Exhibit 99.02
STRATEGIC ALLIANCE AGREEMENT
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This Strategic Alliance Agreement (this "Agreement") is entered into as
of the 15th day of October, 1997 (the "Effective Date") by and between Choice
Hotels Franchising, Inc., which intends to change its name to Choice Hotels
International, Inc. ("Franchising") and Choice Hotels International, Inc., which
intends to change its name to Sunburst Hospitality Corp. ("Realco")
(collectively, the "Parties"), with respect to the following:
WHEREAS, Realco is the common parent of a consolidated group that includes
as one of its subsidiaries Franchising;
WHEREAS, Realco is engaged in the buying, developing and operating of hotel
properties;
WHEREAS, Franchising is engaged in franchising and managing hotels and in
providing various services for its franchisees to strengthen particular hotel
brands, including the operation of a national reservations system for
Franchising's brands and the conducting of advertising and marketing activities
on behalf of franchisees of Franchising's brands;
WHEREAS, the Parties are concurrently entering into a Distribution
Agreement, pursuant to which Realco will distribute all of its outstanding
common stock of Franchising pro rata to Realco's shareholders (the
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"Distribution");
WHEREAS, it is mutually beneficial to Realco and Franchising to establish a
relationship whereby Realco will develop or acquire certain hotels to be
franchised by Franchising and the Parties will continue to cooperate with
respect to matters of mutual interest, including new product/concept testing for
Franchising in Realco Hotels;
WHEREAS, Realco and Franchising desire to take advantage of Franchising's
purchasing power by authorizing Franchising in certain instances to negotiate
with third party vendors on Realco's behalf for the purchase of certain hotel
items;
NOW, THEREFORE, Realco and Franchising agree as follows:
1. Definitions
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1.1 Terms defined in the Distribution Agreement shall have the same
meanings when used in this Agreement.
2. Term
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2.1 This Agreement shall go into effect on the date of the Distribution
(the "Effective Date") and shall continue in force for a period of twenty
years. This Agreement may, however, be terminated by either Party on the fifth,
tenth or fifteenth anniversary dates of the Effective
Date upon at least three months prior written notice to the other Party and may
be renewed upon the mutual consent of the Parties.
3. Franchising of Realco Hotels
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3.1 Realco currently operates approximately 71 hotels under franchise
agreements with Franchising. The terms of these agreements will remain
unchanged.
3.2 Realco hereby grants a right of first refusal to Franchising to
franchise any hotel or lodging property of any kind that Realco develops or
acquires and intends to franchise during the term of this Agreement (a "Lodging
Property"). Realco shall provide to Franchising written notice, in the form of
a completed application form (the "Realco Notice"), setting forth reasonable
detail regarding each Lodging Property that it intends to develop, acquire
and/or franchise, including information which shall include, among other things,
the name, address, number of rooms, planned physical improvements and other data
compiled by Realco with respect to its evaluation of the acquisition or
development of the Lodging Property. Once the Realco Notice is received by
Franchising, Franchising shall respond in writing within thirty days to Realco
indicating whether Franchising chooses to exercise its right of first refusal
and, if so, which brand or brands it believes would be appropriate for the
Lodging Property and the physical renovations, in the case of an existing
Lodging Property, that Realco would be required to effect, and any other
conditions beyond those set forth in Exhibit A attached hereto that Realco must
satisfy in order to obtain Franchising's approval of the Realco application (the
"Franchising Response"). If Franchising does not provide the Franchising
Response within thirty days of receipt of the Realco Notice, Franchising shall
be deemed to have elected not to exercise the right of first refusal.
3.3 If Franchising exercises the right of first refusal as set forth
above, Realco shall be obligated to brand the Lodging Property as designated by
Franchising unless it would not be feasible to do so because (a) the Lodging
Property is already under contract with another franchiser and rebranding would
be uneconomical, or (b) branding the Lodging Property as designated by
Franchising would be otherwise uneconomical. Branding pursuant to Franchising's
designation shall not be considered uneconomical if reasonable projections by
Realco demonstrate that the Lodging Property would provide a return on
investment to Realco over the term of the franchise agreement to be entered into
with Franchising that is equivalent to the hurdle rate of return established by
Realco for its investments in similar types of hotels or lodging properties.
3.4 If Realco wishes to object to a brand selected by Franchising for a
Lodging Property, it must do so in writing, providing the bases for its
objection within fifteen days after receipt of the Franchising Response.
Franchising shall within three days after receipt of such objection, provide a
written response to Realco. If the Parties are unable to reach agreement
regarding branding within three days thereafter, the branding of a Lodging
Property shall be resolved in accordance with Section 7 of this Agreement.
3.5 Prior to receiving the Franchising Response (or the expiration of
thirty days from Franchising's receipt of the Realco Notice, if a Franchising
Response has not been received by
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Realco within such time period), Realco shall not notify, correspond with, or
negotiate with, any other party, except the existing franchisor, with respect to
alternative branding of the Lodging Property.
3.6 In the event a Lodging Property is to be branded by Franchising
pursuant to this Section 3, the Parties shall enter into a franchise agreement
substantially in the form of Exhibit A attached hereto with respect to such
Lodging Property, providing for payment of fees as set forth in Schedule 1
thereto. In addition, with respect to any Lodging Property acquired by Realco
and branded by Franchising pursuant to this Section 3, Realco shall pay to
Franchising upon entering a franchise agreement a one time initial fee of
$10,000.00. No such initial fee, or initial fee associated with the selection
of any software license agreement between the Parties, shall be payable
respecting a Lodging Property newly constructed by Realco that is branded by
Franchising.
4. Development
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4.1 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 fourteen Sleep Inns and fifteen Mainstay Suite Hotels no later than forty-
eight months from the Effective Date.
4.2 With respect to any Sleep Inn or Mainstay Suite Hotel that is not
completed within forty-eight months from the Effective Date, such Lodging
Property shall pay the normal "rack rate" franchise fee then in effect for a
Sleep Inn or Mainstay Suite Hotel rather than the fees set forth in Schedule 1
of Exhibit A attached hereto.
4.3 In the event that the Mainstay Suite Hotel system, including those
hotels owned by Realco, does not total at least one hundred hotels open or under
construction on or before January 1, 2000, Realco will have an option,
exercisable for a period of sixty days following January 1, 2000, to purchase
the brand name, marks, franchise agreements, and other assets of the Mainstay
Suite Hotels system from Franchising at a price equal to nine times
Franchising's revenues attributable to royalties from the Mainstay Suite Hotels
system during the calendar year 1999.
4.4 In the event Realco desires to exercise this option, then Realco shall
provide written notice to Franchising within the sixty day period following
January 1, 2000. The Parties will then negotiate in good faith and execute
definitive agreements within forty-five days of such written notice (with
commercially reasonable terms and conditions governing such purchase, which may
include a financing contingency lasting no more than ninety days), and will
close the
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purchase transaction within thirty days after the expiration of the financing
contingency. If the Parties acting in good faith do not execute a definitive
agreement or close the transaction within the prescribed time periods, then the
option provided by Section 4.3 shall be deemed to have expired.
5. New Product/Concept Testing
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5.1 Realco and Franchising desire to continue their relationship under
which certain new products/concepts are tested for Franchising at hotels owned
by Realco. The Parties agree to negotiate in good faith on a case by case basis
with respect to the terms of such participation by Realco in new product/concept
testing. In the event Franchising desires to test or research any new
product/concept in Realco hotels, Franchising shall deliver to Realco a written
description of the new product/concept and plans for its testing or research.
The Parties shall then evaluate appropriate compensation for Realco to receive,
which compensation shall include all direct and indirect costs associated with
the project and an opportunity cost factor, such that the capital invested by
Realco will receive a return on investment equivalent to Realco's incremental
cost of capital.
5.2 In the event Franchising franchises a new brand or concept,
Franchising agrees that no other franchisee shall receive more favorable terms
or conditions than those offered to Realco.
6. Realco Preferred Vendor Programs
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6.1 Except as set forth in this Section 6, Realco intends to make direct
purchases from third parties for products and services respecting its hotels.
Notwithstanding the foregoing, Realco agrees that Franchising may negotiate with
third party vendors of hotel services and products with respect to the provision
of such services and products to Realco. Once an opportunity to make a purchase
on behalf of Realco is identified by Franchising, Franchising will promptly
consult with Realco to ensure that the economic terms and services to be
provided are equal to or better than those available to Realco, and that
entering into such an agreement would not be inconsistent with any then existing
agreements to which Realco is a party. Realco shall then promptly advise
Franchising in writing whether it grants Franchising the authority to negotiate
the relevant purchase for execution by Realco.
6.2 No agreement negotiated by Franchising on behalf of Realco shall
contain a price commitment for a period greater than one year. In addition,
Realco will be entitled to receive the benefits of any other provisions
negotiated by Franchising on behalf of its other franchisees with such vendors.
7. Dispute Resolution
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7.1 Any dispute, controversy or disagreement ("Dispute") between the
Parties related to the obligations of the Parties under this Agreement in
respect to which an amicable resolution cannot be reached shall be submitted for
mediation to a committee made up of an equal number of non-common members of
each company's Board of Directors ("Committee"). If the Parties
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are unable to reach an amicable resolution of a Dispute within thirty days after
submission to the Committee, then, to the maximum extent allowed by law, the
Dispute shall be submitted and resolved by final and binding arbitration in
Baltimore, Maryland administered by JAMS-Endispute in accordance with JAMS-
Endispute's rules of practice then in effect or such other procedures as the
Parties may agree upon: provided, however, that any Party may seek injunctive
relief and enforcement of any award rendered pursuant to the arbitration
provisions of this Section 7 by bringing a suit in any court of competent
jurisdiction. Any award issued as a result of such arbitration shall be final
and binding between the Parties thereto and shall be enforceable by any court
having jurisdiction over the Party against whom enforcement was sought and
application may be made to such court for judicial acceptance of the award and
order of enforcement. The fees and expenses of arbitration (including reasonable
attorneys' fees) shall be paid by the Party that does not prevail in such
arbitration.
7.2 Attorneys' Fees. If any Party to this Agreement brings an action to
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enforce its rights under this Agreement, the prevailing Party shall be entitled
to recover its costs and expenses, including without limitation reasonable
attorneys' fees, incurred in connection with such action, including any appeal
of such action.
8. Modification
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8.1 This Agreement may only be amended, modified or supplemented in a
written agreement signed by both Parties.
9. Waiver
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9.1 No term or condition of this Agreement shall be deemed to have been
waived nor shall there be any estoppel against the enforcement of any provision
hereof, except by written instrument of the party charged with such waiver or
estoppel.
10. Governing Law
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10.1 This Agreement shall be construed in accordance with the laws of the
State of Maryland without giving effect to the principles of conflict of laws.
11. Construction
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11.1 In the event of a conflict between the terms of this Agreement, and
the terms of a franchise agreement executed by the Parties pursuant to this
Agreement, the terms of the franchise agreement shall control.
