SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) October 1, 1996
Chartwell Leisure Inc.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 0-24794 22-3326054
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(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification
incorporation) No.)
605 Third Avenue, New York, New York 10158
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(Address of Principal Executive Offices) (Zip Code)
(212) 692-1400
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(Registrant's Telephone Number, Including Area Code)
National Lodging Corp.
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(Former Name or Former Address, If Changed Since Last Report.)
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ITEM 2. Acquisition or Disposition of Assets.
On October 1, 1996, Chartwell Leisure Inc., a Delaware corporation
formerly known as National Lodging Corp. (the "Registrant"), through its
indirect wholly-owned subsidiary Chartwell Canada Corp., a Delaware corporation
("Chartwell Canada"), completed the acquisition (the "Canadian Acquisition") of
20 hotels and a one-half interest in an additional hotel (collectively, the
"Hotels"), located throughout Canada, from Capital Properties Limited
Partnership ("CPLP"), pursuant to a Contract of Sale, dated as of July 17,
1996, a copy of which is attached hereto as Exhibit 2.1 and incorporated herein
by reference. The Hotels operate under the Travelodge brand name. The
Registrant accomplished the Canadian Acquisition by paying approximately C$94
million in order to purchase substantially all of CPLP's existing bank debt and
to pay certain specified closing costs (including real estate taxes and
transfer taxes) and by assuming the liability for identified trade payables and
property specific bank debt, aggregating approximately another C$10 million. In
addition, pursuant to a Future Payments Agreement, a copy of which is attached
hereto as Exhibit 10.1 and incorporated herein by reference, the Registrant is
obligated to make certain contingent payments to CPLP following a preferred
return to the Registrant.
Of the C$94 million payment, substantially all was financed
by bank borrowings under the Registrant's revolving credit loan with The Bank
of Nova Scotia, The Chase Manhattan Bank and certain other banks. A copy of the
Credit Agreement, dated as of August 28, 1996, among the Registrant, Chartwell
Canada, The Bank of Nova Scotia, The Chase Manhattan Bank and the various banks
named therein is attached hereto as Exhibit 10.2 and incorporated herein by
reference. US$75 million of the loans under the Credit Agreement have been
guaranteed by HFS Incorporated ("HFS"). The loan is secured by pledges of
common stock of all of the Registrant's wholly-owned domestic subsidiaries and
securities of certain other entities, promissory notes held by the Registrant
and its subsidiaries, and interests in certain of the Registrant's joint
ventures.
In connection with the Canadian Acquisition, Chartwell Canada
Hospitality Corp., a wholly-owned subsidiary of the Registrant ("Hospitality"),
entered into a master franchise agreement with an affiliate of HFS pursuant to
which Hospitality is entitled to develop and operate, or to franchise others to
develop and operate, lodging facilities in Canada under the Travelodge and
Thriftlodge brand names.
The purchase price paid by the Registrant was arrived at
through arm's length negotiations between CPLP, the Registrant and Chartwell
Canada. Principal factors considered during the negotiations in determining the
amount to be paid by the Registrant included the age, condition and location of
each Hotel as well as its historical cash flow. The Registrant intends to
continue to operate the Hotels purchased as Travelodge hotels.
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ITEM 7. Financial Statements and Exhibits.
(a), (b) Financial Statements.
As it is currently impracticable for the Registrant to
provide the financial statements required by this Item 7, the Registrant will
file by amendment to this Report the required financial information as soon as
practicable, but not later than 60 days after the date on which this Report was
required to have been filed.
(c) Exhibits.
2.1 Contract of Sale, dated as of July 17, 1996, by and among Capital
Properties Limited Partnership, Syndicated Capital Properties, Inc.,
Syncap Properties Inc., Tegrad Properties (Winnipeg) Inc., Tegrad
Montreal I Inc., 1002370 Ontario, Inc. and Chartwell Canada Corp.
10.1 Form of Future Payments Agreement, by and between
Chartwell Canada Corp. and Syndicated Capital Properties Inc., as
agent for Capital Properties Limited Partnership.
10.2 Credit Agreement, dated as of August 28, 1996, among the Registrant,
Chartwell Canada Corp., The Bank of Nova Scotia, The Chase Manhattan
Bank and the various banks named therein.
10.3 Development Agreement, dated as of October 1, 1996, by and between NRG
Management Services Inc. and the Registrant.
10.4 Form of Indemnification Agreement, by and among
Chartwell Canada Corp., the Registrant, NL Hotels, Inc., Capital
Properties Limited Partnership, Syndicated Capital Properties Inc.,
Royco Hotels & Resorts Ltd. and NRG Management Services Inc.
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10.5 Guaranty Letter, dated as of October 1, 1996, by Royco Hotels &
Resorts Ltd., Peter P. Sikora, Terrence Royer, Randy Royer and Gregory
Royer.
10.6 Non-Competition Agreement, dated as of October 1, 1996, by and among
Royco Hotels & Resorts Ltd., Peter P. Sikora, Terrence Royer, Randy
Royer, Gregory Royer, NL Hotels, Inc. and the Registrant.
10.7 Debt Restructuring Letter Agreement, dated as of August 15, 1996, by
and among the Registrant, Bank of Montreal, Scotia Mortgage
Corporation, Canadian Imperial Bank of Commerce and Province of
Alberta Treasury Branches.
99.1. Press release of the Registrant, dated October 4, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHARTWELL LEISURE INC.
(Registrant)
Date: October 15, 1996
By /s/ Martin L. Edelman
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Name: Martin L. Edelman
Title: President
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EXHIBIT INDEX
Exhibit
2.1 Contract of Sale, dated as of July 17, 1996, by and among Capital
Properties Limited Partnership, Syndicated Capital Properties, Inc.,
Syncap Properties Inc., Tegrad Properties (Winnipeg) Inc., Tegrad
Montreal I Inc., 1002370 Ontario, Inc. and Chartwell Canada Corp.
10.1 Form of Future Payments Agreement, by and between
Chartwell Canada Corp. and Syndicated Capital Properties Inc., as
agent for Capital Properties Limited Partnership.
10.2 Credit Agreement, dated as of August 28, 1996, among the Registrant,
Chartwell Canada Corp., The Bank of Nova Scotia, The Chase Manhattan
Bank and the various banks named therein.
10.3 Development Agreement, dated as of October 1, 1996, by and between NRG
Management Services Inc. and the Registrant.
10.4 Form of Indemnification Agreement, by and among
Chartwell Canada Corp., the Registrant, NL Hotels, Inc., Capital
Properties Limited Partnership, Syndicated Capital Properties Inc.,
Royco Hotels & Resorts Ltd. and NRG Management Services Inc.
10.5 Guaranty Letter, dated as of October 1, 1996, by Royco Hotels &
Resorts Ltd., Peter P. Sikora, Terrence Royer, Randy Royer and Gregory
Royer.
10.6 Non-Competition Agreement, dated as of October 1, 1996, by and among
Royco Hotels & Resorts Ltd., Peter P. Sikora, Terrence Royer, Randy
Royer, Gregory Royer, NL Hotels, Inc. and the Registrant.
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10.7 Debt Restructuring Letter Agreement, dated as of August 15, 1996, by
and among the Registrant, Bank of Montreal, Scotia Mortgage
Corporation, Canadian Imperial Bank of Commerce and Province of
Alberta Treasury Branches.
99.1. Press release of the Registrant, dated October 4, 1996.
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THIS CONTRACT OF SALE (this "Agreement") made as of the 17th
day of July, 1996 by and among CAPITAL PROPERTIES LIMITED PARTNERSHIP, a
limited partnership formed under the laws of the Province of Ontario, Canada
("Seller"), SYNDICATED CAPITAL PROPERTIES INC., a corporation formed under the
laws of the Province of Ontario, Canada ("Syndicated GP"), each of the entities
identified on Exhibit FF (each a "Nominee" and collectively, the "Nominees"),
1002370 ONTARIO, INC., a corporation formed under the laws of the Province of
Ontario, Canada ("1002370") and Chartwell Canada Corp., a corporation formed
under the laws of the State of Delaware ("Purchaser").
W I T N E S S E T H:
WHEREAS, Bear Financial Corp., a Delaware corporation ("BFC")
is willing to acquire the Assigned Debt pursuant to a Letter Agreement of even
date, but only as, if and when Purchaser or its affiliates is able to acquire
the Properties and assume the Assumed Debt (as hereinafter defined) from
Seller; and
WHEREAS, Purchaser has agreed to provide certain funds on the
Closing Date (as hereinafter defined) to facilitate the acquisition of the
Properties, all as more particularly set forth herein.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto do hereby agree as follows:
1. Sale and Purchase, Description of Properties.
A. Seller agrees to sell, transfer, assign and convey, or
cause to be sold, transferred, assigned and conveyed, to Purchaser, and
Purchaser agrees to purchase, all of Seller's right, title and interest in, to
and under (i) (a) those certain nineteen (19) plots, pieces and parcels of land
located in the Provinces of Alberta, British Columbia, Manitoba, Ontario,
Quebec and Saskatchewan and (b) that certain fifty percent (50%) ownership, as
a tenant in common, of that certain plot, piece and parcel of land located in
the Province of Alberta, each of which is more particularly described in
Exhibit A hereof (collectively, the "Land"); (ii) all rights and benefits
pertaining to or benefitting the Land, if any, including, without limitation,
all right, title and interest of Seller, if any, in and to (a) any land within
the right-of-way of any street, road, avenue, open or proposed, public or
private, in front of or adjacent to the Land or any portion thereof, to the
center line thereof, (b) any unpaid award for damage to the Properties or any
portion thereof by reason of a change of grade of any highway, street, road or
avenue, and (c) all oil, gas and mineral rights appurtenant to the Land, if any
(collectively, the "Appurtenances"); (iii) that certain one (1) leasehold
parcel
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located in the Province of Alberta, and more particularly described in Exhibit
A-1 hereof (the "Ground Lease"); (iv) all buildings and improvements located on
the Land and (subject to the terms and provisions of the Ground Lease) on the
land encumbered by the Ground Lease (the "Buildings"; the Land (including
Seller's leasehold interest in the land encumbered by the Ground Lease),
Appurtenances and Buildings being hereinafter sometimes collectively referred
to as the "Real Estate"); (v) all the fixtures, furniture, furnishings,
equipment, machinery and other personal property of any nature whatsoever
attached or appurtenant to or located on the Real Estate on the date of this
Agreement, and used or intended to be used in connection with the operation or
maintenance of the Real Estate or of the business presently being conducted by
Seller or any affiliate or agent of Seller with respect to the Real Estate (the
"Business"), exclusive of any personal property leased under the Equipment
Leases described below or owned by transient hotel guests or lessees under
Space Leases (as defined below), and subject to the terms and provisions of the
Ground Lease (collectively, the "Personalty"); (vi) all inventories of supplies
used or intended to be used in connection with the maintenance of the Real
Estate or the operation of the Business and located on the Real Estate on the
date of this Agreement, including but not limited to paper goods, brochures,
office supplies, stationery, food, chinaware, glassware, linens, silverware,
soap, gasoline, pool chemicals, gift shop items, all liquor and beverages in
unopened bottles (to the extent permitted by law), food not in process, and new
and unused inventory in unopened containers and other operational and guest
supplies as replaced and replenished in the Ordinary Course of Business (the
"Inventory"), exclusive of any inventory items owned by transient hotel guests
or lessees under Space Leases; (vii) the leases, conditional sales agreements
and usage agreements of, or with respect to, equipment, furnishings or other
personal property located on the Real Estate or used in connection with the
operation or promotion of the Business which are identified in Exhibit B hereof
(the "Equipment Leases"), together with the rights to the property covered
thereby; (viii) the service, maintenance and all other agreements in connection
with the operation and promotion of the Business and the maintenance of the
Real Estate and Personalty or otherwise binding upon Seller and not accurately
reflected in the other Exhibits to this Agreement which are identified in
Exhibit C hereof (the "Service Contracts"); (ix) the contracts and leases for
off-premises signs and billboards advertising the Business which are identified
in Exhibit D hereof (the "Billboard Leases"); (x) the leases, term agreements,
licenses, concessions and other oral or written agreements granting any
occupancy, possessory or entry rights in or to the Real Estate, all of which
are identified in Exhibit E hereof (the "Space Leases"); (xi) all tax deposits,
utility deposits and other deposits owned, controlled or held for the benefit
of Seller in respect of any of the Properties, all of which are identified on
Exhibit F hereof (the "Properties Deposits"); (xii) the Tax Credits described
in Section 19 hereof; (xiii) the Accounts Receivable described in Section 7
hereof; (xiv) any checks, drafts, notes and other evidence of indebtedness
owned by the Seller or its affiliates in connection with the Business and held
at the Properties or at other locations on the Closing Date, and any balances
on deposit with banking institutions relating to any of the Properties other
than the Bank Accounts, all of which are identified on Exhibit G hereof (the
"Notes Receivable"); (xv) the Reservations and the Reservation Deposits (as
such terms are hereinafter defined), if any, described in Section 9 hereof;
(xvi) the books, records, files (including personnel files) in
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Seller's possession or control (as used in this Agreement, the term "in
Seller's possession or control" shall mean in the actual possession or control
of Seller or of any managing agent, hotel manager or other professionals or
agents retained by Seller, and the employees and officers of each) and any
customer, mailing or "frequent user" lists maintained in connection with the
operation or promotion of the Business to the extent of Seller's interest in
such books, records, files, or lists (collectively, the "Books"), exclusive of
(a) original Books which Seller or its manager desires to retain as Seller's
property, provided, however, that Seller shall permit Purchaser, at Purchaser's
sole cost and expense, to examine and/or make copies thereof, and (b) any
income tax records (provided Seller or its representatives shall have
reasonable access to the Books, insofar as the pre-closing period only is
concerned, from time to time subsequent to the Closing Date); (xvii) all cash
on hand and till money (the "House Banks") located at the Properties on the
Closing Date; (xviii) Seller's rights to all names used in connection with the
operation of the Business, the goodwill of Seller and all telephone numbers
(the "Intangibles");(xix) all bank deposits and accounts owned, controlled or
held by or for the benefit of Seller and its partners in respect of any of the
Properties, their operations or revenues, all of which are identified on
Exhibit OO hereof (the "Bank Accounts"); and (xx) prepaid items, the cost of
which is adjusted in the Working Capital Adjustment made pursuant to Section 6.
The Land, the Appurtenances, the Buildings, the Personalty, the Inventory, the
Equipment Leases, the Service Contracts, the Billboard Leases, the Space
Leases, the Properties Deposits, the Tax Credits, the Accounts Receivable, the
Notes Receivable, the House Banks, the Reservations and the Reservation
Deposits, the Books, the Intangibles and the Bank Accounts are hereinafter
collectively called, with respect to any hotel, the "Property", or, with
respect to all hotels, the "Properties"; provided that the Property Deposits,
the Tax Credits, the Accounts Receivable, the Notes Receivable, the Reservation
Deposits, the House Bank and the Bank Accounts shall be subject to the Working
Capital Adjustment in accordance with Exhibit CC. A particular Property will be
hereinafter identified by reference to the name of the city or town in or near
which it is located as identified on Exhibit A. Each Property is located in
Canada and operates as a franchise under the "Travelodge" brand name under and
pursuant to certain franchise agreements between Forte Hotels, Inc., as
licensor, and Seller, as licensee, which are identified on Exhibit KK and, as
so amended, are defined as the "Franchise Agreements".
B. [Intentionally Deleted]
C. It is expressly agreed by the parties hereto that (i) the
Toronto Woodbine Airport property is being retained by Seller, (ii) Seller will
retain all liability with respect to mortgage debt and real estate taxes on
such Property and (iii) Purchaser is assuming all other debt and receivables
with respect to such property, if any, at Closing as and to the extent provided
for in this Agreement and the Exhibits hereto. It is a condition of Closing
that Purchaser in its sole discretion is satisfied with the state of the
disposition of the property and Purchaser's liability with respect thereto
following Closing.
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2. Purchase Price.
A. Subject to adjustment as provided herein, the total
purchase price to be paid for the Properties (the "Purchase Price") is the sum
of the Closing Funds (as hereinafter defined) plus the Assigned Debt (as
reduced in accordance with Section 15 A.(6) hereto, such reduction to be
memorialized by an amendment to the Assigned Debt substantially in the form of
Exhibit U-2) plus the Assumed Debt plus the amount, if any, payable to Seller
pursuant to an agreement in the form of Exhibit BB annexed hereto (the "Future
Payments Agreement") to be delivered by Purchaser to Seller.
B. The total closing funds to be paid to Seller is the sum of
TWO HUNDRED THOUSAND ($200,00.00) DOLLARS (the "Closing Funds"). The Closing
Funds shall be payable by Purchaser on the Closing Date by wire transfer of
immediately available funds, and any amounts payable under the Future Payments
Agreement shall be payable as, if, and when provided therein.
C. All amounts used in this Agreement, unless expressly noted to the
contrary, refer to Canadian Dollars ($CDN).
D. The parties agree that the Purchase Price shall be
allocated among the Properties and shall be further allocated between land,
buildings, personal property and goodwill, all as set forth on Exhibit A-2 (the
"Allocation"). The parties agree that the Allocation has been arrived at by a
process of arm's-length negotiations, including the parties' best judgment as
to the fair market value of each respective asset, and the parties specifically
agree to the Allocation as final and binding, and will consistently reflect the
Allocation on their respective Canadian and United States federal, provincial
and local tax returns. Seller shall execute such tax related statements and
certifications as may be reasonably requested by Purchaser in connection with
the Allocation.
3. Status of Title to Properties.
A. The Properties shall be sold, assigned and conveyed by
Seller to Purchaser, and Purchaser shall accept same, subject only to the
following (collectively, the "Permitted Encumbrances"):
(i) those encumbrances and other matters expressly listed
for the Properties set forth in Exhibit H hereof, as, if necessary,
the same Exhibit H shall be updated at or prior to Closing with such
additional exceptions to title as Purchaser in its sole and absolute
discretion elects to accept as Permitted Encumbrances;
(ii) the state of facts disclosed on the surveys of the
Properties identified in Exhibit H-1 hereof the (the "Surveys");
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(iii) provisions of all laws, ordinances and regulations
affecting the Properties, including but not limited to zoning and
building laws, provided that (x) the present use and operation of the
Properties is in compliance with same, and (y) the present use and
operation of the Properties does not constitute a non-conforming use;
(iv) the occupancy rights of transient lodging guests;
(v) the Space Leases;
(vi) the security on the Properties more particularly
described on Exhibit U hereof securing that certain indebtedness of
Seller to be assumed by Purchaser in the aggregate principal amount of
$9,993,341.37 (as of March 29, 1996) evidenced and governed by the
agreements described in Exhibit U (the Assumed Debt");
(vii) the security on the Properties more particularly
described on Exhibit U-1 hereof securing that certain indebtedness of
Seller to be assigned to BFC in the aggregate principal amount of
$117,301,782.70 (as of March 29, 1996) evidenced and governed by the
agreements described in Exhibit U-1 as reduced pursuant to an
agreement substantially in the form of Exhibit U-2 immediately prior
to the acquisition by BFC (collectively, the "Assigned Debt");
(viii) the liens of any real estate or personal property
taxes, assessments, and water, sewer or fire service charges, provided
apportionment of same is properly reflected in the Working Capital
Adjustment made pursuant to Section 6; and
(ix) any other matter or thing affecting any of the
Properties which Purchaser may, in its sole discretion, expressly
agree in writing to take subject to or to waive pursuant to the
provisions of this Agreement.
B. The interest in the Real Estate to be conveyed to Purchaser
described (i) in Exhibit A is a freehold interest and (ii) in Exhibit A-1 is a
leasehold interest.
4. Title Report, Objections to Title.
As a condition to Closing Purchaser, not less than thirty (30)
days prior to Closing, shall have received (i) a draft title opinion for each
Property substantially in the form annexed hereto as Exhibit EE and
satisfactory to Purchaser from Davies, Ward & Beck with respect to the Ontario
Properties and extra-provincial agents with respect to non-Ontario Properties,
which opinions shall expressly permit reliance thereon by Purchaser's lenders
and such other persons as Purchaser shall direct, (collectively, the "Title
Opinions"), (ii) the Surveys for each Property addressed to Purchaser for its
reliance and dated by each surveyor not earlier than 90 days prior to closing
and (iii) a copy of all documents evidencing any encumbrances to title of the
Properties (other than the Permitted Encumbrances). Purchaser
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will notify Seller of any mortgages, restrictions, covenants, easements,
charges, security interests, liens, hypothecations and other encumbrances
affecting the Properties (other than the Permitted Encumbrances) disclosed in
the Title Opinions, the Surveys, and the documents referred to in clause (iii)
above which Purchaser is not required to accept under the terms of this
Agreement (the "Title Objections"). Seller shall be obligated to discharge, or
cause to be discharged, all Title Objections on or prior to Closing. Seller
shall be obligated to take whatever action and pay whatever sums may be
required to remove such Title Objections. Any amount expended by Seller or, if
Purchaser so elects to cure any Title Objections in its sole discretion, by the
Purchaser, shall be properly reflected as Additional NLC Debt/Equity pursuant
to Section 6. If Seller is unable to eliminate all Title Objections (or any
other exceptions that are subsequently reported which Purchaser is not required
to accept, which shall thereafter become Title Objections) by the Closing Date,
then Seller shall so notify Purchaser in writing and Purchaser shall thereafter
notify Seller in writing of its election, which election may be made in its
sole discretion, to either (i) accept the affected Property or Properties
subject to such Title Objections and the reasonably estimated costs of
curing/removing such remaining Title Objections shall be properly reflected as
Additional NLC Debt/Equity pursuant to Section 6, or (ii) terminate this
Agreement with respect to one or more of the affected Property or Properties,
in which event this Agreement shall remain in full force and effect except that
Seller shall not convey those Properties which Purchaser elects not to accept
and there shall be an equitable reduction of the Purchase Price, Assumed Debt
and Assigned Debt in accordance with the Allocation set forth on Exhibit A-2 or
(iii) terminate this Agreement by notice given to Seller, in which event this
Agreement shall terminate and neither party hereto shall have any further
obligations hereunder (except those expressly stated to survive the termination
of this Agreement).
At Closing, Purchaser shall have received original Title
Opinions dated the Closing Date, which Title Opinions shall update to the
Closing Date the draft title opinions delivered under paragraph 4(i).
5. Closing, Closing Date.
Subject to the compliance or waiver of the various conditions
set forth herein, the payment of the Closing Funds, the delivery of possession
to the Properties, the assumption of the Assumed Debt, the acquisition of the
Assigned Debt by BFC, the delivery of the documents described in Section 16 and
the closing of the other transactions, obligations and activities contemplated
to take place hereunder (collectively, the "Closing") shall occur within ten
(10) business days of receipt of all necessary consents hereunder or such other
date to which Seller and Purchaser mutually agree in writing but in any event
no later than December 31, 1996 (the "Closing Date") at the offices of Fraser &
Beatty, Barristers and Solicitors, 1 First Canadian Place, Toronto, Ontario.
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6. Working Capital Adjustment.
A. Purchaser and Seller shall determine the Working Capital
with respect to the Business after the Closing as specified in this Section 6
and Exhibit CC (the "Working Capital Adjustment").
B. The amount of (i) any Working Capital deficit as set forth
in the final Statement (the "Final Statement") accepted, or deemed accepted, by
Purchaser and Seller (the "Closing Working Capital"), if and to the extent
Purchaser or its affiliates contributes, or arranges for an affiliate to loan
to restore such deficit in Closing Working Capital including, without
limitation, past due Property Taxes plus (ii) all costs and expenses incurred
by Purchaser, without duplication, in curing Title Objections (including,
without limitation, past due Taxes) or of realization in respect of any
security encumbered by the Assigned Debt in order to obtain for Purchaser or an
affiliate thereof fee simple title to the Properties free and clear of any
third party interests or encumbrances whatsoever (other than the Permitted
Encumbrances) or otherwise in performing obligations and covenants of Seller
hereunder shall be defined as "Additional NLC Debt/Equity". Additional NLC
Debt/Equity shall be deemed contributed, without duplication, as NLC
Debt/Equity Investment under the Future Payments Agreement on the date each of
such costs and expenses are incurred by Purchaser (but in no event earlier than
the earlier to occur of (i) closing date of the acquisition of the Assigned
Debt or (ii) the Closing Date hereunder).
C. (i) (A)Within sixty (60) days following the Closing Date,
Seller shall prepare and deliver to Purchaser the statement (the "Statement")
setting forth the Working Capital of the Seller as of the Closing Date,
together with the certified report thereon of Deloitte & Touche, Chartered
Accountants (the "Seller's Accountants") prepared in accordance with the
professional standards as set out in the CICA Handbook and stating that the
Statement fairly presents the Working Capital of the Seller on the Closing Date
in conformity with the standards set forth in this Section 6 and Exhibit CC and
(ii) within thirty (30) days after Seller delivers the Statement pursuant to
Section 6 C.(i)(A), Purchaser shall prepare and deliver to Seller the
Additional NLC Debt/Equity statement (the "Additional NLC Debt/Equity
Statement"), setting forth the Additional NLC Debt/Equity of Purchaser together
with report thereon of David Berdon & Co. LLP, prepared in accordance with U.S.
GAAP (as defined herein) stating that the Additional NLC Debt/Equity Statement
fairly presents the Additional NLC Debt/Equity contributed by Purchaser and its
affiliates as of the date noted in such Statement (which date shall be a date
later than the date of the Statement); and (iii) from time to time, Purchaser
shall deliver to Seller revised Additional NLC Debt/Equity Statements setting
forth revised calculation of the Additional NLC Debt/Equity of Purchaser
together with report thereon of David Berdon & Co. LLP, prepared in accordance
with U.S. GAAP (as defined herein) stating that such revised Additional NLC
Debt/Equity Statement fairly presents the Additional NLC Debt/Equity and the
NLC Debt/Equity Investment contributed by Purchaser as of the date stated in
such Statement.
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D. If Purchaser and Seller and their respective accountants
are unable to resolve any dispute within 30 days of Seller's delivery of the
Statement or Purchaser's delivery of the Additional NLC Debt/Equity Statement,
as the case may be, then such dispute shall be resolved by a jointly selected
United States "Big Six" accounting firm retained to resolve any disputes
between Purchaser and Seller over any item contained in the Statement or the
Additional NLC Debt/Equity Statement (the "Independent Accounting Firm"), as
the case may be, which shall make its determination as promptly as practicable,
and such determination shall be final and binding on the parties. The
Independent Accounting Firm shall, acting as experts and not as arbitrators,
determine on a basis of the standards set forth in this Section 6 and Exhibit
CC and this Agreement, and only with respect to the remaining differences so
submitted, whether and to what extent, if any, the Statement or the Additional
NLC Debt/Equity Statement, as the case may be, requires adjustment. If the
Seller and the Purchaser cannot jointly agree on the identity of the
Independent Accounting Firm, then Seller and Purchaser shall each submit to
their respective accountants the name of an accounting firm which does not at
the time and has not in the prior two years provided services to the Seller or
Purchaser or any of Purchaser's shareholders or any of their respective
affiliates, and the Independent Accounting Firm shall be selected by lot from
these two firms by the respective accountants of the two parties. Any expenses
relating to the engagement of the Independent Accounting Firm shall be properly
reflected in the Final Statement. The Statement and the Additional NLC
Debt/Equity Statement, as the case may be, as modified by resolution of any
disputes by Purchaser and the Seller or by the Independent Accounting Firm
shall be the Final Statement and the Additional NLC Debt/Equity Statement, as
the case may be. The Final Statement and the Additional NLC Debt/Equity
Statement, as the case may be, shall be deemed final for the purposes of this
Section 6 upon the earliest of (i) the failure of either party to notify the
other of a dispute within 30 days after delivery of the Statement and the
Additional NLC Debt/Equity Statement to Purchaser and Seller, as the case may
be, or (ii) the resolution of any disputes by the Purchaser and Seller and
their respective accountants pursuant to this Section 6(D) and (3) the
resolution of any dispute pursuant to this Section 6(D) by the Independent
Accounting Firm.
7. Accounts Receivable/Payable.
A. This sale includes all accounts receivable of Seller for
room, food and beverage and other guest charges incurred at the Properties as
of the Closing Date, as shown on Exhibit G-1 hereof (the "Accounts
Receivable"). If Seller receives or collects any Accounts Receivable after the
Closing Date, Seller shall hold same in trust for the benefit of Purchaser and
shall deliver same promptly to Purchaser upon receipt thereof.
B. Seller agrees to indemnify Purchaser, its successors and
assigns, from and against any and all loss, damage, cost, charge, liability or
expense (including court costs and reasonable lawyers' fees and disbursements)
incurred by Purchaser for any accounts payable for goods supplied or services
performed prior to the Closing Date to or for either Seller or
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any of the Properties, and for any sales taxes and/or hotel/motel occupancy
taxes, if any, due in connection with the rental of rooms, the sale of goods or
the performance of services prior to the Closing Date, except to the extent
properly reflected in the Working Capital Adjustment made pursuant to Section
6. Purchaser agrees to indemnify Seller, its successors and assigns, from and
against any and all loss, damage, cost, charge, liability or expense (including
court costs and reasonable lawyers' fees and disbursements) incurred by Seller
for any accounts payable for goods supplied or services performed on or after
the Closing Date (or prior to the Closing Date to the extent properly reflected
in the Working Capital Adjustments made pursuant to Section 6) to or for either
Purchaser or any of the Properties, and for any sales taxes and/or hotel/motel
occupancy taxes, if any, due in connection with the rental of rooms, the sale
of goods or the performance of services on or after the Closing Date.
C. Except as expressly provided in this Agreement or
identified on any Exhibit attached hereto (provided that, in the case of any
document, a true, accurate and complete copy thereof has been exhibited to, and
receipted by, Purchaser before Closing) or as expressly provided in any
agreement executed and/or delivered at the Closing, Purchaser shall not and
does not assume or undertake any responsibility for any liability or obligation
of Seller, fixed or contingent, disclosed or undisclosed, and assumes no
liability for any claims, debts, defaults, duties, taxes, obligations or
liabilities of Seller of any kind or nature, whether known or unknown,
contingent or fixed, all of which shall be retained by Seller, and Seller shall
and hereby agrees to defend, indemnify and hold Purchaser harmless from and
against any and all costs, expenses, losses or liabilities, including
reasonable lawyers' fees and disbursements, suffered or incurred by Purchaser
arising out of any such liability or obligation, including, without limitation,
any transferee liability, except to the extent Purchaser has expressly assumed
or indemnified Seller against any such liability or obligation. Purchaser shall
and hereby agrees to indemnify and hold Seller harmless from and against any
and all costs, expenses, losses or liabilities, including reasonable lawyers'
fees and disbursements, suffered or incurred by Seller arising out of any
liability or obligation expressly assumed by Purchaser hereunder or in any
agreement executed and/or delivered at the Closing, or for which Purchaser has
indemnified Seller, or in connection with matters relating to the ownership and
operation of the Properties from and after the Closing.
D. The provisions of this Section 7 shall survive the Closing.
8. Transaction Costs.
A. All land and other transfer taxes, conveyance taxes,
registration fees, deed or documentary stamps, sales taxes and other similar
charges due in connection with the sale, transfer and conveyance of the
Properties, all pre-approved closing costs, all of which are identified on
Exhibit DD, all title charges for any title searches and the cost of obtaining
current surveys of the Properties and all registration fees for the deeds and
all mortgage and
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other security, registration or indebtedness for taxes and fees due in
connection with Purchaser's financing, if any, and the fees and disbursements
of each parties' respective lawyers, accountants and other professionals
(collectively, "Transaction Costs") shall be properly reflected as Additional
NLC Debt/Equity for purposes of Section 6.
B. The provisions of this Section 8 shall survive the Closing.
9. Reservation Deposits.
A. On the Closing Date the aggregate amount of any deposits
("Reservation Deposits") received by Seller (whether paid in cash or by credit
card) as a downpayment for reservations ("Reservations") made for rooms,
banquets, meals or other services to be supplied from and/or after the Closing
Date shall be properly reflected as deferred revenue in the Working Capital
Adjustment made pursuant to Section 6.
B. Seller hereby indemnifies and holds Purchaser harmless
from and against all claims by and liabilities to any person resulting from (x)
Seller's failure to properly reflect in the Working Capital Adjustment made
pursuant to Section 6 any Reservation Deposits received by Seller prior to the
Closing Date and (y) Seller's failure to pay over or credit to Purchaser any
Reservation Deposits paid to Seller for the period from and after the Closing
Date. Purchaser hereby indemnifies and holds Seller harmless from and against
all claims by and liabilities to any person resulting from Purchaser's failure
to honor or return any Reservation Deposit paid or credited to Purchaser.
C. The provisions of this Section 9 shall survive the Closing.
10. Safes and Baggage.
A. On the Closing Date Seller shall cause the delivery to
Purchaser of all of Seller's keys to all safes and safety deposit boxes
(collectively, the "safes") at the Properties not then in use by guests at the
Properties. On or prior to the Closing Date, Seller shall give written notices
to those persons who have deposited items in the safes, advising them of the
sale of the applicable Property to Purchaser and requesting the removal or
verification of their contents in the safes on the Closing Date. All such
removals or verifications on the Closing Date shall be under the supervision of
Seller's and Purchaser's respective representatives. All contents which are to
remain in the safes shall be recorded. Items belonging to guests who have not
responded to such written notice by so removing or verifying their safe
contents by the end of the day shall be recorded in the presence of the
respective representatives. Any such contents so verified or recorded shall be
the responsibility of Purchaser and Purchaser hereby agrees to indemnify,
defend and hold Seller harmless from any liability therefor (including, without
limitation, reasonable lawyers' fees and disbursements). Seller hereby agrees
to indemnify and hold Purchaser harmless from any liability (including, without
limitation, reasonable lawyers' fees and disbursements)
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arising from claims by guests for any loss of contents in the safes not
verified or recorded on the Closing Date.
B. On the Closing Date representatives of Purchaser and
Seller shall take an inventory of all baggage, valises, trunks and parcels and
all laundry or valet packages checked or left in the care of Seller at the
Properties. From and after the Closing Date, Purchaser shall be responsible for
all items listed in said inventory and Purchaser hereby indemnifies and agrees
to hold Seller harmless from any liability therefor (including reasonable
lawyers' fees and disbursements). Seller shall remain liable for any negligence
or malfeasance with respect to such baggage which occurred prior to the Closing
Date as well as for claimed omissions from said inventory, and hereby
indemnifies and agrees to hold Purchaser harmless from any liability therefor
(including reasonable lawyers' fees and disbursements).
C. The provisions of this Section 10 shall survive the Closing
Date.
11. Bulk Sales Law.
Seller has determined and hereby represents and warrants to
the Purchaser that the only bulk sales law that applies to the transactions
contemplated by this Agreement are the provisions of the Bulk Sales Act
(Ontario) and of Section 1767ff of the Civil Code of Quebec respecting bulk
sales. Seller shall comply with such laws in a manner reasonably acceptable to
Purchaser and hereby agrees to indemnify, hold harmless and defend Purchaser
from and against any loss, cost, damage, liability, claim or expense
(including, without limitation, reasonable lawyers' fees and disbursements) on
account of claims of Seller's creditors arising from Seller's failure to comply
with any applicable bulk transfers laws (except to the extent of Seller's
liabilities are properly reflected in the Working Capital Adjustment or
disclosed in exhibits to this Agreement), which indemnity shall survive the
Closing Date. Compliance with such bulk sales laws to Purchaser's satisfaction
shall be a condition of Closing hereunder.
12. Liquor Licenses.
A. Prior to the Closing Date, Seller shall coordinate with
Purchaser, at Purchaser's expense, to have all existing liquor licenses at the
Properties transferred to Purchaser or to an entity designated by Purchaser, or
shall, at Purchaser's expense, have new liquor licenses issued in the name of
Purchaser or an entity designated by Purchaser, in either case in accordance
with all Laws (as defined below). Seller shall, at Purchaser's expense, obtain
the approval of the applicable provincial and local authorities for such
transfer or issuance. In the event that such transfer or issuance has not been
approved prior to the Closing Date, Purchaser may elect, in its sole
discretion, either to (i) postpone the Closing until such transfer or issuance
has occurred or (ii) elect to proceed to Closing, in which event Seller shall
cooperate with Purchaser, at Purchaser's expense, to permit the
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continued sale of alcoholic beverages at the Properties after the Closing in
accordance with all Laws, notwithstanding the sale of the Properties to
Purchaser, until such approval has been obtained. Seller agrees to execute such
leases, management agreements and other documents, as are legal, reasonable and
customary in the respective jurisdictions to permit the continued sale of
alcoholic beverages at the Properties after the Closing pending such approval.
Any costs incurred by Purchaser under this Section 12 shall be treated as
Additional NLC Debt/Equity for purposes of Section 6.
B. The provisions of this Section 12 shall survive the Closing.
13. Representations and Warranties.
A. Seller, Nominees, Syndicated GP and 1002370 hereby jointly
and severally represent and warrant to Purchaser as follows:
(1) As of the date hereof, Seller is, and will be as of the
Closing, a limited partnership duly organized, validly existing and not
dissolved and shall have paid all applicable filing fees under the laws of the
Province of Ontario and in all other jurisdictions it is legally required to
pay such fees and is duly licensed, qualified and registered to do business and
in good standing as an extra-provincial limited partnership under the laws of
each jurisdiction where the nature of the business transacted by it requires
such licensing, qualification or registration.
(2) As of the date hereof, Seller has, and as of the Closing
Seller will have, all requisite power, authority and legal right to own and
operate the Properties including the Buildings relating thereto and to carry
out its obligations arising out of or in connection with the conduct of the
Business.
(3) As of the date hereof and at Closing, Syndicated GP has
approved the transactions contemplated hereby. As of the date hereof, Seller
has the requisite power and authority to execute and deliver, and will have as
of the Closing the power and authority to perform, its obligations under this
Agreement and to consummate the transactions contemplated hereby. As of the
Closing Date, Seller will have the power and authority to execute, deliver and
perform its obligations under any other agreement or instrument contemplated
hereby or thereby (collectively, the "Seller Transaction Documents"). As of the
Closing Date, each of Seller Transaction Documents shall have been duly
authorized, executed and delivered by Seller and each shall be the legal, valid
and binding obligation of Seller, enforceable against Seller in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and subject to the availability
of equitable remedies and the effect of general principles of equity. The
persons executing this Agreement on behalf of Seller, the Nominees, 1002370 and
Syndicated GP, respectively, have been duly authorized to do so.
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(4) Except as set forth on Exhibit I hereto, the Assigned
Debt and the Assumed Debt, as of the date hereof and at Closing no consent,
approval, waiver, permit, license or order of, or filing or registration with,
any foreign, federal, territorial, provincial, municipal or local court,
private arbitration tribunal, governmental department, agency, board or
commission, regulatory authority, or other governmental, quasi-governmental or
administrative body, subdivision, agency or instrumentality having or asserting
jurisdiction over Seller (collectively, "Governmental Authority") or third
party is required to be obtained by Seller in connection with (i) the
execution, delivery and performance by Seller of each of the Seller Transaction
Documents and (ii) the consummation by Seller of the transactions contemplated
hereby and thereby, except for third party consents that are required under the
Service Contracts, Equipment Leases or Billboard Leases that are terminable at
Purchaser's option without cause or cost and effective as of the Closing Date
("Immaterial Contracts"). Except as set forth on Exhibit I-1, at Closing,
Seller shall have obtained each and every consent, approval, waiver, permit,
license or order of, and made each filing or registration with, any
Governmental Authority or third party required in connection with (i) the
execution, delivery and performance of each of Seller Transaction Documents by
Seller and (ii) the consummation by Seller of the transactions contemplated
hereby including, without limitation, the assumption of the Assumed Debt and
the assignment of the Assigned Debt, except for those consents which are
required under Immaterial Contracts (collectively, "Required Consents").
(5) As of the date hereof and at Closing, none of the
execution, delivery or performance by Seller of the Seller Transaction
Documents, nor the consummation by Seller of the transactions contemplated in
any of the Seller Transaction Documents, will (i) violate any provision of the
Organizational Documents (as defined below), (ii) except as set forth on
Exhibits I or I-1, violate or be in conflict with, or constitute a default (or
an event or condition which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or acceleration of,
or result in the creation or imposition of, any Lien or (iii) subject to the
veracity of Section 13.C. hereof, violate any statutes, laws, governmental
ordinances, rules, regulations, decrees, orders or requirements of any
Governmental Authority (collectively, "Laws"). As used herein, the term "Lien"
means any lien, mortgage, equity, restriction, charge, hypothec, option,
contractual restriction on transfer, security interest, tax lien, pledge,
encumbrance, conditional sale or title retention arrangement, or any other
claim or interest against the Properties securing any indebtedness, any
agreement to create or confer any of the foregoing, whether arising by
agreement or under any Laws or otherwise or any agreement or instrument to
which Seller is a party or by which Seller is or will then be bound or to which
Seller (or any of its assets) is or will then be subject of every kind and
nature whatsoever.
(6) (a) As of the date hereof (subject to the undivided
interests of the parties identified on Exhibit H-2 in the Kitchener Property,
the Sudbury Property and the London Property, respectively) and at Closing,
Seller shall be the beneficial owner of each of the Properties, and will have
good and marketable title thereto in fee simple (and good and valid leasehold
title to the Edmonton West Property) in all cases, free and clear of any Liens,
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other than only the Permitted Encumbrances and the taxes payable in respect of
the Properties ("Real Estate Taxes") identified, with respect to each of the
Properties, on Exhibit J.
(b) Except as expressly provided in this Agreement, Seller
has not committed nor obligated itself in any manner whatsoever to sell, lease
or encumber any of the Properties or any interest therein to any party other
than Purchaser (whether by law, pre-emptive or contractual). No rights of first
refusal regarding any of the Properties exist under the Organizational
Documents (defined below) of Seller or under any agreement by which Seller may
be bound or affected, other than (w) the Franchise Agreements, (x) the Edmonton
West Property ground lease (y) the Edmonton South Property (i) joint venture
agreement and (ii) memorandum of agreement regarding cash flow distribution,
identified on Exhibit H-2 (collectively, the "Edmonton South Agreements"), and
(z) the existing management agreements identified on Exhibit TT attached hereto
(which existing management agreements and all rights of first refusal contained
therein will be terminated as a condition precedent to Closing hereunder).
(c) Except as expressly provided in Exhibit H-2, there are no
unrecorded or undisclosed legal or equitable interests in any of the Properties
owned or claimed by any party other than Seller.
(d) The Nominees hold, on behalf of the Seller, good and
marketable legal title to the Properties identified on Exhibit FF pursuant to
certain nominee agreements identified on said exhibit (the "Nominee
Agreements") free and clear of any Liens, encumbrances and other matters, other
than the Permitted Encumbrances. The Nominees, on behalf of the Seller, have
held legal title to the Properties for at least two years prior to the date
hereof. Seller shall not amend the Nominee Agreements prior to Closing except
as expressly directed by Purchaser. Each of the Nominees has been duly formed,
is validly existing and in good standing in its Province of registration, has
not been dissolved and has all requisite power and authority to carry on its
respective business as such businesses are now carried on or proposed to be
carried on, and is duly qualified and authorized to carry on its respective
business whatsoever. The Nominees do not carry on business in their own right,
and any action undertaken or document executed by any of the Nominees is done
solely as bare trustee with respect to the Properties on the direction of
Seller. Except as provided in the immediately preceding sentence, other than
holding legal title to certain of the Properties pursuant to the Nominee
Agreement to which it is a party, none of the Nominees has transacted any
business or has any assets or liabilities save and except nominal capital
received by each of the Nominees for their incorporating shares. All assets
owned by the Nominees are the beneficial property of Seller and pertain to the
Properties. Seller and Syndicated GP own (100%) of the legal and beneficial
title to each of the Nominees free and clear of all Liens or other encumbrances
and in accordance with all Laws.
(e) Seller owns all of the issued and outstanding shares of
1002370, free and clear of all liens or other encumbrances and in accordance
with all Laws.
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(f) 1002370 is the sole beneficial and legal owner of the
former CIBC construction financing debt as described in Exhibit H in respect of
the Ingersol, Kitchener, London, Sudbury and Laval properties, secured by first
charges on each of such five (5) Properties, and that 1002370 has taken no act
to encumber or assign such debt except to Seller.
(7) As of the date hereof and as of the Closing, Exhibit K
annexed hereto and made a part hereof identifies each document pursuant to
which Seller is organized and governed, including all declarations of limited
partnership and agreements of limited partnership, certificates or articles of
incorporation and by-laws and all amendments thereto and all other agreements
among any legal or beneficial owners of interests in such entities
(collectively, the "Organizational Documents"). The Organizational Documents
are in full force and effect and true and complete copies of all the
Organizational Documents have been made available by Seller to Purchaser and,
as of the Closing, true, correct and complete copies of all the Organizational
Documents shall have been delivered by Seller to Purchaser. None of the
foregoing entities and no partner of Seller is in material default of any of
its obligations under the Organizational Documents, and no event has occurred
or is continuing, and no condition exists, which, with the passage of time or
the giving of notice, or both, would constitute a default by any such entity.
(8) As of the date hereof, and at Closing, except as
expressly provided in Exhibit E-1, none of the Space Leases set forth on
Exhibit E and none of the rents or other amounts payable thereunder have been
assigned, pledged or encumbered by Seller other than as provided in the Assumed
Debt and the Assigned Debt. Each of said Space Leases is in full force and
effect and, except as expressly provided in Exhibit E-2, there are no defaults
thereunder (alleged or otherwise) by either landlord or tenant, nor has there
occurred any event which with the giving of notice or the passage of time or
both would constitute a default thereunder. No rent or additional rent due
under the Space Leases has been paid beyond the current month. There are no
security deposits or advance payments of rent being held by Seller pursuant to
any of the Space Leases except as set forth on Exhibit E. All of the tenants
named in the Space Leases are in possession of the spaces leased to them and
conducting business in the ordinary course. No brokerage or leasing commission,
fee or other compensation is or will be due as of the Closing Date or
thereafter in connection with any Space Lease or any renewal or extension
thereof. All decorating, installation, alteration and repair work which the
landlord was or may be obligated to perform for any tenant prior to the Closing
Date has been performed or will be performed prior thereto at the cost of
Seller, except as expressly provided in Exhibit E-2. True and correct copies of
each Space Lease (including any agreement or letter modifying or supplementing
the terms thereof) have been delivered to Purchaser.
(9) As of the date hereof and at Closing, there are no
commercial or residential lessees, tenants or other occupants at any of the
Properties except pursuant to the Space Leases as described on the rent rolls
delivered to Purchaser or its representatives, which are annexed hereto and
made a part hereof as Exhibit E-3 (collectively, the "Rent
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Rolls") or transient hotel invitees. The Rent Rolls are true, accurate and
correct with respect to all Space Leases, leases and all other non-lease
tenancies (all such tenancies, collectively, the "Tenancies") affecting each
Property, and contain the following information: (A) the location of the
portion of the premises to which the Space Leases and Tenancies relate; (B) the
name of the existing tenant(s) or, if the unit is vacant, a notation indicating
the vacancy; (C) the expiry date of the existing term thereof; and (D) the
monthly rentals and other payments, if any, payable thereunder.
(10) As of the date hereof, Exhibit J identifies the real
estate taxes for each of the Properties. Except as expressly provided in
Exhibit J-1, neither Seller, 1002370 nor any of the Nominees has received
written notice of any special assessments, local improvement charges,
reassessments or other levies affecting any of the Properties.
(11) As of the date hereof, all licenses, permits, approvals,
consents, registrations, certificates and other authorizations ("Licenses")
that are necessary and required by Law in connection with the use and operation
of the Properties and Business are listed in Exhibit L annexed hereto and made
a part hereof. True and correct copies of all Licenses have been made available
by Seller to Purchaser. Such Licenses are in full force and effect; none of
Seller, 1002370 or any of the Nominees has taken any action that could (or
failed to take any action the omission of which could) result in the revocation
or limitation of any such Licenses; and Seller, 1002370 and the Nominees have
not received any written notice of violation from any Governmental Authority or
notice of an intention by any such Governmental Authority to revoke any
certificate of occupancy or other License issued by it in connection with the
use and operation of any Properties, that in each case has not been cured or
otherwise resolved to the satisfaction of such Governmental Authority. The sale
and service of alcoholic beverages at each of the Properties (other than
portions of the Properties which are leased to third parties pursuant to the
Space Leases) has been in compliance with all applicable laws and regulations
and Seller has no knowledge of any violation or alleged violation of any such
laws or regulations during its period of ownership (including any act or
omission by tenants under the Space Leases).
(12) As of the date hereof, Seller has continuously
maintained insurance since taking title to each Property and now maintains
insurance on the Properties and on its businesses and personnel as disclosed on
Exhibit M. Exhibit M lists all insurance policies presently affording coverage
with respect to each Property and the information contained therein is accurate
in all material respects as of the date hereof. As of the Closing, Seller shall
have continuously maintained such insurance since taking title to each Property
(in such amounts and with such deductibles and coverage limits as so indicated
on Exhibit M), and shall then have on each Property and on the business and
personnel insurance coverage as shown on Exhibit M. Seller does not have any
liability which, in accordance with Canada GAAP (defined hereinafter), would be
required to be reported on the financial statements of Seller to properly
reflect the financial condition or results of operations of Seller.
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(13) As of the date hereof and at Closing, except as listed
in Exhibit N annexed hereto and made a part hereof and except for such claims
as are fully covered by insurance (subject to any applicable deductibles),
which covered claims are listed in Exhibit N-1 hereto, there is no claim,
action, suit, proceeding, arbitration, investigation or inquiry pending before
any Governmental Authority relating to, or, to the knowledge of Seller, 1002370
or the Nominees, threatened in writing against, Seller, 1002370, the Nominees,
the Properties or any of Seller's other assets.
(14) As of the date hereof and at Closing, Seller has
delivered to Purchaser true and correct copies of the comprehensive reports,
drafts, studies and other diligence listed on Exhibit O annexed hereto and made
a part hereof for each Property (the "Property Reports"), which Property
Reports include all comprehensive engineering reports with respect to the
Properties commenced by, prepared for, or delivered to, Seller or Syndicated
GP.
(15) As of the date hereof and at Closing, except as set
forth in Exhibit P hereto ("Environmental Conditions"), there is no material
work currently being performed at any Property, nor is any such work required,
in order to bring such Property into compliance with any federal, provincial or
local law, statute, ordinance, rule, regulation, guideline, code, license,
permit, authorization, approval, consent, legal doctrine, order, judgment,
decree, injunction, requirement or agreement with any governmental entity,
relating to (x) the protection, preservation or restoration of the environment
(including, without limitation, air, water, vapor, surface water, groundwater,
drinking water supply, surface land, subsurface land, plant and animal life or
any other natural resource), or to human health or safety, or (y) the exposure
to, or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Substances, and Seller and each Property are in compliance with all applicable
Environmental Laws other than as shown on Exhibit P. As used in this Agreement,
the term "Environmental Laws" means all applicable federal, provincial,
municipal, local and international laws, statutes, ordinances, by-laws, codes,
regulations, treaties, conventions and the like and all applicable policies,
guidelines, orders, directives, decisions and the like rendered or promulgated
by any court, ministry, or administrative or regulatory agency or body
whatsoever (including international organizations formed by or participated in
by any national or provincial government or representatives thereof) related to
the protection or preservation of the environment (or any portion thereof),
health and safety or the manufacture, processing, distribution, use, treatment,
storage, disposal, discharge, transport, handling, containment, cleanup or
other remediation of Hazardous Substances, including, without limitation, the
Environmental Protection Act (Ontario), the Ontario Water Resources Act
(Ontario), the Waste Management Act and Waste Management Amendment Act, 1993
(British Columbia), the Environmental Management and Protection Act
(Saskatchewan), Environment Act (Manitoba), the Environmental Quality Act
(Quebec), the Occupational Health and Safety Act (Ontario), the Environmental
Protection and Enhancement Act (Alberta) and the Canadian Environmental
Protection Act (Canada). As used herein, the term "Hazardous Substances" means
any waste, hazardous substance, chemical,
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contaminant, toxic substance, special waste, dangerous good, deleterious
substance or pollutant regulated or controlled pursuant to any Environmental
Laws.
(16) As of the date hereof, Seller has delivered to Purchaser
true and correct copies of all environmental reports, drafts, studies, tests,
assessments and other diligence relating to the Business or the Properties or
their use which are or with reasonable effort could be in the Seller's
possession or under its control, which reports, drafts, studies and other
diligence are listed on Exhibit Q hereto (the "Environmental Reports"). Neither
Seller, 1002370 nor the Nominees have caused any other investigations or
studies, other than the Environmental Reports, to be commenced concerning
Hazardous Substances in compliance with Environmental Laws at the Properties.
Other than as shown in Exhibit Q-1, none of Seller, 1002370 or the Nominees has
caused, or as of the Closing has caused or permitted, nor has there been any
release or discharge of any Hazardous Substances on, under or from or in
connection with the Properties or any portion thereof. Other than as shown on
Exhibit Q-1, there are no administrative, regulatory or judicial proceedings or
notices pending or, to Seller's or Nominee's knowledge, threatened against
Seller arising out of or relating to the presence of Hazardous Substances at,
on, in, under, about or affecting any of the Properties or any portion of the
Properties. Other than as shown on Exhibits Q and Q-2, to Seller's knowledge
there are no historical or offsite environmental conditions that could affect
any of the Properties.
(17) As of the date hereof, neither Seller, 1002370 nor the
Nominees have received any notice of any pending or threatened expropriation
affecting any of the Properties or any portion thereof.
(18) Attached hereto as Exhibit R are the audited
consolidated balance sheets and statements of income, changes in the equity,
and cash flow as of and for the fiscal period ended September 30, 1995, for
Seller (the "Financial Statements"). The Financial Statements have been
prepared in accordance with Canadian generally accepted accounting principles
and practices ("Canada GAAP") applied on a consistent basis throughout the
periods covered thereby, have been audited by Seller's Accountants, and present
fairly the financial condition and results of operations of Seller. Also
attached hereto as Exhibit R are the latest available internally prepared
unaudited financial statements for Seller, which have also been prepared in
accordance with Canada GAAP applied on a consistent basis and on a basis
substantially consistent with the Financial Statements and which present fairly
the financial condition and results of operations of Seller during the period
since September 30, 1995. Seller has not, and as of the Closing Date, will not
have changed its accounting practices or its accounting or tax methods or
practices including, without limitation, its policies, relating to
capitalization of fixed assets, bad debts, expenses, depreciation or
amortization policies, or made any tax elections. If any of the Financial
Statements has not been prepared in accordance with United States generally
accepted accounting principles ("U.S. GAAP") applied on a consistent basis
through the periods covered thereon, then Seller shall provide a reconciliation
of such Financial Statement to U.S. GAAP purposes. The fact that a Working
Capital Adjustment has been made with respect to any matter
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(including, without limitation, treating a liability assumed as Additional NLC
Debt/Equity pursuant to Section 6 hereof) shall not be deemed a waiver by
Purchaser of, or a limitation of Seller's liability with respect to, a breach
by Seller of its representations, warranties or covenants set forth herein.
(19) Since September 30, 1995, except as set forth on Exhibit
Z, there has not been any material adverse change in the assets, liabilities,
business, financial condition, operations or results of operations of Seller.
(20) Seller, 1002370 and the Nominees and the Properties are
and have been each in material compliance with all applicable Laws (including
Environmental Laws) having jurisdiction over them or their assets or the
Properties and they have obtained and complied with all Licenses of
Governmental Authorities required in connection with the Business and the
Properties as presently operated. Neither Seller, 1002370 nor the Nominees has
received any written notice that it is not in such compliance, except as
expressly set forth in the Exhibits to this Agreement.
(21) As of the date hereof, Seller has not, and prior to the
Closing Seller will not have, made any claim under any of the Title Opinions.
(22) A. Employees. Exhibit QQ contains:
(a) the names and titles of all individuals who are
full-time, part-time or casual employees or individuals engaged on contract to
provide employment services or sales or other agents or representatives of the
Seller employed or engaged at the Properties (the "Employees");
(b) the date each existing Employee was hired;
(c) a list of all written employment contracts between the
Seller and Employees;
(d) the rate of remuneration of each Employee at the date
hereof, any bonuses paid since the end of Seller's last completed financial
year and all other bonuses, incentive schemes and benefits to which such
Employee is entitled;
(e) the amount of vacation pay to which each Employee is
entitled on the date hereof;
(f) the names of all employees of the Seller on disability,
the nature of their disability, whether they are expected to return to work and
if so, when, and the nature of the benefits to which such disabled employees
are entitled from the Seller; and
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(g) particulars of all other material terms and conditions of
employment or engagement of the Employees and the positions held by them.
Except as disclosed in Exhibit QQ-1, no Employee is employed
under a contract which cannot be terminated by the Seller with or without
notice, except for those Employees who are employed on indefinite hirings
requiring reasonable notice of termination by applicable Law. To the best of
Seller's knowledge, no Employee is bound by any third-party non-competition or
similar covenant or any confidentiality agreement which could prevent or
restrict such Employee from performing services for the Seller or the
Purchaser.
B. Collective Agreements. Except as described in Exhibit
QQ-2, Seller has not entered into any agreements with any labor union or
employee association nor made commitments to or conducted negotiations with any
labor union or employee association with respect to any future agreements and
Seller is not aware of any current attempts by a labor union to organize any
Employees of the Seller nor are there any proceedings or applications for
certification or representation of any Employee of Seller. Other than
grievances brought in the ordinary and normal course of business, none of which
could, individually or collectively with other such grievances, have a material
adverse effect on the Properties or the right or the ability of the Seller or
the Purchaser to carry on the businesses at the Properties substantially in the
manner in which it has heretofore been carried on, there are no grievances
against the Seller of which the Seller has received written notice under any
collective agreement. Exhibit QQ-3 describes all work stoppages and strikes
(legal or otherwise) that the Properties have experienced in the past five
years, including the dates and length of each such occurrence. To the best of
the knowledge of the Seller, Exhibit QQ-4 describes every arbitration award
arising in respect of any collective agreement described in Exhibit QQ-2 issued
in the past five years.
C. Employee Plans. Exhibit QQ-5 identifies each retirement,
pension, bonus, stock purchase, profit-sharing, stock option, deferred
compensation, severance or termination pay, insurance, medical, hospital,
dental, vision care, drug, sick leave, disability, salary continuation, legal
benefits, unemployment benefits, vacation, incentive or other compensation plan
or arrangement or other employee benefit which is maintained, or otherwise
contributed to or required to be contributed to, by the Seller relating to the
Properties for the benefit of Employees or former employees of the Seller (the
"Employee Plans") and a true and complete copy of each Employee Plan has been
furnished to the Purchaser together with a copy of all current employee
communications relating to the Employee Plans, whether or not such
communications have been, or are required to be, filed with any applicable
Government Authority. Each Employee Plan has been mainly maintained in
compliance with its terms and requirements prescribed by any and all statutes,
orders, rules and regulations that are applicable to such Employee Plan. The
Seller has delivered to the Purchaser the actuarial valuations, if any,
prepared for each Employee Plan during the past years, and:
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(a) all contributions to, and payments from, each Employee
Plan which may have been required to be made in accordance with the terms of
any such Employee Plan or with the recommendation of the actuary for such
Employee Plan and, where applicable, the laws of the jurisdictions which govern
such Employee Plan, have been made in a timely manner;
(b) all material reports, returns and similar documents
(including applications for approval of contributions) with respect to any
Employee Plan required to be filed with any Governmental Authority or
distributed to any Employee Plan participant have been duly filed in a timely
manner or distributed;
(c) there are no pending investigations by any Governmental
Authority or authority involving or relating to any Employee Plan, no
threatened or pending claims (except for claims for benefits payable in the
normal operation of the Employee Plans), suits or proceedings against any
Employee Plan or any rights or claims to benefits under any Employee Plan which
could give rise to a liability nor, to the knowledge of the Seller, are there
any facts which could give rise to any liability in the event of such
investigation, claim, suit or proceeding;
(d) no notice has been received by the Seller of any
complaints or other proceedings of any kind involving the Seller or, to the
Seller's knowledge, any of the Employees of the Seller before any pension board
or committee relating to any Employee Plan or to the Properties; and
(e) the assets of each Employee Plan are at least equal to
the liabilities of such Employee Plan based on the actuarial assumptions
utilized in the most recent valuation performed by the actuary for such
Employee Plan, and the Purchaser will not incur any liability with respect to
any Employee Plan as a result of the transactions contemplated by this
Agreement.
D. Workers' Compensation. Except as disclosed on Exhibit
QQ-6, there are no notices of assessment, provisional assessment, reassessment,
supplementary assessment, penalty assessment, surcharges, orders or increased
assessment (collectively, "Assessments") or any other communications related
thereto which the Seller or any of the Properties has received from any
workers' compensation board or similar authorities in any jurisdiction in which
the Properties are located. To the best of the Sellers knowledge there are no
Assessments which are unpaid on the date hereof or which will be unpaid at
Closing and there are no facts or circumstances which may result in a material
increase in liability to the Purchaser from any applicable workers'
compensation legislation, regulations or rules after the Closing.
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E. Pay Equity. The Seller is in full compliance with the Pay
Equity Act (Ontario).
F. Employee Accruals. All accruals for unpaid vacation pay,
premiums for unemployment insurance, health premiums, Canada Pension Plan
premiums, Quebec Pension Plan premiums, accrued wages, and commissions and
employee benefit payments have been reflected in the books and records of the
Seller or the Properties and will be reflected in the Working Capital
Adjustment made pursuant to Section 6.
(23) Except for or in respect of the Assumed Debt and the
Assigned Debt and as shown on Exhibit SS, neither Seller, 1002370 nor any
Nominee has (i) any indebtedness outstanding or (ii) given any guaranty,
indemnity, comfort letter or other assurance of payment or security of any
nature for, or otherwise agreed to or may become directly or contingently
liable for, any obligation of any other Person. Seller has provided Purchaser
with true, correct and complete copies of the Assumed Debt and the Assigned
Debt and there are no modifications or amendments thereto and all security
thereof.
(24) Except as expressly provided in Exhibits NN and H, each
Property is an independent property that does not rely on any facilities
located on any property not included in such Property to fulfill any
requirement of any Governmental Authority or for the furnishing to such
Property of any essential building systems or utilities, and Seller does not
permit any other person to use its facilities. The owner of each Property has
no obligation to any Governmental Authority to contribute funds in connection
with the construction or maintenance of off-site improvements or services,
zoning proffers, or similar matters that are or were required as a condition to
the issuance of any building permit, certificate of occupancy or zoning
variance for such Property.
(25) Except as expressly provided in Exhibit S, neither
Seller nor the Nominee have received any written notice that there is any
violation of a condition or agreement affecting any Property or any portion
thereof which has not been rectified.
(26) Other than as identified in the Environmental Reports or
on Exhibit P, to Seller's knowledge, there are no Hazardous Substances at, on,
in, under, about or affecting any Property; provided, however, for purposes of
this representation, knowledge is limited to Hazardous Substances identified in
the Environmental Reports, Seller's actual knowledge and the actual knowledge
of Syndicated GP and its affiliates and written notices received from
Government Authorities or third parties.
(27) Except as set forth on Exhibit RR annexed hereto, as of
the date hereof no building, structure or improvement located on any of the
Properties is or ever has been insulated with urea formaldehyde insulation, and
none of such buildings or structures contains asbestos or PCBs;
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(28) Except as set forth on Exhibit RR-1 annexed hereto, as
of the date hereof and as of Closing no underground or aboveground storage
tanks are or have been located on any of the Properties.
(29) As of the date hereof and as of Closing none of Seller,
1002370 or the Nominees has ever received any notice of, or been prosecuted for
non-compliance with, any Environmental Laws and none of Seller, 1002370 or the
Nominees has settled any allegation of non-compliance prior to prosecution.
There are no notices, orders or directions relating to Environmental Laws or
notifying Seller or any Nominee that it is or may be responsible for any
containment, cleanup, remediation or corrective action or any work, repairs,
construction or capital expenditures to be made under Environmental Laws with
respect to the Business or any of the Properties.
(30) Seller is classified as a limited partnership under the
Income Tax Act (Canada), and the regulations and rules thereunder, as the same
may be amended from time to time (the "Canada Code").
(31) Except as set forth in Exhibit J (with respect to realty
taxes and business taxes), each of the Nominees, 1002370 and Seller has, duly
and on a timely basis, and in the manner prescribed by law, filed all returns
and reports required to be filed by it with respect to all governmental taxes
(including realty taxes and business taxes), levies, duties, assessments,
reassessments and social and other charges of any nature whatsoever, whether
direct or indirect, and any interest, fines, additions to tax and penalties
thereon (collectively, "Taxes"). All such returns and reports are correct and
complete in all respects and fully disclose the income Tax, expenses,
deductions and credits for such periods to the extent required or permitted by
law. Except as set forth in Exhibit J (with respect to realty taxes and
business taxes), each of the Nominees, 1002370 and Seller has paid or remitted
all Taxes which are due and payable by it, or assessed against it on or before
the date hereof. None of the Nominees, 1002370 or Seller is aware of any
pending assessments, reassessments, actions, suits, inquiries or other
proceedings regarding Taxes in respect of a preceding taxation year or other
taxable period, no audits are currently being conducted, and there are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the filing, assessments or reassessment of any Taxes payable by
any of the Nominees. Each of the Nominees, 1002370 and Seller has collected or
withheld all amounts required to be collected or withheld by it on account of
Taxes or otherwise, and has remitted the same to the appropriate governmental
authority in the manner and within the time required under any applicable
legislation or has set it aside in appropriate accounts for payment when due.
The Canadian federal income Tax liabilities of the Nominees and 1002370 have
been assessed by Revenue Canada for all taxation years up to and including the
taxation year ended September 30, 1995. True and complete copies of federal and
provincial income Tax returns for each of the Nominees and 1002370 for each
taxation year and copies of all assessments and reassessments relating to such
taxation years have been provided to the Purchaser.
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(32) Except as set forth on Exhibit JJ, there are no material
defects in any of the Buildings or in any of the heating, ventilating, air
conditioning, plumbing, electrical or mechanical systems therein.
(33) Except as set forth on Exhibit S, each of the Properties
is in material compliance with all applicable Laws including, without
limitation, with respect to zoning and all municipal ordinances.
(34) True and complete copies of each of the Service
Contracts identified on Exhibit C have been delivered to Purchaser. The Service
Contracts are in full force and effect and there are no defaults thereunder by
any party thereto.
(35) True and complete copies of each of the Equipment Leases
listed in Exhibit B have been delivered to Purchaser. The Equipment Leases are
in full force and effect and there are no defaults thereunder, nor have there
occurred any events which with the passage of time or the giving of notice or
both would constitute a default thereunder. Except for the items covered by the
Equipment Leases identified on Exhibit B, or items owned by transient hotel
guests or lessees under Space Leases, all of the personal property located on
the Properties is owned by Seller free and clear of all liens and encumbrances
other than the Permitted Encumbrances.
(36) Except as set forth in Exhibit S, neither Seller,
1002370 nor the Nominees have received written notice of any violation of law
or municipal ordinance, order or requirement noted in or issued by any
governmental entity asserting jurisdiction against or affecting any of the
Properties. Except as set forth in Exhibit S, the Properties and the Business
conducted thereon are in material compliance with all applicable federal,
provincial and local laws and regulations, including zoning, and all necessary
permits and licenses for the lawful conduct of such business have been obtained
and are in full force and effect. The Properties are in compliance with any
variances granted to construct the Buildings thereon. No conditional permit has
been granted with respect to any of the Properties.
(37) All billboards or signs located off the Land which are
used to advertise the Properties, and the contracts or leases therefor, are
identified on Exhibit D. The Billboard Leases are in full force and effect and
there are no defaults thereunder by either party thereto nor have there
occurred any events which with the passage of time or the giving of notice or
both would constitute a default thereunder. True and complete copies of the
Billboard Leases have been delivered to Purchaser.
(38) Except as set forth in Exhibit T, neither Seller,
1002370 nor the Nominees have received any written notice from any insurance
company, or any governmental or quasi-governmental agency, requiring any
repairs or work to be done on the Properties or pertaining to the maintenance
of the Properties, employment of labor or working conditions.
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(39) Except as set forth on Exhibit V and as set out in the
Working Capital Adjustment, there are no "due bills" or "trade agreements" with
respect to any of the Properties.
(40) All of the information concerning Seller, each of the
Nominees, Syndicated GP, 1002370 and the Properties and all other reports,
contracts, or other items delivered by Seller, each of the Nominees, Syndicated
GP, 1002370 and their respective affiliates to Purchaser in connection with the
transactions contemplated by this Agreement, are true, complete and correct in
all respects and fairly present the information set forth in a manner that is
not misleading and Seller has not omitted any information required to be
included in order to make the information furnished not misleading.
(41) Except as expressly provided in Sections 13.A.(6)(a),
(b) and (c), no person or party, other than Purchaser, has any right or option
to acquire any of the Properties covered by this Agreement, or any part thereof
or any beneficial or legal interest therein.
(42) Neither Seller, nor any affiliate, agent or employee of
Seller, has entered into any oral or written agreement or commitment to make
rooms or any portion of any of the Properties available at any time in the
future or quoted or guaranteed certain rates or fees, except for the
Reservations and the agreements described in Exhibit W (the "Rate Agreements").
True and complete copies of each of the Rate Agreements have been delivered to
Purchaser.
(43) There are no easements, conditions, covenants,
restrictions, agreements, Liens, leases, security interests and encumbrances
affecting the Properties other than the Permitted Encumbrances and as otherwise
expressly described in an Exhibit to this Agreement.
(44) Seller is, and on the Closing Date will be, (a) a
registrant for purposes of Part IX of the Excise Tax Act (the "GST
Legislation"), whose registration numbers for such purposes are identified on
Exhibit VV attached hereto and (b) a registrant for purposes of the Quebec
Sales Tax Act, whose registration number for such purposes are identified on
Exhibit VV attached hereto.
(45) Neither Syndicated GP nor any of the Royco Principals
(hereinafter defined) have been reassessed for income tax in connection with,
and there are no audits, examinations, actions, suits or other proceedings or
investigations or claims in progress, pending or threatened against any of
Syndicated GP or the Royco Principals in connection with any of the activities
of Seller. All filings required under the Income Tax Act (Canada) to be made by
Seller have been made within the time prescribed by the Income Tax (Canada).
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(46) Except as expressly provided in Exhibit MM, with respect
to the Investment Canada Act, as of the date hereof and as of Closing, Seller
does not
(a) engage in the production of uranium or own an interest in a
producing uranium property in Canada,
(b) engage in the provision of any financial services,
(c) engage in the provision of any transportation services,
(d) engage in the production, distribution, sale, rental or
exhibition of any audio or video music recordings,
(e) engage in the publication, distribution or sale of any music
in print or machine readable form, or
(f) engage in radio communication in which the transmissions
are intended for direct reception by the general public, any radio, television
and cable television broadcasting undertakings and any satellite programming
and broadcast network services.
(47) Seller does not maintain, own, control or hold any bank
accounts or deposits, nor are there any bank accounts or deposits maintained or
held for the benefit of Seller, other than the Bank Accounts identified on
Exhibit OO hereof.
B. The representations and warranties of Seller, Syndicated
GP, 1002370 and the Nominees set forth in Section 13.A and elsewhere in this
Agreement shall be true, accurate and correct in all material respects upon the
execution of this Agreement, shall be repeated on and as of the Closing and
shall survive the Closing for the periods of time specified in Section 24
hereof.
C. Purchaser represents and warrants to Seller as follows:
(1) As of the date hereof, Purchaser is, and will be as of
the Closing, a corporation duly organized and validly existing and in good
standing under the laws of the State of Delaware. As of the Closing, Purchaser
will be duly licensed or qualified to do business and in good standing as a
foreign corporation under the laws of each jurisdiction where the nature of the
business transacted by it requires such licensing or qualification.
(2) As of the date hereof, Purchaser has the requisite power
and authority to execute and deliver, and will have as of the Closing the power
and authority to perform, its obligations under this Agreement and each other
agreement or instrument contemplated hereby to which Purchaser is a party to
consummate the transactions contemplated hereby and thereby. This Agreement is,
and as of the Closing each other agreement or instrument
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<PAGE>
contemplated hereby to which Purchaser will be a party will have been, duly
authorized, executed and delivered on Purchaser's behalf, and the legal, valid
and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement thereof or relating to creditors' rights generally
and subject to the availability of equitable remedies and the effect of general
principles of equity.
(3) Purchaser is, and on the Closing Date will be, (a) a
registrant for purposes of Part IX of the GST Legislation, whose registration
number for such purposes is listed on Exhibit VV and (b) a registrant for
purposes of the Quebec Sales Tax Act, whose registration number for such
purposes is listed on Exhibit VV.
(4) Purchaser has obtained each and every consent, approval,
waiver, permit, license or order of, and made each filing or registration with,
any Government Authority or third party required to have been obtained by it in
connection with (i) the execution, delivery and performance by Purchaser of
this Agreement and each other agreement or instrument contemplated hereby to
which Purchaser is a party and (ii) the consummation by Purchaser of the
transactions contemplated hereby and thereby.
(5) None of the execution, delivery or performance by
Purchaser of this Agreement or any other agreement or instrument contemplated
hereby to which Purchaser is a party nor the consummation by Purchaser of the
transactions contemplated hereby or thereby, will violate any provision of the
certificate of incorporation or by-laws of Purchaser or violate or be in
conflict with, or constitute a default (or an event or condition which, with
notice or lapse of time or both, would constitute a default) under, or result
in the termination or acceleration of, or result in the creation or imposition
of any Lien under, any agreement or instrument to which Purchaser is a party or
by which Purchaser is or will then be bound or subject, or violate any Laws.
(6) There is no claim, action, suit, proceeding, arbitration,
investigation or inquiry pending before any federal, provincial, municipal,
foreign or other court or governmental or administrative body or agency, or any
private arbitration tribunal relating to, or, to the knowledge of Purchaser,
threatened in writing against, Purchaser which, if adversely determined, may
have an adverse impact on the transactions contemplated by this Agreement.
D. Syndicated GP and 1002370, jointly and severally, represent
and warrant to Seller and Purchaser as follows:
(1) As of the date hereof, Syndicated GP and 1002370 are, and
will be as of the Closing, corporations duly organized and validly existing and
in good standing under the laws of the Province of Ontario. As of the Closing
Syndicated GP and 1002370 will be duly licensed or qualified to do business and
in good standing as extra-provincial corporations
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under the laws of each jurisdiction where the nature of the business transacted
by them requires such licensing or qualification.
(2) As of the date hereof and at Closing, Syndicated GP and
1002370 each have the requisite power and authority to execute, deliver, and
perform their obligations under this Agreement and each other agreement or
instrument contemplated hereby to which Syndicated GP or 1002370 is a party to
consummate the transactions contemplated hereby and thereby. This Agreement is,
and as of the Closing each other agreement or instrument contemplated hereby to
which Syndicated GP and 1002370 will be a party will have been, duly
authorized, executed and delivered on Syndicated GP's and 1002370's,
respectively, behalf, and the legal, valid and binding obligation of Syndicated
GP and 1002370, respectively, enforceable against Syndicated GP and 1002370, in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement thereof or relating to creditors' rights generally
and subject to the availability of equitable remedies and the effect of general
principles of equity.
(3) Syndicated GP and 1002370 have obtained each and every
consent, approval, waiver, permit, license or order of, and made each filing or
registration with, any Government Authority or third party required to have
been obtained by them in connection with (i) the execution, delivery and
performance by Syndicated GP and 1002370 of this Agreement and each other
agreement or instrument contemplated hereby to which Syndicated GP and 1002370
are a party and (ii) the consummation by Syndicated GP and 1002370 of the
transactions contemplated hereby and thereby.
(4) Except as expressly provided in this Agreement and the
Exhibits thereto, none of the execution, delivery or performance by Syndicated
GP or 1002370 of this Agreement or any other agreement or instrument
contemplated hereby to which Syndicated GP or 1002370 is a party nor the
consummation by Syndicated GP or 1002370 of the transactions contemplated
hereby or thereby, will violate any provision of the certificate of
incorporation or by-laws of Syndicated GP or 1002370 or violate or be in
conflict with, or constitute a default (or an event or condition which, with
notice or lapse of time or both, would constitute a default) under, or result
in the termination or acceleration of, or result in the creation or imposition
of any Lien under, any agreement or instrument to which Syndicated GP or
1002370 is a party or by which Syndicated GP or 1002370 is or will be bound or
subject, or violate any Laws.
(5) Except as expressly provided in this Agreement and the
Exhibits thereto, there is no claim, action, suit, proceeding, arbitration,
investigation or inquiry pending before any federal, provincial, municipal,
foreign or other court or governmental or administrative body or agency, or any
private arbitration tribunal relating to, or, to the knowledge of Syndicated GP
or 1002370, threatened in writing against, Syndicated GP or 1002370 which, if
adversely determined, may have an adverse impact on the transactions
contemplated by this Agreement.
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E. The representations and warranties of Purchaser, of
Syndicated GP and of 1002370 set forth in Sections 13.C and 13.D, respectively,
shall be true, accurate and correct in all material respects upon the execution
of this Agreement and shall be repeated on and as of the Closing. The
representations and warranties set forth in Sections 13.C and 13.D shall
survive the Closing for the periods of time specified in Section 24 hereof.
F. The terms "known to" or "knowledge of" or similar terms
means with respect to Seller or any of its affiliates the actual knowledge of
any of Messrs. Randy Royer, Terrence Royer, Gregory Royer, Peter Sikora and
Kirk Morgan (collectively, the "Royco Principals"), provided that each such
person shall be deemed to have knowledge of any written notice actually
received by or forwarded to such person from any Governmental Authority or
other third party.
14. Pre-Closing Covenants.
A. As used herein, the term "Ordinary Course of Business"
means the ordinary and prudent course of business (i) consistent with past
custom and practice (including with respect to quantity and frequency) and (ii)
consistent with industry standards for the maintenance and operation of
properties similar in size, quality, type and location to the Properties;
provided, however, in all events no action shall be deemed to be in the
Ordinary Course of Business unless such action or expenditure has been
contemplated or accounted for in the current budget for the Properties.
B. Seller and Purchaser agree that between the date hereof
and the Closing Date, the parties shall undertake the following and whenever
Seller requires the consent of Purchaser under this section Purchaser shall
either grant or deny Seller's request for written consent within two (2)
business days after Purchaser receives such request, however, if Purchaser
fails to respond to Seller's request within such period, Purchaser's consent
shall have been deemed given:
(a) Seller shall continue to operate and maintain the
Properties in the Ordinary Course of Business and shall, among other things:
(i) accept cancellations of Reservations and return
Reservation Deposits provided such cancellations shall not result in the making
of new reservations with any affiliate of Seller, and make new Reservations and
accept new Reservation Deposits, and enter into new Rate Agreements provided
such Rate Agreements are cancelable on thirty (30) days notice without penalty,
all in the Ordinary Course of Business;
(ii) order and purchase Personalty and Inventory in the Ordinary
Course of Business;
(iii) in the Ordinary Course of Business, but subject to the
prior written consent of Purchaser, renew any of the existing Service
Contracts, Equipment Leases or
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Billboard Leases or enter into new Service Contracts, Equipment Leases or
Billboard Leases. No consent shall be required if (i) the renewal or new
Service Contract, Equipment Lease or Billboard Lease is terminable at
Purchaser's option, at no cost, effective as of the Closing Date or (ii) such
Service Contracts, Equipment Leases or Billboard Leases is for not more than
one (1) year and liability under such contact is not more than $20,000; and
(iv) in the Ordinary Course of Business, but subject to the
prior written consent of Purchaser, renew, amend or modify any existing Space
Lease or enter into any new Space Lease.
(b) From and after the date hereof until the Closing Date,
Seller shall not without the prior written consent of Purchaser.
(i) sell, lease, transfer, convey, acquire or assign any
assets other than for fair consideration in the Ordinary Course of Business;
(ii) accelerate, terminate, modify or cancel any Contract or
Lease to which Seller is a party or by which Seller is bound outside the
Ordinary Course of Business;
(iii) create, incur, assume or guarantee any Indebtedness
which either is in an amount exceeding $20,000 in the aggregate or is outside
the Ordinary Course of Business or incur or, to its knowledge, permit the
imposition of, any Lien on any of the assets of Seller other than Permitted
Encumbrances;
(iv) make any loans to, or enter into any other transaction
with, or distribute any funds or payments to or for the benefit of, any of its
partners or any of their respective partners, directors, officers or employees
other than the payments of employee compensation in the Ordinary Course of
Business;
(v) other than in respect of cash management of uninvested
funds in accordance with its prior practices in the Ordinary Course of
Business, make any capital investment in, any loan to, or any acquisition of
the securities or assets of, any other Person (or series of related capital
investments, loans, and acquisitions);
(vi) cancel, compromise, waive or release any right or claim
(or series of related rights and claims) other than in the Ordinary Course of
Business;
(vii) terminate any Employee, hire any individual, make any
general or specific increase in the remuneration of the Employees (other than
in the Ordinary Course of Business), officers, directors and agents of the
Seller or, grant to them any additional benefits, or enter into any collective
bargaining agreement or any other agreement with any labor union or employee
association or modify the terms of any such existing agreement;
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(viii) enter into any negotiations or Contracts other than in
the Ordinary Course of Business;
(ix) transfer, convey, withdraw, pledge, lien, hypothecate
or assign, in whole or in part, any of the Bank Accounts other than deposits
and withdrawals in the Ordinary Course of Business;
(x) open or establish a new bank account or depository
arrangement with respect to any of the Properties; or
(xi) maintain, own, control or hold any bank accounts or
deposits, other than the Bank Accounts identified on Exhibit OO hereof.
(c) Seller shall continue to make all repairs and
replacements, structural and non-structural, ordinary and extraordinary, in the
Ordinary Course of Business, in a manner consistent with Seller's prior
practice provided such repairs and replacements were expressly provided for as
a line item in the hotel budget submitted to Purchaser prior to the date hereof
or the prior written consent of Purchaser shall have first been obtained.
(d) Seller will give to Purchaser, its lawyers, accountants,
engineers and other representatives, during normal business hours and as often
as may be requested, on reasonable prior notice, full access to any and all
parts of any Property and to all books, records and files relating to the
Property in Seller's possession or control (including the possession or control
of any managing agents, to the extent Seller has the right to give such
access). Seller will furnish to Purchaser all information concerning the
Property in Seller's possession or control which the Purchaser, its lawyers,
accountants, engineers or other representatives shall reasonably request.
Purchaser may, during the hours 9 A.M. to 5 P.M. (local time), and upon
reasonable advance notice, at Purchaser's sole expense, (i) cause the
Properties and any part thereof to be inspected by such engineers, architects
and others acting on behalf of Purchaser, as Purchaser may designate, and (ii)
cause a full or partial physical count of the Personalty or Inventory to be
made. Such inspections and counts shall be conducted in a manner and at such
times as shall not interfere with the use and enjoyment of the Properties by
any guests, tenants, employees or occupants thereof or thereat. Purchaser
agrees to indemnify Seller from and against any and all losses, damages, costs
or expenses (including reasonable lawyers' fees and disbursements) incurred in
connection with such inspections and counts, and such indemnification
obligations shall survive the Closing or any earlier termination of this
Agreement.
(e) None of Seller, the Nominees, Syndicated GP, 1002370 or
any of their respective affiliates shall (x) take any action which would cause
or constitute a breach of any of the representations or warranties set forth in
Section 13 hereof or (y) fail to take any action, the omission of which would
cause or constitute a breach of any of the representations or warranties set
forth in Section 13 hereof.
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(f) Promptly after becoming aware of any event which could
cause or constitute a breach, or, if it occurred prior to the date of this
Agreement, would have caused or constituted a breach, of any of the
representations and warranties set forth in Section 13 hereof, Seller will
notify Purchaser of such event and will use its best efforts to promptly remedy
or to prevent such breach.
(g) None of Seller, the Nominees, Syndicated GP, 1002370 or
any of their respective affiliates shall make, grant or suffer any Liens,
easement, right-of-way, covenant, restriction or other encumbrance on or with
respect to the Property, nor will any of such persons enter into any other
agreements, contracts or commitments with respect to the Property except in the
Ordinary Course of Business and with the prior written consent of the
Purchaser.
(h) Except as expressly provided herein, (i) Seller will pay,
or will not pay but apportion, prior to Closing, all taxes and assessments
imposed on or against the Properties or due in connection with the operation of
the Properties or the Business and (ii) Seller will pay, or will not pay but
apportion, at Closing or promptly thereafter in the ordinary course of
business, all sums owed to vendors, purveyors and other trade creditors, and
all other debts and obligations relating to the Properties or the operation of
the Business thereon. All such payments, or accruals to the extent such taxes
and other payables are not so paid, shall be properly reflected in the Working
Capital Adjustment made pursuant to Section 6.
(i) Seller shall maintain in full force and effect the
casualty insurance evidenced by the certificate of insurance annexed hereto as
Exhibit M, until the Closing Date, and will pay any premiums, if any, required
to keep such coverage in effect until the Closing. To the extent such insurance
is assumed by the Purchaser, premiums prepaid with respect to the period
following Closing shall be properly reflected as Working Capital Adjustment
made pursuant to Section 6.
(j) Prior to the Closing Date, but conditional upon the
completion of the Closing, the Purchaser shall offer employment to all the
Employees on terms and conditions which are substantially similar to those upon
which such Employees are employed by the Seller at the Closing Date. Employment
with the Purchaser, if accepted by the Employees, shall constitute continued
and uninterrupted service by the Employees (the "Transferred Employees"),
whether pursuant to contract, common law, statute or otherwise. No Employee
shall be entitled to any rights under this Section or under any provisions of
this Agreement.
(k) Seller represents that as of Closing there will be no
liability for accrued benefits under any of the Employee Plans, except for
Employee Plan premium adjustments which will be properly reflected in the
Working Capital Adjustment made pursuant to Section 6. The Purchaser agrees
that it may establish replacement plans, in its sole and absolute
discretion(the "Replacement Plans") for the Transferred Employees in respect of
their
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employment by the Purchaser from and after the Closing Date. For the purpose of
determining the eligibility of a Transferred Employee for membership or
benefits under the Employee Plans and under the Replacement Plans:
(i) their period of employment shall include employment
with both the Seller and the Purchaser and shall be
deemed not to have been interrupted at the Closing
Date; and
(ii) subject to any applicable legislation, their period
of membership shall include membership in both the
Employee Plans and the Replacement Plans and shall
be deemed not to have been interrupted at the
Closing Date;
provided that no Transferred Employee shall be entitled to benefits under any
disability plan sponsored by the Purchaser in respect of any condition existing
at or event occurring prior to the Closing Date. The Transferred Employee shall
begin to accrue benefits under the Replacement Plans as of the Closing Date in
respect of their employment by the Purchaser. Seller agrees to assist Purchaser
in obtaining the required approvals of the applicable Governmental Authorities
in connection with the establishment and registration of the Replacement Plans.
Subject to the Exhibits to this Agreement, Seller shall indemnify and save
Purchaser harmless as and from all actions, causes of action, suits, claims,
demands, grievances, arbitration awards and any cost whatsoever which may be
asserted by any Employee or former employee, including any Transferred
Employee, against the Purchaser and which are by reason of the employment of
such Employee or former employee or the termination of the employment of such
Employee or former employee by the Seller on or prior to Closing. Purchaser
shall indemnify and save Seller harmless of and from all actions, causes of
action, suits, claims, demands, grievances, arbitration awards and any costs
whatsoever which may be asserted by any Transferred Employees against Seller in
respect of any termination of employment of such Transferred Employees by
Purchaser after Closing and the implementation of the Replacement Plans.
15. Conditions to Closing.
A. Satisfaction of each of the following conditions, any of
which may be waived in writing by Purchaser, shall be deemed a condition to
Purchaser's obligation to close hereunder:
(1) Seller shall deliver title to the Properties in
accordance with the provisions of Sections 3 and 4 and shall deliver each of
the documents referred to in Section 16.A.
(2) Seller shall have used its best efforts to obtain, on
notice to the parties identified on Exhibit H-2, an order (the "Approval
Order") from the Ontario Court (General Division) approving the sale to the
Purchaser, by the Seller, of one hundred (100%) percent of the legal and
beneficial interests in the Kitchener Property, the Sudbury Property and the
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London Property (including for greater certainty the beneficial interests in
such properties, if any, held by the parties identified on Exhibit H-2).
(3) Except for Exhibits which must be updated at the Closing
Date to reflect changes permitted under the terms of this Agreement and the
Working Capital Adjustments, the representations and warranties set forth in
Section 13A, D and E shall be true and correct as of the Closing Date;
provided, however, with respect to Section 13A(40), solely for purposes of
determining compliance with this Section 15A(3), the word "material" shall be
deemed inserted between the words "all" and "respects" in the fifth line
thereof. For the avoidance of doubt, the word "material" as deemed inserted in
said Section 13A(40), shall not be so deemed inserted when determining if
Seller, any of the Nominees, Syndicated GP or 1002370 are in breach of said
representation in the event Purchaser makes a claim for such a breach pursuant
to Section 24 hereof or the Indemnification Agreement.
(4) Seller shall have performed, observed, and complied with
all of the pre-Closing covenants, agreements, and conditions required by this
Agreement to be performed, observed and complied with by it prior to or as of
the Closing, including, but not limited to, each of the covenants set forth in
Sections 11, 12 and 14.
(5) None of Seller, Syndicated GP, 1002370, any of the
Nominees or their respective affiliates shall have made an assignment for the
benefit of creditors or have been adjudicated as bankrupt or have filed an
assignment in bankruptcy or an application under the Companies' Creditors'
Arrangement Act (Canada) ("CCAA") or a notice of intention to file a proposal
or a proposal under the Bankruptcy and Insolvency Act (Canada) ("BIA") and no
petition in bankruptcy or application under the CCAA, the BIA or any other
insolvency legislation or the application for the appointment of a liquidator,
curator, trustee, receiver, receiver-manager, monitor or other similar official
shall have been filed against or in respect of any of such persons.
(6) The Assigned Debt shall have been acquired by BFC, BFC
shall have cancelled and forgiven the portion of the Assigned Debt that exceeds
$87,630,000, and Seller shall have received an express release of liability
from BFC in respect of said forgiven amount.
(7) Purchaser shall have received (i) an executed guaranty in
substantially the form of Exhibit AA annexed hereto (the "Principals Guaranty")
and (ii) an executed indemnification agreement in substantially the form of
Exhibit AA-1 annexed hereto (the "Indemnification Agreement").
(8) [Intentionally Deleted]
(9) If all or any portion of the Properties is owned by someone
other than Seller, Seller shall cause such party to transfer and convey to
Purchaser at the Closing such portion of the Properties as it may own (subject
only to the Permitted Encumbrances). If,
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after exerting reasonable commercial efforts, Seller remains unable to transfer
and convey to Purchaser any portion of the Properties at the Closing in the
manner provided in Section 3, then Seller shall so notify Purchaser in writing
and Purchaser shall have the same rights and remedies as if Seller could not
remove all Title Objections with respect to the affected Property or
Properties.
(10) Seller shall have complied with the Bulk Sales Law to
the full satisfaction of Purchaser.
