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 .
C/M: 11752.0002 376635.12
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, Xxxxx Xxxxx, Xxxxxxxx Xxxxx, Xxxxxxx Xxxxx and Xxxxx X. Xxxxxx. 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
C/M: 11752.0002 376635.12
2
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
3
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
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.
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xx. Xxxxxxxx Xxxxx
Telecopy: (000) 000-0000
Xx. Xxxxx Xxxxxx
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Telecopy: (000) 000-0000
Xx. Xxxxxxx Xxxxx
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Telecopy: (000) 000-0000
Xx. Xxxxxxxx Xxxxx
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Telecopy: (000) 000-0000
Xx. Xxxxx Xxxxx
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Telecopy: (000) 000-0000
With a copy to:
Brans, Lehun, Xxxxxxx & Champagne
000 Xxxxxxxx Xxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxxx X. Xxxxx, Esq.
Telecopy: (000) 000-0000
C/M: 11752.0002 376635.12
5
If to NLC, at:
c/o National Lodging Corp.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
With a copy to:
Battle Xxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Telecopy: (000) 000-0000
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
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
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/ Xxxxxxxx Xxxxx
Name: XXXXXXXX XXXXX
Title:
By: /s/ Xxxxx X. Xxxxxx
Name: XXXXX X. XXXXXX
Title: An Individual
By: /s/ Xxxxxxxx Xxxxx
Name: XXXXXXXX XXXXX
Title: An Individual
By: /s/ Xxxxx Xxxxx
Name: XXXXX XXXXX
Title: An Individual
By: /s/ Xxxxxxx Xxxxx
Name: XXXXXXX XXXXX
Title: An Individual
C/M: 11752.0002 376635.12
8