12. Headings
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12.1 The headings of the sections of this Agreement are for convenience
only and shall not affect the construction of this Agreement.
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13. Notices
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13.1 All notices and other communications hereunder shall be in writing
and shall be delivered by hand or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such other
addresses for a party as shall be specified by like notice) and shall be deemed
given on the date on which such notice is received:
To Choice:
Sunburst Hospitality Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
To Franchising:
Choice Hotels International, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
14. Assignment
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14.1 Neither Party shall sell, assign, pledge or otherwise transfer its
interest in this Agreement or any part thereof without the prior written consent
of the other Party, except to an entity succeeding to substantially all of the
business and operations of such Party. The transferring Party shall remain
liable for liabilities and obligations existing at the time of such transfer.
Subject to the foregoing, this Agreement shall bind and inure to the benefit of
the Parties' respective successors and permitted assigns.
15. Counterparts
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15.1 This Agreement may be executed in two counterparts, each of which
shall be deemed an original, but which together shall constitute one and the
same instrument.
16. No Joint Venture Or Agency
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16.1 This Agreement is not intended to create a joint venture, partnership
or any other similar arrangement between the Parties, and neither Party shall be
authorized to act as an agent of the other Party, except as expressly provided
herein. Notwithstanding the foregoing, each Party shall be free to designate
the other as its agent for appropriate purposes.
17. Severability
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17.1 If any provision of this Agreement shall to any extent be invalid or
unenforceable, the remainder of this Agreement shall not be affected thereby,
and each provision shall be valid and enforceable to the fullest extent
permitted by law.
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18. Entire Agreement
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18.1 This Agreement contains the entire Agreement between the Parties
hereto. There are no representations, inducements, promises, arrangements,
agreements or undertakings, oral or written, between the Parties other than
those set forth herein respecting the matters addressed in this Agreement. In
entering this Agreement, each of the Parties agrees that it did not rely on any
promises, representations or agreements not expressly contained herein.
19. Consent to Jurisdiction
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Subject to Section 7.1 hereof, the parties irrevocably submit to the
exclusive jurisdiction of (a) the Courts of the State of Maryland in ▇▇▇▇▇▇▇▇▇▇
County, and (b) the United States District Court for the State of Maryland for
the purposes of any suit, action or other proceeding arising out of this
Agreement. The parties hereby irrevocably designate, appoint and empower
Prentice Hall Corporation System, Inc. as its true and lawful agent and
attorney-in-fact in its name, place, and stead to receive on its behalf service
of process in any action, suit, or proceeding with respect to any matters as to
which it has submitted to jurisdiction as set forth in the immediately preceding
sentence.
IN WITNESS THEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
CHOICE HOTELS FRANCHISING, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
CHOICE HOTELS INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Vice President
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EXHIBIT A
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[LODGING BRAND NAME]/*/
FRANCHISE AGREEMENT
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THIS AGREEMENT is made in Silver Spring, Maryland, effective on the __
day of ________________, 199_, between Choice Hotels Franchising, Inc., a
Delaware corporation ("we" or "us"), and Sunburst Hospitality Corporation.
INTRODUCTION
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We own a system ("System") for providing lodging accommodations with a
high standard of service, courtesy and cleanliness which uses distinctive
identification, trademarks and service marks, standards, and specifications; and
Our System includes our advance reservation system and our business
referral and credit card arrangements; and
You want to use our System at your hotel on the terms and conditions in
this Agreement; and
Our System's value and success, and the success of your hotel, depends
in large part on your operating and maintaining your hotel in accordance with
the System.
AGREEMENT
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We and you agree:
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/*/ This form of agreement shall be conformed, in any particular case, in
accordance with the provisions of Schedule 1 pertaining to the applicable
brand.
A-1
I. DEFINITIONS.
A. "Hotel" is the property at PROPERTY ADDRESS ("Location") and
includes the building, land and all improvements, structures,
fixtures, amenities, equipment, furniture and related rights,
privileges and properties. The Hotel will be operated only under the
name [Lodging Brand Name].
B. "Rentable Rooms" means the total number of rentable sleeping rooms in
the Hotel. The Rentable Rooms for the Hotel is ROOM COUNT.
C. "Designated Representative" is your representative for matters about
this Agreement. Until you change the Designated Representative under
section 15 below, your Designated Representative is REP NAME whose
address is REP ADDRESS.
D. "Opening Date" is the date on which you begin to rent sleeping rooms
to the public at the Hotel under this Agreement.
E. "Gross Room Revenues" are revenues from the rental, sale, use or
occupancy of sleeping rooms and meeting rooms at the Hotel, including
cash and credit transactions, whether or not collected by you. Gross
Room Revenues does not include taxes required by law, revenues from
telephone calls, vending machines, room service or food and beverages
sales.
F. "Hotel Goods" are all furniture, fixtures, equipment, signs and
supplies used in the Hotel construction and operation.
G. "Marks" are the trademarks, trade names, service marks and logos
[_____________________________________________________________________
_______________________________], and the related logo, including
designs, stylized letters, and colors that we permit you to use at the
Hotel and in advertising for the Hotel.
A-2
H. "Manuals" are our published materials containing, among other things,
our standards, requirements and recommendations for constructing,.
equipping, furnishing, supplying, operating, maintaining and marketing
the Hotel.
I. Rules and Regulations" are our published materials containing, among
other things, our standards and requirements for constructing,
equipping, furnishing, supplying, operating, maintaining and marketing
the Hotel.
II. GRANT OF LICENSE. WE GRANT TO YOU A NON-EXCLUSIVE LICENSE TO USE THE SYSTEM
AND THE MARKS [________] AND [_____________] IN OPERATING THE HOTEL.
III. TERM. THE TERM OF THIS AGREEMENT ("TERM") IS FROM THE DATE THIS AGREEMENT
IS SIGNED BY BOTH PARTIES TO THE DATE [20] YEARS AFTER THE OPENING DATE.
IV. FEES AND REPORTS.
A. ROYALTY FEE. BEGINNING ON THE OPENING DATE, YOU WILL PAY US A ROYALTY
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FEE OF [__%] OF YOUR GROSS ROOM REVENUES EACH MONTH DURING THE TERM AS
SET FORTH IN EXHIBIT [__] ATTACHED HERETO.
B. MARKETING FEE. BEGINNING ON THE OPENING DATE, YOU WILL PAY US A
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MARKETING FEE OF [__%] OF YOUR GROSS ROOM REVENUES EACH MONTH DURING
THE TERM AS SET FORTH IN EXHIBIT [__] ATTACHED HERETO. [WE MAY
INCREASE THE MARKETING FEE FOR INCREASES IN INFLATION OR COSTS OF
ADVERTISING, PUBLICITY, PUBLIC RELATIONS, OR MARKETING SO LONG AS ANY
MARKETING FEE INCREASES APPLY TO ALL OR MOST OF THE U.S. HOTELS IN THE
SYSTEM UNLESS WE GET YOUR APPROVAL TO A GREATER AMOUNT.]
C. RESERVATION FEE. BEGINNING ON THE OPENING DATE, YOU WILL PAY US A
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RESERVATION FEE OF [__%] OF YOUR GROSS ROOM REVENUES EACH MONTH DURING
THE TERM AS SET FORTH IN EXHIBIT [__] ATTACHED HERETO. [WE MAY
INCREASE THE RESERVATION FEE FOR INCREASES IN INFLATION OR OTHER COSTS
SO LONG AS ANY RESERVATION FEE INCREASES APPLY TO ALL OR MOST OF THE
U.S. HOTELS IN THE SYSTEM UNLESS WE GET YOUR APPROVAL TO A GREATER
AMOUNT.]
A-3
D. PAYMENTS AND REPORTS. WITHIN 10 DAYS AFTER THE END OF EACH CALENDAR
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MONTH, YOU WILL SEND US A STATEMENT (IN A FORM THAT WE REQUIRE)
SHOWING THE HOTEL'S GROSS ROOM REVENUES, OCCUPANCY AND OTHER RELATED-
INFORMATION THAT WE REQUEST. YOU WILL CERTIFY THAT YOUR REPORTS ARE
TRUE AND ACCURATE. WE WILL ▇▇▇▇ YOU FOR AMOUNTS DUE ON OR ABOUT THE
15TH DAY OF EACH MONTH, AND YOU WILL PAY US THOSE AMOUNTS BY THE FIRST
DAY OF THE FOLLOWING MONTH. YOU WILL PARTICIPATE IN COMPUTERIZED
INFORMATION REPORTING PROGRAMS AND ELECTRONIC FUND PAYMENT PROGRAMS
THAT WE MAY ADOPT FOR USE BY HOTELS IN THE SYSTEM. YOU MAY NEED TO BUY
COMPUTER HARDWARE AND RELATED TELEPHONE SERVICES TO PARTICIPATE IN
SUCH PROGRAMS. IF YOU DO NOT TIMELY SEND US THE REQUIRED REPORTS:
1. WE WILL ESTIMATE YOUR GROSS ROOM REVENUES FOR INTERIM BILLING
PURPOSES; AND
2. YOU WILL BE IN BREACH OF THE AGREEMENT AND MUST PAY US A LATE
CHARGE OF 1.5% OF YOUR PREVIOUS MONTH'S ROYALTY FEE, BUT NOT LESS
THAN $50.
We will consider interim bills accurate until we receive your late
monthly reports.
A-4
E. ANNUAL REPORTS. IF WE REQUEST, YOU WILL SEND US A PROFIT AND LOSS
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STATEMENT FOR THE HOTEL FOR THE PRIOR FISCAL YEAR IN A FORM MEETING
OUR RULES AND REGULATIONS. YOU WILL CERTIFY THAT THIS ANNUAL STATEMENT
IS ACCURATE, COMPLETE AND TRUE.
F. KEEPING RECORDS. YOU WILL KEEP AT THE HOTEL OR, IF YOU NOTIFY US IN
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WRITING, YOUR PRINCIPAL PLACE OF BUSINESS, FOR AT LEAST 3 YEARS,
ACCURATE HOTEL ACCOUNTS, BOOKS, RECORDS AND DATA, INCLUDING
INFORMATION ON HOTEL ROOM RENTALS, GROSS ROOM REVENUES AND
PROFITABILITY ("HOTEL DATA"). YOU WILL ALLOW US TO EXAMINE, AUDIT, AND
COPY THE HOTEL DATA DURING YOUR NORMAL BUSINESS HOURS. IF WE REQUEST
IN WRITING, YOU WILL SEND US COPIES OF THE HOTEL DATA. IF WE FIND, BY
AN AUDIT OF THE HOTEL DATA, THAT YOU UNDERPAID ANY FEES DUE US UNDER
THIS AGREEMENT, YOU MUST PAY US ALL UNDERPAID AMOUNTS, PLUS INTEREST
AT THE RATE IN SECTION 4.G BELOW. IF YOU UNDERPAID US BY MORE THAN 5%
OF FEES PAYABLE DURING THE PERIOD OF THIS AUDIT, YOU MUST ALSO PAY THE
REASONABLE COSTS OF THE AUDIT.