(11) With respect to the Competition Act:
(i) The Director of Investigation and Research (the
"Director") appointed under the Competition Act (Canada) (the
"Competition Act") shall have issued an advance ruling certificate
("ARC") under Section 102 of the Competition Act in respect of the
transaction contemplated by the Agreement (the "Transaction") and
shall not have subsequently withdrawn nor purported to withdraw such
ARC or indicated that he has obtained new information as a result of
which he is no longer satisfied that he would not have sufficient
grounds on which to apply to the Competition Tribunal under Section 92
of the Competition Act with respect to the Transaction; or
(ii) The Director or his representative shall have advised
Purchaser (on terms and in a form satisfactory to Purchaser) that the
Director does not currently intend to make an application under
Section 92 of the Competition Act in respect of the Transaction and
neither the Director nor any of his representatives shall have
rescinded or amended such advice.
(12) Seller shall have complied with the applicable Retail
Sales Tax legislation to the full satisfaction of Purchaser.
(13) In the event the Approval Order is granted, Seller shall
deliver such Approval Order on Closing.
(14) Seller shall deliver an absolute assignment of the
original $26,540,000 demand note made by 1002370 in favor of Seller which is
held by Canadian Imperial Bank of Commerce in connection with the Assigned Debt
and an assignment of all security collateral thereto.
(15) Purchaser shall have obtained the issuance or transfer
of the Liquor Licenses to itself or to an entity designated by Purchaser, on
terms satisfactory to the Purchaser.
(16) Seller shall have fulfilled its obligations as to any
severance of employment agreements to the full satisfaction of Purchaser.
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<PAGE>
(17) Intentionally deleted.
(18) Purchaser shall have received the Title Opinions.
(19) Purchaser shall have received a legal opinion in the
form annexed hereto as Exhibit WW (the "Transaction Opinion").
(20) The transactions contemplated by this Agreement shall
have been approved by sixty-six and two-thirds (66-2/3%) percent of the
partners in attendance, in person or by proxy, at a meeting duly called by the
Seller in accordance with Seller's Organizational Documents pursuant to
documentation reviewed and approved by Purchaser including a fairness opinion
prepared by a financial advisor and valuations of each Sellers' partner units,
both to the full satisfaction of Purchaser.
B. Satisfaction of each of the following conditions, any of
which may be waived in writing by Seller, shall be deemed a condition to
Seller's obligation to close hereunder:
(1) The representations and warranties set forth in Section
13.C shall be true and correct as of the Closing Date.
(2) None of the Purchaser or its affiliates shall have made
an assignment for the benefit of creditors or have been adjudicated as bankrupt
or have filed either (i) an assignment in bankruptcy or an application under
CCAA or a notice of intention to file a proposal or a proposal under BIA and no
petition in bankruptcy or application under CCAA, BIA, or (ii) a petition in
bankruptcy pursuant to Chapter 11, Title 11 of the United States Code, 11 USC
Section 1101 et seq., or any other insolvency legislation or the application
for the appointment of a liquidator, curator, trustee, receiver,
receiver-manager, monitor or other similar official shall have been filed
against or in respect of any of such persons.
(3) Seller shall have received a covenant not to sue from
each of the assignors of the Assigned Debt in the form of Exhibit PP.
(4) The transactions contemplated by this Agreement shall
have been approved by sixty-six and two-thirds (66-2/3%) percent of the
partners in attendance, in person or by proxy, at a meeting duly called by the
Seller in accordance with Seller's Organizational Documents pursuant to
documentation reviewed and approved by Purchaser including a fairness opinion
prepared by a financial advisor and valuations of each Sellers' partner units,
both to the full satisfaction of Purchaser.
(5) The Purchaser or its affiliates, as the case may be,
shall have entered into a management agreement (the "Management Agreement") and
a revised management services and franchise development agreement (the "MFSDA")
in the forms annexed hereto as Exhibits LL-1 and LL-2.
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(6) The Assigned Debt shall have been acquired by BFC, BFC
shall have cancelled and forgiven the portion of the Assigned Debt that exceeds
$87,630,000, and Seller shall have received an express release of liability
from BFC in respect of said forgiven amount.
16. Documents to be Delivered at Closing.
A. Seller's Documents
Seller, pursuant to the provisions of this Agreement, shall
deliver or cause to be delivered to Purchaser on the Closing Date the following
documents in connection with the transfer, assignment and conveyance of the
Properties:
(1) For each of the Properties, (a) (i) mutual releases
pursuant to the following agreements pursuant to which the Nominees are
directed and authorized by the Seller to hold legal title for and on behalf of
the Purchaser from the time of Closing, (a) (i) those certain Declarations of
Trust executed by Syncap Properties Inc. as of the 30th day of September, 1992,
(ii) that certain Declaration of Trust executed by Tegrad Properties (Winnipeg)
Inc. as of the 30th day of September, 1992, and (iii) that certain Declaration
of Trust executed by Tegrad Montreal I Inc. as of the 30th day of September,
1992 (collectively, the "Nominee Direction"), (b) duplicate certificates of
title memorializing the conveyance to Purchaser of fee simple title to the Real
Estate free of all Liens and encumbrances except the Permitted Encumbrances
(where applicable), (c) a transfer of all of the issued and outstanding shares
in each of the Nominees to Purchaser or its designee and (d) a beneficial
conveyance of all Properties in which legal title is held by the Nominees or,
at the request of the Purchaser, deeds in registrable form conveying any of the
Properties to the Purchaser or as it may direct. Each Nominee Direction shall
(x) be in the form of Exhibit GG annexed hereto, (y) direct each Nominee to
hold legal title to such of the Properties for which it is Nominee for the
benefit of Purchaser and (z) contain Seller's indemnity against any liability
for obligations thereunder relating to periods prior to the Closing Date (other
than those obligations set forth on Exhibit H or expressly assumed by Purchaser
hereunder) and customary trustee representations and warranties as to the
selling, leasing, encumbering or transferring of the Properties or any
interests therein to any party other than Purchaser.
(2) A general conveyance conveying, selling and transferring
to Purchaser all of Seller's right, title and interest in and to the Personalty
and Inventory. The bill of sale shall contain a warranty that the Personalty
and Inventory are owned by Seller free and clear of all liens, encumbrances and
security interests except for any Permitted Encumbrances which encumber the
Personalty or Inventory.
(3) An assignment and assumption of the Service Contracts,
Equipment Leases and Billboard Leases, together with Seller's executed
counterparts (or, if not
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available, copies) thereof. The assignment shall contain Purchaser's indemnity
of Seller against any liability for obligations thereunder relating to periods
from and after the Closing Date and Seller's indemnity of Purchaser against any
liability for such obligations relating to periods prior to the Closing Date
unless reflected in the Working Capital Adjustment made pursuant to Section 6
or expressly assumed by Purchaser hereunder. Seller shall also deliver the
written consent of the other party to any such contracts and leases, if
required for the assignment thereof except as expressly provided in Exhibit
I-1. With respect to any service, maintenance and other agreements in
connection with the operation and promotion of the Business and the maintenance
of the Real Estate and Personalty which are not listed on Exhibit B, C or D
attached hereto and which shall not be assigned to nor assumed by Purchaser
("Rejected Contracts") which are listed on Exhibit C-1, the assignment shall
also contain Seller's indemnity of Purchaser against any liability (including,
without limitation, lawyers' costs and disbursements) for any obligations in
connection with the Rejected Contracts. Seller shall also deliver evidence (x)
of written notice which terminates the Rejected Contracts as of the Closing
Date or as soon thereafter as practicable, and (y) of the parties to each
Rejected Contracts releasing forever Purchaser from any and all liability
pursuant to such Rejected Contracts.
(4) Plans and specifications, technical manuals and similar
material, for the Buildings, if any, in Seller's possession or control.
(5) If assignable, any Licenses, or copies thereof, in
Seller's possession pertaining to the operation and maintenance of the
Properties, together with a duly executed assignment thereof to Purchaser. If
any of such Licenses are not assignable, Seller agrees to cooperate with
Purchaser after the Closing to the extent required to enforce any rights under
such Licenses, at Purchaser's expense.
(6) If assignable, any unexpired warranties and guarantees,
or copies thereof, in Seller's possession which Seller has received (i) in
connection with the Buildings and any work or services performed with respect
to, or equipment installed in, the Properties, or (ii) from any prior owners of
the Properties, together with individual or omnibus assignments thereof to
Purchaser. If any such warranties or guarantees are not assignable, Seller
agrees to cooperate with Purchaser after the Closing to the extent required to
enforce any rights under such warranties or guarantees, at Purchaser's expense.
(7) An assignment of the Reservation Deposits and Purchaser's
receipt therefor.
(8) A certified copy of Seller's declaration of limited
partnership and its partnership agreement, together with any amendments
thereto, as filed with the Ministry of Consumer and Commercial Relations
(Ontario). A certified copy of Seller's general partner's certificate of
incorporation, together with a Secretary's Certificate certifying that the
Board of Directors of such general partner has duly adopted resolutions
authorizing the within transaction and an executed and acknowledged Incumbency
Certificate certifying to
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the authority of the officers of such general partner executing the documents
to be delivered by Seller on the Closing Date.
(9) All documents and agreements reasonably required by
Purchaser to confirm that Seller shall have obtained the Required Consents.
(10) A Declaration of Possession for each Properties,
substantially in the forms annexed hereto as Exhibit X and otherwise acceptable
to Purchaser.
(11) An assignment and assumption of the Space Leases and of
any security deposits held by Seller in connection therewith, together with
Seller's executed counterparts (or, if not available, copies) thereof. The
assignment shall contain Purchaser's indemnity of Seller against any liability
for the security deposits assigned to Purchaser and for any other obligations
of the landlord under the Space Leases from and after the Closing Date and
Seller's indemnity of Purchaser against any liability for such obligations
relating to periods prior to the Closing Date, except as is expressly disclosed
on the Exhibits to this Agreement or reflected in the Working Capital
Adjustment made pursuant to Section 6.
(12) Such other instruments, in addition to those identified
in Section 16.A.2, which may be required to assign to Purchaser Seller's
interests in the Ground Lease. The assignment shall contain Purchaser's
indemnity of Seller against any liability for any obligations of the tenant
under the Ground Lease from and after the Closing Date and Seller's indemnity
of Purchaser against any liability for any obligations relating to periods
prior to the Closing Date, except as is expressly disclosed on the Exhibits to
this Agreement or reflected in the Working Capital Adjustment made pursuant to
Section 6.
(13) Each stock certificate with appropriate stock powers
evidencing its ownership of shares in each of the Nominees and 1002370 endorsed
in blank or to Purchaser's designee.
(14) An assignment and assumption of the Franchise Agreements.
(15) Estoppel certificates signed (a) by the lessor under the
Ground Lease and (b) by the joint venturer under the Edmonton South Agreements,
which estoppel certificates shall be substantially in the form annexed hereto
as Exhibit Y.
(16) All keys and master keys to all locks located on the
Properties.
(17) An assignment of all right, title and interest in and to
the Intangibles.
(18) The original Books.
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(19) Any documents reasonably required in connection with the
transfer of any existing liquor license or the issuance of a new liquor
license, including any interim arrangements as described in Section 12 pending
the approval of such transfer or issuance.
(20) Release by Smith Barney of all claims in respect of any
brokerage commission, or any other payment of any fees in respect of the
structuring of the transaction or the Properties conditional only upon receipt
of $500,000 in United States dollars (together with expense reimbursement to
Smith Barney of $34,556 in United States dollars), which payment shall be made
at Closing by the Purchaser and shall be included in the calculation of
Additional NLC Debt/Equity.
(21) One or more certificates issued by the Minister of
National Revenue under section 116 of the Income Tax Act (Canada) with a
certificate limit (or, where more than one such certificate is issued, with an
aggregate certificate limit) at least equal to the Purchase Price. If Seller
fails to deliver a certificate under section 116 of the Income Tax Act (Canada)
or delivers one or more certificates with an aggregate certificate limit less
than the Purchase Price, Purchaser shall withhold from the Purchase Price the
amount required by section 116 of the Income Tax Act (Canada) and shall remit
such amount to the Receiver General for Canada on behalf of the partners of
Seller. Seller shall deliver to Purchaser, on or before the Closing Date, one
or more certificates issued by the Minister of Revenue of Quebec under section
1097 of the Taxation Act (Quebec) with a certificate limit (or, where more than
one certificate is issued, with an aggregate certificate limit) at least equal
to the portion of the Purchase Price allocable to the Properties in Quebec. If
Seller fails to deliver a certificate under section 1097 of the Taxation Act
(Quebec) or delivers one or more certificates with an aggregate certificate
limit less than the Purchase Price allocable to the Properties in Quebec,
Purchaser shall withhold from the Purchase Price the amount required by section
1102.2 of the Taxation Act (Quebec) and shall remit such amount to the Minister
of Revenue of Quebec on behalf of the Partners of Seller.
(22) Any affidavits or required documents to comply with any
bulk sales requirements pursuant to Section 11 hereof.
(23) A confirmation that the representations and warranties
made by Seller and Syndicated remain true and correct, in the form of Exhibit
II annexed hereto (the "Bring Down Certificate").
(24) Such other instruments, if any, to indicate any changes or
updates to any Exhibit.
(25) (i) A certificate issued by the Minister of Revenue of
Ontario under subsection 6(1) of The Retail Sales Tax Act (Ontario), (ii) a
certificate issued pursuant to
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section 51 of The Revenue and Financial Services Retail Sales Tax Act
(Saskatchewan), (iii) a certificate issued pursuant to section 8 of The Retail
Sales Tax Act (Manitoba), and (iv) a certificate issued pursuant to subsection
3(4) of The Social Services Tax Act (British Columbia).
(26) An assignment of all rights, title and interests in and to
the Bank Accounts.
B. Purchaser's Documents
Purchaser, pursuant to the provisions of this Agreement,
shall deliver or cause to be delivered to Seller on the Closing Date the
following documents (in addition to the Closing Funds):
(1) A certified copy of Purchaser's certificate of
incorporation, together with any amendments thereto, together with a duly
executed Secretary's Certificate certifying that the Board of Directors has
duly adopted resolutions authorizing the within transaction and an executed and
acknowledged Incumbency Certificate certifying to the authority of the officers
of such corporation executing the documents to be delivered by Purchaser on the
Closing Date.
(2) The Future Payments Agreement.
C. Jointly Executed Documents
Seller and Purchaser shall each execute or cause to be
executed the following documents and deliver same as indicated:
(1) The documents referred to in subsections 16.A.(2), (3),
(7), (11), (12), (14), (19) and subsection 16.B(2).
(2) All documents required to permit the continued sale of
alcoholic beverages at the Properties.
(3) An agreement in the form of Exhibit HH annexed hereto
(the "Assignment and Assumption Agreement") pursuant to which Seller will
assign to Purchaser, and Purchaser will assume from Seller, Seller's rights and
obligations under the Service Contracts, the Ground Lease, the Space Leases,
the Equipment Leases, the Billboard Leases, the Franchise Agreements, and other
liabilities and trade payables, agreed to be assigned and assumed hereunder.
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(4) Seller and Purchaser shall, on the Closing Date, elect
jointly under subsection 167(l) of the GST Legislation, in the form prescribed
for purposes of that subsection, in respect of the sale and transfer of the
assets hereunder, and the Purchaser shall file such election with Revenue
Canada not later than the day on which it is required to file its return under
the GST Legislation for the reporting period which includes the Closing Date.
Seller and Publisher shall, on the Closing Date, elect jointly under section 75
of the Quebec Sales Tax Act, in the form prescribed for purposes of that
section, in respect of the sale and transfer of the assets hereunder, and
Purchaser shall file such election with the Minister of Revenue of Quebec not
later than the day on which it is required to file its return under such
legislation for the reporting period which includes the Closing Date.
(5) The Seller and the Purchaser shall execute an election
pursuant to section 22 of the Income Tax Act (Canada) in respect of the sale of
Accounts Receivable contemplated herein pursuant to which they will elect an
amount equal to the amount of the Accounts Receivable so transferred less the
amount shown as the allowance for doubtful debt in the books and records of the
Seller. The Purchaser agrees to file that election with the Minister of
National Revenue within the time prescribed for the filing of such election by
the Income Tax Act (Canada).
17. Post-Closing Covenants.
Seller and Purchaser agree that from and after the Closing
Date:
(a) Seller will continue to cooperate with Purchaser to
facilitate the acquisition by Purchaser of all nonassignable Licenses required
for the use and operation of the Properties and the Business all at the expense
of the Purchaser which shall be included in the calculation of Additional NLC
Debt/Equity made pursuant to Section 6.
(b) Seller shall provide such conveyances, transfers,
assignments, or other agreements which shall be requested by the Purchaser in
order to assist in transferring to the Purchaser, whether by way of power of
sale, quit claim, assignment or otherwise, any interests in the Kitchener
Property, the Sudbury Property and/or the London Property (including for
greater certainty the interests, if any, of the parties listed in Exhibit H-2
in and to such properties) not conveyed to the Purchaser on Closing.
(c) Seller will make all books and records retained by Seller
available for inspection by Purchaser and its representatives during business
hours on reasonable advance notice. Purchaser will make all books and records
transferred to Purchaser available for inspection by Seller and its
representatives during business hours on reasonable advance notice.
(d) Seller and Purchaser shall cooperate in timely making any
filing required pursuant to federal, provincial or local laws.
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(e) Seller shall cooperate with Purchaser, at Purchaser's
sole expense, in enforcing any rights under any unexpired guarantees or
warranties given by persons other than Seller in connection with any of the
Properties.
(f) Purchaser shall incur, within two (2) years of the
Closing Date, not less than $5,000,000 in capital improvement expenditures as
described in Exhibit UU attached hereto (the "Proposed Development Budget")
with respect to the Properties and the Business, such $5,000,000 to consist of
both "hard" and "soft" costs, including, without limitation, debt service on
borrowed funds for such capital improvements accruing during such two (2) year
period, professionals' fees and disbursements, compliance with Laws and
insurance requirements and the cost of materials and labor. Any costs incurred
by Purchaser under this Section 17(e) shall be Additional NLC Debt/Equity.
(g) Seller shall continue to deposit into the Bank Accounts
all funds received or collected on its behalf with respect to any of the
Properties.
(h) The provisions of this Section 17 shall survive Closing.
18. Brokerage.
A. Seller and Purchaser each warrant and represent to the
other that it has not dealt or negotiated with any broker in connection with
this transaction other than Smith Barney.
B. Seller and Purchaser each hereby agree to indemnify and
hold the other harmless from and against any and all claims, demands, causes of
action, loss, costs and expenses (including reasonable lawyers' fees and
disbursements) or other liability arising from or pertaining to any brokerage
commissions, fees, or other compensation, which may be due to any other brokers
or persons claiming to have dealt with it in connection with this transaction.
C. The provisions of this Section 18 shall survive the Closing.
19. Tax Reduction Proceedings.
A. This sale includes all tax refunds or tax credits owned,
controlled, held, payable or due for the benefit of Seller in respect of any of
the Properties (the "Tax Credits") which shall be properly reflected in the
Working Capital Adjustment made pursuant to Section 6 hereof.
B. During the term of this Agreement, with Purchaser's prior
written consent, Seller may institute and/or continue any proceeding or
proceedings for the reduction
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of the assessed valuation of the Properties or any portion thereof for real
estate taxes, or of any rate applicable thereto. All ongoing proceedings for
the reduction of the assessed valuation of any of the Properties (or any tax
payment with respect thereto (including, without limitation, Business Tax)) and
any amounts owed to Seller as Tax Credits are identified on Exhibit J-1 hereof.
C. If Seller receives or collects any Tax Credits, Seller
shall hold same in trust for the benefit of Purchaser and shall deliver same
promptly to Purchaser upon receipt thereof.
D. The provisions of this Section 19 shall survive the Closing.
20. Damage and Destruction.
If, prior to the Closing Date, all or any part of any of the
Properties is damaged by fire or other casualty, Seller shall turn over to
Purchaser on the Closing Date an amount equal to the net amount of any casualty
insurance proceeds collected by Seller on account of said physical damage or
destruction, and to the extent not so collected, to assign to Purchaser the
right to receive and settle same, in either case less (x) any expense actually
incurred by Seller in connection with any emergency repair by reason of such
damage or destruction and (y) any business interruption insurance payments for
periods prior to the Closing Date, provided, in each such instance, any
unapplied or receivable business interruption insurance shall be properly
reflected in the Working Capital Adjustment made pursuant to Section 6.
Notwithstanding the foregoing, in the event that any such damage or casualty
shall reasonably require in Purchaser's reasonable estimation, an amount in
excess of $1,000,000 to complete the restoration or rebuilding resulting
therefrom, then Purchaser may elect to terminate this Agreement. If Purchaser
so elects, this Agreement shall terminate and neither party hereto shall have
any further obligations hereunder (except those expressly stated to survive the
termination of this Agreement).
21. Expropriation.
If, prior to the Closing Date, all or any portion of any
Property is taken by expropriation or in the event of a change of legal grade
caused by an act of Governmental Authority, Seller shall promptly give
Purchaser written notice thereof, and the parties shall nonetheless proceed to
the Closing in accordance with this Agreement, without any abatement of the
Purchase Price or any liability or obligation on the part of Seller by reason
of such taking, provided, however, that Seller shall, at the Closing, (i)
assign and turn over, and Purchaser shall be entitled to receive and keep, the
proceeds of any award or other proceeds of such taking which may have been
collected by Seller as a result of such taking, less any portion thereof
applied to the cost of emergency repairs made by Seller prior to Closing with
Purchaser's prior written consent, which consent shall not be unreasonably
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withheld or delayed, or (ii) if no award or other proceeds shall have been
collected, deliver to Purchaser an assignment of Seller's right to any such
award or other proceeds which may be payable to Seller as a result of such
taking. If the net proceeds are paid to the holder of any mortgage or deed of
trust on the Properties or any ground lessor and such holder refuses to release
sufficient sums therefrom for the purpose of making repairs and restorations
required by reason of such expropriation, then, unless Purchaser elects to
contribute the amount required to make such repairs and restorations at the
Closing as Additional NLC Debt/Equity, Purchaser may elect to terminate this
Agreement. Notwithstanding the foregoing, in the event that any such
expropriation shall reasonably require in Purchaser's reasonable estimation, an
amount in excess of $1,000,000 to compensate for such expropriation, then
Purchaser may elect to terminate this Agreement, and neither party hereto shall
have any further obligations hereunder (except those expressly stated to
survive the termination of this Agreement).
22. Miscellaneous.
Whenever in this Agreement it is provided that any party
shall indemnify and hold harmless the other party, then, as a condition to such
indemnity, the party indemnified shall promptly give written notice to the
indemnitor of any claim or demand made upon it which is or may be indemnified
against, and the indemnitor shall have the right to defend against such claim
or demand by counsel of its own choice, provided that such counsel be
satisfactory to the party being indemnified. There shall be no settlement of
any action arising under any indemnity contained herein without the prior
written consent of the indemnitor.
23. Notices.
All notices, demands, requests or other communications
("notices") required to be given or which may be given hereunder shall be in
writing and shall be deemed given three days after being sent by certified
mail, postage prepaid, return receipt requested, or on the day of delivery if
hand delivered and receipted for or refused by the intended recipient, or on
the business day following the day of dispatch by overnight receipted courier
or, if sent by facsimile transmission, on the date confirmed receipt is
received if additionally delivered the next day by prepaid overnight receipted
courier, addressed as follows:
If to Seller, Syndicated GP, 1002370 or any of the Nominees,
at:
Capital Properties Limited Partnership
5940 Macleod Trail South
Suite 209
Calgary, Alberta T2H 2G4
Attention: Mr. Peter P. Sikora
Telecopy: (403) 292-0222
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With a copy to:
Brans, Lehun, Baldwin & Champagne
120 Adelaide Street West
Suite 1701
Toronto, Ontario M5H 1T1
Attention: Dennis M. Brans, Esq.
Telecopy: (416) 601-0655
If to Purchaser, at:
Chartwell Canada Corp.
c/o National Lodging Corp.
605 Third Avenue
New York, New York 10158
Attention: Martin L. Edelman
Telecopy: (212) 867-5475
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Robert J. Wertheimer, Esq.
Telecopy: (212) 856-7808
or to such other address or addresses as the parties may designate from time to
time by notice given in accordance with this Section 23.
24. Survival of Representations and Indemnifications.
A. (1) Subject to Section 13.B hereof, the representations
and warranties of Seller, the Nominees, 1002370 and Syndicated GP in Section 13
and elsewhere in this Agreement (other than with respect to Taxes as described
in Exhibit AA-1) shall survive the Closing for a period of twenty-four (24)
months from the Closing Date and shall then expire. The representations and
warranties of the Seller, Nominees and 1002370 in this Agreement related to
Taxes shall survive the Closing until the expiry of the relevant period for
assessing or reassessing such Taxes. Upon the expiration of a representation or
warranty pursuant to this Section 24.A.(1), such representation or warranty
shall be deemed to be of no further force or effect, as if never made, and no
action may be brought based on the same, directly or indirectly, whether for
breach of contract, tort or under any other legal theory irrespective of the
circumstances; provided, however, that such representation shall not so
terminate (and any related claim may continue to be pursued) if written notice
of a claim based on such representation or warranty specifying in reasonable
detail the facts on which the claim is
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based and the damages incurred shall have been delivered to Seller in
accordance with the notice provisions hereof prior to the expiration of such
representation or warranty net of any benefits actually received and enjoyed by
Purchaser in connection with such claim. Provided that (x) if a claim has not
been settled or if none of the indemnifying or indemnified parties has
commenced an action within six (6) months of the date of the notice of claim
and (y) all conditions precedent for bringing such claim in an appropriate
court has been met for not less than sixty (60) days, then the claim shall be
deemed to have been settled and the representation shall terminate.
(2) The representations and warranties of Purchaser set forth
in Sections 13.C shall survive the Closing for a period of twenty-four (24)
months from the Closing Date and shall then expire. Upon the expiration of a
representation or warranty pursuant to this Section 24.A.(2), such
representation or warranty shall be deemed to be of no further force or effect,
as if never made, and no action may be brought based on the same, directly or
indirectly, whether for breach of contract, tort or under any other legal
theory irrespective of the circumstances; provided that such representation
shall not so terminate (and any related claim may continue to be pursued)
unless written notice of a claim based on such representation or warranty
specifying in reasonable detail the facts on which the claim is based shall
have been delivered to Purchaser prior to the expiration of such representation
and warranty.
B. (1) Subject to the terms and conditions of this Section 24
and in particular the time limitations in Section 24.A, Seller hereby agrees to
indemnify, defend and hold and save harmless Purchaser, its officers,
directors, partners, controlling persons, affiliates and agents (the "Purchaser
Indemnified Parties"), any successor to the Purchaser's interest in the
Properties or the Business to whom this indemnity is assigned or any part of
any of the foregoing and all directors, officers, employees and agents of such
successors (collectively, all of the foregoing are referred to as the
"Purchaser Related Indemnified Parties") from all claims, demands, actions,
causes of action, judgments, orders, suits and Losses suffered or incurred by
any such Purchaser Related Indemnified Party as a result of, or arising
directly or indirectly out of, or in connection with, the cost or expense of
any repair or remediation in excess of $100,000 performed as a result of
matters disclosed in the Environmental Reports or in any environmental report
performed in respect of Properties or disclosed in any Exhibit to this
Agreement where further investigation is recommended in any such report and
such repair or remediation is required by Environmental Laws (the aggregate of
all such costs, "Environmental Cleanup Costs"). The obligation set forth in
this Paragraph 24(B)(1) shall not expire and shall be payable solely by
reducing the Termination Payment (as defined in the Future Payments Agreement)
by the amount of liability hereunder.
(2) Subject to the terms and conditions of this Section 24,
Purchaser hereby agrees, to indemnify, defend and hold Syndicated GP, its
officers, directors, partners, controlling persons, affiliates and agents and
Seller (the "Seller Indemnified Parties") harmless from and against all claims,
demands, actions, causes of action and Losses suffered
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or incurred by the Seller Indemnified Parties relating to or arising from any
inaccuracy in or breach of any representation or warranty of Purchaser made
pursuant to this Agreement.
C. The respective obligations and liabilities of Seller and
Syndicated GP to the Purchaser Indemnified Parties and of Purchaser to the
Seller Indemnified Parties under Section 24.B hereof with respect to claims
resulting from the assertion of liability by third parties shall be subject to
the following terms and conditions:
(1) Within fifteen (15) days after receipt of notice of
commencement of any action or the assertion of any claim by a third
party, the Purchaser Indemnified Party or the Seller Indemnified
Party, as the case may be (the "Indemnified Party"), shall give Seller
or Purchaser, as the case may be (the "Indemnifying Party") written
notice thereof together with a copy of such claim, process or other
legal pleading, and the Indemnifying Parties shall have the right to
undertake the defense thereof by representatives of its own choosing
(but who shall be reasonably satisfactory to the Indemnified Party);
provided, however, that a failure to so notify the Indemnifying
Parties within such fifteen (15) day period shall not affect the
Indemnified Party's rights hereunder except to the extent such
Indemnifying Parties are materially prejudiced by such failure.
(2) In the event that the Indemnifying Party, by the
fifteenth day after receipt of notice of any such claim (or, if
earlier, by the fifth day preceding the day on which an answer or
other pleading must be served in order to prevent judgment by default
in favor of the person asserting such claim), do not elect to defend
against such claim, the Indemnified Party will have the right to
settle or compromise any claim or consent to the entry of any
judgment; provided that the Indemnifying Party shall have the right to
assume the defense of such claim with counsel of its own choosing (but
who shall be reasonably satisfactory to the Indemnified Party) at any
time prior to settlement, compromise or final determination thereof.
(3) Notwithstanding anything to the contrary in this Section
24.C, the Indemnifying Parties shall not, without the prior written
consent of the Indemnified Party, settle or compromise any claim or
consent to the entry of any judgment which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff
to the Indemnified Party a full and absolute release from all
liability in respect of such claim.
(4) In connection with any such indemnification, the
Indemnified Party will cooperate in all reasonable requests of the
Indemnifying Parties at the Indemnifying Parties' expense.
(5) Purchaser shall recover Losses in accordance with the
Indemnification Agreement.
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(6) With respect to any indemnifiable claim by a Governmental
Authority that may result in an obligation to conduct environmental
remediation activities at any of the Properties, Purchaser shall have
the right to negotiate the scope and extent of such remediation with
such Governmental Authority and to compromise such claim.
(7) If the Seller and the Purchaser, acting reasonably,
determine that any payment (the "Payment") made pursuant to this
Section 24 is subject to goods and services tax or is deemed by the
GST Legislation to be inclusive of goods and services tax, or is
subject to any other tax, the Indemnifying Parties agree to pay to the
Indemnified Party, in addition to the Payment, an amount equal to the
tax payable in connection with such Payment and such additional
amount.
D. Notwithstanding anything to the contrary contained in this
Agreement, in the event (i) an Indemnified Party (a "Non-Defaulting Party") has
not been paid all Losses and other damages it is owed hereunder by an
Indemnifying Party (or, if the Indemnifying Party is a Seller Indemnified
Party, then if any of the Seller Indemnified Parties shall not have made all
payments to such Indemnified Party) (a "Defaulting Party") and (ii) thereafter,
such Defaulting Party (or, if the Defaulting Party is a Seller Indemnified
Party, then any of the Seller Indemnified Parties) brings a claim (an
"Offsettable Claim") for indemnification hereunder against such Non-Defaulting
Party, then, in such event, the amount of such Offsettable Claim shall be
reduced by any amounts owed by such Defaulting Party (or, if such Defaulting
Party is a Seller Indemnified Party, then the amounts owed by any of the Seller
Indemnified Parties) to the Non-Defaulting Party.
E. As used herein (x) "Losses" means any and all assessments,
liabilities, losses, fines, penalties, costs, damages and expenses (including,
without limitation, lawyers', consultants', experts' and accountants' fees and
disbursements net of any benefits actually received by the Purchaser in
connection with such Loss) and (y) "Person" shall mean any natural person,
corporation, limited partnership, limited liability company, limited
partnership, general partnership, joint stock company, joint venture, real
estate investment trust, association, company, trust, bank, trust company, land
trust, vehicle trust, business trust or other organization irrespective of
whether it is a legal entity, or any government or agency or political
subdivision thereof. All references in this Section 24 to Losses shall exclude
goods and services tax to the extent that input tax credits are available
therefor.
25. Investment Canada Act.
A. Seller shall cease to engage in any publication,
distribution, or sale of any books, magazines, periodicals or newspapers in
print or machine readable form, and shall cease to engage in any production,
distribution, sale, exhibition or rental of any film recordings, or video
recordings, not later than three (3) days prior to Closing.
B. The provisions of this Section 25 shall survive Closing.
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26. Submission to Jurisdiction.
A. Any legal action or proceeding with respect to this
Agreement may be brought in the courts of the Province of Ontario and the
appellate courts of any thereof, and by execution and delivery of this
Agreement, each party to this Agreement hereby accepts, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each party to this
Agreement hereby expressly and irrevocably submits the person of such party to
this Agreement to the in personam jurisdiction of the foregoing courts in any
suit, action or proceeding arising, directly or indirectly, out of or relating
to this Agreement. To the extent permitted under applicable law, this consent
to personal jurisdiction shall be self-operative and no further instrument or
action, other than service of process in one of the manners specified in this
Agreement or as otherwise permitted by law, shall be necessary in order to
confer jurisdiction upon the person of such party to this Agreement in any such
court.
B. SELLER, SYNDICATED GP, THE NOMINEES, 1002370 AND PURCHASER
HEREBY WAIVE (FOR THEMSELVES AND THEIR SUCCESSORS AND ASSIGNS) TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER AGAINST THE OTHER ON
ANY MATTER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.
C. The provisions of this Section 26 shall survive the Closing.
27. Obligations to Cure.
A. In the event any of the representations or warranties
contained in Section 13 hereof are rendered untrue by the intentional, bad
faith or wanton acts of Seller, Syndicated GP, 1002370 or the Nominees, as the
case may be, through the Closing Date, Seller, Syndicated GP, 1002370 or the
Nominees, as the case may be, shall be obligated to use best efforts to cure
such untrue representations or warranties and expend all necessary money to
facilitate such cure.
B. The provisions of this Section 27 shall survive Closing.
28. Entire Agreement.
This Agreement together with the Exhibits and Schedules
hereto contains all of the terms agreed upon between the parties with respect
to the subject matter hereof.
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29. Amendments.
This Agreement may not be changed, modified or terminated,
except by an instrument executed by the parties hereto who are or will be
affected by the terms of such instrument.
30. Waiver.
No waiver by either Seller or Purchaser of any failure or
refusal of the other party to comply with its obligations hereunder shall be
deemed a waiver of any other or subsequent failure or refusal to so comply by
such other party.
31. Partial Invalidity.
If any term or provision of this Agreement or the application
thereof to any person or circumstances shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement, or the application of such term
or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Agreement shall be valid and be enforced to the fullest
extent permitted by law.
32. Section Headings.
The headings of the various sections of this Agreement have
been inserted only for the purposes of convenience, and are not part of this
Agreement and shall not be deemed in any manner to modify, explain, expand or
restrict any of the provisions of this Agreement.
33. Governing Law.
This Agreement shall be governed by the laws of the Province
of Ontario and the federal laws of Canada applicable therein.
34. Further Assurances.
Seller and Purchaser will do, execute, acknowledge and
deliver all and every such further acts, deeds, conveyances, assignments,
notices, transfers and assurances as may be reasonably required for the better
assuring, conveying, assigning, transferring and
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confirming unto Purchaser the Properties, and for carrying out the intentions
or facilitating the consummation of this Agreement.
35. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
36. Counterparts.
This Agreement may be executed in several counterparts, each
of which shall constitute the same instrument.
37. Assignment.
Except for assignment to an entity or entities directly or
indirectly owned or controlled by Purchaser or National Lodging Corp., for
which Seller's consent shall not be required, this Agreement may not be
assigned by Purchaser without the prior written consent of Seller, which
consent may be granted or withheld by Seller in its sole and absolute
discretion. In the event of any such assignment, any references in this
Agreement to Purchaser shall be construed to mean the assignee(s) to which
Purchaser named herein shall have assigned its rights under this Agreement and
which shall have assumed all obligations of the Purchaser under this Agreement.
38. References to Income Tax Act (Canada).
For purposes of this Agreement, where the context so permits,
any references to the Income Tax Act (Canada) includes a reference to the
analogous provincial legislation, any reference to Revenue Canada or to the
Minister of National Revenue includes a reference to any relevant provincial
taxing authority and any reference to a filing or similar requirement imposed
under the Income Tax Act (Canada) includes a reference to any corresponding
filing or requirement under any such analogous provincial legislation.
THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK;
THE SIGNATURE PAGE FOLLOWS
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IN WITNESS WHEREOF, the undersigned have caused this
Agreement to be executed the day and year first above written.
SELLER:
CAPITAL PROPERTIES LIMITED PARTNERSHIP
By: Syndicated Capital Properties Inc.,
its sole general partner
By: /s/ Peter Sikora
Name: PETER SIKORA
Title:
SYNDICATED CAPITAL PROPERTIES INC.
By: /s/ Peter Sikora
Name: PETER SIKORA
Title:
SYNCAP PROPERTIES INC.
By: /s/ Peter Sikora
Name: PETER SIKORA
Title:
TEGRAD PROPERTIES (WINNIPEG) INC.
By: /s/ Peter Sikora
Name: PETER SIKORA
Title:
TEGRAD MONTREAL I INC.
By: /s/ Peter Sikora
Name: PETER SIKORA
Title:
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1002370 ONTARIO, INC.
By:/s/ Peter Sikora
Name: PETER SIKORA
Title:
PURCHASER:
CHARTWELL CANADA CORP.
By:/s/ Martin Edelman
Name: MARTIN EDELMAN
Title: President
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Exhibit CC
Working Capital Adjustment
As contemplated by Section 6 of the Agreement, the Statement and the
Final Statement (collectively the "Statements") will be prepared as described
herein in Canadian Dollars ($CDN).
The Statements will be prepared utilizing the accounting policies,
procedures, methods and practices herein unless this schedule is silent in
which case utilizing the same accounting policies, procedures, methods and
practices which the Seller used to prepare its audited financial statements for
the year ended September 30, 1995 or to the extent that circumstances or a type
of transaction exists which did not exist or were not dealt with in those
financial statements, then in accordance with the CICA Handbook.
For purposes of the Statements, there will be no change in the
accounting policies utilized in preparing the Statements as a result of any new
accounting pronouncements that may be issued or become effective between
September 30, 1995 and the Closing Date.
The Statements will be prepared as of 11:59 P.M. on the day
immediately preceding the Closing Date (the "Apportionment Date").
The amounts recorded in the Statements will not reflect any asset
impairment or liability (not including liabilities assumed) that may be
required under CICA Handbook by any actions or decisions of Purchaser to
acquire the Properties at or subsequent to the Closing Date, including, but not
limited to, inventory write-downs, severance and termination benefits,
relocation costs, receivable write-offs, assets impairments, lease termination
costs and asset disposal costs.
I. Statement of Working Capital
The Statement will be prepared in the following
form:
$m
Current Assets
Cash
Current receivables
Prepaid expenses
Current other assets
Less:
Current Liabilities
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Trade accounts payable
Accrued expenses and other current
liabilities
Working Capital
II. Definition of Working Capital
Working Capital shall be the difference between Current
Assets and Current Liabilities of Seller. Current Assets shall contain the
following accounts: cash; current receivables (including current amounts
receivable from affiliates); prepaid expenses and other current assets. Current
Liabilities shall contain the following accounts: trade accounts payable;
accrued and other current liabilities (including, without limitation, current
payables to affiliates of Seller and Syndicated GP) (but excluding the current
portion of the Assumed Debt and the Assigned Debt or any amounts due, if any,
under Leases other than Apportionments for current period payments).
The following are specific definitions of the components of
Working Capital:
1. Cash
All cash and cash equivalents, including but not limited to
securities with maturity dates of less than 1 year.
2. Current receivables
The nominal value of all current trade accounts and other
current receivables, including unbilled receivables and including any current
amounts receivable from affiliates or (excluding amounts classified in pre-paid
expenses and other current assets) net of allowances for doubtful current
receivables. For greater clarification, accounts receivable include amounts due
from co-owners of the Edmonton South Property with respect to the purchase of
interests in the hotel and renovation loans to the co-owner.
3. Prepaid expenses
To the extent that payment has been made or a payable had
been recorded by Seller before the Closing Date for events, activities,
consumption or benefit occurring wholly or partly after the Closing Date, the
amount of such payment or payable (prorated in accordance with the timing of
such event) shall be included as an asset in the Statements. For the avoidance
of doubt, this will include any prepayment in respect of the Management
Agreement or property taxes or insurance.
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4. Other current assets
The nominal value of other current assets (including but not
limited to inventories).
5. Trade accounts payable
The nominal value of trade accounts payable arising from the
purchase of goods and services used in the normal course of business.
6. Accrued expenses and other current liabilities
To the extent that payment has been received by Seller before
the Closing Date for events, activities, consumption or benefit occurring
wholly or partly after the Closing Date, the amount of such payment shall be
pro-rated in accordance with the timing of such events, activities or
consumption and an appropriate portion included as a liability in the
Statements. For the avoidance of doubt, this will include any necessary accrual
in respect of the Management Agreement.
To the extent that payment has not been made by Seller before
the Closing Date for events, activities or consumption which occurred wholly or
partly before the Closing Date, the amount of such payment shall be included as
a liability in the Statements. For the avoidance of doubt, there shall be no
accruals for (i) unpaid discretionary bonuses to employees of Seller, the
deductible portion of the outstanding insurance liability or (ii) for accrued
interest on the Assigned Debt being forgiven on Closing (except to the extent
interest due and payable prior to Closing was not paid as required under the
letter agreement pursuant to which BFC agreed to purchase the Assigned Debt).
For the avoidance of doubt, no provision will be made for
deferred Federal, territorial, provincial or local deferred income taxes.
III. Apportionments.
A. The following shall be apportioned between Seller and Purchaser as
of the Apportionment Date:
a. real estate taxes, personal property taxes, sewer rents
and taxes, fire service charges, and any other governmental tax,
including, but not limited to, branch taxes, capital taxes and income
taxes, if applicable, or charge levied or assessed whatsoever against
the Properties (collectively, the "Properties Taxes"), on the basis of
the respective periods for which each is assessed or imposed, to be
apportioned in accordance with Section B hereof;
b. water charges to be apportioned in accordance with Section C
hereof;
c. charges for electricity, telephone, television, cable
television, steam, gas and any other utilities (collectively,
"Utilities") made by the utility companies servicing the Properties
to be apportioned based on a meter reading obtained by Seller
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<PAGE>
on or near to the Apportionment Date or on the basis of the most
recent bills that are available, and transferable utility and other
deposits, if any, for which Seller shall be reimbursed if same be
assigned, but all amounts refundable under unassigned or unassignable
utility and other arrangements shall be delivered to Purchaser for
application against deposits for such utilities required of Purchaser;
d. amounts paid or payable (but only the current portion thereof
to the extent properly apportionable) under the Franchise Agreements,
Service Contracts, Equipment Leases, and Billboard Leases;
e. room charges and other guest charges incurred on or before
the Apportionment Date to be apportioned and collected in accordance
with Section D hereof;
f. travel agents' commissions, if any;
g. all amounts payable by the Seller in respect of the
Employees which require apportionment including, without limiting the
generality of the foregoing, accrued but unpaid vacation pay earned
prior to the Apportionment Date, premiums for unemployment insurance,
premiums for worker's compensation, provincial health taxes, Canada
Pension Plan and Quebec Pension Plan premiums and accrued but unpaid
wages, salaries, benefits, commissions and other remuneration and
shall be reflected in the Working Capital Adjustment; rent and all
other charges due under the Space Leases shall be apportioned in
accordance with Section F;
h. all rents and other obligations and charges under the Ground
Lease, and all prepaid rents and security and other deposits under
the Ground Lease, to be apportioned in accordance with Section G
hereof;
i. amounts paid for transferable licenses, if any; and
j. value of fuel stored on the Properties, at the price then
charged by Seller's supplier, including any taxes, based on a tank
reading obtained by Seller on the Apportionment Date.
B. Properties Taxes shall be apportioned on the basis of the
fiscal period for which assessed. If the Closing Date shall occur either before
an assessment is made or a tax rate is fixed for the tax period in which the
Closing occurs, the apportionment of such Properties Taxes shall be calculated
on the basis of the prior year's Properties Taxes, but, after the assessment
and tax rate for the current year are fixed, the apportionment thereof shall be
recalculated and the Working Capital Adjustment shall be increased or decreased
based on such recalculation.
C. If there are water meters at the Properties, Seller shall
endeavor to have the water company servicing each Properties read the meters on
or immediately prior to the Apportionment Date. All charges based on such final
reading shall be reflected in the Working Capital Adjustment and Purchaser
shall be responsible for all charges thereafter. If such readings are not
obtainable, then the calculation of Working Capital Adjustment shall be
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postponed until such time as actual readings are obtained or in the
alternative, Purchaser and Seller may read the meters themselves and adjust the
amount based on usage over the billing period that includes the Closing Date.
All unpaid water bills in Seller's possession shall be turned over to Purchaser
at the Closing and shall be paid by Purchaser at the Closing, which shall be
reflected in the Working Capital Adjustment.
D. Income from the rental of rooms shall be properly credited
to Seller to the extent attributable to any period through the Apportionment
Date. Room charges for the night commencing on the Apportionment Date and
ending on the morning of the Closing Date shall belong to Purchaser. Any lost
revenues suffered by Purchaser in connection with Seller's "Eleventh Night
Free" program or other similar marketing schemes shall be properly reflected in
the Working Capital Adjustment. Income from food and beverage and other sales
or services through midnight of the Apportionment Date shall be properly
credited to Seller. Income from food and beverage and other sales or services
on the Closing Date shall belong to Purchaser. No cash adjustment shall be made
at the Closing on account of such income.
E. Prepaid minimum rents and other fixed charges payable
under the Space Leases for the month in which the Closing occurs shall be
apportioned and reflected in the Working Capital Adjustment. If any tenant is
in arrears in the payment of rent or other fixed charges due for months prior
to the month in which the Closing occurs, any payments on account of rent or
such other fixed charges received by Purchaser from such tenant after the
Closing shall be applied first to rent and other charges due for the month in
which such payments are received and then to preceding months for which there
are arrearages (always to the most recent first). If any payments of rent or
other fixed charges received by Seller or Purchaser after the Closing are
payable to the other party by reason of this allocation, the appropriate sum
(less a proportionate share of any reasonable lawyers' fees, costs and other
expenses incurred in the collection thereof) shall be promptly reflected in the
Working Capital Adjustment. At the Closing, Seller shall furnish to Purchaser a
complete and correct schedule of all minimum rents and other fixed charges
which are then due and payable but which have not been paid. Percentage rents
and other variable charges under the Space Leases, such as payments for real
estate taxes and other expenses, which are not fixed in amount, shall be
adjusted when and as received based upon the number of days in the payment
period that each party owned the Properties. Any security deposits or advance
payments of rent held by Seller under the Space Leases shall be assigned to
Purchaser at the Closing and reflected in the Working Capital Adjustment.
F. Seller shall be responsible for all accrued but unpaid
vacation pay, premiums for unemployment insurance, premiums for workers
compensation, provincial health taxes, Canada Pension Plan and Quebec Pension
Plan premiums, termination pay, severance pay and accrued but unpaid wages,
salaries, bonuses, commissions and other remuneration and benefits (a) with
respect to Employees terminated prior to Closing and (b) with respect to
Employees retained after Closing (collectively "Accrued Benefits") and shall be
reflected in the Working Capital Adjustment.
G. All rent and other fixed charges under the Ground Lease
shall be prorated as of the Apportionment Date. Any prepaid rent, security and
other deposits under the Ground Lease (including interest thereon, to the
extent payable under the Ground Lease)
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<PAGE>
shall be assigned to Purchaser and reflected in the Working Capital Adjustment
at the Closing.
H. Any errors or omissions in computing apportionments at
Closing shall be promptly corrected as soon as they are discovered and any
dispute as to the treatment of any errors or omissions shall be dealt with in
accordance with Section 6.D of the Agreement. Purchaser agrees to indemnify and
hold Seller harmless from and against any liability, cost or expense resulting
from Purchaser's failure to make any payment for which it has received a credit
pursuant to this Section.
I. It is the intent and agreement of the parties that all
costs and expenses of operating the Properties and the Business, and all
liabilities and revenues therein be for the account of Seller through the
Apportionment Date, and for the account of Purchaser thereafter.
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<PAGE>
CONTRACT OF SALE
by and among
CAPITAL PROPERTIES LIMITED PARTNERSHIP,
SELLER,
SYNDICATED CAPITAL PROPERTIES, INC.
SYNCAP PROPERTIES INC.
TEGRAD PROPERTIES (WINNIPEG) INC.
TEGRAD MONTREAL I INC.
1002370 ONTARIO, INC.
and
CHARTWELL CANADA CORP.,
PURCHASER.
Properties:
DATED AS OF JULY 17, 1996
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<PAGE>
TABLE OF CONTENTS
Page
1. Sale and Purchase, Description of Properties...................... 1
2. Purchase Price.................................................... 4
3. Status of Title to Properties..................................... 4
4. Title Report, Objections to Title................................. 5
5. Closing, Closing Date............................................. 6
6. Working Capital Adjustment........................................ 7
7. Accounts Receivable/Payable....................................... 8
8. Transaction Costs................................................. 9
9. Reservation Deposits.............................................. 10
10. Safes and Baggage................................................ 10
11. Bulk Sales Law................................................... 11
12. Liquor Licenses.................................................. 11
13. Representations and Warranties................................... 12
14. Pre-Closing Covenants............................................ 29
15. Conditions to Closing............................................ 33
16. Documents to be Delivered at Closing............................. 37
17. Post-Closing Covenants........................................... 42
18. Brokerage........................................................ 43
19. Tax Reduction Proceedings........................................ 43
20. Damage and Destruction........................................... 44
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Section Page
21. Expropriation.................................................... 44
22. Miscellaneous.................................................... 45
23. Notices.......................................................... 45
24. Survival of Representations and Indemnifications................. 46
25. Investment Canada Act............................................ 49
26. Submission to Jurisdiction....................................... 50
27. Obligations to Cure.............................................. 50
28. Entire Agreement................................................. 50
29. Amendments....................................................... 51
30. Waiver........................................................... 51
31. Partial Invalidity............................................... 51
32. Section Headings................................................. 51
33. Governing Law.................................................... 51
34. Further Assurances............................................... 51
35. Successors and Assigns........................................... 52
36. Counterparts..................................................... 52
37. Assignment....................................................... 52
38. References to Income Tax Act (Canada)............................ 52
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C/M: 11752.0002 350869.22
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Exhibits
A Description of Land and Identification of Hotels
A-1 Description of Ground Lease
A-2 Allocation of Purchase Price; Allocation with respect
to Land, Building,Personalty and Goodwill
B Equipment Leases
C Service Contracts
C-1 Rejected Service Contracts
D Billboard Leases
E Space Leases
E-1 Assigned Rents
E-2 Space Leases Not in Full Force and Effect/Tenant Improvements
E-3 Rent Rolls
F Properties Deposits
G Notes Receivable
G-1 Accounts Receivable
H Permitted Encumbrances
H-1 Surveys
H-2 Third Party Interests; Rights of First Refusal for Edmonton
South and Edmonton West Properties
I Consents To Be Obtained
I-1 Consents Not To Be Obtained
J Tax Bills
J-1 Tax Credits
K Organizational Documents
L Licenses and Permits
M Certificates of Insurance
N Litigation and Claims
N-1 Insured Litigation Claims
O Property Reports
P Environmental Conditions
Q Environmental Reports
Q-1 Known Release and Discharge of Hazardous Substances
Q-2 Off-Site Environmental Matters
R Financial Statements
S Violations
T Notices
U Assumed Debt
U-1 Assigned Debt
U-2 Mortgage Note (reduced amount)
V Due Bills and Trade Agreements
W Rate Agreements
X Declaration of Possession
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Y Form of Ground Lessor Estoppel Certificate
Z Change in Financial Conditions
AA Principals Guaranty
AA-1 Indemnity Agreement
BB Future Payments Agreement
CC Working Capital Adjustment
DD Transaction Costs
EE Form of Title Opinions
FF List of Nominees; Nominee Agreements
GG Form of Nominee Agreement (Direction)
HH Form of Assignment and Assumption Agreement
II Form of Bringdown Certificate
JJ Properties Defects
KK Franchise Agreements
LL-1 Form of Management Agreement
LL-2 Form of Master Franchise Services and Development Agreement
MM Investment Canada Act
NN Reliance on Outside Facilities
OO Bank Accounts
PP Form of Covenant Not to Sue
QQ List Employees
QQ-1 Non-Terminable Employees
QQ-2 Collective Agreements
QQ-3 Labor Strikes
QQ-4 Labor Settlements
QQ-5 Employer Plans
QQ-6 Worker's Compensation
RR Properties with ACM and PCB
RR-1 Underground Storage Tanks
SS Other Indebtedness
TT Rights of First Refusal in Existing Management Agreements
UU Proposed Development Budget
VV GST Tax Registration Numbers
WW Transaction Opinion
C/M: 11752.0002 350869.22
FORM OF FUTURE PAYMENTS AGREEMENT
THIS FUTURE PAYMENTS AGREEMENT (this "Agreement") dated as of
this ____ day of _____________, 1996 by and among Chartwell Canada Corp., a
Delaware corporation ("Owner"), having an office at 605 Third Avenue, 23rd
Floor, New York, New York, United States 10158, Syndicated Capital Properties
Inc., an Ontario corporation ("Agent" or "Syndicated") having an office at 5940
MacLeod Trail South, Suite 209, Calgary, Alberta, Canada P2H 2G4, acting not
for itself but solely as nominee for the benefit of Capital Properties Limited
Partnership, an Ontario limited partnership ("CPLP"), having an office at 5940
MacLe-od Trail South, Suite 209, Calgary, Alberta, Canada T2H 2G4, and CPLP.
W I T N E S S E T H:
WHEREAS, the individuals identified on Schedule A annexed hereto,
being the holders of the Class A Units and Class B Units, are the limited
partners (the "Limited Partners"), and together with Syndicated are the persons
owning all of the legal interests in CPLP and are the sole partners of CPLP;
WHEREAS, pursuant to a certain contract of sale dated as of
July___, 1996 (the "Purchase Agreement"), CPLP has sold substantially all of
its assets (the "CPLP Assets") to Owner in consideration for a sum certain
payable at closing (the "Closing Payment") and certain conditional payments
("Future Payments") as, if and when provided herein;
WHEREAS, in accordance with the terms and conditions of the
Purchase Agreement, CPLP and Syndicated have made certain representations,
warranties, covenants and agreements with Owner, the breach of which results in
certain indemnification obligations as and to the extent provided in the
Purchase Agreement;
WHEREAS, CPLP and the Limited Partners have agreed that all
Future Payments are subject to offset for the Indemnification Obligations
(hereinafter defined) as and to the extent set forth herein; and
WHEREAS, the parties hereto have agreed to set forth their
respective rights, covenants and obligations with respect to Future Payments
and Indemnification Obligations, all as more particularly set forth herein.
NOW, THEREFORE, in consideration for the mutual promises herein
contained and other good and valuable consideration, the receipt and legal
sufficiency of which is hereby acknowledged, the parties hereto do hereby agree
as follows:
C/M: 11752.0002 369570.13
<PAGE>
1. Certain Definitions. The following capitalized terms shall
have the ---------------------- meaning set forth below:
(a) "Capital Proceeds Participation Payment" means the amount
payable to Agent, solely as nominee for CPLP, in accordance with the Capital
Proceeds Participation Payment Calculation, as Capital Proceeds Participation,
less any accrued and unpaid Indemnification Obligations.
(b) "Capital Proceeds Participation Payment Calculation" means
the manner in which a Capital Proceeds Participation Payment is determined with
respect to each Capital Proceeds Transaction, as follows:
(i) Step 1: determine Net Capital Proceeds;
(ii) Step 2: subtract the lesser of (x) Net Capital Proceeds
or (y) accrued and unpaid NLC Preferred Return;
(iii) Step 3: if any Net Capital Proceeds remain, subtract
the NLC Debt/Equity Investment (such amount, as so reduced, the
"Capital Proceeds Participation Cash");
(iv) Step 4: if there is Capital Proceeds Participation Cash
remaining, then an amount equal to twenty-five (25%) percent
thereof shall be defined as the "Capital Proceeds Participation"
for such Capital Proceeds Transaction.
(c) "Capital Proceeds Transaction" means (i) the closing of any
debt, equity or other financing transaction to which Owner is a party, and
which is not in the ordinary course of Owner's business in which Owner realizes
cash or equivalent proceeds, including, without limitation, the sale of any of
the CPLP Assets, except to the extent any such debt, equity or other financing
transaction constitutes NLC Debt/Equity Investment, or (ii) Owner's receipt of
insurance proceeds or expropriation awards with respect to CPLP Assets, if but
only if Owner has elected, in its sole discretion, to not use such proceeds or
awards to rebuild or replace the asset or assets that are the subject of such
casualty or expropriation.
(d) "Capital Tax" means, in the first instance without
duplication, any federal or provincial tax paid by Owner or NLC Lender (as
hereinafter defined) which is determined with reference to Owner's capital with
respect to the CPLP Assets, including, without limitation, taxes payable by
Owner under Part I.3 of the Income Tax Act (Canada), Part IV of the Taxation
Act (Quebec), Part III of the Corporations Tax Act (Ontario), the Corporation
Capital Tax Act (Manitoba), the Corporation Capital Tax Act (Saskatchewan), the
Corporation Capital Tax Act (British Columbia) and any other similar federal or
provincial legislation.
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<PAGE>
(e) "Capital Transaction Date" shall mean the date on which
Owner receives the proceeds from a Capital Proceeds Transaction (i.e., the
closing thereof).
(f) "Cash Flow Participation Payment" means the amount
payable to Agent, solely as nominee for CPLP, in accordance with the Cash Flow
Participation Payment Calculation, as Cash Flow Participation, less any accrued
and unpaid Indemnification Obligations.
(g) "Cash Flow Participation Payment Calculation" means the
manner in which a Cash Flow Participation Payment is determined, as follows:
(i) Step 1: determine Net Available Cash as of the last day
of any fiscal year of Owner commencing with December 31, 1996 and each
December 31st thereafter (for each such calculation, a "Reference
Date");
(ii) Step 2: subtract an amount equal to the NLC Preferred
Return attributable to the period for which Net Available Cash is
determined (such period, being the period commencing on the day after
the immediately preceding Reference Date (or the closing date under
the Purchase Agreement in the case of the first Reference Period) and
ending on the subject Reference Date, is defined as a "Reference
Period"), as well as previously unpaid and accrued NLC Preferred
Return, less any payments and/or credits in respect of the NLC
Preferred Return made in connection with Capital Proceeds
Participation Payment distributable during such Reference Period;
(iii) Step 3: subtract an amount equal to the Capital Taxes
paid during such Reference Period less the Net Capital Tax Savings
realized during such Reference Period (such amount, as so reduced, the
"Cash Flow Participation Cash");
(iv) Step 4: determine an amount (the "First Split") as
follows:
1. If the Cash Flow Participation Cash is greater than
or equal to $600,000, then the First Split shall be
$600,000.
2. If the Cash Flow Participation Cash is less than
$600,000 and the Reference Period is either the 1997
or 1998 year, then the First Split shall be an
amount equal to the greater of the Cash Flow
Participation Cash or:
(A) For the Reference Period ending December 31,
1997, $200,000;
(B) For the Reference Period ending December 31,
1998, $400,000:
3. In all other circumstances, the First Split shall
equal the Cash Flow Partic- ipation Cash;
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C/M: 11752.0002 369570.13
<PAGE>
provided, however, notwithstanding the foregoing, solely for the
Reference Period ending on December 31, 1996, the amount determined by
reference to subclauses 1 or 3, as applicable, of this Step 4 shall be
reduced by multiplying such amount by a fraction, the numerator of
which is the number of days in such Reference Period and the
denominator of which is 365.
(v) Step 5: if there is Cash Flow Participation Cash
remaining after subtracting the First Split (such amount, if any, is
defined as the "Remaining Balance"), divide the Remaining Balance into
two categories, (A) the first being an amount (the "Intermediate
Split") equal to the lesser of $1,800,000 and the Remaining Balance
and (B) the second being an amount (the "Final Split") equal to the
Cash Flow Participation Cash above $2,400,000, if any; and
(vi) Step 6: add the First Split plus sixteen (16%) percent
of the Intermediate Split plus twenty-five (25%) percent of the Final
Split; and
(vii) Step 7: deduct an amount equal to (x) the sum of all
Canadian income taxes (whether at the federal, provincial or local
level) paid by Owner during such Reference Period, less (y) actual
United States income tax benefits received by Owner during such
Reference Period from the payment of Canadian income taxes previously
or currently taken into account pursuant to this Step 7, without
duplication for benefits previously taken into account times (z) a
fraction, the numerator of which is the amount calculated in Step 6
above and the denominator of which is the amount calculated in Step 1
above. Such amount shall be defined as the "Cash Flow Participation"
with respect to such Reference Period.
(h) "FF&E Reserves" shall mean a reserve which shall be established
by Owner in an amount equal to: (i) three (3%) percent of Owner's revenues from
operations ("Operating Cash") for the first Reference Period; (ii) three and
one-half (3-1/2%) percent of Operating Cash for the second Reference Period;
(iii) four and one-half (4-1/2%) percent of Operating Cash for the third
Reference Period; and (iv) five (5%) percent of Operating Cash for each
Reference Period thereafter.
(i) "Indemnification Obligations" means all indemnification
obligations or other amounts payable to Owner under that certain
indemnification agreement dated as of the date hereof between Owner, NLC and NL
Hotels, Inc., on the one hand, and CPLP, Agent, Royco Hotels & Resorts, Ltd.
and NRG Management Services Inc., on the other hand (the "Indemnification
Agreement"), the Indemnification Agreement, the Purchase Agreement or any of
the other agreements executed in connection with the transactions contemplated
by the Purchase Agreement, together with interest at the Interest Rate on the
accrued and outstanding amount thereof from time to time, calculated from a
date which is sixty (60) days following the date each claim is made by Owner
for indemnification until the date such claim is paid.
-4-
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<PAGE>
(j) "Interest Rate" shall mean a rate per annum equal to thirteen
(13%) percent.
(k) "Mortgage Debt" shall mean the Assumed Debt, the Assigned Debt
and all arms' length financings secured by mortgages, charges, security
interests, liens, hypothecations and other encumbrances on the CPLP Assets,
provided, further, that the Assigned Debt (as such term is defined in the
Purchase Agreement) shall be reduced to reflect a principal balance outstanding
of not more than $87,630,0001, bearing a contract rate of interest of thirteen
(13%) percent calculated and compounded annually, and other customary terms.
(l) "Mortgage Note" means the mortgage note to be entered into
between Owner and NLC Lender with respect to the Assigned Debt substantially in
the form annexed hereto as Exhibit A which mortgage note shall not be amended
by Owner resulting in an Event of Default thereunder.
(m) "Net Available Cash" means, as of a Reference Date, Owner's net
cash flow with respect to the Reference Period ending on such Reference Date,
taking into account (I) all of the Owner's revenues actually received/collected
from the CPLP Assets, including, without limitation, operations, sale of
assets, insurance recoveries, condemnation awards and financings, but
specifically excluding (1) capital contributions, loan proceeds or other
fundings made and/or incurred by Owner included within the definition of NLC
Debt/Equity Investment and (2) Net Capital Proceeds relating to the CPLP Assets
(collectively, "Operating Revenue") less (II) an amount ("Operating Expenses")
equal to the sum of:
(i) all cash outlays (including, without limitation, all operating
expenses incurred with respect to the CPLP Assets, interest on Mortgage Debt
(other than interest payable pursuant to the Mortgage Note or the Assigned
Debt) notional interest at 9% on all reductions in the NLC Debt/Equity
Investment as provided in Section 1(q) herein, but only to the extent that New
Third Party Debt (as hereinafter defined) has not been incurred, plus an
additional amount for amortization payments on Mortgage Debt other than
amortization payments required pursuant to the Mortgage Note or the Assigned
Debt) and other costs and expenses incurred or accrued by Owner, including,
without limitation, any reasonable accounting costs or other costs incurred in
order to comply with Canadian and United States securities laws or other laws
in respect of the payment obligations set forth in this Agreement, during such
Reference Period, as well as actual out-of-pocket costs incurred with
arms-length third parties to hedge or otherwise protect Owner's return on
investment in U.S. Dollars, not to exceed twenty-five (25%) percent of an
amount equal to the lesser of (x) $200,000 in respect of any single year's
attributable hedging or currency fluctuation protection costs, and (y) what
Owner is contractually
- --------
1 To be adjusted to include Transaction Costs paid
by Owner or its Affiliates (as de- fined in the Purchase Agreement).
-5-
C/M: 11752.0002 369570.13
<PAGE>
ally obligated to spend in respect of such year (e.g., if Owner spends
$800,000 to contract in respect of a four (4) year hedge or other
currency fluctuation protection agreement in year 1 and spends $0 in
each of years 2, 3 and 4, Owner may claim hedging costs/investment
protection of $200,000 in each of years 1, 2, 3 and 4);
(ii) the FF&E Reserve; plus
(iii) any transfers, sales or other taxes (including, without
limitation, property taxes and business taxes), other than land
transfer tax and U.S. and Canadian income taxes and Capital Tax,
payable by Owner with respect to the CPLP Assets;
provided, however, for the avoidance of doubt, (A) except as expressly
provided in 1(m)(II)(i) hereof, in no event shall (1) the NLC
Preferred Return, (2) any other payments (including debt payments or
repayments) on account of the NLC Debt/Equity Investment, the Mortgage
Note or the Assigned Debt or (3) any expenses unrelated to the
business of financing, owning and operating the CPLP Assets be
deducted in calculating Net Available Cash; (B) prepaid expenses shall
not reduce Net Available Cash, however, prepaid expenses from a prior
Reference Period shall be appropriately deducted when determining Net
Available Cash for the current Reference Period; and (C) Net Available
Cash shall not include Net Capital Proceeds.
(n) "Net Capital Proceeds" means the proceeds realized by
Owner from any Capital Proceeds Transaction, net of: (i) expenses incident to
such Capital Proceeds Transaction; and (ii) amounts required to be paid out of
such proceeds in satisfaction of Mortgage Debt.
(o) "Net Capital Tax Savings" means, with respect to any
Reference Period, the actual savings received by Owner as a result of applying
Capital Tax paid by Owner during such Reference Period or a prior Reference
Period against U.S. and Canadian income tax obligations of Owner at the
federal, state, provincial and local level with respect to any Reference Period
and not previously taken into account.
(p) "NLC Debt/Equity Investment" means the aggregate
debt/equity investment by Owner and its affiliates (including, without
limitation, Owner and Bear Financial Corp., a Delaware corporation ("NLC
Lender")) from time to time and all other amounts expended, made or paid (A) to
acquire, own, operate, maintain, finance (including, without limitation, but
without duplication of other costs and expenses previously included in
calculating the NLC Debt/Equity Investment from time to time, the payment of
principal and interest on indebtedness incurred with respect to the CPLP
Assets) and dispose of the CPLP Assets (including any minority interests
relating to the CPLP Assets), including, without limitation, (i) amounts
expended in respect of Capital Taxes for any Reference Period less Net Capital
Tax Savings for such Reference Period (but only to the extent that (1) Capital
Taxes less Net Capital Tax Savings for such Reference Period are not deductible
under Section 1(g)(iii) hereof or (2) for the
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Reference Period ending (x) December 31, 1997 Cash Flow Participation Cash is
less than $200,000 or (y) December 31, 1998 Cash Flow Participation Cash is
less than $400,000), (ii) amounts expended in respect of capital improvements,
(iii) amounts funded for Working Capital needs which are not normally expended
from the FF&E Reserve or which exceed the FF&E Reserve, (iv) Accrued Benefits
(as defined in the Purchase Agreement) not reflected in the Working Capital
Adjustments made pursuant to Section 6 of the Purchase Agreement, but only to
the extent such Accrued Benefits relate to the period prior to the
Apportionment Date (as such term is defined in the Purchase Agreement), and (v)
costs incurred resulting from uninsured losses; provided, however, any sums
otherwise includable as NLC Debt/Equity Investment pursuant to this Section
1(p)(A) shall not be included when calculating the NLC Debt/Equity Investment
to the extent the source of such amounts was Operating Revenue or working
capital contributions previously included as NLC Debt/Equity Investment and (B)
satisfying CPLP obligations and the costs and expenses, howsoever defined or
denominated, of closing the transactions contemplated under the Purchase
Agreement, including, without limitation, all closing costs (including, without
limitation, assuming certain obligations and liabilities of CPLP) incident to
the Purchase Agreement, payment of the Purchase Price and the Additional NLC
Debt/Equity, purchasing the Assigned Debt (together with costs of realization
in respect of any of the security encumbered by the Assigned Debt in order to
obtain for NLC Lender fee simple title to the hotels and their appurtenant real
estate free and clear of any third party interests or encumbrances whatsoever),
satisfying pre-closing claimants and creditors whose claims were not fully
adjusted in the Working Capital Adjustment, to the extent NLC determines in its
sole discretion (but without obligation) to do so, and Environmental Cleanup
Costs (as such term is defined in the Purchase Agreement). Monies paid or
deemed paid to Owner or NLC Lender or their affiliates out of Net Available
Cash or from Net Capital Proceeds shall not reduce the NLC Debt/Equity
Investment unless, and only to the extent that, funds are withdrawn from the
working capital of the Business (as such term is defined in the Purchase
Agreement). For the avoidance of doubt, there shall be no reduction in the NLC
Debt/Equity Investment upon foreclosure by NLC Lender unless and to the extent
proceeds from an unaffiliated third-party are realized by NLC Lender.
(q) "NLC Preferred Return" means a preferred return on the NLC
Debt/Equity Investment, calculated at a rate of thirteen (13%) percent per
annum, compounded annually; provided, however, that solely for purposes of
calculating the NLC Preferred Return, and not otherwise, the NLC Debt/Equity
Investment shall be deemed reduced dollar for dollar from and after January 1,
1999 (such reduction not to exceed $45 million (CDN) in any event) if and to
the extent that Mortgage Debt (excluding the Assumed Debt and the Assigned
Debt, such new debt, the "New Third Party Debt") has not been incurred by
Owner, directly or indirectly; provided, however, that both the dollar for
dollar and the maximum $45,000,000 (CDN) reduction in the NLC Debt/Equity
Investment as herein provided shall be multiplied by a fraction, the numerator
of which is equal to the amount of the NLC Debt/Equity Investment funded by NLC
and its affiliates at closing remaining from time to time, and the denominator
of which is the said NLC Debt/Equity Investment funded at closing. Any amounts
in respect
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C/M: 11752.0002 369570.13
<PAGE>
of the NLC Preferred Return not paid or deemed to be paid pursuant to
paragraphs 1(b) and 1(g) hereof during or within ninety (90) days of any
Reference Period shall accrue and be added to the principal amount of the NLC
Debt/Equity Investment as of the end of the previous Reference Period (such
amounts earning a NLC Preferred Return together with the existing NLC
Debt/Equity Investment).
2. Future Payments. (a) Owner shall deliver to Agent, solely as agent
for CPLP, a Cash Flow Participation Payment once per annum within ninety (90)
days after the end of each Reference Period; each payment to be made in respect
of such Reference Period, together with a statement, audited by Owner's third
party accountants, setting out in reasonable detail the calculation of Net
Available Cash and the Cash Flow Participation Payment.
(b) Owner shall deliver to Agent, solely as agent for CPLP, a Capital
Proceeds Participation Payment with respect to each Capital Transaction within
sixty (60) days after each Capital Transaction Date, together with a statement,
certified by Owner's third party accountants, setting out in reasonable detail
the calculation of Net Capital Proceeds and the Capital Proceeds Participation
Payment.
(c) Any amounts in respect of a Cash Flow Participation Payment not
paid within 90 days of the last day of the relevant Reference Period or any
amounts with respect of the Capital Proceeds Participation Payment not paid
within 60 days of the Capital Transaction Date, in both instances shall bear
interest at the Interest Rate from the end of the relevant Reference Period or
Capital Transaction Date, as the case may be, until paid.
(d) Any errors or omissions in computing Cash Flow Participation
Payments or Capital Proceeds Participation Payments after the end of each
Reference Period or after the applicable Capital Transaction Date, as the case
may be, shall be corrected promptly upon discovery thereof and (x) if CPLP is
due additional funds, then such additional funds shall be added to the next
payments hereunder, provided that if there is an error or omission of greater
than 5%, then such additional funds shall be delivered to CPLP within 60 days
upon discovery of such error, and (y) if Agent, on behalf of CPLP, received
funds in excess of what was due CPLP hereunder, such funds shall be withheld
from the next distributions due to Agent, on behalf of CPLP, hereunder.
3. Termination of Agreement. (a) At any time after December 31, 2000
but prior to the twelfth (12th) anniversary of the closing, Owner may, in its
sole and absolute discretion, by delivery of notice in writing (a "Termination
Notice") to Agent, on behalf of CPLP, of its intention to pay a Termination
Payment in accordance with the provisions of this Agreement, followed, within
sixty (60) days thereafter, by delivery to Agent, on behalf of CPLP, of a
statement, certified by Owner's third party accountants, setting forth in
reasonable detail the calculation of the Termination Payment, be entitled to
elect to terminate its obligation to make Future Payments and terminate this
Agreement upon payment to Agent, solely as agent
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C/M: 11752.0002 369570.13
<PAGE>
for CPLP, ratably (i.e., in equal installments) over a four-year period,
without interest, commencing within 60 days of the giving of such Termination
Notice, of an aggregate amount (the "Termination Payment") equal to (x) 8.3
times the Cash Flow Participation Payment that would have been payable to
Agent, as agent for CPLP, if the Reference Period for the Cash Flow
Participation Payments Calculation was the twelve (12) month period immediately
preceding delivery of such Termination Notice by Owner electing to terminate
this Agreement less (y) the sum of (i) $375,000 plus (ii) any unpaid
Indemnification Obligations plus (iii) Environmental Cleanup Costs, but only to
the extent incurred to comply with present or future laws or legal
requirements. The second, third and fourth installments of the Termination
Payment shall be made not later than, respectively, the first, second and third
anniversaries of the date the first installment is paid (each such date, a
"Termination Payment Date"). For the avoidance of doubt, the Cash Flow
Participation Payments referred to in this Section 3(a) exclude Capital
Proceeds Participation Payments for the Reference Period in question and,
except for the Stub Cash Flow Participation Payment (defined below), there
shall be no Cash Flow Distribution Payments made to Agent, on behalf of CPLP,
during the four (4) year payment period for the Termination Payment.
(b) In addition to the Termination Payment, together with delivery of
the first installment, Owner shall pay to Agent, solely as agent for CPLP, an
amount (the "Stub Cash Flow Participation Payment") equal to the Cash Flow
Participation Payment which would have been due CPLP if the relevant Reference
Period commenced on January 1st of the year in which the first installment of
the Termination Payment is made and ended on the day immediately preceding the
date on which such Termination Notice is given, pro rating all expenses,
deductions and the like that would have been used to calculate the Cash Flow
Participation Payment for a full year.
(c) If Owner does not deliver to Agent, solely as agent for CPLP, the
second, third and fourth installments of the Termination Payment on or prior to
each respective Termination Payment Date, and does not then make such payment
within five (5) business days after notice from Agent that such payment was not
made when due, then such payment shall accrue interest at the Interest Rate
from the date due until the date paid.
(d) Should Owner so elect, the second, third and/or fourth
installment payments may be prepaid at any time without premium, penalty or
prior written notice of such intent to prepay.
(e) It is acknowledged and agreed that despite giving a Termination
Notice, the obligation to make the Termination Payment is revocable until, if
and when the first installment payment thereof, together with any then due Stub
Cash Flow Participation Payment, is made. If Owner does not make, or elects not
to make, the first installment of the Termination Payment, together with such
Stub Cash Flow Participation Payment, within such sixty (60) day
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C/M: 11752.0002 369570.13
<PAGE>
period, then Owner may, at any time during or after such sixty (60) day period,
in its sole and absolute discretion, deliver subsequent Notices of such intent
to make the Termination Payment.
(f) Upon payment of the aggregate Termination Payment and any then
due Stub Cash Flow Termination Payment, Owner shall have no further obligation
or liability to CPLP or the Limited Partners, and CPLP and the Limited Partners
shall have no further obligation or liability for Indemnification Obligations
or Environmental Clean-up Costs.
4. NOTICES.
(a) All notices under this Agreement shall be written and shall be
(i) delivered personally with receipt acknowledged, (ii) sent by prepaid,
internationally (in Canada and the United States) recognized overnight delivery
service, or (iii) sent by telecopy or other facsimile transmission (following
with next-day hard copy sent by prepaid, nationally recognized overnight
delivery service).
(b) All notices shall be deemed given when actually received or
refused by the party to whom the same are directed. Any notice required to be
sent under the terms of this Agreement shall be sent as follows:
If to Agent or to CPLP, to the addresses first set forth above;
Attention: Peter Sikora
Telecopy: (403) 292-0922
with a copy to:
Brans, Lehun, Baldwin & Champagne
120 Adelaide Street West
Suite 1701
Toronto, Ontario M5H 1T1
Attention: Dennis M. Brans, Esq.
Telephone: (416) 601-1040
Telecopy: (416) 601-0655
If to Owner, to the address first set forth above;
Attention: Martin L. Edelman
Telecopy: (212) 867-4644
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C/M: 11752.0002 369570.13
<PAGE>
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Robert J. Wertheimer, Esq.
Telephone: (212) 856-6910
Facsimile: (212) 856-7808
By giving to the other party at least 15 days written notice thereof,
the parties hereto and their respective successors and assigns will have the
right from time to time and at any time during the term of this Agreement to
change their respective addresses and each will have the right to specify as
its address any other address.
5. MISCELLANEOUS PROVISIONS
(a) Governing Law. This Agreement has been entered into in the
Province of Ontario, Canada and the federal laws of Canada applicable therein.
This Agreement and all rights of the parties hereunder shall be governed by and
construed in accordance with the internal law of the Province of Ontario
without regard to principals of conflicts of laws.
(b) Entire Agreement. This Agreement embodies and constitutes the
entire understanding among the parties with respect to the matters herein
contained, and all prior or contemporaneous agreements, understandings,
representations and statements, oral or written, are merged into this
Agreement. No waiver or modification of any provision of this Agreement shall
be valid unless in writing and signed by the party to be charged, and then only
to the extent therein set forth.
(c) Captions. The captions in this Agreement are intended only for
convenience of reference, do not constitute a part of this Agreement and shall
not be construed to define, interpret, describe or limit the scope or intent of
any provision of this Agreement.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
(e) No Assignment. CPLP is, and is intended to be, the sole
beneficiary of the right to receive Future Payments. There is no other right
accorded to CPLP or the Limited Partners hereunder and, accordingly, the right
to receive Future Payments may not be assigned to anyone other than CPLP and
the current Limited Partners thereof, and CPLP covenants and agrees that all
Future Payments shall be paid to the current Limited Partners. Any purported
assignment, pledge, hypothecation or other purported transfer by CPLP or the
Limited Partners shall be void ab initio; provided, however, Syndicated shall
have the right to assign its rights
-11-
C/M: 11752.0002 369570.13
<PAGE>
and obligations under this Agreement if the prior written consent of Owner is
first obtained, which consent may be withheld in Owner's sole and absolute
discretion.
(f) No Waiver. No assent, express or implied, by either party to any
breach of or default in any Term, covenant or condition herein contained on the
part of the other to be performed or observed shall constitute a waiver of or
assent to any succeeding breach of or default in the same or any other Term,
covenant or condition hereof.
(g) Invalidity of Provisions. In the event that any one or more of
the phrases, sentences, clauses or paragraphs contained in this Agreement shall
be declared invalid by the final and unappealable order, decree or judgment of
any court, this Agreement shall be construed as if it did not contain such
phrases, sentences, clauses or paragraphs; provided, however, that the parties
hereto shall endeavor in good faith to replace such invalid aspect with another
that is valid and that insofar as possible manifests the intent of the parties.
(h) Rights of Others. Nothing in this Agreement, express or implied,
is intended to confer upon any person other than the parties hereto, and their
permitted successors and assigns, any rights or remedies under or by reason of
this Agreement.
THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK;
THE SIGNATURE PAGE FOLLOWS
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly signed this
Future Payments Agreement as of the day and year first above written.
OWNER:
By:
AGENT:
By:
CPLP:
By:
GUARANTY
The undersigned hereby guarantees to CPLP the payment by Owner of the
Future Payments provided for in Section 2 of the within agreement and the
Termination Payment and the Stub Cash Flow Participation Payment provided for
in Section 3 of the within agreement as, if and to the extent Owner is
obligated to make such Future Payments or Termination Payments but does not do
so within thirty (30) days after written notice of such default, and demand for
payment, is made to Owner and the undersigned.
Dated: _________________________, 1996
NATIONAL LODGING CORP. (Now known as
Chartwell Leisure Inc. as of 8/8/96)
a Delaware corporation
By:
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C/M: 11752.0002 369570.13
EXECUTION COPY
CREDIT AGREEMENT
among
CHARTWELL LEISURE INC.
(formerly NATIONAL LODGING CORP.),
CHARTWELL CANADA CORP.,
VARIOUS BANKS,
THE BANK OF NOVA SCOTIA,
as SYNDICATION AGENT,
THE CHASE MANHATTAN BANK,
as ADMINISTRATIVE AGENT
_______________
Dated as of August 28, 1996
_______________
C/M 11752.0000 414856.1
<PAGE>
TABLE OF CONTENTS
SECTION 1. Amount and Terms of Credit.............................. 1
1.01 The Commitments......................................... 1
1.02 Minimum Amount of Each Borrowing........................ 3
1.03 Notice of Borrowing..................................... 3
1.04 Disbursement of Funds................................... 4
1.05 Notes................................................... 4
1.06 Conversions............................................. 5
1.07 Pro Rata Borrowings..................................... 5
1.08 Interest................................................ 5
1.09 Interest Periods........................................ 6
1.10 Increased Costs, Illegality, etc........................ 7
1.11 Compensation............................................ 9
1.12 Change of Lending Office................................ 9
1.13 Replacement of Banks.................................... 10
1.14 Joint and Several Obligations........................... 10
SECTION 2. Letters of Credit....................................... 10
2.01 Letters of Credit....................................... 11
2.02 Minimum Stated Amount................................... 12
2.03 Letter of Credit Requests............................... 12
2.04 Letter of Credit Participations......................... 12
2.05 Agreement to Repay Letter of Credit Drawings............ 13
2.06 Increased Costs......................................... 14
SECTION 3. Fees: Reductions of Commitment.......................... 15
3.01 Fees.................................................... 15
3.02 Voluntary Termination of Unutilized Commitments......... 15
3.03 Mandatory Reduction of Commitments...................... 16
SECTION 4. Prepayments; Payments; Taxes............................ 18
4.01 Voluntary Prepayments................................... 18
4.02 Mandatory Payments...................................... 19
4.03 Method and Place of Payment............................. 20
4.04 Net Payments; Taxes..................................... 20
SECTION 5. Conditions Precedent to Extensions of Credit on
the Initial Borrowing Date.............................. 21
5.01 Execution of Agreement, Notes........................... 21
5.02 Officer's Certificate................................... 21
5.03 Fees, etc............................................... 21
5.04 Opinion of Counsel...................................... 21
5.05 Corporate Documents; Proceedings, etc................... 22
5.06 Refinancing............................................. 22
5.07 Pledge Agreement........................................ 22
5.08 Guaranties.............................................. 22
5.09 Adverse Change.......................................... 22
5.10 Litigation.............................................. 23
5.11 Solvency Certificate and Insurance Certificates......... 23
5.12 Pro Forma Financial Information; Projections............ 23
i
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Page
5.13 Approvals, etc.......................................... 23
5.14 Cash on Hand............................................ 23
5.15 Absence of Downgrade.................................... 23
5.16 HFS Subordination Agreement............................. 24
5.17 Additional Equity....................................... 24
5.18 Additional Financial Statements......................... 24
SECTION 6. Conditions Precedent to Extensions of Credit on
the Canadian Borrowing Date............................. 24
6.01 Consummation of the Canadian Acquisition................ 24
6.02 Officer's Certificate................................... 25
6.03 Adverse Change.......................................... 25
6.04 Litigation.............................................. 25
6.05 Environmental Assessments............................... 25
6.06 Approvals, etc.......................................... 25
6.07 Security Agreement...................................... 25
SECTION 7. Conditions Precedent to All Credit Events............... 26
7.01 No Default; Representations and Warranties.............. 26
7.02 Adverse Change, etc..................................... 26
7.03 Litigation.............................................. 26
7.04 Notice of Borrowing; Letter of Credit Request........... 26
7.05 Certain Requirements With Respect to Loans
Incurred to Effect Permitted Hotel Acquisitions......... 27
SECTION 8. Representations and Warranties.......................... 27
8.01 Corporate and Partnership Status........................ 27
8.02 Corporate or Partnership Power and Authority............ 27
8.03 No Violation............................................ 27
8.04 Governmental Approvals.................................. 28
8.05 Financial Statements; Financial Condition;
Undisclosed Liabilities; Projections, etc............... 28
8.06 Litigation.............................................. 29
8.07 True and Complete Disclosure............................ 29
8.08 Use of Proceeds; Margin Regulations..................... 30
8.09 Tax Returns and Payments................................ 30
8.10 Compliance with ERISA................................... 30
8.11 The Security Documents.................................. 31
8.12 Representations and Warranties in Documents............. 31
8.13 Properties.............................................. 31
8.14 Capitalization.......................................... 32
8.15 Subsidiaries, Joint Ventures, Unrestricted
Subsidiaries............................................ 32
8.16 Compliance with Statutes, etc........................... 32
8.17 Investment Company Act.................................. 32
8.18 Public Utility Holding Company Act...................... 32
8.19 Environmental Matters................................... 32
8.20 Labor Relations......................................... 33
8.21 Patents, Licenses, Franchises and Formulas.............. 33
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<PAGE>
Page
8.22 Indebtedness............................................ 33
8.23 Canadian Acquisition; Recapitalization.................. 33
SECTION 9. Affirmative Covenants................................... 34
9.01 Information Covenants................................... 34
9.02 Books, Records and Inspections.......................... 36
9.03 Maintenance of Property, Insurance...................... 36
9.04 Corporate Franchises.................................... 37
9.05 Compliance with Statutes, etc........................... 37
9.06 Compliance with Environmental Laws...................... 37
9.07 ERISA................................................... 37
9.08 End of Fiscal Years; Fiscal Quarters.................... 38
9.09 Performance of Obligations.............................. 38
9.10 Payment of Taxes........................................ 38
9.11 Hotel Franchisors....................................... 38
9.12 Joint Venture Distributions............................. 38
9.13 Corporate Separateness.................................. 39
9.14 Management Agreements................................... 39
SECTION 10. Negative Covenants...................................... 39
10.01 Liens................................................... 39
10.02 Consolidation, Merger, Purchase or Sale of
Assets, etc............................................. 41
10.03 Restricted Payments..................................... 43
10.04 Indebtedness............................................ 44
10.05 Advances, Investments and Loans......................... 47
10.06 Transactions with Affiliates............................ 50
10.07 Capital Expenditures.................................... 51
10.08 Minimum Consolidated Net Worth.......................... 52
10.09 Consolidated Interest Coverage Ratio.................... 52
10.10 Consolidated Current Ratio.............................. 52
10.11 Total Leverage Ratio.................................... 52
10.12 Limitation on Payments of Certain Indebtedness,
Modifications of Certain Indebtedness,
Modifications of Certificate of Incorporation,
By-Laws and Certain Agreements, etc..................... 52
10.13 Limitation on Certain Restrictions on
Subsidiaries and Joint Ventures......................... 53
10.14 Limitation on Issuance of Capital Stock................. 53
10.15 Business................................................ 53
10.16 Limitation on Creation of Subsidiaries;
Unrestricted Subsidiaries and Joint Ventures............ 53
SECTION 11. Events of Default....................................... 54
11.01 Payments................................................ 54
11.02 Representations......................................... 54
11.03 Covenants............................................... 54
11.04 Default Under Other Agreements.......................... 54
11.05 Bankruptcy, etc......................................... 55
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<PAGE>
11.06 ERISA................................................... 55
11.07 Security Documents...................................... 55
11.08 Guaranty................................................ 56
11.09 HFS Subordination Agreement............................. 56
11.10 Judgments............................................... 56
11.11 HFS Franchise Agreements, etc........................... 56
11.12 Total Unrestricted Subsidiary Leverage Ratio............ 56
11.13 Unrestricted Subsidiary Tax Payments.................... 56
SECTION 12. Definitions and Accounting Terms........................ 57
12.01 Defined Terms........................................... 57
SECTION 13. The Agents.............................................. 82
13.01 Appointment............................................. 82
13.02 Nature of Duties........................................ 82
13.03 Lack of Reliance on the Agents.......................... 82
13.04 Certain Rights of the Agents............................ 82
13.05 Reliance................................................ 82
13.06 Indemnification......................................... 83
13.07 The Agents in their Individual Capacities............... 83
13.08 Holders................................................. 83
13.09 Resignation by the Agents............................... 83
SECTION 14. Miscellaneous........................................... 84
14.01 Payment of Expenses, etc................................ 84
14.02 Right of Setoff......................................... 84
14.03 Notices................................................. 85
14.04 Benefit of Agreement.................................... 85
14.05 No Waiver; Remedies Cumulative.......................... 86
14.06 Payments Pro Rata....................................... 86
14.07 Calculations; Computations.............................. 87
14.08 GOVERNING LAW; SUBMISSION TO JURISDICTION;
VENUE; WAIVER OF JURY TRIAL............................. 87
14.09 Counterparts............................................ 88
14.10 Effectiveness........................................... 88
14.11 Headings Descriptive.................................... 88
14.12 Amendment or Waiver; etc................................ 88
14.13 Survival................................................ 89
14.14 Domicile of Loans....................................... 89
14.15 Confidentiality......................................... 89
14.16 Register................................................ 90
14.17 Limitation on Additional Amounts, etc................... 90
14.18 Certain Provisions Regarding Joint Ventures............. 90
14.19 Judgment; Currency...................................... 91
iv
C/M 11752.0000 414856.1
<PAGE>
SCHEDULE I Commitments
SCHEDULE II Bank Addresses
SCHEDULE III [INTENTIONALLY OMITTED]
SCHEDULE IV Real Property
SCHEDULE V Subsidiaries and Joint Ventures
SCHEDULE VI Existing Indebtedness
SCHEDULE VII Insurance
SCHEDULE VIII Existing Liens
SCHEDULE IX Existing Investments
SCHEDULE X Certain Joint Ventures
SCHEDULE XI Litigation
SCHEDULE XII Identified Capital Expenditures
EXHIBIT A Notice of Borrowing
EXHIBIT B-1 Revolving Note
EXHIBIT B-2 Swingline Note
EXHIBIT B-3 Revolving Canadian Note
EXHIBIT C Letter of Credit Request
EXHIBIT D Section 4.04(b)(ii) Certificate
EXHIBIT E Officer's Certificate
EXHIBIT F Pledge Agreement
EXHIBIT G-1 HFS Guaranty
EXHIBIT G-2 Subsidiaries Guaranty
EXHIBIT G-3 Company Guaranty
EXHIBIT H Officer's Solvency Certificate
EXHIBIT I HFS Subordination Agreement
EXHIBIT J HFS Subordinated Note
EXHIBIT K Assignment and Assumption Agreement
EXHIBIT L-1 Form of Travelodge Franchise Agreement
EXHIBIT L-2 Form of Ramada Franchise Agreement
EXHIBIT M-1 Form of Opinion of Counsel to HFS
EXHIBIT M-2 Form of Opinion of Counsel to the Borrowers
EXHIBIT M-3 Form of Opinion of General Counsel to the Borrower
EXHIBIT N Form of Permitted Subordinated Indebtedness
Subordination Provisions
EXHIBIT O Form of Security Agreement
v
C/M 11752.0000 414856.1
<PAGE>
CREDIT AGREEMENT, dated as of August 28, 1996, among CHARTWELL
LEISURE INC. (the "Company"), CHARTWELL CANADA CORP. (the "Canadian Borrower"),
the Banks party hereto from time to time, THE BANK OF NOVA SCOTIA, as
Syndication Agent, and THE CHASE MANHATTAN BANK, as Administrative Agent (all
capitalized terms used herein and defined in Section 12 are used herein as
therein defined).
