AREA DEVELOPMENT AGREEMENT
AGREEMENT made the 3rd day of March, 1998, by and between GuestHouse
International LLC ("GuestHouse"), an Arkansas limited liability company and
Western Steel, Inc. ("Western"), a Washington corporation, or subsidiaries or
affiliates of George A. Swift.
RECITALS
WHEREAS, GuestHouse is the franchisor of hotel/motel property affiliations
under the names "GuestHouse(R) Inn," "GuestHouse(R) Hotel," "GuestHouse(R)
Suites," "GuestHouse International(R)" or other variations which contain the
trademarked name GuestHouse(R), along with allied services and products; and
WHEREAS, Western is in the business of construction, ownership. maintenance
and operation of hotel/motel properties; and
WHEREAS, Western has requested and GuestHouse has agreed to grant Western an
exclusive night. subject to the terms and conditions set forth herein, to
develop GuestHouse affiliated properties in a designated area; and
WHEREAS, Western's exclusive rights are based upon the development of a
required number of GuestHouse(R) properties within specified times; and
WHEREAS, the parties desire to set forth their respective rights, duties,
obligations and benefits,
IT IS THEREFORE AGREED by and between the parties as follows:
1. EXCLUSIVE DEVELOPMENT RIGHTS. Subject to the terms and conditions set
forth below, GuestHouse hereby grants to Western the exclusive right to
construct, establish, develop, own. operate and maintain GuestHouse affiliated
properties in the states of Washington, Oregon, Montana, Idaho and Alaska (the
"Designated Area") for a twenty year period ending December 31, 2018. So long as
this Agreement is in effect, no other person shall be allowed to enter into a
franchise agreement with GuestHouse 'in the Designated Area without the prior
written consent of Western.
2. NONEXCLUSIVE GRANT. Upon the termination of this Agreement for any
reason, other persons shall be allowed to enter into franchise agreements with
GuestHouse in the Designated Area. In addition, Western may request to enter
into franchise agreements with GuestHouse in states other than in the Designated
Area on a nonexclusive basis. Irrespective of the status of this Agreement.
3. FRANCHISE REGULATION. Notwithstanding, paragraphs 1 and 2 above, Western
must meet the then current standards for franchisees to be able to enter into
franchise agreement with GuestHouse within or without the Designated Area.
Further, Western acknowledges that all franchise agreements and offers to enter
into franchise agreements are conditioned upon GuestHouse's compliance with all
federal and state laws and regulations governing the offer, sale and operation
of franchises. For any period 'in which GuestHouse's application for
Initials G.A.S.
registration with any state which requires pre-sale registration of franchise
offerings is pending, the parties acknowledge that GuestHouse may not offer nor
may Western accept any franchise. GuestHouse will keep Western informed of its
franchise registration process within the Designated Area and in other states
'in which Western may wish to develop GuestHouse properties, as requested.
4. DEVELOPMENT SCHEDULE. In consideration of the exclusive rights granted
Western in paragraph I above and as a condition to retaining said exclusive
rights, Western agrees that it shall construct or acquire at least one (1)
hotel/motel property for each calendar year of this Agreement plus construct or
acquire at least five (5) hotel/motel properties in every three (3) year
period which shall be GuestHouse affiliated properties. For the purposes of this
Agreement, a property shall be considered constructed when it is framed and
under roof. Properties constructed or acquired both within and Without the
Designated Area for which GuestHouse franchise agreements have been signed shall
be counted for the purposes of the minimum development schedule set forth
herein. Every three (3) year period shall include the most recently concluded
calendar year and the two (2) prior years, on a rolling, basis. After completion
of thirty five (35) GuestHouse franchised properties the performance and
affiliation clause described above will be satisfied.