G. INTEREST. YOU WILL PAY US INTEREST ON AMOUNTS NOT PAID ON TIME AT THE
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RATE OF 1.5% PER MONTH OR PORTION OF THAT MONTH, BUT NOT MORE THAN THE
MAXIMUM INTEREST RATE PERMITTED BY APPLICABLE LAWS.
V. OUR DUTIES. We will:
A. LOAN TO YOU ONE COPY OF THE CURRENT MANUALS AND OF THE RULES AND
REGULATIONS. THESE ARE OUR PROPERTY AND WE MAY CHANGE THEM
PERIODICALLY;
B. PROVIDE TO YOU AND UP TO TWO HOTEL EMPLOYEES AN INITIAL ORIENTATION
PROGRAM. YOU PAY THE COSTS OF TUITION, TRAVEL EXPENSES AND LIVING
EXPENSES FOR THIS PROGRAM;
C. PERIODICALLY INSPECT THE HOTEL, EVALUATE YOUR COMPLIANCE WITH THIS
AGREEMENT AND THE RULES AND REGULATIONS, AND ADVISE YOU ON CHANGES
NECESSARY TO BRING THE HOTEL INTO SYSTEM COMPLIANCE;
A-5
D. USE THE MARKETING FEE RECEIVED FROM YOU AND OTHER FRANCHISEES USING
THE SAME BRAND, FOR ADVERTISING, PROMOTION, PUBLICITY, MARKETING
RESEARCH, SYSTEM PROGRAMS AND RELATED ACTIVITIES. WE WILL PUBLISH AND
DISTRIBUTE TO THE TRAVELING PUBLIC A DIRECTORY OF ALL SYSTEM HOTELS IN
GOOD STANDING;
E. USE THE RESERVATION FEE RECEIVED FROM YOU AND OTHER FRANCHISEES USING
THE SAME BRAND, FOR ADVANCE RESERVATION SERVICES FOR YOUR HOTEL AND
OTHER HOTELS WHICH BELONG TO THE SYSTEM (AND, IF WE CHOOSE TO DO SO,
FOR OTHER HOTEL SYSTEMS THAT WE OR OUR AFFILIATES OPERATE); AND
F. MAINTAIN IN CONFIDENCE ALL INFORMATION YOU PROVIDE US ABOUT THE
HOTEL'S OPERATIONS AND PROFITABILITY.
VI. YOUR DUTIES. After the Opening Date, you will:
A. OPERATE THE HOTEL ACCORDING TO THE AGREEMENT AND THE RULES AND
REGULATIONS. YOU MUST KEEP CURRENT YOUR COPY OF THE MANUALS AND OF THE
RULES AND REGULATIONS AND COMPLY WITH ANY CHANGES THAT WE MAKE IN THE
RULES AND REGULATIONS. IF A DISPUTE ARISES, OUR COPY OF THE MANUALS OR
RULES AND REGULATIONS WILL CONTROL. YOU MAY NOT SHARE THE CONFIDENTIAL
INFORMATION IN THE MANUALS OR THE RULES AND REGULATIONS EXCEPT WITH
AUTHORIZED EMPLOYEES;
B. OPERATE THE HOTEL EXCLUSIVELY UNDER THE MARKS, AS NOTED IN SECTION 7
BELOW;
C. MAINTAIN THE HOTEL INTERIOR AND EXTERIOR, INCLUDING PARKING AREAS OR
FOOD AND BEVERAGE FACILITIES LOCATED AT THE LOCATION (WHETHER OPERATED
BY YOU OR BY A THIRD PARTY UNDER A LEASE OR OTHER AGREEMENT WITH YOU),
IN A CLEAN, SOUND, AND ATTRACTIVE CONDITION AND IN GOOD REPAIR AT ALL
TIMES, REPAIRING, CLEANING, REDECORATING, REPAINTING, AND REPLACING
OBSOLETE OR OUTDATED SIGNS, EQUIPMENT, FURNISHINGS, AND FIXTURES AND
TAKING CORRECTIVE ACTION NECESSARY TO COMPLY WITH THE RULES AND
REGULATIONS;
D. MAINTAIN AND ONLY USE HOTEL GOODS DESCRIBED IN THE RULES, AND
REGULATIONS AND WHICH MEET OUR SPECIFICATIONS;
A-6
E. USE IN THE HOTEL STATIONERY, BUSINESS CARDS, MARKETING MATERIALS,
ADVERTISING MATERIALS, PRINTED MATERIALS AND FORMS DESCRIBED IN THE
RULES AND REGULATIONS AND WHICH MEET OUR SPECIFICATIONS;
F. NOT PERMIT THE HOTEL TO BE USED FOR ANY PURPOSE OR ACTIVITY NOT
CONTEMPLATED IN THIS AGREEMENT WITHOUT OUR WRITTEN CONSENT;
G. SEND THE HOTEL GENERAL MANAGER(S), AT YOUR EXPENSE, TO OUR ORIENTATION
AND TRAINING PROGRAMS;
H. OBTAIN AND DISPLAY PROMINENTLY AT THE HOTEL, OUR APPROVED ILLUMINATED
EXTERIOR SIGNS. YOU MUST MAINTAIN THESE EXTERIOR SIGNS IN GOOD WORKING
ORDER AT ALL TIMES. IN DISPLAYING THE SIGNS, YOU ARE RESPONSIBLE FOR
COMPLYING WITH ALL APPLICABLE LAWS OR REGULATIONS;
I. OBTAIN, INSTALL AND MAINTAIN AT THE HOTEL OUR RECOMMENDED PROPERTY
MANAGEMENT SYSTEM;
J. ALLOW US TO ENTER THE HOTEL AT ANY REASONABLE TIME TO EVALUATE YOUR
COMPLIANCE WITH THIS AGREEMENT. DURING OUR EVALUATION, YOU WILL ASSIST
US OR OUR AGENT AND, SUBJECT TO AVAILABILITY, PROVIDE US WITH ONE FREE
HOTEL SLEEPING ROOM FOR ONE NIGHT;
K. SEND US PERIODICALLY YOUR HOTEL DESCRIPTION AND RATES THAT WE MAY
INCLUDE IN DIRECTORIES THAT WE MAY PUBLISH. IF YOU DO NOT SEND US
CHANGES BY THE DEADLINES WHICH ARE INDICATED, YOU WILL HONOR THE RATES
AND DESCRIPTIVE INFORMATION ON RECORD;
L. HONOR THE TERMS OF ANY DISCOUNT OR PROMOTIONAL PROGRAM THAT WE OFFER
TO-THE PUBLIC ON YOUR BEHALF, AND ANY ROOM RATE QUOTED TO ANY GUEST AT
THE TIME THE GUEST MAKES AN ADVANCE RESERVATION;
M. PAY REASONABLE TRAVEL AGENT COMMISSIONS AS REQUIRED BY THE RULES AND
REGULATIONS;
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N. USE YOUR BEST EFFORTS TO MAXIMIZE AND INCREASE HOTEL AND SYSTEM
BUSINESS. IF YOU ARE UNABLE TO ACCOMMODATE A POTENTIAL GUEST, YOU WILL
REFER THE GUEST TO OTHER SYSTEM HOTELS NEAR THE HOTEL. IF YOU REFER A
GUEST TO A NON-SYSTEM HOTEL WHERE NEARBY SYSTEM HOTELS HAVE SPACE
AVAILABLE, YOU MUST PAY US LIQUIDATED DAMAGES EQUAL TO THE AVERAGE
ROOM RATE (GROSS ROOM REVENUES DIVIDED BY THE NUMBER OF ROOMS RENTED)
FOR THE MONTH DURING WHICH THE VIOLATION OCCURRED;
O. PARTICIPATE IN OUR ADVANCE RESERVATION SYSTEM, MAKING RESERVATIONS AND
ACCEPTING RESERVATIONS USING REQUIRED EQUIPMENT, SOFTWARE AND
PROCEDURES;
P. NOT CHANGE THE HOTEL'S RENTABLE ROOMS BY MORE THAN 5% FROM THE
ORIGINAL RENTABLE ROOM COUNT IN SECTION L.B OF THIS AGREEMENT WITHOUT
RECEIVING OUR PRIOR WRITTEN CONSENT AND OBEYING OTHER RESTRICTIONS OF
THIS AGREEMENT, AND NOTIFY US IN WRITING AND OBEY OTHER RESTRICTIONS
IN THIS AGREEMENT IF YOU CHANGE THE RENTABLE ROOM COUNT BY 5% OR LESS
FROM THE NUMBER STATED IN SECTION L.B; AND
Q. ADVERTISE AND PROMOTE THE HOTEL IN A WAY THAT MEETS OUR STANDARDS AND
REQUIREMENTS.
VII. MARKS.
A. YOU WILL NOT CONTEST OUR RIGHTS TO THE CURRENT OR FUTURE SYSTEM AND
MARKS, OR OUR RIGHT TO GRANT TO OTHERS USE OF THE MARKS;
B. YOU MUST NOT INCLUDE THE MARKS OR ANY WORDS RESEMBLING THE MARKS IN
YOUR NAME OR THE NAME OF ANY OF YOUR AFFILIATES, WHETHER A
PARTNERSHIP, CORPORATION, JOINT VENTURE OR ANY OTHER TYPE OF BUSINESS
ORGANIZATION;
C. YOU UNDERSTAND THAT THE MARKS ARE AND WILL REMAIN OUR PROPERTY, AND
THAT YOUR USE OF THE MARKS INURES TO OUR BENEFIT. YOU WILL IMMEDIATELY
ASSIGN TO US ANY RIGHTS TO THE MARKS THAT YOU MAY GAIN THROUGH YOUR
USE OF THE MARKS;
D. IF YOU ARE REQUIRED BY LAW TO REGISTER THE MARKS, YOUR REGISTRATION
APPLICATION MUST SPECIFY THAT YOU USE THE MARKS:
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1. ONLY AT THE HOTEL AND IN ADVERTISING FOR THE HOTEL;
2. ONLY DURING THE TERM; AND
3. WITHOUT CLAIMING ANY PROPERTY RIGHT IN THE MARKS DURING
OR AFTER THE TERM.
E. YOU WILL NOT INTERFERE WITH OUR USE OR REGISTRATION OF THE MARKS, OR
WITH USE OF THE MARKS BY OTHER HOTELS;
F. YOU MUST PROMPTLY NOTIFY US OF ANY SUIT FILED OR DEMAND MADE AGAINST
YOU CHALLENGING THE VALIDITY OF ANY OF THE MARKS ("▇▇▇▇ CLAIM"). WE
AGREE TO PROTECT AND DEFEND YOU AGAINST A ▇▇▇▇ CLAIM, AND TO DEFEND
AND INDEMNIFY YOU AGAINST YOUR LOSS, COST OR EXPENSE RELATED TO THE
▇▇▇▇ CLAIM. YOU MAY NOT SETTLE OR COMPROMISE A ▇▇▇▇ CLAIM WITHOUT OUR
PRIOR WRITTEN CONSENT. WE MAY DEFEND, COMPROMISE OR SETTLE A ▇▇▇▇
CLAIM AT OUR EXPENSE, USING OUR ATTORNEYS, AND YOU MUST COOPERATE WITH
US WITH THE DEFENSE. WE ARE NOT OBLIGATED TO DEFEND OR INDEMNIFY YOU
IF THE ▇▇▇▇ CLAIM AROSE BECAUSE YOU USED THE MARKS IN VIOLATION OF
THIS AGREEMENT; AND
G. YOU HAVE NO RIGHT TO SUBLICENSE ANYONE ELSE TO USE THE MARKS OR THE
SYSTEM.