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions set forth
herein, the Banks are willing to make available to the Company and the Canadian
Borrower the respective credit facilities provided for herein:
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 The Commitments. (a) Subject to and upon the terms and
conditions set forth herein, each Bank severally agrees to make a loan or loans
(each a "Revolving $ Loan" and, collectively, the "Revolving $ Loans") to the
Company in an aggregate amount up to but not exceeding such Bank's Revolving
Loan Commitment, which Revolving $ Loans:
(i) shall be made at any time and from time to time on and after the
Initial Borrowing Date and prior to the Final Maturity Date;
(ii) shall, at the option of the Company, be $ Base Rate Loans or $
Eurodollar Loans, provided that, except as otherwise specifically provided
in Section 1.10(b), all Revolving $ Loans comprising the same Borrowing
shall at all times be of the same Type;
(iii) may be repaid and reborrowed in accordance with the provisions
hereof;
(iv) shall not exceed for any Bank at any time outstanding the
Revolving Loan Commitment of such Bank at such time less the product of
(x) such Bank's Adjusted Percentage and (y) the sum of (I) the aggregate
amount of all Letter of Credit Outstandings (exclusive of Unpaid Drawings
which are repaid with the proceeds of, and simultaneously with the
borrowing of, Loans) at such time, (II) the aggregate principal amount of
all Swingline Loans then outstanding and (III) the Dollar Equivalent
Amount of Revolving Loans at such time; and
C/M 11752.0000 414856.1
<PAGE>
(v) shall not exceed for all Banks at any time outstanding the Total
Revolving Loan Commitment at such time less the sum of (x) the aggregate
amount of all Letter of Credit Outstandings (exclusive of Unpaid Drawings
which are repaid with the proceeds of, and simultaneously with the
borrowing of, Loans) at such time, (y) the aggregate principal amount of
all Swingline Loans then outstanding and (z) the Dollar Equivalent Amount
of Revolving Loans at such time.
(b) Subject to and upon the terms and conditions herein set forth
Chase in its individual capacity agrees, at any time and from time to time
after the Initial Borrowing Date and prior to the Swingline Expiry Date, to
make a loan or loans (each a "Swingline Loan" and, collectively, the "Swingline
Loans") to the Company in an aggregate principal amount up to but not exceeding
the Swingline Commitment which Swingline Loans (i) shall be made and maintained
as $ Base Rate Loans, (ii) shall not exceed at any time outstanding the
Swingline Commitment, (iii) shall not exceed in aggregate principal amount at
any time outstanding the Total Revolving $ Loan Commitment then in effect less
(x) the Dollar Equivalent Amount of the aggregate principal amount of all
Revolving Loans then outstanding and (y) all Letter of Credit Outstandings
(exclusive of Unpaid Drawings which are repaid at such time with the proceeds
of, and simultaneously with the occurrence of, the borrowing of Loans) at such
time, and (iv) may be repaid and reborrowed in accordance with the provisions
hereof. On the Swingline Expiry Date, all Swingline Loans shall be repaid in
full. Chase shall not make any Swingline Loan after receiving a written notice
from the Company or any Bank stating that a Default or an Event of Default
exists and is continuing until such time as Chase shall have received written
notice of (i) rescission of all such notices from the party or parties
originally delivering such notice (which notice of rescission such Person or
Persons shall deliver to Chase promptly upon the discontinuance of such Default
or Event of Default) or (ii) the waiver of such Default or Event of Default in
accordance with this Agreement. Also, Chase shall have no obligation to make
any Swingline Loan in the event a Bank Default exists unless Chase has entered
into arrangements satisfactory to it and the Company to eliminate Chase's risk
with respect to any such Defaulting Bank's or Banks' obligations to fund
Mandatory Borrowings, including by collateralizing such Defaulting Bank's or
Banks' Adjusted Percentages of the Swingline Loans outstanding from time to
time. On any Business Day, Chase may, in its sole discretion, give notice to
the Banks that all then outstanding Swingline Loans shall be funded with a
Borrowing of Revolving $ Loans (provided that such notice shall be deemed to
have been automatically given upon the occurrence of an Event of Default under
Section 11.05), in which case a Borrowing of Revolving $ Loans constituting $
Base Rate Loans (each such Borrowing, a
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"Mandatory Borrowing") shall be made on the immediately succeeding Business Day
by all Banks pro rata based on each such Banks's Adjusted Percentage and the
proceeds thereof shall be applied directly to Chase to repay such outstanding
Swingline Loans. Each Bank hereby irrevocably agrees to make such Revolving $
Loans upon one Business Day's notice pursuant to each Mandatory Borrowing in
the amount and in the manner specified in the preceding sentence and on the
date specified to it in writing by Chase notwithstanding (i) that the amount of
the Mandatory Borrowing may not comply with the minimum amount for a Borrowing
specified in Section 1.02, (ii) whether any conditions specified in Section 5,
6 or 7 are then satisfied, (iii) the date of such Mandatory Borrowing and (iv)
any reduction in the Total Revolving Loan Commitment after any such Swingline
Loans were made. In the event that any Mandatory Borrowing cannot for any
reason be made on the date otherwise required above (including, without
limitation, as a result of the commencement of a proceeding under the
Bankruptcy Code in respect of the Company), each Bank hereby agrees that it
shall forthwith purchase from Chase (without recourse or warranty), by
assignment, such outstanding Swingline Loans as shall be necessary to cause
such Banks to share in such Swingline Loans ratably based upon their respective
Adjusted Percentages, provided that, all interest payable on such Swingline
Loans shall be for the account of Chase until the date the respective purchase
is made and, to the extent attributable to such purchase, shall be payable to
such Bank purchasing same from and after such date of purchase.
(c) Subject to and upon the terms and conditions set forth herein,
each Bank severally agrees to make a loan or loans (each a "Revolving C$ Loan"
and, collectively, the "Revolving C$ Loans") to the Canadian Borrower in an
aggregate amount up to but not exceeding such Bank's Revolving C$ Loan
Commitment, which Revolving C$ Loans:
(i) shall be made at any time and from time to time on and after the
Canadian Borrowing Date and prior to the Final Maturity Date;
(ii) may be repaid and reborrowed in accordance with the provisions
hereof;
(iii) shall not exceed for any Bank at any time outstanding the
Revolving C$ Loan Commitment of such Bank at such time;
(iv) shall not exceed for all Banks at any time outstanding the Total
C$ Revolving Loan Commitment at such time;
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(v) shall have a Dollar Equivalent Amount which shall not exceed for
any Bank at any time outstanding the Revolving Loan Commitment of such
Bank at such time less the product of (x) such Bank's Adjusted Percentage
and (y) the sum of (I) the aggregate amount of all Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid with the
proceeds of, and simultaneously with the borrowing of, Loans) at such
time, (II) the aggregate principal amount of all Swingline Loans then
outstanding and (III) the Revolving $ Loans at such time; and
(vi) shall have a Dollar Equivalent Amount which shall not exceed for
all Banks at any time outstanding the Total Revolving Loan Commitment at
such time less the sum of (x) the aggregate amount of the Letter of Credit
Outstandings at such time (exclusive of Unpaid Drawings which are repaid
with the proceeds of, and simultaneously with the borrowing of, Loans),
(y) the aggregate principal amount of all Swingline Loans then outstanding
and (z) the Revolving $ Loans at such time.
The Canadian Borrower may not borrow Revolving C$ Loans more than once in any
period of 30 consecutive days. The Revolving C$ Loans shall bear interest at
the rate set forth in Section 1.08(c) (subject to the provisions of Section
1.08(d)).
(d) Notwithstanding anything to the contrary contained herein, prior
to the Canadian Borrowing Date (i) the Total Outstandings shall not exceed
$85,000,000 and (ii) the Canadian Borrower may not borrow or have Letters of
Credit issued for its account under this Agreement.
1.02 Minimum Amount of Each Borrowing. The aggregate principal amount
of each Borrowing of Revolving $ Loans shall not be less than $1,000,000
(except that Mandatory Borrowings shall be made in the amounts required by
Section 1.01(b)), and the aggregate principal amount of each Borrowing of
Swingline Loans shall not be less than $50,000. The aggregate principal amount
of each Borrowing of Revolving C$ Loans shall not be less than C$1,000,000.
More than one Borrowing may occur on the same date, but at no time shall there
be outstanding more than six Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. (a) Whenever a Borrower desires to borrow
Revolving Loans hereunder, it shall give the Administrative Agent at its Notice
Office at least one Business Day's prior written notice (or telephonic notice
promptly confirmed in writing) of each $ Base Rate Loan, at least three
Business Days' prior written notice (or telephonic notice promptly confirmed in
writing) of each $ Eurodollar Loan to be made hereunder and at least four
Business Days' prior written
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notice (or telephone notice promptly confirmed in writing) of each Revolving C$
Loan to be made hereunder, provided that any such notice shall be deemed to
have been given on a certain day only if given before 11:00 A.M. (New York
time) on such day. Each such written notice or written confirmation of
telephonic notice (each a "Notice of Borrowing"), except as otherwise expressly
provided in Section 1.10, shall be irrevocable and shall be given by the
respective Borrower in the form of Exhibit A, appropriately completed to
specify (i) the name of such Borrower, (ii) the aggregate principal amount of
the Loans to be made pursuant to such Borrowing, (iii) the date of such
Borrowing (which shall be a Business Day), (iv) whether the Loans being made
pursuant to such Borrowing are Revolving $ Loans or Revolving C$ Loans, (v)
whether the Loans being made are to be initially maintained as $ Base Rate
Loans, $ Eurodollar Loans or C$ Eurodollar Loans and (vi) in the case of
Eurodollar Loans, the Interest Period to be applicable thereto. The
Administrative Agent shall promptly give each Bank notice of such proposed
Borrowing, of such Bank's proportionate share thereof and of the other matters
required by the immediately preceding sentence to be specified in the Notice of
Borrowing.
(b) Whenever the Company desires to borrow Swingline Loans hereunder,
it shall give the Administrative Agent no later than 12:00 Noon (New York time)
on the day such Swingline Loan is to be made, written notice (or telephonic
notice promptly confirmed in writing) of such Borrowing. Each such notice shall
be irrevocable and specify in each case (i) the date of Borrowing (which shall
be a Business Day) and (ii) the aggregate principal amount of the Swingline
Loans to be made pursuant to such Borrowing. The Administrative Agent shall
promptly give Chase written notice (or telephonic notice promptly confirmed in
writing) of each proposed Borrowing of Swingline Loans and of the other matters
covered by the Notice of Borrowing.
(c) Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(b), with the Company irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of Mandatory Borrowings as set forth in such
Section.
(d) Without in any way limiting the obligation of either Borrower to
confirm in writing any telephonic notice of any Borrowing, the Administrative
Agent may act without liability upon the basis of telephonic notice of such
Borrowing believed by the Administrative Agent in good faith to be from an
Authorized Officer of such Borrower prior to receipt of written confirmation.
In each such case, the Borrowers hereby waive the right to dispute the
Administrative Agent's record of the terms of such telephonic notice.
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1.04 Disbursement of Funds. No later than 12:00 Noon (2:00 P.M. in
the case of Swingline Loans) (New York time) on the date specified in each
Notice of Borrowing (or, in the case of Swingline Loans, the notice delivered
under Section 1.03(b)), each Bank will make available its pro rata portion of
each Borrowing (or, in the case of Swingline Loans, Chase will make available
the entire amount of such Borrowing) requested to be made on such date. All
such amounts shall be made available in Dollars or Canadian Dollars, as the
case may be, and in immediately available funds at the Payment Office of the
Administrative Agent, and the Administrative Agent will make available to the
applicable Borrower at the Payment Office, in Dollars or Canadian Dollars, as
the case may be, and in immediately available funds, the aggregate of the
amounts so made available by the Banks. Unless the Administrative Agent shall
have been notified by any Bank prior to the date of Borrowing that such Bank
does not intend to make available to the Administrative Agent such Bank's
portion of any Borrowing to be made on such date, the Administrative Agent may
assume that such Bank has made available such amount to the Administrative
Agent on such date of Borrowing and the Administrative Agent may, in reliance
upon such assumption, make available to the applicable Borrower a corresponding
amount. If such corresponding amount is not in fact made available to the
Administrative Agent by such Bank, the Administrative Agent shall be entitled
to recover such corresponding amount on demand from such Bank. If such Bank
does not pay such corresponding amount forthwith upon the Administrative
Agent's demand therefor, the Administrative Agent shall promptly notify the
applicable Borrower and such Borrower, to the extent such Borrower has been
funded such amount, shall within one day thereafter pay such corresponding
amount to the Administrative Agent. The Administrative Agent shall also be
entitled to recover on demand from such Bank or the applicable Borrower, as the
case may be, interest on such corresponding amount in respect of each day from
the date such corresponding amount was made available by the Administrative
Agent to such Borrower until the date such corresponding amount is recovered by
the Administrative Agent, at a rate per annum equal to (i) if recovered from
such Bank (a) at the overnight Federal Funds Rate, in the case of Revolving $
Loans, and (b) at a rate determined by the Administrative Agent to represent
its cost of overnight or short-term funds in Canadian Dollars, in the case of
Revolving C$ Loans, and (ii) if recovered from a Borrower, the rate of interest
applicable to the respective Borrowing, as determined pursuant to Section 1.08.
Nothing in this Section 1.04 shall be deemed to relieve any Bank from its
obligation to make Loans hereunder or to prejudice any rights which the
Borrower may have against any Bank as a result of any failure by such Bank to
make Loans hereunder.
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1.05 Notes. (a) The Company's obligation to pay the principal of, and
interest on, the Revolving $ Loans made to it by each Bank shall be evidenced
by (i) if Revolving $ Loans, a promissory note duly executed and delivered by
the Company substantially in the form of Exhibit B-1, with blanks appropriately
completed in conformity herewith (each a "Revolving $ Note" and, collectively,
the "Revolving $ Notes") and (ii) if Swingline Loans, by a promissory note duly
executed and delivered by the Company substantially in the form of Exhibit B-2,
with blanks appropriately completed in conformity herewith (the "Swingline
Note").
(b) The Canadian Borrower's obligation to pay the principal of, and
interest on, the Revolving C$ Loans made by each Bank shall be evidenced by a
promissory note duly executed and delivered by the Canadian Borrower
substantially in the form of Exhibit B-3, with blanks appropriately completed
in conformity herewith (each a "Revolving C$ Note" and, collectively, the
"Revolving C$ Notes").
(c) The Revolving $ Note issued to each Bank shall (i) be executed by
the Company, (ii) be payable to the order of such Bank or its registered
assigns and be dated the Initial Borrowing Date, (iii) be in a stated principal
amount equal to the Revolving Loan Commitment of such Bank and be payable in
the principal amount of the Revolving $ Loans evidenced thereby, (iv) mature on
the Final Maturity Date, (v) bear interest as provided in the appropriate
clause of Section 1.08 in respect of the $ Base Rate Loans and $ Eurodollar
Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary
repayment as provided in Section 4.01, and mandatory repayment as provided in
Section 4.02 and (vii) be entitled to the benefits of this Agreement and the
other Credit Documents.
(d) The Swingline Note issued to Chase shall (i) be executed by the
Company, (ii) be payable to the order of Chase and be dated the Initial
Borrowing Date, (iii) be in a stated principal amount equal to the Swingline
Commitment and be payable in the outstanding principal amount of the Swingline
Loans evidenced thereby, (iv) mature on the Swingline Expiry Date, (v) bear
interest as provided in Section 1.08(a) in respect of the $ Base Rate Loans
evidenced thereby, (vi) be subject to voluntary prepayment as provided in
Section 4.01, and mandatory prepayment as provided in Section 4.02 and (vii) be
entitled to the benefits of this Agreement and the other Credit Documents.
(e) The Revolving C$ Note issued to each Bank shall (i) be executed
by the Canadian Borrower, (ii) be payable to the order of such Bank or its
registered assigns and be dated the Initial Borrowing Date, (iii) be in a
stated principal amount equal to the Revolving C$ Loan Commitment of such Bank
and be
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payable in the outstanding principal amount of the Loans evidenced thereby,
(iv) mature on the Final Maturity Date, (v) bear interest as provided in
Section 1.08 in respect of Revolving C$ Loans evidenced thereby, (vi) be
subject to voluntary prepayment as provided in Section 4.01 and mandatory
prepayment as provided in Section 4.02 and (vii) be entitled to the benefits of
this Agreement and the other Credit Documents.
(f) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby. Failure to make any
such notation shall not affect either Borrower's obligations in respect of such
Loans.
1.06 Conversions. (a) The Company shall have the option to convert,
on any Business Day, at least $1,000,000 of the outstanding principal amount of
Revolving $ Loans made to the Company pursuant to one or more Borrowings of one
or more Types of Revolving $ Loans into a Borrowing or Borrowings of another
Type of Revolving Loan, provided that (i) except as otherwise provided in
Section 1.10(b), $ Eurodollar Loans may be converted into $ Base Rate Loans
only on the last day of an Interest Period applicable to the Revolving $ Loans
being converted and no partial conversion of a Borrowing of $ Eurodollar Loans
shall reduce the outstanding principal amount of such $ Eurodollar Loans made
pursuant to a single Borrowing to less than $1,000,000; (ii) upon the
occurrence and during the continuance of any Event of Default, $ Base Rate
Loans may not be converted into $ Eurodollar Loans if the Administrative Agent
(acting at the instruction of the Required Banks) has notified the Company that
such conversions shall not be permitted during the continuance of an Event of
Default; and (iii) no conversion pursuant to this Section 1.06 shall result in
a greater number of Borrowings of Eurodollar Loans than is permitted under
Section 1.02. Each such conversion shall be effected by the Company by giving
the Administrative Agent at its Notice Office prior to 11:00 A.M. (New York
time) at least three Business Days' prior written notice (each a "Notice of
Conversion") specifying the Revolving $ Loans to be so converted, the
Borrowing(s) pursuant to which such Revolving $ Loans were made and, if to be
converted into $ Eurodollar Loans, the Interest Period to be initially
applicable thereto. The Administrative Agent shall give each Bank prompt notice
of any such proposed conversion. Upon any such conversion the proceeds thereof
will be deemed to be applied directly on the day of such conversion to prepay
the outstanding principal amount of the Revolving $ Loans being converted.
(b) Swingline Loans shall be made and maintained as $ Base Rate
Loans.
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1.07 Pro Rata Borrowings. All Borrowings of Revolving Loans under
this Agreement shall be incurred from the Banks pro rata on the basis of their
Revolving Loan Commitments. It is understood that no Bank shall be responsible
for any default by any other Bank of its obligation to make Loans hereunder and
that each Bank shall be obligated to make the Loans provided to be made by it
hereunder, regardless of the failure of any other Bank to make its Loans
hereunder.
1.08 Interest. (a) The Company agrees to pay interest in respect of
the unpaid principal amount of each $ Base Rate Loan made to the Company from
the date the proceeds thereof are made available to the Company until the
earlier of (i) the maturity (whether by acceleration or otherwise) of such $
Base Rate Loan and (ii) the conversion of such $ Base Rate Loan to a $
Eurodollar Loan pursuant to Section 1.06, at a rate per annum which shall be
equal to the sum of the Applicable Margin plus the Base Rate in effect from
time to time.
(b) The Company agrees to pay interest in respect of the unpaid
principal amount of each $ Eurodollar Loan made to the Company from the date
the proceeds thereof are made available to the Company until the earlier of (i)
the maturity (whether by acceleration or otherwise) of such $ Eurodollar Loan
and (ii) the conversion of such $ Eurodollar Loan to a $ Base Rate Loan
pursuant to Section 1.06, 1.09 or 1.10, as applicable, at a rate per annum
which shall, during each Interest Period applicable thereto, be equal to the
sum of the Applicable Margin plus the Eurodollar Rate for such Interest Period.
(c) The Canadian Borrower agrees to pay interest in respect of the
unpaid principal amount of each C$ Eurodollar Loan made to the Canadian
Borrower from the date the proceeds thereof are made available to the Canadian
Borrower until the earlier of (i) the maturity (whether by acceleration or
otherwise) of such C$ Eurodollar Loan and (ii) the conversion of such C$
Eurodollar Loan pursuant to Section 1.10, as applicable, at a rate per annum
which shall, during each Interest Period applicable thereto, be equal to the
sum of the Applicable Margin plus the Eurodollar Rate for such Interest Period.
(d) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable hereunder
shall, in each case, bear interest at a rate per annum equal to the greater of
(x) 2% per annum in excess of the rate otherwise applicable to $ Base Rate
Loans from time to time and (y) the rate which is 2% in excess of the rate then
borne by such Loan, in each case with such interest to be payable on demand.
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(e) Accrued (and theretofore unpaid) interest shall be payable (i) in
respect of each $ Base Rate Loan, quarterly in arrears on each Quarterly
Payment Date, (ii) in respect of each Eurodollar Loan, on the last day of each
Interest Period applicable thereto and, in the case of an Interest Period in
excess of three months, on each date occurring at three month intervals after
the first day of such Interest Period and (iii) in respect of each Loan, on any
repayment or prepayment (on the amount repaid or prepaid), at maturity (whether
by acceleration or otherwise) and, after such maturity, on demand.
(f) Upon each Interest Determination Date, the Administrative Agent
shall determine the Eurodollar Rate for the respective Interest Period or
Interest Periods and shall promptly notify the applicable Borrower and the
Banks thereof. Each such determination shall, absent manifest error, be final
and conclusive and binding on all parties hereto.
1.09 Interest Periods. At the time it gives a Notice of Borrowing or
Notice of Conversion in respect of the making of, or conversion into, any
Eurodollar Loan (in the case of the initial Interest Period applicable thereto)
or on the third Business Day (or the fourth Business Day in the case of a C$
Eurodollar Loan) prior to the expiration of an Interest Period applicable to
such Eurodollar Loan (in the case of any subsequent Interest Period), the
applicable Borrower shall have the right to elect, by giving the Administrative
Agent notice thereof, the interest period (each an "Interest Period")
applicable to such Eurodollar Loan, which Interest Period shall, at the option
of such Borrower, be a one, two, three or six-month or, to the extent available
to each Bank, nine or twelve month period, provided that:
(i) all Eurodollar Loans comprising a Borrowing shall at all times
have the same Interest Period;
(ii) the initial Interest Period for any Eurodollar Loan shall
commence on the date of Borrowing of such Eurodollar Loan (including, in
the case of $ Eurodollar Loans, the date of any conversion thereto from a
$ Base Rate Loan) and each Interest Period occurring thereafter in respect
of such Eurodollar Loan shall commence on the day on which the next
preceding Interest Period applicable thereto expires;
(iii) if any Interest Period relating to a Eurodollar Loan begins on
a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period, such Interest Period shall end
on the last Business Day of such calendar month;
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(iv) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided, however, that if any Interest Period
for a Eurodollar Loan would otherwise expire on a day which is not a
Business Day but is a day of the month after which no further Business Day
occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(v) upon the occurrence and during the continuance of any Event of
Default, no Interest Period may be selected if the Administrative Agent
(acting at the instruction of the Required Banks) has notified the
applicable Borrower that selections of Interest Periods shall not be
permitted during the continuance of an Event of Default;
(vi) no Interest Period in respect of any Borrowing of Loans shall be
selected which extends beyond the Final Maturity Date; and
(vii) no Interest Period in respect of any Borrowing of any Revolving
Loans shall be selected which extends beyond any date upon which a
mandatory repayment of Revolving Loans will be required to be made under
Section 4.02(a), as a result of reductions to the Total Revolving Loan
Commitment pursuant to Section 3.03(b), unless the aggregate principal
amount of Revolving Loans which are $ Base Rate Loans or which have
Interest Periods which will expire on or before such date will be
sufficient to make such required repayment.
If upon the expiration of any Interest Period applicable to a
Borrowing of $ Eurodollar Loans, the Company has failed to elect, or is not
permitted to elect, a new Interest Period to be applicable to such $ Eurodollar
Loans as provided above, the Company shall be deemed to have elected to convert
such $ Eurodollar Loans into $ Base Rate Loans, effective as of the expiration
date of such current Interest Period. If the Canadian Borrower has failed to
select an Interest Period for a C$ Eurodollar Loan at least four Business Days
prior to the expiration of the Interest Period applicable to such C$ Eurodollar
Loan, the Canadian Borrower shall be deemed to have selected a one month
Interest Period to apply such C$ Eurodollar Loan upon the expiration of the
current Interest Period therefor.
1.10 Increased Costs, Illegality, etc. (a) In the event that any Bank
shall have determined (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties hereto but with respect to
clause (i) below, may be made only by the Administrative Agent):
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(i) on any Interest Determination Date that, by reason of any changes
arising after the date of this Agreement affecting the interbank
Eurodollar market, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the definition
of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loan because of (x) any change since the date of this
Agreement in any applicable law or governmental rule, regulation, order,
guideline or request (whether or not having the force of law) or in the
interpretation or administration thereof and including the introduction of
any new law or governmental rule, regulation, order, guideline or request,
such as, for example, but not limited to: (A) a change in the basis of
taxation of payment to any Bank of the principal of or interest on the
Notes or any other amounts payable hereunder (except for changes with
respect to any tax imposed on, or measured by the net income or net
profits of such Bank, or any franchise tax based on the net income or net
profits of a Bank, in either case pursuant to the laws of the juris-
diction in which such Bank is organized or in which such Bank's principal
office or applicable lending office is located or any subdivision thereof
or therein), or (B) a change in official reserve requirements, but, in all
events, excluding reserves required under Regulation D to the extent
included in the computation of the Eurodollar Rate and/or (y) other
circumstances since the date of this Agreement adversely affecting such
Bank or the interbank Eurodollar market or the position of such Bank in
such market; or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has been made (x) unlawful by any law or governmental rule,
regulation or order, (y) impossible by compliance by any Bank in good
faith with any governmental request (whether or not having force of law)
or (z) impracticable as a result of a contingency occurring after the date
of this Agreement which materially and adversely affects the interbank
Eurodollar market; or
(iv) at any time that Canadian Dollars are not available due to
market conditions in sufficient amounts, as determined in good faith by
such Bank, to fund any Borrowing of Revolving C$ Loans;
then, and in any such event, such Bank (or the Administrative Agent, in the
case of clause (i) above) shall promptly give notice (by telephone confirmed in
writing) to the applicable Borrower and, except in the case of clause (i)
above, to the
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Administrative Agent of such determination (which notice the Administrative
Agent shall promptly transmit to each of the other Banks). Thereafter (w) in
the case of clause (i) above, Eurodollar Loans shall no longer be available
until such time as the Administrative Agent notifies the applicable Borrower
and the Banks that the circumstances giving rise to such notice by the
Administrative Agent no longer exist, and any Notice of Borrowing or Notice of
Conversion given by the applicable Borrower with respect to Eurodollar Loans
which have not yet been borrowed (including by way of conversion) shall be
deemed rescinded by the applicable Borrower, (x) in the case of clause (ii)
above the applicable Borrower shall pay to such Bank, upon written demand
therefor, such additional amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Bank in its sole
discretion shall determine) as shall be required to compensate such Bank for
such increased costs or reductions in amounts received or receivable hereunder
(a written notice as to the additional amounts owed to such Bank, showing the
basis for the calculation thereof, submitted to the applicable Borrower by such
Bank in good faith shall, absent manifest error, be final and conclusive and
binding on all the parties hereto), (y) in the case of clause (iii) above, the
applicable Borrower shall take one of the actions specified in Section 1.10(b)
as promptly as possible and, in any event, within the time period required by
law and (z) in the case of clause (iv) above, Revolving C$ Loans shall no
longer be available until such time as the Administrative Agent notifies the
Canadian Borrower and the Banks that the circumstances giving rise to such
notice by the applicable Bank no longer exists, and any Notice of Borrower
given by the Canadian Borrower with respect to Revolving C$ Loans which have
not yet been borrowed shall be deemed rescinded by the Canadian Borrower. Each
of the Administrative Agent and each Bank agrees that if it gives notice to a
Borrower of any of the events described in clause (i), (iii) or (iv) above, it
shall promptly notify the applicable Borrower and, in the case of any such
Bank, the Administrative Agent, if such event ceases to exist. If any such
event described in clause (iii) above ceases to exist as to a Bank, the
obligations of such Bank to make Eurodollar Loans and to convert $ Base Rate
Loans into $ Eurodollar Loans on the terms and conditions contained herein
shall be reinstated.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the applicable
Borrower may (and in the case of a Eurodollar Loan affected by the
circumstances described in Section 1.10(a)(iii) shall) either (x) if the
affected Eurodollar Loan is then being made initially or pursuant to a
conversion, cancel the respective Borrowing by giving the Administrative Agent
telephonic notice (confirmed in writing) on the same date that such Borrower
was notified by the affected Bank or the Administrative Agent
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pursuant to Section 1.10(a)(ii) or (iii) or (y) if the affected Eurodollar Loan
is then outstanding, upon at least three Business Days (four Business Days in
the case of Revolving C$ Loans) written notice to the Administrative Agent,
require the affected Bank to convert such Eurodollar Loan into a $ Base Rate
Loan, in the case of $ Eurodollar Loans, or a Loan denominated in Canadian
Dollars having an interest rate comparable to the Base Rate as determined in
the sole discretion of the affected Bank, in the case of C$ Eurodollar Loans,
as the case may be, provided that, if more than one Bank is affected at any
time, then all affected Banks must be treated the same pursuant to this Section
1.10(b). If at any time the making or continuance of any Revolving C$ Loan, or
any giving effect to the obligations of a Bank in respect thereof, has been
made unlawful by any law coming into force or by any change since the date of
this Agreement in any applicable law or regulation or in the interpretation or
application thereof by any court or any statutory board or commission, then the
Canadian Borrower, upon at least three Business Days' written notice to the
Administrative Agent and the affected Bank, and subject to Section 4.02(b),
shall repay such Revolving C$ Loan in full.
(c) If at any time any Bank determines that the introduction after
the Effective Date of, or any change after the Effective Date in, any
applicable law or governmental rule, regulation, order, guideline, directive or
request (whether or not having the force of law) concerning capital adequacy,
or any change after the Effective Date in interpretation or administration
thereof by any governmental authority, central bank or comparable agency, will
have the effect of increasing the amount of capital required or expected to be
maintained by such Bank or any corporation controlling such Bank, based on the
existence of such Bank's Commitments hereunder or its obligations hereunder,
then the Company shall pay to such Bank, within 15 days after its written
demand therefor, such additional amounts as shall be required to compensate
such Bank or such other corporation for the increased cost to such Bank or such
other corporation or the reduction in the rate of return to such Bank or such
other corporation as a result of such increase of capital. In determining such
additional amounts, each Bank will act reasonably and in good faith and will
use averaging and attribution methods which are reasonable, provided that such
Bank's reasonable good faith determination of compensation owing under this
Section 1.10(c) shall, absent manifest error, be final and conclusive and
binding on all the parties hereto. Each Bank, upon determining that any
additional amounts will be payable pursuant to this Section 1.10(c), will give
prompt written notice thereof to the Company, which notice shall show the basis
for calculation of such additional amounts, although the failure to give any
such notice shall not release or diminish any Borrower's Obligations to pay
additional amounts pursuant to this Section
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1.10(c). A Borrower shall not be required to pay additional amounts pursuant to
this Section 1.10(c) unless it has received the written notice described in the
prior sentence (which notice need not be given during an Event of Default under
Section 11.05).
(d) In the event that any Bank shall determine (which determination
shall, absent manifest error, be final and conclusive and binding on all
parties hereto) at any time that such Bank is required to maintain reserves
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves required by applicable law) which have been established by
any Federal, state, local or foreign court or governmental agency, authority,
instrumentality or regulatory body with jurisdiction over such Bank (including
any branch, Affiliate or funding office thereof) in respect of any Revolving C$
Loans or any category of liabilities which includes deposits by reference to
which the interest rate on any Revolving C$ Loan is determined or any category
of extensions of credit or other assets which includes loans by a non-United
States office of any Bank to non-United States residents, then, unless such
reserves are included in the calculation of the interest rate applicable to
such Revolving C$ Loans or in Section 1.10(a)(ii), such Bank shall promptly
notify the Canadian Borrower in writing specifying the additional amounts
required to indemnify such Bank against the cost of maintaining such reserves
(such written notice to provide in reasonable detail in computation of such
additional amounts) and the Canadian Borrower shall pay to such Bank such
specified amounts as additional interest at the time that the Canadian Borrower
is otherwise required to pay interest in respect of such Revolving C$ Loan or,
if later, on written demand therefor by such Bank.
1.11 Compensation. Each applicable Borrower shall compensate each
Bank, upon its written request (which request shall set forth the basis for
requesting such compensation), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other
funds required by such Bank to fund its Eurodollar Loans, but excluding any
loss of anticipated profit) which such Bank may sustain: (i) if for any reason
(other than a default by such Bank or the Administrative Agent) a Borrowing of,
or conversion from or into, Eurodollar Loans does not occur on a date specified
therefor in a Notice of Borrowing or Notice of Conversion (whether or not
withdrawn by the applicable Borrower or deemed withdrawn pursuant to Section
1.10(a)); (ii) if any repayment (including any repayment made pursuant to
Section 4.01 or 4.02 or as a result of an acceleration of the Revolving Loans
pursuant to Section 11), prepayment or conversion of any Eurodollar Loans
occurs on a date which is not the last day of an Interest Period
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with respect thereto; (iii) if any prepayment of any of the Eurodollar Loans is
not made on any date specified in a notice of prepayment given by the
applicable Borrower or on the date that such prepayment is required under this
Agreement; or (iv) as a consequence of any election made pursuant to Section
1.10(b).
1.12 Change of Lending Office. Each Bank agrees that on the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), Section 1.10(c), Section 1.10(d), Section 2.06 or Section 4.04 with
respect to such Bank, it will, if requested by the Company, use reasonable
efforts (subject to overall policy considerations of such Bank) to designate
another lending office for any Loans or Letters of Credit affected by such
event, provided that such designation is made on such terms that such Bank and
its lending office suffer no economic, legal or regulatory disadvantage, with
the object of avoiding the consequence of the event giving rise to the
operation of such Section. Nothing in this Section 1.12 shall affect or
postpone any of the obligations of any Borrower or the right of any Bank
provided in Sections 1.10, 2.06 and 4.04.
1.13 Replacement of Banks. (x) If any Bank becomes a Defaulting Bank
or otherwise defaults in its obligations to make Loans or Mandatory Borrowings
or fund Unpaid Drawings, (y) upon the occurrence of any event giving rise to
the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.06 or
Section 4.04 with respect to any Bank which results in such Bank charging to
any Borrower increased costs in excess of those being generally charged by the
other Banks, or (z) as provided in Section 14.12(b) in the case of certain
refusals by a Bank to consent to certain proposed changes, waivers, discharges
or terminations with respect to this Agreement which have been approved by the
Required Banks, the Company shall have the right, if no Default or Event of
Default will exist immediately after giving effect to such replacement, to
replace such Bank (the "Replaced Bank") with one or more other Eligible
Transferees, none of whom shall constitute a Defaulting Bank at the time of
such replacement (collectively, the "Replacement Bank"), and in the case of an
Eligible Transferee which is not then a Bank under this Agreement, each of whom
shall be required to be reasonably acceptable to the Administrative Agent,
provided, that:
(i) at the time of any replacement pursuant to this Section 1.13, the
Replaced Bank and the Replacement Bank shall enter into one or more
Assignment and Assumption Agreements pursuant to Section 14.04(b) (and
with all fees payable pursuant to said Section 14.04(b) to be paid by the
Replacement Bank) pursuant to which the Replacement Bank shall acquire the
Commitments and all outstanding Loans of, and in each case participations
in Letters of Credit by, the
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Replaced Bank and, in connection therewith, shall pay, in the applicable
Currency, to (x) the Replaced Bank in respect thereof an amount equal to
the sum of (A) an amount equal to the principal of, and are accrued
interest on, all outstanding Loans of the Replaced Bank, (B) an amount
equal to all Unpaid Drawings that have been funded by (and not reimbursed
to) such Replaced Bank, together with all then unpaid interest with
respect thereto at such time and (C) an amount equal to all accrued, but
theretofore unpaid, Fees owing to the Replaced Bank pursuant to Section
3.01, and (y) the Issuing Bank an amount equal to such Replaced Bank's
Adjusted Percentage (for this purpose, determined as if the adjustment
described in clause (y) of the immediately succeeding sentence had been
made with respect to such Replaced Bank) of any Unpaid Drawing (which at
such time remains an Unpaid Drawing) with respect to a Letter of Credit
issued by it to the extent such amount was not theretofore funded by such
Replaced Bank; and
(ii) all obligations of the Borrowers owing to the Replaced Bank
(other than those specifically described in clause (i) above in respect of
which the assignment purchase price has been, or is concurrently being,
paid) accrued through the date of replacement shall be paid in full to
such Replaced Bank concurrently with such replacement.
Upon the execution of the respective Assignment and Assumption Agreements, the
payment of amounts referred to in clauses (i) and (ii) above, and, if so
requested by the Replacement Bank, delivery to the Replacement Bank of the
appropriate Notes executed by the respective Borrowers, (x) the Replacement
Bank shall become a Bank hereunder and the Replaced Bank shall cease to
constitute a Bank hereunder, except with respect to indemnification provisions
under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.06,
4.04 and 14.01), which shall survive as to such Replaced Bank and (y) in the
case of a replacement of a Defaulting Bank with a Non-Defaulting Bank, the
Adjusted Percentages of the Banks shall be automatically adjusted at such time
to give effect to such replacement (and to give effect to the replacement of a
Defaulting Bank with one or more Non-Defaulting Banks).
1.14 Joint and Several Obligations. The Company shall be jointly and
severally obligated as a primary obligor for the obligations of the Canadian
Borrower under this Agreement.
SECTION 2. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms and
conditions set forth herein, each Borrower may request the Issuing Bank to
issue, at any time and from time to
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time on and after the Initial Borrowing Date and prior to (i) the third
Business Day preceding the Final Maturity Date in the case of standby Letters
of Credit or (ii) the 30th day preceding the Final Maturity Date in the case of
trade Letters of Credit, (x) for the account of such Borrower and for the
benefit of any holder (or any trustee, agent or other similar representative
for any such holders) of L/C Supportable Indebtedness, irrevocable standby
letters of credit in a form customarily used by the Issuing Bank or in such
other form as has been approved by the Issuing Bank in support of such L/C
Supportable Indebtedness and (y) for the account of such Borrower and for the
benefit of sellers of goods to the Company or any of its Subsidiaries,
irrevocable sight trade letters of credit in a form customarily used by the
Issuing Bank or in such other form as has been approved by the Issuing Bank
(each such standby letter of credit and trade letter of credit, a "Letter of
Credit" and collectively, the "Letters of Credit"). All Letters of Credit shall
be denominated in Dollars.
(b) The Issuing Bank hereby agrees that it will (subject to the terms
and conditions contained herein), at any time and from time to time on and
after the Initial Borrowing Date and prior to (i) the third Business Day
preceding the Final Maturity Date in the case of standby Letters of Credit or
(ii) the 30th day preceding the Final Maturity Date in the case of trade
Letters of Credit, in each case following its receipt of the respective Letter
of Credit Request, issue for the account of a Borrower one or more Letters of
Credit in support of such sellers of goods referred to in Section 2.01(a)(y) or
such L/C Supportable Indebtedness as is permitted to remain outstanding without
giving rise to a Default or an Event of Default hereunder; provided that the
Issuing Bank shall be under no obli- gation to issue any Letter of Credit if at
the time of such issuance:
(i) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain the Issuing
Bank from issuing such Letter of Credit or any requirement of law
applicable to the Issuing Bank or any request or directive (whether or not
having the force of law) from any governmental authority with jurisdiction
over the Issuing Bank shall prohibit, or request that the Issuing Bank
refrain from, the issuance of letters of credit generally or such Letter
of Credit in particular or shall impose upon the Issuing Bank with respect
to such Letter of Credit any restriction or reserve or capital requirement
(for which the Issuing Bank is not otherwise compensated) not in effect on
the date hereof, or any unreimbursed loss, cost or expense which was not
applicable, in effect or known to the Issuing Bank as of the
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date hereof and which the Issuing Bank in good faith deems material to it;
(ii) the Issuing Bank shall have received notice from the Required
Banks prior to the issuance of such Letter of Credit of the type described
in the last sentence of Section 2.03(b); or
(iii) a Bank Default exists unless the Issuing Bank has entered into
arrangements satisfactory to it and the Company to eliminate the Issuing
Bank's risk with respect to the Bank which is the subject of the Bank
Default, including by cash collateralizing such Bank's Adjusted Percentage
of the Letter of Credit Outstandings.
(c) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date
of, and prior to the issuance of, the respective Letter of Credit) at such
time, would exceed either (x) $50,000,000 or (y) when added to the Dollar
Equivalent Amount of the aggregate principal amount of all Revolving Loans
and Swingline Loans made by Non-Defaulting Banks then outstanding, an
amount equal to the Adjusted Total Revolving Loan Commitment then in
effect, (ii)(x) each standby Letter of Credit shall by its terms terminate
on or before the date which occurs twelve months after the date of the
issuance thereof (although each standby Letter of Credit may be extendable
for successive periods of up to twelve months, but not beyond the third
Business Day preceding the Final Maturity Date, on terms acceptable to the
Issuing Bank) and (y) each trade Letter of Credit shall by its terms
terminate on or before the date occurring not later than 180 days after
such trade Letter of Credit's date of issuance and (iii) (x) no standby
Letter of Credit shall have an expiry date occurring later than the third
Business Day preceding the Final Maturity Date and (y) no trade Letter of
Credit shall have an expiry date occurring later than 30 days prior to the
Final Maturity Date.
2.02 Minimum Stated Amount. The initial Stated Amount of each Letter
of Credit shall be not less than $100,000 or such lesser amount as is
acceptable to the Issuing Bank, provided that in each calendar quarter up to
five Letters of Credit may be issued having an initial Stated Amount of greater
than $10,000 and less than $100,000.
2.03 Letter of Credit Requests. (a) Whenever a Borrower desires that
a Letter of Credit be issued for its account, such Borrower shall give the
Administrative Agent and the Issuing Bank at least five Business Days' (or such
shorter period as is acceptable to the Issuing Bank in any given case)
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written notice prior to the proposed date of issuance (which shall be a
Business Day). Each notice shall be in the form of Exhibit C (each a "Letter of
Credit Request").
(b) The making of each Letter of Credit Request shall be deemed to be
a representation and warranty by the applicable Borrower that such Letter of
Credit may be issued in accordance with, and will not violate the requirements
of, Section 2.01(c). Unless the Issuing Bank has received notice from the
Required Banks before it issues a Letter of Credit that one or more of the
conditions specified in Section 5, 6 or 7, as the case may be, are not then
satisfied, or that the issuance of such Letter of Credit would violate Section
2.01(c), then the Issuing Bank shall issue the requested Letter of Credit for
the account of such Borrower in accordance with the Issuing Bank's usual and
customary practices.
2.04 Letter of Credit Participations. (a) Immediately upon the
issuance by the Issuing Bank of any Letter of Credit, the Issuing Bank shall be
deemed to have sold and transferred to each Bank, other than the Issuing Bank
(each such Bank, in its capacity under this Section 2.04, a "Participant"), and
each such Participant shall be deemed irrevocably and unconditionally to have
purchased and received from the Issuing Bank, without recourse or warranty, an
undivided interest and participation, to the extent of such Participant's
Adjusted Percentage, in such Letter of Credit, each substitute letter of
credit, each drawing made thereunder and the obligations of the Borrower for
whose account such Letter of Credit was issued under this Agreement with
respect thereto, and any security therefor or guaranty pertaining thereto. Upon
any change in the Revolving Loan Commitments or Adjusted Percentages of the
Banks pursuant to Section 1.13 or 14.04 or as a result of a Bank Default, it is
hereby agreed that, with respect to all outstanding Letters of Credit and
Unpaid Drawings there shall be an automatic adjustment to the participations
pursuant to this Section 2.04 to reflect the new Adjusted Percentages of the
assignor and assignee Bank or of all Banks, as the case may be.
(b) In determining whether to pay under any Letter of Credit, the
Issuing Bank shall have no obligation relative to the other Banks other than to
confirm that any documents required to be delivered under such Letter of Credit
appear to have been delivered and that they appear to substantially comply on
their face with the requirements of such Letter of Credit. Any action taken or
omitted to be taken by the Issuing Bank under or in connection with any Letter
of Credit issued by it, if taken or omitted in the absence of gross negligence
or willful misconduct, shall not create for the Issuing Bank any resulting
liability to the Borrower for whose account such Letter of Credit was issued or
any Bank.
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(c) In the event that the Issuing Bank makes any payment under any
Letter of Credit issued by it and the Borrower for whose account such Letter of
Credit was issued shall not have reimbursed such amount in full to the Issuing
Bank pursuant to Section 2.05(a), the Issuing Bank shall promptly notify the
Administrative Agent, which shall promptly notify each Participant of such
failure, and each Participant shall promptly and unconditionally pay to the
Administrative Agent for the account of the Issuing Bank the amount of such
Participant's Adjusted Percentage of such unreimbursed payment in Dollars and
in same day funds. If the Administrative Agent so notifies, prior to 11:00 A.M.
(New York time) on any Business Day, any Participant required to fund a payment
under a Letter of Credit, such Participant shall make available to the
Administrative Agent at the Payment Office of the Administrative Agent for the
account of the Issuing Bank in Dollars such Participant's Adjusted Percentage
of the amount of such payment on such Business Day in same day funds. If and to
the extent such Participant shall not have so made its Adjusted Percentage of
the amount of such payment available to the Administrative Agent for the
account of the Issuing Bank, such Participant agrees to pay to the
Administrative Agent for the account of the Issuing Bank, forthwith on demand
such amount, together with interest thereon, for each day from such date until
the date such amount is paid to the Administrative Agent for the account of the
Issuing Bank at the overnight Federal Funds Rate. The failure of any
Participant to make available to the Administrative Agent for the account of
the Issuing Bank its Adjusted Percentage of any payment under any Letter of
Credit issued by it shall not relieve any other Participant of its obligation
hereunder to make available to the Administrative Agent for the account of the
Issuing Bank its Adjusted Percentage of any such Letter of Credit on the date
required, as specified above, but no Participant shall be responsible for the
failure of any other Participant to make available to the Administrative Agent
for the account of the Issuing Bank such other Participant's Adjusted
Percentage of any such payment.
(d) Whenever the Issuing Bank receives a payment of a reimbursement
obligation as to which the Administrative Agent has received for the account of
the Issuing Bank any payments from the Participants pursuant to clause (c)
above, the Issuing Bank shall pay to the Administrative Agent and the
Administrative Agent shall promptly pay each Participant which has paid its
Adjusted Percentage thereof, in Dollars and in same day funds, an amount equal
to such Participant's share (based on the proportionate aggregate amount funded
by such Participant to the aggregate amount funded by all Participants) of the
principal amount of such reimbursement obligation and interest thereon accruing
after the purchase of the respective participations.
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(e) Immediately after the issuance of, or amendment to, a standby
Letter of Credit, the Issuing Bank shall immediately notify the Administrative
Agent and each Participant of such issuance or amendment, as the case may be,
and such notice shall be accompanied by a copy of the issued standby Letter of
Credit or amendment, as the case may be.
(f) The obligations of the Participants to make payments to the
Administrative Agent for the account of the Issuing Bank with respect to
Letters of Credit issued by it shall be irrevocable and not subject to any
qualification or exception whatsoever and shall be made in accordance with the
terms and conditions of this Agreement under all circumstances, including,
without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement or any
other Credit Document;
(ii) the existence of any claim, setoff, defense or other right which
the Company or any of its Subsidiaries may have at any time against a
beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the
Administrative Agent, any Bank, the Issuing Bank, any Participant, or any
other Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated transactions
(including any underlying transaction between the Company or any of its
Subsidiaries and the beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or any other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Credit Documents; or
(v) the occurrence of any Default or Event of Default.
2.05 Agreement to Repay Letter of Credit Drawings. (a) Each Borrower
for whose account a Letter of Credit is issued hereby agrees to reimburse the
Issuing Bank, by making payment to the Administrative Agent in immediately
available funds at the Payment Office (or by making the payment directly to the
Issuing Bank at such location as may otherwise have been agreed upon by the
Company and the Issuing Bank), for any payment or dis- bursement made by the
Issuing Bank under such Letter of Credit (each such amount so paid until
reimbursed, an "Unpaid Drawing"),
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immediately after, and in any event on the date of, such payment or
disbursement, with interest on the amount so paid or disbursed by the Issuing
Bank, to the extent not reimbursed prior to 12:00 Noon (New York time) on the
date of such payment or disbursement, from and including the date paid or
disbursed to but excluding the date the Issuing Bank is reimbursed by the
applicable Borrower therefor at a rate per annum which shall be the sum of the
Applicable Margin plus the Base Rate in effect from time to time, provided,
however, to the extent such amounts are not reimbursed prior to 12:00 Noon (New
York time) on the third Business Day following notice to the Company by the
Administrative Agent or the Issuing Bank of such payment or disbursement,
interest shall thereafter accrue on the amounts so paid or disbursed by the
Issuing Bank (and until reimbursed by the applicable Borrower) at a rate per
annum which shall be the sum of the Applicable Margin plus the Base Rate in
effect from time to time plus 2%, in each such case, with interest to be
payable on demand, it being understood and agreed, however, that the notice
referred to in the immediately preceding proviso shall not be required to be
given if a Default or an Event of Default under Section 11.05 shall have
occurred and be continuing (in which case the Unpaid Drawings shall bear
interest at the rate provided in the foregoing proviso from the third Business
Day following the respective payment or disbursement). The Issuing Bank shall
give the Company prompt notice of each Drawing under any Letter of Credit,
provided that the failure to give any such notice shall in no way affect,
impair or diminish either Borrower's obligations hereunder.
(b) The obligation of each applicable Borrower under this Section
2.05 to reimburse the Issuing Bank with respect to Unpaid Drawings (including,
in each case, interest thereon) shall be absolute and unconditional under any
and all circumstances and irrespective of any setoff, counterclaim or defense
to payment which the Company or any of its Subsidiaries may have or have had
against any Bank (including in its capacity as Issuing Bank, or as
Participant), including, without limitation, any defense based upon the failure
of any drawing under a Letter of Credit (each a "Drawing") to conform to the
terms of such Letter of Credit or any nonapplication or misapplication by the
beneficiary of the proceeds of such Drawing; provided, however, that a Borrower
shall not be obligated to reimburse the Issuing Bank for any wrongful payment
made by the Issuing Bank under a Letter of Credit issued by it as a result of
acts or omissions constituting willful misconduct or gross negligence on the
part of the Issuing Bank. Any action taken or omitted to be taken by the
Issuing Bank under or in connection with any Letter of Credit if taken or
omitted in the absence of gross negligence or willful misconduct, shall not
create for the Issuing Bank any resulting liability to either Borrower.
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2.06 Increased Costs. If at any time the Issuing Bank or any
Participant determines that the introduction after the Effective Date of or any
change after the Effective Date in any applicable law, rule, regulation, order,
guideline or request or in the interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance by the Issuing Bank or any Participant with any request
or directive by any such authority (whether or not having the force of law), or
any change after the Effective Date in generally acceptable accounting
principles shall either (i) impose, modify or make applicable any reserve,
deposit, capital adequacy or similar requirement against letters of credit
issued by the Issuing Bank or participated in by any Participant, or (ii)
impose on the Issuing Bank or any Participant any other conditions relating,
directly or indirectly, to this Agreement or any Letter of Credit, and the
result of any of the foregoing is to increase the cost to the Issuing Bank or
any Participant of issuing, maintaining or participating in any Letter of
Credit, or reduce the amount of any sum received or receivable by the Issuing
Bank or any Participant hereunder with respect to Letters of Credit or reduce
the rate of return on its capital with respect to Letters of Credit, then, upon
demand to the Company by the Issuing Bank or any Participant (a copy of which
demand shall be sent by the Issuing Bank or such Participant to the
Administrative Agent), the Company shall pay to the Issuing Bank or such
Participant such additional amount or amounts as will compensate such Bank for
such increased cost or reduction in the amount receivable or reduction on the
rate of return on its capital. The Issuing Bank or any Participant, upon
determining that any additional amounts will be payable pursuant to this
Section 2.06, will give prompt written notice thereof to the Company, which
notice shall include a certificate submitted to the Company by the Issuing Bank
or such Participant (a copy of which certificate shall be sent by the Issuing
Bank or such Participant to the Administrative Agent), setting forth in
reasonable detail the basis for the calculation of such additional amount or
amounts necessary to compensate the Issuing Bank or such Participant, although
failure to give any such notice shall not release or diminish the Company's
obligations to pay additional amounts pursuant to this Section 2.06. The
certificate required to be delivered pursuant to this Section 2.06 shall,
absent manifest error, be final, conclusive and binding on the Company. The
Company shall not be required to pay additional amounts pursuant to this
Section 2.06 unless it has received the written notice described in the second
preceding sentence (which notice need not be given during an Event of Default
under Section 11.05).
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SECTION 3. Fees: Reductions of Commitment.
3.01 Fees. (a) The Company agrees to pay to the Administrative Agent
for distribution to each Non-Defaulting Bank a commitment commission (the
"Commitment Commission") for the period from the Effective Date to but not
including the Final Maturity Date (or such earlier date as the Total Revolving
Loan Commitment shall have been terminated), computed at a rate per annum equal
to the rate set forth under the column captioned "Commitment Fee" in the
definition of "Applicable Margin" set forth in Section 12.01 hereof, as in
effect from time to time, on the Unutilized Revolving Loan Commitment of such
Non-Defaulting Bank as in effect from time to time. Accrued and unpaid
Commitment Commission shall be due and payable quarterly in arrears on each
Quarterly Payment Date and on the Final Maturity Date or such earlier date upon
which the Total Revolving Loan Commitment is terminated.
(b) The Company agrees to pay to the Administrative Agent for
distribution to each Non-Defaulting Bank (based on their respective Adjusted
Percentages) a fee in respect of each Letter of Credit issued hereunder (the
"Letter of Credit Fee"), for the period from and including the date of issuance
of such Letter of Credit to and including the termination of such Letter of
Credit, computed at a rate per annum equal to the Applicable Margin for $
Eurodollar Loans, as in effect, from time to time, on the daily Stated Amount
of such Letter of Credit. Accrued and unpaid Letter of Credit Fees shall be due
and payable quarterly in arrears on each Quarterly Payment Date and upon the
termination of the Total Revolving Loan Commitment or the first day thereafter
upon which no Letters of Credit remain outstanding.
(c) The Company agrees to pay to the Issuing Bank, for its own
account, a facing fee in respect of each Letter of Credit issued for its own
account hereunder (the "Facing Fee"), for the period from and including the
date of issuance of such Letter of Credit to and including the termination of
such Letter of Credit, equal to the higher of (i) $500 (the "Minimum Facing
Fee") and (ii) the rate per annum agreed to in writing by the Issuing Bank in
respect of such Letter of Credit, on the daily Stated Amount of such Letter of
Credit. The Minimum Facing Fee, if applicable, is due and payable on the date
of issuance of such Letter of Credit and each annual anniversary date or
extension date thereof. In addition, all other accrued Facing Fees shall be due
and payable quarterly in arrears on each Quarterly Payment Date and upon the
termination of the Total Revolving Loan Commitment or the first day thereafter
upon which no Letters of Credit remain outstanding.
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(d) The Company agrees to pay to the Issuing Bank, for its own
account, upon each payment under, issuance of, or amendment to, any Letter of
Credit such amount as shall at the time of such event be the administrative
charge and expense which the Issuing Bank generally imposes in connection with
such occurrence with respect to letters of credit.
(e) The Company agrees to pay to each Agent, for such Agent's own
account, such other fees as have been agreed to in writing by the Company and
such Agent.
3.02 Voluntary Termination of Unutilized Commitments. (a) Upon at
least three Business Days' prior written notice (or telephonic notice promptly
confirmed in writing) to the Administrative Agent at its Notice Office (which
notice the Administrative Agent shall promptly transmit to each of the Banks),
the Company shall have the right, at any time or from time to time, without
premium or penalty, to terminate the Total Unutilized Revolving Loan
Commitment, in whole or in part, in integral multiples of $1,000,000 in the
case of partial reductions to the Total Unutilized Revolving Loan Commitment,
provided that (v) each reduction shall apply to reduce the then remaining
Scheduled Commitment Reductions pro rata based upon the then remaining amount
of such Scheduled Commitment Reductions after giving effect to all prior
reductions thereto, (w) each such reduction shall apply proportionately to
permanently reduce the Revolving Loan Commitment of each Bank, (x) the
reduction to the Total Unutilized Revolving Loan Commitment shall in no case be
in an amount which would cause the Revolving Loan Commitment of any Bank to be
reduced by an amount which exceeds the Unutilized Revolving Loan Commitment of
such Bank as in effect immediately before giving effect to such reduction, (y)
each such reduction of the Total Revolving Loan Commitment shall reduce the
Total Revolving C$ Loan Commitments ratably and (z) each such reduction shall
apply proportionately to permanently reduce the Revolving C$ Loan Commitment of
each Bank.
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
14.12(b), the Company may, upon five Business Days' prior written notice to the
Administrative Agent at its Notice Office (which notice the Administrative
Agent shall promptly transmit to each of the Banks) and subject to obtaining
the consents required by Section 14.12(b) terminate all of the Revolving Loan
Commitment of such Bank so long as all Loans, together with accrued and unpaid
interest, Fees and all other amounts owing to such Bank are repaid concurrently
with the effectiveness of such termination pursuant to Section 4.01(b) (at
which time Schedule I shall be deemed modified to reflect such changed
amounts), and at such
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<PAGE>
time, such Bank shall no longer constitute a "Bank" for purposes of this
Agreement, except with respect to indemnifications under this Agreement
(including, without limitation, Sections 1.10, 1.11, 2.06, 4.04, 14.01 and
14.06), which shall survive as to such repaid Bank.
3.03 Mandatory Reduction of Commitments. (a) The Total Revolving Loan
Commitment (and the Revolving Loan Commitment and Swingline Commitment of each
Bank) shall terminate in its entirety on August 30, 1996 unless the Initial
Borrowing Date has occurred on or before such date.
(b) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03 on each date set forth below, the Total Revolving Loan
Commitment shall be reduced by the amount set forth opposite such date (each
such reduction as the same may be reduced as provided in Sections 3.02(a) and
3.03(g), a "Scheduled Commitment Reduction" and each such date, a "Scheduled
Commitment Reduction Date"):
Scheduled Commitment Reduction Date Amount
August 15, 1998 $7,500,000
February 15, 1999 7,500,000
August 15, 1999 10,000,000
February 15, 2000 10,000,000
August 15, 2000 10,000,000
February 15, 2001 10,000,000
August 15, 2001 10,000,000
February, 2002 10,000,000
Final Maturity Date 75,000,000
(c) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, on each date on and after the Effective Date upon which
any Subsidiaries of the Company or any Joint Ventures receives any proceeds
from any capital contribution or any sale or issuance of its equity (but
excluding proceeds from capital contributions to, or equity investments in, any
Subsidiary or Joint Venture of the Company to the extent made by the Company,
any other Subsidiary of the Company or the respective joint venture partner of
such Joint Venture), the Total Revolving Loan Commitment shall be permanently
reduced by an amount equal to 50% of the Net Cash Proceeds of the
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<PAGE>
respective capital contribution or sale or issuance (or in the case of any
capital contribution to, or any sale or issuance of equity by, any Joint
Venture, the Total Revolving Loan Commitment shall be permanently reduced by an
amount equal to 50% of the Company's Allocable Share of such Net Cash Proceeds
(but, in the case of a Joint Venture in which the Company or a Subsidiary
thereof does not control the timing of distributions by such Joint Venture,
only as and when such Net Cash Proceeds are distributed by such Joint Venture
to the Company or a Wholly-Owned Subsidiary thereof)), in each case in
accordance with the requirements of Section 3.03(g); provided that, so long as
no Default or Event of Default then exists, the Total Revolving Loan Commitment
shall not be required to be reduced pursuant to the requirements of this
Section 3.03(c) at any time to an amount which is less than the Guaranty Amount
then in effect.
(d) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, on each date on and after the Effective Date upon which
the Company or any of its Subsidiaries or Joint Ventures receives Cash Proceeds
from any Asset Sale, the Total Revolving Loan Commitment shall be permanently
reduced by an amount equal to 100% of the Net Cash Proceeds therefrom (or, in
the case of any Asset Sale by a Joint Venture, the Total Revolving Loan
Commitment shall be permanently reduced by an amount equal to 100% of the
Company's Allocable Share of such Net Cash Proceeds (but, in the case of a
Joint Venture in which the Company or a Subsidiary thereof does not control the
timing of distributions by such Joint Venture, only as and when such Net Cash
Proceeds are distributed by such Joint Venture to the Company or a Wholly-Owned
Subsidiary thereof)) in each case in accordance with the requirements of
Section 3.03(g), provided that so long as no Default or Event of Default then
exists, (i) the Net Cash Proceeds of any Asset Sale pursuant to Section
10.02(ii) shall not be required to reduce the Total Revolving Loan Commitment
on the date of receipt thereof to the extent that the Company has delivered a
certificate to the Administrative Agent on or prior to such date stating that
it intends to reinvest such Net Cash Proceeds in equipment or materials within
365 days after the respective date of sale or, in lieu thereof, commit to so
invest such Net Cash Proceeds within 365 days after such date of sale and
actually expend the funds pursuant to such commitment within 365 days after
such date of sale, and (ii) the Net Cash Proceeds from the sale of any Existing
Investment, the sale of the equity interests in any Joint Venture, the sale of
any Hotel Property or from any Recovery Event shall not be required to reduce
the Total Revolving Loan Commitment on the date of receipt thereof to the
extent that (A) the Company delivers a certificate to the Administrative Agent
stating that it intends to utilize the Net Cash Proceeds therefrom to make
Permitted Hotel Acquisitions pursuant to Sections 10.02(ix) and/or 10.05(viii)
(and/or, in the case of the Net Cash Proceeds from a
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<PAGE>
Recovery Event, to replace or restore any properties or assets in respect of
which such proceeds are paid), other Investments permitted under Section 10.05
or Capital Expenditures permitted under Section 10.07 within 365 days after the
date of the respective Asset Sale, or make Investment Commitments for a
Permitted Hotel Acquisition within 365 days after the date of the respective
Asset Sale and actually make the respective Permitted Hotel Acquisition (or
effect such replacement or restoration, as the case may be), Investment or
Capital Expenditure within 365 days after the date of the respective Asset Sale
and (B) after giving effect to any election pursuant to this clause (ii), the
Reinvestment Amount shall at no time outstanding exceed $25,000,000, provided,
further, that with respect to each of clauses (i) and (ii) of the immediately
preceding proviso, if all or any portion of the Net Cash Proceeds of the
respective Asset Sale are not in fact utilized for the purposes permitted by
said clauses within 365 days after the respective date of such Asset Sale (or
committed to be so used within 365 days and actually applied within 365 days
after the date of the respective Asset Sale), then on such 365th day after the
date of the respective Asset Sale, the amount of Net Cash Proceeds not actually
applied for the purposes permitted by said clauses (i) and (ii) shall be used
to permanently reduce the Total Revolving Loan Commitment as otherwise required
by this Section 3.03(d) in the absence of the immediately preceding proviso.
(e) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03. on the first date on and after the Effective Date on
which (i) the long term senior unsecured debt credit rating of HFS shall have
been reduced to a level equal to or below BBB- by S&P and/or be unrated by S&P
and (ii) the long term senior unsecured debt rating of the Company shall have
been reduced to a level equal to or below BBB- by S&P and/or be unrated by S&P,
both of which downgradings and/or failures to be rated shall have continued for
at least 30 consecutive days, the Total Revolving Loan Commitment shall be
permanently reduced by an amount equal to $37,500,000 in accordance with the
requirements of Section 3.03(g).
(f) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, on the first date on and after the Effective Date on
which (i) the long term senior unsecured debt credit rating of HFS shall have
been reduced to a level below BBB- by S&P and/or be unrated by S&P and (ii) the
long term senior unsecured debt rating of the Company shall have been reduced
to a level below BBB- by S&P and/or be unrated by S&P, both of which
downgradings and/or failures to be rated shall have continued for at least 30
consecutive days, the Total Revolving Loan Commitment shall be permanently
reduced by an amount equal to $75,000,000 (less any amount by which the Total
Revolving Loan
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<PAGE>
Commitment had already been reduced pursuant to clause (e) above) in accordance
with the requirements of Section 3.03(g).
(g) The amount of each reduction to the Total Revolving Loan
Commitment made as required by (A) Sections 3.03(c) and (d) shall be applied to
reduce the then remaining Scheduled Commitment Reductions pro rata based on the
then remaining amounts of such Scheduled Commitment Reductions after giving
effect to all prior reductions thereto and (B) Sections 3.03(e) and (f) shall
be applied to reduce the then remaining Scheduled Commitment Reductions in
inverse order of maturity.
(h) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Revolving Loan Commitment (and the Revolving
Loan Commitment of each Bank) shall terminate in its entirety on the Final
Maturity Date.
(i) The Swingline Commitment shall terminate on the Swingline Expiry
Date.
(j) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, on the 15th day after each date on which any Change of
Control occurs, the Total Revolving Loan Commitment (and the Revolving Loan
Commitment of each Bank) shall terminate in its entirety, in each case unless
the Supermajority Banks otherwise agree in writing in their sole discretion.
(k) Each reduction to the Total Revolving Loan Commitment pursuant to
(i) this Section 3.03 shall be applied proportionately to reduce the Revolving
Loan Commitment of each Bank or (ii) Section 3.02 or this Section 3.03 shall
reduce the Swingline Commitment to the extent the Total Revolving Loan
Commitment would otherwise exceed the Swingline Commitment.
(l) Each reduction to the Total Revolving Loan Commitment shall (i)
reduce the Total Revolving C$ Loan Commitment ratably and (ii) be applied
proportionately to reduce the Revolving C$ Loan Commitment of each Bank. Each
termination of the Total Revolving Loan Commitment shall terminate the Total
Revolving C$ Loan Commitment (and the Revolving C$ Loan Commitment of each
Bank) in its entirety.
SECTION 4. Prepayments; Payments; Taxes.
4.01 Voluntary Prepayments. (a) Each Borrower shall have the right to
prepay the Loans, without premium or penalty, in whole or in part at any time
and from time to time on the following terms and conditions:
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(i) the applicable Borrower shall give the Administrative Agent prior
to 12:00 Noon (New York time) at its Notice Office (x) at least one
Business Day's prior written notice (or telephonic notice promptly
confirmed in writing) of such Borrower's intent to prepay $ Base Rate
Loans (or 11:00 A.M. on the date of prepayment, in the case of Swingline
Loans), (y) at least three Business Days' prior written notice (or
telephonic notice promptly confirmed in writing) of such Borrower's intent
to prepay $ Eurodollar Loans and (z) at least four Business Days prior
written notice (or telephone notice promptly confirmed in writing) of such
Borrower's intent to prepay C$ Eurodollar Loans, the amount of such
prepayment and the Types of Revolving Loans to be prepaid, whether such
Loans are Revolving $ Loans, Revolving C$ Loans or Swingline Loans, and,
in the case of Eurodollar Loans, the specific Borrowing or Borrowings
pursuant to which made, which notice the Administrative Agent shall
promptly transmit to each of the Banks;
(ii) each prepayment shall be in an aggregate principal amount of at
least (A) $500,000 in the case of Revolving $ Loans, (B) $50,000 in the
case of Swingline Loans and (C) C$500,000 in the case of Revolving C$
Loans; provided, that (A) if any partial prepayment of $ Eurodollar Loans
made pursuant to any Borrowing shall reduce the outstanding $ Eurodollar
Loans made pursuant to such Borrowing to an amount less than $1,000,000,
then such Borrowing shall be converted at the end of the then current
Interest Period into a Borrowing of $ Base Rate Loans and any election of
an Interest Period with respect thereto given by the applicable Borrower
shall have no force or effect and (B) no such prepayment may be made which
reduces the outstanding C$ Eurodollar Loans made pursuant to a Borrowing
to less than C$ $1,000,000; and
(iii) each prepayment in respect of any Revolving Loans made pursuant
to a Borrowing shall be applied pro rata among such Revolving Loans,
provided that, at the applicable Borrower's election in connection with
any prepayment of Revolving Loans pursuant to this Section 4.01(a), such
prepayment shall not be applied to any Revolving Loan of a Defaulting
Bank.
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
14.12(b), the Company shall have the right, upon five Business Days' prior
written notice to the Administrative Agent at its Notice Office (which notice
the Administrative Agent shall promptly transmit to each of the Banks) to repay
all Loans, together with accrued and
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<PAGE>
unpaid interest, Fees, and other amounts owing to such Bank in accordance with
said Section 14.12(b) so long as (A) in the case of the repayment of Loans of
any Bank pursuant to this clause (b) the Commitments of such Bank are
terminated concurrently with such repayment pursuant to Section 3.02(b) (at
which time Schedule I shall be deemed modified to reflect the changed Revolving
Loan Commitments) and (B) the consents required by Section 14.12(b) in
connection with the repayment pursuant to this clause (b) have been obtained.
4.02 Mandatory Payments. (a) (i) On any day on which the sum of the
Dollar Equivalent Amount of the aggregate outstanding principal amount of
Swingline Loans and Revolving Loans made by Non-Defaulting Banks and the Letter
of Credit Outstandings exceeds the Adjusted Total Revolving Loan Commitment as
then in effect, the Company shall prepay on such day principal of the Swingline
Loans and, after the Swingline Loans have been paid in full, Unpaid Drawings
and, after Unpaid Drawings have been paid in full, Revolving Loans of
Non-Defaulting Banks in an amount equal to such excess. If, after giving effect
to the prepayment of all Swingline Loans, Unpaid Drawings and Revolving Loans
of Non- Defaulting Banks, the aggregate amount of the Letter of Credit
Outstandings exceeds the Adjusted Total Revolving Loan Commitment as then in
effect, the Company shall pay to the Administrative Agent at the Payment Office
on such date an amount of cash or Cash Equivalents equal to the amount of such
excess (up to a maximum amount equal to the Letter of Credit Outstandings at
such time), such cash or Cash Equivalents to be held as security for all
obligations of the Company to Non-Defaulting Banks hereunder in a cash
collateral account to be established by the Administrative Agent.
(ii) On any day on which the aggregate outstanding principal amount
of Revolving C$ Loans made by Non-Defaulting Banks exceeds the Adjusted Total
Revolving C$ Loan Commitment as then in effect, the Canadian Borrower shall
prepay on such day principal of the Revolving C$ Loans of Non-Defaulting Banks
in an amount equal to such excess.
(iii) The Administrative Agent may determine the Dollar Equivalent
Amount of the Revolving Loans at any time. Each such determination shall,
absent manifest error, be final, conclusive and binding on the Canadian
Borrower.
(b) With respect to each repayment of Loans required by this Section
4.02, the applicable Borrower may designate the Types of Loans which are
required to be repaid and, in the case of Eurodollar Loans, the specific
Borrowing or Borrowings pursuant to which made, provided that: (i) if any
repayment of $ Eurodollar Loans made pursuant to a single Borrowing shall
reduce the outstanding $ Eurodollar Loans made pursuant to such Borrowing to
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<PAGE>
an amount less than $1,000,000, such Borrowing shall be converted at the end of
the then current Interest Period into a Borrowing of $ Base Rate Loans, (ii) if
any repayment of C$ Eurodollar Loans made pursuant to a single Borrowing would
reduce the outstanding C$ Eurodollar Loans made pursuant to such Borrowing to
an amount less than C$1,000,000, the consent of the Required Banks to such
repayment shall be obtained and (iii) except for differing treatments of
Defaulting Banks and Non-Defaulting Banks as expressly provided in Section
4.02(a), each repayment of Revolving Loans made pursuant to a Borrowing shall
be applied pro rata among such Revolving Loans; provided, that no repayment
pursuant to Section 4.02(a) shall be applied to any Revolving Loans of a
Defaulting Bank at any time when the aggregate amount of the Revolving Loans of
any Non-Defaulting Bank exceeds such Non- Defaulting Bank's Adjusted Percentage
of Revolving Loans then outstanding. In the absence of a designation by the
Company as described in the preceding sentence, the Administrative Agent shall,
subject to the above, make such designation in its sole discretion.
(c) In addition to any other mandatory repayments required pursuant
to this Section 4.02, on the 15th day after each date on which any Change of
Control occurs, all outstanding Loans shall be required to be immediately
repaid in full and all Letter of Credit Outstandings shall be cash
collateralized on terms similar to those described in the last sentence of
Section 4.02(a)(i), in each case unless the Supermajority Banks otherwise agree
in writing in their sole discretion.
4.03 Method and Place of Payment. Except as otherwise specifically
provided herein, all payments under this Agreement or under any Note shall be
made to the Administrative Agent for the account of the Bank or Banks entitled
thereto not later than 12:00 Noon (New York time) on the date when due and
shall be made (i) in respect of all obligations other than principal and
interest in respect of Revolving C$ Loans, in Dollars in immediately available
funds at the Payment Office of the Administrative Agent and (ii) in respect of
principal and interest in respect of Revolving C$ Loans, in Canadian Dollars in
immediately available funds of the Payment Office of the Administrative Agent.
The principal of, and interest on, each Revolving C$ Loan shall be paid only in
Canadian Dollars. Whenever any payment to be made hereunder or under any Note
shall be stated to be due on a day which is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest shall be payable at the applicable rate
during such extension.
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<PAGE>
4.04 Net Payments; Taxes. (a) All payments made by each Borrower
hereunder or under any Note will be made without setoff, counterclaim or other
defense. Except as provided in Section 4.04(b), all such payments will be made
free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein with respect to
such payments (but excluding, except as provided in the second succeeding
sentence, any tax imposed on or measured by the net income or net profits of a
Bank, or any franchise tax based on the net income or net profits of a Bank
based solely on the amounts specified in the preceding sentence, in either case
pursuant to the laws of the jurisdiction in which it is organized or the
jurisdiction in which the principal office or applicable lending office of such
Bank is located or any subdivision thereof or therein) and all interest,
penalties or similar liabilities with respect to such non-excluded taxes,
levies, imposts, duties, fees or other charges (all such non-excluded taxes,
levies, imposts, duties, fees, assessments or other charges being referred to
collectively as "Taxes"). If any Taxes are so levied or imposed, the applicable
Borrower agrees to pay the full amount of such Taxes, and such additional
amounts as may be necessary so that every payment of all amounts due under this
Agreement or under any Note, after withholding or deduction for or on account
of any Taxes, will not be less than the amount provided for herein or in such
Note. If any amounts are payable in respect of Taxes pursuant to the preceding
sentence, the applicable Borrower agrees to reimburse each Bank, upon the
written request of such Bank, for taxes imposed on or measured by the net
income or net profits of such Bank, or any franchise tax based on the net
income or net profits of a Bank based solely on the amounts specified in the
preceding sentence, in either case pursuant to the laws of the jurisdiction in
which such Bank is organized or in which the principal office or applicable
lending office of such Bank is located or under the laws of any political
subdivision or taxing authority of any such jurisdiction in which such Bank is
organized or in which the principal office or applicable lending office of such
Bank is located and for any withholding of income or similar taxes imposed by
the United States of America as such Bank shall determine are payable by, or
withheld from, such Bank in each case in respect solely to such amounts so paid
to or on behalf of such Bank pursuant to the preceding sentence and in respect
of any amounts paid to or on behalf of such Bank pursuant to this sentence. The
Company will furnish to the Administrative Agent within 45 days after the date
the payment of any Taxes is due pursuant to applicable law certified copies of
tax receipts evidencing such payment by such Borrower. Each Borrower agrees to
indemnify and hold harmless each Bank, and reimburse such Bank upon its written
request, for the amount of any Taxes so levied or imposed and paid by such
Bank.
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(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax
purposes agrees to deliver to the Company and the Administrative Agent on or
prior to the Effective Date, or in the case of a Bank that is an assignee or
transferee of an interest under this Agreement pursuant to Section 1.13 or
14.04 (unless the respective Bank was already a Bank hereunder immediately
prior to such assignment or transfer), on the date of such assignment or
transfer to such Bank, (i) two accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying to
such Bank's entitlement to a complete exemption from United States withholding
tax with respect to payments to be made under this Agreement and under any
Note, or (ii) if the Bank is not a "bank" within the meaning of Section
881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service
Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate substantially
in the form of Exhibit D (any such certificate, a "Section 4.04(b)(ii)
Certificate") and (y) two accurate and complete original signed copies of
Internal Revenue Service Form W-8 (or successor form) certifying to such Bank's
entitlement to a complete exemption from United States withholding tax with
respect to payments of interest to be made under this Agreement and under any
Note. In addition, each Bank agrees that from time to time after the Effective
Date, when a lapse in time or change in circumstances renders the previous
certification obsolete or inaccurate in any material respect, it will deliver
to the Company and the Administrative Agent two new accurate and complete
original signed copies of Internal Revenue Service Form 4224 or 1001, or Form
W-8 and a Section 4.04(b)(ii) Certificate, as the case may be, and such other
forms as may be required in order to confirm or establish the entitlement of
such Bank to a continued exemption from or reduction in United States
withholding tax with respect to payments under this Agreement and any Note, or
it shall immediately notify the Company and the Administrative Agent of its
inability to deliver any such Form or Certificate. Notwithstanding anything to
the contrary contained in Section 4.04(a), but subject to Section 14.04(b) and
the immediately succeeding sentence, (x) each Borrower shall be entitled, to
the extent it is required to do so by law, to deduct or withhold income or
similar taxes imposed by the United States (or any political subdivision or
taxing authority thereof or therein) from interest, Fees or other amounts
payable hereunder for the account of any Bank which is not a United States
person (as such term is defined in Section 7701(a)(30) of the Code) for U.S.
Federal income tax purposes to the extent that such Bank has not provided to
the Company U.S. Internal Revenue Service Forms that establish a complete
exemption from such deduction or withholding and (y) neither Borrower shall be
obligated pursuant to Section 4.04(a) to gross-up payments to be made to a Bank
in respect of income or similar taxes imposed by the United States if (I) such
Bank has
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not provided to the Company the Internal Revenue Service Forms required to be
provided to the Company pursuant to this Section 4.04(b) or (II) in the case of
a payment, other than interest, to a Bank described in clause (ii) above, to
the extent that such Forms do not establish a complete exemption from
withholding of such taxes. Notwithstanding anything to the contrary contained
in the preceding sentence or elsewhere in this Section 4.04 and except as set
forth in Section 14.04(b), each Borrower agrees to pay additional amounts and
to indemnify each Bank in the manner set forth in Section 4.04(a) (without
regard to the identity of the jurisdiction requiring the deduction or
withholding) in respect of any Taxes deducted or withheld by it as described in
the immediately preceding sentence as a result of any changes after the Initial
Borrowing Date in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof, relating to the deducting
or withholding of such Taxes.
SECTION 5. Conditions Precedent to Extensions of Credit on the
Initial Borrowing Date. The obligation of each Bank to make its Loans, and the
obligation of the Issuing Bank to issue Letters of Credit, on the Initial
Borrowing Date, is subject at the time of the making of such Loans or the
issuance of such Letters of Credit to the satisfaction of the following
conditions:
5.01 Execution of Agreement, Notes. On or prior to the Initial
Borrowing Date (i) the Effective Date shall have occurred, (ii) there shall
have been delivered to the Administrative Agent for the account of each of the
Banks the appropriate Revolving $ Note executed by the Company, in the amount,
maturity and as otherwise provided herein, (iii) there shall have been
delivered to the Administrative Agent for the account of Chase the Swingline
Note executed by the Company, in the amount, maturity and as otherwise provided
herein and (iv) there shall have been delivered to the Administrative Agent for
the amount of each of the Banks the appropriate Revolving C$ Note executed by
the Canadian Borrower, in the amount, maturity and as otherwise provided
herein.
5.02 Officer's Certificate. On the Initial Borrowing Date, the
Administrative Agent shall have received a certificate, dated the Initial
Borrowing Date and signed on behalf of the Company by an Authorized Officer,
stating all of the conditions of 5.06, 5.13, 5.14, 5.15, 5.17, 7.01, 7.02 and
7.03 have been satisfied on such date.
5.03 Fees, etc. On the Initial Borrowing Date, the Company shall have
paid to the Agents and the Banks all costs, fees and expenses (including,
without limitation, legal fees and expenses) payable to the Agents and the
Banks to the extent then due.
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5.04 Opinion of Counsel. On the Initial Borrowing Date, the
Administrative Agent shall have received opinions addressed to the Agents and
each of the Banks and dated the Initial Borrowing Date, from (i) Skadden, Arps,
Slate, Meagher & Flom, special counsel to HFS, which opinion shall cover the
matters addressed in Exhibit M-1 hereto (ii) Battle Fowler LLP, special counsel
to the Borrowers and the Subsidiary Guarantors, which opinion shall cover the
matters addressed in Exhibit M-2 hereto and (iii) the General Counsel to the
Borrowers and the Subsidiary Guarantors, which opinion shall cover the matters
addressed in Exhibit M-3 hereto.
5.05 Corporate Documents; Proceedings, etc. (a) On the Initial
Borrowing Date, the Administrative Agent shall have received a certificate,
dated the Initial Borrowing Date, signed by the President, any Vice President,
the Secretary or an Assistant Secretary of each Credit Party, in the form of
Exhibit E with appropriate insertions, together with copies of the certificate
of incorporation and by-laws or other organizational documents of each such
Credit Party and the resolutions of each such Credit Party referred to in such
certificates, and the foregoing shall be acceptable to the Administrative
Agent.
(b) All corporate and legal proceedings and all instruments and
agreements in connection with the transactions contemplated by this Agreement
and the other Documents shall be satisfactory in form and substance to the
Agents and the Required Banks, and the Administrative Agent shall have received
all information and copies of all documents and papers, including records of
corporate proceedings, governmental approvals, good standing certificates and
bring-down telegrams, if any, which the Agents may have requested in connection
therewith, such documents and papers where appropriate to be certified by
proper corporate or governmental authorities.
5.06 Refinancing. On the Initial Borrowing Date and after giving
effect to the Loans incurred on the Initial Borrowing Date, neither the Company
nor any of its Subsidiaries shall have any Indebtedness outstanding except for
(x) the Loans and Letters of Credit and (y) the Existing Indebtedness, which
Existing Indebtedness shall not exceed $10,000,000 in aggregate outstanding
principal amount. The Agents and the Required Banks shall be satisfied with the
amount of and the terms and conditions of (i) all Existing Indebtedness and
(ii) the repayment of all Indebtedness to be repaid in connection with the
transactions contemplated hereby (collectively, the "Refinancing") and the
amount of all accrued interest, premiums, fees, commissions and expenses owing
in connection with the Refinancing. The Refinancing shall have been effected in
accordance with the requirements of the immediately preceding sentence and all
Liens in connection with such refinanced Indebtedness shall have been
terminated (and all appropriate releases, termination statements
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or other instruments of assignment with respect thereto shall have been
obtained) to the satisfaction of the Agents and the Required Banks. The
Administrative Agent shall have received copies, certified as true and complete
by an appropriate officer of the Company, of all documents executed in
connection with the repayment of the Indebtedness and the release of the Liens
thereunder (collectively, the "Refinancing Documents").
5.07 Pledge Agreement. On the Initial Borrowing Date, each Credit
Party (other than HFS) shall have duly authorized, executed and delivered a
Pledge Agreement in the form of Exhibit F (as modified, supplemented or amended
from time to time, the "Pledge Agreement") and shall have delivered to the
Collateral Agent, as Pledgee, all the Pledged Securities (which Pledged
Securities shall be required to include (to the extent provided in the Pledge
Agreement), on the Initial Borrowing Date, all capital stock, partnership and
Joint Venture interests and promissory notes owned by the Company and each
Subsidiary Guarantor on the Initial Borrowing Date), if any, referred to
therein then owned by such Credit Party, (x) endorsed in blank in the case of
promissory notes constituting Pledged Securities and (y) together with executed
and undated stock powers, in the case of capital stock constituting Pledged
Securities.
5.08 Guaranties. On the Initial Borrowing Date, (i) HFS shall have
duly authorized, executed and delivered a Guaranty in the form of Exhibit G-1
(as modified, amended or supplemented from time to time, the "HFS Guaranty"),
(ii) each Subsidiary Guarantor shall have duly authorized, executed and
delivered a Subsidiary Guaranty in the form of Exhibit G-2 (as modified,
amended or supplemented from time to time, the "Subsidiaries Guaranty") and
(iii) the Company shall have duly authorized, executed and delivered a Guaranty
in the form of Exhibit G-3 (as modified, amended or supplemented from time to
time, the "Company Guaranty").
5.09 Adverse Change. On the Initial Borrowing Date, since December
31, 1995 nothing shall have occurred (and the Banks shall not have become aware
of any facts, conditions or other information not previously known) which the
Agents or the Required Banks shall reasonably determine has had or could
reasonably expected to have a material adverse effect (i) on the Transaction,
(ii) on the rights or remedies of the Agents or the Banks, or on the ability of
any Credit Party to perform their respective obligations to the Agents and the
Banks, under the Credit Documents or (iii) on the business, operations,
property, assets, nature of assets, liabilities, condition (financial or
otherwise) or prospects of the Company or the Company and its Subsidiaries
taken as a whole.
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5.10 Litigation. On the Initial Borrowing Date, no litigation by any
Person (private or governmental) shall be pending or, to the knowledge of any
of the Credit Parties, threatened with respect to (i) the Canadian Acquisition,
the making of the Loans or the Credit Documents or any documentation executed
in connection therewith or the transactions contemplated thereby except as set
forth on Schedule XI or (ii) which the Agents or the Required Banks shall
reasonably determine could have a materially adverse effect on the business,
operations, property, assets, nature of assets, liabilities, condition
(financial or otherwise) or prospects of the Company or the Company and its
Subsidiaries taken as a whole.
5.11 Solvency Certificate and Insurance Certificates. On or prior to
the Initial Borrowing Date, there shall have been delivered to the
Administrative Agent:
(i) a solvency certificate in the form of Exhibit H, addressed to
each of the Agents and each of the Banks and dated the Initial Borrowing
Date from an Authorized Financial Officer of the Company providing the
opinion of such Authorized Financial Officer as to the solvency of each of
the Company and its Subsidiaries on a consolidated basis and the Canadian
Borrower, in each case, after giving effect to the Transaction and the
financing therefor; and
(ii) certificates of insurance complying with the requirements of
Section 9.03 for the business and properties of the Company and its
Subsidiaries, in scope, form and substance satisfactory to the Agents and
the Required Banks.
5.12 Pro Forma Financial Information; Projections. (a) On the Initial
Borrowing Date, the Banks shall have received the audited, the unaudited and
the pro forma financial information required by Section 8.05(a), which shall be
in form and substance satisfactory to the Agents and the Required Banks. In
addition, the Banks shall have received such comfort with respect to the
preparation of such pro forma financial information from the outside auditors
of the Company and/or CPLC referenced in Section 8.05(a) as may have been
requested by the Agents or the Required Banks, which comfort shall be
satisfactory in form and substance to the Agents and the Required Banks.
(b) On the Initial Borrowing Date, the Banks shall have received
consolidated financial projections for the Company and its Subsidiaries for the
six fiscal years ended after the Initial Borrowing Date (the "Projections"),
which Projections, and the supporting assumptions and explanations thereto,
shall be satisfactory in form and substance to the Agents and the Required
Banks.
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5.13 Approvals, etc. On or prior to the Initial Borrowing Date, all
necessary governmental (domestic and foreign) and third party approvals in
connection with the Refinancing, the transactions contemplated by this
Agreement and otherwise referred to herein shall have been obtained and remain
in effect, and all applicable waiting periods shall have expired without any
action being taken by any competent authority which restrains, prevents or
imposes materially adverse conditions upon the making of the Loans and the
transactions contemplated by the Credit Documents. Additionally, there shall
not exist any judgment, order, injunction or other restraint issued or filed or
a hearing seeking injunctive relief or other restraint pending or notified
prohibiting or imposing materially adverse conditions upon the making of the
Loans or the transactions contemplated by the Credit Documents.
5.14 Cash on Hand. On the Initial Borrowing Date (and without giving
effect to any incurrence of Loans on such date), the Company shall have cash on
hand of at least $5,000,000.
5.15 Absence of Downgrade. From and after September 30, 1995, HFS
shall have suffered no rating downgrade (or at any time be unrated) by S&P and
shall not have been placed on "credit watch" with negative implications by S&P.
5.16 HFS Subordination Agreement. On the Initial Borrowing Date, HFS,
the Company and the Administrative Agent shall have duly authorized, executed
and delivered the HFS Subordination Agreement in the form of Exhibit I (the
"HFS Subordination Agreement"), pursuant to which HFS shall have agreed, among
other things, (i) notwithstanding anything to the contrary contained in any HFS
Agreement or otherwise, until the occurrence of the Bank Termination Date, HFS
will not terminate the Corporate Services Agreement for any reason whatsoever
without the prior written consent of the Required Banks, (ii) notwithstanding
anything to the contrary contained in any HFS Agreement or otherwise, until the
occurrence of the Bank Termination Date, fees owing pursuant to the various HFS
Agreements shall be payable only in accordance with the requirements of
Sections 10.03 and 10.06, (iii) to the extent that any fees or amounts are
owing to HFS or any of its Subsidiaries pursuant to any HFS Agreement or
otherwise as a result of the activities, operations or revenues of any
non-Wholly-Owned Subsidiary, Unrestricted Subsidiary or Joint Venture of the
Company, then neither the Company nor any of its Wholly-Owned Subsidiaries
shall have any liability to HFS or any of its Subsidiaries in respect of the
amounts so owed, and HFS or its respective Subsidiary shall have a claim for
the respective amounts owed to it only against the respective non-Wholly-Owned
Subsidiary, Unrestricted Subsidiary or Joint Venture, as the case may be,
provided that, notwithstanding the foregoing, the Company
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may be liable for its Allocable Share of any such fees or amounts of only a
non-Wholly-Owned Subsidiary or Joint Venture (but not of an Unrestricted
Subsidiary) (as determined for the respective non-Wholly-Owned Subsidiary or
Joint Venture), (iv) HFS shall agree that all amounts payable to it by the
Company and its Subsidiaries (except the amounts expressly provided pursuant to
Sections 10.06(iii), (v), (x)(a) and (xi)) shall be subordinated to the payment
in full of the Obligations on the terms set forth in the HFS Subordination
Agreement and (v) HFS shall agree, and shall agree to cause its Subsidiaries,
not to accept any Restricted Payment which is not permitted to be paid pursuant
to the provisions of this Agreement and, if any amount is received by it which
constitutes a Restricted Payment in excess of the amounts permitted under this
Agreement (including as may occur pursuant to Section 10.06(vii)), then
promptly after HFS has actual knowledge of its receipt of such excess payment
(or promptly after it receives notice from any Bank thereof), HFS shall
reimburse the Company in cash for the amount by which the payments made to HFS
and its Subsidiaries exceed the respective amounts permitted to be paid in
accordance with the requirements of this Agreement.
