ROYALTY SHARING AGREEMENT
This ROYALTY SHARING AGREEMENT (the "Agreement"), is entered into as of
this 30th day of September 2000, by and among AMERIHOST PROPERTIES, INC., a
Delaware corporation ("API"), CENDANT FINANCE HOLDING CORPORATION, a Delaware
corporation ("Cendant") and AMERIHOST FRANCHISE SYSTEMS, INC., a Delaware
corporation (the "Buyer").
WHEREAS, pursuant to an Asset Purchase Agreement among API, Cendant,
the Buyer and others, dated as of August 17, 2000 (the "Asset Purchase
Agreement"), API and certain of its subsidiaries have transferred to Cendant or
the Buyer (together with AmeriHost Franchise Systems, Inc. and their respective
affiliates, collectively, the "Cendant Parties") certain assets relating to the
franchising of a hotel system under the AmeriHost Inn(R), AmeriHost Inn and
SuitesSM, AmeriHost HotelSM, AmeriHost SuitesSM and any other proprietary brands
of the Parent or any of its subsidiaries trademarks (the "Brands") and
WHEREAS, as a condition to the closing of the transactions contemplated
by the Asset Purchase Agreement, the parties hereto are required to enter into
this Agreement, which provides for, among other things, the delivery of certain
contingent payments.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, and subject to the terms and conditions hereof, the parties
intending to be legally bound, hereby agree as follows:
Section 1. Brand Royalty Sharing Payments.
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(a) With respect to all Brand Royalties (as defined below) received by
the Cendant Parties, Cendant shall pay to API an amount equal to [ECONOMIC TERMS
OMITTED] of such Brand Royalties (subject to Section 2 below). Payments of Brand
Royalties to API pursuant hereto shall be made on a monthly basis within thirty
(30) days after the end of (i) the calendar month in which an amount first
becomes owing under this Section 1(a) and (ii) each calendar month thereafter.
Notwithstanding anything set forth herein to the contrary, for a period of
twenty four months from the date hereof, any facility operating under any of the
then-current proprietary brands of Cendant or its subsidiaries which coverts to
one of the Brands shall be excluded from the calculation of Brand Royalties for
the remainder of the term of this Agreement.
(b) For purposes of this Agreement, the following terms shall mean:
(i) "Brand Royalties." For a particular period, the royalty revenues
(calculated as a share of Gross Room Revenues (as defined below)) received by
the Cendant Parties for all hotels operating under any of the Brands or any
other brands incorporating the "AmeriHost" name or any derivation thereof during
such period. Brand Royalties shall not include fees received for marketing and
reservation services.
(ii) "Gross Room Revenue." The gross receipts attributable to or
payable for the rental of guest sleeping rooms at a particular facility operated
under any of the Brands, including
CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT. PORTIONS FOR
WHICH CONFIDENTIAL TREATMENT IS REQUESTED ARE DENOTED BY [ECONOMIC TERMS
OMITTED]. MATERIAL OMITTED HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
without limitation the net proceeds of use and occupancy and business
interruption, rent loss or similar insurance with respect to such facility;
provided however that insurance proceeds shall be included in Gross Room Revenue
only when and to the extent actually received, and for purposes of this Section
1, shall not exceed the amount of gross receipts reasonably estimated to have
been lost as a result of the event that gave rise to payment of insurance
proceeds. Gross Room Revenue shall not include Federal, state and local taxes or
fees collected by the franchisee of such facility for transmittal to the
appropriate taxing authority.
Section 2. Development and Collection Efforts; Rights of Set-Off.
Cendant shall utilize commercially reasonable efforts (i) to pursue the
development of the Brands, provided that Cendant shall not be obligated to
pursue development of the AmeriHost Inn & SuitesSM Brand and (ii) to collect on
a timely basis all Brand Royalties due and owing. Amounts collected shall first
be allocated to reimburse the costs of collection, then to reimburse marketing
and reservation fees and commissions paid to third parties on behalf of the
account debtor, then to Brand Royalties. Cendant shall have the right to set-off
against amounts due API pursuant hereto the obligations of API to repay any
Repayment Amounts (as defined in the Development Agreement) due to Cendant or
its subsidiaries pursuant to the Development Agreement among Cendant, API and
others, dated the date hereof (the "Development Agreement).
Section 3. Reports. With each payment made pursuant to Section 1 above,
Cendant shall deliver to API a report detailing the calculation of such payment
made by Cendant for the period in question. Cendant shall cause each such report
to be certified by Cendant's chief financial officer (or such other corporate
officer as Cendant may designate) as being true, correct, and complete.