VIII. FUTURE ADDITIONS. You may not begin constructing additional sleeping rooms
or make substantial alterations to the Hotel without our prior written consent,
which we are under no obligation to give. In order to apply for our consent, you
must send us your construction plans and pay us an expansion fee for each
additional sleeping room equal to the per-room charge under new franchises for
this brand, but the expansion fee will be not less than $1,000. We will add the
additional sleeping rooms to the Rentable Rooms, and include revenues from the
additional sleeping rooms and any additional meeting rooms in calculating the
Gross Room Revenues for determining fees due under this Agreement.
IX. ASSIGNMENT.
A. OUR ASSIGNMENT. WE MAY ASSIGN ALL OR PART OF OUR RIGHTS OR
--------------
OBLIGATIONS UNDER THIS AGREEMENT TO ANY PERSON OR LEGAL ENTITY. WE
ARE NOT RELIEVED OF OUR OBLIGATIONS UNDER THIS AGREEMENT BY ASSIGNING
THE AGREEMENT.
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B. YOUR ASSIGNMENT. YOUR RIGHTS AND DUTIES UNDER THIS AGREEMENT ARE
---------------
PERSONAL TO YOU. WE GRANTED THIS AGREEMENT TO YOU IN RELIANCE ON YOUR
BUSINESS SKILL, FINANCIAL CAPACITY AND PERSONAL CHARACTER. YOU MAY NOT
SELL, ASSIGN, TRANSFER, OR OTHERWISE ENCUMBER ANY DIRECT OR INDIRECT
INTEREST THAT YOU HAVE IN THE HOTEL, IN YOU, OR IN ANY RIGHTS OR
OBLIGATIONS CREATED BY THIS AGREEMENT WITHOUT GIVING US AT LEAST 15
DAYS PRIOR WRITTEN NOTICE AND OBTAINING OUR PRIOR WRITTEN CONSENT. OUR
CONSENT WILL NOT BE REQUIRED FOR A MORTGAGE, FOR A COLLATERAL
ASSIGNMENT OF THE FRANCHISE AGREEMENT AS COLLATERAL FOR A MORTGAGE, OR
FOR THE SALE OR TRANSFER BY ANY PARTY OF SECURITIES IN A PUBLICLY-
TRADED CORPORATION OR ENTITY WHICH INDIVIDUALLY, OR IN THE AGGREGATE
WITH OTHER SALES OR TRANSFERS BY A PARTY, CONSTITUTE THE SALE OR
TRANSFER OF LESS THAN 5% OF THE OUTSTANDING CAPITAL STOCK OR OTHER
EQUITY INTERESTS IN THE CORPORATION OR ENTITY. IF YOU ASSIGN OR
TRANSFER THE HOTEL OR THIS AGREEMENT WITHOUT OUR WRITTEN CONSENT, YOU
BREACH THIS AGREEMENT AND WE MAY TERMINATE THIS AGREEMENT.
C. CONDITIONS FOR ASSIGNMENT: APPROVAL. IF YOU WISH TO TRANSFER YOUR
-----------------------------------
INTEREST IN THE HOTEL OR YOUR CONTROLLING INTEREST IN YOU, OR IN THIS
AGREEMENT, ALONE OR TOGETHER WITH OTHER PREVIOUS, SIMULTANEOUS, OR
PROPOSED TRANSFERS, YOU MUST FIRST:
1. SATISFY ALL OF YOUR ACCRUED MONETARY OBLIGATIONS AND ALL OTHER
OUTSTANDING OBLIGATIONS TO US;
2. CURE ANY DEFAULT OF THIS AGREEMENT (INCLUDING ANY AMENDMENTS) OR
OF ANY OTHER AGREEMENT BETWEEN YOU AND US;
3. EXECUTE A GENERAL RELEASE, IN A FORM THAT WE APPROVE, OF ANY AND
ALL CLAIMS AGAINST US AND OUR OFFICERS, DIRECTORS, SHAREHOLDERS,
AND EMPLOYEES; AND
4. ENSURE THAT THE SUCCESSOR:
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a. EXECUTES (AND, IF THE SUCCESSOR IS A CORPORATION OR
PARTNERSHIP, THE BENEFICIAL OWNERS OF A CONTROLLING INTEREST
IN THE SUCCESSOR AS WE REQUEST) THE THEN-CURRENT FORM OF
AGREEMENT, FOR A TERM ENDING ON THE EXPIRATION DATE OF THIS
AGREEMENT, WHICH WILL REPLACE AND MAY DIFFER FROM THIS
AGREEMENT, INCLUDING A HIGHER ROYALTY FEE;
b. [PAYS US THE THEN-CURRENT AFFILIATION FEE;]
c. DEMONSTRATES, TO OUR SATISFACTION, THAT THE SUCCESSOR MEETS
OUR STANDARDS, POSSESSES A GOOD BUSINESS REPUTATION AND
CREDIT RATING, AND HAS THE ABILITY, FINANCIAL RESOURCES, AND
CAPITAL TO SUCCESSFULLY OPERATE THE HOTEL;
d. AGREES IN WRITING TO UPGRADE THE HOTEL, AT SUCCESSOR'S
EXPENSE AND WITHIN A SPECIFIED TIME, TO CONFORM TO OUR THEN-
CURRENT STANDARDS AND SPECIFICATIONS;
e. ATTENDS, ALONG WITH THE SUCCESSOR'S GENERAL MANAGER OF THE
HOTEL, OUR THEN CURRENT ORIENTATION PROGRAM; AND
f. OWNS THE ENTIRE LEASEHOLD OR FEE INTEREST IN THE HOTEL.
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D. TRANSFER ON DEATH OR MENTAL INCOMPETENCE. IF YOU OR ANY NATURAL
----------------------------------------
PERSON IN YOUR ENTITY DIES OR BECOMES MENTALLY INCOMPETENT, THE
EXECUTOR, ADMINISTRATOR, OR PERSONAL REPRESENTATIVE OF THAT
PERSON MUST TRANSFER THAT PERSON'S HOTEL INTEREST (WITHIN 6
MONTHS AFTER DEATH OR MENTAL INCOMPETENCE) TO ONE OR MORE OF THE
REMAINING PERSONS IN YOUR ENTITY (IF APPLICABLE) OR TO YOUR HEIRS
THAT WE APPROVE. THIS TRANSFER AND TRANSFERS BY DEVISE OR
INHERITANCE ARE SUBJECT TO THE SAME CONDITIONS APPLICABLE TO
OTHER TRANSFERS. IN TRANSFERRING BY DEVISE OR INHERITANCE,
HOWEVER, THE REPRESENTATIVE OR EXECUTOR MUST DISPOSE (WITHIN A
REASONABLE TIME) OF THE INTEREST, SUBJECT TO THE TERMS OF THIS
AGREEMENT, IF THE HEIRS OR BENEFICIARIES ARE UNABLE TO MEET THE
CONDITIONS OF THIS AGREEMENT. EXCEPT AS OTHERWISE PROVIDED IN
THIS AGREEMENT, WE MAY TERMINATE THIS AGREEMENT IF THE INTEREST
IS NOT DISPOSED OF WITHIN 6 MONTHS OF DEATH OR MENTAL
INCOMPETENCE.
E. NON-WAIVER OF CLAIMS. IF WE CONSENT TO YOUR TRANSFER OF ANY
--------------------
INTEREST GRANTED UNDER THIS AGREEMENT, WE DO NOT:
1. WAIVE CLAIMS THAT WE MAY HAVE AGAINST YOU, INCLUDING CLAIMS
FOR INDEMNIFICATION; OR
2. WAIVE OUR RIGHT TO DEMAND THAT YOU OR SUCCESSOR COMPLY WITH
ANY SECTION OF THIS AGREEMENT OR WITH ANY SUBSEQUENT
TRANSFER.
F. CONTROLLING INTEREST. FOR PURPOSES OF THIS AGREEMENT,
--------------------
"CONTROLLING INTEREST" INCLUDES ANY GENERAL PARTNER'S INTEREST IN
A PARTNERSHIP ENTITY, THE OWNER(S) OF 50% OR MORE OF THE VOTING
STOCK OF A CORPORATE ENTITY, AND THE OWNER(S) OF 50% OR MORE OF
THE MEMBER'S INTERESTS IN A LIMITED LIABILITY COMPANY.
X. DEFAULT AND TERMINATION.
A. TERMINATION BY YOU. IF WE DEFAULT IN OUR MATERIAL OBLIGATIONS
------------------
UNDER THIS AGREEMENT, YOU MAY TERMINATE THIS AGREEMENT ONLY IF WE
DO NOT CURE THOSE DEFAULTS WITHIN 30 DAYS FROM RECEIVING YOUR
WRITTEN NOTICE.
B. TERMINATION BY US.
-----------------
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1. TERMINATION WITH NOTICE. WE MAY TERMINATE THIS AGREEMENT,
-----------------------
EFFECTIVE ON THE DATE SPECIFIED IN OUR NOTICE (OR THE EARLIEST
DATE PERMITTED BY LAW), IF YOU:
a. DO NOT SEND US CONSTRUCTION PROGRESS REPORTS WHEN DUE OR
WITHIN 10 DAYS OF OUR NOTICE OF DEFAULT TO YOU;
b. DO NOT PAY US FEES OR OTHER AMOUNTS DUE UNDER THIS
AGREEMENT WHEN DUE OR WITHIN 10 DAYS OF OUR NOTICE OF
DEFAULT TO YOU;
c. DO NOT BEGIN CONSTRUCTION OF THE HOTEL ON TIME OR, ONCE
BEGUN, DO NOT CONTINUE WITHOUT INTERRUPTIONS THE
CONSTRUCTION OF THE HOTEL OR RENOVATIONS TO THE HOTEL;
d. DO NOT SEND US MONTHLY REPORTS WHEN DUE OR WITHIN 10 DAYS OF
OUR NOTICE OF DEFAULT TO YOU;
e. DO NOT CURE FULLY ANY OTHER BREACH OF YOUR OBLIGATIONS OR
WARRANTIES UNDER THIS AGREEMENT WITHIN 30 DAYS OF OUR NOTICE
OF DEFAULT TO YOU;
f. MATERIALLY BREACH ANY OTHER AGREEMENT WITH US OR OUR
AFFILIATES, OR ANY MORTGAGE, DEED OF TRUST OR LEASE COVERING
THE HOTEL, UNLESS CURED WITHIN ANY APPLICABLE NOTICE OR
GRACE PERIODS CONTAINED IN THOSE DOCUMENTS; OR
g. RECEIVE 2 OR MORE NOTICES OF DEFAULT UNDER THIS AGREEMENT
FOR THE SAME OR A SIMILAR CAUSE OR REASON IN ANY CONSECUTIVE
12 MONTH PERIOD, WHETHER OR NOT CURED.
If the validity of the termination of this Agreement is disputed,
either party may introduce evidence of a breach of this Agreement or evidence of
any claim associated with the Hotel, including any facilities that are managed
by others at the Hotel, even if not contained in the default notice.
