Page 65 - Microsoft Word - Hot Shots CIM Version 1.9.2 Final

It is truly aligned to the best interests of Hot Shots, not only for the first Centre in
Newcastle but also for additional subsequent Centres in other locations.

For these reasons. HG&L agreed to appoint STR as manager of the later Centres it may
build under an overarching agreement between HG&L and STR, with each of the Centre
subsidiaries signing up to it as it is formed. It is acknowledged that it may not be best
business for STR to run directly all the Centres. There may be occasions when it will need
to appoint a sub-manager. If that is the case it will only be done with the full agreement
of HG&L, with STR being directly responsible to HG&L for the management of the Centre
by its subcontractor.

The operation of a typical Centre has many similarities to that of a hotel or other leisure
facility and the management agreement draws from such agreements in that sector.
Agreed Heads of Terms for the Management Agreement (MA) are in Appendix 11. The
MA will be for a term of 5 years and then evergreen for an indefinite term. It may be
terminated by 12 months ’notice to be worked out by STR. It may be terminated by HG&L
for STR’s breach or failure to meet KPIs. If the termination is required as a condition of
a sale by the current investors in HG&L or a refinancing of HG&L, then STR will be entitled
to a buyout fee in recognition of its contribution to the creation of the business value,
driving the sale or refinancing value. That buy-out fee will be 3% of valuation HG&L
business. (after repayment of any outstanding equity if this is necessary). An annual
management fee will be paid as a percentage of annual gross operating profit – 8% in
year 1, 9% in year 2 and 10% thereafter.

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