5. FRANCHISE AFFILIATION AND FEES. GuestHouse agrees to execute franchise
agreements with Western for the properties developed or acquired by Western in
furtherance of this Agreement provided said properties meet all current
standards for GuestHouse franchisees. GuestHouse will permit the use of the
GuestHouse Inn(R) and GuestHouse Suites(R) name for motels that are designed
with rooms that are single room suites. In consideration of Western's commitment
to develop GuestHouse affiliated properties, GuestHouse shall waive the
franchise fee for ten (10) proper-ties of the properties developed or acquired
by Western in furtherance of this Agreement. In regard to liquidated damages as
provided in the franchise agreements, the parties agree to amend the franchise
agreement to provide that in the event Western sells all of Its Interest in a
site, no liquidated damages will be due GuestHouse. All franchise agreements
shall be on the same terms and conditions as the then current franchise
agreement for other GuestHouse franchisees. with the exception of the waiver of
the franchise fee for ten (10) of the properties as noted above. In addition,
for the term of this Agreement, any franchise agreement that is not included in
the ten (10) for which the franchise fee is waived, the franchise fee shall be
fixed at Twenty Thousand and no/100 Dollars ($20,000.00). All franchise
agreements between GuestHouse and Western shall be not less than five (5) nor
more than ten (10) years' duration. Prior to signing any franchise agreement,
Western will be provided a copy of GuestHouse's then current Franchise Offering
Circular, with any state addendum, as appropriate. Western will have an
automatic right to renew each license agreement at the end of its initial term
if Western is not in default of any of the terms and conditions of the franchise
agreement. Renewal shall be accomplished by execution by the parties of the then
current franchise agreement under the then current tee structure.
6. DESIGNATION AS SELECT VENDOR. As additional consideration for this Agreement,
Western shall be designated a Select Vendor pursuant to Section 16 of the
current GuestHouse License Agreement for such goods and services as agreed
between GuestHouse and Western. Continuation as a Select Vendor shall be
contingent upon Western maintaining the quality standards as established by
GuestHouse from time to time. Failure of Western to continue to meet the
standards of a Select Vendor shall not terminate Western's rights under
paragraphs 1 and 2 above. Within ten (10) days of GuestHouse mailing any Select
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Initials G.A.S.
Vendor list to GuestHouse franchisees, GuestHouse will provide Western with
written notice of the mailing and include the names and addresses of all persons
receiving such mailing.
7. TERMINATION. This Agreement shall terminate upon the earlier of December
31, 2018 and Western's failure to meet the development and affiliation schedule
as set forth in paragraph 4 above. The effect of termination of this Agreement
shall be the loss of the exclusive rights of Western in the Designated Area.
Western's rights as a franchisee, as Select Vendor or rights to construct or
acquire GuestHouse proper-ties on a nonexclusive basis shall not be terminated
by termination of this Agreement.
8. ADDITIONAL TERMS. The terms of this Agreement are subject to the
following additional terms and conditions:
(a) Relationship of Parties. Western is an independent contractor.
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Neither party is the legal representative or agent of, or has the power to
obligate (or has the right to direct or supervise the daily affairs of) the
other for any purpose whatsoever. and no partnership, joint venture, agency,
fiduciary or employment relationship is intended or created by reason of this
Agreement.
(b) Partial Invalidity. Should any part of this Agreement, for any
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reason, be declared invalid, such decision shall not affect the validity of any
remaining portion.
(c) No Waiver. No failure or delay in requiring strict compliance with
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any obligation of this Agreement (or in the exercise of any right or remedy
provided herein) and no custom or practice at variance with the requirements
hereof shall constitute a waiver or modification of arty such obligation,
requirement, right or remedy or preclude exercise of any such night or remedy or
the right to require strict compliance with any obligation set forth herein. No
waiver of any particular default or any right or remedy with respect to such
default shall preclude, affect or impair enforcement of any right or remedy
provided herein with respect to any subsequent default. No approval or consent
of GuestHouse shall be effective unless in writing and signed by an authorized
representative of GuestHouse. GuestHouse's consent or approval may be withheld
for so long as Western is in default of any of its obligations under this
Agreement.
(d) Notices. Notices will be effective hereunder when and only when
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they are reduced to writing and delivered via a recognized carrier which
provides a verifiable receipt of delivery to the appropriate party at its
address stated below or to such person and at such address as may be designated
by notice hereunder. Notices shall be deemed given on the date delivered or date
of attempted delivery, if service is refused.
If to Western: If to GuestHouse:
WESTERN STEEL, INC. GUESTHOUSE INTERNATIONAL LLC
1044 Industry Drive 1501 North University, Suite 968
Seattle, Washington 98188-4801 Little Rock, Arkansas 72207
Attention: Mr. George Swift Attention: President
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Initials G.A.S.
(e) Choice of Forum. Litigation related to this Agreement in which
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GuestHouse is the plaintiff shall be initiated and prosecuted in the state of
Washington. litigation related to this Agreement in which Western is the
plaintiff shall be initiated and prosecuted in the state of Arkansas.
