EXHIBIT 10.15
OMNIBUS AMENDMENT AGREEMENT
THIS OMNIBUS AMENDMENT AGREEMENT (this "Agreement") is made this
28/th/ day of December, 1998 by and between CHOICE HOTELS INTERNATIONAL, INC., a
Delaware corporation ("Choice"), and SUNBURST HOSPITALITY CORPORATION, a
Delaware corporation ("Sunburst").
WHEREAS, in connection with the spin-off of Choice by Sunburst (the
"Spin-off"), Choice and Sunburst entered into a Strategic Alliance Agreement
(the "Strategic Alliance Agreement") dated October 15, 1997 pursuant to which,
among other things, the parameters of the operating relationship between Choice
and Sunburst with regard to matters of mutual interest are set forth;
WHEREAS, the Strategic Alliance Agreement contains a form of
Franchising Agreement (the "Franchising Agreement") as Exhibit A to be entered
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into by and between Choice and Sunburst whenever Choice is to brand any hotel or
lodging property of any kind that Sunburst develops or acquires and intends to
franchise during the term of the Strategic Alliance Agreement;
WHEREAS, Choice and Sunburst have entered into numerous franchising
agreements substantially in the form of the Franchising Agreement and now desire
to amend the provisions relating to liquidated damages contained in the
aforementioned franchising agreements;
WHEREAS, Choice and Sunburst desire to eliminate the option contained
in the Strategic Alliance Agreement for Sunburst to purchase the Mainstay Suite
Hotels system from Choice in exchange for Choice's forgiveness of $16,900,000 of
the $19,900,000 receivable to Choice from Sunburst currently outstanding
pursuant to the Distribution Agreement;
WHEREAS, in connection with the Spin-off, Choice and Sunburst entered
into a Distribution Agreement (the "Distribution Agreement") dated October 15,
1997 pursuant to which, among other things, Choice agreed to loan to Sunburst
$115,000,000 which was evidenced by a subordinated note (the "Term Note") with
an aggregate principal amount of $115,000,000 and a maturity date of five years;
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WHEREAS, Choice and Sunburst desire to amend the Term Note;
NOW, THEREFORE, Choice and Sunburst agree as follows:
ARTICLE ONE
AMENDMENTS TO STRATEGIC ALLIANCE AGREEMENT
Section 1.1. Definitions. Any defined term used within this Article
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One and not defined within this Agreement, will have the meaning ascribed to
such term in the Strategic Alliance Agreement.
Section 1.2. Elimination of Option to Purchase Mainstay Suite Hotels
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System. The Strategic Alliance Agreement is hereby amended such that Sections
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4.3 and 4.4 of the Strategic Alliance Agreement are deleted in their entirety.
Section 1.3. Liquidated Damages Provision in Franchising Agreements.
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Notwithstanding Section 3.1 of the Strategic Alliance Agreement and as long as
Sunburst is not in default under the Term Note:
(a) Any and all franchising agreements entered into prior to the date
hereof by and between Choice and Sunburst (or any of their respective
predecessors or affiliates), except any franchising agreements related to
(i) Mainstay Suites and Sleep Inns or (ii) any other hotels owned by
Sunburst that carried a Choice brand which is not sold by Sunburst within
three years from the date such hotel was reflagged with a different non-
Choice brand (the "Reflagged Hotels"), are hereby amended such that any
references to liquidated damages are deleted and Choice agrees that it
waives any claim it may have against Sunburst for lost future profits
arising from such franchising agreements; and
(b) Section 10.d.2 of the respective franchising agreements entered
into prior to, on or after the date hereof by and between Choice and
Sunburst related to Mainstay Suites and Sleep Inns or any Reflagged Hotel
is hereby amended to include the following:
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"Any liquidated damages to be paid pursuant to this section will
not exceed a maximum of $100,000."
Section 1.4. Development. Section 4.1 of the Strategic Alliance
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Agreement is hereby amended and restated as follows:
Realco and Franchising are currently in the midst of a program under which
Realco will develop Sleep Inns and Mainstay Suite Hotels franchised by
Franchising. Realco agrees that absent (i) a material change in market
conditions that would render construction of further hotels pursuant to
this program uneconomical (meaning that reasonable projections by Realco
demonstrate that the hotel would provide a return on investment to Realco
that is less than the hurdle rate of return established by Realco for its
investments in similar types of hotels), (ii) Realco's inability to finance
construction or acquisition of such hotels, or (iii) Franchising's
discontinuance of efforts to support the Mainstay Suite Hotel brand, Realco
will continue to develop Sleep Inns and Mainstay Suite Hotels so that it
will have opened no fewer than a total of thirteen Sleep Inns and twenty-
five Mainstay Suite Hotels no later than forty-eight months from the
effective date.
Section 1.5. Other Amendments to Franchising Agreements.
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Notwithstanding anything contained in any franchising agreements entered into
prior to the date hereof by and between Choice and Sunburst (or any of their
respective predecessors or affiliates), the following terms shall apply from and
after the date hereof to the relevant franchising agreements:
(a) Sunburst shall pay to Choice in cash an application fee of
$20,000 upon execution of a franchise agreement from and after the date
hereof.
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(b) No royalty, marketing or reservation fees shall be payable for a
period of two years with respect to the first ten such agreements entered
into by Sunburst after the date hereof and at the end of such period, the
initial fee schedule will commence; and such ten agreements shall contain a
provision permitting termination by either party only on the tenth or
fifteenth anniversary of the date of the contract.