5.17 Additional Equity. On or prior to the Initial Borrowing Date,
the Company shall have received at least $57,000,000 in gross proceeds from the
issuance of additional common stock of the Company to Chartwell and FNSL
pursuant to the Chartwell Stock Purchase Agreement, and the terms thereof shall
be satisfactory to the Required Banks.
5.18 Additional Financial Statements. On or prior to the Initial
Borrowing Date, the Company shall have delivered to the Agents for each
Material Joint Venture (a) a profit and loss statement for the portion of its
current fiscal year ending on or about July 31, 1996 and (b) its federal income
tax returns for its tax year most recently ended.
SECTION 6. Conditions Precedent to Extensions of Credit on the
Canadian Borrowing Date. The obligation of each Bank to make its Loans, and the
obligation of the Issuing Bank to issue Letters of Credit, on the Canadian
Borrowing Date, is subject at the time of the making of such Loans or the
issuance of such Letters of Credit to the satisfaction of the following
conditions (which shall occur on or before December 31, 1996):
6.01 Consummation of the Canadian Acquisition. On or prior to the
Canadian Borrowing Date, there shall have been delivered to the Banks true and
correct copies of all Canadian Acquisition Documents, and all terms and
provisions of such Canadian Acquisition Documents shall be in form and
substance satisfactory to the Agents and the Required Banks and shall not be
amended in any material respect without the consent of the Required Banks. The
Canadian Acquisition, including all of the
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terms and conditions thereof, shall have been duly authorized by the board of
directors and (if required by applicable law) the shareholders of the Canadian
Borrower, and all Canadian Acquisition Documents shall have been duly executed
and delivered by the parties thereto and shall be in full force and effect. The
representations and warranties set forth in the Canadian Acquisition Documents
shall be true and correct in all material respects as if made on and as of the
Canadian Borrowing Date. Each of the conditions precedent to the Canadian
Borrower's obligations to consummate the Canadian Acquisition as set forth in
the Canadian Acquisition Documents shall have been satisfied to the
satisfaction of the Agents and the Required Banks or waived with the consent of
the Administrative Agent and the Required Banks and the Canadian Acquisition
shall have been consummated in accordance with all applicable law and the
respective Canadian Acquisition Documents (without giving effect to any
amendment or modification thereof or waiver with respect thereto unless
consented to by the Agents or the Required Banks). The consideration (exclusive
of fees) paid in the Canadian Acquisition shall not exceed C$ 98,000,000.
6.02 Officer's Certificate. On the Canadian Borrowing Date, the
Administrative Agent shall have received a certificate, dated the Canadian
Borrowing Date and signed on behalf of the Company by an Authorized Officer,
stating all of the conditions of 6.01, 7.01, 7.02 and 7.03 have been satisfied
on such date.
6.03 Adverse Change. On the Canadian Borrowing Date, since December
31, 1995 nothing shall have occurred (and the Banks shall not have become aware
of any facts, conditions or other information not previously known) which the
Agents or the Required Banks shall reasonably determine has had or could
reasonably expected to have a material adverse effect (i) on the Transaction,
(ii) on the rights or remedies of the Agents or the Banks, or on the ability of
any Credit Party to perform their respective obligations to the Agents and the
Banks, under the Credit Documents or (iii) on the business, operations,
property, assets, nature of assets, liabilities, condition (financial or
otherwise) or prospects of the Company or the Company and its Subsidiaries
taken as a whole.
6.04 Litigation. On the Initial Borrowing Date, no litigation by any
entity (private or governmental) shall be pending or, to the knowledge of any
of the Credit Parties, threatened with respect to (i) the Canadian Acquisition,
the making of the Loans or the Credit Documents or any documentation executed
in connection therewith or the transactions contemplated thereby except as set
forth on Schedule XI or (ii) which the Agents or the Required Banks shall
reasonably determine could have a materially adverse effect on the business,
operations, property, assets, nature of assets, liabilities, condition
(financial or
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otherwise) or prospects of the Company or the Company and its Subsidiaries
taken as a whole.
6.05 Environmental Assessments. On or prior to the Canadian Borrowing
Date, there shall have been delivered to the Administrative Agent the Phase I
environmental assessments from environmental consultants satisfactory to the
Agents and in form, scope and substance reasonably satisfactory to the Agents
and the Required Banks.
6.06 Approvals, etc. On or prior to the Canadian Borrowing Date, all
necessary governmental (domestic and foreign) and third party approvals in
connection with the Canadian Acquisition (excluding such immaterial approvals
which may not have been obtained in connection with the Canadian Acquisition),
shall have been obtained and remain in effect, and all applicable waiting
periods shall have expired without any action being taken by any competent
authority which restrains, prevents or imposes materially adverse conditions
upon the consummation of the Canadian Acquisition. Additionally, there shall
not exist any judgment, order, injunction or other restraint issued or filed or
a hearing seeking injunctive relief or other restraint pending or notified
prohibiting or imposing materially adverse conditions upon the Canadian
Acquisition.
6.07 Security Agreement. On the Canadian Borrowing Date, Chartwell
Lodging Inc. shall have duly authorized, executed and delivered a Security
Agreement substantially in the form of Exhibit O (as modified, supplemented or
amended from time to time in accordance with the terms thereof and hereof and
together with the security agreements required under Section , a "Security
Agreement" and collectively, the "Security Agreements") covering all of such
Credit Party's present and future interest in an Amended and Restated
Management Services and Franchise Development Agreement among Chartwell Hotels,
Inc., Royco Hotels & Resorts Ltd. and the Company, in each case together with:
(v) a legal opinion, from counsel and in form satisfactory to the
Agents, with respect to the execution, delivery and performance by such
Credit Party of the Security Agreement, accompanied by evidence as to the
signature of such Credit Party and its authority to execute, delivery and
perform the Security Agreement;
(w) executed copies of Financing Statement (Form UCC-1) in
appropriate form for filing under the UCC of each jurisdiction as may be
necessary to perfect the security interests purported to be created by the
Security Agreement;
(x) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, each of a recent
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date listing all effective financing statements that name such Credit
Party as debtor and that are filed in the jurisdictions referred to in
clause (w), together with copies of such financing statements (none of
which shall cover the Collateral except (i) those with respect to which
appropriate termination statements executed by the secured lender
thereunder have been delivered to the Administrative Agent and (ii) to the
extent evidencing Permitted Liens);
(y) evidence of the completion of, or arrangements to complete, all
other recordings and filings of, or with respect to, the Security
Agreement as may be necessary or, in the opinion of the Collateral Agent,
desirable to perfect the security interests intended to be created by the
Security Agreement; and
(z) evidence that all other actions reasonably necessary or, in the
reasonable opinion of the Collateral Agent, desirable to perfect and
protect the security interests purported to be created by each Security
Agreement have been, or are in the process of being, taken.
SECTION 7. Conditions Precedent to All Credit Events. The obligation
of each Bank, to make Loans (including Loans made on the Initial Borrowing Date
and the Canadian Borrowing Date), and the obligation of the Issuing Bank to
issue any Letter of Credit, is subject, at the time of each such Credit Event
(except as hereinafter indicated), to the satisfaction of the following
conditions:
7.01 No Default; Representations and Warranties. At the time of each
such Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein and in the other Credit Documents shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on the date of the making of such Credit Event (it
being understood and agreed that any representation or warranty which by its
terms is made as of a specified date shall be required to be true and correct
in all material respects only as of such specified date).
7.02 Adverse Change, etc. Nothing shall have occurred (and the Banks
shall have become aware of no facts or conditions not previously known) which
could reasonably be expected to have a material adverse effect on (x) the
rights or remedies of the Banks or the Agents under the Credit Documents, (y)
on the ability of the Company or any other Credit Party to perform its
obligations to the Banks under the Credit Documents or (z) on the business,
operations, property, assets, nature of assets, liabilities, condition
(financial or otherwise) or prospects of the Company or
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the Company and its Subsidiaries taken as a whole from December 31, 1995 or
from the pro forma financial statements referred to in Section 8.05.
7.03 Litigation. At the time of each such Credit Event and also after
giving effect thereto, no litigation by any entity (private or governmental)
shall be pending or threatened with respect to this Agreement or any other
Credit Document or the transactions contemplated hereby or thereby or which
could reasonably be expected to have a materially adverse effect on the
business, operations, property, assets, nature of assets, liabilities,
condition (financial or otherwise) or prospects of the Company or the Company
and its Subsidiaries taken as a whole.
7.04 Notice of Borrowing; Letter of Credit Request. (a) Prior to the
making of each Loan, the Administrative Agent shall have received a Notice of
Borrowing meeting the requirements of Section 1.03(a) or, in the case of a
Swingline Loan, the notice required by Section 1.03(b).
(b) Prior to the issuance of each Letter of Credit, the
Administrative Agent and the Issuing Bank shall have received a Letter of
Credit Request meeting the requirements of Section 2.03(a).
7.05 Certain Requirements With Respect to Loans Incurred to Effect
Permitted Hotel Acquisitions. Prior to the making of any Loan the proceeds of
which are to be used to effect a Permitted Hotel Acquisition in which the total
consideration exceeds $2,000,000, the Company shall have satisfied the relevant
requirements of Section 10.02(ix) or 10.05(viii), as the case may be.
The occurrence of the Initial Borrowing Date and the acceptance of
the proceeds or benefits of each Credit Event shall constitute a representation
and warranty by the Borrowers to each of the Administrative Agent and each of
the Banks that all the conditions specified in Section 5, 6 and in this Section
7 and applicable to such Credit Event exist as of that time. All of the Notes,
certificates, legal opinions and other documents and papers referred to in
Sections 5 and 6 and in this Section 7, unless otherwise specified, shall be
delivered to the Administrative Agent at the Notice Office for the account of
each of the Banks and, except for the Notes, in sufficient counterparts for
each of the Banks and shall be in form and substance reasonably satisfactory to
the Banks.
SECTION 8. Representations and Warranties. In order to induce the
Banks to enter into this Agreement and to make the Loans, and issue (or
participate in) the Letters of Credit as provided herein, the Borrowers make
the following representations,
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warranties and agreements, in each case after giving effect to the Canadian
Acquisition and the Recapitalization to be consummated on or before the
Canadian Borrowing Date, all of which shall survive the execution and delivery
of this Agreement and the Notes and the making of the Loans and issuance of the
Letters of Credit, with the occurrence of each Credit Event being deemed to
constitute a representation and warranty that the matters specified in this
Section 8 are true and correct on and as of the date of such Credit Event (it
being understood and agreed that any representation or warranty which by its
terms is made as of a specified date shall be required to be true and correct
in all material respects only as of such specified date):
8.01 Corporate and Partnership Status. Each of the Company and each
of its Subsidiaries (i) is a duly organized and validly existing corporation or
partnership, as the case may be, in good standing (if applicable) under the
laws of the jurisdiction of its organization, (ii) has the corporate or
partnership power and authority to own its property and assets and to transact
the business in which it is engaged and presently proposes to engage and (iii)
is duly qualified and is authorized to do business and is in good standing (if
applicable) in each jurisdiction where the conduct of its business requires
such qualifications except for failures to be so qualified which, individually
or in the aggregate, could not reasonably be expected to have a material
adverse effect on the business, operations, property, assets, nature of assets,
liabilities, condition (finan- cial or otherwise) or prospects of the Company
or the Company and its Subsidiaries taken as a whole.
8.02 Corporate or Partnership Power and Authority. Each Credit Party
has the corporate or partnership power and authority to execute, deliver and
perform the terms and provisions of each of the Documents to which it is a
party and has taken all necessary corporate or partnership action to authorize
the execution, delivery and performance by it of each of such Documents. Each
Credit Party has duly executed and delivered each of the Documents to which it
is a party, and each of such Docu- ments constitutes the legal, valid and
binding obligation of such Credit Party enforceable in accordance with its
terms, except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
other similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at law).
8.03 No Violation. Neither the execution, delivery or performance by
any Credit Party of the Documents to which it is a party, nor compliance by it
with the terms and provisions thereof, (i) will contravene in any material
respect any provision of any applicable law, statute, rule or regulation or any
applicable
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order, writ, injunction or decree of any court or governmental instrumentality,
(ii) will conflict with or result in any breach of any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any Lien
(except pursuant to the Security Documents) upon any of the properties or
assets of any Credit Party or any of its Subsidiaries pursuant to the terms of
any indenture, mortgage, deed of trust, credit agreement or loan agreement, or
any other material agreement, contract or instrument, to which any Credit Party
or any of its Subsidiaries is a party or by which it or any of its property or
assets is bound or to which it may be subject (excluding, in the case of the
Canadian Acquisition Documents and the Recapitalization Documents, from the
foregoing clauses (i) and (ii) such immaterial violations, which in no event
shall violate the provisions of this Agreement or otherwise be reasonably
expected to have a material adverse effect on (x) the Transaction, (y) the
rights or remedies of the Agents or the Banks under the Credit Documents, or on
the ability of any Credit Party to perform its obligations to the Agents and
the Banks under the Credit Documents or (z) on the business, operations,
properly, assets, nature of assets, liabilities or condition (financial or
otherwise) or prospects of the Company or the Company and its Subsidiaries
taken as a whole) or (iii) will violate any provision of the certificate of
incorporation or by-laws (or similar organizational documents) of any Credit
Party or any of its Subsidiaries.
8.04 Governmental Approvals. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with
(except as have been obtained or made and which remain in full force and
effect), or exemption by, any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection
with, (i) the Canadian Acquisition, (ii) the Recapitalization, (iii) the
execution, delivery and performance of any Credit Document or (iv) the
legality, validity, binding effect or enforceability of any such Credit
Document.
8.05 Financial Statements; Financial Condition; Undisclosed
Liabilities; Projections, etc. (a)(i) The audited consolidated balance sheet of
the Company for the fiscal year ended in December 1995 and the related
consolidated statements of income and retained earnings and cash flows of the
Company for the fiscal year ended as of said date, which statements have been
audited by Deloitte & Touche LLP or its predecessor in interest, who delivered
an unqualified opinion with respect thereto and copies of which have heretofore
been delivered to each Bank, present fairly the consolidated financial position
of the respective entities at the dates of said statements and the results of
operations for the periods covered thereby, (ii) the
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unaudited consolidated balance sheet of the Company for the fiscal quarter
ended in June 1996 and the related unaudited consolidated statements of income
and retained earnings and cash flows of the Company for the fiscal quarter
ended as of said date, copies of which have heretofore been delivered to each
Bank, present fairly the consolidated financial position of the respective
entities at the dates of such statements and the results of operations for the
periods covered thereby, (iii) the audited consolidated balance sheets of CPLP
for the fiscal years ended September 30 1995, 1994 and 1993 and the related
consolidated statements of income, changes in equity and cash flows of CPLP for
the fiscal years ended as of said dates, which statements have been examined by
Deloitte & Touche, Chartered Accountants, or its predecessor in interest, who
delivered an unqualified opinion with respect thereto and copies of which have
heretofore been delivered to each Bank, present fairly the consolidated
financial position of CPLP at the dates of said statements and the results of
operations for the periods covered thereby and (iv) the unaudited consolidated
balance sheet of CPLP for the fiscal quarter ended in June 27, 1996 and the
related consolidated statements of income, changes in equity and cash flows of
CPLP for the fiscal quarter ended as of said date, copies of which have
heretofore been delivered to each Bank, present fairly the consolidated
financial position of CPLP at the dates of said statements and the results of
operations for the periods covered thereby. All financial statements referred
to in the preceding sentence have been prepared in accordance with generally
accepted accounting principles and practices consistently applied except (i) in
the case of the audited financial statements, to the extent provided in the
notes to said financial statements, (ii) in the case of the unaudited financial
statements, for the absence of footnotes and for the same being subject to
normal year-end audit adjustments and (iii) in the case of the financial
statements of CPLP, such financial statements have been prepared in accordance
with Canadian generally accepted accounting principles and practices
consistently applied and the Company has provided to the Banks a reconciliation
of such financial statements of CPLP to generally accepted accounting
principles in the United States. The unaudited pro forma consolidated balance
sheets and income statements of each of (i) the Company and its Subsidiaries
(including CPLP and its Subsidiaries) and (ii) the Canadian Borrower and its
subsidiaries prepared prior to the Initial Borrowing Date and designated by the
Company as the pro forma financial statements referred to in this Section
8.05(a), copies of which have been furnished to the Banks on or prior to the
Initial Borrowing Date, present fairly the consolidated pro forma financial
position and results of operations of the entities covered thereby as at March
31, 1996 (in the case of the pro forma consolidated balance sheets) or for the
twelve month period ended on such date (in the case of the pro forma
consolidated income statements), in each case based on the assumption that the
Canadian Acquisition, the Recapitalization,
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the related financing thereof and the other transactions contemplated pursuant
to this Agreement had been consummated on March 31, 1996 (in the case of the
pro forma consolidated balance sheets) or March 31, 1996 (in the case of the
pro forma consolidated income statements). The unaudited pro forma consolidated
financial statements referred to in the preceding sentence have been prepared
on a basis consistent with the financial statements of CPLP referred to in the
first sentence of this Section 8.05(a), and have been prepared in a manner
consistent with the requirements of Regulation S-X of the SEC which are
applicable to pro forma financial information prepared in accordance with the
requirements thereof but shall be subject to audit adjustments which shall not
materially change the information set forth in such unaudited pro forma
financial statements. Since December 31, 1995 (but after giving effect to the
Canadian Acquisition, the Recapitalization and the financing of the Canadian
Acquisition as if same had occurred prior thereto), there has been no material
adverse change in the business, operations, property, assets. nature of assets,
liabilities, condition (financial or otherwise) or prospects of the Company or
the Company and its Subsidiaries taken as a whole.
(b) On and as of each of the Initial Borrowing Date and the Canadian
Borrowing Date, on a pro forma basis after giving effect to the Canadian
Acquisition, the Recapitalization and all other transactions contemplated by
the Documents and to all Indebtedness (including the Loans and Letters of
Credit) being incurred or assumed and Liens created by each Credit Party in
connection therewith, (x) the sum of the assets, at a fair valuation, of the
Company and its Subsidiaries (taken as a whole) and each Borrower (on a
stand-alone basis) will exceed their respective debts, (y) the Company and its
Subsidiaries (taken as a whole) and each Borrower (on a stand-alone basis) have
not incurred and do not intend to incur, and do not believe that they will
incur, debts beyond their ability to pay such debts as such debts mature and
(z) the Company and its Subsidiaries (taken as a whole) and each Borrower (on a
stand-alone basis) have sufficient capital with which to conduct its business.
For purposes of this Section 8.05(b) "debt" means any liability on a claim, and
"claim" means (i) right to payment whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (ii) right to
an equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(c) Except as fully disclosed in the financial statements delivered
pursuant to Section 8.05(a), there were as of the Initial Borrowing Date and
the Canadian Borrowing Date no
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liabilities or obligations with respect to the Company or any of its
Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due) which, either individually or in aggregate,
would be material to the Company or to the Company and its Subsidiaries taken
as a whole. As of the Initial Borrowing Date and the Canadian Borrowing Date,
the Company knows of no basis for the assertion against it of any liability or
obligation of any nature that is not fully disclosed in the financial
statements delivered pursuant to Section 8.05(a) which, either individually or
in the aggregate, could reasonably be expected to be material to the Company or
the Company and its Subsidiaries taken as a whole.
(d) On and as of the Initial Borrowing Date, the Projections, which
include the projected results of the Canadian Acquired Assets and which have
been delivered to the Agents and the Banks on or prior to the Initial Borrowing
Date, have been prepared on a basis consistent with the pro forma financial
statements referred to in Section 8.05(a), and there are no statements or
conclusions in any of the Projections which are based upon or include
information known to the Borrower to be misleading or which fail to take into
account material information regarding the matters reported therein. On the
Initial Borrowing Date, the Borrower believes that the Projections were
reasonable and attainable (it being understood that the Borrower makes no
representation or warranty that the results projected in the Projections will
actually be attained).
8.06 Litigation. There are no actions, suits or proceedings pending
or, to the best knowledge of either Borrower, threatened (i) with respect to
the Transaction or any Document except as set forth on Schedule XI or (ii) that
could reasonably be expected to materially and adversely affect the business,
operations, property, assets, nature of assets, liabilities, condition
(financial or otherwise) or prospects of the Company or the Company and its
Subsidiaries taken as a whole.
8.07 True and Complete Disclosure. All factual information (taken as
a whole) furnished by or on behalf of the Company or any of its Subsidiaries in
writing to any Agent or any Bank (including, without limitation, all
information contained in the Documents, but excluding the Projections and
assumptions contained therein, which are covered pursuant to preceding Section
8.05(d)) for purposes of or in connection with this Agreement, the other
Documents or any transaction contemplated herein or therein is, and all other
factual information (taken as a whole) hereafter furnished by or on behalf of
the Company or any of its Subsidiaries in writing to any Agent or any Bank will
be, true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
fact necessary to make such information (taken as a
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whole) not misleading at such time in light of the circumstances under which
such information was provided. The projections (including the Projections,
which include the projected results of the Canadian Acquired Assets) contained
in such materials are based on good faith estimates and assumptions believed by
the Company to be reasonable at the time made, it being recognized by the
Agents and the Banks that such projections as to future events are not to be
viewed as facts and that actual results during the period or periods covered
thereby may differ from the projected results.
8.08 Use of Proceeds; Margin Regulations. (a) The proceeds of the
Revolving C$ Loans shall be used by the Canadian Borrower on the Canadian
Borrowing Date (i) to finance the purchase price of the Canadian Acquisition
and (ii) to pay fees and expenses related to the Canadian Acquisition and the
financing therefor. The proceeds of all other Loans shall be used by the
Company for the Company's and its Subsidiaries' and Joint Ventures' general
corporate and partnership purposes, including to finance the working capital
needs of the Company and its Subsidiaries and Joint Ventures and to finance
Permitted Hotel Acquisitions and to pay the fees and expenses in connection
therewith (but shall not be used to pay any portion of the purchase price of
the Canadian Acquisition, the fees and expenses related thereto or to effect
the Recapitalization).
(b) No part of any Credit Event (or the proceeds thereof) will be
used to purchase or carry any Margin Stock or to extend credit for the purpose
of purchasing or carrying any Margin Stock. Neither the making of any Loan nor
the use of the proceeds thereof nor the occurrence of any other Credit Event
will violate or be inconsistent with the provisions of Regulation G, T, U or X
of the Board of Governors of the Federal Reserve System.
8.09 Tax Returns and Payments. (a) The Company and its Subsidiaries
have timely filed or caused to be timely filed, on the due dates thereof or
within applicable grace periods, with the appropriate taxing authority, all
Federal, state and other material returns, statements, forms and reports for
taxes (the "Returns") required to be filed by or with respect to the income,
properties or operations of the Company and/or its Subsidiaries and Material
Joint Ventures, as the case may be. The Returns accurately reflect in all
material respects all liability for taxes of the Company and its Subsidiaries
and Material Joint Ventures for the periods covered thereby. Each of the
Company and each of its Subsidiaries and Material Joint Ventures has paid all
material taxes payable by them other than taxes which are not delinquent, and
other than those contested in good faith and for which adequate reserves have
been established in accordance with generally accepted accounting principles.
There is no material action, suit, proceeding, investigation, audit, or claim
now
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pending or, to the best knowledge of the Company, threatened by any authority
regarding any taxes relating to the Company or any of its Subsidiaries or
Material Joint Ventures. As of the Initial Borrowing Date, neither the Company
nor any of its Subsidiaries has entered into an agreement or waiver or been
requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of taxes of the Company or
any its Subsidiaries.
(b) As of the Initial Borrowing Date, the Company has, subject to
certain limitations and restrictions pursuant to the Code, available net
operating and capital loss carryovers within the meaning of Section 172(b) of
the Code in the amount of at least $15,000,000, which net operating and capital
loss carryovers expire beginning in the year 2009 and shall be made available
by the Company to offset future income of the Company and its Subsidiaries.
8.10 Compliance with ERISA. (i) Each Plan is in substantial
compliance with ERISA and the Code; no Reportable Event has occurred with
respect to a Plan; no Plan is insolvent or in reorganization; no Plan has an
Unfunded Current Liability; no Plan has an accumulated or waived funding
deficiency or has applied for an extension of any amortization period within
the meaning of Section 412 of the Code (other than where the failure to do so
would not result in a material liability to the Borrower or any Subsidiary);
all contributions required to be made with respect to a Plan and a Foreign
Pension Plan have been timely made; neither the Company nor any Subsidiary of
the Company nor any ERISA Affiliate has incurred any material liability to or
on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or
4980 of the Code which has not been satisfied or expects to incur any material
liability (including any indirect, contingent, or secondary liability) under
any of the foregoing Sections with respect to any Plan; no proceedings have
been instituted to terminate or appoint a trustee to administer any Plan; no
condition exists which presents a material risk to the Company or any
Subsidiary of the Company or any ERISA Affiliate of incurring a liability to or
on account of a Plan pursuant to the foregoing provisions of ERISA and the
Code; using actuarial assumptions and computation methods consistent with Part
1 of subtitle E of Title IV of ERISA, the annual aggregate liabilities of the
Company and its Subsidiaries and its ERISA Affiliates to all Plans which are
multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of
a complete withdrawal therefrom, as of the close of the most recent fiscal year
of each such Plan ended prior to the date of the most recent Credit Event,
would not exceed $50,000; no lien imposed under the Code or ERISA on the assets
of the Company or any Subsidiary of the Company or any ERISA Affiliate exists
or is likely to arise on
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account of any Plan; and the Company and its Subsidiaries may cease
contributions to or terminate any employee benefit plan maintained by any of
them without incurring any material liability.
(ii) Each Foreign Pension Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. Neither the
Company nor any of its Subsidiaries has incurred any obligation in connection
with the termination of or withdrawal from any Foreign Pension Plan. The
present value of the accrued benefit liabilities (whether or not vested) under
each Foreign Pension Plan, determined as of the end of the Company's most
recently ended fiscal year on the basis of actuarial assumptions, each of which
is reasonable, did not exceed the current value of the assets of such Foreign
Pension Plan allocable to such benefit liabilities.
8.11 The Security Documents. (a) The security interests created in
favor of the Collateral Agent, as Pledgee, for the benefit of the Secured
Creditors under the Pledge Agreement constitute first priority perfected
security interests in the Pledged Securities described in the Pledge Agreement,
subject to no security interests of any other Person. No filings or recordings
are required in order to perfect (or maintain the perfection or priority of)
the security interests created in the Pledged Securities and the proceeds
thereof under the Pledge Agreement.
(b) The Security Agreement creates, as security for the Obligations
purported to be secured thereby, a valid and enforceable perfected security
interest in and Lien on all of the Collateral subject thereto, superior to and
prior to the rights of all third Persons and subject to no other Liens (except
that the Collateral may be subject to the security interests evidenced by
Permitted Liens relating thereto thereunder), in favor of the Collateral Agent
for the benefit of the Banks. No filings or recordings are required in order to
perfect the security interests created under any Security Document except for
filings or recordings required in connection with the Security Agreement which
shall have been made, or for which satisfactory arrangements have been made,
upon or prior to the execution and delivery thereof.
8.12 Representations and Warranties in Documents. All representations
and warranties set forth in the other Documents were true and correct in all
material respects at the time as of which such representations and warranties
were made (or deemed made) and shall be true and correct in all material
respects as of the Initial Borrowing Date as if such representations or
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warranties were made on and as of such date, unless stated to relate to a
specific earlier date, in which case such representations or warranties shall
be true and correct in all material respects as of such earlier date.
8.13 Properties. Each of the Company and each of its Subsidiaries and
Material Joint Ventures has good and marketable title to all properties owned
respectively by it, including all property reflected in the consolidated
balance sheets referred to in Section 8.05(a) (except as sold or otherwise
disposed of since the date of such balance sheets in the ordinary course of
business), free and clear of all Liens, other than (i) as referred to in the
balance sheets or in the notes thereto or (ii) Permitted Liens. Schedule IV
contains a true and complete list of each parcel of Real Property owned or
leased by the Company and its Subsidiaries and Material Joint Ventures on the
Initial Borrowing Date, and the type of interest therein held by the Company or
such Subsidiary or Material Joint Venture. The Company and each of its
Subsidiaries and Material Joint Ventures have good and indefeasible title to
all fee-owned Real Properties and valid leasehold title to all Leaseholds.
8.14 Capitalization. On the Initial Borrowing Date, the Canadian
Borrowing Date and after giving effect to the Recapitalization and the other
transactions contemplated hereby, the authorized capital stock of the Company
shall consist of 100,000,000 shares of common stock, $0.01 par value per share
and 10,000,000 shares of preferred stock, $1.00 par value per share. As of the
Initial Borrowing Date and the Canadian Borrowing Date, 9,452,320 shares of
common stock of the Company are outstanding and no shares of preferred stock of
the Company are outstanding. All such outstanding shares of common stock have
been duly and validly issued, are fully paid and nonassessable and are free of
preemptive rights. As of the Initial Borrowing Date and the Canadian Borrowing
Date, except for options to purchase 1,635,000 shares of common stock of the
Company granted under its 1994 Stock Option Plan and the obligation of the
Company to issue up to 413,910 shares of its common stock under the
Distribution Agreement dated as of November 22, 1994, the Company does not have
outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any rights to subscribe for or to purchase, or any options
for the purchase of, or any agreements providing for the issuance (contingent
or otherwise) of, or any calls, commitments or claims of any character relating
to, its capital stock.
8.15 Subsidiaries, Joint Ventures, Unrestricted Subsidiaries. After
giving effect to the Canadian Acquisition, the Company will have no
Subsidiaries, Joint Ventures or Unrestricted Subsidiaries other than (i) those
Subsidiaries and Joint Ventures listed (and in each case identified as such) on
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Schedule V and (ii) new Subsidiaries, Joint Ventures and Unrestricted
Subsidiaries created in compliance with Section 10.16. On the Initial Borrowing
Date and the Canadian Borrowing Date, the Company has no Unrestricted
Subsidiaries. Schedule V correctly sets forth, as of the Initial Borrowing Date
(i) the percentage ownership (direct or indirect) of the Company in each class
of capital stock or other equity interest of each of its Subsidiaries and Joint
Ventures and also identifies the direct owner thereof and (ii) each Material
Joint Venture.
8.16 Compliance with Statutes, etc. Each of the Company and each of
its Subsidiaries and Joint Ventures is in compliance with all applicable
statutes, regulations and orders of, and all applicable restrictions imposed
by, all governmental bodies, domestic or foreign, in respect of the conduct of
its business and the ownership of its property (including applicable statutes,
regulations, orders and restrictions relating to environmental standards and
controls), except such noncompliances as could not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
business, operations, property, assets, nature of assets, liabilities,
condition (financial or otherwise) or prospects of the Company or the Company
and its Sub- sidiaries taken as a whole.
8.17 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
8.18 Public Utility Holding Company Act. Neither the Company nor any
of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
8.19 Environmental Matters. (a) Each of the Company and each of its
Subsidiaries and Joint Ventures has complied with all applicable Environmental
Laws and the requirements of any permits issued under such Environmental Laws.
There are no pending or threatened Environmental Claims against the Company or
any of its Subsidiaries or Joint Ventures or any Real Property owned or
operated by the Company or any of its Subsidiaries or Joint Ventures. There are
no facts, circumstances, conditions or occurrences on any Real Property owned
or operated by the Company or any of its Subsidiaries or Joint Ventures or on
any property adjoining or in the vicinity of any such Real Property that could
reasonably be expected (i) to form the basis of an Environmental Claim against
the Company or any of its Subsidiaries or Joint Ventures or any such Real
Property or (ii) to cause any such Real Property to be subject to any
restrictions on the ownership,
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occupancy, use or transferability of such Real Property by the Company or any
of its Subsidiaries or Joint Ventures under any applicable Environmental Law.
(b) To the best knowledge of the Company, Hazardous Materials have
not at any time been generated, used, treated or stored on, or transported to
or from, or Released on or from, any Real Property owned or operated by the
Company or any of its Subsidiaries or Joint Ventures except in compliance with
all applicable Environmental Laws and reasonably required in connection with
the operation, use and maintenance of any such Real Property by the Company's,
such Subsidiary's or such Joint Venture's business.
(c) Notwithstanding anything to the contrary in this Section 8.19,
the representations made in this Section 8.19 shall only be untrue if the
aggregate effect of all failures and noncompliance of the types described above
could reasonably be expected to have a material adverse effect on the business,
operations, property, assets, nature of assets, liabilities, condition
(financial or otherwise) or prospects of the Company or the Company and its
Subsidiaries taken as a whole.
8.20 Labor Relations. Neither the Company nor any of its Subsidiaries
or Joint Ventures is engaged in any unfair labor practice that could reasonably
be expected to have a material adverse effect on the business, operations,
property, assets, nature of assets, liabilities, condition (financial or
otherwise) or prospects of the Company or the Company and its Subsidiaries
taken as a whole. There is (i) no unfair labor practice complaint pending or,
to the best knowledge of the Company, threatened against the Company or any of
its Subsidiaries or Joint Ventures before the National Labor Relations Board
and no grievance or arbitration proceeding arising out of or under any
collective bargaining agreement is so pending or threatened against the Company
or any of its Subsidiaries or Joint Ventures, (ii) no strike, labor dispute,
slowdown or stoppage is pending or, to the best knowledge of the Company,
threatened against the Company or any of its Subsidiaries or Joint Ventures and
(iii) to the best knowledge of the Company, no union representation question
exists with respect to the employees of the Company or any of its Subsidiaries
or Joint Ventures, except (with respect to any matter specified in clause (i),
(ii) or (iii) above, either individually or in the aggregate) such as could not
reasonably be expected to have a material adverse effect on the business,
operations, property, assets, liabilities, condition (financial or otherwise)
or prospects of the Company or the Company and its Subsidiaries taken as a
whole.
8.21 Patents, Licenses, Franchises and Formulas. Each of the Company
and each of its Subsidiaries and Joint Ventures
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owns all material patents, trademarks, permits, service marks, trade names,
copyrights, licenses, franchises and formulas, or rights with respect to the
foregoing, and has obtained assignments of all leases and other rights of
whatever nature, reasonably necessary for the present conduct of its business,
without any known conflict with the rights of others which, or the failure to
obtain which, as the case may be, would result in a material adverse effect on
the business, operations, property, assets, liabilities, condition (financial
or otherwise) or prospects of the Company or the Company and its Subsidiaries
taken as a whole.
8.22 Indebtedness. Schedule VI sets forth a true and complete list of
all Indebtedness of the Company and its Subsidiaries and Joint Ventures as of
the Initial Borrowing Date and the Canadian Borrowing Date (excluding the Loans
and any Indebtedness to be refinanced pursuant to the Refinancing, the
"Existing Indebtedness"), in each case showing the aggregate principal amount
thereof and the name of the respective borrower and any other entity which
directly or indirectly guaranteed such debt.
8.23 Canadian Acquisition; Recapitalization. On the Canadian
Borrowing Date, the Canadian Acquisition and the Recapitalization shall have
been consummated in all respects in accordance with the terms of the respective
Documents and all applicable laws. At the time of consummation of the Canadian
Acquisition and the Recapitalization, all consents and approvals of, and
filings and registrations with, and all other actions in respect of, all
governmental agencies, authorities or instrumentalities required in order to
make or consummate the Canadian Acquisition and the Recapitalization will have
been obtained, given, filed or taken and are or will be in full force and
effect (or effective judicial relief with respect thereto has been obtained),
except where the failure to so obtain, give, file or take would not have a
material adverse effect on the Canadian Acquisition or on the business,
operations, property, assets, nature of assets, liabilities, condition
(financial or otherwise) or prospects of the Company or the Company and its
Subsidiaries taken as whole. All applicable waiting periods with respect
thereto have or, prior to the time when required, will have, expired without,
in all such cases, any action being taken by any competent authority which
restrains, prevents, or imposes material adverse conditions upon the Canadian
Acquisition or the Recapitalization. Additionally, there does not exist any
judgment, order or injunction prohibiting or imposing material adverse
conditions upon the Canadian Acquisition or the Recapitalization, or the
occurrence of any Credit Event or the performance by any Credit Party of its
obligations under the respective Documents. All actions taken by the Credit
Parties pursuant to or in furtherance of the Canadian Acquisition and the
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Recapitalization have been taken in compliance with the respective Documents
and all applicable laws.
SECTION 9. Affirmative Covenants. The Company hereby covenants and
agrees that on and after the Effective Date and until the Total Revolving Loan
Commitment and all Letters of Credit have terminated and the Loans, Notes and
Unpaid Drawings, together with interest, Fees and all other obligations
incurred hereunder and thereunder, are paid in full:
9.01 Information Covenants. The Company will furnish to the
Administrative Agent (with sufficient copies for each of the Banks, and the
Administrative Agent will promptly forward to each of the Banks):
(a) Quarterly Reports. Within 60 days after the end of each fiscal
quarter of the Company, the quarterly management reports prepared by (or on
behalf of) the Company or the respective Subsidiary or Joint Venture for each
Hotel Property, which quarterly management reports shall contain the revenues
of such Hotel Property for such fiscal quarter (including room revenues, food
and beverage revenues and other revenues), the average occupancy rate for such
Hotel Property for such fiscal quarter, the average daily room rate for such
Hotel Property for such fiscal quarter and such other information as may be
reasonably requested by the Administrative Agent for such Hotel Property to the
extent reasonably available.
(b) Quarterly Financial Statements. Within 60 days after the close of
the first three quarterly accounting periods in each fiscal year of the Company
(beginning with the fiscal quarter ending on or about September 30, 1996), (i)
consolidated and consolidating balance sheets of the Company and its
consolidated Subsidiaries and Unrestricted Subsidiaries as at the end of such
quarterly accounting period and the related consolidated statements of income
and retained earnings and statement of cash flows, in each case for such
quarterly accounting period and for the elapsed portion of the fiscal year
ended with the last day of such quarterly accounting period, in each case
setting forth comparative figures for the related periods in the prior fiscal
year, all of which shall be certified by an Authorized Financial Officer of the
Company, subject to normal year-end audit adjustments and (ii) management's
discussion and analysis of the important operational and financial developments
during the quarterly accounting period and year-to-date periods.
(c) Annual Financial Statements. Within 90 days after the close of
each fiscal year of the Company, the consolidated and consolidating balance
sheets of the Company and its consolidated Subsidiaries and Unrestricted
Subsidiaries, as at the end of such fiscal year and the related consolidated
and consolidating
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statements of income and retained earnings and of cash flows for such fiscal
year setting forth comparative figures for the preceding fiscal year and
certified, in the case of the consolidated statements, by Deloitte & Touche LLP
or such other independent certified public accountants of recognized national
standing acceptable to the Administrative Agent, together with a report of such
accounting firm stating that in the course of its regular audit of the
financial statements of the Company and its Subsidiaries and Unrestricted
Subsidiaries, which audit was conducted in accordance with generally accepted
auditing standards, such accounting firm obtained no knowledge of any Default
or Event of Default which has occurred and is continuing under any of Sections
10.03, 10.06 through 10.11, inclusive, and Section 11.12, or, if in the opinion
of such accounting firm such a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof.
(d) Budgets. No later than 30 days (90 days in the case of the
budgets delivered pursuant to clause (y) below) after the first day of each
fiscal year of the Company. budgets in form satisfactory to the Administrative
Agent (including, in any event, budgeted statements of cash flow and budgeted
debt and cash bal- ances) for (x) such fiscal year prepared in detail and (y)
each of the five years immediately following such fiscal year prepared in
summary form, in each case, of the Company and its Subsidiaries and Joint
Ventures, accompanied by the statement of an Authorized Financial Officer of
the Company to the effect that the budget is a reasonable estimate for the
period covered thereby.
(e) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Sections 9.01(a), (b) and (c), a
certificate of an Authorized Financial Officer of the Company to the effect
that no Default or Event of Default has occurred and is continuing or, if any
Default or Event of Default has occurred and is continuing, specifying the
nature and extent thereof, which certificate, if delivered with the financial
statements required by Sections 9.01 (b) and (c), shall also (x) set forth the
calculations required to establish whether the Company was in compliance with
the provisions of Sections 3.03(d) (and shall show the calculation of the
Reinvestment Amount as of the last day of the period covered by such financial
statements), and 10.03 through 10.11, inclusive, at the end of such fiscal
quarter or year, as the case may be, as well as the calculations required to
establish compliance with the provisions of Section 11.12 at the end of such
fiscal quarter or year, as the case may be, (y) set forth the amounts (and
supporting calculations), as at the last day of the respective fiscal quarter
(but after giving effect to the making of any Restricted Payments pursuant to
Section 10.06(vii) in respect of such fiscal quarter or fiscal year, as the
case may be, and any Capital Expenditure made pursuant to Section 10.07(c) in
respect of such fiscal
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quarter or fiscal year, as the case may be), of the Cumulative Retained
Residual Excess Cash Flow Amount, as well as a description of all Restricted
Payments made during (or with respect to) the respective fiscal quarter or
fiscal year and showing the calculations establishing compliance with the
provisions of Section 10.03 and 10.06 and (z) if delivered with the financial
statements required by Section 10.01(c), set forth the amount of (and the
calculations required to establish Excess Cash Flow for the fiscal year covered
by such financial statements).
(f) Notice of Default or Litigation; HFS or Company Downgrade.
Promptly, and in any event within three Business Days after an officer of the
Company or any of its Subsidiaries obtains knowledge thereof, notice of (i) the
occurrence of any event which constitutes a Default or an Event of Default,
(ii) any litigation or governmental investigation or proceeding pending or
threatened (x) against the Company or any of its Subsidiaries which could
reasonably be expected to materially and adversely affect the business,
operations, property, assets, liabilities, condition (financial or otherwise)
or prospects of the Company or the Company and its Subsidiaries taken as a
whole, (y) with respect to any material Indebtedness of the Company or any of
its Subsidiaries or Joint Ventures or (z) with respect to any Document and
(iii) any downgrading or discontinuance of rating of HFS or the Company by S&P
or any other rating agency, and any placement by S&P or any other rating agency
of HFS or the Company on "credit watch" or any similar action.
(g) Management Letters. Promptly after receipt thereof by the Company
or any of its Subsidiaries, a copy of any "management letter" received by the
Company or any of its Subsidiaries from its certified public accountants and
the management's responses thereto.
(h) Other Reports and Filings. Promptly, copies of all financial
information, proxy materials and other information and reports, if any, which
the Company or any of its Subsidiaries or Material Joint Ventures shall file
with the Securities and Exchange Commission or any successor thereto (the
"SEC") and copies of all notices and reports which the Company or any of its
Subsidiaries or Material Joint Ventures shall deliver to holders of its
Indebtedness pursuant to the terms of the documentation governing such
Indebtedness (or any trustee, agent or other representative therefor).
(i) Environmental Matters. Promptly upon, and in any event within ten
Business Days after, an officer of the Company or any of its Subsidiaries
obtains knowledge thereof, notice of one or more of the following environmental
matters:
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(i) any pending or threatened material Environmental Claim against
the Company or any of its Subsidiaries or Joint Ventures or any Real
Property owned or operated by the Company or any of its Subsidiaries or
Joint Ventures;
(ii) any condition or occurrence on or arising from any Real Property
owned or operated by the Company or any of its Subsidiaries or Joint
Ventures that (a) results in non-compliance by the Company or any of its
Subsidiaries or Joint Ventures with any applicable Environmental Law or
(b) could reasonably be expected to form the basis of a material
Environmental Claim against the Company or any of its Subsidiaries or
Joint Ventures or any such Real Property;
(iii) any condition or occurrence on any Real Property owned or
operated by the Company or any of its Subsidiaries or Material Joint
Ventures that could reasonably be expected to cause such Real Property to
be subject to any restrictions on the ownership, occupancy, use or
transferability by the Company or any of its Subsidiaries or Material
Joint Ventures of such Real Property under any Environmental Law; and
(iv) the taking of any removal or remedial action in response to the
actual or alleged presence of any Hazardous Material on any Real Property
owned or operated by the Company or any of its Subsidiaries or Material
Joint Ventures as required by any Environmental Law or any governmental or
other administrative agency; provided that in any event the Company shall
deliver to each Bank all notices received by it or any of its Subsidiaries
from any government or governmental agency under, or pursuant to,
Environmental Law.
All such notices shall describe in reasonable detail the nature of the claim,
investigation, condition, occurrence or removal or remedial action and the
Company's or such Subsidiary's response or proposed response thereto. In
addition, the Company and any of its Subsidiaries and Material Joint Ventures
will provide the Administrative Agent with copies of all material
communications with any government or governmental agency relating to
Environmental Laws, all material communications with any Person relating to
Environmental Claims, and such detailed reports of any Environmental Claim as
may be requested by the Administrative Agent or any Bank.
(j) Annual Meetings with Banks. At the request of the Administrative
Agent, the Company shall within 120 days after the close of each fiscal year of
the Company, hold a meeting (at a mutually agreeable location and time) with
all of the Banks at which meeting shall be reviewed the financial results of
the previous fiscal year and the financial condition of the Company
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and the budgets presented for the current fiscal year of the Company and its
Subsidiaries and Material Joint Ventures.
(k) Other Information. From time to time, such other information or
documents (financial or otherwise) with respect to the Company or its
Subsidiaries or Joint Ventures as the Administrative Agent or any Bank (through
the Administrative Agent) may reasonably request.
9.02 Books, Records and Inspections. The Company will, and will cause
each of its Subsidiaries and Material Joint Ventures to, keep proper books of
record and account in which full, true and correct entries in conformity with
generally accepted accounting principles and all requirements of law shall be
made of all dealings and transactions in relation to its business and
activities. The Company will, and will cause each of its Subsidiaries and Joint
Ventures to, permit officers and designated representatives of any Agent or the
Banks to visit and inspect, during regular business hours, upon reasonable
advance notice and under guidance of officers of the Company, such Subsidiary
or such Joint Venture, any of the properties of the Company or any of its
Subsidiaries or Joint Ventures, and to examine the books of account of the
Company and any of its Subsidiaries or Joint Ventures and discuss the affairs,
finances and accounts of the Company and any of its Subsidiaries or Joint
Ventures with, and be advised as to the same by, its and their respective
officers and independent accountants, all at such times and intervals and to
such extent as any Agent or the Banks may request.
9.03 Maintenance of Property, Insurance. (a) Schedule VII sets forth
a true and complete listing of all insurance maintained by, or on behalf of,
the Company and its Subsidiaries and Material Joint Ventures as of the Initial
Borrowing Date and the Canadian Borrowing Date. The Company will, and will
cause each of its Subsidiaries and Material Joint Ventures to, (i) keep all
property necessary in its business in good working order and condition, (ii)
maintain insurance on all its property in at least such amounts and against at
least such risks as is consistent and in accordance with industry practice and
(iii) furnish to the Administrative Agent, upon written request, full
information as to the insurance carried. In addition to the requirements of the
immediately preceding sentence, the Company will at all times cause insurance
of the types described in Schedule VII to be maintained (with the same scope of
coverage as that described in Schedule VII) at levels which are at least as
great as the respective amount described opposite the respective type of
insurance on Schedule VII. Such insurance shall include physical damage
insurance on all real and personal property (whether now owned or hereafter
acquired) on an all risk basis, covering the full repair and replacement costs
of all such property and
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business interruption insurance for the actual loss sustained. All such
insurance shall be provided by insurers having an A.M. Best general
policyholders service rating of not less than B+III.
(b) If the Company or any of its Subsidiaries or Material Joint
Ventures shall fail to maintain all insurance in accordance with this Section
9.03, the Administrative Agent and/or the Collateral Agent shall have the right
(but shall be under no obligation), upon at least 10 days' notice to the
Company, to procure such insurance, the Company agrees to reimburse the
Administrative Agent or the Collateral Agent, as the case may be, for all costs
and expenses of procuring such insurance.
9.04 Corporate Franchises. The Company will, and will cause each of
its Subsidiaries and Material Joint Ventures to, do or cause to be done, all
things necessary to preserve and keep in full force and effect its existence
and its material rights, franchises, licenses and patents; provided, however,
that nothing in this Section 9.04 shall prevent (i) transactions permitted in
accordance with the applicable requirements of Sections 10.02 and 10.05 or (ii)
the withdrawal by the Company or any of its Subsidiaries or Material Joint
Ventures of its qualification as a foreign corporation in any jurisdiction
where such withdrawal could not reasonably be expected to have a material
adverse effect on the business, operations, property, assets, nature of assets,
liabilities, condition (financial or otherwise) or prospects of the Company or
the Company and its Subsidiaries taken as a whole.
9.05 Compliance with Statutes, etc. The Company will, and will cause
each of its Subsidiaries and Joint Ventures to, comply with all applicable
statutes, regulations and orders of, and all applicable restrictions imposed
by, all governmental bodies, domestic or foreign, in respect of the conduct of
its business and the ownership of its property, except such noncompliances as
could not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the Company or
the Company and its Subsidiaries taken as a whole.
9.06 Compliance with Environmental Laws. The Company will comply, and
will cause each of its Subsidiaries and Joint Ventures to comply, in all
material respects with all Environmental Laws applicable to the ownership or
use of its Real Property now or hereafter owned or operated by the Company or
any of its Subsidiaries or Joint Ventures, will promptly pay or cause to be
paid all costs and expenses incurred in connection with such compliance, and
will keep or cause to be kept all such Real Property free and clear of any
Liens imposed pursuant to such Environmental Laws, in each case except to the
extent that such noncompliance, failure to pay or failure to keep such Real
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Property free of Liens could not, individually or in the aggregate, reasonably
be expected to have a material adverse effect on the business, operations,
property, assets, liability, condition (financial or otherwise) or prospects of
the Company or the Company and its Subsidiaries taken as a whole. Neither the
Company nor any of its Subsidiaries or Joint Ventures will generate, use,
treat, store, release or dispose of, or permit the generation, use, treatment,
storage, release or disposal of Hazardous Materials on any Real Property now or
hereafter owned or operated by the Company or any of its Subsidiaries or Joint
Ventures, or transport or permit the transportation of Hazardous Materials to
or from any such Real Property except for Hazardous Materials used or stored at
any such Real Properties in compliance with all applicable Environmental Laws
and reasonably required in connection with the operation, use and maintenance
of any such Real Property, in each case except to the extent that doing so
could not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the business, operations, property, assets,
liability, condition (financial or otherwise) or prospects of the Company or
the Company and its Subsidiaries taken as a whole.
9.07 ERISA. As soon as possible and, in any event, within 15 days
after the Company, any Subsidiary of the Company or any ERISA Affiliate knows
or has reason to know of the occurrence of any of the following, the Company
will deliver to each of the Banks a certificate of an Authorized Financial
Officer of the Company setting forth details as to such occurrence and the
action, if any, that the Company, such Subsidiary or such ERISA Affiliate is
required or proposes to take, together with any notices required or proposed to
be given to or filed with or by the Company, the Subsidiary, the ERISA
Affiliate, the PBGC, a Plan participant or the Plan administrator with respect
thereto: that a Reportable Event has occurred; that an accumulated funding
deficiency has been incurred or an application has been made to the Secretary
of the Treasury for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code with respect to a Plan and
such action has not been dismissed within 30 days; that a contribution required
to be made to a Plan or Foreign Pension Plan has not been timely made; that a
Plan has been or may be terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA, that a Plan has an Unfunded Current
Liability giving rise to a lien under ERISA or the Code; that proceedings may
be or have been instituted to terminate or appoint a trustee to administer a
Plan. that a proceeding has been instituted against the Company, any Subsidiary
of the Company or any ERISA Affiliate pursuant to Section 515 of ERISA to
collect a delinquent contribution to a Plan and such action has not been
dismissed within 30 days; that the Company. any Subsidiary of the Company or
any ERISA Affiliate will incur
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any liability (including any indirect, contingent, or secondary liability) to
or on account of the termination of or withdrawal from a Plan under Section
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan
under Section 401 (a)(29), 4971, 4975 or 4980 of the Code or Section 409 or
502(i) or 502(l) of ERISA; or that the Company, or any Subsidiary of the
Company may incur any material unfunded liability pursuant to any employee
welfare benefit plan (as defined in Section 3(1) of ERISA) that provides
benefits to retired employees or other former employees (other than as required
by Section 601 of ERISA) or any employee pension benefit plan (as defined in
Section 3(2) of ERISA). Within 10 days after a request by the Administrative
Agent, the Company will deliver to each of the Banks a complete copy of the
annual report (Form 5500) of each Plan (including, to the extent required, the
related financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information) required to be filed
with the Internal Revenue Service. In addition to any certificates or notices
delivered to the Banks pursuant to the first sentence hereof, copies of any
material notices received by the Company, any Subsidiary of the Company or any
ERISA Affiliate with respect to any Plan or Foreign Pension Plan shall be
delivered to the Banks no later than 10 days after the date such notice has
been received by the Company, the Subsidiary or the ERISA Affiliate, as
applicable.
9.08 End of Fiscal Years; Fiscal Quarters. The Company will cause (i)
each of its, and each of its Subsidiaries' and Joint Ventures', fiscal years to
end on December 31, and (ii) each of its, and each of its Subsidiaries', fiscal
quarters to end on the last day of each March, June, September and December.
9.09 Performance of Obligations. The Company will, and will cause
each of its Subsidiaries and Joint Ventures to, perform all of its obligations
under the terms of each mortgage, deed of trust, indenture, loan agreement or
credit agreement and each other material agreement, contract or instrument by
which it is bound, except such non-performances as could not, individually or
in the aggregate, reasonably be expected to have a material adverse effect on
the business, operations, property, assets, nature of assets, liabilities,
condition (financial or otherwise) or prospects of the Company or the Company
and its Subsidiaries taken as a whole.
9.10 Payment of Taxes. The Company will, and will cause each of its
Subsidiaries and Material Joint Ventures to, pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, in each case on a
timely basis, and all lawful claims for sums that have become due and payable
which, if unpaid, might become a lien or charge upon any properties of
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the Company, any such Subsidiary or any such Material Joint Venture, provided
that neither the Company nor any such Subsidiary or any Material Joint Venture
shall be required to pay any such tax, assessment, charge, levy or claim which
is being contested in good faith and by proper proceedings if it has maintained
adequate reserves with respect thereto in accordance with generally accepted
accounting principles.
9.11 Hotel Franchisors. The Company will take, and will cause each of
its Subsidiaries and Joint Ventures to take, all action necessary so that (x)
except as otherwise provided in Section 11.11, each Hotel Property owned or
leased by the Company and its Subsidiaries and Joint Ventures are at all times
operated as a "Travelodge", "Thriftlodge" or another nationally recognized
hotel brand which the Chairman of the Board of Directors and the chief
financial officer of the Company (in a certificate signed by them delivered to
the Agents) have determined to be in the best interests of the Company and (y)
except in connection with the sale of any Hotel Property pursuant to the terms
of this Agreement or as otherwise provided in Section 11.11, no Franchise
Agreement with respect to a Hotel Property is terminated, provided that,
notwithstanding the foregoing, at any date of determination Hotel Properties
representing less than 10% in the aggregate for all such Hotel Properties of
Total Hotel Revenues for the Test Period then most recently ended and less than
10% of the consolidated total assets of the Company and its Subsidiaries (after
reduction for minority interests) as calculated on the most recently ended
fiscal quarter of the Company shall not be required to be subject to this
Section 9.11.
9.12 Joint Venture Distributions. To the extent any Joint Venture
receives any Net Cash Proceeds from any of the events specified in Sections
3.03(c) and (d) then, to the extent such Net Cash Proceeds would have to be
applied to reduce the Total Revolving Loan Commitment in accordance with the
requirements of Sections 3.03(c), and/or (d), as the case may be, if received
by a Wholly-Owned Subsidiary of the Company, the Company will use its best
efforts to cause such Joint Venture to distribute to the Company or a
Wholly-Owned Subsidiary thereof, concurrently with or as soon after the
respective event as is practicable, the Company's Allocable Share of such Net
Cash Proceeds received by such Joint Venture.
9.13 Corporate Separateness. The Company will take, and will cause
each of its Subsidiaries, Joint Ventures and Unrestricted Subsidiaries to take,
all action as is necessary to keep the operations of the Company and its
Subsidiaries and Joint Ventures separate and apart from those of any
Unrestricted Subsidiaries including, without limitation, ensuring that all
customary formalities regarding their respective corporate existence including
holding regular board of directors' and
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shareholders' meetings and maintenance of corporate offices and records, are
followed. Neither the Company nor any of its Subsidiaries or Joint Ventures
shall make any payment to a creditor of any Unrestricted Subsidiary in respect
of any liability of any Unrestricted Subsidiary. All financial statements
provided to creditors shall clearly evidence the corporate separateness of the
Company and its Subsidiaries and Joint Ventures from any Unrestricted
Subsidiaries, and the Company and its Subsidiaries and Joint Ventures shall
maintain their own respective payroll (if any) and separate books of account
and bank accounts from Unrestricted Subsidiaries. Each Unrestricted Subsidiary
shall pay its respective liabilities, including all administrative expenses,
from its own separate assets, and assets of the Company and its Subsidiaries
and Joint Ventures shall at all times be separately identified and segregated
from the assets of Unrestricted Subsidiaries. Finally, neither the Company nor
any of its Subsidiaries, Joint Ventures or Unrestricted Subsidiaries shall take
any action, or conduct its affairs in a manner which is likely to result in the
corporate existence of any Unrestricted Subsidiary being ignored, or in the
assets and liabilities of any Unrestricted Subsidiary being substantively
consolidated with those of the Company or any of its Subsidiaries or Joint
Ventures in a bankruptcy, reorganization or other insolvency proceeding.
9.14 Management Agreements. (a) Cause each Management Agreement
entered into by the Company of any of its Subsidiaries or any Joint Venture
after the Initial Borrowing Date with a third-party (a "Third-Party Manager" to
be pledged as Collateral pursuant to the Security Agreement within 10 days of
the effectiveness of such Management Agreement, and the Company or the
applicable Subsidiary or Joint Venture, as the case may be, shall execute and
deliver to the Collateral Agent the Security Agreement, if it is not already a
party thereto, or an amendment to the Security Agreement, as the Collateral
Agent reasonably requests in order to grant to the Collateral Agent, for the
benefit of the Lenders, a security interest in such Management Agreement, and
take all actions reasonably requested by the Collateral Agent to grant to the
Collateral Agent, for the benefit of the Lenders, a security interest in such
Management Agreement, including without limitation, the filing of UCC financing
statements in such jurisdictions as may be required by the Security Agreement
or by law or as may be requested by the Administrative Agent; and deliver such
legal opinions and other documents, resolutions and evidence of authority as
the Agents may reasonably request; and (b) cause such Third-Party Manager to
subordinate its rights under such Management Agreements on terms satisfactory
to the Agents.
SECTION 10. Negative Covenants. The Company covenants and agrees that
on and after the Effective Date and
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until the Total Revolving Loan Commitment and all Letters of Credit have
terminated and the Loans, Notes and Unpaid Drawings, together with interest,
Fees and all other Obligations incurred hereunder and thereunder, are paid in
full:
10.01 Liens. The Company will not, and will not permit any of its
Subsidiaries or Material Joint Ventures to, create, incur, assume or suffer to
exist any Lien upon or with respect to any property or assets (real or
personal, tangible or intangible) of the Company or any of its Subsidiaries or
Material Joint Ventures, whether now owned or hereafter acquired, or sell any
such property or assets subject to an understanding or agreement, contingent or
otherwise, to repurchase such property or assets (including sales of accounts
receivable with recourse to the Company or any Subsidiary or Material Joint
Venture of the Company), or assign any right to receive income or permit the
filing of any financing statement under the UCC or any other similar notice of
Lien under any similar recording or notice statute, provided that the
provisions of this Section 10.01 shall not prevent the creation, incurrence,
assumption or existence of the following (Liens described below are herein
referred to as "Permitted Liens"):
(i) inchoate Liens for taxes, assessments or governmental charges or
levies not yet due and payable or Liens for taxes, assessments or
governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves have been established
in accordance with generally accepted accounting principles;
(ii) Liens in respect of property or assets of the Company or any of
its Subsidiaries or Material Joint Ventures imposed by law, which were
incurred in the ordinary course of business and do not secure Indebtedness
for borrowed money, such as carriers', warehousemen's, materialmen's and
mechanics' liens and other similar Liens arising in the ordinary course of
business, and (x) which do not in the aggregate materially detract from
the value of the Company's, such Subsidiary's or such Material Joint
Venture's property or assets or materially impair the use thereof in the
operation of the business of the Company, such Subsidiary or such Material
Joint Venture or (y) which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing
the forfeiture or sale of the property or assets subject to any such Lien;
(iii) Liens in existence on the Initial Borrowing Date which are
listed, and the property subject thereto described, in Schedule VIII
(which Schedule VIII need not set forth the Liens created pursuant to the
Security Documents), but only to the respective date, if any, set forth in
such Schedule
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VIII for the removal and termination of any such Liens, but no renewals or
extensions of such Liens shall be permitted;
(iv) Liens created pursuant to the Credit Documents;
(v) leases or subleases granted by the Company or any of its
Subsidiaries or Material Joint Ventures to other Persons in the ordinary
course of business not materially interfering with the conduct of the
business of the Company or any of its Subsidiaries or Material Joint
Ventures;
(vi) Liens upon assets subject to Capitalized Lease Obligations to
the extent such Capitalized Lease Obligations are permitted by Section
10.04, provided that (x) such Liens only serve to secure the payment of
Indebtedness arising under such Capitalized Lease Obligation and (y) the
Lien encumbering the asset giving rise to the Capitalized Lease Obligation
does not encumber any other asset of the Company or any Subsidiary or
Material Joint Venture of the Company;
(vii) Liens placed upon equipment or machinery used in the ordinary
course of business of the Company or any of its Subsidiaries or Material
Joint Ventures at the time of acquisition thereof by the Company or any
such Subsidiary or Material Joint Venture or within 60 days thereafter to
secure Indebtedness incurred to pay all or a portion of the purchase price
thereof, provided that (x) the aggregate outstanding principal amount of
all Indebtedness secured by Liens permitted by this clause (vii) shall not
at any time exceed $4,000,000 and (y) in all events. the Lien encumbering
the equipment or machinery so acquired does not encumber any other asset
of the Company, such Subsidiary or such Material Joint Venture;
(viii) easements, rights-of-way, restrictions, encroachments and
other similar charges or encumbrances, and minor title deficiencies, in
each case not securing Indebtedness and which do not materially interfere
with the conduct of the business of the Company or any of its Subsidiaries
or Material Joint Ventures;
(ix) Liens arising from precautionary UCC financing statement filings
regarding operating leases entered into by the Company or any of its
Subsidiaries or Material Joint Ventures in the ordinary course of
business;
(x) statutory and common law landlords' liens under leases to which
the Company or any of its Subsidiaries or Material Joint Ventures is a
party;
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(xi) Liens (other than Liens created or imposed under ERISA) incurred
or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory obligations,
surety bonds, operating leases, bids, government contracts, performance
and return-of-money bonds and other similar obligations incurred in the
ordinary course of business (exclusive of obligations in respect of the
payment for borrowed money);
(xii) Liens arising out of judgments, awards or decrees (other than
any judgment, award or decree that is described in Section 11.10) in
respect of which the Company or any of its Subsidiaries or Material Joint
Ventures shall in good faith be prosecuting an appeal or proceedings for
review in respect of which there shall have been secured a subsisting stay
of execution pending such appeal or proceedings, provided that the
Company, such Subsidiary or such Material Joint Venture shall have set
aside on its books adequate reserves, in accordance with GAAP, with
respect to such judgment or award;
(xiii) Liens on Real Property and other assets to finance the
purchase price thereof provided that (a) the obligations secured by such
Liens are recourse only to such assets and the holder(s) of such
obligations have expressly waived recourse against the Company and its
Subsidiaries and the Joint Ventures except to such assets, (b) any Event
of Default under this Agreement shall not constitute a default under such
obligations and (c) the aggregate principal amount of such obligations
does not exceed $15,000,000;
(xiv) Liens on Hotel Properties described in clause (xi) of Section
10.04 to secure the construction or renovation financing thereof;
(xv) Liens on Wingate Hotels securing Indebtedness of the Company and
its Subsidiaries permitted by Section 10.04(xiv) but only to the extent
such Liens are required in order to obtain such acquisition and
construction Indebtedness and do not secure any refinancing or other
Indebtedness; and
(xvi) Liens securing the Indebtedness described in Section
10.05(xiii).
10.02 Consolidation, Merger, Purchase or Sale of Assets, etc. The
Company will not, and will not permit any of its Subsidiaries or Material Joint
Ventures to, wind up, liquidate or dissolve its affairs or enter into any
transaction of merger or
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consolidation, or convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any future time) all or any part of its property or
assets, or enter into any sale leaseback transactions, or purchase or otherwise
acquire (in one or a series of related transactions) any part of the property
or assets (other than purchases or other acquisitions of inventory, materials
and equipment in the ordinary course of business) of any Person, except that:
(i) Capital Expenditures (including payments in respect of
Capitalized Lease Obligations) by the Company and its Subsidiaries and
Material Joint Ventures shall be permitted to the extent not in violation
of Section 10.07:
(ii) the Company and each of its Subsidiaries and Material Joint
Ventures may in the ordinary course of business, sell, lease (as lessor)
or otherwise dispose of equipment and materials which, in the reasonable
opinion of such Person, are obsolete, uneconomic or no longer useful in
the conduct of such Person's business, provided that (x) except to the
extent the respective equipment or materials are transferred in like-kind
exchanges and/or trade-in-value is received on purchases of like-kind
assets, at least 80% of the consideration therefor (taking the amount of
cash and the fair market value of any non-cash consideration or, if
greater, the principal amount of any non-cash consideration) shall be in
the form of cash, (y) the aggregate Net Cash Proceeds of all assets sold
or otherwise disposed of pursuant to this clause (ii) shall not exceed
$2,000,000 in any fiscal year of the Company and (z) the Net Cash Proceeds
from each Asset Sale pursuant to this clause (ii) are applied in
accordance with the requirements of Section 3.03(d);
(iii) Investments (including by loans and advances) may be made to
the extent permitted by Section 10.05;
(iv) the Company and each of its Subsidiaries and Material Joint
Ventures may lease (as lessee) real or personal property in the ordinary
course of business (so long as any such lease does not create a
Capitalized Lease Obligation unless permitted by clause (i) of this
Section 10.02);
(v) the Company and each of its Subsidiaries and Material Joint
Ventures may make sales of inventory in the ordinary course of business;
(vi) the Canadian Acquisition shall be permitted as contemplated in
the Canadian Acquisition Documents;
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(vii) the Company and its Subsidiaries may sell any Specified
Existing Investment, so long as (i) each sale is in an arms' length
transaction and the Company or the respective Subsidiary receives at least
fair market value (as determined in good faith by the Board of Directors
of the Company or any authorized committee of such Board of Directors) and
(ii) the Net Cash Proceeds from each Asset Sale pursuant to this clause
(vii) are applied in accordance with the requirements of Section 3.03(d);
(viii) the Company and each of its Subsidiaries and Material Joint
Ventures may sell Hotel Properties (or the entire equity interests of such
Person in any Subsidiary or Joint Venture owning or leasing the respective
Hotel Properties), so long as (i) no Default or Event of Default then
exists or would result therefrom, (ii) each sale is in an arms' length
transaction and the Company or the respective Subsidiary or Material Joint
Venture receives at least fair market value (as determined in good faith
by the Board of Directors of the Company or any authorized committee of
such Board of Directors), (iii) the total consideration received by the
Company or such Subsidiary is at least 75% in cash with respect to the
sale of any wholly-owned Hotel Property of the Company or a Wholly-Owned
Subsidiary thereof (or with respect to the sale of any Wholly-Owned
Subsidiary of the Company) or with respect to the sale of any Joint
Venture (or any Hotel Property of such Joint Venture) set forth on
Schedule X, provided that, (x) in lieu of receiving cash in any sale of
the entire equity interest in any Joint Venture existing on the Initial
Borrowing Date, the Company or the respective Subsidiary may exchange the
entire equity interest of such Joint Venture for equity interests (not
theretofore owned, directly or indirectly, by the Company) of one or more
other Joint Ventures existing on the Initial Borrowing Date so long as the
effect of any such exchange is to increase the Company's direct or
indirect, as the case may be, equity interests in the Joint Venture or
Joint Ventures so acquired and (y) with respect to the sale of any Joint
Venture (or any Hotel Property owned by such Joint Venture) (other than
with respect to the sale of any Joint Venture (or any Hotel Property owned
by such Joint Venture) listed on Schedule X) the aggregate amount of all
non-cash consideration held at any one time shall not exceed $10,000,000
(taking the face amount of debt and the fair market value of all other
non-cash collateral, and determined without regard to any writedowns or
write-offs thereof), (iv) the aggregate Net Cash Proceeds of all assets
sold pursuant to this clause (viii) shall not exceed $25,000,000 in any
fiscal year of the Company and (v) the Net Cash Proceeds from each Asset
Sale pursuant to this clause (viii) are applied in accordance with the
requirements of Section 3.03(d);
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(ix) the Company and each of its Wholly-Owned Subsidiaries may
acquire Hotel Properties (including by purchasing 90% or more of the
capital stock or partnership interests of the Person that owns such Hotel
Properties) so long as (i) such Hotel Properties are at least 90% owned by
the Company or such Wholly-Owned Subsidiary, (ii) such Hotel Properties
are located in the United States, Canada, Mexico or Puerto Rico, provided
that, notwithstanding the foregoing, at any date of determination Hotel
Properties representing less than 10% of Total Hotel Revenues for the Test
Period then most recently ended and less than 10% of the consolidated
total assets of the Company and its Subsidiaries (after reduction for
minority interests) as calculated on the most recently ended fiscal
quarter of the Company shall not be required to be subject to this clause
(ii), (iii) prior to the date of acquisition of any such Hotel Property,
the Company shall have delivered to each of the Banks a Phase I
environmental assessment on such Hotel Property from an environmental
firm, certified to and in form, scope and substance, reasonably
satisfactory to the Administrative Agent, (iv) with respect to the
acquisition of any Hotel Property subject to a Leasehold (and which will
not be owned by the Company or the respective Wholly-Owned Subsidiary in
fee), such Hotel Property may be acquired only if the respective Leasehold
shall have a remaining term (including a right of extension by the Company
or such Wholly-Owned Subsidiary) of at least 15 years, (v) at least 10
Business Days prior to the consummation of any acquisition of any Hotel
Property the Company shall have delivered to each of the Banks the
Information Package relating to such Hotel Property, and in the case of
any acquisition of any Hotel Property or group of related Hotel Properties
in which the total consideration exceeds $15,000,000, the Required Banks
shall have not informed the Company in writing prior to the end of 15
Business Days after the Bank's receipt of the respective Information
Package that they do not approve of such acquisition, (vi) except to the
extent otherwise permitted by Section 9.11, each Hotel Property shall be
operated as a "Travelodge", a "Thriftlodge" or another nationally
recognized hotel brand which the Chairman of the Board of Directors and
the chief financial officer of the Company (in a certificate signed by
them delivered to the Agents) have determined to be in the best interests
of the Company and shall be subject to a Franchise Agreement, a copy of
which Franchise Agreement shall be delivered to each of the Banks on or
prior to the date of the consummation of the acquisition of such Hotel
Property, and (vii) in the case of any acquisition of any Hotel Property
or group of related Hotel Properties in which the total consideration
exceeds $3,000,000, (I) based on calculations made by the Company on a Pro
Forma Basis after giving effect to the respective
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acquisition, no Default or Event of Default will exist under, or would
have existed during the period of four consecutive fiscal quarters last
reported (or required to be reported pursuant to Section 9.01(b) or (c),
as the case may be) prior to the date of the respective acquisition under,
the financial covenants contained in Sections 10.08 through 10.11,
inclusive, (II) based on good faith projections prepared by the Company
for the period from the date of the consummation of the acquisition to the
date which is one year thereafter or based on the historical financial
statements (but after giving effect to all Scheduled Commitment Reductions
that will occur during the one year period after the date of the
consummation of the respective acquisition) delivered in the Information
Package for such Hotel Property or Hotel Properties calculated on a Pro
Forma Basis after giving effect to the respective acquisition, the level
of financial performance measured by the covenants set forth in Sections
10.08 through 10.11, inclusive, shall be better than or equal to such
level as would be required to provide that no Default or Event of Default
will exist under the financial covenants contained in such Sections 10.08
through 10.11, inclusive, as compliance with such covenants will be
required through the date which is one year from the date of the
consummation of the respective acquisition, and (III) the Company shall
have delivered to the Administrative Agent an officer's certificate
executed by an Authorized Financial Officer of the Company, certifying to
the best of such officer's knowledge, compliance with the requirements of
this clause (vii) and containing the calculations (in reasonable detail)
required by this clause (vii);
(x) [INTENTIONALLY OMITTED];
(xi) the Company may make the Mexican Investment in accordance with
clause (xv) of Section 10.06; and
(xii) the Company and its Subsidiaries may sell the Gaming Assets.
To the extent the Required Banks waive the provisions of this Section
10.02 with respect to the sale of any Collateral, or any Collateral is
sold or otherwise disposed of as permitted by this Section 10.02, such
Collateral shall be sold or otherwise transferred or disposed of free and
clear of the Liens created by the Security Documents and the
Administrative Agent and the Collateral Agent shall be authorized to take
any actions deemed appropriate in order to effect the foregoing.
10.03 Restricted Payments. The Company will not, and will not permit
any of its Subsidiaries or Material Joint
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Ventures to, authorize, declare or pay any Restricted Payments, except:
(i) any Subsidiary or Material Joint Venture of the Company may make
Restricted Payments to the Company or any Wholly-Owned Subsidiary of the
Company;
(ii) any Subsidiary of the Company which is not a Wholly-Owned
Subsidiary of the Company or any Material Joint Venture of the Company may
make Restricted Payments so long as the Company and each Subsidiary of the
Company which has an ownership interest in such non-Wholly-Owned
Subsidiary or Material Joint Venture receives a portion of such Restricted
Payment which is at least as great as the percentage ownership interest of
the Company or such other Subsidiary of the Company in the respective
Subsidiary or Material Joint Venture which is making the Restricted
Payment;
(iii) after the execution and delivery of any HFS Subordinated Note
in accordance with the requirements of Section 10.04(vii), the Company may
make regularly scheduled payments of interest in respect thereof (at the
interest rate described in Section 10.04(vii)), so long as (x) no Default
or Event of Default shall exist at the time of the making of such payment
or immediately after giving effect thereto and (y) the respective payment
is permitted in accordance with the HFS Subordination Agreement;
(iv) the Company may make Restricted Payments as specifically
permitted by clauses (iii) through (xi) of Section 10.06;
(v) after the issuance of any Redeemable Capital Stock in accordance
with the requirements of Section 10.04(viii), the Company may pay cash
dividends to HFS in respect thereof at times that the Company could have
paid interest on any HFS Subordinated Note (i.e., such dividends shall be
permitted to be paid at the end of each successive three-month Interest
Period with respect thereto), so long as (x) no Default or Event of
Default shall exist at the time of the making of such payment or
immediately after giving effect thereto, (y) the respective payment is
permitted in accordance with the HFS Subordination Agreement and (z) the
amount of dividends paid in cash with respect to the HFS Redeemable
Capital Stock shall not exceed the amounts permitted to be paid pursuant
to Section 10.04(viii)(y) (after giving effect to the proviso thereto);
(vi) [INTENTIONALLY OMITTED];
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(vii) after the issuance of any Chartwell Preferred
Stock/Subordinated Debt, the Company may pay cash dividends or make cash
interest payments, as the case may be, to Chartwell in respect thereof, so
long as (x) no Default or Event of Default shall exist at the time of the
making of such payment or immediately after giving effect thereto, (y) the
aggregate amount of Restricted Payments made pursuant to this clause (vii)
does not exceed the Cumulative Unrestricted Subsidiary Dividend Amount as
in effect immediately prior to the making of such payment, and (z) the
terms of such Chartwell Preferred Stock/Subordinated Debt satisfy the
requirements of Section 10.04(ix); and
(viii) after the issuance of any Permitted Subordinated Indebtedness,
the Company may make regularly scheduled payments of interest in respect
thereof (at the stated non- default interest rate set forth in such
Permitted Subordinated Indebtedness), so long as (x) no Default or Event
of Default shall exist at the time of the making of such payment or
immediately after giving effect thereto, (y) the respective payment is
permitted in accordance with the subordination provisions of such
Permitted Subordinated Indebtedness and (z) such payments are made no more
frequently than semi-annually and are made only in respect of unpaid
accrued interest.
10.04 Indebtedness. The Company will not, and will not permit any of
its Subsidiaries or Material Joint Ventures to, contract, create, incur, assume
or suffer to exist any Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(ii) Existing Indebtedness to the extent the same is listed on
Schedule VI, but no refinancing or renewals thereof, provided that (a) the
Bank of America Facility may be refinanced and (b) in no event shall the
aggregate outstanding principal amount of Indebtedness under the Bank of
America Facility exceed $15,000,000 at any one time;
(iii) (a) Indebtedness under Interest Rate Protection Agreements
entered into with respect to Indebtedness outstanding under the Agreement
and other Indebtedness (i.e., to provide protection against fluctuations
in floating interest rates with respect to a notional amount not to
exceed, at the time of the entering into of the respective Interest Rate
Protection Agreement, the aggregate principal amount of the underlying
Indebtedness outstanding); and (b) Indebtedness under Other Hedging
Agreements entered into with respect to foreign currency owned or
projected to be owned by
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the Company or any of its Subsidiaries or Material Joint Ventures (i.e.,
to provide protection against fluctuations in currency exchange rates with
respect to a notional amount not to exceed, at the time of the entering
into of the respective Agreement, the amount of foreign currency owned or
projected to be owned by the Company or any of its Subsidiaries of
Material Joint Ventures); provided that no such transaction described in
this paragraph (iii) is entered into for speculative purposes;
(iv) Indebtedness of the Company and its Subsidiaries and Material
Joint Ventures evidenced by Capitalized Lease Obligations entered into
after the Initial Borrowing Date, in each case so long as the respective
Capitalized Lease Obligation relates to an acquisition of assets made
after the Initial Borrowing Date in accordance with Section 10.07 and the
Liens arising as a result thereof are permitted pursuant to Section 10.01,
and so long as the aggregate outstanding principal amount of Capitalized
Lease Obligations incurred on or after the date hereof at no time exceeds
$10,000,000;
(v) Indebtedness of the Company and its Subsidiaries and Material
Joint Ventures subject to Liens permitted under Section 10.01(vii), so
long as the aggregate principal amount of Indebtedness outstanding
pursuant to this clause is limited as provided in said Section 10.01(vii);
(vi) intercompany Indebtedness among the Company and its Subsidiaries
and Material Joint Ventures to the extent permitted by Section 10.05;
(vii) unsecured subordinated Indebtedness of the Company issued to
HFS upon a downgrading of each of HFS' and the Company's long-term senior
unsecured debt credit rating by S&P triggering a mandatory commitment
reduction pursuant to Section 3.03(e) or (f) (the "HFS Subordinated
Indebtedness") so long as (x) the aggregate outstanding principal amount
of HFS Subordinated Indebtedness does not exceed the aggregate cash
proceeds actually loaned by HFS to the Company to enable it to make
mandatory repayments of Loans pursuant to Section 4.02(a) as a result of a
reduction to the Total Revolving Loan Commitment pursuant to Sections
3.03(e) and/or (f)), (y) the HFS Subordinated Indebtedness shall not be
guaranteed and shall be evidenced by a subordinated promissory note or
notes (subject to the limitation on the aggregate outstanding principal
amount thereof provided in preceding clause (x)) in the form of Exhibit J,
which shall mature not earlier than the date which occurs one year after
the Final Maturity Date and shall bear interest at a rate per annum not to
exceed the Eurodollar Rate (as determined for successive interest periods
of 3 months) plus the Applicable Margin as in effect
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from time to time (each an "HFS Subordinated Note") and (z) 100% of the
cash proceeds loaned to the Company as evidenced by the HFS Subordinated
Indebtedness shall be used for the purposes described in preceding clause
(x);
(viii) Redeemable Capital Stock of the Company issued to HFS upon a
downgrading of each of HFS' and the Company's long-term senior unsecured
debt credit rating by S&P triggering a mandatory reduction pursuant to
Section 3.03(e) or (f) (the "HFS Redeemable Capital Stock") so long as (x)
the aggregate amount thereof does not exceed the aggregate cash proceeds
invested by HFS in the Company by way of such Redeemable Capital Stock
investment to enable it to make mandatory repayments of Loans pursuant to
Section 4.02(a) as a result of the reduction to the Total Revolving Loan
Commitment pursuant to Sections 3.03(e) and/or (f)), (y) the HFS
Redeemable Capital Stock shall not be guaranteed and shall have no
required redemptions and no required offers to purchase same by the
Company or any of its Subsidiaries or Joint Ventures, whether through the
lapse of time, the occurrence of certain contingencies or otherwise, at
any time prior to the date which occurs one year after the Final Maturity
Date and such HFS Redeemable Capital Stock shall accrue dividends at a
rate per annum not to exceed the Eurodollar Rate (as determined for
successive interest periods of 3 months) plus the Applicable Margin as in
effect from time to time, provided that the amount of dividends permitted
to be paid in cash on any HFS Redeemable Capital Stock issued pursuant to
this clause (viii) at the end of any such interest period shall not exceed
an amount equal to the dividends which would accrue on such HFS Redeemable
Capital Stock for such interest period at the rate described above
multiplied by an amount equal to 1 minus the then Current Consolidated Tax
Rate of the Company during such period, with any dividends which is not
permitted to be paid in cash for any interest period because of the
immediately preceding proviso to be deferred (with no additional dividends
to accrue on such deferred amounts) until after the Bank Termination Date,
and (z) 100% of the cash proceeds invested by the Company in return for
the issuance of the HFS Redeemable Capital Stock shall be used for the
purposes described in preceding clause (x);
(ix) Chartwell Preferred Stock/Subordinated Debt issued to Chartwell
so long as (u) the aggregate amount thereof does not exceed the aggregate
cash proceeds invested by Chartwell in the Company by way of a Chartwell
Preferred Stock investment (provided that, in any event, the aggregate
amount of Chartwell Preferred Stock/Subordinated Debt shall not exceed
$50,000,000 less the aggregate principal amount of Permitted Subordinated
Indebtedness outstanding under clause
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(x) below), in each case except to the extent such excess has resulted
from the accrual of dividends or interest thereon (as the case may be),
(v) the Chartwell Preferred Stock/Subordinated Debt shall be issued by the
Company, shall not be guaranteed and shall have no required redemptions or
amortization and no required offers to purchase same by the Company or any
of its Subsidiaries or Joint Ventures, whether through the lapse of time,
the occurrence of certain contingencies or otherwise, at any time prior to
the date which occurs one year after the Final Maturity Date, (w) the
Chartwell Preferred Stock/Subordinated Debt shall accrue dividends or
interest, as the case may be, at a rate per annum not to exceed 8.5%, (x)
the Chartwell Preferred Stock/Subordinated Debt shall not have any
covenants restricting the business or operations of the Company or any of
its Subsidiaries or Joint Ventures and shall expressly provide that any
payments in respect thereof, whether in respect of accrued dividends or
interest, mandatory redemptions or payments of principal, may only be made
to the extent permitted by the terms of this Agreement (including Sections
10.03, 10.04 and 10.06), as same may be amended, supplemented, amended and
restated, or refinanced from time to time, and (z) Chartwell Subordinated
Debt may be issued only upon the conversion thereto of outstanding
Chartwell Preferred Stock theretofore issued in accordance with the
requirements of this Agreement, and prior to (and the Chartwell Preferred
Stock shall provide that as a condition to) the conversion of the
Chartwell Preferred Stock into Chartwell Subordinated Debt, the prior
written consent of the Required Banks is obtained;
(x) subordinated Indebtedness of the Company in a principal amount
not to exceed $50,000,000, less the aggregate amount of Chartwell
Preferred Stock/Subordinated Debt outstanding under clause (ix) above
(excluding Chartwell Preferred Stock/Subordinated Debt consisting of
accrual of dividends or interest thereon), provided, that (a) the
subordination provisions contain the terms set forth in Exhibit N; (b) no
such Indebtedness shall mature (whether by scheduled payment or mandatory
prepayment) earlier than the date which occurs one year after the Final
Maturity Date; (c) payment of such Indebtedness may not be accelerated or
come due prior to the date which occurs one year after the Final Maturity
Date unless payment of the Loans has previously been accelerated in
accordance with Section 12; and (d)(i) based on calculations made by the
Company on a Pro Forma Basis after giving effect to the incurrence of such
Indebtedness, no Default or Event of Default will exist under, or would
have existed during the period of four consecutive fiscal quarters last
reported (or required to be reported pursuant to Section 9.01(b) or (c),
as the case may be) prior to the
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date of the incurrence of such Indebtedness under, the financial covenants
contained in Sections 10.08 through 10.11, inclusive, (ii) based on good
faith projections prepared by the Company for the period from the date of
the incurrence of such Indebtedness to the date which is one year
thereafter (but after giving effect to all Scheduled Commitment Reductions
that will occur during the one year period after the date of the
incurrence of such Indebtedness calculated on a Pro Forma Basis after
giving effect to the incurrence of such Indebtedness, the level of
financial performance measured by the covenants set forth in Sections
10.08 through 10.11, inclusive, shall be better than or equal to such
level as would be required to provide that no Default or Event of Default
will exist under the financial covenants contained in such Sections 10.08
through 10.11, inclusive, as compliance with such covenants will be
required through the date which is one year from the date of the
incurrence of such Indebtedness, and (iii) the Company shall have
delivered to the Administrative Agent an officer's certificate executed by
an Authorized Financial Officer of the Company, certifying to the best of
such officer's knowledge, compliance with the requirements of this clause
(d) and containing the calculations (in reasonable detail) required by
this clause (d);
(xi) Indebtedness consisting of guaranties by the Company of
obligations of its Subsidiaries and Material Joint Ventures incurred
solely to finance the construction or renovation of Hotel Properties,
provided that the aggregate amount of the obligations guaranteed by the
Company pursuant to this clause (xi) shall not exceed $20,000,000 less the
aggregate amount paid by the Company pursuant to such guaranties, and
provided, further, that the aggregate principal amount of Indebtedness
incurred pursuant to this clause (xi) and clause (xiv) of this Section
10.04 shall not exceed $30,000,000;
(xii) Indebtedness of Material Joint Ventures permitted by clause
(xiv) of Section 10.05;
(xiii) non-recourse Indebtedness in an aggregate principal amount not
to exceed $15,000,000 as described in clause (xiii) of Section 10.01;
(xiv) Indebtedness of the Company in an aggregate principal amount
not to exceed $20,000,000 incurred to finance the acquisition and
construction of Wingate Hotels, provided that the aggregate principal
amount of Indebtedness incurred pursuant to this clause (xiv) and clause
(xi) of this Section 10.04 shall not exceed $30,000,000; and
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(xv) Indebtedness (from and after the execution of the Las Vegas
Lease described below) consisting of a guaranty by the Company of the
obligations of the tenant under the Las Vegas Lease with respect to the
Hotel Property and adjoining real property located at Las Vegas South
Strip (in the vicinity of, and including, 3735 Las Vegas Boulevard South),
Las Vegas, Nevada (the "Las Vegas Lease") which leasehold interest is to
be acquired by Chartwell Lodging Inc. (formerly NL Hotels, Inc.) pursuant
to a right of first refusal pursuant to Article XXII of the existing
Travelodge lease for 3735 Las Vegas Boulevard South, provided that the
Company may not guarantee payment of more than $2,000,000 per year under
the Las Vegas Lease.
Notwithstanding anything to the contrary contained in (A) clauses (vii) and
(viii) above, the sum of the aggregate principal amount of HFS Subordinated
Indebtedness incurred pursuant to such clause (vii) and the aggregate
liquidation preference of all HFS Redeemable Capital Stock issued pursuant to
such clause (viii) shall in no event exceed the aggregate repayments
theretofore made pursuant to Section 4.02(a) (as a result of reductions to the
Total Revolving Loan Commitment pursuant to Sections 3.03(e) and/or (f)) made
with funds provided to the Company by HFS (except to the extent the increase in
the aggregate liquidation preference of any such HFS Redeemable Capital Stock
is attributable to the accrual of dividends with respect thereto) and (B)
clause (ix) above, the sum of the aggregate principal amount of Chartwell
Subordinated Debt plus the aggregate liquidation preference of all Chartwell
Preferred Stock (excluding Chartwell Preferred Stock theretofore converted into
Chartwell Subordinated Debt) shall in no event exceed the aggregate cash
investments made by Chartwell in the Company (except to the extent that any
increase in the aggregate principal amount of any Chartwell Subordinated Debt
or any increase in the aggregate liquidation preference of any such Chartwell
Preferred Stock is attributable to the accrual of dividends or interest, as the
case may be, with respect thereto).