Section 4. Withholding. If a payment due under this Agreement is
subject to withholding or other income taxes under applicable legal requirements
or U.S. laws, the withholding party shall promptly deliver to the other party
receipts of tax authorities or other suitable documentation for all taxes paid
or withheld. The withholding party shall take all reasonable steps to assist the
other party in obtaining any tax credit which may be due to such other party
with respect to any withholding taxes.
Section 5. Records and Audit. Cendant shall keep true and accurate
books of account and shall keep and maintain all records, documents, and other
instruments relating to Brand Royalties (the "Cendant Material Records") in such
detail as to enable API to ascertain the amounts due under this Agreement. API
may designate a firm of certified or charted public accountants, reasonably
acceptable to Cendant, for the purpose of auditing the Cendant Material Records.
During the Term and for a period of one hundred eighty (180) days after the end
of the Term, such accountants may audit the Cendant Material Records during
Cendant's normal business hours upon prior written notice to Cendant. API shall
pay for the cost of the audit unless Cendant has, in its reports submitted under
Section 3 above, understated by more than five
2
percent (5%) the amounts payable to API pursuant to Section 1 above. In the
event of such an understatement, Cendant shall pay for such accountants'
reasonable audit costs.
Section 6. Brand Merger; Dispute Resolution.
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(a) In the event that Cendant intends to merge any of the Brands with
any of the then-current proprietary brands of Cendant or its subsidiaries (the
"Brand Merger"), Cendant shall provide API with written notice of such intent.
Cendant and API shall negotiate in good faith in order to determine the
appropriate percentage of royalties to be paid to API with respect to such
merged brand. If Cendant and API are unable to agree as to such revised royalty
payment, then the dispute shall be settled, prior to the implementation of any
Brand Merger, by arbitration in accordance with the Commercial Arbitration Rules
of the American Arbitration Association then in effect, except as modified
herein (the "Rules"). The arbitration shall be held, and the award shall be
issued in the State of Delaware.
(b) There shall be one neutral arbitrator. The parties shall have
thirty (30) days from the receipt by the respondent of the notice of arbitration
to agree on an arbitrator. If the arbitrator is not appointed within the time
limit provided herein, such arbitrator shall be appointed by the American
Arbitration Association by using a list striking and ranking procedure in
accordance with the Rules. Any arbitrator appointed by the AAA shall be a
retired judge or a practicing attorney with no less than fifteen years of
experience and an experienced arbitrator.
(c) The hearing shall be held, if possible, no later than four (4)
months after the appointment of the arbitrator. The arbitrator shall be required
to follow the law of the state designated by the parties herein.
(d) Within thirty days after the close of the arbitration hearing, the
arbitrator shall issue a provisional award ("Provisional Award"). The
Provisional Award shall be a reasoned award stating the findings and conclusions
on which it is based. At the sole election of Cendant, which election must be
made within thirty 30 days of receipt by Cendant of a copy of the Provisional
Award, Cendant, by notice to API and the arbitrator in writing ("Notice of
Non-Merger") may elect not to go forward with the Brand Merger. If Cendant does
not timely give Notice of Non-Merger, the Provisional Award shall become a final
award (the "Default Final Award"). In the event of a timely Notice of
Non-Merger, all the costs of the arbitration, including the reasonable costs and
attorneys' fees of API (the "Costs"), shall be paid by Cendant. If Cendant
timely gives Notice of Non-Merger, API shall submit evidence of Costs to the
arbitrator and the arbitrator shall enter a final award (the "Non-Merger Final
Award") providing that (i) the Costs shall be paid by Cendant and (ii) that
Cendant has the sole and exclusive right to determine to go forward with the
Brand Merger at any time after the issuance of the Non-Merger Final Award;
provided, however, that (x) Cendant must so notify API prior to implementation
of the Brand Merger; (y) if Cendant notifies API of its intent to go forward
with the Brand Merger within one year of the date of issuance of the Non-Merger
Final Award,
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Cendant and API shall be bound by the terms of the Provisional Award as a final
award and (z) if Cendant notifies API more than one year after the issuance of
the Non-Merger Final Award, then Cendant and API shall utilize this Section 6 to
settle any subsequent dispute regarding royalties due to API following the Brand
Merger. Any final award shall be binding on the parties and judgment upon any
final award may be entered in any court having jurisdiction thereof.
Section 7. Term. Except as otherwise specified, the term of this
agreement (the "Term") begins on the date of this Agreement and ends on the
twenty-five (25) year anniversary of the date hereof. None of the parties hereto
is obligated under this Agreement to make any payments for any period after the
end of the Term.