(f) Miscellaneous. This Agreement is exclusively for the benefit of the
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par-ties hereto and may not give rise to liability to a third party. No
agreement between GuestHouse and anyone else is for the benefit of Western.
Neither party will interfere with contractual relations of the other and
exercise by GuestHouse of any right provided GuestHouse under this Agreement
shall not constitute such Interference. The section headings in this Agreement
are for convenience of reference only and will not affect its interpretation.
All monetary references are to United States dollars. This Agreement, together
with all instruments, exhibits, attachments and schedules hereto, constitutes
the entire agreement (superceding all prior agreements and understandings, oral
or written) of the parties hereto with respect to the matters stated herein and
shall not be modified or amended in any respect except in writing executed by
all such parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first stated above.
GUESTHOUSE:
GUESTHOUSE INTERNATIONAL LLC
By: /s/ James M. Sculley
Title: President and COO
ATTEST:
By: /s/ Eris Canady
Title: Executive Asssistant
WESTERN:
Western Steel, Inc.
By: /s/ George A Swift
Title: President
ATTEST:
By: /s/ Kristine Tanaka
Title: Secretary/Treasurer
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Initials G.A.S.
FIRST AMENDMENT TO AREA DEVELOPMENT AGREEMENT
This First Amendment to Area Development Agreement ("First Amendment") is
entered into as of the 31st day of August, 1999, by and between GuestHouse
International Franchise Systems, Inc. ("GuestHouse"), a Georgia corporation,
Western Steel, Inc. ("Western"), a Washington corporation, and George A. Swift,
an individual residing in the state of Washington.
RECITALS
WHEREAS, GuestHouse International LLC and Western entered into an Area
Development Agreement, dated as of March 3, 1998 (the Area Development Agreement
is hereafter referred to individually as "Area Development Agreement" and
collectively with the First Amendment as "Agreement"); and
WHEREAS, GuestHouse International LLC assigned all of its right, title and
interest in the Agreement to GuestHouse, pursuant to the provisions of a certain
General Assignment and Bill of Sale, dated as of June 1, 1999; and
WHEREAS, GuestHouse and Western desire to clarify and modify certain provisions
of the Agreement;
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree to amend the Agreement as follows,
1. GuestHouse and Western agree that new Franchise Agreements for
GuestHouse affiliated properties hereafter executed by the parties
pursuant to the Agreement shall provide for the following fees and
contributions:
(a) Franchises Agreements executed from the date first above
written until December 31, 2001:
(i) $1.25 per room per day Operating Fee, for the five
year initial term;
(ii) $.25 per room per day Marketing Contribution for
brand awareness (non-property specific);
(iii) all reservation charges paid directly by Franchisee;
(iv) for ten year franchise agreements years six through
ten shall have an Operating Fee of $1.75 per room per
day, and a Marketing Contribution of $.25 per room
per day for brand awareness (non-property specific).
(b) Franchises Agreements executed from January 1, 2002 until
December 31, 2003:
(i) $1.50 per room per day Operating Fee, for the five
year initial term;
(ii) if less than 150 properties are open system wide,
$.25 per room per day Marketing Contribution for
brand awareness (non-proper specific),
(iii) if 150 or more properties are open system wide, $.50
per room per day Marketing Contribution for brand
awareness (non-proper specific);
(iv) all reservation charges paid directly by Franchisee.
(c) Franchises executed from January 1, 2004 until December 31,
2005:
(i) $1.75 per room per day Operating Fee, for the five
year initial term;
(ii) if less than 150 properties are open system wide,
$.25 per room per day Marketing Contribution for
brand awareness (non-property specific);
(iii) if 150 or more properties are open system wide, $.50
per room per day Marketing Contribution for brand
awareness (non-property specific);
(iv) all reservation charges paid directly by Franchisee.
(d) Franchises executed from January 1, 2006 until December 31,
2010:
(i) Operating Fees and Marketing Contribution shall each
be at the then current rate as set forth in the then
current GuestHouse Uniform Franchise Offering
Circular, however when combined shall not exceed 7%
of the gross room revenue for the property.