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2. IMMEDIATE TERMINATION EFFECTIVE ON NOTICE. WE MAY TERMINATE THIS
-----------------------------------------
AGREEMENT IMMEDIATELY, WITHOUT GIVING YOU AN OPPORTUNITY TO CURE
THE DEFAULT, IF:
a. YOU STOP INDEFINITELY CONSTRUCTION OF THE HOTEL;
b. THERE IS AN IMMINENT THREAT OR DANGER TO PUBLIC HEALTH OR
SAFETY RESULTING FROM HOTEL CONSTRUCTION, MAINTENANCE, OR
OPERATION;
c. YOU STOP OPERATING THE HOTEL AS PART OF THE SYSTEM, YOU
ABANDON THE HOTEL OR THE LOCATION, YOU LOSE THE RIGHT TO
POSSESS THE HOTEL, OR YOU FORFEIT THE RIGHT TO DO OR
TRANSACT BUSINESS IN THE JURISDICTION IN WHICH THE HOTEL IS
LOCATED;
d. YOU (OR A BENEFICIAL OWNER OF YOU) ARE CONVICTED OF A
FELONY, A FRAUD, A CRIME INVOLVING MORAL TURPITUDE OR ANY
OTHER CRIME OR OFFENSE THAT WE BELIEVE IS LIKELY TO HAVE AN
ADVERSE EFFECT ON THE SYSTEM, THE MARKS, OUR GOODWILL, OR
OUR INTEREST IN THIS AGREEMENT;
e. YOU (OR A BENEFICIAL OWNER OF YOU) TRANSFER OR PURPORTS TO
TRANSFER ANY RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT OR
ANY CONTROLLING INTEREST IN YOU WITHOUT OUR PRIOR WRITTEN
CONSENT;
f. YOU KNOWINGLY MAINTAIN FALSE BOOKS OR RECORDS, SEND US FALSE
REPORTS, OR MAKE ANY MATERIALLY FALSE STATEMENT IN YOUR
FRANCHISE APPLICATION;
g. YOU DO NOT OPEN THE HOTEL TO THE PUBLIC AS PART OF THE
SYSTEM;
h. YOU DO NOT BUY, MAINTAIN OR SEND US EVIDENCE OF INSURANCE
REQUIRED IN THIS AGREEMENT; OR
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i. YOU BECOME INSOLVENT OR MAKE A GENERAL ASSIGNMENT FOR THE
BENEFIT OF CREDITORS; YOU FILE A PETITION IN BANKRUPTCY OR A
PETITION IS FILED AGAINST YOU AND YOU DO NOT OPPOSE IT; YOU
ARE JUDGED BANKRUPT OR INSOLVENT; YOU FILE OR CONSENT TO A
▇▇▇▇ IN EQUITY OR OTHER PROCEEDING FOR THE APPOINTMENT OF A
RECEIVER OR OTHER CUSTODIAN FOR YOUR BUSINESS OR ASSETS; A
RECEIVER OR OTHER CUSTODIAN (PERMANENT OR TEMPORARY) OF YOUR
ASSETS OR PROPERTY IS APPOINTED BY ANY COURT OF COMPETENT
JURISDICTION; A FINAL JUDGMENT REMAINS UNSATISFIED OR OF
RECORD FOR 30 DAYS OR LONGER (UNLESS A SUPERSEDEAS BOND IS
FILED); OR THE HOTEL REAL OR PERSONAL PROPERTY WILL BE SOLD
AFTER LEVY BY ANY SHERIFF, MARSHAL, OR CONSTABLE.
C. SUSPENSION OF FRANCHISE RIGHTS. WHEN YOU BREACH YOUR
------------------------------
MATERIAL OBLIGATIONS REQUIRED BY THIS AGREEMENT, WE MAY, WITHIN 10
DAYS OF OUR WRITTEN NOTICE (OR LONGER TIME REQUIRED BY LAW):
1. SUSPEND ANY OR ALL SERVICES TO YOU, OR
2. SUSPEND YOUR RIGHT TO USE THE MARKS.
We will reinstate this Agreement, the suspended services or the right
to use the Marks if you cure your default before the Agreement terminates and if
we determine that reinstatement would not cause a substantial loss of goodwill.
If we suspend services or your right to use the Marks, we may use other
remedies, including termination of this Agreement after the appropriate time to
cure has lapsed.
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D. OUR REMEDIES.
------------
1. WHENEVER THIS AGREEMENT IS TERMINATED, WE WILL REMOVE THE HOTEL
FROM DIRECTORIES AND ADVERTISING AND DISCONNECT THE HOTEL FROM
THE ADVANCE RESERVATIONS SYSTEM.
2. IF WE TERMINATE THIS AGREEMENT BEFORE THE OPENING DATE DUE TO
YOUR DEFAULT, YOU WILL PAY US, AS LIQUIDATED DAMAGES FOR THE
PREMATURE TERMINATION AND NOT AS A PENALTY, THE PRODUCT OF THE
RENTABLE ROOMS MULTIPLIED BY $3,000.
3. IF WE TERMINATE THIS AGREEMENT ON OR AFTER THE OPENING
DATE DUE TO YOUR DEFAULT, YOU WILL PAY US, WITHIN 30 DAYS AFTER
TERMINATION, AS LIQUIDATED DAMAGES AND NOT AS A PENALTY, THE
PRODUCT OF:
(1) THE AVERAGE MONTHLY GROSS ROOM REVENUES DURING THE
PRIOR 12 FULL CALENDAR MONTHS (OR THE SHORTER TIME
THAT THE HOTEL HAS BEEN IN THE SYSTEM), MULTIPLIED BY
(2) THE ROYALTY FEE PAYABLE IN THE REMAINING MONTHS,
MULTIPLIED BY
(3) THE NUMBER OF MONTHS UNTIL THE NEXT DATE ON WHICH YOU
COULD HAVE TERMINATED THIS AGREEMENT WITHOUT A
PENALTY ("REMAINING MONTHS"), NOT TO EXCEED 60
MONTHS.
However, the product of (i) multiplied by (ii) will not be less than
the product of $40.00 multiplied by the Rentable Rooms. We may also seek
equitable relief to collect amounts accrued before termination, or to enforce
survival of indemnification by you. You understand that the injury to us caused
by your breach is difficult or impossible to accurately estimate, and that the
above method of computation of liquidated damages constitutes a reasonable
estimate of our probable loss from your breach.
You will also pay us any applicable taxes assessed on the payment of
liquidated damages.
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XI. OBLIGATIONS ON TERMINATION. On termination of this Agreement for any
reason, you must, at your expense:
A. IMMEDIATELY DISCONTINUE ANY AND ALL USE OF THE MARKS, OR ANY WORD
OR ▇▇▇▇ SIMILAR TO THE MARKS, AND REFRAIN FROM IDENTIFYING THE
HOTEL AS A [LODGING BRAND NAME] HOTEL OR A FORMER [LODGING BRAND
NAME] HOTEL. IF YOU DO NOT DISCONTINUE USE OF THE MARKS, WE WILL
SEEK INJUNCTIVE AND EQUITABLE RELIEF FOR YOUR INFRINGEMENT. YOU
AGREE THAT YOU WILL WAIVE, TO THE MAXIMUM EXTENT, ANY BOND REQUIRED
WITH THE ISSUANCE OF ANY INJUNCTION, AND THAT IF A BOND IS
REQUIRED, IT WILL NOT EXCEED $1,000;
B. CANCEL ANY ASSUMED NAME OR SIMILAR REGISTRATION CONTAINING THE
MARKS OR ANY VARIATION OR PORTION OF THE MARKS, AND FURNISH US WITH
EVIDENCE SHOWING THAT YOU COMPLIED WITH THIS OBLIGATION WITHIN 30
DAYS AFTER TERMINATION OR EXPIRATION OF THE AGREEMENT;
C. PROMPTLY PAY ALL SUMS OWING TO US AND OUR SUBSIDIARIES OR
AFFILIATES, AND ALL DAMAGES, COSTS, AND EXPENSES, INCLUDING
REASONABLE ATTORNEY'S FEES, THAT WE INCUR AS A RESULT OF YOUR
DEFAULT, INCLUDING OUTSTANDING ROYALTY FEES, MARKETING FEES,
RESERVATIONS FEES AND ANY LIQUIDATED DAMAGES DUE UNDER THIS
AGREEMENT;
D. PAY US ALL DAMAGES, COSTS AND EXPENSES, INCLUDING REASONABLE
ATTORNEYS' FEES, THAT WE INCUR AFTER THE TERMINATION OR EXPIRATION
OF THE TERM IN OBTAINING INJUNCTIVE OR OTHER RELIEF FOR THE
ENFORCEMENT OF ANY SECTION OF THIS AGREEMENT;
E. IMMEDIATELY SEND US ALL ORIGINALS AND COPIES OF MANUALS, THE RULES
AND REGULATIONS, RECORDS, FILES, INSTRUCTIONS, CORRESPONDENCE AND
ALL OTHER MATERIALS THAT WE PROVIDED TO YOU. EXCEPT FOR YOUR COPY
OF THIS AGREEMENT AND OTHER DOCUMENTS WHICH YOU REASONABLY NEED TO
COMPLY WITH THE LAW, YOU MAY NOT RETAIN ANY MATERIAL THAT WE GAVE
YOU DURING THE TERM; AND
F. THE OBLIGATIONS IN THIS SECTION WILL SURVIVE THE TERMINATION OF
THIS AGREEMENT.