(c) Choice agrees that if Sunburst sells any property that is the
subject of an existing franchising agreement, if that property is not past
due on any fees or failing a quality assurance review then Choice will
enter into a new franchise agreement on customary/market terms with the
buyer.
ARTICLE TWO
AMENDMENTS TO TERM NOTE
Section 2.1. Definitions. Any defined term used within this Article
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Two and not defined within this Agreement, will have the meaning ascribed to
such term in the Term Note.
Section 2.2. Interest. Section 1.1 of the Term Note is hereby
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amended so that commencing on October 15, 2000 interest payable under the Term
Note shall accrue at a rate of 11.00% per annum compounded daily on both the
principal amount and the amount of unpaid interest outstanding under the Term
Note.
Section 2.3. Asset Sale Proceeds. Section 1 of the Term Note is
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hereby amended to include the following:
1.6. Asset Sale Proceeds.
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(a) The Payor will pay to the Payee within fourteen (14)
calendar days after the consummation of an Asset Sale by wire transfer to
the bank account designated by the Payee such aggregate principal amount of
this Note as equals fifty percent (50%) of Asset Sale Proceeds in excess of
the aggregate of amounts required to be used to pay secured Senior Debt and
the Payor shall apply the remaining fifty percent (50%) of Asset Sale
Proceeds to the development of Mainstay Suite Hotels.
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(b) The Payor will provide the Payee notice in writing at least
fifteen (15) days prior to a proposed Asset Sale and such notice will
include a detailed description of the specific terms of the Asset Sale and
the proposed uses for the portion of the proceeds to be retained by Payor
in accordance with Section 1.6(a).
(c) The Payor will provide to the Payee within fourteen (14)
calendar days after the closing of an Asset Sale a certificate signed by
the Chief Financial Officer certifying the amount and form of consideration
received and the use of the Asset Sale Proceeds received in respect of such
Asset Sale.
Section 5 of the Term Note is hereby amended to include the following:
"Asset Sale" means the sale, transfer or other disposition (other than
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to the Payor or a Subsidiary) in any single transaction or series of
related transactions of (a) any capital stock of or other equity interest
in any Subsidiary unless such transfer is to another wholly-owned
Subsidiary or (b) any hotel or any interest in any hotel, the real property
on which any hotel is located, the personal property located at any hotel
(unless sold as part of a refurbishment of a hotel and the proceeds are
reinvested in the hotel), or the earnings or profits generated by any hotel
owned or operated by the Payor or any Subsidiary.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
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received (net of reasonable broker commissions and closing costs) by the
Payor or a Subsidiary from such Asset Sale (including cash received as
consideration for the assumption of liabilities incurred in connection with
or in anticipation of such Asset Sale) and (ii) promissory notes and other
non-cash consideration received (net of reasonable broker commissions and
closing costs) by the Payor or a Subsidiary from such Asset Sale or other
disposition upon the liquidation or conversion of such notes or non-cash
consideration into cash.
Section 2.4. Penalty Interest Payments. Section 1 of the Term Note
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is hereby amended to include the following:
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1.7 Default Payments. Upon the occurrence and during the
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continuation of any Event of Default, the outstanding principal amount
under this Note and, to the extent permitted by applicable law, any
interest payments thereon not paid when due, shall thereafter bear interest
(including post-petition interest in any proceeding under the applicable
bankruptcy laws) at a rate that is 2% per annum in excess of the interest
rate otherwise payable under this Note.
ARTICLE THREE
DISTRIBUTION AGREEMENT
Section 3.1. Satisfaction of Receivable. In consideration for the
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termination of Sunburst's option to purchase the Mainstay Suites brand,
$16,900,000 of the $19,900,000 receivable currently owing from Sunburst to
Choice pursuant to Section 3.03 of the Distribution Agreement shall be deemed
satisfied and no longer due and owing. The remaining $3,000,000 of the
receivable is to be paid by Sunburst to Choice by wire transfer to the bank
account designated by Choice no later than three business days after the date
hereof.
ARTICLE FOUR
MISCELLANEOUS PROVISIONS
Section 4.1. Conflicts. In the event of any conflict between the
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terms of this Agreement and the terms of the Strategic Alliance Agreement, any
franchising agreement entered into by and between Choice and Sunburst referred
to in this Agreement, the Term Note, the Distribution Agreement and any other
documents related thereto and executed by one or more parties hereto in
connection with any of the aforementioned agreements, the terms and provisions
of this Agreement shall control.
Section 4.2. Agreements Remain in Effect. The Strategic Alliance
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Agreement, any franchising agreement entered into by and between Choice and
Sunburst referred to in this Agreement, the Term Note and the Distribution
Agreement shall remain fully effective and are changed only as specifically
provided herein and shall bind the parties to each in all respects as originally
contemplated.
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Section 4.3. Counterparts. This Agreement may be executed in one or
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more counterparts, all of which taken together shall constitute one instrument.
SIGNATURES ON FOLLOWING PAGE
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IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
hereto have executed this Agreement as of the day and year first written above.
CHOICE HOTELS INTERNATIONAL, INC.
_/s/ Xxxxxxx X. DeSantis______
Name:
Title:
SUNBURST HOSPITALITY CORPORATION
__/s/Xxxxx X. MacCutcheon_____
Name:
Title:
