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")
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NATIONAL LODGING CORP., a corporation incorporated under the
laws of the State of Delaware, U.S.A. ("NLC")
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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")
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SYNDICATED CAPITAL PROPERTIES INC., a corporation
incorporated under the laws of the Province of Ontario,
Canada ("Syndicated")
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ROYCO HOTELS & RESORTS LTD., a corporation incorporated under
the laws of Canada ("Royco")
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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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(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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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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(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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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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(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: _________________________
Xxxxx Xxxxxx
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