XII. INSURANCE.
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A. BEGINNING ON THE OPENING DATE AND FOR THE REST OF THE TERM, YOU
MUST PURCHASE AND MAINTAIN, AT YOUR EXPENSE, THE FOLLOWING
INSURANCE COVERAGES:
1. ALL-RISK PHYSICAL DAMAGE COVERAGE, INSURING THE HOTEL FOR AN
AMOUNT NOT LESS THAN 80% OF ITS REPLACEMENT COST, AND FULL
COVERAGE FOR 12 MONTHS OF BUSINESS INTERRUPTION. IF THE HOTEL
IS DAMAGED OR DESTROYED, UNLESS A MORTGAGEE REQUIRES
OTHERWISE, THE PROCEEDS OF ANY INSURANCE WILL BE USED TO
REPAIR OR RESTORE THE HOTEL IN ACCORDANCE WITH YOUR PLANS THAT
WE APPROVE. YOUR INSURANCE MUST CONTAIN A WAIVER OF
SUBROGATION IN OUR FAVOR AND THE FAVOR OF THE ADDITIONAL
INSUREDS;
2. COMMERCIAL AUTOMOBILE AND COMPREHENSIVE GENERAL LIABILITY
INSURANCE POLICIES WRITTEN ON AN OCCURRENCE FORM PROTECTING
YOU AS THE NAMED INSURED AND NAMING US AND OUR AFFILIATES AND
SUBSIDIARIES THEIR RESPECTIVE OFFICERS, DIRECTORS, AGENTS AND
EMPLOYEES ("ADDITIONAL INSUREDS") AS ADDITIONAL INSUREDS FROM
AND AGAINST ALL TYPES OF LIABILITIES, INCLUDING PERSONAL
INJURY AND PROPERTY DAMAGE OF ANY NATURE, TOGETHER WITH THE
COSTS AND EXPENSES OF THE DEFENSE AND/OR ADJUSTMENT OF INJURY
OR DAMAGE, WITHOUT EXCEPTION, FROM OR IN ANY WAY RELATED TO
ANY OPERATION OR ACTIVITY CONDUCTED UNDER THIS AGREEMENT
AND/OR OF THE HOTEL, INCLUDING ADJACENT AREAS LIKE PARKING
LOTS, RESTAURANTS, BARS. YOUR AUTOMOBILE LIABILITY POLICY MUST
COVER OWNED, HIRED AND NON-OWNED VEHICLES. THE POLICIES
DESCRIBED IN THIS SECTION AND SECTION 12.A. 1 MUST APPLY TO
LAWSUITS OR ACTIONS BROUGHT ANYWHERE IN THE WORLD. THESE
POLICIES MUST PROVIDE LIMITS PER LOCATION OF NOT LESS THAN
$5,000,000 ($10,000,000 IF THE HOTEL HAS 6 OR MORE STORIES)
PER OCCURRENCE AND MUST BE ACCOMPANIED BY WAIVER OF
SUBROGATION. YOU MAY MEET THE REQUIRED TOTAL MINIMUM LIMITS
THROUGH A COMBINATION OF PRIMARY AND UMBRELLA POLICIES;
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3. COMPREHENSIVE GENERAL LIABILITY WRITTEN ON AN OCCURRENCE FORM
WHICH IS PRIMARY TO ANY COVERAGE THAT WE MAINTAIN AND WHICH
INCLUDES, WITHOUT LIMITATION, BROAD FORM CONTRACTUAL, PRODUCTS
AND COMPLETED OPERATIONS, INDEPENDENT CONTRACTORS, PERSONAL
INJURY, BROAD FORM PROPERTY DAMAGE, EXTENDED BODILY INJURY AND
HOST LIQUOR LIABILITY. IN ADDITION, IF ALCOHOLIC BEVERAGES ARE
SOLD AT THE HOTEL, YOU MUST PURCHASE AND MAINTAIN DRAM
SHOP/LIQUOR LIABILITY INSURANCE WITH LIMITS OF NOT LESS THAN
$5,000,000 PER OCCURRENCE; AND
4. STATUTORY WORKERS COMPENSATION AND EMPLOYERS LIABILITY
INSURANCE WITH MINIMUM EMPLOYERS LIABILITY LIMITS OF $100,000
BY ACCIDENT AND $100,000 BY DISEASE;
B. WE MAY CHANGE THE ABOVE INSURANCE COVERAGE REQUIREMENTS DURING THE
TERM BY GIVING YOU AT LEAST 30 DAYS NOTICE OF THE CHANGE. YOU MUST
COMPLY WITH OUR DIRECTIONS, AT YOUR EXPENSE, AND DELIVER US
EVIDENCE OF YOUR COMPLIANCE WITHIN 30 DAYS OF OUR NOTICE OF THE
CHANGE;
C. YOU MUST PLACE YOUR INSURANCE WITH AN INSURANCE COMPANY OR
COMPANIES REASONABLY ACCEPTABLE TO US. ALL INSURANCE REQUIRED WILL
BE SPECIFICALLY ENDORSED TO PROVIDE THAT THE COVERAGE WILL BE
PRIMARY AND THAT ANY INSURANCE CARRIED BY ADDITIONAL INSUREDS WILL
BE EXCESS AND NON-CONTRIBUTORY. IF WE REQUEST, YOU WILL SEND US
COMPLETE COPIES OF ALL OR ANY INSURANCE POLICIES;
D. YOU MUST SEND US, AT LEAST 10 DAYS BEFORE THE OPENING DATE (OR THE
CONSTRUCTION START IF APPLICABLE), CERTIFICATES OF INSURANCE
INDICATING YOUR UNIT NUMBER, THE HOTEL NAME AND ADDRESS, THE
ADDITIONAL INSUREDS, AND EVIDENCE THAT THE INSURANCE PREMIUMS HAVE
BEEN PAID. YOU MUST ALSO PROVIDE US WITH EVIDENCE OF RENEWAL BEFORE
THE EXPIRATION DATE OF INSURANCE. EACH POLICY AND CERTIFICATE OF
INSURANCE MUST INCLUDE A STATEMENT BY THE INSURER THAT THE POLICY
WILL NOT BE CANCELLED, REDUCED IN COVERAGE, OR OTHERWISE ALTERED
WITHOUT 30 DAYS ADVANCE WRITTEN NOTICE TO US;
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E. IF YOU DO NOT COMPLY WITH THIS SECTION, WE MAY, WITHOUT NOTICE, IN
ADDITION TO OTHER RIGHTS AND REMEDIES WHICH WE MAY HAVE,
IMMEDIATELY TERMINATE THIS AGREEMENT; AND
F. YOUR PURCHASE AND MAINTENANCE OF INSURANCE AND YOUR PERFORMANCE OF
YOUR OBLIGATIONS UNDER THIS AGREEMENT WILL NOT RELIEVE YOU OF YOUR
OBLIGATION TO INDEMNIFY US. WE DO NOT REPRESENT THAT THE ABOVE
INSURANCE COVERAGE WILL INSURE YOU AGAINST ANY OR ALL INSURABLE
RISKS FROM OR WITH THE HOTEL.
XIII. INDEMNIFICATION. You must defend, indemnify and hold harmless us, our
affiliates and subsidiaries, their respective officers, directors, agents and
employees from any loss, cost, damage, expense and liability, including
reasonable attorneys' fees and any court costs, by reason of damage or loss,
including personal injury, of any nature, from or connected with the Hotel
construction, or operation, or any facilities that are managed by others in the
Hotel, or out of, or as a result of, your (or your agent's or employee's) error,
omission, act or failure, even where our own negligence is alleged, except where
the loss, costs, damage, expense or liability is proximately caused by the gross
negligence of us or our officers, directors, agents or employees. You must
reimburse us for any amounts we reasonably spend, including attorneys' fees and
court costs, to protect us or our affiliates and subsidiaries, or our officers,
directors, agents and employees of each, from or to remedy, your defaults under
this Agreement or claims arising out of your operation of the hotel.
XIV. CASUALTY. If the Hotel is damaged by fire or other casualty, you must
promptly repair the damage. If the damage or repair requires closing the Hotel,
you must immediately notify us, begin reconstruction within 4 months after
closing and in accordance with the Rules and Regulations, and reopen the Hotel
for continuous business operations as soon as practicable (but in any event
within 12 months after the Hotel closing), sending us at least 30 days prior
written notice of the date of reopening. We will extend the Term of the
Franchise Agreement by the number of days between the date of closing and the
date of reopening. If your insurance proceeds are not available to repair or
rebuild the Hotel and if you notify us within 4 months after closing, we will
terminate this Agreement without penalty to either party.
XV. NOTICES. All notices required or permitted under this Agreement must be
in writing and, until a different address has been designated by written notice
to the other party, must be personally delivered or mailed by registered or
certified mail, return receipt requested, or by a nationally recognized courier
service, to us at CHOICE HOTELS FRANCHISING, INC., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ATTENTION GENERAL COUNSEL, and to you at the Designated
Representative's address above. The Designated Representative is authorized to
receive our written notices to you. Any notice by registered or certified mail
or by courier service is deemed given and received at the date and time of
mailing. You may change the Designated Representative by written notice to us.
XVI. BUSINESS RELATIONSHIP.
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A. YOU AGREE THAT:
1. THIS AGREEMENT DOES NOT CREATE A FIDUCIARY RELATIONSHIP BETWEEN
YOU AND US;
2. YOU ARE AN INDEPENDENT CONTRACTOR. NOTHING IN THIS AGREEMENT IS
INTENDED TO MAKE EITHER PARTY AN AGENT, LEGAL REPRESENTATIVE,
SUBSIDIARY, JOINT VENTURER, PARTNER, EMPLOYEE, INDEPENDENT
CONTRACTOR OR SERVANT OF THE OTHER (EXCEPT THAT WE ARE ACTING
AS YOUR AGENT WHEN MAKING RESERVATIONS FOR YOUR HOTEL);
3. YOU ARE NOT AUTHORIZED TO MAKE ANY CONTRACT, AGREEMENT,
WARRANTY, OR REPRESENTATION ON OUR BEHALF, OR TO INCUR ANY DEBT
OR OTHER OBLIGATION IN OUR NAME; AND
4. YOU WILL NOT REPRESENT IN ANY PROPOSED FINANCING AGREEMENT OR
TO ANY PROPOSED LENDER OR PARTICIPANT IN A PUBLIC OR PRIVATE
INVESTMENT OFFERING THAT WE OR ANY OF OUR AFFILIATES IS, OR
WILL BECOME, RESPONSIBLE FOR YOUR OBLIGATION UNDER THE
FINANCING AGREEMENT, NOR THAT WE ARE, OR WILL BE, PARTICIPATING
IN A PRIVATE OR PUBLIC INVESTMENT OFFERING. BEFORE YOU
DISTRIBUTE A PROSPECTUS OF YOUR INTENDED PRIVATE OR PUBLIC
OFFERING, YOU MUST SEND US A COPY FOR OUR PRIOR WRITTEN
APPROVAL, NOT TO BE UNREASONABLY WITHHELD.
B. DURING THE TERM OF THIS AGREEMENT, YOU WILL HOLD YOURSELF OUT TO
THE PUBLIC AS AN INDEPENDENT CONTRACTOR CONSTRUCTING AND OPERATING
THE HOTEL UNDER AN AGREEMENT WITH US. YOU MAY NOT USE ALL OR A
PORTION OF THE MARKS IN YOUR CORPORATE OR PARTNERSHIP NAME.
C. NEITHER PARTY ASSUMES LIABILITY FOR, OR WILL BE DEEMED LIABLE AS A
RESULT OF ACTION OR OMISSION OF THE OTHER PARTY, OR ANY CLAIM OR
JUDGMENT ARISING FROM SUCH CONTRACT, AGREEMENT, WARRANTY OR
REPRESENTATION.
XVII. ATTORNEYS' FEES. The prevailing party in any action filed to enforce the
terms and conditions of this Agreement (as determined by the Court or
arbitrator) shall recover from the other party reasonable attorneys' fees and
court costs.