Section 8. Notices. Any notice required or permitted by this Agreement
must be in writing and must be sent by facsimile, by nationally recognized
commercial overnight courier, or mailed by United States registered or certified
mail, addressed to the other party at the address below or to such other address
for notice (or facsimile number, in the case of a notice by facsimile) as a
party gives the other party written notice of in accordance with this Section 8.
Any such notice will be effective as of the date of receipt:
if to Cendant: if to API:
Cendant Corporation Amerihost Properties, Inc.
6 Sylvan Way 2355 South Arlington Heights Road
Parsippany, New Jersey 07054 Suite 400
Telecopy: 973-496-5331 Arlington Heights, Illinois 60005
Attn: Senior Vice President - Legal Telecopy: 847-228-5409
Attn: President
Section 9. Relationship of the Parties. This Agreement does not create
any relationship of agency, partnership, or joint venture between the parties.
API, Cendant and their respective subsidiaries are independent contractors.
Nothing in this Agreement makes any party a general or special agent, legal
representative, subsidiary, joint venture, partner, fiduciary, employee, or
servant of another party for any purpose. None of the parties hereto shall
misrepresent the relationship between them or make any express or implied
agreement, guaranty, or representation, or incur any debt or obligation, in the
name or on behalf of the other. No party shall have any liability under any
agreement, obligation, or representation made by another party in violation of
the preceding sentence.
Section 10. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which, taken together, are deemed to be one and the same document.
Section 11. Interpretation. The headings of the sections and paragraphs
of this Agreement are inserted for convenience of reference only and in no way
restrict or otherwise modify any of the terms or provisions of this Agreement.
The use of the words "include," "includes," and "including" followed by one or
more examples is intended to be illustrative and does not limit the scope of the
description or term for which the examples are provided.
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Section 12. Third Party Beneficiaries. This Agreement shall not benefit
or create any right or cause of action in or on behalf of any person other than
the parties hereto; provided, however, that this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and permitted assigns.
Section 13. Entire Agreement. This Agreement constitutes the entire
agreement of the parties relating to the subject matter hereof and supersede
other prior agreements and understandings between the parties both oral and
written regarding such subject matter.
Section 14. Severability. Any provision of this Agreement that is held
by a court of competent jurisdiction to violate any applicable law or regulation
shall be limited or nullified only to the extent necessary to bring the
Agreement within the requirements of such law.
Section 15. Governing Law; Consent to Jurisdiction. This Agreement
shall be governed by, enforced under and construed in accordance with the laws
of the State of Delaware, without giving effect to any choice or conflict of law
provision or rule thereof. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of (a) the state courts of the State of Delaware, and (b)
the United States District Court for the State of Delaware, for the purposes of
any suit, action or other proceeding arising out of this Agreement or any
transaction contemplated hereby. Each of the parties hereto further agrees that
service of any process, summons, notice or document by U.S. registered mail to
such party's respective address set forth above shall be effective service of
process for any action, suit or proceeding in Delaware with respect to any
matters to which it has submitted to jurisdiction in this Section 14. Each of
the parties hereto irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in (i) the state courts of the State of
Delaware, or (ii) the United States District Court for the State of Delaware,
and hereby and thereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
Section 16. Expenses. Except as set forth in Section 6, the prevailing
party in any suit or other action arising out of or related to this Agreement
shall be entitled to recover from the other party all reasonable fees, costs,
and expenses incurred by the prevailing party in connection with the action,
including reasonable judicial and extra-judicial attorneys' fees, expenses, and
disbursements, and fees, costs, and expenses relating to any mediation or
appeal.
Section 17. Waiver and Modification. No term or condition in this
Agreement is waived or modified unless a writing doing so is signed by the Party
against whom enforcement of the waiver or modification is sought.
Section 18. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that (a) this Agreement and the rights,
interests and obligations of Cendant may be assigned by Cendant to an affiliate
of Cendant without the consent of API provided that such assignment shall not
relieve Cendant of its obligations hereunder and (b) in the event that API sells
substantially all of its assets to a third party, this Agreement and the rights,
interests and obligations of API shall be
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assigned by API to the purchaser and the consent of Cendant shall not be
required. Failure by API to assign this Agreement in accordance with the
preceding sentence shall be deemed to be a material default hereunder. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
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IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be duly signed as of the date first above written.
AMERIHOST FRANCHISE SYSTEMS, INC.
By: /s/ Joel R. Buckberg
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Name: Joel R. Buckberg
Title: Executive Vice President
CENDANT FINANCE HOLDING CORPORATION
By: /s/ Joel R. Buckberg
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Name: Joel R. Buckberg
Title: Executive Vice President
AMERIHOST PROPERTIES, INC.
By: /s/ Michael P. Holtz
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Michael P. Holtz, President