10.05 Advances, Investments and Loans. The Company will not, and will
not permit any of its Subsidiaries or Material Joint Ventures to, directly or
indirectly, lend money or credit or make advances to any Person, or purchase or
acquire any stock, obligations or securities of, or any other interest in, or
make any capital contribution to, any other Person, or purchase or own a
futures contract or otherwise become liable for the purchase or sale of
currency or other commodities at a future date in the nature of a futures
contract, (collectively, "Investments"), or permit any Investment to remain
outstanding, or agree or commit to make any Investment (any such agreement or
commitment an "Investment Commitment"), except that the following shall be
permitted (but only so long as no Default or Event of Default exists at the
time of the making of the respective Investment or
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Investment Commitment (or would exist immediately after giving effect thereto)
in the case of Investments or Investment Commitments described in following
clauses (viii) through (xii), inclusive):
(i) the Company and its Subsidiaries and Material Joint Ventures may
acquire and hold accounts receivables owing to any of them, if created or
acquired in the ordinary course of business and payable or dischargeable
in accordance with customary terms;
(ii) the Company and its Subsidiaries and Material Joint Ventures may
acquire and hold cash and Cash Equivalents;
(iii) the Company may enter into Interest Rate Protection Agreements
and Other Hedging Agreements to the extent permitted by Section
10.04(iii);
(iv) (x) any Subsidiary or Material Joint Venture of the Company may
make intercompany loans of cash to the Company or to any Wholly-Owned
Subsidiary of the Company, any Wholly-Owned Subsidiary of the Company may
make cash equity investments in any other Wholly-Owned Subsidiary of the
Company, and the Company may make intercompany loans of cash to, or cash
equity investments in, its Wholly-Owned Subsidiaries, provided that to the
extent that any such intercompany loan is evidenced by a promissory note,
such promissory note shall be pledged to the Collateral Agent pursuant to
the Pledge Agreement and (y) the Company or any of its Wholly-Owned
Subsidiaries may make intercompany loans to, cash capital contributions
in, guaranty the obligations of, or have Letters of Credit issued for the
benefit of, any Material Joint Venture of the Company (other than any
Material Joint Venture that constitutes a Specified Existing Investment)
or any joint venture partner of such Material Joint Venture, provided that
(i) the aggregate amount of all such Investments (including, without
limitation, the maximum amount of all guarantees, the maximum amount of
all Letters of Credit and the amount of all intercompany loans and capital
contributions as described in following clause (ii)) outstanding at any
one time shall not exceed $15,000,000 (determined without regard to any
write-downs or write-offs thereof), (ii) the aggregate amount of all such
intercompany loans and cash capital contributions outstanding at any one
time shall not exceed $5,000,000 (determined without regard to any
write-downs or write-offs thereof) and (iii) to the extent that any such
intercompany loan is evidenced by promissory note, such promissory note
shall be pledged to the Collateral Agent pursuant to the Pledge Agreement;
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(v) non-cash consideration received by the Company or any of its
Subsidiaries in connection with Asset Sales permitted pursuant to Sections
10.02(ii), (vii) and (viii), provided that the amount of such non-cash
consideration shall not exceed the limitations provided in Section
10.02(ii) or (viii), as the case may be;
(vi) the Company and its Subsidiaries and Material Joint Ventures may
make loans and advances in the ordinary course of business to their
respective employees so long as the aggregate principal amount thereof at
any time outstanding (determined without regard to any write-downs or
write-offs of such loans and advances) shall not exceed $1,000,000;
(vii) the Company and its Subsidiaries and Material Joint Ventures
may permit to remain outstanding the Investments that were made prior to
the Initial Borrowing Date to the extent that same are set forth on
Schedule IX (the "Existing Investments") (provided that any additional
Investments with respect thereto (other than the acquisition of additional
equity in any Joint Venture existing as of the Initial Borrowing Date if
no Default or Event of Default exists or would result therefrom) shall be
permitted only if independently justified under the other provisions of
this Section 10.05);
(viii) in addition to Investments made as otherwise permitted
pursuant to this Section 10.05, the Company and its Wholly-Owned
Subsidiaries may make Investments in Hotel Properties (including by making
the respective investment in the Person (other than an Unrestricted
Subsidiary) which owns the respective Hotel Property but which shall not
be a Wholly-Owned Subsidiary of the Company) that are not wholly-owned by
the Company or any of its Wholly-Owned Subsidiaries so long as (i) no
Default or Event of Default then exists or would result therefrom, (ii)
all of the applicable requirements of Section 10.02(ix) (other than clause
(i) thereof) are satisfied with respect to such Investment and (iii) the
aggregate amount of Investments made pursuant to this Section 10.05(viii)
in any fiscal year of the Company does not exceed $10,000,000 in the
aggregate and $5,000,000 in any fiscal year;
(ix) the Company and its Wholly-Owned Subsidiaries may make
Investment Commitments from time to time so long as (i) the respective
Investment Commitment is in respect of an Investment of the type described
in clause (viii) of this Section 10.05, (ii) the respective Investment
Commitment expressly provides that the Company or its respective
Wholly-Owned Subsidiary has no obligation to make the respective
Investment unless same is in compliance with this
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Agreement (and so long as the Company shall suffer no penalty or loss of
funds as a result of any failure to make the Investment for the reasons
set forth above in this clause (ii)), (iii) all of the applicable
conditions set forth in Section 10.05(viii) are satisfied with respect to
the Investment to be made pursuant to the respective Investment Commitment
(but only to the extent that such Investment is made) and (iv) the maximum
amount which could be required to be invested pursuant to the respective
Investment Commitment in any fiscal year of the Company shall not exceed
that amount set forth in clause (viii) of this Section 10.05, and with any
amount so invested pursuant to the respective Investment Commitment to be
considered an Investment made pursuant to clause (viii) of this Section
10.05;
(x) the Company may establish Subsidiaries, Joint Ventures and
Unrestricted Subsidiaries to the extent permitted by Section 10.16;
(xi) the Company and its Wholly-Owned Subsidiaries may (i) make
Investments (other than Investments in Unrestricted Subsidiaries) so long
as all consideration therefor paid by the Company and its Subsidiaries in
respect of such Investment consists solely of Qualified Capital Stock of
the Company and the proceed thereof and (ii) enter into commitments or
agreements to make Investments ("Qualified Equity Commitments") so long as
all consideration to be paid for the respective Investment pursuant to the
Qualified Equity Commitment consists solely of Qualified Capital Stock of
the Company;
(xii) the Company and its Wholly-Owned Subsidiaries may make cash
Investments in Unrestricted Subsidiaries so long as the aggregate amount
of all such Investments does not exceed the aggregate Net Cash Proceeds
(including. for this purpose, net of any amounts paid by the Company to
HFS pursuant to Section 10.06(viii)) received by the Company from cash
equity investments by Chartwell after the Closing Date (other than the
equity investment described in Section 6.07);
(xiii) the Canadian Borrower may consummate the Canadian Acquisition,
it being agreed that (i) in accordance with the Canadian Acquisition
Documents, as consideration for the Canadian Acquisition, Bear Financial
Corp., a Wholly-Owned Subsidiary of the Company, will acquire, for
C$87,500,000, the secured Indebtedness which encumbers the Canadian
Acquired Assets and the Canadian Borrower will assume such Indebtedness
and (ii) payment of such Indebtedness will be subordinated to payment of
the obligations of the Canadian Borrower under the Loan Documents on terms
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satisfactory to the Agents and, at the option of the Agents, such
Indebtedness will be pledged to the Collateral Agent;
(xiv) the Company may make loans to, or guaranty loans of, the Joint
Ventures of the Company, provided that (i) the aggregate principal amount
of such loans and guaranties shall not exceed $15,000,000, (ii) such loans
and guaranties are made in connection with a financing program for the
Joint Ventures that is not, in the aggregate, materially less favorable to
the Company than the Bank of America Facility and (iii) no such loan may
be made if a Default or Event of Default has occurred and is continuing;
and
(xv) the Company may make the Mexican Investment;
(xvi) the Company and each of its Wholly-Owned Subsidiaries may make
Permitted Hotel Acquisitions to the extent permitted by Section 10.02(ix);
(xvii) the Company (directly or through any Subsidiary or Joint
Venture) may make an Investment in the Las Vegas Lease to the extent
permitted by Section 10.04(xv); and
(xviii) the Company and its Subsidiaries may make equity investment
of up to $7,000,000 (not to exceed $1,000,000 per Wingate Hotel) in
connection with obtaining acquisition and construction financing for
Wingate Hotels and, to the extent required by any source providing
acquisition or construction financing for such Wingate Hotels, the Company
and its Subsidiaries may deliver environmental and construction guarantees
in connection therewith.
Notwithstanding the foregoing, the proceeds of the sale of common stock of the
Company described in Section 5.17 may be used solely to fund the Canadian
Acquisition or for other purposes to be approved by the Required Banks (and,
pending such application, may be invested in Cash Equivalents). The Company
agrees that Bear Financial Corp. will not assign or transfer, or create or
suffer to exist a Lien on, any of the Indebtedness described in clause (xiii)
above and will not permit any amendment or waiver of or to such Indebtedness
without the consent of the Agents.
10.06 Transactions with Affiliates. The Company will not, and will
not permit any of its Subsidiaries or Material Joint Ventures to, enter into
any transaction or series of related transactions with any Affiliate of the
Company or any of its Subsidiaries or Material Joint Ventures, other than in
the ordinary course of business and on terms and conditions substantially as
favorable to the Company, such Subsidiary or such Material Joint Venture as
would reasonably be obtained by the
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Company, such Subsidiary or such Material Joint Venture at that time in a
comparable arm's-length transaction with a Person other than an Affiliate,
except that the following transactions, whether or not such transactions would
otherwise be permitted by this Section 10.06, shall be permitted:
(i) Restricted Payments may be paid to the extent provided in Section
10.03 (excluding clause (iv) thereof);
(ii) loans may be made and other transactions may be entered into by
the Company and its Subsidiaries and Material Joint Ventures to the extent
permitted by Sections 10.04 and 10.05;
(iii) the Company may make quarterly payments (in advance) of the
Corporate Services Fee, provided that the aggregate amount permitted to be
paid pursuant to this clause (iii) in any fiscal quarter of the Company
shall not exceed $375,000;
(iv) [INTENTIONALLY OMITTED];
(v) the Company and its Subsidiaries and Material Joint Ventures may
pay to HFS or a Subsidiary thereof the Marketing and Reservation Fee as
and when due pursuant to the terms of the respective HFS Franchise
Agreement, and the Company and its Subsidiaries and Material Joint
Ventures may pay to HFS or a Subsidiary thereof the Licensing Fee as and
when due pursuant to the terms of the HFS Master License Agreement;
(vi) [INTENTIONALLY OMITTED];
(vii) [INTENTIONALLY OMITTED];
(viii) [INTENTIONALLY OMITTED];
(ix) so long as no Default or Event of Default then exists, the
Company may pay to HFS an annual guaranty fee (payable quarterly in
arrears) (the "Guaranty Fee") pursuant to the Financing Agreement in an
aggregate amount not to exceed 2% of the Guaranty Amount then in effect,
provided that such Guaranty Fee shall otherwise be subject to the terms of
the HFS Subordination Agreement;
(x) (a) the Company and its Subsidiaries and Material Joint Ventures
may pay to HFS or a Subsidiary thereof the Standard Termination Fees set
forth in the HFS Franchise Agreements and (b) so long as no Default or
Event of Default then exists, the Company and its Subsidiaries and
Material Joint Ventures may pay to HFS or a Subsidiary thereof the Excess
Termination Fees set forth in the HFS Franchise
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Agreements, provided that such Excess Termination Fees shall otherwise be
subject to the terms of the HFS Subordination Agreement;
(xi) the Company and its Subsidiaries and Material Joint Ventures may
pay to HFS or a Subsidiary thereof pursuant to the respective HFS
Franchise Agreements such other customary and arm's length charges and
expenses that HFS charges (and on the same basis on which HFS charges) to
its other similarly situated franchisees; and
(xii) the Company may make payments to Fisher 40th & 3rd Company and
Hawaiian Realty Inc. pursuant to the lease of its corporate headquarters
located at 605 Third Avenue, New York, New York as long as the aggregate
annual payments thereunder do not exceed $600,000 plus the operating cost
and tax escalator increases as set forth therein on the date hereof.
Except as expressly permitted by clauses (i) through (xii) above, neither the
Company nor any of its Subsidiaries or Material Joint Ventures shall pay any
management, consultant, advisory or other fees to HFS or any Subsidiary of HFS,
and neither the Company nor any of its Subsidiaries or Material Joint Ventures
shall pay any management, consultant, advisory or similar fees to any other
Affiliate of the Company or HFS (excluding payments made by Subsidiaries of the
Company to the Company or a Wholly-Owned Subsidiary of the Company).
10.07 Capital Expenditures. (a) The Company will not, and will not
permit any of its Subsidiaries or Material Joint Ventures to, make any Capital
Expenditures, except that during any fiscal year of the Company, the Company
and its Subsidiaries and Material Joint Ventures may make Capital Expenditures
so long as the aggregate amount of Capital Expenditures made by the Company and
its Wholly-Owned Subsidiaries in any such fiscal year when added to the
Company's Allocable Share of the Capital Expenditures made by its Material
Joint Ventures for such fiscal year, does not exceed an amount equal to 6% of
Total Hotel Revenues for such fiscal year.
Notwithstanding anything to the contrary contained above, to the extent that
Capital Expenditures made during any fiscal year of the Company are less than
the amount permitted to be made for such fiscal year as set forth above such
unused amount may be carried forward to the immediately succeeding fiscal year
and utilized to make Capital Expenditures of the type permitted above in this
Section 10.07 in excess of the amount permitted above in the following fiscal
year, provided that (x) any amounts carried forward from the immediately
preceding fiscal year shall be deemed to be utilized during the current fiscal
year before the relevant amount for such current fiscal year shall be deemed to
be utilized
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to make Capital Expenditures during such fiscal year and (y) no amounts once
carried forward to the next fiscal year may be carried forward to fiscal years
thereafter. In addition to the foregoing, the Company and its Subsidiaries may
make additional Capital Expenditures to the extent that any Permitted Hotel
Acquisition made as permitted by Section 10.02(ix) and/or 10.05(viii)
constitutes Capital Expenditures.
(b) In addition to the Capital Expenditures permitted to be made
pursuant to clause (a) of this Section 10.07 and the following clause (c) of
this Section 10.07, the amount of insurance proceeds received by the Company
and its Subsidiaries from any Recovery Event may be used by the Company and its
Subsidiaries to make Capital Expenditures to replace or restore any properties
or assets in respect of which such proceeds were paid, in each case to the
extent such proceeds are not used to make Permitted Hotel Acquisitions or are
not required to be applied pursuant to Section 3.03(d), provided that any
proceeds that are so used to make Capital Expenditures pursuant to this clause
(b) are, to the extent required by Section 3.03(d) used within the period of
time as is set forth in such Section 3.03(d).
(c) In addition to the Capital Expenditures permitted to be made
pursuant to clauses (a) and (b) of this Section 10.07, the Company and its
Wholly-Owned Subsidiaries may make Capital Expenditures in any fiscal year of
the Company beginning with its fiscal year commencing on January 1, 1997 in an
amount equal to the Cumulative Retained Residual Excess Cash Amount as in
effect immediately prior to the making of the respective Capital Expenditure.
(d) The Company may consummate the Canadian Acquisition for a
purchase price (including assumed debt but excluding fees relating thereto) not
to exceed C$98,000,000, and such amounts so expended shall not be counted as
expenditures under paragraph (a) above.
(e) The Company may make the Capital Expenditure set forth on
Schedule XII, and such amounts shall not be counted as expenditures under
paragraph (a) above.
10.08 Minimum Consolidated Net Worth. The Company will not permit
Consolidated Net Worth at any time to be less than the sum of (a) $125,000,000
and (b) if positive, 50% of Consolidated Net Income for the period from July 1,
1996 through the last day of the most recent fiscal quarter ending prior to
such time.
10.09 Consolidated Interest Coverage Ratio. The Company will not
permit the Consolidated Interest Coverage Ratio for any Test Period ended on
the last day of a fiscal quarter to
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be less than (a) 2.0 to 1.0 for each fiscal quarter ending on or prior to
September 30, 1999 and (b) 3.0 to 1.0 for each fiscal quarter thereafter.
10.10 Consolidated Current Ratio. The Company will not permit the
Consolidated Current Ratio at any time to be less than 1.0 to 1.0.
10.11 Total Leverage Ratio. The Company will not permit the Total
Leverage Ratio on the last day of any fiscal quarter to be greater than (a) 5.0
to 1.0 on and prior to September 30, 1999 and (b) 4.0 to 1.0 thereafter.
10.12 Limitation on Payments of Certain Indebtedness, Modifications
of Certain Indebtedness, Modifications of Certificate of Incorporation, By-Laws
and Certain Agreements, etc. The Company will not, and will not permit any of
its Subsidiaries or Material Joint Ventures to, (i) make (or give any notice in
respect of) any voluntary or optional payment or prepayment on or redemption or
acquisition for value of, or any prepayment or redemption as a result of any
change of control or similar event of including, in each case without
limitation, by way of depositing with the trustee with respect thereto money or
securities before due for the purpose of paying when due any HFS Subordinated
Indebtedness, any Chartwell Subordinated Debt or any Permitted Subordinated
Indebtedness, (ii) amend or modify, or permit the amendment or modification of,
any provision of the Bank of America Facility, any HFS Subordinated
Indebtedness, any Chartwell Subordinated Debt or any Permitted Subordinated
Indebtedness or any agreement (including, without limitation, any HFS
Subordinated Note) related thereto, (iii) amend or modify. or permit the
amendment or modification of, any provision of any Canadian Acquisition
Document, Management Agreement, Tax Sharing Agreement, HFS Agreement or
Affiliate Agreement (other than any amendment or modification thereto which
would not violate or be inconsistent with any of the terms or provisions of
this Agreement and the other Credit Documents and could not be adverse to the
interests of the Banks in any respect as determined by the Agents) or enter
into any new agreement which would have constituted a Tax Sharing Agreement,
HFS Agreement or Affiliate Agreement if same had been in effect on the Initial
Borrowing Date except for Unrestricted Subsidiary Tax Sharing Agreements
entered into in compliance with Section 10.16(c) and additional HFS Franchise
Agreements in connection with the acquisition of new Hotel Properties, (iv)
amend, modify or change its certificate of incorporation (including, without
limitation, by the filing or modification of any certificate of designation) or
by-laws, or any agreement entered into by it, with respect to its capital stock
(including the Chartwell Stock Purchase Agreement), or enter into any new
agreement with respect to its capital stock, other than any amendments,
modifications or changes pursuant to this clause
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(iv) or any such new agreements pursuant to this clause (iv) which would not
violate or be inconsistent with any of the terms of this Agreement and the
other Credit Documents and could not in any way adversely affect the interests
of the Banks, (v) amend or modify, or permit the amendment or modification of,
any Joint Venture Agreement in any material respect (it being agreed that
acting under any Joint Venture Agreement in accordance with its terms,
including as to termination rights and buyout provisions, shall not be
restricted by this clause (v)) or (vi) retain or engage, or permit the
retention or engagement of, any Person to manage a Hotel Property in which the
Company and its Subsidiaries have a controlling interest unless the consent of
the Real Estate Committee is obtained, such consent not to be unreasonably
withheld or (vii) consent to or acquiesce in the pledge or assignment by HFS of
any HFS Subordinated Notes.
10.13 Limitation on Certain Restrictions on Subsidiaries and Joint
Ventures. The Company will not, and will not permit any of its Subsidiaries or
Material Joint Ventures to, directly or indirectly, create or otherwise cause
or suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary or Material Joint Venture of the Company to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Company or any of its
Subsidiaries or Material Joint Ventures, or pay any Indebtedness owed to the
Company or any Subsidiary or Material Joint Venture of the Company, (b) make
loans or advances to the Company or any Subsidiary or Material Joint Venture of
the Company, (c) transfer any of its properties or assets to the Company or any
of its Subsidiaries or Joint Ventures or (d) create Liens on its property,
except in each case for such encumbrances or restrictions existing under or by
reason of (i) applicable law, (ii) this Agreement and the other Credit
Documents, (iii) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of the Company or any Subsidiary or
Material Joint Venture of the Company, (iv) customary provisions restricting
assignment of any licensing agreement entered into by the Company or any
Subsidiary or Material Joint Venture of the Company in the ordinary course of
business, and (v) restrictions on the transfer or encumbrance of any assets
subject to a Lien permitted by this Agreement.
10.14 Limitation on Issuance of Capital Stock. (a) The Company will
not issue (i) any class of preferred stock (except (x) preferred stock of the
Company issued in accordance with the requirements of Sections 10.04(viii) and
(ix) and (y) any class of preferred stock which has no required redemptions and
no required offers to purchase same by the Company or any of its Subsidiaries
or Material Joint Ventures, whether through the lapse of time, the occurrence
of certain contingencies or otherwise) or
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(ii) any class of redeemable (except at the sole option of the Company) common
stock.
(b) The Company will not permit any of its Subsidiaries or Material
Joint Ventures to issue any capital stock (including by way of sales of
treasury stock) or any options or warrants to purchase, or securities
convertible into, capital stock, except (i) for transfers and replacements of
then outstanding shares of capital stock, (ii) for stock splits, stock
dividends and similar or additional issuances which do not decrease the
percentage ownership of the Company or any of its Subsidiaries in any class of
the capital stock of such Subsidiary or Material Joint Venture, (iii) stock
options issued to employees provided that such options and the capital stock
issuable upon the exercise of such stock options are not mandatorily redeemable
prior to the first anniversary of the Final Maturity Date, and (iv) to qualify
directors to the extent required by applicable law.
10.15 Business. The Company will not, and will not permit any of its
Subsidiaries or Joint Ventures to, engage (directly or indirectly) in any
business other than the businesses in which the Company and its Subsidiaries
and Joint Ventures are engaged on the Initial Borrowing Date and reasonable
extensions thereof and businesses incidental thereto, provided that the Company
(x) may not expand or develop any gaming business or venture after the Initial
Borrowing Date and (y) may wind down its existing gaming business and related
Specified Existing Investments.
10.16 Limitation on Creation of Subsidiaries; Unrestricted
Subsidiaries and Joint Ventures. (a) The Company will not, and will not permit
any of its Subsidiaries or Joint Ventures to, establish, create or acquire any
additional Subsidiaries or Joint Ventures, except that the Company and its
Wholly-Owned Subsidiaries shall be permitted to establish, create or acquire
(x) Joint Ventures as provided in Section 10.16(b) and (y) at least 90% owned
Subsidiaries in connection with Permitted Hotel Acquisitions and Permitted
Business Acquisitions so long as (i) all of the capital stock of such new
Subsidiary (to the extent that same is a corporation) is pledged pursuant to
(and to the extent required by) the Pledge Agreement and the certificates
representing such stock, together with stock powers duly executed in blank, are
delivered to the Collateral Agent, (ii) all of the partnership interests of
such new Subsidiary (to the extent that same is a partnership) are pledged and
assigned pursuant to (and to the extent required by) the Pledge Agreement and
(iii) any such new domestic Subsidiary executes a counterpart of the
Subsidiaries Guaranty and the Pledge Agreement. In addition, each such new
domestic Subsidiary shall execute and deliver, or cause to be executed and
delivered all other relevant documentation of the type described in Section 5
as such new domestic Subsidiary would
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have had to deliver if such new domestic Subsidiary were a Credit Party on the
Initial Borrowing Date.
(b) The Company will not, and will not permit any of its Subsidiaries
or Joint Ventures to, establish, create or acquire any additional Joint
Ventures after the Initial Borrowing Date, except that the Company or any
Wholly-Owned Subsidiary of the Company referenced in following clause (z) may
establish, create or acquire Joint Ventures in connection with Investments
permitted by Section 10.05 from time to time, in each case so long as (x) no
Default or Event of Default exists at the time of the establishment, creation
or acquisition of the respective Joint Venture or shall exist immediately after
giving effect thereto, (y) all Investments therein are permitted pursuant to
Section 10.05 and (z) all equity interests in each Joint Venture are owned
directly by the Company or a Wholly-Owned Subsidiary of the Company which
engages in no business or activities other than the holding of ownership
interests in one or more Joint Ventures and all equity interests therein are
pledged pursuant to (and to the extent required by) the Pledge Agreement,
provided that if any Joint Venture is in the form of a partnership, joint
venture or other business form other than a corporation, the equity interests
therein shall not be directly owned by the Company (but shall be owned by a
Wholly-Owned Subsidiary thereof as referenced above in this clause (z)).
(c) The Company will not, and will not permit any of its Subsidiaries
or Joint Ventures to, establish, create or acquire any Unrestricted Subsidiary,
except that any Wholly-Owned Domestic Subsidiary of the Company referenced in
following clause (z) may establish, create or acquire Unrestricted Subsidiaries
solely in connection with Investments permitted by Section 10.05(xii) from time
to time, in each case so long as (w) no Default or Event of Default exists at
the time of the establishment, creation or acquisition of the respective
Unrestricted Subsidiary or shall exist immediately after giving effect thereto,
(x) all Investments therein (including as a result of the designation thereof
as provided in the definition of Unrestricted Subsidiary) are permitted
pursuant to Section 10.05(xii), (y) all equity interests in each Unrestricted
Subsidiary are owned directly by a Wholly-Owned Domestic Subsidiary of the
Company which engages in no business or activities other than the holding of
ownership interests in one or more Unrestricted Subsidiaries and all equity
interests therein are pledged pursuant to (and to the extent required by) the
Pledge Agreement and (z) each such Unrestricted Subsidiary enters into, or
becomes a party to, an Unrestricted Subsidiary Tax Sharing Agreement on terms
and conditions satisfactory to the Required Banks.
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SECTION 11. Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
11.01 Payments. The Company shall (i) default in the payment when due
of any principal of any Loan or any Note, (ii) default in the payment of any
Unpaid Drawing for three or more Business Days after the date the respective
Drawing was made or, if no Default or Event of Default exists pursuant to
Section 11.05 for three or more Business Days after the receipt by the Company
of notice of the respective Drawing by the Administrative Agent or the Issuing
Bank or (iii) default, and such default shall continue unremedied for three or
more Business Days, in the payment when due of any interest on any Loan or Note
or Unpaid Drawing, or any Fees or any other amounts owing hereunder or under
any other Credit Document; or
11.02 Representations, etc. Any representation, warranty or statement
made by any Credit Party herein or in any other Credit Document or in any
certificate delivered pursuant hereto or thereto shall prove to be untrue in
any material respect on the date as of which made or deemed made; or
11.03 Covenants. Any Credit Party shall (i) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 9.11 or Section 10 or (ii) default in the due performance or observance
by it of any other term, covenant or agreement contained in this Agreement and
such default shall continue unremedied for a period of 30 days after written
notice to the Company by the Administrative Agent or any Bank; or
11.04 Default Under Other Agreements. (i) The Company or any of its
Subsidiaries or Material Joint Ventures shall (x) default in any payment of any
Indebtedness (other than the Obligations) beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness was
created or (y) default in the observance or performance of any agreement or
condition relating to any Indebtedness (other than the Obligations) or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause (determined without regard to whether any notice is
required), any such Indebtedness to become due prior to its stated maturity, or
(ii) any Indebtedness (other than the Obligations) of the Company or any of its
Subsidiaries or Material Joint Ventures shall be declared to be due and
payable, or required to be prepaid other than by a regularly scheduled required
prepayment, prior to the stated maturity thereof provided
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that it shall not be a Default or an Event of Default under this Section 11.04
unless the aggregate principal amount of all Indebtedness as described in
preceding clauses (i) and (ii) is at least $1,000,000; or
11.05 Bankruptcy, etc. The Company or any of its Subsidiaries or
Material Joint Ventures shall commence a voluntary case concerning itself under
Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter
in effect, or any successor thereto (the "Bankruptcy Code"), or an involuntary
case is commenced against the Company or any of its Subsidiaries or any such
Material Joint Ventures and the petition is not controverted within 10 days, or
is not dismissed within 60 days, after commencement of the case; or a custodian
(as defined in the Bankruptcy Code) is appointed for, or takes charge of, all
or substantially all of the property of the Company or any of its Subsidiaries
or any such Material Joint Ventures or the Company or any of its Subsidiaries
or any such Material Joint Ventures commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Company or any of its
Subsidiaries or any such Material Joint Ventures, or there is commenced against
the Company or any of its Subsidiaries or any such Material Joint Ventures any
such proceeding which remains undismissed for a period of 60 days, or the
Company or any of its Subsidiaries or any such Material Joint Ventures is
adjudicated insolvent or bankrupt, or any order of relief or other order
approving any such case or proceeding is entered and is not vacated or stayed
within 60 days, or the Company or any of its Subsidiaries or any such Material
Joint Ventures suffers any appointment of any custodian or the like for it or
any substantial part of its property to continue undischarged or unstayed for a
period of 60 days, or the Company or any of its Subsidiaries or any such
Material Joint Ventures makes a general assignment for the benefit of
creditors, or any partnership and/or corporate action is taken by the Company
or any of its Subsidiaries or any such Material Joint Ventures for the purpose
of effecting any of the foregoing; or
11.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof or a waiver of such
standard or extension of any amortization period is sought or granted under
Section 412 of the Code, any Plan shall have had or is likely to have a trustee
appointed to administer such Plan, any Plan is, shall have been or is likely to
be terminated or to be the subject of termination proceedings under ERISA, any
Plan shall have an Unfunded Current Liability a contribution required to be
made to a Plan or a Foreign Pension Plan has not been timely made, the Company
or any Subsidiary of the Company or any ERISA Affiliate has incurred or
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is likely to incur a liability to or on account of a Plan under Section 409,
502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or
Section 401(a)(29), 4971, 4975 or 4980 of the Code, or the Company or any of
its Subsidiaries has incurred or is likely to incur liabilities pursuant to one
or more employee welfare benefit plans (as defined in Section 3(1) of ERISA)
that provide benefits to retired employees or other former employees (other
than as required by Section 601 of ERISA) or employee pension benefit plans (as
defined in Section 3(2) of ERISA) or Foreign Pension Plans; (b) there shall
result from any such event or events the imposition of a lien, the granting of
a security interest, or a liability or a material risk of incurring a
liability; (c) which lien, security interest or liability, individually and/or
in the aggregate, in the opinion of the Required Banks, could reasonably be
expected to have a material adverse effect upon the business, operations,
property, assets, nature of assets, liabilities, condition (financial or
otherwise) or prospects of the Company or the Company and its Subsidiaries
taken as a whole; or
11.07 Security Documents. Any Security Document shall cease to be in
full force and effect, or shall cease to give the Collateral Agent for the
benefit of the Secured Creditors, the Liens, rights, powers and privileges
purported to be created thereby (including, without limitation, a perfected
security interest in, and Lien on, all of the Collateral), in favor of the
Collateral Agent superior to and prior to the rights of all third Persons, and
subject to no other Liens, or any Credit Party shall default in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to such Security Document and such default shall
continue beyond any grace period specifically applicable thereto pursuant to
the terms of such Security Document; or
11.08 Guaranty. Any Guaranty shall cease to be in full force or
effect as to the relevant Guarantor, or any Guarantor or Person acting by or on
behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations
under the relevant Guaranty, or any Guarantor Event of Default shall occur, or
at any time the Maximum Guaranteed Amount for any reason whatsoever shall be
less than an amount equal to the remainder of (x) $75,000,000 less (y) the
aggregate amount of cash actually loaned by HFS to the Company after the
Initial Borrowing Date pursuant to Section 10.04(vii) and/or invested by HFS in
the Company pursuant to Qualified Equity Investments as described in the
definition thereof contained herein, so long as all such cash loaned or
invested was actually used by the Company to repay the principal of Loans
pursuant to the requirements of Section 4.02(a) (as a result of a reduction to
the Total Revolving Loan Commitment pursuant to Sections 3.03(e) and (f)); or
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11.09 HFS Subordination Agreement. The HFS Subordination Agreement
shall cease to be in full force or effect for any reason, or HFS or any Person
acting by or on behalf of HFS shall deny or disaffirm HFS's obligations
thereunder or HFS shall default, and such default shall continue unremedied for
a period of 10 days after written notice to HFS by the Administrative Agent or
any Bank, in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant thereto; or
11.10 Judgments. One or more judgments or decrees shall be entered
against the Company or any of its Subsidiaries or Material Joint Ventures
involving in the aggregate for the Company and its Subsidiaries and any such
Material Joint Ventures a liability (not fully covered by a reputable and
solvent insurance company or not paid) and such judgments and decrees either
shall be final and non-appealable or shall not be vacated, discharged or stayed
or bonded pending appeal for any period of 60 consecutive days, and the
aggregate amount of all such judgments exceeds $1,000,000; or
11.11 HFS Franchise Agreements, etc. (i) Any Franchise Agreement
shall be terminated or any event or condition shall exist which would enable
any party to such Franchise Agreement to terminate or suspend its obligations
thereunder or (ii) at any time any Hotel Property shall be operated as other
than a "Travelodge", "Thriftlodge" or any other nationally recognized hotel
brand which the Chairman of the Board of Directors and the chief financial
officer of the Company (in a certificate signed by them delivered to the
Agents) have determined to be in the best interests of the Company, provided
that (A) a Hotel Property shall not be deemed to be subject to the events
described in preceding clause (i) or (ii) if the respective Hotel Property, in
the ordinary course of business and with the approval of the Board of Directors
of the Company (or an authorized committee of such Board), is being changed to
another nationally recognized hotel brand, and in connection with the
change-over, the respective Hotel Property is for a period, in no event to
exceed 90 days, operating other than under a nationally recognized hotel brand
and (B) it shall not be a Default or an Event of Default under clause (i) or
(ii) of this Section 11.11 so long as all Hotel Properties subject to any of
the events described above in this Section 11.11 (after giving effect to
preceding clause (A)) at any time do not represent either more than 10% of the
total assets of the Company and its Subsidiaries (after reduction for minority
interests) as of the last day of the most recently ended fiscal quarter of the
Company or more than 10% of the Total Hotel Revenues of the Company and its
Subsidiaries (after reduction for minority interests) for the Test Period then
most recently ended; or
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11.12 Total Unrestricted Subsidiary Leverage Ratio. The Total
Unrestricted Subsidiary Leverage Ratio at any time is greater than 5.00: 1.00;
or
11.13 Unrestricted Subsidiary Tax Payments. Any Unrestricted
Subsidiary of the Company shall not pay any amounts owing by it under any
Unrestricted Subsidiary Tax Sharing Agreement to which it is a party and such
failure shall continue unremedied for 10 or more days;
Then, and in any such event, and at any time thereafter, if any Event
of Default shall then be continuing, the Administrative Agent, upon the written
request of the Required Banks, shall by written notice to the Company, take any
or all of the following actions, without prejudice to the rights of the
Administrative Agent, any Bank or the holder of any Note to enforce its claims
against any Credit Party (provided, that, if an Event of Default specified in
Section 11.05 shall occur with respect to a Borrower or if a Guarantor Event of
Default specified in Section 14(d) of the HFS Guaranty shall occur with respect
to HFS, the result which would occur upon the giving of written notice by the
Administrative Agent to the Company as specified in clauses (i) and (ii) below
shall occur automatically without the giving of any such notice): (i) declare
the Total Revolving Loan Commitment terminated, whereupon the Revolving Loan
Commitment and Revolving C$ Loan Commitment of each Bank shall forthwith
terminate immediately and any Commitment Commission shall forthwith become due
and payable without any other notice of any kind; (ii) declare the principal of
and any accrued interest in respect of all Loans and the Notes and all
Obligations owing hereunder and thereunder to be, whereupon the same shall
become, forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by each Credit Party; (iii)
terminate any Letter of Credit, which may be terminated, in accordance with its
terms; (iv) direct the Company to pay (and the Company agrees that upon receipt
of such notice, or upon the occurrence of an Event of Default specified in
Section 11.05 with respect to the Company, it will pay) to the Collateral Agent
at the Payment Office such additional amount of cash, to be held as security by
the Collateral Agent, as is equal to the aggregate Stated Amount of all Letters
of Credit issued for the account of the Company and then outstanding; (v)
enforce, as Collateral Agent, all of the Liens and security interests created
pursuant to the Pledge Agreement; and (vi) take any of the actions specified in
clause (ii) of the proviso to Sections 1.06(a) and (b) or in clause (v) of the
proviso to Section 1.09.
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SECTION 12. Definitions and Accounting Terms.
12.01 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Adjusted Certificate of Deposit Rate" shall mean, on any day, the
sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing
(x) the most recent weekly average dealer offering rate for negotiable
certificates of deposit with a three-month maturity in the secondary market as
published in the most recent Federal Reserve System publication entitled
"Select Interest Rates," published weekly on Form H.15 as of the date hereof,
or if such publication or a substitute containing the foregoing rate
information shall not be published by the Federal Reserve System for any week,
the weekly average offering rate determined by the Administrative Agent on the
basis of quotations for such certificates received by it from three certificate
of deposit dealers in New York of recognized standing or, if such quotations
are unavailable, then on the basis of other sources reasonably selected by the
Administrative Agent, by (y) a percentage equal to 100% minus the stated
maximum rate of all reserve requirements as specified in Regulation D
applicable on such day to a three-month certificate of deposit of a member bank
of the Federal Reserve System in excess of $100,000 (including, without
limitation, any marginal, emergency, supplemental, special or other reserves),
plus (2) the then daily net annual assessment rate as estimated by the
Administrative Agent for determining the current annual assessment payable by
the Administrative Agent to the Federal Deposit Insurance Corporation for
insuring three-month certificates of deposit.
"Adjusted Consolidated Company EBITDA" for any period shall mean
Adjusted Consolidated EBITDA of the Company for such period, provided that in
determining Consolidated EBITDA (as required pursuant to the definition of
Adjusted Consolidated EBITDA) of the Company for such period, Consolidated
Company Net Income (and not Consolidated Net Income) shall be used, with the
term "Consolidated Company Net Income" being deemed inserted in lieu of the
term "Consolidated Net Income" in each place such term is used in the
definition of Consolidated EBITDA contained herein.
"Adjusted Consolidated EBITDA" any Person for any period shall mean
Consolidated EBITDA of such Person for such period, but without giving effect
to any gains or losses from sales of assets other than inventory in the
ordinary course of business.
"Adjusted Consolidated Working Capital" at any time shall mean
Consolidated Current Assets (but excluding therefrom
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all cash and Cash Equivalents) less Consolidated Current Liabilities at such
time.
"Adjusted Percentage" shall mean (x) at a time when no Bank Default
exists, for each Bank, such Bank's Percentage and (y) at a time when a Bank
Default exists (i) for each Bank that is a Defaulting Bank, zero and (ii) for
each Bank that is a Non- Defaulting Bank, the percentage determined by dividing
such Bank's Revolving Loan Commitment at such time by the Adjusted Total
Revolving Loan Commitment at such time, it being understood that all references
herein to Revolving Loan Commitments, the Adjusted Total Revolving Loan
Commitment and the Adjusted Total Revolving C$ Loan Commitment at a time when
the Total Revolving Loan Commitment, Adjusted Total Revolving Loan Commitment
or the Adjusted Total Revolving C$ Loan Commitment, as the case may be, has
been terminated shall be references to the Revolving Loan Commitments, Adjusted
Total Revolving Loan Commitment or the Adjusted Total Revolving C$ Loan
Commitment, as the case may be, in effect immediately prior to such
termination, provided that (A) no Bank's Adjusted Percentage shall change upon
the occurrence of a Bank Default from that in effect immediately prior to such
Bank Default if after giving effect to such Bank Default, and any repayment of
Loans at such time pursuant to Section 4.02(a) or otherwise, the sum of (i) the
Dollar Equivalent Amount of the aggregate outstanding principal amount of Loans
of all Non- Defaulting Banks plus (ii) the Letter of Credit Outstandings,
exceeds the Adjusted Total Revolving Loan Commitment; (B) the changes to the
Adjusted Percentage that would have become effective upon the occurrence of a
Bank Default but that did not become effective as a result of the preceding
clause (A) shall become effective on the first date after the occurrence of the
relevant Bank Default on which the sum of (i) the Dollar Equivalent Amount of
the aggregate outstanding principal amount of the Loans of all Non-Defaulting
Banks plus (ii) the Letter of Credit Outstandings is equal to or less than the
Adjusted Total Revolving Loan Commitment; and (C) if (i) a Non-Defaulting
Bank's Adjusted Percentage is changed pursuant to the preceding clause (B) and
(ii) any repayment of such Bank's Loans, or of Unpaid Drawings with respect to
Letters of Credit, that were made during the period commencing after the date
of the relevant Bank Default and ending on the date of such change to its
Adjusted Percentage must be returned to the Company or the Canadian Borrower,
as the case may be, as a preferential or similar payment in any bankruptcy or
similar proceeding of the Company or the Canadian Borrower, as the case may be,
then the change to such Non- Defaulting Bank's Adjusted Percentage effected
pursuant to said clause (B) shall be reduced to that positive change, if any,
as would have been made to its Adjusted Percentage if (x) such repayments had
not been made and (y) the maximum change to its Adjusted Percentage would have
resulted in the sum of the Dollar Equivalent Amount of the outstanding
principal of Loans made by
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such Bank plus such Bank's new Adjusted Percentage of Letter of Credit
Outstandings equalling such Bank's Revolving Loan Commitment at such time.
"Adjusted Total Revolving C$ Loan Commitment" shall mean, at any
time, the Total Revolving C$ Loan Commitment at such time less the aggregate
Revolving C$ Loan Commitments of all Defaulting Banks at such time.
"Adjusted Total Revolving Loan Commitment" shall mean, at any time,
the Total Revolving Loan Commitment at such time less the aggregate Revolving
Loan Commitments of all Defaulting Banks at such time.
"Administrative Agent" shall mean The Chase Manhattan Bank, in its
capacity as Administrative Agent for the Banks hereunder, and shall include any
successor to the Administrative Agent appointed pursuant to Section 13.09.
"Affiliate" shall mean, with respect to any Person, any other Person
(i) directly or indirectly controlling (including, but not limited to, all
directors, officers and partners of such Person) controlled by, or under direct
or indirect common control with such Person or (ii) that directly or indirectly
owns more than 5% of any class of the voting securities or capital stock of or
equity interests in such Person. A Person shall be deemed to control another
Person if such Person possesses, directly or indirectly the power to direct or
cause the direction of the management and policies of such other Person,
whether through the ownership of voting securities, by contract or otherwise.
Notwithstanding anything to the contrary contained above, for all purposes of
this Agreement, HFS and its Subsidiaries and Affiliates shall be deemed to be
Affiliates of the Company and its Subsidiaries.
"Agent" shall mean and include the Administrative Agent, the
Collateral Agent and the Syndication Agent.
"Agreement" shall mean this Credit Agreement, as modified,
supplemented, amended, restated, extended, renewed, refinanced or replaced from
time to time.
"Allocable Share" shall mean, with respect to any Joint Venture and
non-Wholly-Owned Subsidiary and event or circumstance under this Agreement that
requires the determination thereof, that percentage of such Joint Venture's or
non-Wholly-Owned Subsidiary's equity interests that are owned (directly or
indirectly) by the Company.
"Applicable Margin" shall mean on any day with respect to any (i) $
Eurodollar Loan, (ii) Commitment Fee or (iii) C$
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Eurodollar Loan, the applicable margin set forth below under the respective
captions "$ Eurodollar Margin", "Commitment Fee" or "C$ Eurodollar Margin", as
applicable:
$ C$
Total Eurodollar Commitment Eurodollar
Outstandings Margin Fee Margin
Equal or
less than
$75 million 0.400% 0.200% 0.400%
Equal or
less than
$85 million 0.500% 0.200% 0.500%
Equal or
less than
$95 million 0.600% 0.250% 0.600%
Equal or
less than
$105 million 0.650% 0.250% 0.650%
Equal or
less than
$115 million 0.700% 0.300% 0.700%
Equal or
less than
$125 million 0.750% 0.300% 0.750%
Equal or
less than
$150 million 0.875% 0.375% 0.875%
Notwithstanding anything to the contrary contained in this definition:
(a) the Applicable Margin shall be increased by .25% per annum on
that portion of the Total Outstandings which exceeds the Guaranty Amount
if the Consolidated Interest Coverage Ratio for any Test Period ended on
the last day of a fiscal quarter is less than 3.0 to 1.0, any such
increase to be effective on the date of delivery of the Company's
financial statements under Section 9.01(b) or (c), as the case may be, and
the related officer's certificate under Section 9.01(e) and to remain
effective until the date of delivery of the Company's financial statements
under Section 9.01(b) or (c) and the related officer's certificate under
Section 9.01(e) for the next fiscal period (it being agreed that (i) the
Applicable Margins shall not be increased by more than .25% per annum at
any time pursuant to this paragraph (a) and the Applicable Margin on that
portion of
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the Total Outstandings which exceeds the Guaranty Amount shall
automatically be increased by .25% per annum on the date that the Company
is required and fails to deliver its financial statements and related
officer's certificate for any fiscal period pursuant to Sections 9.01(b),
(c) and (e) until such statements and certificates are delivered and (ii)
the specific Loans and Letters of Credit to which such increased
Applicable Margin shall apply shall be determined by the Administrative
Agent in its sole discretion);
(b) the Applicable Margin shall be increased by the per annum
percentage, if any, by which applicable margin for eurodollar loans under
HFS's primary bank credit agreement exceeds or would exceed .40% per
annum; and
(c) to the extent that the Applicable Margin for Eurodollar Loans
exceeds 1.00%, the Applicable Margin for $ Base Rate Loans shall be such
Applicable Margin for $ Eurodollar Loans less 1.00%
"Approved Bank" shall have the meaning provided in the definition of
"Cash Equivalents."
"Asset Sale" shall mean (i) any Recovery Event or (ii) any sale,
transfer or other disposition by the Company or any of its Subsidiaries or
Joint Ventures to any Person other than the Company or a Wholly-Owned
Subsidiary of the Company of any asset (including, without limitation, any
capital stock or other securities of another Person) of the Company or any of
its Subsidiaries or Joint Ventures other than (x) any sale, transfer or
disposition permitted by Sections 10.02(v) and (xii) and (y) any sale, transfer
or disposition where the fair market value of the consideration therefor is
less than or equal to $100,000.
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of Exhibit K (appropriately
completed).
"Authorized Financial Officer" of any Credit Party shall mean any of
the Chief Financial Officer, the Treasurer or the Chief Accounting Officer of
such Credit Party.
"Authorized Officer" of any Credit Party shall mean any of the
President, any Authorized Financial Officer or any Vice- President of such
Credit Party or any other officer of such Credit Party which is designated in
writing to the Administrative Agent by any of the foregoing officers of such
Credit Party as being authorized to give such notices under this Agreement.
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"Bank" shall mean each financial institution listed on Schedule I, as
well as any Person which becomes a "Bank" hereunder pursuant to Section
14.04(b).
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing in
violation of this Agreement or (ii) a Bank having notified in writing the
Company and/or the Administrative Agent that it does not intend to comply with
its obligations under Section 1.01 or 2.04 including, without limitation, as a
result of any takeover of such Bank by any regulatory authority or agency.
"Bank of America Facility" shall mean the credit facilities made
available by Bank of America National Trust & Savings Association to Joint
Ventures of FHI pursuant to the terms of that certain Letter Loan Agreement,
dated June 17, 1994, among Bank of America National Trust & Savings
Association, FHI, Forte (U.K.), Limited Forte Plc and certain affiliates
thereof, as in effect on the Initial Borrowing Date.
"Bank Termination Date" shall mean that date occurring after the
Effective Date upon which the Total Revolving Loan Commitment and all Letters
of Credit shall have terminated and all Loans, Notes and Unpaid Drawings,
together with interest, Fees and all other Obligations incurred hereunder and
thereunder, are paid in full to the Banks; provided that if any amount so
received by the Banks must be disgorged by them, then the Bank Termination Date
shall be deemed to have not occurred until such future time as the foregoing
conditions are once again satisfied.
"Bankruptcy Code" shall have the meaning provided in Section 11.05.
"Base Rate" at any time shall mean the highest of (i) the rate which
is 1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate, (ii) 1/2 of
1% in excess of Federal Funds Rate and (iii) the Prime Lending Rate.
"BNS" shall mean The Bank of Nova Scotia in its individual capacity.
"Borrower" shall mean each of the Company and the Canadian Borrower.
"Borrowing" shall mean (i) the borrowing of one Type of Revolving
Loan from all the Banks on a given date (or resulting from a conversion or
conversions on such date) having in the case of Eurodollar Loans of such Type
the same Interest Period, provided that $ Base Rate Loans or Revolving C$ Loans
made at an
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alternate rate of interest incurred pursuant to Section 1.10(b) shall be
considered part of the related Borrowing of Eurodollar Loans and (ii) the
borrowing of a Swingline Loan.
"Business Day" shall mean (i) for all purposes other than as covered
by clauses (ii) and (iii) below, any day except Saturday, Sunday and any day
which shall be in New York City a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close, (ii) with respect to all notices and determinations in connection with,
and payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) above and which is also a day for trading
by and between banks in the New York interbank Eurodollar market and (iii) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, Revolving C$ Loans, any day which is a Business Day
described in clauses (i) and (ii) above and which is not a Saturday, Sunday or
other day which shall be in Toronto, Ontario a legal holding or a day on which
banking institutions are authorized or required by law or other government
actions to close.
"Calculation Period" shall mean the period of four consecutive fiscal
quarters last ended before the date of the respective Permitted Hotel
Acquisition or incurrence of Permitted Subordinated Indebtedness which requires
calculations to be made on a Pro Forma Basis.
"Canadian Acquired Assets" shall mean the property purchased by the
Canadian Borrower under the Canadian Acquisition Documents, generally
consisting of 20 hotels and a 50% interest in another hotel, all operating
under the "Travelodge" franchise, and related assets.
"Canadian Acquisition" shall mean the purchase by the Canadian
Borrower of the Canadian Acquired Assets pursuant to the Canadian Acquisition
Documents.
"Canadian Acquisition Documents" shall mean the collective reference
to the (i) the Contract of Sale dated as of July 16, 1996 among CPLP, as
seller, the Canadian Borrower, as purchaser, and certain others and (ii) all
other documents entered into or delivered in connection with the Canadian
Acquisition.
"Canadian Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"Canadian Borrowing Date" shall mean the first date on which the
Canadian Borrower is entitled to borrow or have a Letter of Credit issued for
its account under this Agreement,
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which shall be the date on which the Canadian Acquisition is consummated and
the conditions therefor set forth in Section 6 are satisfied.
"Canadian Dollars" and the sign "C$" shall each mean freely
transferable lawful money of Canada.
"C$ Eurodollar Loans" shall mean Eurodollar Loans denominated in
Canadian Dollars.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person which should be capitalized in accordance with
generally accepted accounting principles, including all such expenditures with
respect to fixed or capital assets (including, without limitation, expenditures
for maintenance and repairs which should be capitalized in accordance with
generally accepted accounting principles) and the amount of Capitalized Lease
Obligations incurred by such Person.
"Capital Stock" of any Person means all shares, interests,
participations, partnership interests or other equivalents (however designated)
of such Persons' capital stock or other equity interests.
"Capitalized Interest" shall mean interest that is capitalized and is
not counted as interest expense in accordance with GAAP.
"Capitalized Lease Obligations" of any Person shall mean all rental
obligations which, under generally accepted accounting principles, are or will
be required to be capitalized on the books of such Person, in each case taken
at the amount thereof accounted for as indebtedness in accordance with such
principles.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than six months from the date of acquisition, (ii) U.S. dollar denominated time
deposits, certificates of deposit and bankers acceptances of (x) any Bank or
(y) any bank whose short-term commercial paper rating from S&P is at least A-1
or the equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank or Bank, an "Approved Bank"), in each case with
maturities of not more than six months from the date of acquisition, (iii)
commercial paper issued by any Approved Bank or by the parent company of any
Approved Bank and commercial paper issued by, or guaranteed by, any industrial
or financial company with a short-term commercial paper rating of at
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least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent
thereof by Moody's or guaranteed by any industrial company with a long term
unsecured debt rating of at least A or A2, or the equivalent of each thereof,
from S&P or Moody's, as the case may be, and in each case maturing within six
months after the date of acquisition, (iv) marketable direct obligations issued
by any state of the United States of America or any political subdivision of
any such state or any public instrumentality thereof maturing within six months
from the date of acquisition thereof and, at the time of acquisition, having
one of the two highest ratings obtainable from either S&P or Moody's and (v)
investments in money market funds substantially all the assets of which are
comprised of securities of the types described in clauses (i) through (iv)
above.
"Cash Proceeds" shall mean, with respect to any Asset Sale, the
aggregate cash payments (including any cash received by way of deferred
payment, pursuant to a note, receivable or otherwise, in connection with such
Asset Sale, but only as and when so received) received by the Company or any of
its Subsidiaries or Joint Ventures from such Asset Sale.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time
to time, 42 U.S.C. Sec. 9601 et seq.
"Change of Control" shall mean (i) the direct or indirect acquisition
by any Person or a group (as such term is defined in Section 13(d)(3) of the
Securities Exchange Act), other than (x) HFS and its Subsidiaries and/or (y)
Chartwell and/or (z) FSNL (collectively, the "Designated Persons"), of
beneficial ownership (as such term is defined in Rule 13D-3 promulgated under
the Securities Exchange Act), of more of the outstanding shares of common stock
of the Company (on a fully diluted basis) than is collectively beneficially
owned by the Designated Persons or (ii) the Board of Directors of the Company
shall not consist of a majority of Continuing Directors or (iii) prior to the
date of the first widely distributed primary public offering by the Company of
its nonredeemable common stock after the Initial Borrowing Date (the "Public
Offering Date"), the Designated Persons collectively shall fail to have
beneficial ownership of shares representing at least a majority of the
aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Company or (iv) after the Public Offering Date, the
Designated Persons collectively shall fail to have beneficial ownership of
shares representing at least 25% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of the Company or (v)
Chartwell or FSNL shall sell or dispose of any common stock of the Company or
convert any common stock of the Company into any other class of Capital Stock.
For purposes of this definition of "Change of
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Control", shares of common stock of the Company shall be deemed to be
beneficially owned by Chartwell and/or FSNL only if Chartwell effectively has
sole voting control of such shares (or FSNL is required to vote its shares in
the same way that Chartwell votes its shares).
"Chartwell" shall mean Chartwell Leisure Associates, L.P., any other
partnership controlled by one or more of the existing partners of Chartwell
Leisure Associates, L.P. on the Initial Borrowing Date, Chartwell Leisure
Associates L.P. II or any Affiliate thereof or other investors therein in each
case reasonably acceptable to the Administrative Agent.
"Chartwell Preferred Stock" shall mean the class of the Company's
preferred stock issued to Chartwell satisfying the applicable requirements of
Section 10.04(ix) and containing such other terms as are reasonably acceptable
to the Administrative Agent.
"Chartwell Preferred Stock/Subordinated Debt" shall mean, as the
context may require, the Chartwell Preferred Stock and/or the Chartwell
Subordinated Debt.
"Chartwell Stock Purchase Agreement" shall mean the Amended and
Restated Stock Purchase Agreement dated as of March 14, 1996 among the Company
and the purchasers named therein.
"Chartwell Subordinated Debt" shall mean the subordinated debt of the
Company issued upon conversion of any outstanding shares of Chartwell Preferred
Stock in accordance with the terms thereof, it being understood and agreed,
however, that (i) the Chartwell Preferred Stock may not be so converted (and
shall expressly provide that no such conversion shall be effective) without the
prior written consent of the Required Banks (which consent may be granted or
withheld by the Banks in their sole discretion), (ii) the Chartwell
Subordinated Debt shall satisfy the applicable requirements of Section
10.04(ix) and (iii) all terms and conditions of the Chartwell Subordinated Debt
shall be required to be satisfactory in form and substance to the Required
Banks.
"Chase" shall mean The Chase Manhattan Bank in its individual
capacity.
"Claims" shall have the meaning provided in the definition of
"Environmental Claims."
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and ruling issued thereunder.
Section references to the Code are to the Code, as in effect at the date of
this Agreement, and to any
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subsequent provisions of the Code, amendatory thereof, supplemental thereto or
substituted therefor.
"Collateral" shall mean all property (whether real or personal) with
respect to which any security interests have been granted (or purported to be
granted) pursuant to the Pledge Agreement or the Security Agreement.
"Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Secured Creditors pursuant to the Pledge Agreement.
"Commitment Commission" shall have the meaning provided in Section
3.01(a).
"Commitments" shall mean the collective reference to the Revolving
Loan Commitments, the Revolving C$ Loan Commitments and the Swingline
Commitment.
"Company" shall have the meaning provided in the first paragraph of
this Agreement.
"Company Guaranty" shall have the meaning specified in Section 5.08.
"Consolidated Company Net Income" shall mean, for any period, the net
income (or loss) of the Company and its Subsidiaries for such period,
determined on a consolidated basis; provided that (i) the net income (if
positive) for such period of any other Person which is not a Wholly-Owned
Subsidiary of the Company or is accounted for by the Company by the equity
method of accounting shall be included only to the extent of the amount of
dividends or distributions actually paid by such Person during such period to
the Company or a Wholly-Owned Subsidiary of the Company (provided that any such
payments made in January 1997 shall, for purposes of this Agreement, be treated
as though made in December 1996), (ii) the net income (or loss) of any other
Person acquired by the Company or a Subsidiary of the Company in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, (iii) Consolidated Net Income shall, without duplication, be
reduced by the aggregate amount of fees and payments by the Company or its
Subsidiaries pursuant to Section 10.06(iii), (v), (vii), (ix), (x) and (xi),
but shall not be reduced by any other fees paid by the Company and its
Subsidiaries to HFS as otherwise permitted by this Agreement and (iv) the net
income of each Unrestricted Subsidiary shall be wholly excluded.
"Consolidated Current Assets" shall mean, at any time, the amounts
that would be classified as consolidated current assets of the Company and its
Subsidiaries in accordance with
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generally accepted accounting principles in a consolidated balance sheet.
"Consolidated Current Liabilities" shall mean, at any time, the
amounts that would be classified as consolidated current liabilities of the
Company and its Subsidiaries at such time in accordance with generally accepted
accounting principles in a consolidated balance sheet, but excluding the
current portion of any Indebtedness under this Agreement and the current
portion of any other long-term Indebtedness which would otherwise be included
therein.
"Consolidated Current Ratio" at any date shall mean the ratio of
Consolidated Current Assets to Consolidated Current Liabilities of such date,
provided, however, any non-cash write- offs with respect to, and any losses
from the disposition of, the Gaming Assets shall be excluded in determining the
Consolidated Current Ratio.
"Consolidated Debt" shall mean, at any time, all Indebtedness of the
Company and its Wholly-Owned Subsidiaries plus, without duplication, the
Company's Allocable Share of any Indebtedness of a Joint Venture, in either
case as would be required to be reflected on the liability side of a balance
sheet as prepared in accordance with generally accepted accounting principles
and as determined on a consolidated basis, but including, in any event, (w) the
Guaranty Inclusion Amount, (x) all Loans and Letters of Credit, (y) the
aggregate amount of Indebtedness then outstanding as evidenced by Redeemable
Capital Stock (including any such Redeemable Capital Stock issued in accordance
with Section 10.04(viii)) and (z) the amount of outstanding HFS Subordinated
Indebtedness and Permitted Subordinated Indebtedness, if any, provided that,
notwithstanding the foregoing, the term Consolidated Debt shall exclude all
outstanding Chartwell Preferred Stock/Subordinated Debt and up to $2,000,000
per year of the Company's guaranty obligations in respect of the Las Vegas
Lease permitted by Section 10.04(xv).
"Consolidated EBITDA" shall mean, for any Person and period, (A) the
sum of the amounts for such Person and period of (i) Consolidated Net Income,
(ii) consolidated interest expense of such Person for such period, to the
extent same reduced Consolidated Net Income for such period, (iii) provisions
for taxes based on income, to the extent same reduced Consolidated Net Income
for such period, (iv) depreciation expense, to the extent same reduced
Consolidated Net Income for such period, (v) amortization expense, to the
extent same reduced Consolidated Net Income for such period, (vi) any other
non-cash items reducing the Consolidated Net Income of such Person for such
period, and (vii) any cash receipts of such Person or a Wholly-Owned Subsidiary
of such Person during such period that represent items
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included in Consolidated Net Income of such Person for a prior period which
were excluded from Consolidated EBITDA of such Person for such prior period by
virtue of clause (B)(i) of this definition, minus (B) the sum of (i) all
non-cash items increasing the Consolidated Net Income of such Person for such
period and (ii) any cash expenditures of such Person during such period to the
extent such cash expenditures (x) did not reduce the Consolidated Net Income of
such Person for such period and (y) were applied against reserves that
constituted non-cash items which reduced the Consolidated Net Income of such
Person during prior periods, all as determined on a consolidated basis for such
Person and its Subsidiaries in accordance with GAAP, provided, however, any
non-cash write-offs with respect to, and any losses from the disposition of,
the Gaming Assets shall be excluded in determining Consolidated EBITDA.
"Consolidated Interest Coverage Ratio" shall mean, for any period,
the ratio of (x) Adjusted Consolidated EBITDA of the Company for such period to
(y) Consolidated Interest Expense of the Company for such period, provided,
however that (i) for the purposes of calculating the Consolidated Interest
Coverage Ratio for the Test Period ending on (a) March 31, 1997, Adjusted
Consolidated EBITDA of the Company shall be the Adjusted Consolidated EBITDA of
the Company for such Test Period divided by 85% and (b) June 30, 1997, Adjusted
Consolidated EBITDA of the Company shall be the Adjusted Consolidated EBITDA of
the Company for such Test Period divided by 95% and (ii) any non-cash write-
offs with respect to, and any losses from the disposition of, the Gaming Assets
shall be excluded in determining the Consolidated Interest Coverage Ratio.
"Consolidated Interest Expense" shall mean, for any Person and
period, the total consolidated interest expense of such Person and its
Wholly-Owned Subsidiaries and the Allocable Share of the interest expense of
such Person's non-Wholly-Owned Subsidiaries and Joint Ventures for such period
(calculated without regard to any limitations on the payment thereof) plus,
without duplication, that portion of Capitalized Lease Obligations of such
Person and its Wholly-Owned Subsidiaries representing the interest factor for
such period and the Allocable Share of that portion of Capitalized Lease
Obligations of such Person's non-Wholly-Owned Subsidiaries and Joint Ventures
representing the interest factor for such period, but excluding the
amortization of any deferred financing costs incurred in connection with this
Agreement, less interest income of such Person and its Wholly-Owned
Subsidiaries and the Allocable Share of the interest income of such Person's
non-Wholly-Owned Subsidiaries and Joint Ventures for such period.
Notwithstanding anything to the contrary contained elsewhere in this Agreement
or the requirements of generally accepted accounting principles, in calculating
Consolidated Interest Expense of the Company, (v) the
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amount of Capitalized Interest incurred during any period shall be added as a
component of Consolidated Interest Expense, (w) the amount of the Guaranty Fee
paid or accrued during any period shall be added as a component of Consolidated
Interest Expense, (x) accrued dividends on any Redeemable Capital Stock
(excluding accrued dividends on the Chartwell Preferred Stock) shall be added
as a component of Consolidated Interest Expense, and (y) the interest expense
on the Chartwell Subordinated Debt shall be excluded.
"Consolidated Net Income" shall mean, for any Person and period, the
net income (or loss) of such Person and its Subsidiaries for such period,
determined on a consolidated basis; provided that (i) in determining
Consolidated Net Income of the Company, the net income of any other Person
which is not a Wholly-Owned Subsidiary of the Person or is accounted for by
such specified Person by the equity method of accounting shall be included only
to the extent of the Company's direct or indirect equity interests in such net
income (taking the Company's direct or indirect distributable share thereof),
in each case reduced to the extent that the declaration or payment of dividends
or distributions by such other Person during such period is not at the time
permitted by operation of the terms of its charter or any other agreement or
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such other Person or requires the consent of any other Person
other than the specified Person as a Wholly-Owned Subsidiary thereof, (ii) the
net income (or loss) of any other Person acquired by such specified Person or a
Subsidiary of such Person in a pooling of interests transaction for any period
prior to the date of such acquisition shall be excluded, (iii) Consolidated Net
Income of the Company shall, without duplication, be reduced by the aggregate
amount of fees and payments by the Company or its Subsidiaries pursuant to
Sections 10.06(iii), (v), (vii), (ix), (x) and (xi), but shall not be reduced
by any other fees paid by the Company and its Subsidiaries to HFS as otherwise
permitted by this Agreement and (iv) in determining Consolidated Net Income of
the Company. the net income of each Unrestricted Subsidiary shall be wholly
excluded.
"Consolidated Net Worth" shall mean, at any time, all items which
would be included under shareholders' equity on a consolidated balance sheet of
the Company in accordance with generally accepted accounting principles,
provided, however, any non-cash write-offs with respect to the Gaming Assets
shall be excluded in determining Consolidated Net Worth.
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person as a result of such Person being a general partner of the other
Person, unless the underlying obligation is expressly made non-recourse as to
such general
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partner, and any obligation of such Person guaranteeing or intended to
guarantee any Indebtedness, leases, dividends or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, any obligation
of such Person, whether or not contingent, (i) to purchase any such primary
obligation or any property constituting direct or indirect security therefor,
(ii) to advance or supply funds (x) for the purchase or payment of any such
primary obligation or (y) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the holder of such primary obligation
against loss in respect thereof; provided, however, that the term Contingent
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) as determined by such Person in good faith.
"Continuing Directors" shall mean the directors of the Company on the
Effective Date and each other director, if such other director's nomination for
election to the Board of Directors of the Company is recommended by a majority
of the then Continuing Directors or is recommended by a committee of the Board
of Directors a majority of which is composed of the then Continuing Directors.
"Corporate Services Agreement" shall mean the Amended and Restated
Corporate Services Agreement, dated as of January 24, 1996, between the Company
and HFS.
"Corporate Services Fee" shall mean an annual fee equal to $1,500,000
which Corporate Services Fee shall be payable on a quarterly basis in advance
of the services to be performed.
"CPLP" shall mean Capital Partners Limited Partnership, a limited
partnership formed under the laws of the Province of Ontario.
"Credit Documents" shall mean this Agreement and, after the execution
and delivery thereof pursuant to the terms of this Agreement, each Note, the
Pledge Agreement, the Security Agreement, each Guaranty and the HFS
Subordination Agreement.
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"Credit Event" shall mean the making of any Loan or the issuance of
any Letter of Credit.
"Credit Party" shall mean HFS, the Borrowers, and each Subsidiary
Guarantor.
"Cumulative Retained Residual Excess Cash Flow Amount" shall
initially be $0, provided that the Cumulative Retained Residual Excess Cash
Flow Amount shall be (i) increased on each April 15, commencing April 15, 1998,
by an amount equal to 50% of the Residual Excess Cash Flow for the immediately
preceding fiscal year (or if Residual Excess Cash Flow is a negative amount for
such fiscal year, the Cumulative Retained Residual Excess Cash Flow Amount
shall be reduced by 100% of such amount) and (ii) reduced, on each date upon
which (x) any Restricted Payment is made pursuant to Section 10.03(vi), by the
amount of such Restricted Payment and (y) any Capital Expenditures are made
pursuant to Section 10.07(c), by the amount of such Capital Expenditure.
"Cumulative Unrestricted Subsidiary Dividend Amount" shall mean, at
any time, the aggregate amount of cash dividends or distributions received by
the Company or a Wholly-Owned Subsidiary thereof from all Unrestricted
Subsidiaries (other than any such dividends or distributions the proceeds of
which are to pay any such Unrestricted Subsidiary's portion of any taxes
payable by the Company or a Wholly-Owned Subsidiary thereof), with the
Cumulative Unrestricted Subsidiary Dividend Amount to be reduced on each date
on which, and in the amount by which, the Company makes a Restricted Payment
pursuant to Section 10.03(vii).
"Currency" shall mean the collective reference to Dollars and
Canadian Dollars.
"Current Consolidated Tax Rate" means, with respect to any Person for
any period, the combined highest marginal U.S. federal, state and local income
tax rate (calculated by (i) taking into account the deductibility of state and
local income taxes for U.S. federal income tax purposes and (ii) using the
highest marginal state income tax rate imposed by any state in which the
Company is doing business) during such period on any incremental ordinary
income (i.e., income in excess of the income generated by such Person during
the respective period) of such Person.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
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"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Dividends" with respect to any Person shall mean that such Person
has declared or paid a dividend or returned any equity capital to its
stockholders or partners or authorized or made any other distribution, payment
or delivery of property (other than common stock of such Person) or cash to its
stockholders or partners as such, or redeemed, retired, purchased or otherwise
acquired, directly or indirectly, for a consideration any shares of any class
of its capital stock or any partnership interests outstanding on or after the
Effective Date (or any options or warrants issued by such Person with respect
to its capital stock), or set aside any funds for any of the foregoing
purposes, or shall have permitted any of its Subsidiaries to purchase or
otherwise acquire for a consideration any shares of any class of the capital
stock or any partnership interests of such Person outstanding on or after the
Effective Date (or any options or warrants issued by such Person with respect
to its capital stock). Without limiting the foregoing, "Dividends" with respect
to any Person shall also include all payments made or required to be made by
such Person with respect to any stock appreciation rights, plans, equity
incentive or achievement plans or any similar plans or setting aside of any
funds for the foregoing purposes, in each case except to the extent the
payments described in this sentence are booked as an expense which reduces
Consolidated Net Income.
"Documents" shall mean the Credit Documents, the Canadian Acquisition
Documents and the Recapitalization Documents.
"$ Base Rate Loan" shall mean each Loan designated or deemed
designated as such by the Company at the time of the incurrence thereof or
conversion thereto, including each Swingline Loan.
"Dollar Equivalent Amount" shall mean with respect to (i) any amount
of Canadian Dollars on any date, the equivalent amount in Dollars of such
amount of Canadian Dollars, as determined by the Administrative Agent using the
Exchange Rate and (ii) any amount in Dollars, such amount.
"$ Eurodollar Loans" shall mean Eurodollar Loans denominated in
Dollars.
"Dollars" and the sign "$" shall each mean freely transferable lawful
money of the United States.
"Drawing" shall have the meaning provided in Section 2.05.
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"Effective Date" shall have the meaning provided in Section 14.10.
"Eligible Transferee" shall mean, with respect to any Bank party to
this Agreement on the date hereof or that becomes a Bank pursuant to Sections
1.13 or 14.04, a commercial bank, financial institution or other "accredited
investor" as defined in Regulation D of the Securities Act.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations, orders or proceedings
relating in any way to any Environmental Law (hereafter "Claims") or any permit
issued under any such law, including, without limitation, (a) any and all
Claims by governmental or regulatory authorities for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and (b) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Law" shall mean any applicable Federal, state, foreign
or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy and rule of
common law now or hereafter in effect and in each case as amended, and any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgement relating to the environment,
employee health and safety or Hazardous Materials, including, without
limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C.
Sec. 2601 et seq., the Clean Air Act, 42 U.S.C. Sec. 7401 et seq.; the Safe
Drinking Water Act, 42 U.S.C. Sec. 3803 et seq.; the Oil Pollution Act of 1990,
33 U.S.C. Sec. 2701 et seq., the Emergency Planning and the Community
Right-to-Know Act of 1986, 42 U.S.C. Sec. 11001 et seq., the Hazardous Material
Transportation Act, 49 U.S.C. Sec. 1801 et seq. and the Occupational Safety and
Health Act, 29 U.S.C. Sec. 651 et seq. (to the extent it regulates occupational
exposure to Hazardous Materials); and any state and local or foreign
counterparts or equivalents, in each case as amended from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at
the date of this Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
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"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with the Company or Subsidiary of the Company or HFS
would be deemed to be a "single employer" (i) within the meaning of Section
414(b),(c), (m) or (o) of the Code or (ii) as a result of the Company, or a
Subsidiary of the Company or HFS being or having been a general partner of such
person.
"Eurodollar Loan" shall mean each Revolving Loan designated as such
by the applicable Borrower at the time of the incurrence thereof or conversion
thereto.
"Eurodollar Rate" shall mean, with respect to any Currency (a) the
offered quotation to first-class banks in the New York interbank Eurodollar
market by Chase for deposits of amounts of such Currency in immediately
available funds comparable to the outstanding principal amount of the
Eurodollar Loan of Chase with maturities comparable to the Interest Period
applicable to such Eurodollar Loan commencing two Business Days thereafter as
of 10:00 A.M. (New York time) on the date which is two Business Days prior to
the commencement of such Interest Period, divided (and rounded off to the
nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%, to the next highest
1/16 of 1%) by (b) a percentage equal to 100% minus the then stated maximum
rate of all reserve requirements (including, without limitation, any marginal,
emergency, supplemental, special or other reserves required by applicable law)
applicable to any member bank of the Federal Reserve System in respect of
Eurocurrency funding or liabilities as defined in Regulation D (or any
successor category of liabilities under Regulation D); provided, in the event
that the Administrative Agent has made any determination pursuant to Section
1.10(a)(i) in respect of Revolving C$ Loans, the Eurodollar Rate for Revolving
C$ Loans determined pursuant to clause (a) of this definition shall instead be
the rate determined by Chase as the all-in cost of funds for Chase to fund such
Revolving C$ Loan with maturities comparable to the Interest Period applicable
thereto.
"Event of Default" shall have the meaning provided in Section 11.
"Excess Cash Flow" shall mean, for any period, the remainder of (a)
the sum of (i) Adjusted Consolidated EBITDA of the Borrower for such period and
(ii) the decrease, if any, in Adjusted Consolidated Working Capital from the
first day to the last day of such period, minus (b) the sum of (i) the amount
of Capital Expenditures made by the Borrower and its Wholly-Owned Subsidiaries
during such period plus, without duplication, the Borrower's Allocable Share of
Capital Expenditures made by Joint Ventures during such period (but excluding
Capital Expenditures (x) financed with the proceeds of Indebtedness or equity
or with
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the proceeds of Asset Sales or (y) made pursuant to the last sentence of
Section 10.07(a) or pursuant to Section 10.07(b) or (c)), (ii) the aggregate
amount of permanent principal payments of Indebtedness for borrowed money of
the Borrower and its Wholly-Owned Subsidiaries (but excluding payments pursuant
to the Refinancing and repayments of Loans, provided that repayments of Loans
shall be deducted in determining Excess Cash Flow if such repayments were (A)
required as a result of a Scheduled Commitment Reduction under Section 3.03(b)
(but not as a reduction to the amount of Scheduled Commitment Reductions
pursuant to another provision of this Agreement) or (B) made as a voluntary
prepayment pursuant to Section 4.01(a) with internally generated funds during
such period (but only to the extent accompanied by a voluntary reduction to the
Total Revolving Loan Commitment pursuant to Section 3.02(a)), (iii) the amount
of Consolidated Interest Expense (excluding payments of dividends in respect of
Redeemable Capital Stock) actually paid in cash during such period, (iv) the
amount of cash taxes actually paid during such period (excluding cash taxes
which must be paid, or reimbursed to the Borrower or its Wholly-Owned
Subsidiaries, by one or more Unrestricted Subsidiaries, whether pursuant to the
Unrestricted Subsidiary Tax Sharing Agreements or otherwise) and (v) the
increase, if any, in Adjusted Consolidated Working Capital from the first day
to the last day of such period (excluding any increase attributable to the
receipt of proceeds of Capital Stock).
"Excess Termination Fees" shall mean, with respect to any HFS
Franchise Agreement entered into in connection with any Hotel Property existing
on the Initial Borrowing Date, any Termination Fee payable pursuant to such HFS
Franchise Agreement in excess of 2% of the total gross revenues for the
respective Hotel Property for the immediately preceding twelve month period in
respect of which such Termination Fee is paid. It is acknowledged and agreed
that Excess Termination Fees shall not be payable in connection with Hotel
Properties acquired after the Initial Borrowing Date, unless expressly
consented to by the Required Banks.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended and the rules and regulations promulgated thereunder.
"Exchange Rate" shall mean, with respect to Canadian Dollars on any
date, the rate at which such Canadian Dollars may be exchanged into Dollars, as
set forth on such date on the relevant Reuters currency page at or about 11:00
A.M. New York City time on such date. In the event that such rate does not
appear on any Reuters currency page, the "Exchange Rate" with respect to such
Canadian Dollars shall be determined by reference to such other publicly
available service for displaying exchange
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rates as may be agreed upon by the Administrative Agent and the Company or, in
the absence of such agreement, such "Exchange Rate" shall instead be the
Administrative Agent's spot rate of exchange in the interbank market where its
foreign currency exchange operations in respect of such Foreign Currency are
then being conducted, at or about 10:00 A.M., local time, at such date for the
purchase of Dollars with such Canadian Dollars, for delivery two Business Days
later; provided that if at the time of any such determination, no such spot
rate can reasonably be quoted, the Administrative Agent may use any reasonable
method as it deems applicable to determine such rate, and such determination
shall be conclusive absent manifest error (without prejudice to the
determination of the reasonableness of such method).
"Existing Indebtedness" shall have the meaning provided in Section
8.22.
"Existing Investment Agreements" shall mean all agreements
evidencing, or relating to, any Existing Investments (including all Joint
Ventures).
"Existing Investments" shall have the meaning provided in Section
10.05(vii).
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day on
such transactions received by the Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to or referred to in
Section 3.01.
"FHI" shall mean Forte Hotels, Inc., a Delaware corporation, which
has changed its name to NL Hotels, Inc.
"Final Maturity Date" shall mean August 28, 2002.
"Financing Agreement" shall mean the Amended and Restated Financing
Agreement, dated as of July 24, 1996, between the Company and HFS.
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"Foreign Pension Plan" means any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by the Company or any one or
more of its Subsidiaries primarily for the benefit of employees of the Company
or such Subsidiaries residing outside the United States of America, which plan,
fund or other similar program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the Code.
"Franchise Agreement" shall mean (i) with respect to any Hotel
Property in which HFS is the franchisor, an HFS Franchise Agreement and (ii)
with respect to any other Hotel Property, a franchise agreement that the
respective franchisor customarily uses with respect to similarly situated
franchises.
"FSNL" shall mean FSNL LLC, a Connecticut limited liability company.
"Gaming Assets" shall mean the gambling, casino, riverboat and other
gaming assets of the Company and its Subsidiaries owned on the Initial
Borrowing Date.
"Guarantor" shall mean HFS, the Company and each Subsidiary
Guarantor.
"Guarantor Event of Default" shall have the meaning provided in the
HFS Guaranty.
"Guaranty" shall mean the HFS Guaranty and the Subsidiaries Guaranty.
"Guaranty Amount" shall mean the amount of the HFS Guaranty then in
effect.
"Guaranty Fee" shall have the meaning provided in Section 10.06(ix).
"Guaranty Inclusion Amount" at any date shall mean the product of (i)
.5 and (ii) the aggregate amount of all obligations supported by guarantees
made by the Company pursuant to clause (xi) of Section 10.04.
"Hazardous Materials" shall mean (a) oil as defined by the Oil
Pollution Act of 1990, 33 U.S.C. Sec. 2701 et seq., (b) any petrochemical or
petroleum products, radioactive materials, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls, and radon gas; and (b) any chemicals,
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materials or substances defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "restricted hazardous
materials," "extremely hazardous wastes," "restrictive hazardous wastes,"
"toxic substances," "toxic pollutants," "contaminants" or "pollutants," or
words of similar meaning and regulatory effect under any applicable
Environmental Law.
"HFS" shall mean HFS Incorporated, a Delaware corporation.
"HFS Agreements" shall mean the Financing Agreement, the Corporate
Services Agreement and all HFS Franchise Agreements, as well as any other
agreements of the Borrower and any of its Subsidiaries with HFS or any of its
Subsidiaries.
"HFS Franchise Agreement" shall mean a Travelodge license agreement
in the form of Exhibit L-1 or such other form of Travelodge license agreement
which at the time is in substantially the same form as is then being offered by
HFS or a Subsidiary thereof in the then current form of Uniform Franchise
Offering Circular for Travelodge license agreements, or a Ramada Plaza license
agreement in the form of Exhibit L-2, or a license agreement for any HFS
affiliated hotel or motel franchise system substantially in the form then being
offered to prospective licensees in the then current Uniform Franchise Offering
Circular for the applicable HFS affiliated franchise system.
"HFS Guaranty" shall have the meaning provided in Section 5.08.
"HFS Master License Agreement" shall mean the License Agreement,
dated as of January 23, 1996, between Bear Acquisition Corp. (which is a
Subsidiary of HFS) and FHI.
"HFS Subordinated Indebtedness" shall have the meaning provided in
Section 10.04.
"HFS Subordinated Note" shall have the meaning provided in Section
10.04.
"HFS Subordination Agreement" shall have the meaning provided in
Section 5.16.
"Hotel Property" shall mean each hotel or motel owned or leased by
the Company or any of its Subsidiaries or Joint Ventures (including the
furniture, fixtures and equipment thereon).
"Indebtedness" shall mean, as to any Person, without duplication, (i)
all indebtedness (including principal, interest,
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fees and charges) of such Person for borrowed money or for the deferred
purchase price of property or services (but excluding accrued expenses and
current trade accounts payable incurred in the ordinary course of business),
(ii) the maximum amount available to be drawn under all letters of credit
issued for the account of such Person and all unpaid drawings in respect of
such letters of credit, (iii) all Indebtedness of the types described in clause
(i), (ii), (iv), (v), (vi), (vii) or (viii) of this definition secured by any
Lien on any property owned by such Person, whether or not such Indebtedness has
been assumed by such Person, (iv) the aggregate amount required to be
capitalized under leases under which such Person is the lessee, (v) all
obligations of such person to pay a specified purchase price for goods or
services, whether or not delivered or accepted, i.e., take-or-pay and similar
obligations, (vi) all Contingent Obligations of such Person, (vii) all
obligations under any Interest Protection Agreement or Other Hedging Agreement
or under any similar type of agreement or arrangement and (viii) all Redeemable
Capital Stock and, without duplication, any Chartwell Preferred Stock of such
Person valued at the greater of its voluntary or involuntary maximum fixed
repurchase price plus accrued and unpaid dividends. For purposes hereof, the
"maximum fixed repurchase price" of any Redeemable Capital Stock which does not
have a fixed repurchase price shall be calculated in accordance with the terms
of such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to this Agreement and, if such price is based upon, or measured by,
the fair market value of such Redeemable Capital Stock, such fair market value
shall be determined in good faith by the board of directors of the Company.
Notwithstanding and without duplication of the foregoing, Indebtedness shall
include the Guaranty Inclusion Amount from time to time.
"Information Package" shall mean, with respect to each Hotel
Property, in an information package consisting of (i) a description of the
respective Hotel Property, (ii) management's discussion and analysis of the
respective Hotel Property and discussing any improvements or changes to be made
with respect thereto, (iii) historical financial statements (which may be
unaudited) for the respective Hotel Property for at least the two full fiscal
years most recently ended and the latest 12-month period ended with the last
day of the fiscal quarter last ended, (iv) projections for the respective Hotel
Property for the four years after the respective acquisition and (v) any other
information which the Company determines should be furnished so that the
Information Package for the respective Hotel Property is true and correct in
all material respects and is not incomplete by omitting to state any fact
necessary to make the information (taken as a whole) contained therein not
misleading in any material respect, which Information Package shall include an
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officer's certificate of the Company certifying (i) the cost to acquire the
respective Hotel Property, (ii) the purchase of related working capital in
connection with the acquisition of such Hotel Property, (iii) the amount
expected to be used to pay fees and expenses in connection with the acquisition
of the respective Hotel Property, and (iv) the amount anticipated to be spent
within one year after the date of the acquisition of the respective Hotel
Property to pay preopening costs and to make improvements of the respective
Hotel Property so acquired.
"Initial Borrowing Date" shall mean the date occurring on or after
the Effective Date on which the initial Borrowing of Revolving Loans hereunder
occurs.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Expense" shall mean, with respect to any Joint Venture, the
total interest expense of such Joint Venture for such period, adjusted by (x)
excluding any interest expense owing to the Company or one or more of its
Wholly-Owned Subsidiaries and (y) including as interest expense any accrued
dividends payable on any Redeemable Capital Stock of such Joint Venture.
"Interest Period" shall have the meaning provided in Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedging agreement, interest rate floor agreement or other similar
agreement or arrangement.
"Investment" shall have the meaning provided in Section 10.05.
"Investment Commitment" shall have the meaning provided in Section
10.05.
"Issuing Bank" shall mean Chase or any of its Affiliates or BNS or
any of its Affiliates, in its capacity as issuer of a Letter of Credit.
"Joint Venture" shall mean any Person (other than an Unrestricted
Subsidiary) in which the Company or any Subsidiary of the Company owns,
directly or indirectly (except through one or more Unrestricted Subsidiaries),
more than 5% but less than
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100% of the voting or equity interests or in which the Company or a Subsidiary
of the Company has general partnership liability.
"Joint Venture Agreement" shall mean each partnership agreement,
other organizational agreement or agreement governing the management or
ownership of a Joint Venture.
"Las Vegas Lease" shall have the meaning provided in Section
10.04(xv).
"L/C Supportable Indebtedness" shall mean obligations of the Company
or any of its Subsidiaries or Joint Ventures incurred in the ordinary course of
business permitted to exist pursuant to this Agreement, including obligations
under the Bank of America Facility.
"Leaseholds" of any Person means all the right, title and interest of
such Person as lessee or licensee in, to and under leases or licenses of land,
improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Outstandings" shall mean, at any time, the sum of
(i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii)
the amount of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning provided in Section
2.03(a).
"Licensing Fee" shall mean the licensing fees paid pursuant to the
HFS Master License Agreement, which Licensing Fee is generally based on up to
4.5% of revenues of the respective Hotel Property.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other) or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
"Loans" shall mean the Revolving Loans and the Swingline Loans.
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"Management Agreements" shall mean all agreements with members of, or
with respect to, the management of the Borrower or any of its Subsidiaries, any
of the Joint Ventures or any Hotel Properties.
"Mandatory Borrowing" shall have the meaning specified in Section
1.01(b).
"Marketing and Reservation Fee" shall mean the separate fee or
payment to cover the marketing and reservation services referred to in the
respective HFS Franchise Agreement, which Marketing and Reservation Fee is
generally based on up to 4.5% of revenues of the respective Hotel Property.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Joint Venture" shall mean (i) any Non- Subsidiary Joint
Venture that at any time of determination has contributed in excess of $150,000
to the Company's Consolidated EBITDA for the Test Period then most recently
ended and (ii) each other Non-Subsidiary Joint Venture designated by the
Company in writing to the Administrative Agent as a Material Joint Venture,
provided that in any event at all time at least the 25 Non-Subsidiary Joint
Ventures which had the largest contribution to the Company's Consolidated
EBITDA for the Test Period then most recently ended shall be deemed to be
Material Joint Ventures provided further that, in addition, (a) each Joint
Venture which has obligations which are recourse to the Company or any of its
Subsidiaries or other Joint Ventures shall be a Material Joint Venture and (b)
each Joint Venture which is or becomes a Material Joint Venture shall continue
to be a Material Joint Venture notwithstanding that it no longer satisfies the
tests specified above.
"Maximum Guaranteed Amount" shall have the meaning provided in the
HFS Guaranty.
"Mexican Investment" shall mean the investment by the Company and its
Subsidiaries of up to $10,000,000 in the aggregate to form a joint venture for
the purpose of developing and operating, or franchising others to operate,
lodging facilities in Mexico under the "Travelodge" and "Thriftlodge"
tradenames, as described in the Memorandum of Understanding with Grupo Piasa, a
Mexican hotel company, as in effect on the date hereof, provided that there
shall be no partner, member or investor in such joint venture other than those
that exist on the date hereof.
"Minimum Facing Fee" shall have the meaning provided in Section
3.01(c).
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"Moody's" shall mean Moody's Investors Service, Inc.
"Net Cash Proceeds" shall mean, with (i) respect to any Asset Sale,
the Cash Proceeds resulting therefrom net of (x) cash expenses of sale
(including, without limitation, brokerage and attorneys' fees, if any, and
payment of principal, premium and interest of Indebtedness other than the Loans
required to be repaid as a result of such Asset Sale) and (y) incremental taxes
paid or payable as a result thereof and (ii) with respect to any issuance of
debt or equity, the Cash Proceeds (including any cash received by way of
deferred payment pursuant to a promissory note, receivable or otherwise, but
only as and when received) received from such event, net of transaction costs
(including, as applicable, any underwriting, brokerage or other customary
commissions and reasonable legal and other fees and expenses associated
therewith) incurred in connection therewith.
"Non-Defaulting Bank" shall mean and include each Bank other than a
Defaulting Bank.
"Non-Subsidiary Joint Venture" shall mean any Joint Venture of the
Company that is not also a Subsidiary of the Company.
"Notes" shall mean the Revolving Notes and the Swingline Notes.
"Notice of Borrowing" shall have the meaning provided in Section
1.03.
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Administrative Agent
located at 140 East 45th Street, 29th Floor, New York, New York 10017,
Attention: Sandra Miklave, or such other office as the Administrative Agent may
hereafter designate in writing as such to the other parties hereto.
"Obligations" shall mean all amounts owing to the Administrative
Agent, the Collateral Agent or any Bank pursuant to the terms of this Agreement
or any other Credit Document.
"Other Hedging Agreements" shall mean any foreign exchange contracts,
currency swap agreements, commodity agreements or other similar agreements or
arrangements designed to protect against the fluctuations in currency values.
"Participant" shall have the meaning provided in Section 2.04.
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"Payment Office" shall mean the office of the Administrative Agent
located at 270 Park Avenue, New York, New York 10017, or such other office as
the Administrative Agent may hereafter designate in writing as such to the
other parties hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" of any Bank at any time shall mean a fraction (expressed
as a percentage) the numerator of which is the Revolving Loan Commitment of
such Bank at such time and the denominator of which is the Total Revolving Loan
Commitment at such time, provided that if the Percentage of any Bank is to be
determined after the Total Revolving Loan Commitment has been terminated, then
the Percentages of the Banks shall be determined immediately prior (and without
giving effect) to such termination.
"Permitted Hotel Acquisition" shall mean an acquisition of a Hotel
Property (or the equity interest of the Person owning such Hotel Property)
pursuant to Sections 10.02(ix) and/or 10.05(viii).
"Permitted Liens" shall have the meaning provided in Section 10.01.
"Permitted Subordinated Indebtedness" shall mean Indebtedness of the
Company permitted under clause (x) of Section 10.04.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any multiemployer or single-employer plan as
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute of), the Company or a Subsidiary
of the Company or an ERISA Affiliate, and each such plan for the five-year
period immediately following the latest date on which, the Company or a
Subsidiary of the Company or an ERISA Affiliate maintained, contributed to or
had an obligation to contribute to such plan.
"Pledge Agreement" shall have the meaning provided in Section 6.09.
"Pledged Securities" shall have the meaning provided in the Pledge
Agreement.
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"Pledgee" shall have the meaning provided in the Pledge Agreement.
"Prime Lending Rate" shall mean the rate which Chase announces from
time to time as its prime lending rate, the Prime Lending Rate to change when
and as such prime lending rate changes. The Prime Lending Rate is a reference
rate and does not necessarily represent the lowest or best rate actually
charged to any customer. Chase may make commercial loans or other loans at
rates of interest at, above or below the Prime Lending Rate.
"Pro Forma Basis" shall mean, with respect to any Permitted Hotel
Acquisition or the incurrence of any Permitted Subordinated Indebtedness, the
calculation of the consolidated results of the Company and its Subsidiaries
otherwise determined in accordance with this Agreement as if the respective
Permitted Hotel Acquisition or Permitted Subordinated Indebtedness (and all
Indebtedness incurred or Permitted Hotel Acquisitions effected during the
respective Calculation Period or thereafter and on or prior to the date of
determination) (each such date, a "Determination Date") had been effected or
incurred on the first day of the respective Calculation Period; provided that
all such calculations shall take into account the following assumptions:
(i) except as provided in following clause (ii), pro forma effect
shall be given to (1) any Indebtedness incurred subsequent to the end of
the Calculation Period and prior to the date of determination, (2) any
Indebtedness incurred during such period to the extent such Indebtedness
is outstanding at the date of determination and (3) any Indebtedness to be
incurred on the date of determination, in each case as if such
Indebtedness had been incurred on the first day of such Calculation Period
and after giving effect to the application of the proceeds thereof;
(ii) in calculating interest expense attributable to Loans, it shall
be assumed that (x) the average principal amount of Loans actually
outstanding during the Calculation Period (or, if the Initial Borrowing
Date occurs after the first day of the Calculation Period, during the
period from the Initial Borrowing Date to the respective Determination
Date) had been outstanding at all times during the period from the first
day of the Calculation Date until the Determination Date and (y) in
addition to the outstandings as calculated pursuant to preceding clause
(x), to the extent that any Loans were incurred during the Calculation
Period or thereafter but on or prior to the date of determination to
finance Permitted Hotel Acquisitions, such Loans will be deemed to have
been outstanding from the first day of the respective Calculation Period
until the date of
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the incurrence thereof (or if earlier, the last day of the respective
Calculation Period);
(iii) interest expense attributable to interest on any Indebtedness
(whether existing or being incurred) bearing a floating interest rate
shall be computed as if the rate in effect on the date of computation
(taking into account any Interest Rate Protection Agreement applicable to
such Indebtedness if such Interest Rate Protection Agreement has a
remaining term in excess of 12 months) had been the applicable rate for
the entire period;
(iv) except as provided in preceding clause (ii), there shall be
excluded from interest expense any interest expense related to any amount
of Indebtedness that was outstanding during such Calculation Period or
thereafter but that is not outstanding or is to be permanently repaid on
the date of determination; and
(v) pro forma effect shall be given to all sales of Hotel Properties
and Permitted Hotel Acquisitions (by excluding or including, as the case
may be, the historical financial results for the respective Hotel
Properties) that occur during such Calculation Period or thereafter and on
or prior to the Determination Date (including any Indebtedness assumed or
acquired in connection therewith) as if they had occurred on the first day
of such Calculation Period.