XVIII. TAXES, PERMIT; COMPLIANCE WITH LAWS; NOTICE OF LEGAL ACTIONS.
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A. YOU MUST PAY WHEN DUE ALL TAXES RELATED TO THE HOTEL WHICH MAY BE
LEVIED OR ASSESSED BY ANY FEDERAL, STATE, OR LOCAL TAX AUTHORITY,
AND ANY AND ALL OTHER INDEBTEDNESS RELATED TO THE HOTEL. YOU MUST
PAY SALES TAX, GROSS RECEIPTS TAX, OR SIMILAR TAX IMPOSED ON US
(BUT NOT INCLUDING OUR INCOME TAXES) ON ANY PAYMENTS THAT YOU MUST
MAKE TO US UNDER THIS AGREEMENT.
B. IF THERE IS A BONA FIDE DISPUTE AS TO LIABILITY FOR TAXES ASSESSED
OR OTHER INDEBTEDNESS, YOU MAY CONTEST THE VALIDITY OR THE AMOUNT
OF THE TAX OR INDEBTEDNESS UNDER THE PROCEDURES OF THE TAXING
AUTHORITY OR APPLICABLE LAW. YOU MAY NOT PERMIT A TAX SALE OR
SEIZURE BY LEVY OF EXECUTION OR SIMILAR WRIT OR WARRANT, OR
ATTACHMENT BY A CREDITOR TO OCCUR AGAINST THE HOTEL OR THE
LOCATION.
C. YOU MUST COMPLY WITH ALL FEDERAL, STATE, AND LOCAL LAWS, RULES AND
REGULATIONS APPLICABLE TO YOU AND TO THE HOTEL. YOU MUST TIMELY
OBTAIN ANY AND ALL PERMITS, CERTIFICATES, OR LICENSES NECESSARY FOR
THE HOTEL, INCLUDING LICENSES TO DO BUSINESS, FICTITIOUS NAME
REGISTRATION AND SALES TAX PERMITS, HEALTH AND SANITATION PERMITS,
AND RATINGS AND FIRE CLEARANCES. YOU MUST SEND US, WITHIN 10 DAYS
OF RECEIPT, COPIES OF ALL SUBSEQUENT INSPECTION REPORTS, WARNINGS,
CERTIFICATES, AND RATINGS, RECEIVED FROM ANY GOVERNMENTAL ENTITY.
D. YOU MUST NOTIFY US IN WRITING, WITHIN 5 DAYS OF RECEIPT,
INFORMATION ABOUT ANY ACTION, SUIT, PROCEEDING, OR THE ISSUANCE OF
ANY ORDER, WRIT, INJUNCTION, AWARD, OR DECREE OF ANY COURT, AGENCY,
OR OTHER GOVERNMENTAL INSTRUMENTALITY, WHICH MAY ADVERSELY AFFECT
THE OPERATION OF THE HOTEL OR YOUR FINANCIAL CONDITION.
XIX. APPROVALS AND WAIVERS.
A. OUR APPROVALS AND CONSENTS WILL NOT BE EFFECTIVE UNLESS SIGNED BY
ONE OF OUR OFFICERS. WE MAY WITHHOLD OUR CONSENT IF YOU ARE IN
BREACH OF A MATERIAL OBLIGATION UNDER THIS AGREEMENT.
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B. EXCEPT AS OTHERWISE STATED IN WRITING IN THIS AGREEMENT (INCLUDING
ANY AMENDMENTS), WE MAKE NO WARRANTIES OR GUARANTEES ON WHICH YOU
MAY RELY. WE ASSUME NO LIABILITY OR OBLIGATION TO YOU BY PROVIDING
ANY WAIVER, APPROVAL, CONSENT, OR SUGGESTION TO YOU WITH THIS
AGREEMENT, OR BY REASON OF ANY DELAY OR DENIAL OF ANY REQUEST.
C. FAILURE TO EXERCISE ANY POWER OR TO INSIST ON STRICT COMPLIANCE
WITH ANY OBLIGATION OR CONDITION UNDER THIS AGREEMENT DOES NOT
CONSTITUTE A WAIVER OF ANY FUTURE RIGHT TO DEMAND EXACT COMPLIANCE
WITH ANY OF THE TERMS IN THIS AGREEMENT. WAIVER OF ANY PARTICULAR
DEFAULT WILL NOT AFFECT OR IMPAIR A PARTY'S RIGHT WITH RESPECT TO
ANY SUBSEQUENT DEFAULT OF THE SAME, SIMILAR, OR DIFFERENT NATURE.
NO DELAY, FORBEARANCE, OR OMISSION TO EXERCISE ANY POWER OR RIGHT
FROM ANY BREACH OR DEFAULT OF ANY OF THE TERMS, SECTIONS, OR
COVENANTS HEREOF, WILL AFFECT OR IMPAIR A PARTY'S RIGHT TO EXERCISE
THE SAME.
XX. SEVERABILITY AND CONSTRUCTION.
A. IF ANY SECTION OF THE AGREEMENT IS HELD TO BE ILLEGAL, INVALID, OR
UNENFORCEABLE, BOTH PARTIES AGREE THAT:
1. THE SECTION WILL BE REMOVED;
2. THIS AGREEMENT WILL BE UNDERSTOOD AND ENFORCED AS IF THE
ILLEGAL, INVALID, OR UNENFORCEABLE SECTION HAD NEVER BEEN IN
THIS AGREEMENT; AND
3. THE REMAINING SECTIONS WILL REMAIN IN FULL FORCE AND EFFECT
AND WILL NOT BE AFFECTED BY THE ILLEGAL, INVALID, OR
UNENFORCEABLE SECTION OR BY ITS REMOVAL. A SIMILAR SECTION TO
THE REMOVED SECTION, TO THE MAXIMUM EXTENT ENFORCEABLE, WILL
BE AUTOMATICALLY ADDED AS A PART OF THIS AGREEMENT.
B. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NOTHING
IN THIS AGREEMENT IS INTENDED, NOR WILL ANYTHING IN THIS AGREEMENT
BE DEEMED, TO CONFER ON ANY PERSON OR LEGAL ENTITY OTHER THAN US OR
YOU, OR OUR RESPECTIVE SUCCESSORS AND ASSIGNS, ANY RIGHTS OR
REMEDIES UNDER OR BY REASON OF THIS AGREEMENT.
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C. ALL CAPTIONS IN THIS AGREEMENT ARE INTENDED SOLELY FOR THE
CONVENIENCE OF THE PARTIES AND DO NOT AFFECT THE MEANING OR
CONSTRUCTION OF ANY SECTION.
D. ALL REFERENCES TO THE MASCULINE, NEUTER, OR SINGULAR, INCLUDE THE
MASCULINE, FEMININE, NEUTER, OR PLURAL. [IF "YOU" CONSISTS OF MORE
THAN ONE PERSON OR ENTITY, YOUR ACKNOWLEDGMENTS, PROMISES,
COVENANTS, AGREEMENTS, AND OBLIGATIONS MADE OR UNDERTAKEN IN THIS
AGREEMENT ARE JOINTLY AND SEVERALLY UNDERTAKEN BY ALL OF YOU.]
E. IF THIS AGREEMENT IS EXECUTED IN MULTIPLE COUNTERPARTS, EACH
EXECUTED COPY IS AN ORIGINAL.
F. THIS AGREEMENT BECOMES VALID ONLY WHEN WE HAVE SIGNED IT, AND IT
WILL BE INTERPRETED UNDER THE SUBSTANTIVE LAWS OF MARYLAND, NOT
INCLUDING MARYLAND'S CONFLICT OF LAWS PROVISION, WHICH LAWS WILL
PREVAIL IF THERE IS ANY CONFLICT OF LAW.
G. NO RIGHT OR REMEDY IN THIS AGREEMENT IS INTENDED TO BE, NOR WILL BE
DEEMED, EXCLUSIVE OF ANY OTHER RIGHT OR REMEDY IN THIS AGREEMENT OR
BY LAW OR EQUITY PROVIDED OR PERMITTED, BUT EACH WILL BE CUMULATIVE
OF THE OTHER RIGHT OR REMEDY.
H. NOTHING CONTAINED IN THIS AGREEMENT WILL BAR EITHER PARTY'S RIGHT
TO OBTAIN INJUNCTIVE RELIEF AGAINST THREATENED CONDUCT THAT WILL
CAUSE IT LOSS OR DAMAGES, UNDER THE USUAL EQUITY RULES, INCLUDING
THE APPLICABLE RULES FOR OBTAINING RESTRAINING ORDERS AND
PRELIMINARY INJUNCTIONS.
I. THIS AGREEMENT CONTAINS THE COMPLETE UNDERSTANDING OF THE PARTIES
AND REPLACES ANY PREVIOUS WRITTEN OR ORAL AGREEMENT. NO
REPRESENTATION, INDUCEMENT, PROMISE OR AGREEMENT, ORAL OR
OTHERWISE, NOT IN THIS AGREEMENT, WILL BE OF ANY FORCE OR EFFECT.
J. THIS AGREEMENT MAY NOT BE AMENDED EXCEPT IN WRITING SIGNED BY BOTH
PARTIES.
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K. NEITHER PARTY MAY FILE A CLAIM (EXCEPT CLAIMS FOR INDEMNIFICATION)
ARISING OUT OF OR RELATED TO THIS AGREEMENT AFTER 3 YEARS FROM THE
DATE ON WHICH THE CLAIM AROSE, UNLESS APPLICABLE LAW SPECIFIES A
SHORTER STATUTE OF LIMITATIONS.
XXI. ACKNOWLEDGMENTS
A. YOU HAVE CONDUCTED AN INDEPENDENT INVESTIGATION OF THIS AGREEMENT,
AND YOU UNDERSTAND THAT THE BUSINESS VENTURE CONTEMPLATED BY THIS
AGREEMENT INVOLVES BUSINESS RISKS, AND THAT ITS SUCCESS WILL BE
LARGELY DEPENDENT ON YOUR ABILITY AS AN INDEPENDENT BUSINESS
PERSON. WE HAVE NOT MADE, AND YOU ACKNOWLEDGE THAT YOU HAVE NOT
RECEIVED FROM US OR OUR AGENTS, ANY PROJECTION, WARRANTY OR
GUARANTEE, EXPRESS OR IMPLIED, AS TO THE POTENTIAL SUCCESS OF THE
BUSINESS VENTURE CONTEMPLATED BY THIS AGREEMENT. BY SIGNING THIS
AGREEMENT, YOU REPRESENT TO US THAT YOU HAVE NEITHER RECEIVED NOR
RELIED ON REPRESENTATIONS OF ANY KIND CONCERNING THE AGREEMENT
EXCEPT AS WRITTEN IN THIS AGREEMENT.
B. YOU AGREE THAT THIS AGREEMENT RELATES TO THE HOTEL AND THE
LOCATION. WE MAY OPERATE, FRANCHISE OR LICENSE OTHER [LODGING BRAND
NAME] HOTELS UNDER THE SYSTEM, AS WELL AS USE OUR OTHER BRANDS, AT
ANY OTHER LOCATION. WE OR OUR AFFILIATES MAY NOW OR IN THE FUTURE
ENGAGE IN TRANSIENT LODGING OR RELATED BUSINESS ACTIVITIES WHICH
MAY COMPETE WITH THE SYSTEM OR WITH THE HOTEL.
C. YOU AGREE THAT THE MARKS AND THIS AGREEMENT RELATE ONLY TO THE
SYSTEM, AND THAT WE MAY DECIDE TO PROVIDE SERVICES TO THE HOTEL
SIMULTANEOUSLY TO ONE OR MORE OF OUR OTHER BRANDS, EITHER
SEPARATELY OR COMBINED.
D. YOU ARE SOLELY RESPONSIBLE FOR EXERCISING ORDINARY BUSINESS CONTROL
OVER THE HOTEL.
E. YOU WARRANT THE TRUTH AND COMPLETENESS OF ALL YOUR STATEMENTS IN
YOUR APPLICATION AND THOSE IN ALL OTHER DOCUMENTS THAT YOU SEND US
AS PART OF THE APPLICATION PROCESS. THIS WARRANTY WILL SURVIVE THE
SIGNING AND THE TERMINATION OF THIS AGREEMENT.
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F. YOU ACKNOWLEDGE THAT YOU RECEIVED FROM US A DISCLOSURE DOCUMENT
REQUIRED BY THE FEDERAL TRADE COMMISSION AND BY THE STATE(S) IN
WHICH YOU LIVE AND WHERE THE HOTEL IS LOCATED, EITHER DURING YOUR
FIRST PERSONAL MEETING WITH OUR REPRESENTATIVE TO DISCUSS THE
FRANCHISE SALE, OR 10 BUSINESS DAYS BEFORE YOU SIGNED THIS
AGREEMENT OR PAID TO US ANY CONSIDERATION FOR THE FRANCHISE,
WHICHEVER OF THOSE FIRST OCCURRED. YOU ALSO ACKNOWLEDGE THAT WE
GAVE TO YOU THE COMPLETED COPIES OF THIS AGREEMENT FOR YOUR
SIGNATURE AT LEAST 5 BUSINESS DAYS BEFORE YOU SIGNED THIS
AGREEMENT.
G. YOU ARE THE TRUE OWNER OF, AND RECORD HOLDER OF TITLE TO, THE
HOTEL, UNLESS YOU HAVE TOLD US IN THE APPLICATION THAT YOU LEASE
THE HOTEL UNDER A LEASE WITH AT LEAST 20 YEARS REMAINING IN ITS
TERM. IF THE HOTEL IS SUBJECT TO A MORTGAGE, YOU ARE THE MORTGAGOR
OF RECORD.
XXII. ARBITRATION. Except for claims for indemnification, actions for
collection of fees owed us under this Agreement, or actions seeking to
enjoin you from using the Marks in violation of this Agreement, any controversy
or claim relating to this Agreement, or the breach of this Agreement, including
any claim that this Agreement or any part of this Agreement is invalid, illegal,
or otherwise voidable or void, will be sent to final and binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator will apply the substantive laws of Maryland, without
reference to Maryland's conflict of laws provision. Judgment on the arbitration
award may be entered in any court having jurisdiction. If any party fails to
appear at any properly noticed arbitration proceeding, an award may be entered
against the party, notwithstanding its failure to appear. Any arbitration will
be conducted at our headquarters office in Maryland.
XXIII. SPECIAL PROVISIONS APPLICABLE ONLY TO HOTELS TO BE CONSTRUCTED OR
COMPLETELY RENOVATED.
A. THE PHRASE "CONSTRUCTION START" MEANS THE DATE ON WHICH BONA FIDE
POURING OF FOOTINGS BEGINS AT THE LOCATION IN THE CASE OF A HOTEL
TO BE CONSTRUCTED OR THE DATE ON WHICH RENOVATIONS BEGIN IN THE
CASE OF AN EXISTING HOTEL WHICH IS TO BE COMPLETELY RENOVATED.
B. IN ADDITION TO THE OTHER PROVISIONS OF THIS AGREEMENT, YOU AGREE
THAT YOU WILL:
1. PRESENT FOR OUR APPROVAL, BEFORE CONSTRUCTION START, YOUR
PRELIMINARY DRAWINGS AND FINAL WORKING DRAWINGS FOR HOTEL
CONSTRUCTION;
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2. CAUSE THE CONSTRUCTION START TO OCCUR WITHIN 12 MONTHS OF THE
DATE OF THIS AGREEMENT. IF YOU DO NOT CAUSE THE CONSTRUCTION
START TO OCCUR WITHIN 12 MONTHS OF THE DATE OF THIS AGREEMENT,
YOU MAY REQUEST, BEFORE THE END OF THE 12 MONTHS, AN
ADDITIONAL 3 MONTHS FOR CONSTRUCTION START. WE ARE NOT
OBLIGATED TO EXTEND THE TIME FOR CONSTRUCTION START. IF WE
AGREE TO EXTEND THE TIME FOR CONSTRUCTION START, YOU WILL PAY
US AN EXTENSION FEE OF $5,000 FOR EACH 3 MONTH EXTENSION;
3. CONTINUE HOTEL CONSTRUCTION IN ACCORDANCE WITH THE PLANS,
AFTER CONSTRUCTION START, WITHOUT INTERRUPTION (EXCEPT BY
EVENTS CONSTITUTING FORCE MAJEURE), UNTIL THE HOTEL IS READY
FOR OUR INSPECTION. YOU MUST COMPLETE HOTEL CONSTRUCTION,
INCLUDING FURNISHING, EQUIPPING, AND PREPARING FOR OPENING,
WITHIN 12 MONTHS AFTER CONSTRUCTION START;
4. SEND US, WHEN WE REQUEST DURING CONSTRUCTION, REPORTS SHOWING
THE PROGRESS MADE TOWARD COMPLETING HOTEL CONSTRUCTION;
5. USE THE MARKS ONLY AS ALLOWED IN SECTION 23.D OF THE
AGREEMENT;
6. COOPERATE WITH US, AND INSTRUCT YOUR ARCHITECT, ENGINEER,
CONTRACTORS AND SUBCONTRACTS TO COOPERATE WITH US, AND ALLOW
US TO INSPECT THE LOCATION AND THE HOTEL CONSTRUCTION TO
DETERMINE WHETHER CONSTRUCTION MEETS THE STANDARDS OUTLINED IN
THE RULES AND REGULATIONS AND THE PLANS;
7. ORDER, PURCHASE AND/OR LEASE AND INSTALL ALL FIXTURES,
EQUIPMENT, FURNISHINGS, SIGNS, COMPUTER TERMINALS AND RELATED
EQUIPMENT, SUPPLIES AND OTHER REQUIRED ITEMS BEFORE THE
OPENING DATE;
8. ADVERTISE THE HOTEL LOCALLY, AT YOUR EXPENSE AND IN A MANNER
MEETING OUR SPECIFICATIONS;
9. CAUSE THE GENERAL MANAGER OF THE HOTEL TO ATTEND AND COMPLETE
OUR INITIAL ORIENTATION PROGRAM;
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10. NOTIFY US AT LEAST 30 DAYS BEFORE THE OPENING DATE. WE WILL
INSPECT AND, IF APPROPRIATE, AUTHORIZE YOU TO BEGIN OPERATING
THE HOTEL UNDER THIS AGREEMENT.
C. BEFORE THE OPENING DATE, YOU MAY MAKE THE FOLLOWING LIMITED USE OF
THE MARKS:
1. PLACE A SIGN AT THE LOCATION ADVISING THE GENERAL PUBLIC THAT
A [LODGING BRAND NAME] HOTEL IS UNDER CONSTRUCTION;
2. PROMOTE THE HOTEL CONSTRUCTION AND OPENING IN THE MEDIA;
3. PURCHASE OPERATING SUPPLIES AND EQUIPMENT BEARING THE MARKS
REQUIRED FOR HOTEL OPERATION; AND
4. PURCHASE AND INSTALL THE PERMANENT HOTEL SIGN REQUIRED FOR
HOTEL OPERATION.
D. YOU MUST PURCHASE BY THE CONSTRUCTION START AND MAINTAIN UNTIL THE
OPENING DATE, DIRECTLY OR THROUGH YOUR GENERAL CONTRACTOR, THE
FOLLOWING INSURANCE COVERAGES:
1. COMPREHENSIVE GENERAL LIABILITY INSURANCE (INCLUDING
AUTOMOBILE LIABILITY, PROPERTY DAMAGE) PROTECTING YOU AND
NAMING US AND OUR AFFILIATES AND SUBSIDIARIES, THEIR
RESPECTIVE OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES AS
ADDITIONAL INSUREDS ("ADDITIONAL INSUREDS") FROM AND AGAINST
ALL TYPES OF LIABILITIES, INCLUDING PERSONAL INJURY AND
PROPERTY DAMAGE, TOGETHER WITH THE COSTS OF DEFENSE AND/OR
ADJUSTMENTS ARISING OUT OF THE OPERATIONS TO CONSTRUCT THE
HOTEL. THE COVERAGES MUST PROVIDE FOR LIMITS OF NOT LESS THAT
$5,000,000 ($10,000,000 IF THE HOTEL HAS 6 OR MORE STORIES)
PER OCCURRENCE PER LOCATION AND INCLUDE COVERAGES FOR
CONTRACTUAL LIABILITY, EXPLOSION, COLLAPSE AND UNDERGROUND
PROPERTY DAMAGE HAZARD LIABILITY, PERSONAL INJURY LIABILITY,
PRODUCTS AND COMPLETED OPERATIONS LIABILITY, OWNER'S AND
CONTRACTOR'S PROTECTIVE LIABILITY, AND INDEPENDENT
CONTRACTOR'S LIABILITY.
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2. ALL-RISK BUILDER'S RISK COVERAGE TO INSURE THE HOTEL BUILDINGS
UNDER CONSTRUCTION TO 100% OF THEIR REPLACEMENT COST VALUE,
PROTECTING YOU, US AND THE ADDITIONAL INSUREDS, AND A WORKERS'
COMPENSATION POLICY AS REQUIRED BY STATUTE.
This agreement is signed by you (and your principals, if a
partnership or corporation) and us, with our seals, on the date written above.
ATTEST: CHOICE HOTELS FRANCHISING, INC.
By (Seal)
------------------------- -----------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Assistant Secretary
WITNESS/ATTEST: SUNBURST HOSPITALITY CORPORATION
By (Seal)
------------------------- -----------------------
Name
Date:
--------------------
By (Seal)
------------------------- -----------------------
Name
Date:
--------------------
By (Seal)
------------------------- -----------------------
Name
Date:
--------------------
By (Seal)
------------------------- -----------------------
Name
Date:
--------------------
NOTE: The person or business organization which is the title owner of the
location, as of the date of this agreement, must be a named signatory. The
liability of all signatories will be joint and several.
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