"Projections" shall have the meaning provided in Section 5.12(b).
"Qualified Capital Stock" of any Person shall mean all Capital Stock
of such Person which is not Redeemable Capital Stock.
"Qualified Equity Commitment" shall have the meaning provided in
Section 10.05.
"Qualified Equity Investment" shall mean any equity investment made
by HFS in the Company (including in return for Redeemable Capital Stock issued
as permitted by Section 10.04(viii) and/or Qualified Capital Stock of the
Company) so long as 100% of the Net Cash Proceeds thereof are actually used by
the Company to make mandatory repayments of Loans as a result of a reduction to
the Total Revolving Loan Commitment pursuant to Sections 3.03(e) and/or (f).
"Quarterly Payment Date" shall mean the last Business Day of each
March, June, September and December occurring after the Initial Borrowing Date.
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"RCRA" shall mean the Resource Conservation and Recovery Act, as the
same may be amended from time to time, 42 U.S.C. Sec. 6901 et seq.
"Real Estate Committee" shall mean Chase and The Bank of Nova Scotia.
"Real Property" of any Person shall mean all the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recapitalization" shall mean collectively (i) the Refinancing and
(ii) the receipt by the Company of at least $57,000,000 from the issuance of
its common stock as described in Section 5.17.
"Recapitalization Documents" shall mean collectively (i) the
Refinancing Documents and (ii) the Chartwell Stock Purchase Agreement.
"Recovery Event" shall mean the receipt by the Company or any of its
Subsidiaries or Joint Ventures of any cash insurance proceeds (other than from
business interruption insurance) or condemnation award payable (i) by reason of
theft, loss, physical destruction, damage or taking or any other similar event
with respect to any property or assets of the Company or any of its
Subsidiaries or Joint Ventures and (ii) under any policy of insurance required
to be maintained under Section 9.03.
"Redeemable Capital Stock" means any Capital Stock that, either by
its terms, by the terms of any security into which it is convertible or
exchangeable or otherwise, is or upon the happening of any event of passage of
time would be, required to be redeemed or repurchased, or is redeemable or
required to be repurchased at the option of the holder thereof, or is
convertible into or exchangeable for debt securities at any time (unless solely
at the option of the Company).
"Refinancing" shall have the meaning provided in Section 5.06.
"Refinancing Documents" shall have the meaning provided in Section
5.06.
"Register" shall have the meaning provided in Section 14.16.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in
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effect and any successor to all or a portion thereof establishing reserve
requirements.
"Regulation G" shall mean Regulation G of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation T" shall mean Regulation T of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Regulation X" shall mean Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof.
"Reinvestment Amount" shall mean the aggregate amount of Net Cash
Proceeds received from Asset Sales which would have been required to be applied
in accordance with Section 3.03(d) (absent clause (ii) of the first proviso to
such Section 3.03(d)), but which have not been applied to reduce the Total
Revolving Loan Commitment pursuant to Section 3.03(d) because the Company has
elected to reinvest such Net Cash Proceeds pursuant to clause (ii) of the first
proviso of such Section 3.03(d), with the Reinvestment Amount to be reduced on
each date on which, and in the amount by which, such Net Cash Proceeds have
been reinvested as provided in clause (ii) of the first proviso of such Section
3.03(d) or have been applied to reduce the Total Revolving Loan Commitment
pursuant to the second proviso of such Section 3.03(d).
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing or migration into the environment.
"Replaced Bank" shall have the meaning provided in Section 1.13.
"Replacement Bank" shall have the meaning provided in Section 1.13.
"Reportable Event" shall mean an event described in Section 4043(c)
of ERISA with respect to a Plan other than those events as to which the 30-day
notice period is waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC
Regulation Section 2615.
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"Required Banks" shall mean Non-Defaulting Banks, the sum of whose
outstanding Revolving Loan Commitments (or after the termination thereof, the
Dollar Equivalent Amount of outstanding Loans and Adjusted Percentage of Letter
of Credit Outstandings) represent an amount greater than 50% of the Adjusted
Total Revolving Loan Commitment (or after the termination thereof, the sum of
the then Dollar Equivalent Amount of total outstanding Loans of Non-Defaulting
Banks and the aggregate Adjusted Percentages of all Non-Defaulting Banks of the
total Letter of Credit Outstandings at such time). If any Affiliate of the
Company (other than any Person that would qualify as an Affiliate of the
Company solely by reason of its status as a creditor of the Company or any
Affiliate thereof or by the exercise of any remedies under the Security
Documents) holds any Loans or Revolving Loan Commitments, then, unless such
Affiliates own 100% of all outstanding Loans and Revolving Loan Commitments,
(x) no such Affiliate shall be included as a Bank for purposes of this
definition and (y) the amount of such Loans or Revolving Loan Commitments shall
be subtracted from the total amounts of such Loan or Revolving Loan Commitments
based on which the calculation of Required Banks is made.
"Residual Excess Cash Flow" shall mean, for any fiscal year of the
Company, Excess Cash Flow for such fiscal year less the aggregate amount of
payments of fees made with respect to such fiscal year as permitted by Section
10.06(vii).
"Restricted Payment" shall mean (a) any authorization, declaration or
payment of any Dividends with respect to the Company or any of its Subsidiaries
or Joint Ventures, (b) the making (or the giving of any notice in respect
thereof) by the Company or any of its Subsidiaries or Joint Ventures of any
voluntary or mandatory payment, purchase, acquisition or redemption, whether by
the making of any payments of the principal, interest or otherwise, in respect
of any loan, advance or extension of credit made to the Company or any of its
Subsidiaries or Joint Ventures by, or in respect of any guarantee or Contingent
Obligation made for the benefit of the Company or any of its Subsidiaries or
Joint Ventures by, or in respect of any other obligation of the Company or any
of its Subsidiaries or Joint Ventures owed to, any Affiliate of the Company
(excluding the Company and its Wholly-Owned Subsidiaries) and (c) the payment
of any fees or expenses (including the reimbursement thereof by the Company or
any of its Subsidiaries or Joint Ventures) to any Affiliate of the Company
(excluding the Company and its Wholly-Owned Subsidiaries), it being understood
that, in any event, any payment on or in respect of, any Chartwell Preferred
Stock/Subordinated Debt, any HFS Subordinated Indebtedness or any Permitted
Subordinated Indebtedness shall be a Restricted Payment.
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"Returns" shall have the meaning provided in Section 8.09.
"Revolving C$ Loan Commitment" shall mean for each Bank, the amount
set forth opposite such Bank's name in Schedule I directly below the column
entitled "Revolving C$ Loan Commitment," as the same may be (x) reduced from
time to time pursuant to Sections 3.02, 3.03 and/or 11 or (y) adjusted from
time to time as a result of assignments to or from such Bank pursuant to
Section 1.13 or 14.04(b). The Revolving C$ Loan Commitment of a Bank shall be a
subfacility of the Revolving Loan Commitment of such Bank.
"Revolving Loan Commitment" shall mean, for each Bank, the amount set
forth opposite such Bank's name in Schedule I directly below the column
entitled "Revolving Loan Commitment," as the same may be (x) reduced from time
to time pursuant to Sections 3.02, 3.03 and/or 11 or (y) adjusted from time to
time as a result of assignments to or from such Bank pursuant to 1.13 or
14.04(b).
"Revolving Loans" shall be the collective reference to Revolving $
Loans and Revolving C$ Loans.
"Revolving $ Loans" shall have the meaning provided in Section 1.01.
"Revolving C$ Loans" shall have the meaning provided in Section 1.01.
"Revolving C$ Note" and "Revolving C$ Notes" shall have the meanings
provided in Section 1.05(b).
"Revolving $ Note" and "Revolving $ Notes" shall have the meanings
provided in Section 1.05(a).
"Revolving Notes" shall mean the collective reference to the
Revolving C$ Notes and the Revolving $ Notes.
"S&P" shall mean Standard & Poor's Ratings Group.
"Scheduled Commitment Reduction" shall have the meaning provided in
Section 3.03(b).
"Scheduled Commitment Reduction Date" shall have the meaning provided
in Section 3.03(b).
"SEC" shall have the meaning provided in Section 9.01(h).
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"Security Agreement" shall have the meaning provided in Section 6.07.
"Security Documents" shall be the collective reference to the Pledge
Agreement and the Security Agreement.
"Section 4.04(b)(ii) Certificate" shall have the meaning provided in
Section 4.04(b).
"Secured Creditors" shall have the meaning provided in the respective
Security Documents.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Shareholders' Agreements" shall mean all agreements entered into by
the Borrower or any of its Subsidiaries governing the terms and relative rights
of its capital stock and any agreement entered into by shareholders relating to
any such entity with respect to its capital stock.
"Specified Existing Investments" shall mean those Existing
Investments that relate to the Company's previous gaming businesses and
designated as such on Schedule IX.
"Standard Termination Fee" shall mean (x) with respect to any HFS
Franchise Agreement entered into in connection with any Hotel Property existing
on the Initial Borrowing Date, any Termination Fee payable pursuant to such HFS
Franchise Agreement up to 2% of the total gross revenues for the respective
Hotel Property for the immediately preceding twelve month period in respect of
which such Termination Fee is paid and (y) with respect to any HFS Franchise
Agreement entered into in connection with any Hotel Property acquired after the
Initial Borrowing Date, that portion of the Termination Fee with respect to
such Hotel Property which equals that amount customarily charged by HFS to
other similarly situated franchisees.
"Stated Amount" of each Letter of Credit shall, at any time, mean the
maximum amount available to be drawn thereunder (in each case determined
without regard to whether any conditions to drawing could then be met).
"Subsidiaries Guaranty" shall have the meaning provided in Section
5.08.
"Subsidiary" shall mean, as to any Person, (i) any corporation 50% or
more of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of
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whether or not at the time stock of any class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time owned by such Person and/or one or more
Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has a 50% or greater equity interest at the time. Notwithstanding
the foregoing (and except for purposes of the definition of Unrestricted
Subsidiary contained herein), an Unrestricted Subsidiary shall be deemed not to
be a Subsidiary of the Company or any of its other Subsidiaries for purposes of
this Agreement. Unless the context otherwise requires, all references herein to
"Subsidiaries" shall be to Subsidiaries of the Company.
"Subsidiary Guarantor" shall mean each Wholly-Owned Domestic
Subsidiary of the Company.
"Supermajority Banks" shall mean those Non-Defaulting Banks which
would constitute the Required Banks under, and as defined in, this Agreement if
the percentage "50%" contained therein were changed to "66-2/3%."
"Swingline Commitment" shall mean $5,000,000.
"Swingline Expiry Date" shall mean the date which is one Business Day
prior to the Final Maturity Date.
"Swingline Loan" shall have the meaning specified in Section 1.01(b).
"Swingline Note" shall have the meaning specified in Section 1.05(a).
"Syndication Agent" shall mean The Bank of Nova Scotia, in its
capacity as Syndication Agent for the Banks hereunder.
"Tax Sharing Agreements" shall mean all tax sharing, tax allocation
and other similar agreements entered into by the Borrower or any of its
Subsidiaries.
"Taxes" shall have the meaning provided in Section 4.04(a).
"Termination Fee" shall mean any fees (whether in the form of
liquidated damages or otherwise) that is due and payable by the Company or any
of its Subsidiaries or Joint Ventures to HFS pursuant to Section Paragraph
30(k) an existing HFS Franchise Agreement or the equivalent section of any
other HFS Franchise Agreement.
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"Test Period" shall mean each period of four consecutive fiscal
quarters of the Company (or, if shorter, the period beginning on July 1, 1996
and ending on the last day of a fiscal quarter of the Company ended after the
Initial Borrowing Date), in each case taken as one accounting period, ended
after the Initial Borrowing Date.
"Total Hotel Revenues" shall mean, for any period, the sum of (i) the
gross total revenues of all wholly-owned Hotel Properties owned or leased by
the Company and its Wholly-Owned Subsidiaries plus (ii) the Company's Allocable
Share of the gross total revenues of all non-wholly-owned Hotel Properties
owned or leased by the Company and its Subsidiaries and Joint Ventures plus
(iii) the Company's Allocable Share of the gross total revenues from the retail
operations at the Fisherman's Wharf Travelodge located in San Francisco, it
being understood that Total Hotel Revenues shall include results of operations
of Hotel Properties only for periods after the acquisition thereof by the
Company or the respective Subsidiary or Joint Venture.
"Total Leverage Ratio" shall mean, at any time, the ratio of (x)
Consolidated Debt at such time to (y) Adjusted Consolidated EBITDA of the
Company for the Test Period then last ended, provided that (i) for purposes of
calculating the Total Leverage Ratio for the Test Period ending on (a) December
31, 1996, Adjusted Consolidated EBITDA of the Company shall be the Adjusted
Consolidated EBITDA of the Company for such Test Period divided by 45%, (b)
March 31, 1997, Adjusted Consolidated EBITDA of the Company shall be the
Adjusted Consolidated EBITDA of the Company for such Test Period divided by 55%
and (c) June 30, 1997, Adjusted Consolidated EBITDA of the Company shall be the
Adjusted Consolidated EBITDA of the Company for such Test Period divided by
85%, (ii) for purposes of calculating Consolidated Debt at any time, any
outstanding principal amount of Indebtedness under the Bank of America Facility
shall be included and the amount of any Letter of Credit supporting payment of
the Bank of America Facility shall be excluded and (iii) any non-cash
write-offs with respect to the Gaming Assets shall be excluded in determining
the Total Leverage Ratio.
"Total Outstandings" at any time shall mean the sum of the aggregate
principal amount of the Dollar Equivalent Amount of Loans then outstanding plus
the aggregate amount of Letter of Credit Outstandings at such time.
"Total C$ Revolving Loan Commitment" shall mean, at any time, the sum
of the Revolving C$ Loan Commitments of each of the Banks.
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"Total Revolving Loan Commitment" shall mean, at any time, the sum of
the Revolving Loan Commitments of each of the Banks.
"Total Unrestricted Subsidiary Leverage Ratio" shall mean, at any
time, the ratio of (x) all Indebtedness of all Unrestricted Subsidiaries at
such time as would be required to be reflected on the liability side of a
balance sheet as prepared in accordance with generally accepted accounting
principles and as determined on a consolidated basis plus, without duplication,
the amount of all Redeemable Capital Stock of all Unrestricted Subsidiaries
(determined in accordance with the definition of Indebtedness contained herein)
to (y) Adjusted Consolidated EBITDA of all Unrestricted Subsidiaries
(calculated by using the Adjusted Consolidated EBITDA of the parent
Unrestricted Subsidiary or, if more than one Unrestricted Subsidiary is
directly owned by the Company or a Wholly-Owned Domestic Subsidiary thereof, by
calculating the Adjusted Consolidated EBITDA of the Unrestricted Subsidiaries
on a combined basis) for the Test Period then last ended.
"Total Unutilized Revolving Loan Commitment" shall mean, at any time,
an amount equal to the remainder of (x) the then Total Revolving Loan
Commitment, less (y) the sum of the Dollar Equivalent Amount of the aggregate
principal amount of Loans outstanding plus the then aggregate amount of Letter
of Credit Outstandings.
"Transaction" shall mean the Canadian Acquisition and the
Recapitalization.
"Type" shall mean the type of Revolving Loan determined with regard
to the interest option applicable thereto, i.e., whether a $ Base Rate Loan, a
$ Eurodollar Loan or a C$ Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan means the amount, if any, by
which the actuarial present value of the accumulated plan benefits under the
Plan as of the close of its most recent plan year exceeds the fair market value
of the assets allocable thereto, each determined in accordance with Statement
of Financial Accounting Standards No. 87, based upon the actuarial assumptions
used by the Plan's actuary in the most recent annual valuation of the Plan.
"United States" and "U.S." shall each mean the United States of
America.
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"Unpaid Drawing" shall have the meaning provided for in Section 2.05.
"Unrestricted Subsidiary" shall mean any Subsidiary of the Company
created or acquired after the Initial Borrowing Date that, at the time of such
creation or acquisition, shall be an Unrestricted Subsidiary (as designated by
the Company, as provided below) provided that such Subsidiary does not and
shall not engage, to any substantial extent, in any line or lines of business
activity other than as provided in Section 10.15.
The Company may designate any such Person to be an Unrestricted
Subsidiary if (a) no Default or Event of Default is existing or will occur as a
consequence thereof, (b) such Subsidiary, at the time of designation thereof,
has no assets (except assets which could be invested in such Unrestricted
Subsidiary at the time of designation as described in the immediately
succeeding sentence), (c) such Subsidiary does not own any equity interests in,
or hold any Lien on any property of, the Company or any other Subsidiary or
Joint Venture of the Company (excluding other Unrestricted Subsidiaries) and
(d) the designation of the respective Unrestricted Subsidiary shall be made in
compliance with any additional requirements contained in Section 10.16(c) . The
only asset that may be invested in any such Unrestricted Subsidiary by the
Company in any of its other Subsidiaries or Joint Ventures is the Net Cash
Proceeds of the Chartwell Preferred Stock. The Company may designate any
Unrestricted Subsidiary to be a Subsidiary, provided that no Default or Event
of Default is existing or will occur as a consequence thereof and all actions
which would be required to be taken pursuant to Section 10.16(a) in connection
with the creation or acquisition of a new Subsidiary are taken at the time of
the respective such designation. Each such designation shall be evidenced by
filing with the Administrative Agent a certified copy of the resolution giving
effect to such designation and an officers' certificate of an Authorized
Officer of the Company certifying that such designation complied with the
foregoing conditions.
"Unrestricted Subsidiary Tax Sharing Agreement" shall mean any tax
sharing agreement entered into by the Company with an Unrestricted Subsidiary
pursuant to the requirements of Section 10.16(c), with the terms and conditions
of any such tax sharing agreement to be required to be in form and substance
satisfactory to the Required Banks, and with any changes thereto made after the
entering into of any such tax sharing agreement to be required to be
satisfactory to the Required Banks.
"Unutilized Revolving Loan Commitment" with respect to any Bank, at
any time, shall mean such Bank's Revolving Loan Commitment at such time less
the sum of (i) the Dollar Equivalent
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Amount of the aggregate outstanding principal amount of Revolving Loans made by
such Bank and (ii) such Bank's Adjusted Percentage of the total Letter of
Credit Outstandings at such time, provided that for purposes of Section 3.01(a)
outstanding Swingline Loans shall be deemed not to be outstanding.
"Wholly-Owned Domestic Subsidiary" shall mean any Wholly-Owned
Subsidiary of the Company that is incorporated or organized in the United
States or any state or territory thereof.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying
shares) is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Wholly-Owned
Subsidiaries of such Person has a 100% equity interest at such time.
SECTION 13. The Agents.
13.01 Appointment. The Banks hereby designate The Chase Manhattan
Bank as Administrative Agent (for purposes of this Section 13, the term
"Administrative Agent" shall include Chase in its capacity as Collateral Agent
pursuant to the Pledge Agreement) to act as specified herein and in the other
Credit Documents. The Banks hereby designate The Bank of Nova Scotia Bank as
Syndication Agent to act as specified herein and in the other Credit Documents.
Each Bank hereby irrevocably authorizes, and each holder of any Note by the
acceptance of such Note shall be deemed irrevocably to authorize, each Agent to
take such action on its behalf under the provisions of this Agreement, the
other Credit Documents and any other instruments and agreements referred to
herein or therein and to exercise such powers and to perform such other duties
hereunder and thereunder as are specifically delegated to or required of each
Agent by the terms hereof and thereof and such other powers as are reasonably
incidental thereto. Each Agent may perform any of its duties hereunder by or
through its respective officers, directors, agents, employees or affiliates.
13.02 Nature of Duties. Neither Agent shall have any duties or
responsibilities except those expressly set forth in this Agreement and in the
other Credit Documents. Neither Agent nor any of its respective officers,
directors, agents, employees or affiliates shall be liable for any action taken
or omitted by it or them hereunder or under any other Credit Document or in
connection herewith or therewith, unless caused by its or their gross
negligence or willful misconduct. The duties of each Agent shall be mechanical
and administrative in nature; neither Agent shall have by reason of this
Agreement or any other
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Credit Document a fiduciary relationship in respect of any Bank or the holder
of any Note; and nothing in this Agreement or any other Credit Document,
expressed or implied, is intended to or shall be so construed as to impose upon
any Agent any obligations in respect of this Agreement or any other Credit
Document except as expressly set forth herein or therein.
13.03 Lack of Reliance on the Agents. Independently and without
reliance upon any Agent, each Bank and the holder of each Note, to the extent
it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of each of HFS
and the Company and its Subsidiaries and Joint Ventures in connection with the
making and the continuance of the Loans and the taking or not taking of any
action in connection herewith and (ii) its own appraisal of the
creditworthiness of each of HFS and the Company and its Subsidiaries and Joint
Ventures and, except as expressly provided in this Agreement, neither Agent
shall have any duty or responsibility, either initially or on a continuing
basis, to provide any Bank or the holder of any Note with any credit or other
information with respect thereto, whether coming into its possession before the
making of the Loans or at any time or times thereafter. Neither Agent shall be
responsible to any Bank or the holder of any Note for any recitals, statements,
information, representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith or for the
execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of this Agreement or any other Credit
Document or the financial condition of HFS or the Company and its Subsidiaries
and Joint Ventures or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any other Credit Document, or the financial condition of HFS or
the Company and its Subsidiaries and Joint Ventures or the existence or
possible existence of any Default or Event of Default.
13.04 Certain Rights of the Agents. If any Agent shall request
instructions from the Required Banks with respect to any act or action
(including failure to act) in connection with this Agreement or any other
Credit Document, such Agent shall be entitled to refrain from such act or
taking such action unless and until such Agent shall have received instructions
from the Required Banks; and neither Agent shall incur liability to any Person
by reason of so refraining. Without limiting the foregoing, no Bank or the
holder of any Note shall have any right of action whatsoever against either
Agent as a result of such Agent acting or refraining from acting hereunder or
under any other Credit Document in accordance with the instructions of the
Required Banks.
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13.05 Reliance. Each Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any Person that such Agent believed to be the proper Person, and, with respect
to all legal matters pertaining to this Agreement and any other Credit Document
and its duties hereunder and thereunder, upon advice of counsel selected by
such Agent.
13.06 Indemnification. To the extent any Agent is not reimbursed and
indemnified by the Company, the Banks will reimburse and indemnify such Agent,
in proportion to their respective "percentages" as used in determining the
Required Banks, for and against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, judgments, costs, expenses or
disbursements of whatsoever kind or nature which may be imposed on, asserted
against or incurred by such Agent in performing its respective duties hereunder
or under any other Credit Document, in any way relating to or arising out of
this Agreement or any other Credit Document; provided that no Bank shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from such Agent's gross negligence or willful misconduct.
13.07 The Agents in their Individual Capacities. With respect to its
obligation to make Loans and issue Letters of Credit under this Agreement, each
Agent shall have the rights and powers specified herein for a "Bank" and may
exercise the same rights and powers as though it were not performing the duties
specified herein; and the term "Banks," "Required Banks," "holders of Revolving
Notes", "Issuing Bank" or any similar terms shall, unless the context clearly
otherwise indicates, include each Agent in its individual capacity. Each Agent
may accept deposits from, lend money to, and generally engage in any kind of
banking, trust or other business with any Credit Party or any Affiliate of any
Credit Party as if they were not performing the duties specified herein, and
may accept fees and other consideration from the Company or any other Credit
Party for services in connection with this Agreement and otherwise without
having to account for the same to the Banks.
13.08 Holders. Each Agent may deem and treat the payee of any Note as
the owner thereof for all purposes hereof unless and until a written notice of
the assignment, transfer or endorsement thereof, as the case may be, shall have
been filed with the Administrative Agent. Any request, authority or consent of
any Person who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee,
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assignee or indorsee, as the case may be, of such Note or of any Note or Notes
issued in exchange therefor.
13.09 Resignation by the Agents. (a) The Administrative Agent may
resign from the performance of all its functions and duties hereunder and/or
under the other Credit Documents at any time by giving 15 Business Days' prior
written notice to the Company and the Banks, and such resignation shall take
effect upon the appointment of a successor Administrative Agent pursuant to
clauses (b) and (c) below or as otherwise provided below. The Syndication Agent
may resign from the performance of all of its functions and duties hereunder
and/or under the other Credit Documents at any time by giving written notice
thereof to the Company and the Banks, and such resignation shall take effect
immediately.
(b) Upon any such notice of resignation by the Administrative Agent,
the Required Banks shall appoint a successor Administrative Agent hereunder or
thereunder who shall be a commercial bank or trust company reasonably
acceptable to the Company.
(c) If a successor Administrative Agent shall not have been so
appointed within such 15 Business Day period, the Administrative Agent, with
the consent of the Company (which consent shall not be unreasonably withheld),
shall then appoint a commercial bank or trust company with capital and surplus
of not less than $250,000,000 as successor Administrative Agent who shall serve
as Administrative Agent hereunder or thereunder until such time, if any, as the
Required Banks appoint a successor Administrative Agent as provided above.
(d) If no successor Administrative Agent has been appointed pursuant
to clause (b) or (c) above by the 20th Business Day after the date such notice
of resignation was given by the Administrative Agent, the Administrative
Agent's resignation shall become effective and the Banks shall thereafter
perform all the duties of the Administrative Agent hereunder and/or under any
other Credit Document until such time, if any, as the Required Banks appoint a
successor Administrative Agent as provided above.
SECTION 14. Miscellaneous.
14.01 Payment of Expenses, etc. The Company shall: (i) whether or not
the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of each Agent (including, without limitation,
the reasonable fees and disbursements of Simpson Thacher & Bartlett) in
connection with the preparation, execution and delivery of this Agreement and
the other Credit Documents and the documents and instruments
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referred to herein and therein and any amendment, waiver or consent relating
hereto or thereto, of each Agent in connection with its syndication efforts
with respect to this Agreement and of each Agent and, following and during the
continuation of an Event of Default, each of the Banks in connection with the
enforcement of this Agreement and the other Credit Documents and the documents
and instruments referred to herein and therein (including, without limitation,
the reasonable fees and disbursements of counsel for each Agent and, following
and during the continuation of an Event of Default, for each of the Banks);
(ii) pay and hold each of the Banks harmless from and against any and all
present and future stamp, excise and other similar taxes with respect to the
foregoing matters and save each of the Banks harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Bank) to pay such taxes; and (iii)
indemnify each Agent and each Bank, and each of their respective officers,
directors, employees, representatives and agents from and hold each of them
harmless against any and all liabilities, obligations (including removal or
remedial actions), losses, damages, penalties, claims, actions, judgments,
suits, costs, expenses and disbursements (including reasonable attorneys' and
consultants' fees and disbursements) incurred by, imposed on or assessed
against any of them as a result of, or arising out of, or in any way related
to, or by reason of, (a) any investigation, litigation or other proceeding
(whether or not any Agent or any Bank is a party thereto) related to the
entering into and/or performance of this Agreement or any other Credit Document
or the use of any Letter of Credit or the proceeds of any Loans hereunder or
the consummation of any transactions contemplated herein (including, without
limitation, the Canadian Acquisition or the Recapitalization) or in any other
Credit Document or the exercise of any of their rights or remedies provided
herein or in the other Credit Documents, or (b) the actual or alleged presence
of Hazardous Materials in the air, surface water or groundwater or on the
surface or subsurface of any Real Property owned or at any time operated by the
Company or any of its Subsidiaries, Joint Ventures or Unrestricted
Subsidiaries, the generation, storage, transportation, handling or disposal of
Hazardous Materials at any location, whether or not owned or operated by the
Company or any of its Subsidiaries, Joint Ventures or Unrestricted
Subsidiaries, the non-compliance of any Real Property with foreign, federal,
state and local laws, regulations, and ordinances (including applicable permits
thereunder) applicable to any Real Property, or any Environmental Claim
asserted against the Company or any of its Subsidiaries, Joint Ventures or
Unrestricted Subsidiaries or any Real Property owned or at any time operated by
the Company or any of its Subsidiaries, Joint Ventures or Unrestricted
Subsidiaries (but excluding, in each case, any losses, liabilities, claims,
damages or expenses to the extent incurred by reason of the gross
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negligence or willful misconduct of the Person to be
indemnified). To the extent that the undertaking to indemnify,
pay or hold harmless any Agent or any Bank set forth in the
preceding sentence may be unenforceable because it is violative
of any law or public policy, the Company shall make the maximum
contribution to the payment and satisfaction of each of the
indemnified liabilities which is permissible under applicable
law.
14.02 Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and during the continuance of an Event of
Default, each Bank is hereby authorized at any time or from time to time,
without presentment, demand, protest or other notice of any kind to the Company
or any Subsidiary Guarantor or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and apply any and all
deposits (general or special, time or demand, provisional or final) and any
other Indebtedness at any time held or owing by such Bank (including, without
limitation, by branches, agencies or affiliates of such Bank wherever located)
to or for the credit or the account of the Company or any Subsidiary Guarantor
against and on account of the Obligations and liabilities of the Company or
such Subsidiary Guarantor to such Bank under this Agreement or under any of the
other Credit Documents, including, without limitation, all interests in
Obligations purchased by such Bank pursuant to Section 14.06(b), and all other
claims of any nature or description arising out of or connected with this
Agreement or any other Credit Document, irrespective of whether or not such
Bank shall have made any demand hereunder and although said Obligations,
liabilities or claims, or any of them, shall be contingent or unmatured.
14.03 Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered: if to the Company, at
the Company's address specified opposite its signature below; if to any Bank,
at its address specified opposite its name on Schedule II; and if to the
Administrative Agent, at its Notice Office; or, as to any Credit Party or any
Agent, at such other address as shall be designated by such party in a written
notice to the other parties hereto and, as to each Bank, at such other address
as shall be designated by such Bank in a written notice to the Company and the
Administrative Agent. All such notices and communications shall, when mailed,
telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be
effective when deposited in the mails, delivered to the telegraph company,
cable company or overnight courier, as the case may be, or sent
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by telex or telecopier, except that notices and communications to each Agent
and the Company shall not be effective until received by such Agent or the
Company, as the case may be.
14.04 Benefit of Agreement. (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, no Credit Party may assign or
transfer any of its rights, obligations or interest hereunder or under any
other Credit Document without the prior written consent of the Required Banks
(or all Banks in the case of the Company or HFS) and, provided further, that,
although any Bank may transfer, assign or grant participations in its rights
hereunder, such Bank shall remain a "Bank" for all purposes hereunder (and may
not transfer or assign all or any portion of its Revolving Loan Commitments
hereunder except as provided in Section 14.04(b)) and the transferee, assignee
or participant, as the case may be, shall not constitute a "Bank" hereunder
and, provided further, that no Bank shall transfer or grant any participation
under which the participant shall have rights to approve any amendment to or
waiver of this Agreement or any other Credit Document except to the extent such
amendment or waiver would (i) extend the final scheduled maturity of any Loan,
Note or Letter of Credit (unless such Letter of Credit is not extended beyond
the Final Maturity Date) in which such participant is participating, or reduce
the rate or extend the time of payment of interest or Fees thereon (except in
connection with a waiver of applicability of any post-default increase in
interest rates) or reduce the principal amount thereof, or increase the amount
of the participant's participation over the amount thereof then in effect (it
being understood that a waiver of any Default or Event of Default or of a
mandatory reduction in the Total Revolving Loan Commitment shall not constitute
a change in the terms of such participation, and that an increase in the
Revolving Loan Commitment shall be permitted without the consent of any
participant if the participant's participation is not increased as a result
thereof), (ii) consent to the assignment or transfer by a Borrower of any of
its rights and obligations under this Agreement or (iii) release all or
substantially all of the Collateral (except as expressly provided in the Credit
Documents) supporting the Loans hereunder in which such participant is
participating. In the case of any such participation, the participant shall not
have any rights under this Agreement or any of the other Credit Documents (the
participant's rights against such Bank in respect of such participation to be
those set forth in the agreement executed by such Bank in favor of the
participant relating thereto) and all amounts payable by the Company hereunder
shall be determined as if such Bank had not sold such participation.
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(b) Notwithstanding the foregoing, any Bank (or any Bank together
with one or more other Banks) may (x) assign all or a portion of its Revolving
Loan Commitment (and related outstanding Obligations hereunder) to its parent
company and/or any affiliate of such Bank which is at least 50% owned by such
Bank or its parent company or to one or more Banks or (y) assign all or, if
less than all, a portion equal to at least $5,000,000 in the aggregate for the
assigning Bank or assigning Banks, of such Revolving Loan Commitments (and
related outstanding Obligations) hereunder to one or more Eligible Transferees,
each of which assignees shall become a party to this Agreement as a Bank by
execution of an Assignment and Assumption Agreement, provided that, (i) at such
time Schedule I shall be deemed modified to reflect the Revolving Loan
Commitments and Revolving C$ Loan Commitments of such new Bank and of the
existing Banks, (ii) new Notes will be issued, at the Company's expense, to
such new Bank and to the assigning Bank upon the request of such new Bank or
assigning Bank, such new Notes to be in conformity with the requirements of
Section 1.05 (with appropriate modifications) to the extent needed to reflect
the revised Revolving Loan Commitments and Revolving C$ Loan Commitments, (iii)
the consent of each of the Administrative Agent, the Company and the Issuing
Bank shall be required in connection with any such assignment pursuant to
clause (y) above (which consent, in each case, shall not be unreasonably
withheld) and (iv) the Administrative Agent shall receive at the time of each
such assignment, from the assigning or assignee Bank, the payment of a
non-refundable assignment fee of $3,500. To the extent of any assignment
pursuant to this Section 14.04(b), the assigning Bank shall be relieved of its
obligations hereunder with respect to its assigned Revolving Loan Commitment
and Revolving C$ Loan Commitment. At the time of each assignment pursuant to
this Section 14.04(b) to a Person which is not already a Bank hereunder and
which is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for Federal income tax purposes, the respective
assignee Bank shall, to the extent legally entitled to do so, provide to the
Company and the Administrative Agent the appropriate Internal Revenue Service
Forms (and, if applicable, a Section 4.04(b)(ii) Certificate) described in
Section 4.04(b). To the extent that an assignment of all or any portion of a
Bank's Revolving Loan Commitment and related outstanding Obligations pursuant
to Section 1.13 or this Section 14.04(b) would, at the time of such assignment,
result in increased costs under Section 1.10, 1.11, 2.06 or 4.04 from those
being charged by the respective assigning Bank prior to such assignment, then
the Company shall not be obligated to pay such increased costs (although the
Company shall be obligated to pay any other increased costs of the type
described above resulting from changes after the date of the respective
assignment).
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(c) Nothing in this Agreement shall prevent or prohibit any Bank from
pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank.
(d) The parties hereto acknowledge and agree that HFS has certain
rights to repurchase the Loans and Revolving Loan Commitments in full as
provided in Section 5 of the HFS Subordination Agreement.
(e) Any sale or transfer of a Revolving Loan Commitment by any Bank
shall also constitute a sale or transfer by such Bank of a ratable portion of
its Revolving C$ Loan Commitment.
14.05 No Waiver; Remedies Cumulative. No failure or delay on the part
of any Agent or any Bank or any holder of any Note in exercising any right,
power or privilege hereunder or under any other Credit Document and no course
of dealing between the Company or any other Credit Party, any Agent or any Bank
or the holder of any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or under
any other Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder. The
rights, powers and remedies herein or in any other Credit Document expressly
provided are cumulative and not exclusive of any rights, powers or remedies
which any Agent or any Bank or the holder of any Note would otherwise have. No
notice to or demand on any Credit Party in any case shall entitle any Credit
Party to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of any Agent or any Bank or
the holder of any Note to any other or further action in any circumstances
without notice or demand.
14.06 Payments Pro Rata. (a) Except as otherwise provided in this
Agreement, the Administrative Agent agrees that promptly after its receipt of
each payment from or on behalf of the Company in respect of any Obligations
hereunder, it shall distribute such payment to the Banks (other than any Bank
that has consented in writing to waive its pro rata share of any such payment)
pro rata based upon their respective shares, if any, of the Obligations with
respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker' s lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise), which is applicable to the payment of the principal
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of, or interest on, the Loans, Unpaid Drawings, Commitment Commission or Letter
of Credit Fees, of a sum which with respect to the related sum or sums received
by other Banks is in a greater proportion than the total of such Obligation
then owed and due to such Bank bears to the total of such Obligation then owed
and due to all of the Banks immediately prior to such receipt, then such Bank
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Banks an interest in the Obligations of the respective
Credit Party to such Banks in such amount as shall result in a proportional
participation by all the Banks in such amount; provided that if all or any
portion of such excess amount is thereafter recovered from such Bank, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
(c) Notwithstanding anything to the contrary contained herein, the
provisions of the preceding Sections 14.06(a) and (b) shall be subject to the
express provisions of this Agreement which require, or permit, differing
payments to be made to Non- Defaulting Banks as opposed to Defaulting Banks.
14.07 Calculations; Computations. (a) The financial statements to be
furnished to the Banks pursuant hereto shall be made and prepared in accordance
with generally accepted accounting principles in the United States consistently
applied throughout the periods involved (except as set forth in the notes
thereto or as otherwise disclosed in writing by the Company to the Banks);
provided that, (i) as provided in the definition of Subsidiary, Unrestricted
Subsidiaries shall not be included for any purposes of this Agreement
(including the computations and calculations described in the immediately
succeeding clause (ii)) as Subsidiaries of the Company, (y) except as otherwise
specifically provided herein, all computations of Excess Cash Flow and the
Cumulative Retained Residual Excess Cash Flow Amount, and all computations
determining compliance with Sections 10.03 and 10.05 through 10.11, inclusive,
shall utilize accounting principles and policies in conformity with those used
to prepare the historical pro forma financial statements delivered to the Banks
pursuant to Section 8.05(a) and (iii) for purposes of determining compliance
with Sections 10.10 and 11.12 only, Adjusted Consolidated EBITDA of the Company
or the Unrestricted Subsidiaries, as the case may be, shall be determined
giving pro forma effect to sales and acquisitions of Hotel Properties and
Acquired Businesses on the same basis as is provided in clause (v) of the
definition of Pro Forma Basis contained herein.
(b) All computations of interest, Commitment Commission and other
Fees hereunder shall be made on the basis of a year of 360 days for the actual
number of days (including the
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first day but excluding the last day) occurring in the period for which such
interest, Commitment Commission or Fees are payable.
14.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. EACH BORROWER HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM
THAT ANY SUCH COURTS LACK JURISDICTION OVER SUCH BORROWER, AND AGREES NOT TO
PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN ANY OF THE AFORESAID COURTS,
THAT ANY SUCH COURT LACKS JURISDICTION OVER SUCH BORROWER. EACH BORROWER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH BORROWER AT
ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH BORROWER HEREBY IRREVOCABLY WAIVES
ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND
AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR
UNDER ANY OTHER CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID
OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY AGENT UNDER THIS
AGREEMENT, ANY BANK OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST ANY CREDIT PARTY IN ANY OTHER JURISDICTION.
(b) EACH BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID
ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR
ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE
AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY
SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
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14.09 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Company and the
Administrative Agent.
14.10 Effectiveness. This Agreement shall become effective on the
date (the "Effective Date") on which each Borrower and each of the Banks shall
have signed a counterpart hereof (whether the same or different counterparts)
and shall have delivered the same to the Administrative Agent at its Notice
Office or, in the case of the Banks, shall have given to the Administrative
Agent telephonic (confirmed in writing), written or telex notice (actually
received) at such office that the same has been signed and mailed to it. The
Administrative Agent will give the Company and each Bank prompt written notice
of the occurrence of the Effective Date.
14.11 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not
in any way affect the meaning or construction of any provision of this
Agreement.
14.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination
is in writing signed by the respective Credit Parties party thereto and the
Required Banks (or, as contemplated by Section 13(b) of the HFS Guaranty, by
the Agents), provided that no such change, waiver, discharge or termination
shall, without the consent of each Bank (other than a Defaulting Bank) (with
Obligations being directly affected in the case of following clause (i)), (i)
extend the final scheduled maturity of any Loan or Note or extend the stated
maturity of any Letter of Credit beyond the Final Maturity Date, or reduce the
rate or extend the time of payment of interest or Fees thereon, or reduce the
principal amount thereof (except to the extent repaid in cash), (ii) release
all or substantially all of the Collateral (except as expressly provided in the
Credit Documents), (iii) release HFS from its payment obligations pursuant to
the HFS Guaranty (except as expressly provided therein), (iv) amend, modify or
waive any provision of this Section 14.12, (v) reduce the percentage specified
in the definition of Required Banks (it being understood that, with the consent
of the Required Banks, additional extensions of credit pursuant to this
Agreement may be included in the determination of the Required Banks on
substantially the same basis as the extensions of Revolving Loan Commitments
are included on the Effective Date) or (vi) consent to the assignment or
transfer by
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the Company or HFS of any of its rights and obligations under this Agreement or
the HFS Guaranty, as the case may be; provided further, that no such change,
waiver, discharge or termination shall (v) increase the Revolving Loan
Commitment or Revolving C$ Loan Commitment of any Bank over the amount thereof
then in effect without the consent of such Bank (it being understood that
waivers or modifications of conditions precedent, covenants, Defaults or Events
of Default or of a mandatory reduction in the Total Revolving Loan Commitment
or Total Revolving C$ Loan Commitment shall not constitute an increase of the
Revolving Loan Commitment or Total Revolving C$ Loan Commitment of any Bank,
and that an increase in the available portion of the Revolving Loan Commitment
or Revolving C$ Loan Commitment of any Bank shall not constitute an increase in
the Revolving Loan Commitment or Revolving C$ Loan Commitment of such Bank),
(w) without the consent of the Issuing Bank, amend, modify or waive any
provision of Section 2 or alter its rights or obligations with respect to
Letters of Credit, (x) without the consent of the applicable Agent, amend,
modify or waive any provision of Section 13 as same applies to such Agent or
any other provision as same relates to the rights or obligations of such Agent,
(y) without the consent of the Collateral Agent, amend, modify or waive any
provision relating to the rights or obligations of the Collateral Agent or (z)
without the consent of the Supermajority Banks, amend, modify or waive any
Scheduled Commitment Reduction.
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by
clauses (i) through (vi), inclusive, of the first proviso to Section 14.12(a),
the consent of the Required Banks is obtained but the consent of one or more of
such other Banks whose consent is required is not obtained, then the Company
shall have the right, so long as all non-consenting Banks whose individual
consent is required are treated as described in either clause (A) or (B) below,
to either (A) replace each such non-consenting Bank or Banks with one or more
Replacement Banks pursuant to Section 1.13 so long as at the time of such
replacement, each such Replacement Bank consents to the proposed change,
waiver, discharge or termination or (B) terminate such non-consenting Bank's
Revolving Loan Commitment and Revolving C$ Loan Commitment in accordance with
Sections 3.02(b) and/or 4.01(b), provided that, unless the Revolving Loan
Commitment and Revolving C$ Loan Commitment terminated and Loans repaid
pursuant to preceding clause (B) are immediately replaced in full at such time
through the addition of new Banks or the increase of the Revolving Loan
Commitments and Revolving C$ Loan Commitments of existing Banks (who in each
case must specifically consent thereto), then in the case of any action
pursuant to preceding clause (B) the Required Banks (determined after giving
effect to the proposed action) shall specifically consent thereto, provided
further, that in any event the Company shall not have the right
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to replace a Bank, terminate its Revolving Loan Commitment and Revolving C$
Loan Commitment or repay its Loans solely as a result of the exercise of such
Bank's rights (and the withholding of any required consent by such Bank)
pursuant to the second proviso to Section 14.12(a).
(c) It is understood and agreed by the parties hereto that, to the
extent (and only to the extent) expressly provided in Section 2.06 of the HFS
Subordination Agreement, certain amendments to the Credit Agreement shall, to
the extent provided in said Section 2.06, require the consent of HFS.
14.13 Survival. All indemnities set forth herein including, without
limitation, in Sections 1.10, 1.11, 2.06, 4.04, 13.01 and 13.06 shall, survive
the execution, delivery and termination of this Agreement and the Notes and the
making and repayment of the Loans.
14.14 Domicile of Loans. Each Bank may transfer and carry its Loans
at, to or for the account of any office, Subsidiary or Affiliate of such Bank.
Notwithstanding anything to the contrary contained herein, to the extent that a
transfer of Loans pursuant to this Section 14.14 would, at the time of such
transfer, result in increased costs under Section 1.10, 1.11, 2.06 or 4.04 from
those being charged by the respective Bank prior to such transfer, then the
Company shall not be obligated to pay such increased costs (although the
Company shall be obligated to pay any other increased costs of the type
described above resulting from changes after the date of the respective
transfer).
14.15 Confidentiality. (a) Subject to the provisions of clause (b) of
this Section 14.15, each Bank agrees that it will not disclose without the
prior consent of the Company (other than to its employees, auditors, advisors
or counsel or to another Bank if the Bank or such Bank's holding or parent
company in its sole discretion determines that any such party should have
access to such information, provided such Persons shall be subject to the
provisions of this Section 14.15 to the same extent as such Bank) any
information with respect to the Company or any of its Subsidiaries which is now
or in the future furnished pursuant to this Agreement or any other Credit
Document and which is designated by the Company to the Banks in writing as
confidential, provided that any Bank may disclose any such information (a) as
has become generally available to the public, (b) as may be required or
appropriate in any report, statement or testimony submitted to any municipal,
state or Federal regulatory body having or claiming to have jurisdiction over
such Bank or to the Federal Reserve Board or the Federal Deposit Insurance
Corporation or similar organizations (whether in the United States or
elsewhere) or their successors, (c) as
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may be required or appropriate in respect to any summons or subpoena or in
connection with any litigation, (d) in order to comply with any law, order,
regulation or ruling applicable to such Bank, (e) to any Agent or the
Collateral Agent or any Bank and (f) to any prospective or actual transferee or
participant in connection with any contemplated transfer or participation of
any of the Notes or Revolving Loan Commitments or any interest therein by such
Bank, provided, that such prospective transferee agrees to be bound by the
provisions contained in this Section.
(b) The Company hereby acknowledges and agrees that each Bank may
share with any of its affiliates any information related to the Company or any
of its Subsidiaries (including, without limitation, any nonpublic customer
information regarding the creditworthiness of the Company and its
Subsidiaries), provided such Persons shall be subject to the provisions of this
Section 14.15 to the same extent as such Bank.
14.16 Register. Each Borrower hereby designates the Administrative
Agent to serve as such Borrower's agent, solely for purposes of this Section
14.16, to maintain a register (the "Register") on which it will record the
Revolving Loan Commitments and Revolving C$ Loan Commitments from time to time
of each of the Banks, the Loans made by each of the Banks and each repayment in
respect of the principal amount of the Loans of each Bank. Failure to make any
such recordation, or any error in such recordation shall not affect a
Borrower's obligations in respect of such Loans. With respect to any Bank, the
transfer of the Revolving Loan Commitment and Revolving C$ Loan Commitment of
such Bank and the rights to the principal of, and interest on, any Loan made
pursuant to such Revolving Loan Commitment or Revolving c$ Loan Commitment
shall not be effective until such transfer is recorded on the Register
maintained by the Administrative Agent with respect to ownership of such
Revolving Loan Commitment and Revolving C$ Loan Commitment and Loans and prior
to such recordation all amounts owing to the transferor with respect to such
Revolving Loan Commitment and Revolving C$ Loan Commitment and Loans shall
remain owing to the transferor. The registration of assignment or transfer of
all or part of the Revolving Loan Commitment and the Revolving C$ Loan
Commitment and the Loans shall be recorded by the Administrative Agent on the
Register only upon the acceptance by the Administrative Agent of a properly
executed and delivered Assignment and Assumption Agreement pursuant to Section
14.04(b). Coincident with the delivery of such an Assignment and Assumption
Agreement to the Administrative Agent for acceptance and registration of
assignment or transfer of all or part of a Loan, or as soon thereafter as
practicable, the assigning or transferor Bank shall surrender the Note
evidencing such Loan, and thereupon one or more new Notes in the same aggregate
principal amount shall be issued to the assigning or transferor Bank and/or the
new Bank.
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The Company agrees to indemnify the Administrative Agent from and against any
and all losses, claims, damages and liabilities of whatsoever nature which may
be imposed on, asserted against or incurred by the Administrative Agent in
performing its duties under this Section 14.16 other than those resulting from
the Administrative Agent's willful misconduct or gross negligence.
14.17 Limitation on Additional Amounts, etc. Notwithstanding anything
to the contrary contained in Section 1.10, 1.11, 2.06 or 4.04, unless a Bank
gives notice to the Company that it is obligated to pay an amount under any
such Section within 180 days after the later of (x) the date the Bank incurs
the respective increased costs, Taxes, loss, expense or liability, reduction in
amounts received or receivable or reduction in return on capital or (y) the
date such Bank has actual knowledge of its incurrence of the respective
increased costs, Taxes, loss, expense or liability, reductions in amounts
received or receivable or reduction in return on capital, then such Bank shall
only be entitled to be compensated for such amount by the Company pursuant to
said Section 1.10, 1.11, 2.06 or 4.04, as the case may be, to the extent the
costs, Taxes, loss, expense or liability, reduction in amounts received or
receivable or reduction in return on capital are incurred or suffered on or
after the date which occurs 180 days prior to such Bank giving notice to the
Company that it is obligated to pay the respective amounts pursuant to said
Section 1.10, 1.11, 2.06 or 4.04, as the case may be. This Section 14.17 shall
have no applicability to any Section of this Agreement other than said Sections
1.10, 1.11, 2.06 and 4.04.
14.18 Certain Provisions Regarding Joint Ventures. Notwithstanding
anything to the contrary contained in this Agreement, (i) no Default or Event
of Default shall arise under Section 11.02 or 11.03 as a result of any action
(or failure to take any action) by any Non-Subsidiary Joint Venture, or as a
result of any event, condition, fact or circumstance with respect to any
Non-Subsidiary Joint Venture, in each case to the extent that neither the
Company nor any of its Subsidiaries have voting or management control with
respect to the affairs of such Non- Subsidiary Joint Venture and neither the
Company nor any such Subsidiary thereof consented to any such action (or
failure to act), (ii) neither the Company nor any of its Subsidiaries will
relinquish voting or management control over any Material Joint Venture in
which it has such control other than in connection with the sale of the
Company's or such Subsidiary's entire equity interest in such Material Joint
Venture, (iii) neither the Company nor any of its Subsidiaries will reduce
their ownership interest in any Material Joint Venture in which they own a
greater than 50% interest to an ownership interest of 50% or less in such
Material Joint Venture and (iv) neither the Company nor any of its Subsidiaries
shall consent to any action to be taken
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by any Joint Venture if such action would give rise to a Default or an Event of
Default hereunder.
14.19 Judgment; Currency. (a) If for the purpose of obtaining
judgment in any court it is necessary to convert a sum due hereunder in one
Currency into another Currency, the parties hereto agree, to the fullest extent
that they may effectively do so, that the rate of exchange used shall be that
at which in accordance with normal banking procedures the Administrative Agent
could purchase the first currency with such other currency on the Business Day
preceding the day on which final judgment is given.
(b) The obligation of a Borrower in respect of any sum due to any
Bank or the Administrative Agent hereunder shall, notwithstanding any judgment
in or receipt of a currency (the "Alternate Currency") other than that in which
such sum is denominated in accordance with the applicable provisions of this
Agreement or the other Credit Documents (the "Agreement Currency"), be
discharged only to the extent that on the Business Day following receipt by
such Bank or the Administrative Agent (as the case may be) of any such sum so
due in the Alternate Currency such Bank or the Administrative Agent (as the
case may be) may in accordance with normal banking procedures purchase the
Agreement Currency with the Alternate Currency; if the amount of the Agreement
Currency so purchased is less than the sum originally due to such Bank or the
Administrative Agent (as the case may be) in the Agreement Currency, each
Borrower agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify such Bank or the Administrative Agent (as the case may
be) against such loss, and if the amount of the Agreement Currency so purchased
exceeds the sum originally due to any Bank or the Administrative Agent (as the
case may be), such Bank or the Administrative Agent (as the case may be) agrees
to remit to the applicable Borrower such excess.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
Address:
605 Third Avenue CHARTWELL LEISURE INC.
New York, New York 10158
Telephone No.: (212) 692-1400
Telecopier No.: (212) 867-4644 By /s/ Martin L. Edelman
Attention: Kenneth Weber Name: MARTIN L. EDELMAN
Title: President
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Address: CHARTWELL CANADA CORP.
605 Third Avenue
New York, New York 10158 By /s/ Samuel Rosenberg
Telephone No.: (212) 692-1400 Name: SAMUEL ROSENBERG
Telecopier No.: (212) 867-4644 Title: Treasurer
Attention: Kenneth Weber
THE CHASE MANHATTAN BANK,
Individually and as
Administrative Agent
By /s/ William T. Caggiano
Name: WILLIAM T. CAGGIANO
Title: Managing Director
THE BANK OF NOVA SCOTIA,
Individually and as
Syndication Agent
By /s/ Stephen Lockhart
Name: STEPHEN LOCKHART
Title: Vice-President
BANQUE PARIBAS
By /s/ Duane P. Helkowski
Name: DUANE P. HELKOWSKI
Title: Assistant
Vice President
By /s/ Mary T. Finnegan
-----------------------------
Title: Assistant Vice
President
Title: Group Vice
President
CIBC, INC.
By /s/ Justin Sendak
Name: JUSTIN SENDAK
Title: Associate Director
MELLON BANK, N.A.
By /s/ Caroline R. Walsh
Name: CAROLINE R. WALSH
Title: Assistant Vice
President
NATIONSBANK, N.A.
By /s/ Eileen C. Higgins
Name: EILEEN C. HIGGINS
Title: Vice President
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SCHEDULE I
COMMITMENTS
Revolving Revolving C$
Loan Loan
Bank Commitment Commitment
The Chase Manhattan Bank $34,000,000 C$21,533,334
The Bank of Nova Scotia $34,000,000 C$21,533,334
Banque Paribas $15,000,000 C$9,500,000
CIBC, Inc. $25,000,000 C$15,833,333
Mellon Bank, N.A. $25,000,000 C$15,833,333
NationsBank, N.A. $17,000,000 C$10,766,666
TOTAL: ___________ ___________
$150,000,000 C$95,000,000
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SCHEDULE II
BANK ADDRESSES
The Chase Manhattan Bank 270 Park Avenue
New York, New York 10017
Telephone No.: (212) 270-1338
Telecopier No.: (212) 972-0009
Attention: William Caggiano
with a copy to:
Chase Agent Bank Services
140 East 45th Street, 29th Floor
New York, New York 10017
Telephone No.: (212) 622-0005
Telecopier No.: (212) 622-0002
Attention: Sandra Miklave
The Bank of Nova Scotia One Liberty Plaza
New York, New York 10006
Telephone No.: (212) 225-5027
Telecopier No.: (212) 225-5090 or
225-5091
Attention: Frank Monfalcone
Banque Paribas 787 Seventh Avenue
New York, New York 10019
Telephone No.: (212) 841-2940
Telecopier No.: (212) 841-2333
Attention: Duane Helkowski
CIBC, Inc. 425 Lexington Avenue
New York, New York 10017
Telephone No.: (212) 856-3683
Telecopier No.: (212) 856-3991
Attention: Justin Sendak
Mellon Bank, N.A. 65 East 55th Street
New York, NY 10022
Telephone No.: (212) 702-5347
Telecopier No.: (212) 702-5269
Attention: Caroline Walsh
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NationsBank, N.A. NationsBank NC1-007-20-01
100 N. Tyron St.
Charlotte, NC 28255
Telephone No.: (704) 386-8314
Telecopier No.: (704) 386-6453
Attention: David Wiles
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SCHEDULE III
[INTENTIONALLY OMITTED]
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SCHEDULE VII
C/M 11752.0000 414856.1
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") made as of the
1st day of October, 1996, between NRG MANAGEMENT SERVICES INC., an
Alberta corporation ("Developer"), having an address at 5940 MacLeod Trail
South, Suite 209, Calgary, Alberta T2H 2G4 Canada and NATIONAL LODGING CORP., a
Delaware corporation having an office at 605 Third Avenue, 29th Floor, New
York, New York 10158 ("NLC").
W I T N E S S E T H:
WHEREAS, concurrently with the execution of this Agreement,
Chartwell Canada Corp., an affiliate of NLC, ("Owner") is acquiring certain
hotels and other assets from Capital Properties Limited Partnership ("CPLP")
pursuant to a certain contract of sale dated as of July __, 1996 (the "Contract
of Sale"); and
WHEREAS, concurrently with the execution and delivery of this
Agreement, Bear Financial Corp., an affiliate of NLC, ("NLC Lender") is
entering into certain agreements pursuant to which NLC Lender will acquire (the
"Loan Acquisition") the Assigned Debt (as such term is defined in the Contract
of Sale); and
WHEREAS, it is a condition precedent to Owner acquiring the
CPLP Assets and the Business (as such terms are defined in the Contract of
Sale) and NLC Lender entering into the Loan Acquisition that Developer agree
(i) to use its considerable expertise in the planning and execution of hotel
and motel projects in Canada to locate Future Projects (hereinafter defined),
(ii) to submit a Proposal (hereinafter defined) with respect to each Future
Project and (iii) other than in accordance herewith, to not acquire,
beneficially or nominally, any interest in a Future Project during the term of
this Agreement (as extended pursuant to the terms of this Agreement, the
"Term"), all in consideration for payment of the Development Fee (hereinafter
defined) and Flip Transaction Compensation (hereinafter defined) and as more
particularly provided in this Agreement; and
WHEREAS, Developer, in consideration of payment of the
Development Fee and the Flip Transaction Compensation, has agreed to provide
the aforementioned services, all as more particularly described herein, subject
to the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the parties, intending to
be legally bound, covenant and agree with each other as follows:
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ARTICLE 1.
APPOINTMENT OF DEVELOPER
1.1 Engagement of Developer. NLC hereby engages Developer to
perform the services described herein, and Developer hereby accepts such
engagement.
1.2 Agency Obligations. Developer agrees to devote such time
and attention as may be reasonably necessary to accomplish the purposes of this
Agreement. In the discharge of its duties, Developer acknowledges that it shall
act as an agent of NLC and shall not be entitled to receive or retain any
compensation or other fees related directly or indirectly to any Future Project
except as specifically set forth herein. Developer acknowledges and agrees that
the restrictions on its ability and authority to obtain, even if only
temporarily, any interest, whether beneficially and/or nominally, for its own
account, in a Future Project, is a material inducement for NLC to enter into
this Agreement and any breach of such covenants by Developer may be
specifically enforced by NLC.
ARTICLE 2.
DEVELOPMENT SERVICES
2.1 Certain Definitions. As used in this Agreement the following
terms shall have the meanings set forth below:
(i) "Term" shall mean the Initial Term, the First Extended
Term and the Second Extended Term, unless sooner terminated in
accordance with Articles 6 and 7;
(ii) "Initial Term" shall mean the period commencing on the
date hereof and ending on the day immediately preceding the first
(1st) anniversary of the date hereof.
(iii) "First Extended Term" shall mean the period commencing
on the first (1st) anniversary of the date hereof and ending on the
day immediately preceding the second (2nd) anniversary of the date
hereof.
(iv) "Second Extended Term" shall mean the period commencing
on the second (2nd) anniversary of the date hereof and ending on the
day immediately preceding the third (3rd) anniversary of the date
hereof.
(v) "Future Project" or "Future Projects" shall mean any
hotel/motel project located in Canada, whether by way of
rehabilitation, new construction, acquisition, sale/leaseback or other
means of ownership and/or operation and
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development and/or acquisition; provided, however, the term "Future
Project" shall not include any "timeshare" project or "resort" hotels
(which, for the avoidance of doubt, shall mean any project in which
individual units are sold to the general public for specific weekly
intervals during each calendar year and hotels which are rated with
three (3) diamonds or higher by AAA/CAA (Automobile Association of
America/Canadian Automobile Association) designation and will have
certain of the amenities which are customarily included in destination
resorts (such as pool and health club facilities, spa facilities,
recreational facilities and/or banquet/catering facilities).
(vi) "Proposal" shall mean a written business plan with
respect to the development/acquisition of a Future Project, together
with projected cash flows, site analysis, market study, environmental
study, title report and such other information as may be mutually
agreed upon by NLC and Developer in order to make a determination as
to whether to pursue the Future Project to which such Proposal
relates; provided, however, each Proposal must include (i) a
reasonably detailed itemization of the out-of-pocket costs actually
incurred to date in identifying such Future Project and a reasonably
detailed estimate of anticipated out-of-pocket costs to be incurred in
connection with acquiring/developing such Future Project through the
closing thereon (collectively, "Developer Diligence Costs") and (ii) a
detailed, good faith analysis of the fair market value (without
guaranty or liability on the part of Developer of the ultimate
validity of such analysis) of NLC's interest should NLC or Developer
acquire such Future Project or any interest therein and then sell such
interest to a third party prior to closing on such acquisition;
provided, further, that a submission by Developer shall not be
considered a "Proposal" until such Proposal includes all such
information as has been mutually determined to be necessary prior to
making a determination as to whether or not to acquire/develop such
Future Project.
2.2 Submission of Proposal. Commencing as of the date hereof
and ending on the last day of the Term, Developer shall use commercially
reasonable efforts to diligence all Future Projects of which Developer becomes
aware that meet the written criteria submitted to Developer by NLC from time to
time and, upon review of each such Future Project, to submit a Proposal with
respect to such Future Project for review by NLC.
2.3 Response to Proposal. Upon submission of a Proposal to
NLC, NLC shall, within thirty (30) days, deliver notice to Developer, stating
whether or not NLC intends to pursue such Future Project. If NLC elects to
pursue such Future Project, then Developer shall perform the services set forth
in this Agreement and such other related services as NLC shall from time to
time reasonably require in order to acquire such Future Project in the most
diligent, commercially reasonable, economically efficient manner possible;
provided, however, except as provided in this Agreement, including Section 5.5
hereof, Developer shall not be required to incur costs and expenses with
respect to any such
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Future Project unless and to the extent NLC has approved reimbursement to
Developer therefor. In the event NLC declines to pursue such Future Project
(such Future Project thereby becoming a "Rejected Future Project"), then
Developer shall have the option to either (i) not pursue such Future Project,
including, without limitation, to acquire, or seek to acquire, any interest
therein, until after the last day of the Term or (ii) seek a person not
affiliated with Developer, Peter Sikora, Randy Royer, Greg Royer or Terrence
Royer (collectively, the "Royco Group") or NLC to acquire the interests in such
Future Project submitted under the Proposal (a "Flip Transaction") and receive
a commission or other compensation in connection with such introduction,
transfer, conveyance or assignment (such proceeds, howsoever defined or
denominated, "Flip Transaction Proceeds"). All Flip Transaction Proceeds shall
be held by Developer in trust, which shall, within five (5) days after receipt
thereof, distribute to NLC an amount equal to the Flip Transaction Proceeds
less the Flip Transaction Compensation (as defined and provided in Section 5.4
herein).
2.4 Restrictions on Developer's Acquisitions. During the
Term, neither Developer nor any of the Royco Group shall, directly or
indirectly, undertake the acquisition/ development of, or obtain any interest,
whether beneficial or nominal, permanent or temporary, choate or inchoate, in,
a Future Project (a "Developer Interest"); provided, however, the term
"Developer Interest" shall not include an interest in a Future Project acquired
in connection with the fulfillment of Developer's obligations hereunder.
2.5 Development Services Generally. As and to the extent
reasonably requested by NLC, Developer shall be responsible for performing the
activities set forth on Exhibit A hereto; provided, however, as and to the
extent that Developer does not have the personnel on staff to perform such
activities, then, in each such event, Developer shall retain third parties
(under agreements or other arrangements approved in writing in advance by NLC)
at NLC's cost or expense to perform such activities and shall direct and
supervise such performance. Developer, as an independent contractor, but as
agent of NLC, shall perform, or contract for, direct and supervise the
performance of, the aforesaid duties and the other duties and obligations set
forth herein with respect to Future Projects within the parameters and upon the
terms and conditions set forth herein.
2.6 Service Contracts. As a condition precedent to receipt of
any compensation hereunder, Peter Sikora and Randy Royer shall not be in breach
of any representations, warranties or covenants under the Service Contracts.
Attached hereto as Exhibit B are the service contracts which require that the
services of Peter Sikora and Randy Royer to be provided to the Developer (each,
a "Service Contract" and, collectively, the "Service Contracts"). Such Service
Contracts may not be amended without the prior written consent of NLC.
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ARTICLE 3.
RESPONSIBILITIES OF DEVELOPER
3.1 Personnel. Subject to Section 2.5 with respect to the
Development Services set forth on Exhibit A, Developer shall employ such
personnel as Developer shall from time to time consider appropriate to enable
it to properly perform its obligations hereunder and shall be solely
responsible to its personnel and members of its staff for their salary, bonuses
and other benefits. Developer may itself or through any of its affiliates
perform any part or all of its obligations hereunder at Developer's cost and
expense, in which case the obligations of the Developer shall be treated as
satisfied when performed by any such affiliate.
3.2 Meetings. Developer shall be available at reasonable
intervals and on reasonable notice to participate at such public and private
meetings and hearings as may be reasonably requested by NLC.
3.3 Reporting. Developer shall at all times keep NLC advised
of the activities of Developer hereunder and shall afford NLC an opportunity to
take part in all decisions affecting a Future Project. Without limiting the
foregoing, not less frequently than monthly, Developer shall furnish to NLC a
written status report concerning all Future Projects as to which Developer is
considering submitting a Proposal. In addition to the monthly status report,
Developer shall prepare, from time to time, such other reports as NLC may
reasonably request.
ARTICLE 4.
RESPONSIBILITIES OF NLC
4.1 Representative. NLC shall designate in writing a
representative who shall have the sole responsibility for representing it
during the Term of this Agreement. Developer shall communicate with and through
the representative on all matters relating to Developer's performance under
this Agreement and shall have the right to rely on the representative as being
duly authorized to act for NLC on all matters hereunder. The initial Project
representative of NLC shall be Martin L. Edelman; the Project representative
may be changed by NLC from time to time during the Term of this Agreement by
delivery of written notice to Developer.
4.2 Payments. NLC shall make when due all payments hereunder
required to be paid to Developer pursuant to Article 5 and all payments due to
third parties approved in
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writing by NLC under a written agreement in connection with the acquisition of
a Future Project.
4.3 Retention of Management; Future Project Profit
Participation. In the event NLC acquires a Future Project for which Developer
submitted a Proposal during the Term of this Agreement, then, in such event,
NLC shall retain NL Hotels, Inc. (an entity controlled by NLC, being, for the
avoidance of doubt, the same entity which is the manager of Owner's hotels and
hereinafter defined as "Manager") to manage each such Future Project pursuant
to a management agreement (each, a "Management Agreement") which shall be on
terms substantially similar to those contained in that certain management
agreement dated as of the date hereof between Owner, as owner, and Manager, as
manager (the "Chartwell Management Agreement"); provided, however, each such
Management Agreement for a Future Project shall provide that upon expiration or
sooner termination of this Agreement, or any time thereafter, Owner may in its
sole and absolute discretion terminate each Management Agreement on ninety (90)
days written notice without payment of premium or penalty. In addition, through
a separate agreement executed concurrently with each Management Agreement or
earlier as hereinafter provided, Developer shall be entitled to receive a
contractual (i.e., not through equity ownership in the Future Project-owning
entity) five (5%) percent profit participation in the interests of NLC or its
Affiliates in annual cash flow from operations and capital transactions in
respect of the Future Project (as determined in accordance with United States
generally accepted accounting principles consistently applied from period to
period, modified as required by the accounting practices set forth in the
Uniform System of Accounts for Hotels and Motels (most current edition)) after
NLC has received (i) a thirteen (13%) percent cumulative compounded return on
all invested capital, whether through equity or debt investment, with respect
to such Future Project ("Aggregate Capital Investment") and (ii) a return of
the Aggregate Capital Investment with respect to such Future Project (such
Developer profit participation shall be defined, with respect to any Future
Project, as "Future Project Profit Participation"). The agreements evidencing
the Future Project Profit Participation with respect to any Future Project
shall (i) be in a form and structure similar to the manner in which the Capital
Proceeds Participation Calculation, but amended to include cash flow from
operations as set out above, is made pursuant to, and as such term is defined
in, the Future Payments Agreement (as such term is defined in the Contract of
Sale) and (ii) survive termination of the Management Agreement with respect to
such Future Project.
4.4 Non-Exclusive Engagement. It is expressly acknowledged
and agreed that during the term of this Agreement, except as specifically
provided herein with respect to Future Projects for which Developer has
submitted a Proposal, (i) NLC shall have no obligations or liabilities to
Developer whatsoever with respect to Future Projects and (ii) if NLC elects to
construct, operate or acquire other hotels/motels, timeshares or resort hotels
in Canada ("Hotels"), alone or with third parties, NLC shall have no obligation
to employ Developer as manager thereof.
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ARTICLE 5.
DEVELOPER COMPENSATION
5.1 Certain Definitions. As used in this Agreement, the
following terms shall have the meaning set forth below:
(a) "Initial Term Compensation" shall mean an amount equal to
Eight Hundred Thousand ($800,000 CDN) (Canadian) Dollars. The Initial Term
Compensation shall be payable as follows: an amount (the "First Installment")
equal to Three Hundred Forty-One Thousand Six Hundred Seventy-Four ($341,674
CDN) (Canadian) Dollars payable concurrently with the parties' execution of
this Agreement, receipt of which is hereby acknowledged, and Four Hundred
Fifty-Eight Thousand Three Hundred Twenty-Six ($458,326 CDN) Dollars (Canadian)
payable in eleven (11) equal monthly installments of Forty-One Thousand Six
Hundred Sixty-Six ($41,666 CDN) Dollars (Canadian) commencing on the first day
of the next full calendar month following the date hereof and ending on the
first day of the last calendar day of the Initial Term.
(b) "First Extended Term Compensation" shall mean Five
Hundred Thousand ($500,000 CDN) Dollars (Canadian), payable in equal monthly
installments during the First Extended Term commencing on the first day
thereof.
(c) "Second Extended Term Compensation" shall mean an amount
equal to Five Hundred Thousand ($500,000 CDN) Dollars (Canadian) payable in
equal monthly installments during the Second Extended Term commencing on the
first day thereof.
5.2 Development Fee. In consideration for the services to be
performed by Developer hereunder and Developer's agreement to refrain from
acquiring a Developer Interest in Future Projects as and to the extent provided
herein, NLC agrees to pay to Developer, compensation (the "Development Fee") as
follows:
(a) During the Initial Term, the Initial Term Compensation;
(b) During the First Extended Term, if applicable, the First
Extended Term Compensation; and
(c) During the Second Extended Term, if applicable, the Second
Extended Term Compensation.
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5.3 Expense Reimbursement.
(a) If NLC approves a proposal for a Future Project, then
Developer Diligence Costs (exclusive of any goods and services tax under the
Excise Tax Act (Canada) (the "GST") for which the Developer is entitled to an
input tax credit and exclusive of any like tax paid by Developer for which
Developer is entitled to a refund) with respect thereto and consistent with the
proposal shall be reimbursed by NLC to Developer (or, at NLC's election, paid
directly to the supplier of materials and/or provider of services) within
thirty (30) days after receipt of such documentation as may be reasonably
requested by NLC to confirm the incurrence of such expenditures.
(b) If a Rejected Future Project is a subject of a Flip
Transaction, then the Developer Diligence Costs for such Rejected Future
Project ("Rejected Future Project Authorized Expenses") shall be paid in
accordance with Section 5.4 hereof from Flip Transaction Proceeds within
fifteen (15) days after receipt of such documentation as may be reasonably
requested by NLC to confirm the incurrence of such expenditures.
(c) All expenses, howsoever denominated or defined, incurred
in connection with locating, or performing due diligence upon, Future Projects
for which a Proposal is not submitted or, if a Proposal is submitted with
respect to such Future Project, if such Future Project is a Rejected Future
Project and is not the subject of a Flip Transaction, shall be paid by
Developer, unless NLC, in its sole discretion, shall otherwise agree. If NLC
agrees, in its sole and absolute discretion, to pay any such costs and
expenses, then such approved costs and expenses shall be reimbursed by NLC to
Developer (or, at NLC's election, paid directly to the supplier of materials
and/or provider of services) within thirty (30) days after receipt of such
documentation as may be reasonably requested by NLC to confirm the incurrence
of such approved costs and expenses. Developer covenants and agrees to
indemnify and hold NLC harmless from any loss, cost or expense incurred by NLC
in connection with any claim or demand by a provider of services or supplier of
materials, payment for which is the responsibility of Developer (i.e., for
payment of expenses which NLC has not expressly elected to assume, as provided
above).
5.4 Flip Transaction Compensation. In addition to the
Development Fee, upon receipt of any Flip Transaction Proceeds (which Developer
shall hold in trust for NLC as provided in Section 2.3 hereof), together with a
certification from Developer that all expense reimbursement requests with
respect to such Rejected Future Project which is the subject of the Flip
Transaction have been properly submitted to NLC, Developer shall retain from
such Flip Transaction Proceeds (i) the Rejected Future Project Authorized
Expenses and (ii) fifty (50%) percent of the balance of Flip Transaction
Proceeds in consideration for its services performed hereunder in arranging for
such Flip Transaction ("Flip Transaction Compensation"). After reducing the
Flip Transaction Proceeds by the Flip Transaction
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Compensation, Developer shall deliver to NLC the balance of the Flip
Transaction Proceeds from such Rejected Future Project.
5.5 Developer's Overhead. Except as expressly provided herein
with respect to reimbursement of certain Developer Diligence Costs, the
Development Fee and Flip Transaction Compensation shall be deemed to cover all
costs and expenses incurred by Developer in performing its services hereunder;
provided, however, the following, items shall be borne solely by Developer out
of the Development Fee, without any obligation upon NLC to reimburse Developer
therefor or to pay Developer any amount with respect thereto (i.e., these costs
and expenses shall not be includable as Developer Diligence Costs): salaries,
bonuses and other compensation of employees of Developer; rent for offices used
by Developer in performing obligations hereunder; local transportation charges;
telephone, facsimile transmission and utility charges incurred by Developer at
its general office; and office supplies, repair and maintenance of office
machines and postage incurred by Developer at its general office.
5.6 Indemnification Obligations. Developer acknowledges and
agrees that all compensation or other sums due and payable to Developer or its
affiliates hereunder other than amounts paid to Developer in trust for further
payment to persons not affiliated with any of the persons constituting the
Royco Group in reimbursement of expenses previously approved by NLC in
connection with a Future Project or a Rejected Future Project shall be subject
to offset and/or reduction as provided in that certain indemnification
agreement dated as of the date hereof between NLC, Owner and NL Hotels, Inc.,
on the one hand, and Developer, Syndicated Capital Properties Inc., CPLP and
Royco Hotels & Resorts, Ltd., on the other (the "Indemnification Agreement").
5.7 GST and Withholding. All payments in respect of the
Development Fee shall be net of Goods & Services Tax (GST), and the parties
acknowledge that the amount of the GST which NLC is required to pay on such
payments shall be paid by NLC to Developer and shall be remitted by Developer
in accordance with applicable law. To the extent Developer is required by law
to withhold any withholding tax (by reason of NLC being a United States
taxpayer), such amounts shall be deducted from Flip Transaction Proceeds
payable to NLC hereunder; provided, however, the parties shall endeavor to
structure all transactions to eliminate, or minimize, any such withholding tax.
Developer shall provide evidence of payment of GST and withholding tax upon
request of NLC.
ARTICLE 6.
TERM
6.1 Initial Term. Subject to the terms and conditions set forth
in Sections 6.2 and 6.3 below, the parties' obligations under this Agreement
shall commence on the date
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hereof and shall terminate on the last day of the Second Extended Term, unless
this Agreement shall be sooner terminated in accordance with Article 7 below.
6.2 Earlier Expiration of the Term. (a) During the Initial
Term, NLC, in its sole and absolute discretion, may elect to terminate this
Agreement with respect to Future Projects by delivering written notice of
termination to Developer, on or prior to the date which is ninety (90) days
prior to the last day of the Initial Term, in which event the Term shall expire
on the last day of the Initial Term.
(b) During the First Extended Term, NLC, in its sole and
absolute discretion, may elect to terminate this Agreement by delivering
written notice of termination (the "Second Extended Term Termination Notice")
to Developer, on or prior to the date which is ninety (90) days prior to the
end of the First Extended Term, in which event the Term shall expire on the
last day of the First Extended Term.
(c) If (i) NLC does not deliver the Second Extended Term
Termination Notice and (ii) Developer, in its sole and absolute discretion,
does not desire to so further extend the Term to include the Second Extended
Term, then Developer may terminate this Agreement by delivering written notice
of termination to NLC on or prior to the date which is sixty (60) days prior to
the last day of the First Extended Term, in which event the Term shall expire
on the last day of the First Extended Term.
6.3 Expiration of Term. Upon expiration of the Term, by
operation of this Article 6 or pursuant to Article 7:
(i) Developer shall no longer have any obligation to provide NLC
with a Proposal prior to acquiring/developing Future Projects;
(ii) Developer shall have the right to pursue Future Projects
for its own account;
(iii) Developer (1) shall receive Future Project Profit
Participation in respect of any Future Project in existence as at the
expiration of the Term, (2) shall be entitled to receive Future
Project Profit Participation or Flip Transaction Compensation, as the
case may be, arising in respect of any Proposal submitted prior to the
expiration of the Term (and for greater certainty, the provisions of
Section 2.3 of this Agreement shall continue to obtain in respect of
any such Rejected Future Project), (3) shall be entitled to receive
Flip Transaction Compensation arising in respect of any Rejected
Future Project (and for greater certainty, the provisions of Section
2.3 of this Agreement shall continue to obtain in respect of any such
Proposal), (4) shall receive Due Diligence Costs to which it is
entitled pursuant to Section 5.3 of this Agreement and (5) shall
receive installments of Development Fee
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due with respect to the applicable Term in which such termination
event occurs through the date specified in the termination notice;
(iv) Developer shall not be obligated to provide any
development or other services under this Agreement from and after the
expiration of the Term except for its continuing obligation to deliver
to Owner Flip Transaction Proceeds (less Flip Transaction
Compensation) with respect to the Rejected Future Projects in
accordance with Section 2.3; and
(v) for greater certainty, except as expressly provided in
subsection (iii) above, NLC shall have no obligation or liability to
Developer under this Agreement from and after the expiration of the
Term.
ARTICLE 7.
TERMINATION
7.1 Definitions. As used in this Article 7:
(i) An "Insolvency Event" shall have occurred with respect
to a party if such party (and with respect to Developer, Peter Sikora
and Randy Royer shall be deemed a "party") shall make an assignment
for the benefit of creditors, or files, or consents to, any petition
in bankruptcy or for reorganization under any bankruptcy or insolvency
law, or for a receiver or trustee for a substantial portion of its
property, or to effect a composition or extension of time to pay its
debts, or for any alteration or adjustment of a substantial part of
its indebtedness; or if a party shall commence proceedings for or take
any corporate action authorizing or providing for its dissolution or
liquidation; or if a receiver or trustee shall be appointed for a
substantial part of the property of such party and such appointment
shall not be vacated in sixty (60) days; or if a petition in
bankruptcy or insolvency or for reorganization or liquidation of such
party or for alteration or adjustment of a substantial part of the
indebtedness of such party shall be filed against such party under any
bankruptcy, insolvency or other law relating to debtors or to
alteration or adjustment of indebtedness, or if a petition, complaint
or action shall be filed against such party seeking its liquidation,
and any such petition, complaint or action shall not be dismissed
within ninety (90) days after filing.
(ii) A "for cause" event shall be deemed to have occurred
with respect to a party if such party commits gross negligence, fraud
or wilful misconduct, or suffers a criminal indictment, and if any of
such events results in a material breach of such party's obligations
hereunder, which material breach is not cured within thirty (30)
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days after receipt by such party of a notice setting forth and
describing such breach or, if such breach cannot be cured within
thirty (30) days, the curing of such breach is not commenced within
said thirty (30) days and thereafter diligently prosecuted until cured
within a period not to exceed thirty (30) additional days. In
addition, a "for cause" event shall be deemed to have occurred with
respect to Developer if Developer acquires, or contracts to acquire or
attempts to acquire, a Developer Interest in any Future Project
(including any Rejected Future Project), except, upon notice to NLC,
solely in connection with arranging a Flip Transaction.
(iii) The term "Disabled" with respect to any person means
that such person has (i) suffered an Insolvency Event, (ii) become
legally incompetent, (iii) become disabled from performing the
services required under this Agreement for a period of either ninety
(90) consecutive days or sixty (60) days in any one hundred eighty
(180) day period.
7.2 Termination by NLC or Developer. This Agreement is
terminable by NLC immediately upon notice to Developer upon (i) the occurrence
of an Insolvency Event, (ii) Peter Sikora having been Disabled, unless Randy
Royer or another person acceptable to NLC (in its sole and absolute discretion)
having substantial experience in developing Future Projects binds himself
contractually to devote substantially all of his time to NLC in accordance with
this Agreement, within thirty (30) days of Peter Sikora having become Disabled,
(iii) the occurrence of a "for cause" event with respect to Developer or Peter
Sikora or any of their respective successors or (iv) a breach by Peter Sikora
and Randy Royer of their obligations under the Service Contracts, which breach
is not cured within ten (10) days of written notice of such breach by NLC to
Developer. This Agreement is terminable by Developer immediately upon notice to
NLC upon the incurrence of an Insolvency Event or a "for cause" event by NLC.
Upon termination by NLC under this Section 7.2, this Agreement shall be
terminated as if the date specified in said notice of termination was the last
day of the Term and NLC and Developer shall have no further obligation or
liability whatsoever to each other except as set out in Section 6.3.
7.3 Final Reports and Accounts. Within thirty (30) days after
the effective date of termination of this Agreement by either party, Developer
shall furnish to NLC such statements, accounts and reports relating to all
Future Projects located by Developer prior to the effective date of termination
as may be reasonably requested by NLC for tax, administration, diligence or any
other purpose or purposes.
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ARTICLE 8.
NOTICES
8.1 All notices under this Agreement shall be written and
shall be (a) delivered personally, (b) sent by prepaid, nationally recognized
overnight delivery service, or (c) sent by telecopy or other facsimile
transmission (following with next-day hard copy sent by prepaid, nationally
recognized overnight delivery service).
8.2 All notices shall be deemed given when actually received
or refused by the party to whom the same are directed. Any notice required to
be sent under the terms of this Agreement shall be sent as follows:
(i) If to Developer, at the address first set forth above,
attention Peter Sikora, telecopy No.: (403) 292-0922;
with a copy to:
Brans, Lehrun, Baldwin & Champagne
120 Adelaide Street West
Suite 1701
Toronto, Ontario M5H 1T1
Attention: Dennis Brans, Esq.
Telephone: (416) 601-1040
Telecopy: (416) 601-0655
If to NLC, at the address first set forth above,
Attention: Martin L. Edelman,
telecopy No.: (212) 867-54745
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10020
Attention: Robert J. Wertheimer, Esq.
Telephone: (212) 856-6910
Facsimile: (212) 856-7808
By giving to the other party at least 15 days written notice
thereof, the parties hereto and their respective successors and assigns will
have the right from time to time and
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at any time during the Term of this Agreement to change their respective
addresses and each will have the right to specify as its address any other
address.
ARTICLE 9.
REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties of NLC. NLC represents and
warrants to Developer that it is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
necessary power to execute and deliver this Agreement and perform all its
obligations hereunder. This Agreement has been duly authorized by all requisite
action on the part of NLC and is a valid and legally binding obligation of NLC
enforceable in accordance with its terms. Neither the execution and delivery of
this Agreement by NLC nor the performance of its obligations hereunder will
result in the violation of any provision of its articles of formation, as
amended to date, or will conflict with (i) any law or any order or decree of
any court or governmental instrumentality having jurisdiction or (ii) any other
agreement to which NLC is a party or is otherwise bound.
9.2 Representations and Warranties of Developer. Developer
represents and warrants to NLC that it is a corporation duly organized, validly
existing and in good standing under the laws of the Province of Alberta and has
all necessary power to execute and deliver this Agreement and perform all its
obligations hereunder. This Agreement has been duly authorized by all requisite
action on the part of Developer and is a valid and legally binding obligation
of Developer enforceable in accordance with its terms. Neither the execution
and delivery of this Agreement by Developer nor the performance of its
obligations hereunder will result in the violation of any provisions of its
constating documents, as amended to date, or will conflict with (i) any law or
any order or decree of any court or governmental instrumentality having
jurisdiction or (ii) any other agreement to which Developer is a party or is
otherwise bound.
ARTICLE 10.
INDEMNIFICATION PROVISIONS; NLC EXCULPATION
10.1 Indemnity. Developer and NLC agree to indemnify and hold
harmless the other and all of its officers, directors, shareholders, partners,
affiliates, agents and employees (collectively and respectively, "Developer
Indemnitees" and "NLC Indemnitees") against any and all claims, losses,
penalties, fines, forfeitures, judgments, reasonable attorneys' fees and
related litigation costs, fees and expenses and amounts paid in
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settlement actually and reasonably incurred in connection with any claim(s)
against any NLC Indemnitee or Developer Indemnitee, as the case may be:
(a) which result from any act or omission constituting gross
negligence, bad faith or willful misconduct by Developer or NLC, as the case
may be, or any officer, director, shareholder, partner, agent or employee of
Developer or NLC, as the case may be, in connection with the performance by
Developer or NLC of their respective obligations under this Agreement;
(b) which result from any action taken by or on behalf of
Developer or NLC, as the case may be, which is a material breach of any
Developer's or NLC's, as the case may be, covenants or representations in this
Agreement; or
Any payment (the "Payment") made pursuant to this Section 10.1 that is subject
to Goods and Services Tax (GST) or is deemed by Revenue Canada to be inclusive
of Goods and Services Tax (GST), or is subject to any other tax, the
Indemnifying Party (as defined below) agrees to pay to the Indemnified Party
(as defined below), in addition to the Payment, an amount equal to the tax
payable in connection with such Payment and such additional amount.
10.2 Indemnity Procedures. If any claim shall be asserted, or
any action, suit or other proceeding shall be instituted, by a third party
against any NLC Indemnitee or Developer Indemnitee (each an "Indemnified
Party"), with respect to any occurrence as to which the other party (an
"Indemnifying Party") shall have any indemnity obligation under this Agreement,
such Indemnified Party shall promptly notify Indemnifying Party of the
assertion of such claim, action, suit or proceeding and shall tender the
defense and, subject to the next succeeding paragraph, settlement or compromise
of any such claim, action, suit or proceeding to Indemnifying Party for conduct
thereof by Indemnifying Party. Indemnifying Party shall timely commence and
diligently continue such defense, settlement or comprise at Indemnifying
Party's sole expense. Indemnifying Party shall have the right to select
counsel, subject to Indemnified Party's prior written approval, which approval
shall not be unreasonably withheld or delayed, for such defense. Should any
such claim, action, suit or proceeding result in a final and unappealable
judgment, Indemnifying Party shall promptly pay the same. Indemnified Party
agrees to cooperate with Indemnifying Party to the extent Indemnifying Party
may reasonably request such cooperation but at the sole expense of Indemnifying
Party. Indemnifying Party shall succeed to and have the benefit of all the
defenses, claims and other rights of each Indemnified Party relating to or
affecting any obligation or liability of Indemnifying Party under this
indemnity, and each Indemnified Party agrees to fully disclose any and all such
defenses, claims and other rights to Indemnifying Party and upon request to
promptly execute any documents and take any other action (at the sole expense
of the Indemnifying Party) necessary or desirable to further assure unto
Indemnifying Party the right to benefit from such defenses, claims or other
rights.
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<PAGE>
Indemnified Party shall have the right (but shall not have the obligation) upon
notice to Indemnifying Party and failure of Indemnifying Party to act, at any
time and at its own cost and expense, to participate in the defense of any such
claim, action, suit or proceeding, to be represented by counsel of its choice
(provided, however, that the Indemnifying Party shall not be liable under this
subparagraph for the fees and expenses of more than one set of counsel for all
Indemnified Parties unless a conflict of interest exists between or among
Indemnified Parties) and to assert in any such action, suit or proceeding any
counterclaims or cross claims Indemnified Party may have. In the event
Indemnifying Party fails to timely commence the defense, settlement or
compromise thereof, Indemnified Party shall have the right (but shall not have
the obligation), following notice to Indemnifying Party, to act, defend,
settle, compromise or take such other action as Indemnified Party shall deem
necessary in connection with any such claim, action, suit or proceeding. In the
event it is determined that Indemnified Party was entitled to be indemnified
under this Article by Indemnifying Party, then Indemnified Party shall have the
right to be indemnified by Indemnifying Party for the entire cost of defense,
including reasonable attorneys' fees and disbursements and experts' fees and
expenses (including those incurred in connection with appellate proceedings).
Notwithstanding the foregoing, if any party making such claim, or any party to
any such action, suit or proceeding, shall take any action to create or impose
any lien or encumbrance on any of the assets of Indemnified Party in respect of
such claim, action, suit or proceeding or if any judgment shall be entered
which would result in Indemnified Party being obligated to pay the same, then
Indemnifying Party shall provide such bond, deposit or take such other action
as shall be required to prevent the creation or imposition of any such lien,
and to stay the execution of such judgment pending any appeal or other
proceeding prior to final entry thereof. Indemnifying Party shall have the
right to settle or compromise any such claim, action, suit or proceeding
without the prior written consent of Indemnified Party provided that, at the
time of such settlement or compromise, Indemnifying Party shall satisfy and
discharge any and all liability of Indemnified Party resulting therefrom or
shall post security reasonably satisfactory to the Indemnified Party to assure
the ultimate satisfaction and discharge of such liability. Except as provided
in the preceding sentence, Indemnifying Party shall not settle or compromise
any such claim, action, suit or proceeding without the prior written consent of
the Indemnified Party, which consent shall not be unreasonably withheld or
delayed. The failure or delay of Indemnified Party to promptly notify
Indemnifying Party of the institution of any claim, action, suit or other
proceeding shall not release or otherwise limit the indemnification obligation
of Indemnifying Party except to the extent that Indemnifying Party shall be
prejudiced by the failure or delay of Indemnified Party to give Indemnifying
Party notice of such action, suit or proceeding.
10.3 Recovery of Litigation Costs. In the event any dispute
between the parties to this Agreement shall result in litigation, arbitration
or other proceeding, the court shall be requested to award to the prevailing
party all reasonable costs and expenses, including without limitation
reasonable attorneys' fees and disbursements, incurred by the
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<PAGE>
prevailing party in connection with such litigation or other proceeding and any
appeal thereof. Such costs, expenses, fees and disbursements shall be included
and made a part of the judgment recovered by the prevailing party, if any.
ARTICLE 11.
MISCELLANEOUS PROVISIONS
11.1 Governing Law. This Agreement has been entered into in
the Province of Ontario. This Agreement and all rights of the parties hereunder
shall be governed by and construed in accordance with the laws of the Province
of Ontario without regard to principals of conflicts of laws.
11.2 Entire Agreement. This Agreement embodies and
constitutes the entire understanding among the parties with respect to the
matters herein contained, and all prior or contemporaneous agreements,
understandings, representations and statements, oral or written, are merged
into this Agreement. No waiver or modification of any provision of this
Agreement shall be valid unless in writing and signed by the party to be
charged, and then only to the extent therein set forth.
11.3 Captions. The captions in this Agreement are intended
only for convenience of reference, do not constitute a part of this Agreement
and shall not be construed to define, interpret, describe or limit the scope or
intent of any provision of this Agreement.
11.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
11.5 Benefits and Obligations. Except as otherwise provided
in this Agreement, this Agreement shall be binding upon and shall inure to the
benefit of the respective successors and permitted assigns of the parties
hereto. NLC shall have the right to assign its interests in this Agreement to
any successor-in-interest of NLC's rights in, to or under any Future Project
if, but only if, such assignee and/or a financially capable affiliate thereof
agree to assume each and every obligation of NLC hereunder including, without
limitation, payment of the Compensation payable under Article 5 hereof.
11.6 Prohibition on Assignment by Developer. The rights,
duties and performance of Developer hereunder are personal in nature and may
not be assigned or transferred to any other party other than an entity
wholly-owned, directly or indirectly, and controlled by Peter Sikora, Randy
Royer, Greg Royer and Terrence Royer, or a combination thereof.
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<PAGE>
11.7 No Waiver. No assent, express or implied, by either
party to any breach of or default in any Term, covenant or condition herein
contained on the part of the other to be performed or observed shall constitute
a waiver of or assent to any succeeding breach of or default in the same or any
other Term, covenant or condition hereof.
11.8 Force Majeure. In the event that either party shall be
unable to perform timely its obligations hereunder due to fire, earthquake,
flood, explosion, casualty, strikes, walkouts, work stoppages or other labor
disputes, unavailability of materials, unavoidable accident, riot,
insurrection, governmental action or omission, judicial regulatory order, civil
disturbance, act of public enemy, embargo, war, act of God, or any other cause
beyond its control, the time for such performance shall be extended for a
period equal to the length of the delay caused thereby.
11.9 Invalidity of Provisions. In the event that any one or
more of the phrases, sentences, clauses or paragraphs contained in this
Agreement shall be declared invalid by the final and unappealable order, decree
or judgment of any court, this Agreement shall be construed as if it did not
contain such phrases, sentences, clauses or paragraphs; provided, however, that
the parties hereto shall endeavor in good faith to replace such invalid aspect
with another that is valid and that insofar as possible manifests the intent by
the parties to this aspect.
11.10 Rights of Others. Nothing in this Agreement, express or
implied, is intended to confer upon any person other than the parties hereto,
and their permitted successors and assigns, any rights or remedies under or by
reason of this Agreement.
11.11 Affiliate Transactions. In the performance of its
duties hereunder, Developer may retain, employ or contract with on behalf of
NLC any affiliate, subsidiary or other related person or entity for the
furnishing of materials or services in connection with the Project; provided,
however, that the terms and provisions of any such agreement must be (i)
approved in advance by NLC and (ii) at least as favorable to NLC as would be
obtainable by Developer in a comparable arm's-length transaction with a person
or entity other than Developer's affiliate, subsidiary or other related person
or entity.
11.12 Independent Contractor. Developer's performance of its
duties hereunder will be solely as an independent contractor. Under no
circumstances will Developer be deemed to be a partner or a joint venturer with
NLC, and Developer will have no authority to bind NLC other than as set forth
in this Agreement.
11.13 Survival of Obligations. All of the obligations,
representations, warranties and covenants made in this Agreement shall be
deemed to have been relied upon by the party to which it was made and to be
material and shall survive the execution and performance of any agreements
related hereto to the extent that they are, by their terms, or
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<PAGE>
by a reasonable interpretation of the context, to be performed or observed
after the performance of any such agreements.
11.14 Supplemental Documents. Recognizing that the
implementation of the provisions hereof with respect to various actions of the
parties hereto may require the execution of supplemental documents the precise
nature of which cannot now be anticipated, each of the parties agrees to assent
to, execute and deliver such other and further documents as may be reasonably
required by other parties hereto so long as such other and further documents
are consistent with the terms and provisions hereof, shall not impose
additional obligations on any parties, shall not deprive any party of the
privileges herein granted to it and shall be in furtherance of the intent and
purposes of this Agreement.
11.15 Confidentiality. Developer and NLC, for themselves and
their affiliates, subsidiaries, agents, employees, and retained professionals,
agree to keep this Agreement confidential and not to make any public
announcements or public disclosures or communicate with any media with respect
to the subject matter hereof without the written consent of all parties.
Developer and NLC shall cause their affiliates, subsidiaries, agents, employees
and retained professionals to agree in writing to comply with the provisions of
this paragraph.
11.16 Assignment. Except for assignment to an entity or
entities directly or indirectly owned or controlled by NLC, for which
Developer's consent shall not be required, this Agreement may not be assigned
by NLC without the prior written consent of Developer, which consent may be
granted or withheld by Developer in its sole and absolute discretion. In the
event of any such assignment to an affiliate of NLC, NLC will guaranty, in form
and substance reasonably acceptable to the Developer, the obligations of such
assignee under this Agreement.
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK;
THE SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Development Agreement as of the day and year first above
written.
NATIONAL LODGING CORP. (Now known as
Chartwell Leisure Inc. as of 8/8/96)
By: /s/ Douglas Verner
Name: DOUGLAS VERNER
Title:
NRG MANAGEMENT SERVICES INC.
By: /s/ Peter Sikora
Name: PETER SIKORA
TITLE:
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<PAGE>
EXHIBIT A
Development Services
1. Obtain Required Approvals: Developer shall assist NLC as requested in
obtaining all necessary zoning and other approvals, consents, permits,
licenses, variances, and authorizations required or desirable for the
acquisition, construction, development and operation of each Future Project
(collectively, the "Required Approvals"). Developer hereby agrees to use its
reasonable commercial efforts (x) to secure all Required Approvals and (y) to
comply with all conditions precedent set forth in the Required Approvals or
otherwise to complete each Future Project in accordance with the development
plan therefor ("Development Plan").
2. Retain Project Architect: Developer shall retain, on behalf of the NLC, one
or more architectural firms licensed in the Province in which such Future
Project is located (collectively, the "Project Architect") to prepare initial
schematic and development drawings. The identity and Term of employment of the
Project Architect and any associated architects and design professionals shall
be subject to NLC's approval. Developer shall cause the Project Architect to
prepare preliminary, schematic and final drawings and, thereafter, plans and
specifications for each Future Project (as revised, "Plans and Specifications")
consistent with the Development Plan. NLC shall approve the schematic drawings
and, if inconsistent with the schematic drawings, the final Plans and
Specifications. Developer shall not make material changes to the Plans and
Specifications without NLC's prior written approval unless such material
changes are reflected in the Development Plan or Project Budget.
3. Prepare Pro-Forma Budget: Developer shall prepare, for NLC's approval and as
part of the Proposal, an economic pro-forma budget, noting in detail the
schedule of costs and income sources expected during development of each Future
Project for the period noted in such budget (as revised from time to time, the
"Project Budget") which shall be not earlier than the first anniversary of the
anticipated closing thereon.
4. Assist in Financing: Upon request by NLC, Developer shall introduce NLC to
construction lenders with whom Developer has a continuing and satisfactory
relationship.
5. Retain Construction Manager and Subcontractor: Developer will advise, assist
and make recommendations to NLC regarding the selection of the construction
manager (the "Construction Manager"), subcontractors and any other specialists
retained in connection with the design, construction and completion of the
Project, as well as the negotiation of the agreement(s) under which they are
retained. Developer will endeavor to provide that the general construction
contracts or appropriate change order (i) contains all representations and
warranties with respect to construction, which are required of NLC pursuant to
any lease or
C/M: 11752.0002 346852.8
<PAGE>
financing entered into with respect to the Project, and (ii) provides for
liability insurance, fidelity bond and completion guaranty of the kind and
amounts customarily carried in a construction project of this type and
magnitude; provided, however, any such insurance requirement may be satisfied
by alternative means approved by NLC.
6. Construction Documents; Coordination of Construction Activities: (a)
Developer will supervise the preparation of, and administer and monitor
compliance with, the Construction Documents. As used in this Agreement, the
term "Construction Documents" means, collectively, (x) the Plans and
Specifications setting forth in detail the requirements for the construction of
the Project and (y) the construction agreements between NLC and all
materialmen, suppliers and contractors.
(b) Developer will (w) prepare and maintain time schedules,
(x) coordinate the design, construction and completion of the Project with the
Project Architect, engineers and contractors retained by NLC, (y) supervise and
inspect all phases of the construction of the Project, monitoring the
contractors, Project Architect, engineers and other specialists for performance
in accordance with their respective agreements and (z) promptly notify NLC of
any material failure by such parties to comply with such agreements of which
Developer is aware.
(c) Developer will review the preparation of "punch lists" of
construction work requiring completion and correction from time to time to
ensure such work is performed in accordance with the Construction Documents.
(d) Developer will review applications for payment by
contractors, architects and other specialists in connection with the Project,
will provide recommendations or comments or take other appropriate action with
respect to such applications and will aid in processing such applications with
each Lender.
(e) Developer will establish adequate administrative and
control procedures for the Project, including cash accounting, budgeting,
scheduling and reporting procedures to facilitate completion of the Project in
accordance with the Development Plan, subject to force majeure, and will notify
NLC of any occurrence or circumstance that could reasonably be expected to
materially delay or prevent completion of the Project as provided therein of
which Developer is aware.
7. Cost Estimates: Developer will:
(a) Revise and refine the approved estimate of construction
cost, incorporate approved changes as they occur, and develop cash flow reports
and forecasts as needed.
(b) Provide regular monitoring of the approved estimate of
construction cost, showing actual costs for activities in progress and
estimates for uncompleted tasks. Identify
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<PAGE>
variances between actual and budgeted or estimated costs, and advise NLC
whenever projected costs exceed budgets or estimates.
(c) Arrange for the maintenance of cost accounting records on
authorized work performed under unit costs, actual costs for labor and
materials, or other bases requiring accounting records.
(d) Develop and implement a system for review and processing of
Change Orders.
(e) Recommend necessary or desirable changes to NLC and the
Project Architect, review requests for changes, submit recommendations to NLC
and the Project Architect, and assist in negotiating Change Orders.
(f) Develop and implement a procedure for the review and
processing of applications by Contractors for progress and final payments. Make
recommendations to the Project Architect for certification to NLC for payment.
Cost estimates prepared by the Developer represent its best judgment as a
professional familiar with the construction industry. It is recognized,
however, that the Developer has no control over, or makes any warranty
hereunder as to, the cost of labor, materials or equipment, over Contractors'
methods of determining bid prices, or other competitive bidding or market
conditions.
8. Construction Draws: Developer will supervise the administration of financing
and will use reasonable efforts to arrange for, or to cause, NLC's satisfaction
of the conditions necessary to authorize draws by NLC under any loans obtained
by NLC in connection with the Project. Developer will respond promptly to the
requests of any Lender for information that shall be required under such
Lender's loan documents.
9. Forecasting; Accounting: Developer will arrange a system of capital accounts
and cost accounting for distribution of commitments and expenditures, relating
actual expenditures to those forecast or budgeted.
10. Tenant Improvements: Developer will supervise and coordinate construction
of all tenant improvements for which NLC has responsibility under the Terms and
provisions of space leases.
11. Monitor Budget: Developer, after each calendar quarter, shall revise the
Project Budget as necessary to reflect (a) actual costs for activities in
progress and estimates for uncompleted work, (b) variances in progress and
estimates for uncompleted work and (c) variances between actual and budgeted or
estimated costs for items where costs in the applicable Project Budget for such
items vary from actual costs by more than ten (10%) percent.
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<PAGE>
12. Permits and Government Approvals: Developer shall use reasonable efforts to
take such actions as may be necessary to comply with laws, ordinances, orders,
rules, regulations and requirements of federal, provincial and municipal
governments, courts, departments, commissions, boards and officers, or other
bodies exercising similar functions, which may be applicable to the Project,
and attempt to obtain and maintain all building permits, certificates of
occupancy, licenses and/or operating permits, if any, for the Project. NLC
agrees to execute and deliver any and all applications and other documents
reasonably requested by Developer and otherwise to cooperate to the fullest
extent with Developer in applying for, obtaining and maintaining such
certificates, licenses and permits as are reasonably required. Developer will
also use reasonable efforts to cause the Project to comply with the Terms,
covenants and provisions contained in any mortgage, operating agreement or
other agreement encumbering or affecting the Project or any security agreement
now or hereafter encumbering or affecting the personal property located at the
Project. Developer shall act as NLC's representative in all meetings with
public agencies and in negotiating all contracts with any agency, the State of
New York or any political or quasi-political subdivision thereof, subject to
NLC's approval.
13. Accounting: Developer shall maintain current and complete records and
accounts of all transactions with respect to the realization and implementation
of each Future Project for the benefit of both Developer and NLC. All such
records and accounts shall be maintained at Developer's main office or at such
other place as Developer and NLC shall agree upon, and each party hereto shall
be entitled to audit, at its own expense, such records and accounts by an
accounting firm of its own choosing and at any reasonable time shall have
access to such books. At the end of each calendar year and upon the fulfillment
of its obligations under this Agreement Developer shall retain the Project
Accountants to audit such records and accounts and to prepare and certify
complete financial statements for each Future Project in accordance with
generally accepted accounting principles.
14. Design; Feasibility: Act as NLC's representative in all design matters.
Provide recommendations on relative construction feasibility, availability of
materials and labor, time requirements for installation and construction, and
factors related to costs including costs of alternative designs or materials,
preliminary budgets, and possible economies.
15. Employment: Select, employ and negotiate the Terms and conditions of
employment of all parties employed in the development of the Project.
16. Contracts: Negotiate with all outside parties who are in any way related or
concerned directly or indirectly with the Project.
17. Substantial Completion: Upon the Contractors' determination of substantial
completion of the work or designated portions thereof with respect to each
Future Project, direct the Project Architect's preparation of a list of
incomplete or unsatisfactory items and schedule for their completion. After the
Project Architect certifies the date of substantial
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<PAGE>
completion, direct the Project Architect in the supervision of the correction
and completion of punch list work.
18. Final Project Completion: Upon final project completion with respect to
each Future Project, Developer shall: (i) coordinate the Project Architect's
determination of final completion and provide written notice to NLC and the
Project Architect that the work is ready for final inspection; (ii) secure and
transmit to the Project Architect any required guarantees, affidavits,
releases, bonds and waivers; and (iii) turn over to NLC all keys, manuals,
record drawings and maintenance stocks.
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<PAGE>
BF DRAFT -- 03/10/96
03/11/96
06/20/96
06/22/96
07/02/96
07/10/96
DEVELOPMENT AGREEMENT
between
NATIONAL LODGING CORP.
and
NRG MANAGEMENT SERVICES INC.
Hotel/Motel Properties located in Canada
_______ ___, 1996
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C/M: 11752.0002 346852.8
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. APPOINTMENT OF DEVELOPER............................ 2
1.1 Engagement of Developer...................................... 2
1.2 Agency Obligations........................................... 2
ARTICLE 2. DEVELOPMENT SERVICES................................ 2
2.1 Certain Definitions.......................................... 2
2.2 Submission of Proposal....................................... 3
2.3 Response to Proposal......................................... 3
2.4 Restrictions on Developer's Acquisitions..................... 4
2.5 Development Services Generally............................... 4
2.6 Service Contracts............................................ 4
ARTICLE 3. RESPONSIBILITIES OF DEVELOPER....................... 5
3.1 Personnel.................................................... 5
3.2 Meetings .................................................... 5
3.3 Reporting.................................................... 5
ARTICLE 4. RESPONSIBILITIES OF NLC............................. 5
4.1 Representative............................................... 5
4.2 Payments .................................................... 5
4.3 Retention of Management; Future Project Profit Participation. 6
4.4 Non-Exclusive Engagement..................................... 6
ARTICLE 5. DEVELOPER COMPENSATION ............................. 7
5.1 Certain Definitions.......................................... 7
5.2 Development Fee.............................................. 7
5.3 Expense Reimbursement........................................ 8
5.4 Flip Transaction Compensation................................ 8
5.5 Developer's Overhead......................................... 9
ARTICLE 6. TERM................................................ 9
6.1 Initial Term................................................. 9
6.2 Earlier Expiration........................................... 10
6.3 Expiration of Term........................................... 10
ARTICLE 7. TERMINATION......................................... 11
7.1 Definitions.................................................. 11
7.2 Termination by NLC or Developer.............................. 12
7.3 Final Reports and Accounts................................... 12
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Page
ARTICLE 8. NOTICES............................................. 13
ARTICLE 9. REPRESENTATIONS AND WARRANTIES...................... 14
9.1 Representations and Warranties of NLC........................ 14
9.2 Representations and Warranties of Developer.................. 14
ARTICLE 10. INDEMNIFICATION PROVISIONS; NLC EXCULPATION......... 14
10.1 Indemnity................................................... 14
10.2 Indemnity Procedures........................................ 15
10.3 Recovery of Litigation Costs................................ 16
ARTICLE 11. MISCELLANEOUS PROVISIONS............................ 17
11.1 Governing Law............................................... 17
11.2 Entire Agreement............................................ 17
11.3 Captions.................................................... 17
11.4 Counterparts................................................ 17
11.5 Benefits and Obligations.................................... 17
11.6 Prohibition on Assignment by Developer...................... 17
11.7 No Waiver................................................... 18
11.8 Force Majeure............................................... 18
11.9 Invalidity of Provisions.................................... 18
11.10 Rights of Others........................................... 18
11.11 Affiliate Transactions..................................... 18
11.12 Independent Contractor..................................... 18
11.13 Survival of Obligations.................................... 18
11.14 Supplemental Documents..................................... 19
11.15 Confidentiality............................................ 19
11.16 Assignment................................................. 19
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C/M: 11752.0002 346852.8
FORM OF INDEMNIFICATION AGREEMENT
THIS AGREEMENT made as of the _____ day of _________________, 1996.
BETWEEN:
CHARTWELL CANADA CORP., a corporation incorporated under the
laws of the State of Delaware, U.S.A. (the "Purchaser")
- and -
NATIONAL LODGING CORP., a corporation incorporated under the
laws of the State of Delaware, U.S.A. ("NLC")
- and -
NL HOTELS, INC., a corporation incorporated under the laws of
the State of California, U.S.A. ("NL Hotels")
(the Purchaser, NLC and NL Hotels, together with their
respective officers, directors, partners, members,
shareholders and employees are hereinafter collectively
called the "Indemnitees")
- and -
CAPITAL PROPERTIES LIMITED PARTNERSHIP, a limited partnership
formed under the laws of the Province of Ontario, Canada, by
its sole general partner, Syndicated Capital Properties Inc.
("CPLP")
- and -
SYNDICATED CAPITAL PROPERTIES INC., a corporation
incorporated under the laws of the Province of Ontario,
Canada ("Syndicated")
- and -
C/M: 11752.0002 378469.7
<PAGE>
ROYCO HOTELS & RESORTS LTD., a corporation incorporated under
the laws of Canada ("Royco")
- and -
NRG MANAGEMENT SERVICES INC., a corporation incorporated
under the laws of the Province of Alberta, Canada ("NRG")
(CPLP, Syndicated, Royco and NRG are hereinafter collectively
called the "Indemnitors")
WHEREAS pursuant to a contract of sale (the "Contract of Sale";
capitalized terms used herein and not otherwise defined herein shall have the
meaning ascribed to such terms in the Contract of Sale) made as of the o day of
o, 1996 between the Purchaser, CPLP, Syndicated, 1002370 Ontario Inc. and the
following nominee companies: Syncap Properties Inc., Tegrad Properties
(Winnipeg) Inc. and Tegrad Montreal I Inc. (hereinafter collectively called the
"Nominees"), the Purchaser agreed to purchase from CPLP, and CPLP agreed to
sell to the Purchaser, inter alia, certain hotel properties as more
particularly described therein, and the Purchaser agreed to assume and/or take
an assignment of certain indebtedness in respect of such hotel properties as
more particularly described therein;
AND WHEREAS the execution and delivery of this Indemnification
Agreement is a condition precedent to the completion of the transactions
contemplated by the Contract of Sale;
NOW THEREFORE THE PARTIES AGREE AS FOLLOWS:
1. INDEMNIFICATION
The Indemnitors hereby jointly and severally agree to indemnify and
save the Indemnitees harmless from and against any claims, demands, actions,
causes of action, judgments, order, suits, damages, losses, deficiencies,
costs, liabilities and expenses which may be made or brought against any of the
Indemnitees or which any of the Indemnitees may suffer or incur as a result of,
in respect of, or arising out of, any of the following (collectively,
"Indemnification Obligations"):
(a) any misrepresentations, inaccuracy, incorrectness or breach
of any representation, warranty or covenant (including,
without limitation, a covenant with respect to
indemnification or payment to an Indemnitee, an affiliate
thereof or a third party) made by CPLP, Syndicated, the
Nominees and 1002370 Ontario Inc., contained in the Contract
of Sale or updated thereunder and the other agreements,
documents and certificates executed and/or delivered in
connection with the closing of the transactions contemplated
in and by the Contract of Sale, whether such representations,
warranties or covenants are breached prior to or following
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closing thereunder, or whether the transaction in fact fails
to close as an asset sale and proceeds by means of a
foreclosure or otherwise;
(b) any income, excise, franchise or other taxes of CPLP,
Syndicated or the Nominees (whether for its own account or on
account of others in an agency or fiduciary capacity)
attributable to any period prior to the o day of o, 1996,
including any penalties or interest with respect to such
taxes, except to the extent such taxes are properly reflected
in the Working Capital Adjustments made pursuant to section 6
of the Contract of Sale;
(c) any liabilities of CPLP, Syndicated, 1002370 or the Nominees
under any employment agreements or similar agreements to
which CPLP, Syndicated or any of the Nominees is bound or
otherwise arising from the employment of any persons in
connection with CPLP, Syndicated, 1002370 or any of the
Nominees in any case attributable to any period prior to the
o day of o, 1996 except to the extent such liabilities are
correctly set forth in the exhibits to the Contract of Sale
or properly reflected in the Working Capital Adjustments made
pursuant to section 6 of the Contract of Sale; and
(d) all costs and expenses, including, without limitation,
attorneys, disbursement fees, expenses and court costs,
incidental to or in respect of the foregoing (collectively,
"Collection Costs").
2. LIMITATIONS ON INDEMNIFICATION
The obligations of indemnification by the Indemnitors under section 1
of this Indemnification Agreement shall be: (i) subject to the limitations
described in section 24 of the Contract of Sale, (ii) with respect only to
contribution obligations among the Indemnitors, subject to the indemnification
priorities described in section 3 of this Indemnification Agreement, (iii) with
respect only to contribution obligations among the Indemnitors, subject to the
provisions of section 5 of this Indemnification Agreement, and (iv) subject to
the following limitations:
(a) Subject to section 4 of this Indemnification Agreement, the
liability of Syndicated under this Indemnification Agreement
in respect of Indemnification Obligations:
(i) shall be limited to an amount equal to the aggregate
of all amounts receivable by Developer (as such term
is defined in that certain development agreement
made between NRG and NLC dated as of the date hereof
(the "Development Agreement")) pursuant to the
Development Agreement following the date on which
any of the Indemnitees makes an Indemnity Claim (as
such term is hereinafter defined); and
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(ii) in any event, and notwithstanding section 2(a)(i) of
this Indemnification Agreement, but still subject to
section 4 of this Indemnification Agreement, shall
not exceed the aggregate of Five Hundred Thousand
(CDN $500,000.00) Canadian Dollars plus Collection
Costs in respect of collecting such $500,000.00.
(b) The liability of Royco under this Indemnification Agreement
in respect of Indemnification Obligations shall be limited to
an amount equal to the aggregate of:
(i) all amounts receivable by Royco as "CPLP Incentive
Management Fees" pursuant to section 4.1(c) of the
Amended and Restated Management Services and
Franchise Development Agreement (the "MSFDA") dated
the o day of o, 1996 between NL Hotels, Inc., Royco
and National Lodging Corp. following the date on
which any of the Indemnitees makes an Indemnity
Claim;
(ii) all amounts receivable by Royco as termination fees
pursuant to Section 3.3(c) of the MSFDA following
the date on which any of the Indemnitees makes an
Indemnity Claim; and
(iii) all amounts receivable by Royco as "Incentive
Termination Fees" pursuant to section 4.1(d) of the
MSFDA following the date on which any of the
Indemnitees makes an Indemnity Claim.
(c) Satisfaction of the liability of the Indemnitors with respect
to Environmental Cleanup Costs (except to the extent such
Environmental Clean-up Costs result from a breach of
representation, covenant or warranty under the Contract of
Sale) shall be limited by the provisions of Section 10 hereof
(for the avoidance of doubt, it is acknowledged and agreed
that the Indemnitor's Obligations with respect to breaches of
representations, warranties, and/or other covenants with
respect to environmental matters in the Contract of Sale is
not limited in any respect by the Future Payments Agreement
or the MFSDA except and to the extent provided in sections 13
and 24 of the Contract of Sale and this section 2).
Notwithstanding anything to the contrary contained herein, NRG (NRG is
sometimes referred to herein generically as "Developer"), the Developer under
the Development Agreement), hereby acknowledges, covenants and agrees (i) to
hold in trust, for the benefit of the Indemnitees, all payments received by
Developer under the Development Agreement to the extent of Syndicated's
obligations hereunder, provided that, prior to Developer's receipt of any such
payments, the Indemnitees shall have provided Developer with written notice of
Syndicated's outstanding obligations hereunder and the Canadian dollar amount
thereof, and provided further that Developer shall not be obligated to hold in
trust payments received by Developer under the Development Agreement that are
in excess of the amount of Syndicated's
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outstanding obligations hereunder as set forth in an aforementioned written
notice, (ii) subject to the indemnification priorities set forth in Section 3
of this Indemnification Agreement and subject to the arbitration provisions set
forth in Section 8 of this Indemnification Agreement, to promptly pay to the
Indemnitees, out of amounts received by Developer under the Development
Agreement and held in trust by Developer for the benefit of the Indemnitees as
hereinbefore provided, all amounts owed by Syndicated hereunder as set forth in
an aforementioned written notice, and (iii) that amounts receivable by
Developer under the Development Agreement shall be subject to the prior and
superior claims of the Indemnitees hereunder which could result in a temporary
withholding of, or a permanent loss of, such amounts as and to the extent
required to indefeasibly satisfy Syndicated's obligations hereunder.
3. INDEMNIFICATION PRIORITIES
If any of the Indemnitees is entitled to an indemnification payment (an
"Indemnification Payment") under this Indemnification Agreement, the following
provisions shall apply, subject to the limitations on indemnification described
in section 2 of the Indemnification Agreement:
(a) An Indemnification Payment shall be satisfied firstly out of:
(i) amounts receivable by CPLP pursuant to the Future
Payments Agreement in respect of the calendar year
during which the entitlement of any of the
Indemnitees to an Indemnification Payment arose; and
(ii) amounts receivable by Royco as "CPLP Incentive
Management Fees" pursuant to section 4.1(c) of the
MSFDA in respect of the calendar year during which
the entitlement of any of the Indemnitees to an
Indemnification Payment arose,
and such Indemnification Payment shall be satisfied out of
the amounts described in sections 3(a)(i) and 3(a)(ii) of
this Indemnification Agreement on a pro rata basis according
to the respective entitlements of CPLP and Royco described in
sections 3(a)(i) and 3(a)(ii) of this Indemnification
Agreement.
(b) An Indemnification Payment shall be satisfied secondly out of
amounts receivable by Developer pursuant to the Development
Agreement.
(c) An Indemnification Payment shall be satisfied thirdly out of:
(i) amounts receivable by CPLP pursuant to the Future
Payments Agreement in respect of calendar years
subsequent to the calendar year in which the
entitlement of any of the Indemnitees to an
Indemnification Payment arose (other than for
amounts receivable by CPLP pursuant to Section 3 of
the Future Payments Agreement); and
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<PAGE>
(ii) amounts receivable by Royco as "CPLP Incentive
Management Fees" pursuant to section 4.1(c) of the
MSFDA in respect of calendar years subsequent to the
calendar year in which the entitlement of any of the
Indemnitees to an Indemnification Payment arose,
and such Indemnification Payment shall be satisfied out of
the amounts described in sections 3(c)(i) and 3(c)(ii) of
this Indemnification Agreement on a pro rata basis according
to the respective entitlements of CPLP and Royco described in
sections 3(c)(i) and 3(c)(ii) of this Indemnification
Agreement.
(d) An Indemnification Payment shall be satisfied fourthly out of:
(i) amounts receivable by CPLP pursuant to section 3 of
the Future Payments Agreement consequent upon the
termination of such agreement; and
(ii) amounts receivable by Royco as "Incentive
Termination Fees" pursuant to section 4.1(d) of the
MSFDA or Termination Fees pursuant to section 3.3(c)
of the MSFDA, as the case may be,
and such Indemnification Payment shall be satisfied out of
the amounts described in sections 3(d)(i) and 3(d)(ii) of
this Indemnification Agreement on a pro rata basis according
to the respective entitlements of CPLP and Royco described in
sections 3(d)(i) and 3(d)(ii) of this Indemnification
Agreement.
4. RIGHTS OF NLC & NL HOTELS
In the event that (i) Indemnification Payment entitlements under this
Indemnification Agreement aggregate Fifty Thousand ($50,000) Dollars or more,
or (ii) any Indemnification Payment entitlements aggregating less than Fifty
Thousand ($50,000) Dollars are not paid in full within ten (10) days following
the date on which the entitlement of any of the Indemnitees to such
Indemnification Payment(s) is established under this Indemnification Agreement
as provided in Section 8 hereof, then:
(a) NLC shall be entitled in its sole and absolute discretion to
terminate the Development Agreement, provided that in such
event Developer shall nonetheless be entitled to any and all
termination payments payable to it pursuant to the
Development Agreement consequent upon the termination
thereof, subject however to the Indemnitees' rights of
set-off and withholding as Escrowed Payments under this
Indemnification Agreement;
(b) NL Hotels shall be entitled in its sole and absolute
discretion to terminate the MSFDA, provided that in such
event Royco shall nonetheless be entitled to receive
"Incentive Termination Fees" pursuant to section 4.1(d) of
the MSFDA and termination fees pursuant to section 3.3(c) of
the MFSDA, subject however
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<PAGE>
to the Indemnitees' rights of set-off and withholding as
Escrowed Payments under this Indemnification Agreement; and
(c) the indemnification limitation applicable in respect of
Syndicated as described in section 2(a)(ii) of this
Indemnification Agreement shall not apply.
5. CONTRIBUTION
If all or any portion of an Indemnification Payment is paid out of amounts
receivable by Developer pursuant to the Development Agreement as described in
section 3(b) of this Indemnification Agreement (a "Syndicated Indemnification
Payment") or Royco pursuant to section 3(d)(ii) other than Incentive
Termination Fees (the "Royco Indemnification Payment"), then CPLP and Royco
shall be liable to reimburse Syndicated and Developer for the full amount of
the Syndicated Indemnification Payment and the Royco Indemnification Payment
out of the following entitlements:
(a) in the case of CPLP, amounts receivable by CPLP pursuant to
Section 3 of the Future Payments Agreement consequent upon
the termination of such agreement; and
(b) in the case of Royco, amounts receivable by Royco as
"Incentive Termination Fees" pursuant to Section 4.1(d) of
the MSFDA,
and such Syndicated Indemnification Payment and Royco Indemnification Payment
shall be satisfied out of the amounts described in Sections 5(a) and 5(b) of
this Indemnification Agreement on a pro rata basis according to the respective
entitlements of CPLP and Royco described in Sections 5(a) and 5(b) of this
Indemnification Agreement.
6. INDEMNITY CLAIMS
(a) The following provisions will apply to any claim by any of the Indemnitees
for indemnification by the Indemnitors pursuant to this Indemnification
Agreement (an "Indemnity Claim"):
(A) Promptly after becoming aware of any matter that may give
rise to an Indemnity Claim, the Indemnitees will provide to
the Indemnitors written notice of the Indemnity Claim
specifying (to the extent that information is available) the
factual basis for the Indemnity Claim and the amount of the
Indemnity Claim or, if an amount is not then determinable, an
estimate of the amount of the Indemnity Claim, if an estimate
is feasible in the circumstances.
(B) The Indemnitees may, in their sole and absolute discretion,
upon delivery of notice of such Indemnity Claim, commence
withholding Escrowed Payments as provided in Section 9
hereof.
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<PAGE>
(b) The following provisions will apply if an Indemnity Claim related to an
alleged liability of any of the Indemnitees to a third party:
(A) Within fifteen (15) days after receipt of notice of
commencement of any action or the assertion of any claim by a
third party, the Indemnitees shall give the Indemnitors
written notice thereof together with a copy of such claim,
process or other legal pleading, and the Indemnitors shall
have the right to undertake the defense thereof by
representatives of their own choosing (but who shall be
reasonably satisfactory to the Indemnitees); provided,
however, that a failure to so notify the Indemnitors within
such fifteen (15) day period shall not affect the
Indemnitees' rights hereunder except to the extent the
Indemnitors are materially prejudiced by such failure.
(B) In the event that the Indemnitors, by the fifteenth day after
receipt of notice of any such claim (or, if earlier, by the
fifth day preceding the day on which an answer or other
pleading must be served in order to prevent judgement by
default in favour of the person asserting such claim), do not
elect to defend against such claim, the Indemnitees will have
the right to settle or compromise any claim or consent to the
entry of any judgement; provided that the Indemnitees shall
have the right to assume the defense of such claim with
counsel of its own choosing (but who shall be reasonably
satisfactory to the Indemnitors) at any time prior to
settlement, compromise or final determination thereof.
(C) Notwithstanding anything to the contrary in this
Indemnification Agreement, the Indemnitors shall not, without
the prior written consent of the Indemnitees, settle or
compromise any claim or consent to the entry of any judgement
which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Indemnitees a
full and absolute release from all liability in respect of
such claim.
(D) In connection with any such indemnification, the Indemnitees
will cooperate in all reasonable requests of the Indemnitors
at the Indemnitors' liability and expense.
(E) The Indemnitees may, in their sole and absolute discretion,
upon delivery of notice of such Indemnity Claim, commence
withholding Escrowed Payments as provided in Section 9
hereof.
7. INTENTIONALLY DELETED
8. ARBITRATION
In the event the Indemnitors dispute an Indemnity Claim, then, whether or
not the Indemnitees have commenced withholding Escrowed Payments as provided in
section 9 hereof,
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<PAGE>
the Indemnitees and the Indemnitors shall use their best endeavors to settle
any disputes, claims, questions or differences arising out of or in relation to
the Indemnitees' exercise of such right of set-off. To this effect, they shall
consult and negotiate with each other, in good faith and understanding of their
mutual interests, to reach a just and equitable solution satisfactory to all of
them within fifteen (15) days of written notice of an Indemnity Claim by the
Indemnitees to the Indemnitors. If they do not reach such solution within such
fifteen (15) day period, then any party may deliver notice (the "Arbitration
Notice") to the other party requiring resolution by arbitration 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 within
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, the Indemnitees shall jointly appoint one (1)
arbitrator to the arbitration tribunal and the Indemnitors
shall jointly 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 and shall have a minimum of five (5) years
of experience pertinent to the subject matter of the
Indemnity Claim.
(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; provided,
however, this limitation on exercising rights of set-off
shall in no way be construed to prohibit or mitigate the
right to withhold Escrowed Payments as provided in Section 9
hereof.
(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.
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The amount of any award in arbitration rendered in favor of the Indemnitees,
together with Collection Costs attendant to such Indemnity Claim, may be
immediately withdrawn by the Indemnitees from the Escrow Account and, if the
Escrowed Payments then held in an Escrow Account are insufficient to pay such
amount, the Indemnitees shall immediately, and without further notice or
demand, pay the balance of such amount in accordance with the indemnification
priorities set forth in section 3 hereof.
9. ESCROWED PAYMENTS.
(a) As used herein, an "Escrow Release Date" shall mean, with respect
of each outstanding Indemnity Claim, the date on which such Indemnity Claim is
either satisfied, withdrawn or denied following arbitration in accordance with
the terms and conditions of Section 8 hereof.
(b) Notwithstanding anything to the contrary contained herein, if any
of the Indemnitees deliver a notice stating an Indemnity Claim, then from and
after the date that notice of such Indemnity Claim is delivered until the
Escrow Release Date with respect thereto, the Indemnitees shall withhold all
amounts payable to the Indemnitors (including, with respect to Indemnification
Obligations of Syndicated any amounts payable to Developer) which are, in
accordance with the terms of this Agreement (but subject to section 5.6 of the
Development Agreement), available for payment of Indemnification Obligations
hereunder ("Escrowed Payments"); provided, however, the Indemnitees shall not
withhold as Escrowed Payments amounts in excess of the reasonably estimated
Indemnification Obligations from time to time claimed by outstanding Indemnity
Claims.
(c) Escrowed Payments shall be held by the Indemnitees in a segregated
interest bearing account (an "Escrow Account") in a bank designated by
Indemnitees in a written notice to the Indemnitors. All Escrowed Payments held
from time to time in an Escrow Account shall be available for satisfaction of
Indemnification Obligations upon determination that any of the Indemnitees are
entitled to payment in respect of one or more Indemnity Claims.
(d) On each Escrow Release Date, the Escrowed Payments, if any,
remaining in the Escrow Account with respect to such Indemnity Claims shall be
distributed to the Indemnitors following delivery from the Indemnitors of a
written direction letter specifying how such balance is to be distributed;
provided, however, Escrowed Payments shall not be released to the extent that
the Escrow Account does not then hold an amount equal to the reasonably
expected aggregate Indemnification Obligations with respect to all then
outstanding Indemnity Claims.
10. ENVIRONMENTAL CLEANUP COSTS.
All obligations in respect of Environmental Cleanup Costs shall be
satisfied solely out of:
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<PAGE>
(i) amounts receivable by CPLP pursuant to section 3 of the
Future Payments Agreement consequent upon the termination of
such agreement; and
(ii) amounts receivable by Royco as "Incentive Termination Fees"
pursuant to section 4.1(d) of the MSFDA,
and such Environmental Cleanup Costs shall be satisfied out of the
amounts described in sections 10(i) and 10(ii) of this Indemnification
Agreement on a pro rata basis according to the respective entitlements
of CPLP and Royco described in sections 10(i) and 10(ii) of this
Indemnification Agreement.
11. GENERAL MATTERS
(a) The obligations of the Indemnitors under this Indemnification
Agreement shall not be assigned by any of the Indemnitors
without the prior written consent of the Indemnitees, which
consent may be withheld or granted in their sole and absolute
discretion.
(b) This Indemnification Agreement shall be governed by and
construed in accordance with the laws of the Province of
Ontario and the laws of Canada applicable therein.
(c) This Indemnification Agreement shall enure to the benefit of
and be binding upon the parties hereto and their respective
successors and permitted assigns.
(d) Syndicated acknowledges, represents, warrants, covenants and
agrees that, in addition to its joint and several liability
hereunder, it shall act as agent for the benefit of CPLP.
(e) Notices delivered under this Agreement shall be given in the
manner specified (i) in the Contract of Sale, with respect to
the parties thereto, (ii) in the Development Agreement, with
respect to Developer and (iii) in the MSFDA, with respect to
Royco.
THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK;
THE SIGNATURE PAGE FOLLOWS
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IN WITNESS WHEREOF this Indemnification Agreement has been
executed and delivered by the parties hereto as of the date first written
above.
CHARTWELL CANADA CORP.
Per:
NATIONAL LODGING CORP. (Now known as
Chartwell Leisure Inc. as of 8/8/96
Per:
NL HOTELS, INC. (Now known as Chartwell
Lodging Inc. as of 8/8/96)
Per:
CAPITAL PROPERTIES LIMITED PARTNERSHIP, by
its sole general partner, Syndicated
Capital Properties Inc.
Per:
SYNDICATED CAPITAL PROPERTIES INC.
Per:
ROYCO HOTELS & RESORTS LTD.
Per:
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With respect to their respective obligations and agreements as Developer
pursuant to Section 2 only:
NRG MANAGEMENT SERVICES INC.
Per: _________________________
Peter Sikora
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GUARANTY
October ___, 1996
WHEREAS, FIRST, pursuant to certain loan agreements (the
"Loan Agreements") entered into between each of Province of Alberta Treasury
Branches ("ATB"), Bank of Montreal, Scotia Mortgage Corporation and Canadian
Imperial Bank of Commerce (each, a "Lender" and, collectively, the "Lenders")
with Capital Properties Limited Partnership ("CPLP"), Syndicated Capital
Properties Inc. ("Syndicated"), and Syncap Properties Inc. ("Syncap"), the
Lenders each agreed to lend certain funds to CPLP, Syndicated and Syncap
(collectively, the "Borrowers"), based on certain security provided to the
Lenders or a trustee for a Lender by Tegrad Properties (Winnipeg) Inc., Tegrad
Montreal I Inc. and 1002370 Ontario Inc. (collectively, the "Nominees", the
Nominees and the Borrowers are collectively defined as the "Debtors") including
and in respect of each of the properties (individually, a "Property" or,
collectively, the "Properties") listed in Schedule "A" attached hereto;
WHEREAS, SECOND, as a result of certain ongoing defaults by
the Borrowers under the Loan Agreements and a request by the Lenders that CPLP
attempt to restructure its affairs, National Lodging Corp. ("NLC") agreed to
enter into a letter agreement (the "Lender Letter Agreement") with the Lenders
for the purchase of certain debt and security (the "Loan"), which Lender Letter
Agreement will be assigned prior to or at closing to Bear Financial Corp., an
affiliate of NLC ("Bear");
WHEREAS, THIRD, in order to settle certain disputes between
Royco Hotels & Resorts Ltd. ("Royco"), its shareholders and certain related
parties, on the one hand, and ATB, on the other, such parties, together with
NLC are entering into a certain letter agreement dated as of the date hereof
(the "ATB Letter Agreement") pursuant to which such parties, as a result, in
part, of the intervention by NLC, and the provision by NLC of $155,000, will
settle disputes as referenced therein;
WHEREAS, FOURTH, contemporaneously with the execution of the
Lender Letter Agreement and the ATB Letter Agreement, CPLP and the Debtors
entered into a contract of sale (the "NLC Agreement") with Chartwell Canada
Corp. ("Chartwell") an affiliate of NLC (together with NLC and Bear,
collectively "NLC"), pursuant to which such affiliate will purchase the
Properties; and
WHEREAS, FIFTH, NLC is willing to enter into the Lender
Letter Agreement, the ATB Letter Agreement and the NLC Agreement, respectively,
only if, inter alia, the Guarantors execute and deliver this Guaranty, all as
more particularly set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises
and other good and valuable consideration, the receipt and legal sufficiency of
which is hereby acknowledged, and in order to induce NLC and its Affiliate to
enter into the Lender Letter Agreement, the ATB Letter Agreement and the NLC
Agreement, respectively, Guarantors hereby guarantee, covenant and agree with
NLC as follows:
1. As used herein, the following terms shall have the following
meanings:
Affiliate: The term "Affiliate" shall mean, with respect to
any person, party or entity, another person, party or entity which, directly or
indirectly, legally, beneficially or nominally, controls, is controlled by, or
is under common control with, such first person, party or entity, but, for
greater certainty, the parties acknowledge that CPLP is not an Affiliate of the
Guarantors or NLC .
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<PAGE>
Bankruptcy Code: The term "Bankruptcy Code" shall mean the
Companies' Creditors' Arrangement Act (Canada), the Bankruptcy and Insolvency
Act (Canada) and any applicable provincial insolvency acts.
Costs: The term "Costs" shall mean all actually incurred
costs and expenses, howsoever defined or denominated, incurred by NLC or for
which NLC is liable relating to the Transaction, including, without limitation,
costs of acquiring the Loan, including any deposit under the Lender Letter
Agreement, lawyers fees, accountants fees, associated professional fees and
court costs (for both US and Canadian counsel, advisors, accountants and
professionals), resulting from a breach by the Guarantors of their
representations, warranties, covenants and agreements set forth herein.
Guarantors: The term "Guarantors" shall mean, collectively,
Royco, Randy Royer, Terrence Royer, Gregory Royer and Peter P. Sikora. Each of
the Guarantors shall be defined as a "Guarantor".
Seller Benefits: The term "Seller Benefits" shall mean,
collectively, the Future Payments Agreement (as defined in the NLC Agreement),
the Development Agreement (as defined in the NLC Agreement), the MSFDA (as
defined in the NLC Agreement) and the Management Agreement (as defined in the
NLC Agreement), as well as the payment of all third party professional costs
associated with the Transaction and appurtenant transfer and similar taxes and
the payment to CPLP as working capital of Two Hundred Thousand ($200,000 CDN)
Canadian Dollars, all of which shall be executed and delivered, or paid, as the
case may be, at the closing of the transfer of the Properties in accordance
with the terms of the NLC Agreement or otherwise.
Transaction: The term "Transaction" shall mean the acquisition
of the Loan and the substantially simultaneous (to the extent commercially
feasible) transfer to and continued undisturbed ownership by Chartwell of the
Properties in accordance with the terms of the NLC Agreement, or pursuant to a
foreclosure or other realization on or under the Loan by Bear or its
Affiliates, where NLC or its Affiliates, as required, have agreed to execute
and deliver, or pay, as the case may be, the Seller Benefits.
1. If any of the Guarantors or their respective Affiliates take
any action, or refrain from acting (provided that NLC has given the Guarantors
notice in writing of any action which, if not taken, would be considered to be
non-action by the Guarantors within the meaning of this section), the effect of
which is to materially and adversely affect the Transaction, then the
Guarantors, jointly and severally, agree, with or without notice or demand, to
pay the Costs.
2. Notwithstanding any other provision hereof, none of the
Guarantors or their respective Affiliates shall be obligated to suffer or incur
any costs or expenses for their own accounts in order to take any action or to
refrain from taking any action that may be required in order to avoid a
liability for the Costs unless the necessity for such action or non-action
under this Guaranty arises directly in connection with, or in respect or as a
result of, any relationship between any of the Guarantors or their Affiliates
and any person (a "Third Party") other than NLC or any of its Affiliates, where
such relationship is such that such Guarantor or Affiliate has obligations to a
Third Party or is entitled to receive consideration from a Third Party;
provided, however, the Guarantors shall be required to act as directed by the
beneficiaries hereunder in accordance with this Guaranty if and to the extent
costs and expenses not required to be incurred by the Guarantors are paid by
NLC. For the avoidance of doubt, subject to the proviso in the immediately
preceding sentence, none of the Guarantors or their respective Affiliates shall
be obligated to suffer or incur any costs or expenses for their own accounts in
order to take any action or to refrain from taking any action that may be
required in order to avoid a liability for the Costs in connection with, or in
respect or as a result of, any breach or threatened breach by ATB of the ATB
Letter Agreement or any documents delivered in connection therewith, but not
otherwise in respect of ATB.
3. This Guaranty shall only be in force and effective from and
after the date (the
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Effective Date") on which the limited partners of CPLP approve the Transaction
by resolutions passed at a duly convened meeting of such limited partners by
not less than 66.67% of the votes cast by limited partners of CPLP present at
such meeting in person or by proxy.
4. Notwithstanding any other provision hereof, the Guarantors
shall not be obligated to pay the Costs if:
(i) the beneficiaries of this Guaranty or any of them agree in
writing to waive any such action or non-action;
(ii) for so long as NLC or any of its Affiliates takes any
action which is and at all times remains the primary cause for the
Guarantors' inability to act or refrain from acting, thereby resulting
in the Guarantors' liability hereunder;
(iii) provided performance by NLC or its Affiliates in
respect of the Seller Benefits is possible given the circumstances
(i.e., the Transaction has closed or NLC and its Affiliates, as the
case may be, are deriving the financial benefits from the Properties
(equitably adjusted to the extent of such benefit received)), there is
any non-performance or non-fulfillment of any material covenant or
material agreement on the part of NLC or its Affiliates in respect of
the Seller Benefits (provided, however, that the Development
Agreement, the MSFDA and the Management Agreement may be terminated
for cause as provided therein in accordance with their terms without
same constituting an excuse for required performance or
non-performance by the Guarantors hereunder); or
(iv) the action or non-action by the Guarantors relates to
or is in respect of the operation of the Properties pursuant to the
MSFDA or the Management Agreement.
5. The Guarantors hereby waive (a) notice of acceptance of this
Guaranty; (b) all other notices of any nature whatsoever to which the
Guarantors might otherwise be entitled (except as otherwise expressly provided
for in this Guaranty); and (c) any demand for payment under this Guaranty.
6. Each reference herein to NLC shall be deemed to include its
affiliated successors and assigns, in whose favor the provisions of this
Guaranty shall also inure. Each reference herein to the Guarantors or a
Guarantor shall be deemed to include such Guarantor's, respective heirs,
executors, administrators, legal representatives, trustees, successors and
assigns, and with respect to a Guarantor which is not an individual, such
entities' beneficial owners and their respective heirs, executors,
administrators, legal representatives, trustees, successors and assigns, all of
whom shall be bound by the provisions of this Guaranty (but, subject to the
provisions of section 19 hereof, in no event shall such entities' beneficial
owners and their respective heirs, executors, administrators, legal
representatives, trustees, successors and assigns be liable for amounts in
excess of amounts distributable to such persons by reason of their respective
ownership interests in Royco for and in respect of any period from and after
October 1, 1996), provided, however, that in no event or under any circumstance
shall the Guarantors, or any Guarantor, have the right to assign or transfer
his, its, or their joint and several obligations and liabilities under this
Guaranty, in whole or in part, to any other person, party or entity; provided,
further, however, notwithstanding the foregoing, in no event shall Avola
Limited have any liabilities, obligations or responsibilities in respect of or
as a result of the foregoing and this Guaranty unless and to the extent the
representations and warranties contained in section 20 hereof are at any time
untrue.
7. Neither (x) any delay on the part of NLC in exercising any
right or remedy under this Guaranty or any failure to exercise the same shall
operate as a waiver in whole or in part of any such right or remedy nor (y) the
fact that the Transaction is not completed prior to December 31, 1996, the
outside closing date referenced in Section 5 of the NLC Agreement. No notice to
or demand on the Guarantors nor the fact that the Transaction is not completed
prior to December 31, 1996, the outside closing date referenced in Section
C/M: 11752.0002 376635.12
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5 of the NLC Agreement shall be deemed to be a waiver of the obligation of the
Guarantors or of the right of NLC to take further action without notice or
demand as provided in this Guaranty.
8. This Guaranty may only be modified, amended or changed by an
agreement in writing signed by NLC and the Guarantors, and shall in no event be
terminated except in accordance with the provisions of this Guaranty. No waiver
of any term, covenant or provision of this Guaranty shall be effective unless
given in writing by NLC and if so given by NLC shall only be effective in the
specific instance in which given.
9. Other than as expressly stated herein, the Guarantors
acknowledge and agree that this Guaranty and their obligations hereunder are
and shall at all times be absolute and unconditional in all respects, and are
and shall at all times be valid and enforceable irrespective of any other
agreements or circumstances of any nature whatsoever which might otherwise
constitute a defense to this Guaranty and the obligations of the Guarantors
hereunder or the obligations of any other person or party (including, without
limitation, the Debtors) relating to this Guaranty or the obligations of the
Guarantors hereunder or otherwise with respect to the Transaction, other than
factual matters which may have a bearing on liability hereunder. This Guaranty
sets forth the entire agreement and understanding of NLC and the Guarantors
with respect to the matters covered by this Guaranty, and the Guarantors
absolutely, unconditionally and irrevocably waive any and all right to assert
any defense, setoff, counterclaim or crossclaim of any nature whatsoever with
respect to this Guaranty or the obligations of the Guarantors under this
Guaranty or the obligations of any other person or party (including, without
limitation, the Borrowers or the Debtors) relating to this Guaranty or the
obligations of the Guarantors hereunder or to enforce the obligations of the
Guarantors under this Guaranty other than factual matters which may have a
bearing on liability hereunder, but excluding any defenses and the like which
are founded in legal or documentary infirmities or issues, and not assertions
of contrary or germane facts which would mitigate liability hereunder. The
Guarantors acknowledge and agree that no oral or other agreements,
understandings, representations or warranties exist with respect to this
Guaranty or with respect to the obligations of the Guarantors under this
Guaranty, except those specifically set forth in this Guaranty.
10. THE GUARANTORS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE,
AND NLC BY ITS ACCEPTANCE OF THIS GUARANTY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM
ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THIS GUARANTY.
11. In the event that either a petition is filed under the
Bankruptcy Code or under any other applicable federal, provincial or local
bankruptcy, preference or fraudulent conveyance law or other similar law in
regard to the Debtors, or an action or proceeding is commenced for the benefit
of the creditors of the Debtors, this Guaranty shall at all times thereafter
remain effective in regard to any transfer of assets to NLC received from or on
behalf of the Debtors which are held voidable on the grounds of preference,
fraudulent conveyance or otherwise.
12. If at any time any payment, or portion thereof, made by, or
for the account of, the Guarantors on account of the obligations under this
Guaranty is set aside by any court or trustee having jurisdiction as a voidable
preference, fraudulent conveyance or otherwise as being subject to avoidance or
recovery under the provisions of the Bankruptcy Code or under any other
applicable federal or state bankruptcy, preference or fraudulent conveyance law
or similar law, the Guarantors hereby agree that this Guaranty (a) shall
continue and remain in full force and effect or (b) if previously terminated as
a result of the Guarantors having fulfilled the Guarantors' obligations
hereunder in full or as a result of NLC having released the Guarantors from
their obligations and liabilities hereunder, shall without further act or
instrument be reinstated and shall thereafter remain in full force and effect,
in either case with the same force and effect as though such payment or portion
thereof had not been made, and if applicable, as if such previous termination
had not occurred.
C/M: 11752.0002 376635.12
4
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13. Any notice, demand or other communication which any party
hereto may desire or may be required to give to any other party hereto shall be
in writing, and shall be deemed given (a) if and when personally delivered, (b)
upon receipt if sent by a nationally recognized overnight courier addressed to
a party at its address set forth below, or (c) on the seventh (7th) business
day after being deposited in United States or Canadian registered or certified
mail, postage prepaid, addressed to a party at its address set forth below, or
to such other address as the party to receive such notice may have designated
to all other parties by notice in writing in accordance herewith:
If to the Guarantors:
Royco Hotels & Resorts Ltd.
5940 Macleod Trail South
Suite 500
Calgary, Alberta T2H 2G4
Attention: Mr. Terrence Royer
Telecopy: (403) 255-6981
Mr. Peter Sikora
5940 Macleod Trail South
Suite 209
Calgary, Alberta T2H 2G4
Telecopy: (403) 292-0922
Mr. Gregory Royer
5940 Macleod Trail South
Suite 500
Calgary, Alberta T2H 2G4
Telecopy: (403) 255-6981
Mr. Terrence Royer
5940 Macleod Trail South
Suite 500
Calgary, Alberta T2H 2G4
Telecopy: (403) 255-6981
Mr. Randy Royer
5940 Macleod Trail South
Suite 209
Calgary, Alberta T2H 2G4
Telecopy: (403) 292-0922
With a copy to:
Brans, Lehun, Baldwin & Champagne
120 Adelaide Street West
Suite 1701
Toronto, Ontario M5H 1T1
Attention: Dennis M. Brans, Esq.
Telecopy: (416) 601-0655
C/M: 11752.0002 376635.12
5
<PAGE>
If to NLC, at:
c/o National Lodging Corp.
605 Third Avenue
New York, New York 10158
Attention: Martin L. Edelman
Telecopy: (212) 867-5475
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Robert J. Wertheimer, Esq.
Telecopy: (212) 856-7808
Each party to this Guaranty may designate a change of address by written notice
given to the other parties fifteen (15) days prior to the date such change of
address is to become effective.
14. This Guaranty is, and shall be deemed to be, a contract
entered into under and pursuant to the laws of Ontario and shall be in all
respects governed, construed and applied in accordance with the laws of
Ontario.
15. The Guarantors agree to submit to personal jurisdiction of
Ontario courts in any action or proceeding arising out of this Guaranty and, in
furtherance of such agreement, the Guarantors hereby agree and consent that
without limiting other methods of obtaining jurisdiction, personal jurisdiction
over the Guarantors in any such action or proceeding may be obtained within or
without the jurisdiction of any court located in Ontario and that any process
or notice of motion or other application to any such court in connection with
any such action or proceeding may be served upon the Guarantors by registered
or certified mail to or by personal service at the last known address of the
Guarantors, whether such address be within or without the jurisdiction of any
such court.
16. No exculpatory provisions contained in any document to the
Transaction or in any other document or instrument executed and delivered in
connection therewith or under any circumstance be deemed or construed to
modify, qualify or affect in any manner whatsoever the personal recourse
obligations and liabilities of the Guarantors under this Guaranty.
17. Notwithstanding anything to the contrary contained in this
Guaranty and except as specifically hereinafter provided to the contrary in
this paragraph, NLC shall not make a demand for payment under this Guaranty or
commence any action or proceeding to enforce the obligations of the Guarantors
hereunder after the date which is the earlier to occur of (i) the expiry of all
statutes of limitation on any action, proceeding or arbitration that could be
instituted under applicable law, including, without limitation, the Bankruptcy
Code, challenging the Transaction, and (ii) December 31, 2031; provided,
however, if the Transaction has not been completed on or prior to the date
which is three (3) years after NLC has voluntarily ceased to pursue completion
of the Transaction (the "Abandonment Date"), then, provided the Borrowers,
Royco and the Guarantors (for themselves and on behalf of their respective
Affiliates, principals, partners and shareholders) have waived, by written
notice to NLC delivered on or after the Abandonment Date, any entitlement to
receive any Seller Benefits, which shall remain the property of NLC, from and
after the date such notice is received by NLC (the "Waiver Date"), NLC shall
not be permitted to make a demand for payment under this Guaranty or commence
any action or proceeding to enforce the obligations of the Guarantors hereunder
with respect to acts or omissions occurring after the Waiver Date; provided,
further, from and after
C/M: 11752.0002 376635.12
6
<PAGE>
the third (3rd) anniversary of the Effective Date, any of the Guarantors may,
upon not less than thirty (30) days prior written notice to NLC, take such
measures as are otherwise consistent with the terms hereof to cause Syndicated
to withdraw as general partner of CPLP, provided such termination shall not
affect such Guarantor's liability hereunder.
18. The Guarantors covenant and agree not to commence, or assist
third parties, directly or indirectly, with respect to a case under the
Bankruptcy Code or under any other applicable federal, provincial or local
bankruptcy, preference or fraudulent conveyance law or other similar law in
regard to the Debtors, or to cause or assist any person, party or entity to do
so, directly or indirectly; provided, however, that the foregoing shall not
prohibit the Guarantors from responding to properly issued subpoenas or
otherwise testifying in any legal proceeding.
19. In order to further secure their respective obligations
under this Guaranty, the Guarantors, hereby, and do, pledge their respective
interests in any Operations Management Incentive Fees payable under Section
4.1(b) and Section 1.2 of Schedule 3 of the MSFDA. Solely to provide an
additional source for payment of sums due under this Guaranty, the Guarantors
hereby agree that such portion of such fees shall be subject to withholding by
NL under the procedures set forth in the Indemnification Agreement (as such
term is defined in the NLC Agreement), including the notice, escrow and
arbitration provisions thereof, pending final resolution of liability
hereunder, and, if the Guarantors are determined to be liable for payment of
any sums hereunder, such withheld payments may be applied, in the sole and
absolute discretion of NLC, to reduce the Costs.
20. The Guarantors hereby represent and warrant to NLC that
Avola Limited's interest in Royco is and shall at all times remain at not more
than 21.623 percent thereof and that none of the Guarantors has or will at any
time have any direct or indirect, legal or beneficial, interest in Avola
Limited.
21. If any term, covenant or provision of this Guaranty shall be
held to be invalid, illegal or unenforceable in any respect, this Guaranty
shall be construed without such term, covenant or provision; provided, however,
the Guarantors and NLC shall use their best efforts to reform such term,
covenant or provision held to be invalid, illegal or unenforceable so as to
make same valid, legal and binding.
22. Each of the Guarantors acknowledge that he (a) has had the
opportunity to obtain advice of counsel of its own choosing in connection with
the negotiations concerning this Guaranty and the drafting and other
preparation of this Guaranty; (b) has read the Guaranty, has had the Guaranty
fully explained by such counsel, and is fully aware of its contents and legal
effects; (c) has entered into this Guaranty of his own free will and accord and
without threats, coercion, fraud or duress of any kind and (d) is not relying
on any representation, statement or warranty of any person, party or entity
regarding this Guaranty or the transactions contemplated hereby, except as set
forth in this Guaranty.
C/M: 11752.0002 376635.12
7
<PAGE>
IN WITNESS WHEREOF, the undersigned Guarantors have duly
executed this Guaranty as of the day and year first above set forth.
ROYCO HOTELS & RESORTS LTD.
By: /s/ Terrence Royer
Name: TERRENCE ROYER
Title:
By: /s/ Peter P. Sikora
Name: PETER P. SIKORA
Title: An Individual
By: /s/ Terrence Royer
Name: TERRENCE ROYER
Title: An Individual
By: /s/ Randy Royer
Name: RANDY ROYER
Title: An Individual
By: /s/ Gregory Royer
Name: GREGORY ROYER
Title: An Individual
C/M: 11752.0002 376635.12
8
NON-COMPETITION AGREEMENT
October 1, 1996
WHEREAS, FIRST, pursuant to certain loan agreements (the "Loan
Agreements") entered into between each of Province of Alberta Treasury Branches
("ATB"), Bank of Montreal, Scotia Mortgage Corporation and Canadian Imperial
Bank of Commerce (each, a "Lender" and, collectively, the "Lenders") with
Capital Properties Limited Partnership ("CPLP"), Syndicated Capital Properties
Inc. ("Syndicated"), and Syncap Properties Inc. ("Syncap"), the Lenders each
agreed to lend certain funds to CPLP, Syndicated and Syncap (collectively, the
"Borrowers"), based on certain security provided to the Lenders or a trustee
for a Lender by Tegrad Properties (Winnipeg) Inc., Tegrad Montreal I Inc. and
1002370 Ontario Inc. (collectively, the "Nominees", the Nominees and the
Borrowers are collectively defined as the "Debtors") including and in respect
of certain properties;
WHEREAS, SECOND, as a result of certain ongoing defaults by the Borrowers
under the Loan Agreements and a request by the Lenders that CPLP attempt to
restructure its affairs, National Lodging Corp. ("NLC") agreed to enter into a
letter agreement (the "Lender Letter Agreement") with the Lenders for the
purchase of certain debt and security (the "Loan"), which Lender Letter
Agreement will be assigned prior to or at closing to Bear Financial Corp., an
affiliate of NLC ("Bear");
WHEREAS, THIRD, in order to settle certain disputes between Royco Hotels &
Resorts Ltd. ("Royco"), its shareholders and certain related parties, on the
one hand, and ATB, on the other, such parties, together with NLC are entering
into a certain letter agreement dated as of the date hereof (the "ATB Letter
Agreement") pursuant to which such parties, as a result, in part, of the
intervention by NLC, and the provision by NLC of $155,000, will settle disputes
as referenced therein;
WHEREAS, FOURTH, contemporaneously with the execution of the Lender Letter
Agreement and the ATB Letter Agreement, CPLP and the Debtors entered into a
contract of sale (the "NLC Agreement") with Chartwell Canada Corp.
("Chartwell") an affiliate of NLC (together with NLC and Bear, collectively
"NLC"), pursuant to which such affiliate will purchase the Properties;
WHEREAS, FIFTH, contemporaneously with the execution of the NLC Agreement,
the Royers will deliver a Guaranty to NLC (the "Guaranty");
WHEREAS, SIXTH, contemporaneously with the closing of the NLC Agreement,
Royco will enter into an Amended and Restated Management Services and Franchise
Development Agreement with NL Hotels, Inc. ("NL"; and the agreement to be known
as the "MSFDA"); and
WHEREAS, SEVENTH, NLC is willing to enter into the Lender Letter
Agreement, the ATB Letter Agreement and the NLC Agreement, respectively, only
if, inter alia, the Royers execute and deliver this Agreement, all as more
particularly set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and legal sufficiency of which is
hereby acknowledged, and in order to induce NLC and its Affiliate to enter into
the Lender Letter Agreement, the ATB Letter Agreement and the NLC Agreement,
respectively, the Royers hereby guarantee, covenant and agree with NLC as
follows:
1. As used herein, the following terms shall have the following meanings:
C/M: 11752.0002 384735.2
<PAGE>
Royers: The term "Royers" shall mean, collectively, Royco, Randy Royer,
Terrence Royer, Gregory Royer and Peter P. Sikora. Each of the Royers shall be
defined as a "Royer".
1. (A) Save and except as hereinafter provided, without the
prior written consent of the Executive Committee as provided for in
the MSFDA, the Royers hereby covenant and agree that they, and each
of them, shall not (i) engage in any Management Business or Franchise
Business (as such terms are defined in the MSFDA) independent of
Royco or (ii) assist, advise or otherwise consult with any other
person or entity, whether directly or indirectly, with respect to the
Management Business or the Franchise Business independent of Royco
prior to the termination of the MSFDA in accordance with its terms
and satisfaction of the parties' respective obligations thereunder.
(B) The business (the "RVI Business") currently carried on by
RVI Holiday Limited Partnership, NRG Vacations Inc., R.V.I. Holiday
Inc., R.V.I. Holiday Group and Steelgate Financial Services Inc.
(collectively, the "RVI Group") and any direct or indirect
involvement of the Royers or any of them (other than Royco) in the
RVI Business or with the RVI Group, subject to the obligations of the
Royers under the Service Contracts (as that term is defined in the
MSFDA and in the Development Agreement) shall in no event constitute
or be deemed to constitute a breach of the provisions hereof. For
greater certainty, notwithstanding the provisions of section 1(A)
hereof but subject to the foregoing, any of the Royers shall be
entitled to carry on or be engaged in or concerned with, or lend
money to, or guarantee the debts or obligations of, or permit their
names or any part thereof to be used or employed by the RVI Business
or by any member of the RVI Group in respect of or in connection with
the RVI Business. The Royers hereby represent and warrant that the
RVI Business consists solely of (i) the indirect (pursuant to third
party licenses or contracts) and direct purchase and sale of
timeshare inventory, and (ii) the management and operation of
timeshare programs and the use of timeshare inventory (other than the
management of timeshare resorts).
(C) If any Royer (an "Applicant Royer") (i) wishes to engage
in an activity (a "Prohibited Activity") that would be a violation of
the provisions of section 1(A) hereof, (ii) the Applicant Royer is not
at the relevant time directly or indirectly employed by NLC or an
affiliate thereof, pursuant to the MSFDA, the Development Agreement or
otherwise, (iii) the Applicant Royer has submitted a written proposal
(a "Proposal") in respect of the Prohibited Activity to the Executive
Committee, and (iv) the Executive Committee does not wish Royco to
pursue the Prohibited Activity pursuant to its mandate under the
MSFDA, then the Applicant Royer, or an affiliate thereof, may, without
cost to or interference from NLC or NL or interference with the
obligations of Royco under the MFSDA or of the Royers under the
Service Contracts (as such term is defined in the MSFDA and the
Development Agreement), and provided that the Prohibited Activity is
not directly or indirectly competitive with Royco's extant Management
Business, Franchise Business or business plan, pursue the Prohibited
Activity for its own account on substantially the same terms as set
forth in the applicable Proposal without being otherwise liable for
breach hereof or accountable to NLC, NL or the Executive Committee in
respect thereof.
2. Any breach hereunder shall be grounds for NL to terminate the
Development Agreement (as such term is defined in the NLC Agreement) and the
MSFDA "with cause" as provided for therein. In addition, all proceeds realized
by the Royers in connection with a breach hereunder shall be (i) considered to
be Gross Revenues (as that term is defined in the MSFDA), (ii) dealt with as
Gross Revenue in accordance with the MSFDA, and (iii) held in constructive
trust for the benefit of Royco and NLC. Furthermore, all hotel management
business and/or franchise business, as the case may be, performed in breach
hereof shall be (x) considered to be Management Business or Franchise Business,
as the case may be, and (y) dealt with in accordance with the terms of the
MSFDA; provided, however, that terms and conditions of this sentence shall be
deemed partial compensatory damages resulting from a breach of the Royer's
obligations under Section 1
C/M: 11752.0002 384735.2
2
<PAGE>
hereof and shall not be deemed, or construed to be (1) a waiver by NLC of its
right to terminate the Development Agreement and/or MFSDA "with cause" or (2)
as a waiver by NLC of its right to seek, and obtain and receive, damages
resulting from a breach by the Royers or any of their respective affiliates of
any of their respective obligations under the NLC Agreement, the Guaranty, the
Development Agreement, the MFSDA, the Indemnification Agreement or hereunder.
3. The Royers hereby waive (a) notice of acceptance of this
Agreement; and (b) all other notices of any nature whatsoever to which the
Royers might otherwise be entitled (except as otherwise expressly provided for
in this Agreement).
4. Each reference herein to NLC shall be deemed to include its
affiliated successors and assigns, in whose favor the provisions of this
Agreement shall also inure. Each reference herein to the Royers or a Royer
shall be deemed to include such Royer's, respective heirs, executors,
administrators, legal representatives, trustees, successors and assigns, and
with respect to a Royer which is not an individual, such entities' beneficial
owners and their respective heirs, executors, administrators, legal
representatives, trustees, successors and assigns, all of whom shall be bound
by the provisions of this Agreement (but, subject to the provisions of section
19 of the Guaranty, in no event shall such entities' beneficial owners and
their respective heirs, executors, administrators, legal representatives,
trustees, successors and assigns be liable for amounts in excess of amounts
distributable to such persons by reason of their respective ownership interests
in Royco for and in respect of any period from and after October 1, 1996),
provided, however, that in no event or under any circumstance shall the Royers,
or any Royer, have the right to assign or transfer his, its, or their joint and
several obligations and liabilities under this Agreement, in whole or in part,
to any other person, party or entity; provided, further, however,
notwithstanding the foregoing, in no event shall Avola Limited have any
liabilities, obligations or responsibilities in respect of or as a result of
the foregoing and this Agreement unless and to the extent the representations
and warranties contained in section 20 of the Guaranty are at any time untrue.
5. No delay on the part of NLC in exercising any right or remedy
under this Agreement or failure to exercise the same shall operate as a waiver
in whole or in part of any such right or remedy. No notice to or demand on the
Royers shall be deemed to be a waiver of the obligation of the Royers or of the
right of NLC to take further action without notice or demand as provided in
this Agreement.
6. This Agreement may only be modified, amended or changed by an
agreement in writing signed by NLC and the Royers, and shall in no event be
terminated except in accordance with the provisions of this Agreement. No
waiver of any term, covenant or provision of this Agreement shall be effective
unless given in writing by NLC and if so given by NLC shall only be effective
in the specific instance in which given.
7. Other than as expressly stated herein, the Royers acknowledge and
agree that this Agreement and their obligations hereunder are and shall at all
times be absolute and unconditional in all respects, and are and shall at all
times be valid and enforceable irrespective of any other agreements or
circumstances of any nature whatsoever which might otherwise constitute a
defense to this Agreement and the obligations of the Royers hereunder or the
obligations of any other person or party relating to this Agreement or the
obligations of the Royers hereunder, other than factual matters which may have
a bearing on liability hereunder. This Agreement sets forth the entire
agreement and understanding of NLC and the Royers with respect to the matters
covered by this Agreement, and the Royers absolutely, unconditionally and
irrevocably waive any and all right to assert any defense, setoff, counterclaim
or crossclaim of any nature whatsoever with respect to this Agreement or the
obligations of the Royers under this Agreement or the obligations of any other
person or party relating to this Agreement or the obligations of the Royers
hereunder or to enforce the obligations of the Royers under this Agreement
other than factual matters which may have a bearing on liability hereunder, but
excluding any defenses and the like which are founded in legal or documentary
infirmities or issues, and not assertions of contrary or germane facts which
would mitigate liability hereunder. The Royers acknowledge and agree that no
oral or other agreements, understandings, representations or warranties exist
C/M: 11752.0002 384735.2
3
<PAGE>
with respect to this Agreement or with respect to the obligations of the Royers
under this Agreement, except those specifically set forth in this Agreement.
8. THE ROYERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, AND NLC
BY ITS ACCEPTANCE OF THIS AGREEMENT IRREVOCABLY AND UNCONDITIONALLY WAIVES, ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN
CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THIS AGREEMENT.
9. Any notice, demand or other communication which any party hereto
may desire or may be required to give to any other party hereto shall be in
writing, and shall be deemed given (a) if and when personally delivered, (b)
upon receipt if sent by a nationally recognized overnight courier addressed to
a party at its address set forth below, or (c) on the seventh (7th) business
day after being deposited in United States or Canadian registered or certified
mail, postage prepaid, addressed to a party at its address set forth below, or
to such other address as the party to receive such notice may have designated
to all other parties by notice in writing in accordance herewith: If to the
Royers:
Royco Hotels & Resorts Ltd.
5940 Macleod Trail South
Suite 500
Calgary, Alberta T2H 2G4
Attention: Mr. Terrence Royer
Telecopy: (403) 255-6981
Mr. Peter Sikora
5940 Macleod Trail South
Suite 209
Calgary, Alberta T2H 2G4
Telecopy: (403) 292-0922
Mr. Gregory Royer
5940 Macleod Trail South
Suite 500
Calgary, Alberta T2H 2G4
Telecopy: (403) 255-6981
Mr. Terrence Royer
5940 Macleod Trail South
Suite 500
Calgary, Alberta T2H 2G4
Telecopy: (403) 255-6981
Mr. Randy Royer
5940 Macleod Trail South
Suite 209
Calgary, Alberta T2H 2G4
Telecopy: (403) 292-0922
C/M: 11752.0002 384735.2
4
<PAGE>
With a copy to:
Brans, Lehun, Baldwin & Champagne
120 Adelaide Street West
Suite 1701
Toronto, Ontario M5H 1T1
Attention: Dennis M. Brans, Esq.
Telecopy: (416) 601-0655
If to NLC, at:
c/o National Lodging Corp.
605 Third Avenue
New York, New York 10158
Attention: Martin L. Edelman
Telecopy: (212) 867-5475
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Robert J. Wertheimer, Esq.
Telecopy: (212) 856-7808
Each party to this Agreement may designate a change of address by written
notice given to the other parties fifteen (15) days prior to the date such
change of address is to become effective.
10. This Agreement is, and shall be deemed to be, a contract entered
into under and pursuant to the laws of Ontario and shall be in all respects
governed, construed and applied in accordance with the laws of Ontario.
11. The Royers agree to submit to personal jurisdiction of Ontario
courts in any action or proceeding arising out of this Agreement and, in
furtherance of such agreement, the Royers hereby agree and consent that without
limiting other methods of obtaining jurisdiction, personal jurisdiction over
the Royers in any such action or proceeding may be obtained within or without
the jurisdiction of any court located in Ontario and that any process or notice
of motion or other application to any such court in connection with any such
action or proceeding may be served upon the Royers by registered or certified
mail to or by personal service at the last known address of the Royers, whether
such address be within or without the jurisdiction of any such court.
12. No exculpatory provisions contained in any document or instrument
executed and delivered in connection therewith or under any circumstance be
deemed or construed to modify, qualify or affect in any manner whatsoever the
personal recourse obligations and liabilities of the Royers under this
Agreement.
13. If any term, covenant or provision of this Agreement shall be
held to be invalid, illegal or unenforceable in any respect, this Agreement
shall be construed without such term, covenant or provision; provided, however,
the Royers and NLC shall use their best efforts to reform such term, covenant
or provision held to be invalid, illegal or unenforceable so as to make same
valid, legal and binding.
C/M: 11752.0002 384735.2
5
<PAGE>
14. Each of the Royers acknowledge that he (a) has had the
opportunity to obtain advice of counsel of its own choosing in connection with
the negotiations concerning this Agreement and the drafting and other
preparation of this Agreement; (b) has read the Agreement, has had the
Agreement fully explained by such counsel, and is fully aware of its contents
and legal effects; (c) has entered into this Agreement of his own free will and
accord and without threats, coercion, fraud or duress of any kind and (d) is
not relying on any representation, statement or warranty of any person, party
or entity regarding this Agreement or the transactions contemplated hereby,
except as set forth in this Agreement.
15. In the event the parties hereunder are unable to resolve a
dispute, claim, question or difference, then the parties shall use their best
endeavors to settle any disputes, claims, questions or differences arising out
of or in relation to this Agreement. To this effect, they shall consult and
negotiate with each other, in good faith and understanding of their mutual
interests, to reach a just and equitable solution satisfactory to all of them
within fifteen (15) days of written notice of a claim by one party to another.
If they do not reach such solution within such fifteen (15) day period, then
any party may deliver notice (the "Arbitration Notice") to the other party
requiring resolution by arbitration 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 within 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, each party shall
jointly 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 and shall have a minimum of five (5) years
of experience pertinent to the subject matter of the dispute, claim,
question or indifference.
(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.
(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.
16. This Agreement and the obligations of the Royers hereunder shall
terminate upon the termination of the MSFDA in accordance with the terms and
conditions thereof and the satisfaction of the parties' respective obligations
thereunder and hereunder.
C/M: 11752.0002 384735.2
6
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the day and year first above set forth.
ROYCO HOTELS & RESORTS LTD.
By: /s/ Terrence Royer
Name: TERRENCE ROYER
Title:
By: /s/ Peter O. Sikora
Name: PETER P. SIKORA
Title: An Individual
By: /s/ Terrence Royer
Name: TERRENCE ROYER
Title: An Individual
By: /s/ Randy Royer
Name: RANDY ROYER
Title: An Individual
By: /s/ Gregory Royer
Name: GREGORY ROYER
Title: An Individual
NATIONAL LODGING CORP. (Now known as
Chartwell Leisure Inc. as of 8/8/96)
By: /s/ Douglas Verner
Name: DOUGLAS VERNER
Title:
NL HOTELS, INC. (Now known as Chartwell
Lodging Inc. as of 8/8/96)
By: /s/ Douglas Verner
Name: DOUGLAS VERNER
Title:
C/M: 11752.0002 384735.2
7
NATIONAL LODGING CORP.
605 THIRD AVENUE
NEW YORK, NEW YORK 10171
August 15, 1996
Scotia Mortgage Corporation Bank of Montreal
c/o The Bank of Nova Scotia Corporate & Institutional Financial
3820, 700-2nd Street S.W. Services
P.O. Box 2540 First Canadian Place - 24th Floor
Calgary, Alberta Toronto, Ontario M5X 1A1
AB T2P 2N7 Attention: Cahal B. Carmody
Attention: R.A. Gray Director
Unit Head
Alberta Treasury Branches
Canadian Imperial Bank of Commerce Calgary North Hill
Commerce Court West - 6th Floor P.O. Box 30079, Stn B
Toronto, Ontario M5L 1A2 3rd Floor, 217 16 Avenue N.W.
Attention: A.C. Becker Calgary, Alberta T2M 4N7
General Manager Attention: K.S. Tunnicliffe
Senior Accounts Manager
RE: Capital Properties Limited Partnership - Restructuring
Dear Sirs:
Pursuant to certain loan agreements (the "Loan Agreements") entered
into between each of Alberta Treasury Branches ("ATB"), Bank of Montreal
("BofM"), Scotia Mortgage Corporation ("BNS") and Canadian Imperial Bank of
Commerce ("CIBC") (collectively, the "Lenders") with Capital Properties Limited
Partnership ("CPLP"), Syndicated Capital Properties Inc. ("Syndicated"), and
Syncap Properties Inc. ("Syncap"), the Lenders each agreed to lend certain
funds to CPLP, Syndicated and Syncap (collectively, the "Borrowers"), based on
certain security provided to the Lenders or a trustee for a Lender by the
Borrowers, Tegrad Properties (Winnipeg) Inc., Tegrad Montreal I Inc. and
1002370 Ontario Inc. (collectively, the "Debtors") including and in respect of
each of the properties
C/M: 11752.0002 345257.20
<PAGE>
(the "Properties") listed in Schedule "A" attached hereto (it being understood
that only ATB has a charge on the Calgary Airport Hotel Property and that such
charge is in regards to the renovation loan).
As a result of certain ongoing defaults by the Borrowers under the
Loan Agreements and a request by the Lenders that CPLP attempt to restructure
its affairs, National Lodging Corp. ("NLC") or an affiliate of NLC intends to
enter into a contract of sale (the "NLC Agreement") pursuant to which an
affiliate of NLC will purchase the Properties. NLC will purchase the Debt (as
defined in paragraph 1) and the Security from the Lenders, which transaction is
separate from the NLC Agreement but conditional upon certain approvals required
for the implementation of the NLC Agreement. NLC confirms that the Lenders have
not taken part in the negotiation of the NLC Agreement which will require the
Debt and Security to be amended and restated following the purchase from the
Lenders nor have the Lenders participated in settling or are aware of the terms
of the proposed amendment and restatement of Debt.
Accordingly, NLC agrees with each of the Lenders as follows:
1. Each of the Lenders severally agrees to assign to NLC or to such other
person as NLC may direct, all obligations and indebtedness of the Borrowers to
such Lender under the applicable Loan Agreement (collectively, the "Debt"), and
to assign or transfer to NLC or as it may otherwise direct, all security held
by such Lender or a trustee for such Lender pursuant to the applicable Loan
Agreement with respect to the Debt (collectively, the "Security"), including
all guarantees thereof, forthwith upon payment to the Lenders of the sum of
Eighty Seven Million Five Hundred Thousand ($87,500,000) Dollars (the "Purchase
Price").
2. The Purchase Price shall be allocated and paid to each of the
Lenders in accordance with a separate agreement among the Lenders.
3. NLC shall pay the Purchase Price for the Debt as follows:
(a) A deposit of $5,000,000.00 will be paid by NLC upon
acceptance of this offer, to be held by Fraser & Beatty,
Barristers & Solicitors, as agent for all the Lenders. This
deposit will be forfeited to the Lenders pro rata, in
accordance with a separate agreement among the Lenders, if
NLC fails to close the acquisition of the Debt in accordance
with the terms of this agreement but will be refunded to NLC
within three (3) business days after the closing date if the
conditions referred to in paragraph 7 have not been satisfied
or if any of the Lenders fails to close in accordance with
the terms hereof. If the deposit is forfeited, the Lenders
will have no other claims against NLC arising from its
failure to close. The deposit will be deposited by Fraser &
Beatty in an interest bearing trust account with Bank of
Montreal. If any dispute
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C/M: 11752.0002 345257.20
<PAGE>
arises with respect to the deposit, the deposit and all
interest thereon shall be paid into court by Fraser & Beatty.
(b) The balance of the Purchase Price (i.e. $82,500,000 less
interest earned pursuant to paragraph 3(a) above) by way of
bank draft of an institution reasonably acceptable to the
Lenders, certified cheque drawn on an institution reasonably
acceptable to the Lenders or wire transfer of immediately
available funds, shall be payable severally to each Lender at
closing.
4. The Lenders expect the Borrowers to continue to make monthly
payments to each of the Lenders in the amounts currently being paid to
each of the Lenders; for the avoidance of doubt, the payments are the
amounts paid by the Borrowers to each of the Lenders for the month of
March, 1996, as set out in Schedule "G" hereto. If the Borrowers do
not make any such payment to a Lender when such payment is due as
provided by the applicable Loan Agreement, such Lender may notify NLC
of such default. If NLC does not pay to such Lender, within ten (10)
days after the delivery of such notice to NLC by fax at (212) 867-5475
Attn: Martin L. Edelman, with a copy faxed at (212) 856-7808 Attn:
Robert J. Wertheimer, the payments listed in Schedule G which were not
paid by the Borrowers and all interest accrued thereon to the date of
payment in full, such Lender shall be entitled to terminate this
letter agreement by notice to NLC and the other Lenders unless NLC
agrees in writing prior to the expiry of such ten (10) day period to
close the acquisition of the Debt as provided herein within five (5)
days following the expiry of the said ten (10) day period and does
complete the acquisition within such five (5) day period. NLC shall,
on such closing, pay in addition to the Purchase Price all such
monthly payments then in arrears and such interest accrued to the date
of closing. Upon such termination, the deposit and all interest
thereon shall be refunded to NLC within three (3) business days.
5. At closing, each Lender shall, at its own expense, prepare, execute,
and deliver complete assignments of all Debt and the Security held by
such Lender, including, without limiting the generality of the
foregoing, all mortgages, debentures and security agreements
comprising the Security with respect to the applicable Properties, all
Personal Property Security Act and other registrations in all
Provinces and Territories of Canada where such registrations have been
effected, and shall deliver to NLC all notes and guarantees in respect
of the Debt.
6. In connection with the sale by the Lenders of the Debt and Security,
each of the Lenders severally makes to NLC the representations and
warranties set forth in the Schedule "B" and the Schedule "C" which
are applicable to such Lender but not in any other Schedule "B" or
Schedule "C" hereto. The Lenders make no other representations or
warranties to NLC or any other person. Neither NLC nor the purchaser
of the Debt and Security shall have any recourse to any Lender in
respect
-3-
C/M: 11752.0002 345257.20
<PAGE>
of any Debt or Security or otherwise (except for a breach by a Lender
of its representations or warranties contained herein) and the
assignments by the Lenders shall so state.
7. Subject to paragraph 9 herein, this purchase of Debt and Security
will close not later than the tenth (10th) business day following the
date on which 66.6% or more (or such lesser percentage as may be
satisfactory to NLC in its sole opinion) of the votes cast at a
meeting of CPLP's limited partners have approved the terms of the NLC
Agreement and such other resolutions as may by referred to them by NLC
at such meeting, provided all the representations and warranties set
forth in Schedules "B" and "C" remain true and correct on and as of
the closing (to be confirmed by certificates of the Lenders delivered
at closing). The closing (the "closing") shall occur at the offices of
Fraser & Beatty, Barristers & Solicitors, whose address is 1 First
Canadian Place, Toronto. NLC shall give the Lenders at least nine (9)
business days' prior notice of the closing date. If the closing has
not occurred on or before October 15, 1996 on account of the failure
by NLC to close and each Lender is ready, willing and able to close,
this letter agreement shall terminate and, if all conditions precedent
to NLC's obligation to close were satisfied on or before October 15,
1996, the deposit and all interest accrued thereon shall be paid to
the Lenders pro rata, in accordance with a separate agreement among
the Lenders. If all such conditions precedent were not satisfied on or
before October 15, 1996, this letter agreement shall terminate and the
deposit and all interest accrued thereon shall be paid to NLC within
three (3) business days. If the closing has not occurred on or before
the date set as the closing date pursuant to this paragraph 7, solely
on account of a failure to close on the part of one or more of the
Lenders when NLC is ready, willing and able to close, NLC shall be
entitled to pursue all legal and equitable remedies (including
specific performance) against such Lender or Lenders which was or were
unwilling to close, and the said closing date hereinabove referenced
may by written notice by NLC to each of the Lenders on or before a
date ten (10) business days after the date set for closing be extended
to October 15, 1996 at NLC's option in order to permit NLC to close
the acquisition of the Debt and the Security from all of the Lenders
simultaneously on or before October 15, 1996. However, this letter
agreement shall be terminated if the closing has not been completed on
or before October 15, 1996. Upon such termination of this agreement,
other than as provided in the last sentence in this paragraph 7, the
deposit plus all interest thereon shall be refunded to NLC within
three (3) business days. NLC agrees that any damage claim arising from
a breach of a Lender's obligations hereunder, however, may be asserted
only against such of the Lenders who are unwilling to close when NLC
is otherwise ready, willing and able to do so, and not against any of
the other Lenders. If, on October 15, 1996, all of the Lenders are
ready, willing and able to close, all conditions precedent to NLC's
obligation to close have been satisfied and NLC does not itself close
for any reason, this letter agreement shall be terminated, and the
deposit plus all interest thereon shall be paid to the Lenders pro
rata, in accordance with a separate agreement among the Lenders.
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C/M: 11752.0002 345257.20
<PAGE>
8. From the date hereof until the earlier of closing or the termination
of this Agreement, each of the Lenders agrees not to commence any
realization procedures relating to the Security (other than giving
notices of default, demands for payment and notices of intention to
enforce security) unless:
(a) an event occurs which, in the sole discretion of any
Lender, would or could, in the reasonable opinion of any
Lender, result in the loss by such Lender of priority over
any of the Borrower's assets to another creditor (including a
loss of priority to any governmental liens, statutorily
created liens or existing liens but excluding a lien for real
property taxes and utility charges), provided that the
Lenders shall notify NLC of such priority claim event by
giving notice in the manner and to the addresses referred to
in paragraph 4 above and NLC shall have had an opportunity
(but no obligation) to cure such event within ten (10) days
after the delivery of such notice and NLC shall have failed
to cure such event within such ten (10) day period, having
not elected to close the acquisition of the Debt by not later
than the tenth (10th) day following receipt of such notice
hereinbefore provided (or having so timely elected, having
failed to close when the Lenders were ready, willing and able
to do so by not later than five (5) days after the expiry of
said ten (10) day period); or
(b) any Lender has not received the monthly payments referred
to in paragraph 4 above, the ten (10) day period provided to
NLC therein has expired absent the required payment or
payments by NLC, this letter agreement has been terminated
and NLC has had the deposit plus all interest thereon
refunded.
Subject to this paragraph 8, the Lenders shall be entitled to realize
on their Security despite any provision of the NLC Agreement or any
other agreement.
9. In the event of an appointment of a receiver and manager of all or
substantially all of the assets of the Borrowers, or if a voluntary
assignment or involuntary petition in bankruptcy is filed against any
Borrower, NLC may within five (5) days of such event terminate this
agreement, whereupon the Lenders shall refund the deposit plus all
interest thereon to NLC within three (3) business days after such
termination, provided that neither NLC nor any affiliate thereof shall
have initiated such event.
10. On closing, each of the Lenders will execute and deliver a covenant
not to sue in favour of the Borrowers and the other Debtors in the
form of Schedule "D" attached hereto and each of the Borrowers and the
other Debtors will execute and deliver a covenant not to sue in favor
of each Lender in the form of Schedule "E" attached hereto.
-5-
C/M: 11752.0002 345257.20
<PAGE>
11. Each of the Lenders and their assigns shall execute and deliver such
other instruments and perform or cause to be performed such further
acts in respect of the foregoing as they and their respective legal
counsel reasonably deem appropriate.
12. Upon full execution and delivery of this letter agreement by the
parties hereto, this offer shall constitute a legal and binding
agreement between NLC and each of the Lenders.
13. All dollar amounts referred to herein are in Canadian Dollars.
14. Time shall be of the essence with respect to the dates specified
in this letter agreement.
15. Nothing in this letter agreement shall be construed as a waiver of the
notices of default or demands for payment previously issued by any of
the Lenders with respect to any Debt, and if NLC does not complete the
purchase contemplated under the terms of this letter agreement by
October 15, 1996, the Lenders shall be entitled to exercise all rights
and remedies available to them at law, or otherwise against the
Debtors.
16. Each of the parties hereto shall pay its own counsel and
professional fees, provided the foregoing shall not affect any
arrangements among the Lenders.
17. NLC shall be permitted to assign its rights and obligations hereunder
to a wholly owned and controlled subsidiary provided such assignment
in no way relieves NLC of its obligations to the Lenders.
18. Each of the obligations of each of the Lenders hereunder is
several and not joint or joint and several. No Lender shall have any
liability in respect of any obligation or default by any other Lender.
19. This agreement may be executed in counterparts and all
counterparts shall constitute one and the same agreement.
20. This agreement shall be governed by and construed in accordance
with the laws of Ontario. The parties hereto attorn to the
jurisdiction of Ontario courts to resolve any dispute hereunder.
21. The obligation of NLC to complete the purchase of the Debt and
Security is conditional upon:
(a) the delivery to NLC on closing of executed documents in
the forms of Schedules F hereto upon the payment of the
additional amount of $325,000 to
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C/M: 11752.0002 345257.20
<PAGE>
ATB on such closing (and NLC shall cause to be paid or pay
such additional sum of $325,000 to ATB on closing); and
(b) there being an absence of a Court Order in effect on
closing which prohibits the completion of the NLC Purchase.
For the purpose of this paragraph and paragraph 26, the "NLC
Purchase" shall mean the purchase by an affiliate of NLC of
the Properties, the purchase by an affiliate of NLC of the
Debt and Security and the exercise by the purchaser of the
Debt and Security of its remedies subsequent to closing in
respect of the Security, should that be necessary in the
opinion of NLC. For the purposes of this paragraph, "Court
Order" shall mean any action or application (resulting from
an action or application by a person other than NLC,
Chartwell Canada Corp., a Delaware corporation ("Chartwell"),
any affiliate of either of them or any of their respective
successors or assigns) before any court or governmental
authority or agency instituted or decided adversely against
CPLP, Syndicated, NLC, Chartwell, any of the Lenders or their
affiliates:
(i) that challenges the NLC Purchase or the means by which
same may be accomplished;
(ii) that seeks to prohibit or impose limitations on the NLC
Purchase or to compel NLC, Chartwell or its affiliates to
unwind the NLC Purchase, including any subsequent business
transactions; or
(iii) that seeks to impose any material condition to the NLC
Purchase which is unacceptable to NLC, Chartwell or its
affiliates.
This condition is inserted for the sole benefit of NLC and may be
waived by it on or before closing in writing but such waiver shall not
affect NLC's obligation pursuant to subparagraph 21(a).
22. The obligations of the Lenders to complete the sale of the Debt
and Security are conditional upon the receipt by the Lenders of the
amounts referred to in paragraph 4 (in the case of partial months,
prorated to the date of closing) and upon the execution and delivery
to the Lenders on or before closing of each of the following in form
and substance satisfactory to each Lender: (a) written consent by
Relax Development Corporation Ltd., the Borrowers, the other Debtors
and 1002370 Ontario Inc. to this transaction; (b) written consent by
NL Hotels, Inc. (formerly known as Forte Hotels, Inc.) to this
transaction; (c) written confirmation by the Borrowers of the amount
of the Debt owing to each Lender as the date of closing; and (d) a
covenant by each of the Borrowers and the other Debtors to each of
the Lenders not to sue. These conditions are for the sole benefit of
the Lenders and may be waived by the Lenders on or before closing in
writing.
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C/M: 11752.0002 345257.20
<PAGE>
23. NLC shall indemnify each of the Lenders against any claims or
damages suffered by the Lenders (and any one or more of them) from
conditions, actions or events (not resulting from Lender conduct,
directly or indirectly) occurring after the closing resulting from
any action of NLC, the purchaser of the Debt and Security, any
affiliate of either or their respective successors and assigns,
including any claims or damages arising from the NLC Agreement, any
amendment or restatement of the Debt or any realization of the
Security, but excluding any claims otherwise made in connection with
the acquisition of the Debt from the Lenders or acts, failures to act
or circumstances occurring prior to closing.
24. NLC agrees that it will register, as soon as possible after the
closing, all appropriate documents in all registries where the
Security is registered to show that NLC has become the registered
holder of the Security. NLC shall not hold out or represent to any
person that it acts as agent for any of the Lenders with respect to
any of the Debt or Security or otherwise.
25. For the avoidance of doubt, NLC shall be under no obligation to
close if and to the extent one or more of the Lenders is not ready,
willing or able to close.
26. NLC shall not disclose to any person any matter relating to this
Transaction including, without limitation, the name of any Lender,
the amount of the Debt owing to any Lender, or the purchase price or
the part thereof paid or payable to any Lender, except to the extent
such disclosure is required by law, in connection with any necessary
consent to the purchase of Debt and Security, or as may be disclosed
to NLC's bankers in connection with NLC's corporate borrowing, or to
the extent required by applicable laws mandating the disclosure of
material information concerning issuers of publicly offered or traded
securities. Despite the foregoing, (i) NLC shall be permitted to
disclose to the partners of CPLP the total amount of the Debt being
purchased by NLC and (ii) the Borrowers may be required to disclose
to the partners of CPLP information regarding this letter agreement
in connection with obtaining any necessary consent to the NLC
Purchase.
27. NLC shall cause Forte Hotels Management, Inc., Forte Hotels, Inc.
and Royco Hotels & Resorts Ltd. to deliver to the Lenders on or
before closing a release of all obligations and liabilities of the
Lenders pursuant to the non-disturbance agreement dated as of
September 30, 1992.
28. If any Court Order referenced to in subparagraph 21(b) is in
effect on closing, any party hereto shall be entitled, on notice to,
the other parties hereto, to extend the closing date until October
15, 1996.
29. If and to the extent any of the Lenders receives a payment of
principal on its Debt or fee other than, in respect of BNS or BofM
only, the payments pursuant to paragraph 4 hereof, then and in that
event, the Purchase Price shall be reduced by the amount of
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C/M: 11752.0002 345257.20
<PAGE>
principal or fee received (excluding the principal received by BNS or
the fee received by BofM). All payments and collections received by
the Lender on or in respect of the Debt after the completion of
closing shall be for NLC's account, held in trust by Lenders and
remitted to NLC or its designee upon receipt.
30. Nothing in this agreement shall constitute a waiver by any Lender
of any default by any of the Borrowers or any of the other Debtors.
-9-
C/M: 11752.0002 345257.20
<PAGE>
Dated at New York, New York this 15th day of August, 1996.
NATIONAL LODGING CORP.
Per: /s/ Martin L. Edelman
Name: MARTIN L. EDELMAN
Title:
-10-
C/M: 11752.0002 345257.20
<PAGE>
THIS OFFER IS ACCEPTED BY EACH OF THE LENDERS ON THE DATES INDICATED BELOW.
BANK OF MONTREAL
Per: /s/ Cahal B. Carmody
Per:
Date: August 15, 1996
SCOTIA MORTGAGE CORPORATION
Per:
Per:
Date: August 15, 1996
CANADIAN IMPERIAL BANK OF COMMERCE
Per: /s/ A.C. Becker
Title: General Manager
Per:
Date: August 15, 1996
PROVINCE OF ALBERTA TREASURY BRANCHES, by its authorized agent
Per: /s/ Witness: /s/
Date: August , 1996
-11-
C/M: 11752.0002 345257.20
<PAGE>
SCHEDULE "G"
Monthly Payments Being Received by Each Lender
Lender Amount
Bank of Montreal $
Scotia Mortgage Corporation $
Canadian Imperial Bank of Commerce $
Province of Alberta Treasury Branches $
-12-
C/M: 11752.0002 345257.20
<PAGE>
SCHEDULE "A"
LIST OF PROPERTIES
1. Ottawa Bast (Gloucester) 12. Winnipeg
1486 Innes Road 360 Colony Street
Gloucester, Ontario Winnipeg, Manitoba
2. Scarborough 13. Sudbury
20 Milner Business Court 1401 Paris Street
Scarbourough, Ontario Sudbury, Ontario
3. Burlington 14. London
950 Walker's Line 855 Wellington Road South
Burlington, Ontario London, Ontario
4. Windsor (Downtown) 15. Kitchener
33 Riverside Drive East 2960 King Street East
Windsor, Ontario Kitchener, Ontario
5. North York 16. Ingersoll
50 Norfinch Drive 20 Samnah Crescent
North York, Ontario R.R. #1
Ingersoll, Ontario
6. Richmond
3071 St. Edwards Drive 17. Calgary South
Richmond, British 9206 Macleod Trail South
Columbia Calgary, Alberta
7. Laval 18. Edmonton West
2900 Boulevard Le 18320 Stony Plain Road
Carrefour Edmonton, Alberta
Laval, Quebec (Leasehold)
8. North Bay 19. Edmonton South
1523 Seymour Street 10320 - 45th Avenue South
North Bay, Ontario Edmonton, Alberta
[1/2 interest]
9. Oshawa 20. Regina
940 Champlain Avenue 1110 East Victoria Avenue
Oshawa, Ontario Regina, Saskatchewan
10. Ottawa (Downtown) 21. Calgary Airport
402 Queen Street 2750 Sunridge Blvd. N.E.
Ottawa, Ontario Calgary, Alberta
11. Mississauga
5599 Ambler Drive
Mississauga, Ontario
C/M 11752.0000 414853.1 10/14/96 11:45AM
<PAGE>
SCHEDULE "B"
SCOTIA MORTGAGE CORPORATION ("BNS") represents and warrants to NLC as of the
date hereof that:
(a) it is a wholly-owned subsidiary of a chartered bank of
Canada) validly existing under the laws of Canada;
(b) upon receipt by it of the applicable consents referred to in
paragraph 22 of the Agreement, it has the legal capacity to
sell that part of the Debt owing to it and the Security held
by it therefor;
(c) it has taken all necessary action in order to authorize the
performance by BNS of its obligations pursuant to this
Agreement and the execution and delivery by it of this
Agreement and all documents delivered by it to NLC pursuant
to this Agreement;
(d) it is the beneficial owner of its interest in the Debt and
the Security described in Schedule C-1 and it has not
previously sold, assigned or encumbered such Debt or such
Security to, or in favour of any person other than NLC or
such other person as NLC may direct or has directed;
(e) the execution and delivery of this Agreement by BNS and the
performance by BNS of its obligations hereunder do not
contravene any charter documents or by-laws of BNS, any
resolutions of the directors of BNS, any agreement to which
it is a party, or any judgment, decree, order or award of any
court binding on BNS, or any license or permit of BNS, or any
applicable law, statute or ordinance;
(f) Schedule C-1 to this Agreement sets forth the accurate amount
of principal and interest owing by the Borrowers to BNS under
the Loan Agreement to which BNS is a party as of the date
hereof and the rate of interest currently applicable to the
Debt under said agreement and attached to such Schedule is a
written confirmation of the Borrowers which confirms such
amount;
(g) it has not taken any action to enforce or realize upon its
Security except as permitted by paragraph 8 of the
Agreement; and
(h) there are no actions or lawsuits or claims existing or
pending or, to the best of its knowledge and information,
threatened in connection with its interest in the Debt and
the Security.
C/M: 11752.0002 346170.9 10/14/96 11:49AM
<PAGE>
(i) it has not, on, or, if applicable, after, the date of this
Agreement:
(i) forgiven any Debt;
(ii) accepted payment of any principal amount
of Debt except as provided by paragraphs
4 or 29 of the Agreement; or
(iii) taken any action to adversely affect the
priority of its Security.
C/M: 11752.0002 346170.9 10/14/96 11:49AM
<PAGE>
SCHEDULE "B"
BANK OF MONTREAL ("BOM") represents and warrants to NLC as of the date hereof
that:
(a) it is a chartered bank of Canada validly existing under the
laws of Canada;
(b) upon receipt by it of the applicable consents referred to in
paragraph 22 of the Agreement, it has the legal capacity to
sell that part of the Debt owing to it and the Security held
by it therefor;
(c) it has taken all necessary action in order to authorize the
performance by BOM of its obligations pursuant to this
Agreement and the execution and delivery by it of this
Agreement and all documents delivered by it to NLC pursuant
to this Agreement;
(d) it is the beneficial owner of its interest in the Debt and
the Security described in Schedule C-2 and it has not
previously sold, assigned or encumbered such Debt or such
Security to, or in favour of any person other than NLC or
such other person as NLC may direct or has directed;
(e) the execution and delivery of this Agreement by BOM and the
performance by BOM of its obligations hereunder do not
contravene any charter documents or by-laws of BOM, any
resolutions of the directors of BOM, any agreement to which
it is a party, or any judgment, decree, order or award of any
court binding on BOM, or any license or permit of BOM, or any
applicable law, statute or ordinance;
(f) Schedule C-2 to this Agreement sets forth the accurate amount
of principal and interest owing by the Borrowers to BOM under
the Loan Agreement to which BOM is a party as of the date
hereof and the rate of interest currently applicable to the
Debt under said agreement and attached to such Schedule is a
written confirmation of the Borrowers which confirms such
amount;
(g) it has not taken any action to enforce or realize upon its
Security other than by issuing notices of default to the
Borrowers except as permitted by paragraph 8 of the
Agreement; and
(h) there are no actions or lawsuits or claims existing or
pending or, to the best of its knowledge and information,
threatened in connection with its interest in the Debt and
the Security.
C/M: 11752.0002 346170.9 10/14/96 11:49AM
<PAGE>
(i) it has not, on, or, if applicable, after, the date of this
Agreement:
(i) forgiven any Debt;
(ii) accepted payment of any principal amount
of Debt except as provided by paragraphs
4 or 29 of the Agreement; or
(iii) taken any action to adversely affect the
priority of its Security.
C/M: 11752.0002 346170.9 10/14/96 11:49AM
<PAGE>
SCHEDULE "B"
CANADIAN IMPERIAL BANK OF COMMERCE ("CIBC") represents and warrants to NLC as
of the date hereof that:
(a) it is a chartered bank of Canada validly existing under the
laws of Canada;
(b) upon receipt by it of the applicable consents referred to in
paragraph 22 of the Agreement and a consent by 1002370
Ontario Inc., it has the legal capacity to sell that part of
the Debt owing to it and the Security held by it therefor;
(c) it has taken all necessary action in order to authorize the
performance by CIBC of its obligations pursuant to this
Agreement and the execution and delivery by it of this
Agreement and all documents delivered by it to NLC pursuant
to this Agreement;
(d) it is the beneficial owner of its interest in the Debt and
the Security described in Schedule C-3 and it has not
previously sold, assigned or encumbered such Debt or such
Security to, or in favour of any person other than NLC or
such other person as NLC may direct or has directed and
except as disclosed by subparagraph (e);
(e) it sold to 1002370 Ontario Inc. the debts owing to CIBC by
the owners of four hotels in the Province of Ontario along
with the mortgages over such hotels and other security held
by CIBC as security for such debt. 1002370 Ontario Inc.
obtained the funds for such purchase from CPLP and in turn
gave CPLP its promissory note in the amount of the loan,
which note was secured by an assignment of the purchased
debt and the supporting security. CPLP in turn assigned the
promissory note from 1002370 Ontario Inc. secured by the
purchased debt and collateral security to CIBC as security
for CPLP's indebtedness to CIBC;
(f) the execution and delivery of this Agreement by CIBC and the
performance by CIBC of its obligations hereunder do not
contravene any charter documents or by-laws of CIBC, any
resolutions of the directors of CIBC, any agreement to which
it is a party, or any judgment, decree, order or award of any
court binding on CIBC, or any license or permit of CIBC, or
any applicable law, statute or ordinance;
(g) Schedule C-3 to this Agreement sets forth the accurate amount
of principal and interest owing by the Borrowers to CIBC
under the Loan Agreement to which CIBC is a party as of the
date hereof and the rate of interest currently
C/M: 11752.0002 346170.9 10/14/96 11:49AM
<PAGE>
applicable to the Debt under said agreement and attached to
such Schedule is a written confirmation of the Borrowers
which confirms such amount;
(h) it has not taken any action to enforce or realize upon its
Security except as permitted by paragraph 8 of the
Agreement; and
(i) there are no actions or lawsuits or claims existing or
pending or, to the best of its knowledge and information,
threatened in connection with its interest in the Debt and
the Security.
(j) it has not, on, or, if applicable, after, the date of this
Agreement:
(i) forgiven any Debt;
(ii) accepted payment of any principal amount
of Debt except as provided by paragraphs
4 or 29 of the Agreement; or
(iii) taken any action to adversely affect the
priority of its Security.
C/M: 11752.0002 346170.9 10/14/96 11:49AM
<PAGE>
SCHEDULE "B"
ALBERTA TREASURY BRANCHES ("ATB") represents and warrants to NLC as of the date
hereof that:
(a) it is validly existing under the Province of Alberta
Treasury Branches Act of Alberta;
(b) upon receipt by it of the applicable consents referred to in
paragraph 22 of the Agreement, it has the legal capacity to
sell that part of the Debt owing to it and the Security held
by it therefor;
(c) it has taken all necessary action in order to authorize the
performance by ATB of its obligations pursuant to this
Agreement and the execution and delivery by it of this
Agreement and all documents delivered by it to NLC pursuant
to this Agreement;
(d) it is the beneficial owner of its interest in the Debt and
the Security described in Schedule C-4 and it has not
previously sold, assigned or encumbered such Debt or such
Security to, or in favour of any person other than NLC or
such other person as NLC may direct or has directed;
(e) the execution and delivery of this Agreement by ATB and the
performance by ATB of its obligations hereunder do not
contravene any charter documents or by-laws of ATB, any
resolutions of the directors of ATB, any agreement to which
it is a party, or any judgment, decree, order or award of any
court binding on ATB, or any license or permit of ATB, or any
applicable law, statute or ordinance;
(f) Schedule C-4 to this Agreement sets forth the accurate amount
of principal and interest owing by the Borrowers to ATB under
the Loan Agreement to which ATB is a party as of the date
hereof and the rate of interest currently applicable to the
Debt under said agreement and attached to such Schedule is a
written confirmation of the Borrowers which confirms such
amount;
(g) it has not taken any action to enforce or realize upon its
Security other than by issuing notices of default to the
Borrowers except as permitted by paragraph 8 of the
Agreement; and
(h) there are no actions or lawsuits or claims existing or
pending or, to the best of its knowledge and information,
threatened in connection with its interest in the Debt and
the Security.
C/M: 11752.0002 346170.9 10/14/96 11:49AM
<PAGE>
(i) it has not, on, or, if applicable, after, the date of this
Agreement:
(i) forgiven any Debt;
(ii) accepted payment of any principal amount
of Debt except as provided by paragraphs
4 or 29 of the Agreement; or
(iii) taken any action to adversely affect the
priority of its Security.
C/M: 11752.0002 346170.9 10/14/96 11:49AM
<PAGE>
SCHEDULE "C"
SCOTIA MORTGAGE CORPORATION ("BNS") represents and warrants to NLC as of the
date hereof that:
(a) Schedule C-1 to this Agreement sets forth a true and
complete list of the Loan Agreement with BNS and all
amendments thereto;
(b) Schedule C-1 to this Agreement sets forth a true and complete
list of all the Security of BNS for that part of the Debt
owing to it, including, without limitation, all guarantees
thereof; and
(c) true copies of BNS' Loan Agreement, all amendments thereto
and all the Security have been delivered to NLC prior to or
concurrently with the execution and delivery of this
Agreement by BNS.
C/M: 11752.0002 346170.9 10/14/96 11:49AM
<PAGE>
SCHEDULE "C"
BANK OF MONTREAL ("BOM") represents and warrants to NLC as of the date hereof
that:
(a) Schedule C-2 to this Agreement sets forth a true and
complete list of the Borrower's Loan Agreement with BOM and
all amendments thereto;
(b) Schedule C-2 to this Agreement sets forth a true and complete
list of all the Security of BOM for that part of the Debt
owing to it, including, without limitation, all guarantees
thereof; and
(c) true copies of the Loan Agreements, all amendments thereto
and all the Security have been delivered to NLC prior to or
concurrently with the execution and delivery of this
Agreement by BOM.
C/M: 11752.0002 346170.9 10/14/96 11:49AM
<PAGE>
SCHEDULE "C"
CANADIAN IMPERIAL BANK OF COMMERCE ("CIBC") represents and warrants to NLC as
of the date hereof that:
(a) Schedule C-3 to this Agreement sets forth a true and
complete list of the Borrower's Loan Agreement with CIBC and
all amendments thereto;
(b) Schedule C-3 to this Agreement sets forth a true and complete
list of all the Security of CIBC for that part of the Debt
owing to it, including, without limitation, all guarantees
thereof; and
(c) true copies of the Loan Agreements, all amendments thereto
and all the Security have been delivered to NLC prior to or
concurrently with the execution and delivery of this
Agreement by CIBC.
C/M: 11752.0002 346170.9 10/14/96 11:49AM
<PAGE>
SCHEDULE "C"
ALBERTA TREASURY BRANCHES ("ATB") represents and warrants to NLC as of the date
hereof that:
(a) Schedule C-4 to this Agreement sets forth a true and
complete list of the Borrower's Loan Agreement with ATB and
all amendments thereto;
(b) Schedule C-4 to this Agreement sets forth a true and complete
list of all the Security of ATB for that part of the Debt
owing to it, including, without limitation, all guarantees
thereof; and
(c) true copies of the Loan Agreements, all amendments thereto
and all the Security have been delivered to NLC prior to or
concurrently with the execution and delivery of this
Agreement by ATB.
C/M: 11752.0002 346170.9 10/14/96 11:49AM
<PAGE>
SCHEDULE "D"
TO: CAPITAL PROPERTIES LIMITED PARTNERSHIP SYNDICATED CAPITAL
PROPERTIES INC. SYNCAP PROPERTIES INC. TEGRAD PROPERTIES
(WINNIPEG) INC. TEGRAD MONTREAL I INC. 1002370 ONTARIO INC.
RE: Credit Agreement dated as of September 30, 1992 among
Capital Properties Limited Partnership, Syndicated Capital
Properties Inc. and Syncap Properties Inc. (the "Borrowers")
and [insert name of Lender] (the "Lender"), as amended from
time to time (the "Credit Agreement")
COVENANT NOT TO SUE
WHEREAS, the Borrowers are indebted to the Lender pursuant to the
Credit Agreement and have granted security to the Lender; and
WHEREAS, Tegrad Properties (Winnipeg) Inc., Tegrad Montreal I Inc.
and 1002370 Ontario Inc. (the "Debtors") may have granted security to the
Lender as security for payment of the indebtedness of the Borrower to the
Lender pursuant to or in respect of the Credit Agreement; and
WHEREAS, the Lender is assigning to National Lodging Corp., a
Delaware corporation or its nominee the Lender's interest in all such
indebtedness and the Lender's interest in the Credit Agreement and all security
granted to the Lender by the Borrowers or the Debtors pursuant to or in respect
of the Credit Agreement.
NOW, THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of
other and good and valuable consideration and the sum of Ten ($10.00) Dollars
of lawful of money of Canada now paid by the Borrowers and the Debtors to the
Lender (the receipt and sufficiency of which are hereby acknowledged by the
Lender), the Lender hereby covenants and agrees that it shall not, after the
foregoing assignment by the Lender to National Lodging Corp. or National
Lodging Corp.'s nominee, commence any legal action, including realization or
enforcement against the Borrowers or the Debtors in respect of any indebtedness
or liability owing by the Borrowers or the Debtors to the Lender pursuant to or
in respect of the Credit Agreement or any security granted by any of them to
the Lender pursuant to or in respect of the Credit Agreement.
C/M: 11752.0002 346170.9 10/14/96 11:49AM
<PAGE>
Dated the day of , 1996
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
C/M: 11752.0002 346170.9 10/14/96 11:49AM
<PAGE>
SCHEDULE C-1
SCOTIA MORTGAGE CORPORATION
DEBT AND SECURITY
A. Loan Agreement
Loan Agreement dated as of September 30, 1992 among the Borrowers and
Scotia Mortgage Corporation as amended by amendment agreement no. 1 dated as of
May 6, 1993, among the Borrowers and Scotia Mortgage Corporation and affected
by a Waiver of Default Agreement dated as of May 6, 1993 among the Borrowers
and all Lenders, together with copy of Promissory Note.
B. Amount of Debt as at Date of Representations and Warranty
Principal Amount $29,213,097.88
Accrued Interest $ 93,423.43
Costs $ NIL
Any other amount $ NIL
Total $29,306,521.31
C. Rate of Interest Payable as at Date or Representation and
Warranty
8.5% per annum calculated half-yearly not in advance.
D. List of Security (Including Guarantee)
1. Debenture dated as of September 30, 1992 issued by the
Borrowers in favour of Scotia Mortgage Corporation in
the amount of $32,000,000;
2. Duplicate registered copies of the following Form 2 Charges
(Ontario) or real property in Ontario registered October 26,
1992 (unless otherwise specified):
(i) Mississauga - registered in the Registry Office
of Peel (No. 43) as Instrument No. R01021088
(ii) Ottawa (Downtown) - registered in the Registry
Office of Ottawa-Carleton (No. 4) as Instrument
No. N638429
C/M 11752.0000 414857.1 10/14/96 12:2PM
<PAGE>
- 2 -
(iii) North Bay - registered in the Land Titles Office
of Nipissing (No. 36) as Instrument No. 325474
(iv) Oshawa - registered on October 27, 1992 in the
Registry Office of Durnham (No. 40) as
Instrument No. D399559
3. Delivery Agreement dated as of September 30, 1992 by
the Borrowers in favour of Scotia Mortgage Corporation
in respect of SMC's debenture.
4. Debenture in the principal amount of $150 million (the
"Blanket Debenture").
5. Duplicate registered copies of the following form 2 Charges
(Ontario) for real property in Ontario in respect of the
Blanket Debenture registered on October 26, 1992 (unless
otherwise specified):
(i) Gloucester and Ottawa (Downtown) - registered in
the Registry Office of Ottawa-Carleton (No. 4)
as Instrument No. N638432, as amended
(ii) North York - registered in the Land Titles
Office of Metropolitan Toronto (No. 66) as
Instrument No. C803977
(iii) Scarborough - registered in the Registry Office
of Toronto Boroughs (No. 64) as Instrument No.
TB864440, as amended
(iv) Burlington - registered in the Registry Office
and the Land Titles Office of Halton (No. 20) as
Instrument Nos. 794517 and 527801 respectively,
as amended
(v) Windsor - registered in the Registry Office of
Essex (No. 12) as Instrument No. 1216232, as
amended
(vi) London - registered in the Land Titles Office of
Middlesex (No. 33) as Instrument No. LT284756
(vii) Kitchener - registered in the Registry Office of
Waterloo (No. 58) as Instrument No. 1143078, as
amended
(viii) Ingersoll - registered in the Registry Office
(No. 41) as Instrument No. 375314, as amended
C/M 11752.0000 414857.1 10/14/96 12:2PM
<PAGE>
- 3 -
(ix) Sudbury - registered in the Land Titles Office
of Sudbury (No. 53) as Instrument No. 746281
(x) Mississauga - registered in the Registry Office
of Peel (No. 43) as Instrument No. R01021090, as
amended
(xi) North Bay - registered in the Land Titles Office
of Nipissing (No. 36) as Instrument No. 325476
(xii) Oshawa - registered on October 27, 1992 in the
Registry Office of Durham (No. 40) as Instrument
No. D399561, as amended
(xiii) Edmonton West, Edmonton South and Calgary South
Hotels - registered in the Land Titles Office of
Edmonton as Instrument No. 922328589 and No.
921267515 respectively
(xiv) Regina Hotel - registered in the Land Titles
Offices of Regina on October 26, 1992 as
Instrument No. 92R53708
6. Delivery Agreement dated September 30, 1992 by the
Borrowers in favour of each of the Lenders in respect
of the Blanket Debenture.
7. Specific Assignment of Agreements dated September 30, 1992 by
the Borrowers of the Borrowers' interests in each franchise
and license agreement and each management agreement related
to the hotels of which Scotia Mortgage Corporation holds a
charge.
Richmond Hotel in B.C.
8. Mortgage debenture registered October 23, 1992 at Land Titles
Office in New Westminster/Vancouver as Instrument No.
BF407398 issues by the Trustee in the principal amount of
$32,000,000 containing a fixed charge of the Richmond Hotel
in favour of Scotia Mortgage Corporation as amended
9. Delivery Agreement dated September 30, 1992 by the
Trustee to Scotia Mortgage Corporation in respect of
the Debenture in the amount of $32,000,000
10. Mortgage debenture registered October 23, 1992 at the
Land Titles Office in New Westminster/Vancouver as
Instrument No. BF407400 issued by the Trustee in the
C/M 11752.0000 414857.1 10/14/96 12:2PM
<PAGE>
- 4 -
principal amount of $150,000,000 in favour of the
Lenders containing a fixed charge of the Richmond Hotel
as amended
11. Delivery Agreement dated September 30, 1992 by the
Trustee to the Lenders in respect of such debenture.
Guarantee
12. Guarantee dated September 30, 1992 by Relax Development
Corporation Ltd. to Scotia Mortgage Corporation of
payment of the Trustee's indebtedness to Scotia
Mortgage Corporation up to $30,242,000
C/M 11752.0000 414857.1 10/14/96 12:2PM
<PAGE>
SCHEDULE C-2
BANK OF MONTREAL
DEBT AND SECURITY
A. Loan Agreement
Loan Agreement dated as of September 30, 1992 among the Borrowers and
BMO as amended by amendment agreement no. 1 dated as of May 6, 1993, among the
Borrowers and BMO and affected by a Waiver of Default Agreement dated as of May
6, 1993 among the Borrowers and all Lenders.
B. Amount of Debt as at Date of Representation and Warranty
Principal Amount $27,978,880
Accrued Interest $ 294,445
Any other amount $ 315,978
-----------
Total $28,589,303
C. Rate of Interest Payable as at Date of Representation and
Warranty
8.5% per annum calculated half-yearly not in advance.
D. List of Security (Including Guarantee)
1. Debenture dated as of September 30, 1992 issued by the
Borrowers in favour of BMO in the amount of
$30,000,000;
2. Duplicate registered copies of the following Form 2
Charges (Ontario) of real property in Ontario
registered October 26, 1992:
(i) Gloucester - registered in the Registry Office
of Ottawa-Carleton (No. 4) as Instrument No.
N638430
(ii) North York - registered in the Land Titles
Office of Metropolitan Toronto (No. 66) as
Instrument No. C803975
(iii) Scarborough - registered in the Registry Office
of Toronto Boroughs (No. 64) as Instrument No.
TB864438
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<PAGE>
- 2 -
(iv) Burlington - registered in the Land Titles and
Registry Offices of Halton (No. 20) as
Instrument Nos. 527799 and 794515 respectively
(v) Windsor - registered in the Registry Office of
Essex (No. 12) Windsor as Instrument No.
1216230.
3. Delivery Agreement dated as of September 30, 1992 by
the Borrowers in favour of BMO.
4. Debenture dated as of September 30, 1992 issued by the
Borrowers in favour of the Lenders (the "Blanket Debenture")
in the principal amount of $150 million.
5. Duplicate registered copies of the following Form 2 Charges
(Ontario) for real property in Ontario in respect of the
Blanket Debenture registered on October 26, 1992 (unless
otherwise specified):
(i) Gloucester and Ottawa (Downtown) - registered in
the Registry Office of Ottawa-Carleton (No. 4)
as Instrument No. N638432, as amended
(ii) North York - registered in the Land Titles
Office of Metropolitan Toronto (No. 66) as
Instrument No. C8033977
(iii) Scarborough - registered in the Registry Office
of Toronto Boroughs (No. 64) as Instrument No.
TB64440, as amended
(iv) Burlington - registered in the Registry Office
and the Land Titles Office of Halton (No. 20) as
Instrument Nos. 794517 and 527801 respectively
(v) Windsor - registered in the Registry Office of
Essex (No. 12) as Instrument No. 1216232, as
amended
(vi) London - registered in the Land Titles Office of
Middlesex (No. 33) as Instrument No. LT284756
(vii) Kitchener - registered in the Registry Office of
Waterloo (No. 58) as Instrument No. 1143078, as
amended
(viii) Ingersoll - registered in the Registry Office
(No. 41) as Instrument No. 375314, as amended
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<PAGE>
- 3 -
(ix) Sudbury - registered in the Land Titles Office
of Sudbury (No. 53) as Instrument No. 746281
(x) Mississauga - registered in the Registry Office
of Peel (No. 43) as Instrument No. R01021090, as
amended
(xi) North Bay - registered in the Land Titles Office
of Nipissing (No. 36) as Instrument No. 325476
6. Duplicate registered copies of the Blanket Debenture
registered against title to:
(i) Edmonton West, Edmonton South and Calgary South
Hotels registered in the Land Titles Office of
Edmonton and Calgary as Instruments Nos.
922328589 and 921267515, respectively
(ii) Regina Hotel registered in the Land Titles
Office of Regina on October 26, 1992 as
Instrument No. 92R53708
7. Delivery Agreement dated as of September 30, 1992 by
the Borrowers in favour of each of the Lenders in
respect of the Blanket Debenture
8. Specific Assignment of Agreements dated September 30, 1992 by
the Borrowers to BMO of the Borrowers' interests in each
franchise and license agreement and each management agreement
related to the hotels of which BMO holds a separate charge.
Winnipeg Hotel
9. Debenture dated September 30, 1992 (the "Winnipeg
Debenture") by the Borrowers and Tegrad Properties
(Winnipeg) Inc. ("TPWI") in favour of BMO in the
principal amount of $30 million in respect of the
Winnipeg Property
10. Certified copy dated December 3, 1992 of the Winnipeg
Debenture registered in Manitoba as Instrument No.
1605116
11. Delivery Agreement dated September 30, 1992 by the
Borrowers and TPWI to BMO in respect of the Winnipeg
Debenture
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12. Debenture dated September 30, 1992 by the Borrowers and
TPWI in favour of the Lenders in the principal amount
of $150 million in respect of the Winnipeg Property
13. Certified copy dated December 3, 1992 of the blanket
Winnipeg debenture registered in Manitoba as Instrument
No. 1605118
14. Delivery Agreement dated September 30, 1992 by the
Borrowers and TPWI in favour of the Lenders in respect
of the blanket Winnipeg debenture
15. Specific Assignment of Agreements dated September 30,
1992 by the Borrowers and TPWI to BMO of the franchise
and license agreement and management agreement relating
to the Winnipeg Hotel
Laval Hotel
16. Trust Deed dated October 29, 1992 (the "Trust Deed")
issued by Syndicated Capital Properties Inc. (the
"General Partner") in favour of The R-M Trust Company
as security for three bonds issued to CIBC, Province of
Alberta Treasury Branches and the Lenders respectively,
registered at Laval on October 30, 1992 as No. 811881
17. 25% Mortgage Bond No. 3 dated October 30, 1992 in the
principal amount of $150,000,000 issued under the Trust
Deed in favour of the Lenders and a letter dated
November 4, 1992 from CIBC to BMO and each of the other
Lenders regarding the holding of said Bond by CIBC
18. Delivery Order dated October 26, 1992 by the General
Partner to The R-M Trust Company regarding the delivery
of inter alia the bond
19. Pledge agreement by the General Partner to the Lenders
20. Hypothec granted to the Lenders by Tegrad Montreal I
Inc. and registered on October 30, 1992 as No. 811880
Richmond Hotel
21. Mortgage debenture registered October 23, 1992 at the
Land Titles Office in New Westminster/Vancouver as
Instrument No. BF407400 issued by Syncap Properties
Inc. (the "Trustee") in the principal amount of
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$150,000,000 in favour of the Lenders in respect of the
Richmond Hotel as amended
22. Delivery Agreement dated September 30, 1992 by the
Trustee to the Lenders in respect of such debenture
23. Undertaking dated October 30, 1992 by the Borrowers to
the Lenders to amend mortgage debentures Nos. BF407398,
BF407399 and BF407400 to insert as subparagraph 10(m)
of each an additional event of default with respect to
material adverse changes
Guarantee
24. Guarantee dated September 30, 1992 by Relax Development
Corporation Ltd. to BMO of payment of the Trustee's
indebtedness to BMO up to $28,341,491.22
Excluded
For greater certainty the Security excludes BMO's interest as owner and
landlord of the real property and hotel assets known municipally as 18320 Stony
Plain Road, Edmonton, Alberta.
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<PAGE>
SCHEDULE C-3
CANADIAN IMPERIAL BANK OF COMMERCE
DEBT AND SECURITY
A. Loan Agreement
Credit Agreement dated as of September 30, 1992 among the Borrowers
and CIBC as amended by Amendment Agreement No. 1 dated as of May 6, 1993, among
the Borrowers and CIBC and affected by a Waiver of Default Agreement dated as
of May 6, 1993 among the Borrowers and all Lenders.
B. Amount of Debt as at Date of Representation and Warranty
Principal Amount $33,405,024.07
Accrued Interest $ 361,569.85
Costs $ nil
Any other amount $ nil
Total $33,766,593.92
C. Rate of Interest Payable as at Date of Representation and
Warranty
8.5% per annum calculated half-yearly not in advance.
D. List of Security (Including Guarantee)
1. Debenture dated as of September 30, 1992 issued by the
Borrowers in favour of CIBC in the amount of
$35,000,000;
2. Duplicate registered copies of the following Form 2 Charges
(Ontario) of real property in Ontario registered October 26,
1992 in the principal amount of $35,000,000:
(a) London - registered in the Land Titles Office of
Middlesex (No. 33) as Instrument No. LT-284754
(b) Kitchener - registered in the Registry Office of
Waterloo (No. 58) as Instrument No. 1143076
(c) Ingersoll - registered in the Registry Office (No.
41) as Instrument No. 375312
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(d) Sudbury - registered in the Land Titles Office of
Sudbury (No. 53) as Instrument No. 746279
3. Delivery Agreement dated as of September 30, 1992 by
the Borrowers in favour of CIBC
4. Debenture dated as of September 30, 1992 issued by the
Borrowers in favour of the Lenders (the "Blanket
Debenture") in the principal amount of $150 million
5. Duplicate registered copies of Form 2 Charges (Ontario)
for real property in Ontario in respect of the Blanket
Debenture registered on October 26, 1992 (unless
otherwise specified):
(a) Gloucester and Ottawa (Downtown) - registered in
the Registry Office of Ottawa-Carleton (No. 4) as
Instrument No. N638432 (photocopy), as amended
(b) North York - registered in the Land Titles Office
of Metropolitan Toronto (No. 66) as Instrument No.
C803977 (photocopy)
(c) Scarborough - registered in the Registry Office of
Toronto Boroughs (No. 64) as Instrument No.
TB864440 (photocopy), as amended
(d) Burlington - registered in the Registry Office and
the Land Titles Office of Halton (No. 20) as
Instrument Nos. 794517 and 527801, respectively
(photocopies), as amended
(e) Windsor - registered in the Registry Office of
Essex (No. 12) as Instrument No. 1216232
(photocopy), as amended
(f) London - registered in the Land Titles Office of
Middlesex (No. 33) as Instrument No. LT-284756
(g) Kitchener - registered in the Registry Office of
Waterloo (No. 58) as Instrument No. 1143078, as
amended
(h) Ingersoll - registered in the Registry Office (No.
41) as Instrument No. 375314, as amended
(i) Sudbury - registered in the Land Titles Office of
Sudbury (No. 53) as Instrument No. 746281
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(j) Mississauga - registered in the Registry Office of
Peel (No. 43) as Instrument No. R01021090
(photocopy), as amended
(k) North Bay - registered in the Land Titles Office
of Nipissing (No. 36) as Instrument No. 325476
(photocopy)
(l) Oshawa - registered on October 27, 1992 in the
Registry Office of Durham (No. 40) as Instrument
No. D399561 (photocopy), as amended
6. Duplicate registered copies of the Blanket Debenture
registered against title to:
(a) Edmonton West, Edmonton South and Calgary South
Hotels registered in the Land Titles Office of
Edmonton as Instrument No. 922328589 (photocopy)
and in the Land Titles Office of Calgary as No.
921267515 (photocopy)
(b) Regina Hotel registered in the Land Titles Office
of Regina on October 26, 1992 as Instrument No.
92R53708
7. Delivery Agreement dated as of September 30, 1992 by
the Borrowers in favour of each of the Lenders in
respect of the Blanket Debenture
8. Specific Assignment of Agreements dated September 30, 1992 by
the Borrowers to CIBC of the Borrowers' interests in each
franchise and license agreement and each management agreement
related to the hotels of which CIBC holds a separate charge
9. Assignment of Specific Accounts dated September 30,
1992 from CPLP to CIBC relating to accounts listed in
the Assignment
Richmond Hotel
10. Mortgage debenture registered October 23, 1992 at the
Land Titles Office in New Westminster/Vancouver as
Instrument No. BF407400 issued by Syncap Properties
Inc. (the "Trustee") in the principal amount of
$150,000,000 in favour of the Lenders in respect of the
Richmond Hotel as amended
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11. Delivery Agreement dated September 30, 1992 by the
Trustee to the Lenders in respect of such debenture
12. Undertaking dated October 30, 1992 by the Borrowers to
the Lenders to amend mortgage debentures Nos. BF407398,
BF407399 and BF407400 to insert as subparagraph 10(m)
of each an additional event of default with respect to
material adverse changes
Winnipeg Hotel
13. Debenture dated September 30, 1992 by the Borrowers and
Tegrad Properties (Winnipeg) Inc. ("TPWI") in favour of
the Lenders in the principal amount of $150,000,000 in
respect of the Winnipeg property
14. Certified copy dated December 3, 1992 of the blanket
Winnipeg debenture registered in Manitoba as Instrument
No. 1605118 (photocopy)
15. Delivery Agreement dated September 30, 1992 by the
Borrowers and TPWI in favour of the Lenders in respect
of the blanket Winnipeg debenture
London, Kitchener, Sudbury and Ingersoll Hotels
16. Assignment Agreement dated September 30, 1992 by CIBC
to 1002370 Ontario Inc. of Tegrad Kitchener, Inc.'s
indebtedness to CIBC in the amount of $7,900,000 and
all security therefor including a charge of the
Kitchener Hotel registered in the Land Registry
Division of Waterloo North (No. 58) on September 13,
1990 as No. 1052775
17. Assignment Agreement dated September 30, 1992 by CIBC
to 1002370 Ontario Inc. of Tegrad Properties (I) Inc.'s
indebtedness to CIBC in the amount of $6,600,000 and
all security therefor including a charge of the Sudbury
Hotel registered in the Land Titles Division of Sudbury
(No. 53) on November 21, 1989 as No. 665028
18. Assignment Agreement dated September 30, 1992 by CIBC
to 1002370 Ontario Inc. of Tegrad Properties (II)
Inc.'s indebtedness to CIBC in the amount of $4,800,000
and all security therefor including a charge of the
Ingersoll Hotel registered in the Land Titles Division
of Sudbury (No. 41) on October 31, 1989 as No. 347339
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19. Assignment Agreement dated September 30, 1992 by CIBC
to 1002370 Ontario Inc. of the Guarantor's direct
indebtedness to CIBC in the amount of $7,240,000 and
all security therefor including a charge of the London
Hotel registered in the Land Registry Division of
Middlesex East (No. 33) on February 20, 1989 as No.
828407
20. General assignment dated September 30, 1992 by 1002370
Ontario Inc. to CPLP of all indebtedness and all
security previously assigned by CIBC to 1002370 Ontario
Inc. pursuant to the above assignments (Nos. 16-19)
21. Assignment of Note and Security dated September 30, 1992 by
CPLP to CIBC of the note and security referred to therein as
security for CPLP's liability to CIBC under the Credit
Agreement dated September 30, 1992 among CIBC and the
Borrowers
22. Promissory Notes each dated as of September 30, 1992 as
follows:
(a) from Tegrad Kitchener Inc. to CIBC in the amount
of $7,900,000
(b) from Tegrad Properties (I) Inc. to CIBC in the
amount of $6,600,000
(c) from Tegrad Properties (II) Inc. to CIBC in the
amount of $4,800,000
(d) from Relax Development Corporation Ltd. to CIBC in
the amount of $7,240,000
(e) from 1002370 Ontario Inc. to CPLP in the amount of
$26,935,666
23. Original registered copies of:
(a) Charge/Mortgage of Land by Tegrad Properties (I)
Inc. to CIBC and registered November 21, 1989 in
the Land Titles Office at Sudbury (No. 53) as
Instrument No. 665028
(b) Charge/Mortgage of Land by Tegrad Kitchener Inc.
to CIBC registered September 13, 1990 in the Land
Registry Office at Waterloo (No. 58) as Instrument
No. 1052775
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(c) Charge/Mortgage of Land by Tegrad Properties (II)
Inc. to CIBC registered October 31, 1989 in the
Land Registry Office (No. 41) as Instrument No.
347339
(d) Charge Mortgage of Land by the Guarantor to CIBC
registered February 20, 1989 in the Registry
Office for the Land Registry Division of Middlesex
(No. 33) as Instrument No. 828407
(e) Transfer of Charge No. 665028 by CIBC to 1002370
Ontario Inc. by 1002370 Ontario Inc. to CPLP and
by CPLP to CIBC registered on October 30, 1992 in
the Land Titles Office at Sudbury (No. 53) as
Instrument Nos. 746791, 746792 and 746793
respectively
(f) Transfer of Charge No. 828407 by CIBC to 1002370
Ontario Inc., by 1002370 Ontario Inc. to CPLP and
by CPLP to CIBC registered on October 30, 1992 in
the Land Titles Office for the Land Registry
Division of Middlesex (No. 33) as Instrument Nos.
285434, 285435 and 285436, respectively
(g) Assignment of Mortgage No. 1052775 by CIBC to
1002370 Ontario Inc. by 1002370 Ontario Inc. to
CPLP and by CPLP to CIBC registered on October 30,
1992 in the Registry Office of Waterloo (No. 58)
as Instruments Nos. 1143706, 1143707 and 1143708,
respectively
(h) Assignment of Mortgage No. 347339 by CIBC to
1002370 Ontario Inc. by 1002370 Ontario Inc. to
CPLP and by CPLP to CIBC registered on October 30,
1992 in the Registry Office (No. 41) as Instrument
Nos. 375423, 375424, and 375425, respectively
24. Other security from Tegrad Properties (I) Inc.:
(a) General Security Agreement dated November 2, 1989
(b) Debenture dated October 27, 1989 in the amount of
$7,000,000
(c) Pledge Agreement dated October 27, 1989 with
respect to the above Debenture
(d) Guarantee dated November 2, 1989 from Relax
Development Corporation Ltd. with liability
limited to $6,700,000
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25. Other security from Tegrad Kitchener Inc.:
(a) General Security Agreement dated August 21, 1990
(b) Debenture in the amount of $10,000,000
(c) Pledge Agreement dated August 21, 1990 with
respect to the above Debenture
(d) Guarantee dated August 21, 1990 from Relax
Development Corporation Ltd. with liability
limited to $7,850,000
26. Other security from Tegrad Properties (II) Inc.:
(a) General Security Agreement dated October 16, 1989
(b) Debenture dated October 3, 1989 in the amount of
$5,000,000
(c) Pledge Agreement dated October 3, 1989 with
respect to the above Debenture
(d) Guarantee dated October 23, 1989 from Relax
Development Corporation Ltd. with liability
limited to $4,600,000
27. Other security from Relax Development Corporation Ltd.
(a) General Security Agreement dated February 15, 1989
(b) Debenture dated February 13, 1989 in the amount of
$8,000,000
(c) Pledge Agreement dated February 13, 1989 with
respect to the above Debenture
Laval Hotel
28. (a) Trust Deed dated October 29, 1992 issued by
Syndicated in favour of the R-M Trust Company as
security for three bonds issued to CIBC, ATB and
the Lenders respectively, registered at Laval on
October 30, 1992 as No. 811881 (photocopy)
(b) 25% Mortgage Bond No. 1 dated October 30, 1992 in
the principal amount of $35,000,000 issued under
the Trust Deed in favour of CIBC
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(c) 25% Mortgage Bond No. 3 dated October 30, 1992 in
the principal amount of $150,000,000 issued under
the Trust Deed in favour of the Lenders
(d) Delivery Order dated October 26, 1992 by
Syndicated to the R-M Trust Company regarding the
delivery of the bonds
(e) Pledge agreement by Syndicated to CIBC with
respect to Bond No. 1
(f) Pledge agreement by Syndicated to the Lenders with
respect to Bond No. 3
29. Hypothec granted to CIBC by Tegrad Montreal Inc. in the
amount of $35,000,000 and registered at Laval on
October 30, 1992 as No. 811876
30. Hypothec granted to the Lenders by Tegrad Montreal Inc.
and registered at Laval on October 30, 1992 as No.
811880
Guarantee
31. Guarantee dated September 30, 1992 by Relax Development
Corporation Ltd. to CIBC of payment of indebtedness of
Syncap to CIBC up to $33,860,666
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<PAGE>
SCHEDULE C-4
PROVINCE OF ALBERTA TREASURY BRANCHES
DEBT AND SECURITY
A. Loan Agreement
Loan Agreement dated as of September 30, 1992 among the Borrowers and
ATB as affected by a Waiver of Default Agreement dated as of May 6, 1993 among
the Borrowers and all Lenders
B. Amount of Debt as at Date of Representation and Warranty
Principal Amount (Term Loan) $20,728,041.48
(Renovation Loan) 5,500,000.00
Accrued Interest (Term Loan) 958,410.83
(Renovation Loan) 351,139.09
Costs 50,000.00
Any other amount 0
TOTAL $27,537,591.40
C. Rate of Interest Payable as at Date of Representation and
Warranty
8.5% per annum calculated half-yearly not in advance.
D. List of Security (Including Guarantee)
1. Debenture dated as of September 30, 1992 issued by the
Borrowers in favour of ATB in the amount of
$21,000,000.00 registered at Land Titles Office in
Alberta and Saskatchewan.
(i) Edmonton South Hotel, registered in the Land
Titles Office, Edmonton on October 27, 1992 as
Instrument No. 922328587
(ii) Edmonton West Hotel, registered in the Land
Titles Office, Edmonton on October 27, 1992 as
Instrument No. 922328587
(iii) Calgary South Hotel, registered in the Land
Titles Office, Calgary on October 26, 1992 as
Instrument No. 921267513
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(iv) Regina Hotel, registered in the Land Titles
Office, Regina on October 26, 1992 as Instrument
No. 92R53706
2. Debenture dated April 15, 1993 in the amount of
$450,000.000 with respect to Calgary Airport Hotel and
registered at Land Titles Office Calgary at Instrument
No. 931093363
3. Delivery Agreement dated September 30, 1992 by the
Borrowers in favour of ATB with respect to the
$21,000,000.00 Debenture
4. Renovation Loan Debenture dated September 30, 1992 in favour
of ATB in the principal amount of $9.8 million containing a
second fixed charge with respect to:
(i) Hotels (other than legal title to the Winnipeg,
Laval and Richmond Hotels and excluding the other
CIBC Hotels) and a third fixed charge of such
other CIBC Hotels
(ii) Edmonton West, Edmonton South and Calgary South
Hotels, registered at the Land Titles Office
Calgary as Instrument No. 921267514, and Land
Titles Office Edmonton as Instrument No.
922328588
(iii) Regina Hotel, registered in the Land Titles
Office, Regina on October 26, 1992 as Instrument
No. 92R53707
5. Duplicate registered copies of Forms 2 Charges
(Ontario) and debentures with respect to the Renovation Loan
Debenture registered on October 26, 1992 (unless
otherwise specified):
(i) Windsor - registered in the Registry Office of
Essex (No. 12) as Instrument No. 1216231, as
amended
(ii) Burlington - registered in the Registry Office
and the Land Titles Office of Halton (No. 20) as
Instrument Nos. 794516 and 527800 respectively,
as amended
(iii) Gloucester and Ottawa (Downtown) - registered in
the Registry Office of Ottawa-Carleton (No. 4)
as Instrument No. N638431, as amended
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(iv) Scarborough - registered in the Registry Office
of Toronto Boroughs (No. 64) as Instrument No.
TB864439, as amended
(v) North York - registered in the Land Titles
Office of Metropolitan Toronto (No. 66) as
Instrument No. C803976
(vi) Ingersoll - registered in the Registry Office
(No. 41) as Instrument No. 375313, as amended
(vii) London - registered in the Land Titles Office of
Middlesex (No. 33) London as Instrument No.
284755
(viii) Sudbury - registered in the Land Titles Office
of Sudbury (No. 53) as Instrument No. 746280
(ix) Mississauga - registered in the Registry Office
of Peel (No. 43) as Instrument No. R01021089, as
amended
(x) Oshawa - registered on October 27, 1992 in the
Registry Office of Durham (No. 40) as Instrument
No. D399560, as amended
(xi) Kitchener - registered in the Registry Office of
Waterloo (No. 58) as Instrument No. 1143077, as
amended
(xii) North Bay - registered in the Land Titles Office
of Nipissing (No. 36) as Instrument No. 325475
6. Delivery Agreement dated September 30, 1992 by the
Borrowers to ATB in respect of the Renovation Loan
Debenture
7. Specific Assignment of Agreements dated September 30, 1992 by
the Borrowers to ATB of the Borrowers' interests in each
franchise and license agreement and each management agreement
over which ATB holds a first charge
8. Blanket Debenture dated September 30, 1992 issued by
the Borrowers in favour of the Lenders in the principal
amount of $150,000,000.00
9. Duplicate registered copies of the following Form 2
Charges (Ontario) for real property in Ontario in
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respect of the Blanket Debenture registered on October 26,
1992 (unless otherwise specified):
(i) Gloucester and Ottawa (Downtown) - registered in
the Registry Office of Ottawa-Carleton (No. 4)
as Instrument No. N638432, as amended
(ii) North York - registered in the Land Titles
Office of Metropolitan Toronto (No. 66) as
Instrument No. C803977
(iii) Scarborough - registered in the Registry Office
of Toronto Burroughs (No. 64) as Instrument No.
TB864440 as amended
(iv) Burlington - registered in the Registry Office
and the Land Titles Office of Halton (No. 20) as
Instrument Nos. 794517 and 527801 respectively
as amended
(v) Windsor - registered in the Registry Office of
Essex (No. 12) as Instrument No. 1216232 as
amended
(vi) London - registered in the Land Titles Office of
Middlesex (No. 33) as Instrument No. LT284756;
(vii) Kitchener - registered in the Registry Office of
Waterloo (No. 58) as Instrument No. 1143078 as
amended
(viii) Ingersoll - registered in the Registry Office
(No. 41) as Instrument No. 375314 as amended
(ix) Sudbury - registered in the Land Titles Office
of Sudbury (No. 53) as Instrument No. 746281
(x) Mississauga - registered in the Registry Office
of Peel (No. 43) as Instrument No. R01021090 as
amended
(xi) North Bay - registered in the Land Titles Office
of Nipissing (No. 36) as Instrument No. 325476
(xii) Oshawa - registered on October 27, 1992 in the
Registry Office of Durham (No. 40) as Instrument
No. D399561 as amended
10. Duplicate registered copies of the Blanket Debenture
registered against title to:
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(i) Edmonton West, Edmonton South and Calgary South
Hotels registered in the Land Titles Office of
Calgary as Instrument No. 921267515, and Land
Titles Office Edmonton as Instrument No.
922328589
(ii) Regina Hotel registered in the Land Titles
Office of Regina on October 26, 1992 as
Instrument No. 92R53708
11. Delivery Agreement dated as of September 30, 1992 by
the Borrowers in favour of each of the Lenders in
respect of the Blanket Debenture
12. Trust Deed dated October 29, 1992 (the "Trust Deed")
issued by Syndicated Capital Properties Inc. (the
"General Partner") in favour of The R-M Trust Company
as security for three bonds issued to CIBC, Province of
Alberta Treasury Branches and the Lenders respectively,
registered at Laval on October 30, 1992 as No. 811881
13. 25% Mortgage Bond No. 3 dated October 30, 1992 in the
principal amount of $150,000,000 issued under the Trust
Deed in favour of the Lenders and a letter dated
November 4, 1992 from CIBC to BMO and each of the other
Lenders regarding the holding of said Bond by CIBC
14. Delivery Order dated October 26, 1992 by the General
Partner to The R-M Trust Company regarding the delivery
of, inter alia, the bond
15. Pledge agreement by the General Partner to the Lenders
16. Hypothec granted to the Lenders by Tegrad Montreal I
Inc. and registered on October 30, 1992 as No. 811880
17. Mortgage debenture registered October 23, 1992 at Land
Titles Office in New Westminster/Vancouver as
Instrument No. BF407400 issued by Syncap Properties
Inc. (the "Trustee") in the principal amount of
$150,000,000 in favour of the Lenders in respect of the
Richmond Hotel as amended
18. Delivery Agreement dated September 30, 1992 by the
Trustee to Lenders in respect of such debenture
19. Undertaking dated October 30, 1992 by the Borrowers to
the Lenders to amend mortgage debentures Nos. BF407398,
BF407399 and BF407400 to insert as subparagraph 10(m)
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of each an additional event of default with respect to
material adverse changes
E. Tegrad Properties (Winnipeg) Inc. ("TPWI") - Winnipeg Hotel
1. Debenture dated September 30, 1992 by the Borrowers and
TPWI in favour of ATB in the principal amount of
$9,800,000.000 containing, inter alia, a fixed charge
on the Winnipeg Property
2. Certified copy dated December 3, 1992 of the Renovation
Loan Debenture registered in Manitoba as Instrument No.
1605117
3. Delivery Agreement dated September 30, 1992 by the
Borrowers and TPWI in respect of the Renovation Loan
Debenture in the amount of $9,800,000.00
F. Tegrad Montreal I Inc. ("TMII") - Laval Hotel
1. Direction and Acknowledgment dated October 27, 1992
from the Partnership to TMII regarding granting of
security and encumbering the Laval Hotel in favour of
ATB and other Lenders
2. (i) Trust Deed dated October 29, 1992 issued by
the General Partner in favour of The R-M Trust
Company as security for three bonds issued to
CIBC, ATB and the Lenders respectively,
registered at Laval on October 30, 1992 as No.
811881
(ii) Photocopy of the 25% Mortgage Bond No. 2 dated
October 30, 1992 in the principal amount of
$9,800,000.00 issued under the Trust Deed in
favour of ATB
(iii) Certified copy of a resolution of the directors
of the General Partner dated October 29, 1992
authorizing the issue of the Trust Deed and the
bonds thereunder
(iv) Delivery Order dated October 26, 1992 by the
General Partner to The R-M Trust Company
regarding the delivery of the bonds
(v) Pledge agreement by the General Partner to ATB
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(vi) Certified copy of a resolution of the directors
of TMII dated October 29, 1992 authorizing the
issue of hypothec to ATB
(vii) Hypothec granted to ATB by TMII and registered
on October 30, 1992 as No. 811878
G. The Trustee and Richmond Hotel in B.C.
(i) Mortgage debenture registered October 23, 1992 at
Land Titles Office in New Westminster/Vancouver
as Instrument No. BF407399 issued by the Trustee
in the principal amount of $9,800,000.00 in
favour of ATB containing a fixed charge of the
Richmond Hotel
(ii) Delivery Agreement dated September 30, 1992 by
the Trustee to ATB in respect of the Debenture
in the amount of $9,800,000.00
(iii) Undertaking dated October 30, 1992 by the
Borrowers to the Lenders to amend mortgage
debentures Nos. BF407398, BF407399 and BF407400
to insert as subparagraph 10(m) of each an
additional event of default with respect to
material adverse changes
H. The Guarantee
1. Guarantee dated September 30, 1992 by Relax Development
Corporation Ltd. to ATB of payment of the Trustee's
indebtedness to ATB up to $28,500,000.00
I. Promissory Notes
1. $21,000,000.00 dated September 30, 1992
2. Various Notes dated April 13, 1993 totalling
$5,500,000.00 regarding Renovation Loans:
C/M 11752.0000 414857.1 10/14/96 12:2PM
<PAGE>
- 8 -
Hotel Amount
Burlington $164,521.00
Calgary North $370,100.00
Calgary South $767,812.00
Edmonton South $261,634.00
Edmonton West $1,041,443.00
Edmonton West $53,302.00
Gloucester $295,778.00
Ingersoll $74,144.00
Kitchener $74,628.00
Laval $148,656.00
London $81,765.00
Mississauga $180,310.00
North Bay $79,713.00
North York $297,093.00
Oshawa $64,582.00
Ottawa $202,340.00
Regina $389,199.00
Richmond $214,434.00
Scarborough $208,808.00
Sudbury $81,117.00
Windsor $239,394.00
Winnipeg $209,227.00
C/M 11752.0000 414857.1 10/14/96 12:2PM
<PAGE>
SCHEDULES "C-1", "C-2", "C-3" and "C-4" (continued)
TO: THE LENDERS
AND TO: NATIONAL LODGING CORP.
CONFIRMATION BY BORROWERS
Each of the Borrowers hereby confirms that the contents of
the attached Schedules C-1, C-2, C-3 and C-4 are complete and accurate as at
the date the applicable representation and warranty is given by the applicable
Lender.
DATED the day of , 1996.
CAPITAL
PROPERTIES
LIMITED
PARTNERSHIP by
its general
partner
Syndicated
Capital
Properties Inc.
By
title -
By
title -
SYNDICATED CAPITAL PROPERTIES
INC.
By
title -
By
title -
SYNCAP PROPERTIES INC.
By
title -
By
title -
C/M 11752.0000 414857.1 10/14/96 12:2PM
<PAGE>
SCHEDULE "E"
TO: o (the "Lender")
RE: Credit Agreement dated as of September 30, 1992 among
Capital Properties Limited Partnership, Syndicated
Capital Properties Inc. and Syncap Properties Inc. (the
"Borrowers") and the Lender, as amended from time to
time (the "Credit Agreement")
COVENANT NOT TO SUE
WHEREAS the Borrowers are indebted to the Lender pursuant to
the Credit Agreement and have granted security to the Lender;
AND WHEREAS Tegrad Properties (Winnipeg) Inc., Tegrad
Montreal I Inc. and 1002370 Ontario Inc. (the "Debtors") may have
granted security to the Lender as security for payment of the
indebtedness of the Borrowers to the Lender pursuant to or in
respect of the Credit Agreement;
AND WHEREAS the Lender is assigning to National Lodging Corp. or its
nominee the Lender's interest in all such indebtedness and the Lender's
interest in the Credit Agreement and all security granted to the Lender by the
Borrowers or the Debtors pursuant to or in respect of the Credit Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of other
good and valuable consideration and the sum $10.00 of lawful money of Canada
now paid by the Lender to the Borrowers and the Debtors (the receipt and
sufficiency of which are hereby acknowledged by each of them), each of the
Borrowers and the Debtors hereby jointly and severally covenants and agrees
that it shall not, after the completion of the foregoing assignment by
C/M 11752.0000 414871.1 10/14/96 12:13PM
<PAGE>
the Lender to National Lodging Corp. or National Lodging Corp.'s nominee,
commence any legal action against the Lender in respect of any indebtedness or
liability owing by the Borrowers or the Debtors to the Lender pursuant to or in
respect of the Credit Agreement or any security granted by any of them to the
Lender pursuant to or in respect of the Credit Agreement.
DATED the day of , 1996.
CAPITAL PROPERTIES LIMITED
PARTNERSHIP by its general
partner Syndicated Capital
Properties Inc.
By:
title -
By:
title -
SYNDICATED CAPITAL PROPERTIES INC.
By:
title -
By:
title -
SYNCAP PROPERTIES INC.
By:
title -
By:
title -
TEGRAD PROPERTIES (WINNIPEG) INC.
By:
title -
By:
title -
C/M 11752.0000 414871.1 10/14/96 12:13PM
2
<PAGE>
TEGRAD MONTREAL INC.
By:
title -
By:
title -
1002370 ONTARIO INC.
By:
title -
By:
title -
C/M 11752.0000 414871.1 10/14/96 12:13PM
3
<PAGE>
SCHEDULE "F"
ROYCO HOTELS & RESORTS LTD.
5940 Macleod Trail South
Suite 500
Calgary, Alberta
T2H 2G4
August 9, 1996
K.S. Tunnicliffe
Senior Account Manager
Province of Alberta Treasury Branches
Calgary North Hill
P.O. Box 30079, Stn. B
3rd Floor
217-16th Avenue NW
Calgary, Alberta
T2M 4N7
Dear Sirs:
Re: Capital Properties Limited Partnership - Restructuring
By letter agreement (the "Lender Agreement") of even date herewith
entered into between Province of Alberta Treasury Branches ("ATB"), Bank of
Montreal ("BofM"), The Bank of Nova Scotia ("BNS") and Canadian Imperial Bank
of Commerce ("CIBC") (collectively, the "Lenders") on the one hand and Capital
Properties Limited Partnership ("CPLP"), by its sole general partner Syndicated
Capital Properties Inc. ("Syndicated"), and National Lodging Corp. ("NLC") on
the other, the Lender agreed to assign all of their debt and security with
respect to CPLP and its properties on certain terms and conditions.
It was further a condition of NLC to the entering into of the Lender
Agreement that this letter agreement be entered into, which agreement would
include Royco Hotels & Resorts Ltd. ("Royco"), the shareholders of Royco and
parties associated with Royco.
Accordingly, Royco, on its own behalf and on behalf of its
shareholders and the related parties referred to herein, NLC and ATB, have
agreed as follows:
1. On closing, NLC will pay to ATB the sum of One Hundred
Thirty Thousand ($130,000) Dollars.
C/M 11752.0000 414860.1 10/14/96 12:19PM
<PAGE>
2
2. Subsequent to the meeting of the CPLP limited partners
called to approve the transactions between CPLP, NLC
and the Lenders which are contemplated herein and in
the Lender Agreement and prior to the closing, ATB
shall take all necessary steps to realize upon its
security with respect to those certain CPLP units (the
"RDCL-CPLP Units") pledged to ATB by Relax Development
Corporation Ltd. ("RDCL") and on closing shall transfer
and assign the RDCL-CPLP Units to NLC or as NLC may
otherwise direct in consideration of the foregoing
paragraph 1 payment. The statutory notices required in
respect of such realization proceedings may be issued
by ATB prior to the meeting of the CPLP limited
partners.
3. Royco, on behalf of its shareholders (the "Royco
Shareholders") hereby confirms the entitlement of ATB
to 25% of the after tax incentive management bonus
payments payable by NL Hotels, Inc. (formerly Forte
Hotels Management, Inc.) ("NL") to Royco pursuant to
Schedule 3 of the Management Services and Franchise
Development Agreement (the "MSFDA") entered into
between NL and Royco, for the period ended September
30, 1996, all in accordance with the calculations
applicable to the payments already made to ATB for the
periods ended September 30, 1994 and September 30,
1995. ATB will have the right to the financial
information relevant to the calculation of the said
management bonus for the period ended September 30,
1996, and the right to audit the calculation and the
information relevant to the calculation, together with
the right to dispute with NL and its affiliates such
calculation (with any such dispute to be resolved by
arbitration). Royco will execute an irrevocable
direction to NL to pay directly to ATB the amount owed
to ATB.
4. ATB acknowledges and consents to (i) the termination on
closing of the Asset Purchase Put/Call Agreement
entered into between Royco and NL, and (ii) subject to
paragraph 3 hereof, the amendment of the MSFDA on
closing.
5. RDCL acknowledges that it has transferred the Relax Hotels
Windsor 1988 Limited Partnership ("W88LP") units to ATB.
Randy Royer, Peter Sikora, Terry Royer and Greg Royer
(collectively the "Royers") and RDCL and the general partner
of W88LP, Tegrad Windsor 1988 Inc. ("Tegrad 88"), will use
every commercially reasonable effort, but without the
expenditure of their own money,
C/M 11752.0000 414860.1 10/14/96 12:19PM
<PAGE>
3
to arrange a settlement of ATB's claim vis a vis W88LP which
claim is the subject matter of an action in the Alberta
courts (but subject always to any fiduciary duty owed by such
parties to W88LP). The Royers have caused RDCL to provide ATB
with an accounting of moneys paid to the limited partners of
W88LP as a result of the agreements entered into between RDCL
and W88LP, such accounting having been confirmed by the
auditors of W88LP. The Royers will cause RDCL to consent to
an Order for judgement in the form attached hereto as
Schedule "E" and such Order will be released and delivered to
ATB at closing. Such of the Royers as are requested by ATB
will testify as witnesses in such court action, speaking
truthfully and honestly and subject always to their fiduciary
duty to W88LP. The Royers will cause Tegrad 88 to seek the
approval of the investor advisory committee to list the
assets of W88LP for sale in the open market with an
established real estate company at fair market value and will
use every commercially reasonable effort, without the
expenditure of their own money, to seek the approval of the
limited partners of W88LP to any offer to sell which Tegrad
88 considers reasonable in the circumstances.
6. RDCL shall cause the nominee title holder to provide a
quit claim in favour of ATB of the lands beneficially
owned by RDCL in the city of Kanata, Ontario (or, at
the option of ATB, a transfer of the shares of the
nominee owner of the Kanata lands), or at ATB's option,
RDCL and its nominee owner of the Kanata lands, shall
cooperate with ATB in any power of sale proceedings to
sell the said lands on ATB's behalf. The Royers will
assist ATB, without the expenditure of their own money,
in removing the hotel construction restriction against
the title to the Kanata lands as soon as possible.
7. ATB shall, upon closing, consent to the sale by RDCL of its
interest in Resort Marketing Group Limited Partnership
("RMGLP") to Holdco Joint Venture, a joint venture
represented by 534685 Alberta Limited (as referred to in the
RMGLP limited partnership agreement) and will upon closing
discharge its security interests in respect of the RDCL
interest in RMGLP.
8. The transaction contemplated herein, except as may be
required pursuant to sections 3, 5 and 6 herein, will close
contemporaneously with the closing under the Lender
Agreement.
C/M 11752.0000 414860.1 10/14/96 12:19PM
<PAGE>
4
9. On closing, except for the provisions of this agreement
which will survive and in particular paragraph 3
hereof, ATB will execute and deliver a general release
in favour of Royco and its shareholders, and Royco and
its shareholders will execute and deliver a general
release in favour of ATB, in the forms of Schedules "A"
and "B" attached hereto. On closing, ATB will execute
and deliver a general release in favour of RMGLP, and
RMGLP will execute a general release in favour of ATB
to be given in the forms of Schedules "C" and "D"
attached hereto. In addition, ATB will consent to the
sale and transfer by RDCL to Royco of the furniture and
equipment contemplated and referred to in an Operating
Assets Lease and Option dated September 30, 1992 and
entered into amongst RDCL, Royco and NL.
10. Subsequent to the meeting of the CPLP limited partners
called to approve the transactions between CPLP, NLC
and the Lenders which are contemplated herein and in
the Lender Agreement and prior to the closing, ATB
shall take all necessary steps to realize upon its
security with respect to those certain units in Banff
Rocky Mountain Resort Limited Partnership (the "RDCL-
Banff Units") pledged to ATB by RDCL and on closing
shall transfer and assign the RDCL-Banff Units to Royco
or as Royco may otherwise direct in consideration of
the following paragraph 11 payment. The statutory
notices required in respect of such realization
proceedings may be issued by ATB prior to the meeting
of the CPLP limited partners.
11. On closing Royco and NLC agree that they will cause the
sum of $300,000 to be paid to ATB in consideration of
the releases, consents and transfers set forth above
and will cause the further sum of $25,000 to be paid to
ATB on closing with respect to costs and expenses
incurred or to be incurred by ATB in connection with
the W88LP litigation referred to above, however
evidence of such costs and expenses will not be
required.
12. On closing ATB shall deliver to the law firm of Battle
Fowler, in trust, a release in the form of Schedule "F"
attached hereto, of any and all personal guarantees of
Terry Royer, Greg Royer, Randy Royer and Daniel Royer
(collectively the "Guarantors") held by or given to
ATB, Northill Branch, 217 16th Ave. NW, Calgary,
Alberta (the "Northill Branch") in connection with
RDCL, Royco, RMGLP and any of their affiliates,
subsidiaries or related entities (collectively the
C/M 11752.0000 414860.1 10/14/96 12:19PM
<PAGE>
5
"RDCL Group") and any matter or thing arising therefrom, to
be held by Battle Fowler and to be released only upon the
written concurrence of ATB of the completion of the
following: (i) the completion of testimony of the Royers or
any of them required by ATB in connection with the W88LP
litigation as contemplated in paragraph 5 above or the prior
settlement of such litigation; (ii) the acceptance or
rejection by the limited partners of W88LP of an offer to
sell the property beneficially owned by W88LP obtained in
accordance with the provisions of paragraph 5 above; (iii)
delivery of the accounting and the judgement against RDCL as
contemplated in paragraph 5 above; and (iv) the performance
of all other obligations of the Royers under paragraph 5
above. In the event of a dispute arising under this
paragraph, such dispute will be resolved by a single
arbitrator who is a senior member of the bar of Alberta. If
the parties cannot agree on the arbitrator, either party may
apply to the Court of Queen's Bench to appoint the
arbitrator. The foregoing agreement with respect to the
release of the Guarantors shall replace the provisions for
release of the Guarantors set out in a Letter Agreement dated
August 25, 1995 and entered into between ATB and Randy Royer
as agent for and on behalf of the Guarantors.
13. ATB hereby represents and acknowledges to the Guarantors that
all guarantees of any of the Guarantors of the loans of RDCL
given to ATB at its Mayor Magrath and 6th Street Branches,
601 Mayor Magrath Drive and 319-6th Street, respectively,
Lethbridge Alberta, if any, have been transferred to the
Northill Branch.
14. Each of ATB and Royco and the other parties referred to
herein and their assigns shall execute and deliver and
register such other instruments and perform or cause to be
performed such further acts in respect of the foregoing as
they and their respective legal counsel reasonably deem
appropriate.
15. Upon full execution and delivery by the parties hereto, each
of which represents it has been authorized to execute and
deliver this agreement and perform and close in accordance
with its terms, this agreement shall constitute a legal and
binding agreement between the parties.
16. All amounts referred to herein are in Canadian Dollars.
C/M 11752.0000 414860.1 10/14/96 12:19PM
<PAGE>
6
17. Time shall be of the essence with respect to this
letter agreement.
18. Nothing in this letter agreement shall be construed as
a waiver of the demands for payment previously issued
by ATB with respect to RDCL, Syndicated and CPLP with
respect to monies owing to ATB, and if the transaction
contemplated hereunder and under the terms of the
Lender Agreement is not closed, except as a result of
the default of any of the Lenders, ATB shall be
entitled to exercise all rights and remedies available
to it at law.
19. Except as set out herein, each of the parties hereto
shall pay its own counsel and professional fees.
20. This agreement may be executed by the parties hereto in
counterparts and all such counterparts shall, when executed
by each party hereto, constitute one and the same agreement.
Dated At Calgary, Alberta this 9th day of August, 1996.
ROYCO HOTELS & RESORTS LTD. on its own
behalf and as agent for its shareholders
Per:____________________________________
Terry Royer - President
RELAX DEVELOPMENT CORPORATION LTD.
Per:____________________________________
Randy Royer - President
TEGRAD WINDSOR 1988 INC.
Per:____________________________________
Randy Royer - President
- --------------- ----------------------------------------
Witness TERRY ROYER
C/M 11752.0000 414860.1 10/14/96 12:19PM
<PAGE>
7
- --------------- ----------------------------------------
Witness RANDY ROYER
- --------------- ----------------------------------------
Witness GREG ROYER
- --------------- ----------------------------------------
Witness PETER SIKORA
- --------------- ----------------------------------------
Witness DANIEL ROYER
NL HOTELS, INC.
Per:_______________________________
Name:
Title:
NATIONAL LODGING CORP.
Per:_______________________________
Name:
Title:
THIS OFFER IS HEREBY ACCEPTED BY ATB
PROVINCE OF ALBERTA TREASURE BRANCHES, by its authorized agent
Per: _____________________ __________________________
Witness
Date: August 9, 1996
C/M 11752.0000 414860.1 10/14/96 12:19PM
<PAGE>
SCHEDULE "A"
GENERAL RELEASE
TO: Province of Alberta Treasury Branches
KNOW ALL MEN by these presents that we, the Undersigned, for and in
consideration of ONE DOLLAR ($1.00) paid to the undersigned by Province of
Alberta Treasury Branches (the "Lender") with offices in the City of Calgary in
the Province of Alberta, and for other good and valuable consideration (the
receipt and sufficiency whereof is hereby acknowledged), have remised, released
and forever discharged, and by these presents do for ourselves, our heirs,
executors, administrators, successors and assigns, remise, release and forever
discharge the Lender, its officers, employees, consultants and agents, as well
as their respective heirs, executors, successors and assigns, of and from any
and all manner of action and actions, causes and causes of action, deeds,
suits, proceedings, debts, dues, duties, accounts, interest, covenants,
contracts, claims, demands, damages (known or unknown) sums of money,
obligations, promises, guarantees and liabilities whatsoever at law or in
equity which we ever had, or now have, or which we, or our heirs, executors,
administrators, successors or assigns hereafter can, shall or may have be
reason of any matter, cause or thing whatsoever existing up to the present
time.
PROVIDED THAT nothing herein contained shall be construed so as to
release the Lender from its obligations and covenants arising out of or in
respect of that certain letter agreement dated August 9, 1996 made by Royco
Hotels & Resorts Ltd. and accepted by the Lender on August 9, 1996 or any
documents delivered pursuant to such agreement.
IN WITNESS WHEREOF we have hereunto set out hands and seals this __
day of __ 1996.
ROYCO HOTELS & RESORTS LTD. on its own
behalf and as agent for its shareholders
Per:
Terry Royer - President
C/M 11752.0000 414860.1 10/14/96 12:19PM
<PAGE>
SCHEDULE "B"
GENERAL RELEASE
TO: Royco Hotels & Resorts Ltd.
Temaur Ltd.
530173 Alberta Ltd.
530174 Alberta Ltd.
Avola Management Ltd.
579478 Alberta Ltd. (formerly 990326 Ontario Inc.)
(collectively, the "Released Parties")
KNOW ALL MEN by these presents that the undersigned, for and in
consideration of ONE DOLLAR ($1.00) paid to the undersigned by each of the
Released Parties and for other good and valuable consideration (the receipt and
sufficiency whereof is hereby acknowledged), has remised, released and forever
discharged, and by these presents does for itself, its successors and assigns,
remise, release and forever discharge each of the Released Parties, their
heirs, executors, administrators, successors and assigns, and any directors,
officers and employees of any of the Released Parties, of and from any and all
manner of actions, causes of action, deeds, suits, proceedings, debts, dues,
duties, accounts, interest, covenants, contracts, claims, demands, damages
(known or unknown), sums of money, obligations, promises, guarantees and
liabilities, whatsoever, at law or in equity, which the undersigned ever had,
or now has, or which the undersigned, or its successors or assigns, hereafter
can, shall or may have by reason of any matter, cause or thing whatsoever
existing up to the present time with respect to the obligations of the Released
Parties arising with respect to the Northill Branch of the undersigned,
217-16th Avenue NW, Calgary, Alberta.
PROVIDED THAT nothing herein contained shall be construed so as to
release the Released Parties from their obligations and covenants arising out
of or in respect of that certain letter agreement dated August 9, 1996 made by
certain of the Released Parties and accepted by the undersigned on August 9,
1996 or any documents delivered pursuant to such agreement.
IN WITNESS WHEREOF the undersigned has caused this Release to be
executed by its authorized agent this __ day of __ 1996.
PROVINCE OF ALBERTA TREASURY BRANCHES,
by its authorized agent
C/M 11752.0000 414860.1 10/14/96 12:19PM
<PAGE>
Per:
C/M 11752.0000 414860.1 10/14/96 12:19PM
<PAGE>
SCHEDULE "C"
GENERAL RELEASE
TO: Province of Alberta Treasury Branches
KNOW ALL MEN by these presents that we, the Undersigned, for and in
consideration of ONE DOLLAR ($1.00) paid to the undersigned by Province of
Alberta Treasury Branches (the "Lender") with offices in the City of Calgary in
the Province of Alberta, and for other good and valuable consideration (the
receipt and sufficiency whereof is hereby acknowledged), have remised, released
and forever discharged, and by these presents do for ourselves, our heirs,
executors, administrators, successors and assigns, remise, release and forever
discharge the Lender, its officers, employees, consultants and agents, as well
as their respective heirs, executors, successors and assigns, of and from any
and all manner of action and actions, causes and causes of action, deeds,
suits, proceedings, debts, dues, duties, accounts, interest, covenants,
contracts, claims, demands, damages (known or unknown) sums of money,
obligations, promises, guarantees and liabilities whatsoever at law or in
equity which we ever had, or now have, or which we, or our heirs, executors,
administrators, successors or assigns hereafter can, shall or may have be
reason of any matter, cause or thing whatsoever existing up to the present
time.
IN WITNESS WHEREOF we have hereunto set out hands and seals this __
day of __ 1996.
RESORT MARKETING GROUP LIMITED
PARTNERSHIP, by Resort Marketing Group
Limited
Per:
Greg Royer - President
RESORT MARKETING GROUP LIMITED
Per:
Greg Royer - President
C/M 11752.0000 414860.1 10/14/96 12:19PM
<PAGE>
SCHEDULE "D"
GENERAL RELEASE
TO: Resort Marketing Group Limited Partnership
Resort Marketing Group Limited
533124 Alberta Ltd.
533125 Alberta Ltd.
534685 Alberta Ltd.
(collectively, the "Released Parties")
KNOW ALL MEN by these presents that the undersigned, for and in
consideration of ONE DOLLAR ($1.00) paid to the undersigned by each of the
Released Parties and for other good and valuable consideration (the receipt and
sufficiency whereof is hereby acknowledged), has remised, released and forever
discharged, and by these presents does for itself, its successors and assigns,
remise, release and forever discharge each of the Released Parties, their
heirs, executors, administrators, successors and assigns, and any directors,
officers and employees of any of the Released Parties, of and from any and all
manner of actions, causes of action, deeds, suits, proceedings, debts, dues,
duties, accounts, interest, covenants, contracts, claims, demands, damages
(known or unknown), sums of money, obligations, promises, guarantees and
liabilities, whatsoever, at law or in equity, which the undersigned ever had,
or now has, or which the undersigned, or its successors or assigns, hereafter
can, shall or may have by reason of any guarantees or other obligations of the
Released Parties arising in respect to the Northill Branch of the undersigned,
217-16th Avenue NW, Calgary, Alberta in connection with RDCL, Royco, RMGLP (as
those terms are defined in the Letter Agreement dated August 9, 1996 made by
certain of the Released Parties and accepted by the undersigned August 9, 1996)
and any of their affiliates, subsidiaries or related entities and any matter
arising therefrom.
IN WITNESS WHEREOF the undersigned has caused this Release to be
executed by its authorized agent this __ day of __ 1996.
PROVINCE OF ALBERTA TREASURY BRANCHES,
by its authorized agent
Per:
Witness
C/M 11752.0000 414860.1 10/14/96 12:19PM
<PAGE>
SCHEDULE "E"
Action No. 9601-05529
IN THE COURT OF QUEEN'S BENCH OF ALBERTA
JUDICIAL DISTRICT OF CALGARY
BETWEEN:
PROVINCE OF ALBERTA TREASURY BRANCHES
Plaintiff
- and -
RELAX DEVELOPMENT CORPORATION LTD.,
TEGRAD WINDSOR (1988) INC. and
RELAX HOTELS WINDSOR (1988) LIMITED PARTNERSHIP
Defendants
BEFORE ) DATED AT THE CITY OF CALGARY, IN
) THE PROVINCE OF ALBERTA, THIS
THE HONOURABLE JUSTICE ) __________ DAY OF ________, 1996
)
IN CHAMBERS
CONSENT JUDGMENT
UPON THE APPLICATION of the Plaintiff; AND UPON NOTING the consent of
counsel for the Defendant, Relax Development Corporation Ltd.;
1. IT IS HEREBY DECLARED as against the Defendant, Relax Development
Corporation Ltd. ("RDCL") and only as against the said Defendant that the Cash
Flow Acknowledgment Agreement made among RDCL, Tegrad Windsor (1988) Inc., and
Relax Hotels Windsor (1988) Limited Partnership dated April 19, 1995 is void
pursuant to the Fraudulent Preferences Act as against the Plaintiff, Province
of Alberta Treasury Branches.
C/M 11752.0000 414860.1 10/14/96 12:19PM
<PAGE>
2. IT IS FURTHER ORDERED AND ADJUDGED THAT the Plaintiff shall have judgment
against the Defendant RDCL for the sum of $229,750.00 plus interest in the
amount of $______________, plus costs of $3,500.00, for a total judgment of
$_____________.
3. IT IS FURTHER ORDERED AND ADJUDGED THAT the Plaintiff shall have judgment
against the Defendant, RDCL for any future distributions of funds to the
limited partners of Relax Hotels Windsor (1988) Limited Partnership made
pursuant to the Cash Flow Acknowledgment Agreement referred to in Paragraph 1
above and the amount of such judgment will be proven by affidavit evidence
filed on behalf of the Plaintiff.
4. IT IS FURTHER ORDERED THAT this consent judgment shall be without prejudice
to the claims of the Plaintiff against, and the defenses of, the remaining
Defendants.
J.C.C.Q.B.A.
Consent to as to form and consent
this _______________ day of August, 1996
Singleton Urquhart Scott
Per:
James G. Hanley/John C. Zang
Solicitors for Relax Development Corporation
ENTERED this ______________ day of August, 1996
CLERK OF THE COURT
C/M 11752.0000 414860.1 10/14/96 12:19PM
<PAGE>
Action No. 9601-05529 1996
IN THE COURT OF QUEEN'S BENCH
OF ALBERTA
JUDICIAL DISTRICT OF CALGARY
BETWEEN:
PROVINCE OF ALBERTA
TREASURY BRANCHES
Plaintiff
- and -
RELAX DEVELOPMENT CORPORATION LTD.,
TEGRAD WINDSOR (1988) INC. and
RELAX HOTELS WINDSOR (1988) LIMITED
PARTNERSHIP
Defendants
CONSENT JUDGMENT
BURNET, DUCKWORTH & PALMER
Barristers & Solicitors 1400, 350 - 7th Avenue S.W.
Calgary, Alberta
T2P 3N9
Attention: David P. Haljan
Telephone: 260-0268
Solicitor's File: 38795-1322
C/M 11752.0000 414860.1 10/14/96 12:19PM
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SCHEDULE "F"
GENERAL RELEASE
TO: Terry Royer, Greg Royer, Randy Royer, Daniel Royer
(collectively, the "Released Parties")
KNOW ALL MEN by these presents that the undersigned, for and in
consideration of ONE DOLLAR ($1.00) paid to the undersigned by each of the
Released Parties and for other good and valuable consideration (the receipt and
sufficiency whereof is hereby acknowledged), have remised, released and forever
discharged, and by these presents does for itself, its successors and assigns,
remise, release and forever discharge each of the Released Parties, their
heirs, executors, administrators, successors and assigns, and any directors,
officers and employees of any of the Released Parties, of and from all manner
of actions, causes of action, deeds, suits, proceedings, debts, dues, duties,
accounts, interest, covenants, contracts, claims, demands, damages (known or
unknown), sums of money, obligations, promise, guarantees and liabilities,
whatsoever, at law or in equity, which the undersigned ever had, or now has, or
which the undersigned, or its successors or assigns, hereafter can, shall or
may have by reason of any guarantees or other obligations of the Released
Parties arising with respect to the Northill Branch of the undersigned, 217
16th Ave. NW, Calgary, Alberta, in connection with RDCL, Royco, RMGLP (as those
terms are defined in the Letter Agreement defined below) and any of their
affiliates, subsidiaries or related entities and any matter or thing arising
therefrom.
PROVIDED THAT nothing herein contained shall be construed so as to
release the Released Parties from their obligations and covenants arising out
of or in respect of that certain letter agreement (the "Letter Agreement")
dated August __, 1996 made by certain of the Released Parties and accepted by
the undersigned on August __, 1996 or any documents delivered pursuant to such
agreement.
IN WITNESS WHEREOF the undersigned has caused this Release to be
executed by its authorized agent this __ day of __ 1996.
PROVINCE OF ALBERTA TREASURY BRANCHES,
by its authorized agent
Per:
Witness
C/M 11752.0000 414860.1 10/14/96 12:19PM
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SCHEDULE "G"
Amounts payable to each of the Lenders
prior to and on Closing pursuant to paragraph 4
Scotia Mortgage Corporation
payments in the amount
of $240,533.84 per month to and
including the Closing Date
Bank of Montreal
payments in the amount of $198,802.05
per month to and including the
Closing Date
Canadian Imperial Bank of Commerce
payments in the amount of
$232,534.45 per month to and including
the Closing Date
Province of Alberta Treasury Branches
(a) payments in the amount of
$146,823.00 per month to and including
the Closing Date
(b) Renovation loan - payments in the amount of
$42,041.00 per month to and including
the Closing Date
C/M 11752.0000 414860.1 10/14/96 12:19PM
CHARTWELL LEISURE
CONTACT: Kekst and Company
(212) 593-2655
Barbara Glassman
Jim Fingeroth
FOR IMMEDIATE RELEASE
---------------------
CHARTWELL LEISURE COMPLETES CANADIAN HOTEL ACQUISITION;
ANNOUNCES ACQUISITION OF CANADIAN MASTER LICENSE FOR TRAVELODGE
New York, New York (OCTOBER 4, 1996) - Chartwell Leisure Inc. (NASDAQ:CHRT)
announced today it has completed its acquisition of 20 Travelodge properties
throughout Canada, and a 50% joint venture interest in an additional property
in Edmonton, from Capital Properties Limited Partnership (CPLP). The
transaction is valued at approximately US$70 million.
Separately, Chartwell Leisure announced today that its subsidiary, Chartwell
Canada Hospitality Corp. (CCHC), has acquired the exclusive franchise rights,
known as a Master License, for Travelodge in Canada from Travelodge Hotels,
Inc., a subsidiary of HFS Incorporated (NYSE:HFS). The subsidiary will operate
as a joint venture between Chartwell Leisure and Royco Hotels and Resorts LTD.
Royco, a Canadian hotel management and franchise company headquartered in
Calgary, Alberta, will also manage all 21 of Chartwell's Canadian properties.
The 21 Canadian properties represent a total of 3,466 rooms.
Chartwell Leisure's Chairman of the Board and CEO, Richard L. Fisher, said:
"These steps, including our newly announced Master License acquired from HFS,
give us a significant presence in the growing Canadian market and will be a
springboard for developing and acquiring new properties in Canada, as well as
selling additional Travelodge franchises in Canada."
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All 75 existing Travelodge franchises in Canada will be assigned to Chartwell
Canada Hospitality Corp. CCHC will administer the Master License and provide
franchise services to the 75 Canadian hotels using the Travelodge brand.
Reservation services will continue to be provided by HFS Canada.
Travelodge President and COO, Robert C. Zapletal, commented: "We are extremely
pleased that Chartwell shares our enthusiasm and commitment to growing the
Travelodge brand. These agreements promise to solidify Travelodge as a major
player in North America's limited-service hospitality market."
Terry Royer, President of Royco, said: "Royco is committed to Travelodge. It is
a great brand with tremendous growth potential. We are enthusiastic about
working with Chartwell Leisure as it enters the Canadian market. We have
already begun to implement a Chartwell-backed select room renovation program in
the 21 hotels we currently manage for Chartwell."
Travelodge Hotels, Inc. is a hotel franchisor with more than 500 upper economy
Travelodge and budget Thriftlodge franchise properties of more than 43,000
guest rooms throughout Canada, Latin America, and the United States. Travelodge
Hotels, Inc. is a subsidiary of HFS Incorporated.
Chartwell Leisure Inc. is a hotel owner/operator and developer. With the
Canadian acquisition, the total number of rooms in Chartwell Leisure will be
11,578. Besides Canada, the portfolio includes 19 wholly-owned properties and
joint venture interests in 96 additional properties all located throughout the
United States. In July, Chartwell Leisure announced it had entered into a joint
venture agreement with Grupo Piasa to develop at least 30 Travelodge properties
throughout Mexico.
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Statements in this press release, other than statements of historical
information, are forward-looking statements that are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks which may cause the
Company's actual results in future periods to differ materially from expected
results. Those risks include, among others, risks associated with the
acquisition of existing hotels and development of new hotel, operating risks,
risks associated with the dependence on franchisors of the Company's lodging
properties and the historical cyclicality of the lodging industry. Those and
other risks are described in the Company's filings with the Securities and
Exchange Commission (SEC) over the last 12 months, copies of which are
available from the SEC or may be obtained upon request from the Company.
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