(ii) all reservation charges paid directly by Franchisee;
2. Notwithstanding anything to the contrary in the Area Development
Agreement, Western Steel, Inc. a Washington Corporation, or
subsidiaries or affiliates of George A. Swift, and generally the
defined term "Western" shall be deemed to be George A. Swift
individually, or any entity in which George A. Swift has irrevocable
and unfettered control, and owns at least a 25% equity interest, for
hotels located in the territory set forth in Paragraph I of the
Agreement (51% for hotels located outside of such territory). For
purposes of the foregoing, "irrevocable and unfettered control" shall
be deemed to be: i) the sole general partner in a limited partnership,
ii) the sole manager in a limited liability company, or iii) the sole
director in a corporation. It is the intent of this paragraph that all
of the rights and obligations of the Agreement shall accrue to the
various entities owned and controlled by George A. Swift.
3. GuestHouse and Western acknowledge and agree that the provision in
Paragraph 5 of the Area Development Agreement allowing a waiver of the
"franchise fee" for ten properties, shall be accomplished by inserting
the following language into the individual franchise agreements for
such ten properties:
The Initial Fee (as defined in Section _____ of this
Agreement) is hereby waived and shall be zero for this
Property.
4. GuestHouse and Western acknowledge and agree that the provision in
Paragraph 5 of the Area Development Agreement allowing a reduction of
the "franchise fee" for the properties to be added to the GuestHouse
system that are not included in the ten properties for which the
"'franchise fee" is waived, shall be accomplished by inserting the
following language into the individual franchise agreements for such
properties:
The Initial Fee (as defined in Section _____ of this
Agreement) is hereby reduced and shall be $20,000.00 for this
Property.
5. GuestHouse and Western acknowledge and agree that the provision in
Paragraph 5 of the Area Development Agreement allowing a waiver of
certain liquidated damages in the event Western sells all of its
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interest in a site, shall be accomplished by inserting the following
language into the individual franchise agreements:
In the event Franchisee sells all of its interest in the
Property to an unrelated third party, the Termination Fee set
forth in Section -of this Agreement is hereby waived.
6. Paragraph 8(d) of the Area Development Agreement is hereby modified to
change the address for GuestHouse as follows: GuestHouse International
Franchise Systems, Inc., 300 Galleria Parkway, Suite 1200, Atlanta,
Georgia 30339 Attention: Vice President Development/General Counsel.
7. Paragraph 8(e) of the Area Development Agreement is hereby replaced
with the following:
(e) Choice of Forum. Litigation related to this Agreement in
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which GuestHouse is a Plaintiff shall be initiated and
prosecuted in the state of Washington. Litigation related to
this Agreement in which Western is a Plaintiff shall be
initiated and prosecuted in the state of Georgia.
8. Paragraph 4 of the Area Development Agreement is hereby modified by
adding the following sentences at the conclusion of the Paragraph.
The required number of hotels to be constructed or acquired
must be achieved and continuously maintained on a cumulative
basis. Western must continue to construct or acquire hotels
that shall be operated under a validly executed Franchise
Agreement, at a rate of at least one hotel per calendar year
pursuant to the Agreement and shall continuously maintain not
less than the minimum number of GuestHouse affiliated
properties shown in the chart reproduced below.
Anniversary Date MINIMUM NUMBER of GuestHouse
- ---------------- Affiliated Properties
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December 31, 1998 1
December 31, 1999 2
DECEMBER 31, 2000 5
December 31, 2001 6
December 31, 2002 7
DECEMBER 31, 2003 10
December 31, 2004 11
December 31, 2005 12
DECEMBER 31, 2006 15
December 31, 2007 16
December 31, 2008 17
DECEMBER 31, 2009 20
December 31, 2010 21
December 31, 2011 22
DECEMBER 31, 2012 25
December 31, 2013 26
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December 31, 2014 27
DECEMBER 31, 2015 30
December 31, 2016 31
December 31, 2017 32
DECEMBER 31, 2018 35
Nothing in this Paragraph shall be interpreted to modify any provision
of any license or franchise agreement (now existing or hereafter
executed) with respect to a GuestHouse affiliated property (including,
without limitation, the fights and obligations of the parties thereto
with respect to the term, renewal and termination of such agreements).
9. The terms of this First Amendment shall govern any conflicts between
the terms of the Area Development Agreement. Except as specifically
provided to the contrary in this First Amendment, the remaining
provisions of the Area Development Agreement are hereby reaffirmed and
remain unchanged. The provisions of the First Amendment shall be
binding upon the parties hereto, their successors and assigns.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have entered into this First Amendment as of the
date first stated above.
WESTERN:
Western Steel, Inc.
By: /s/ George A. Swift
Print Name: George A. Swift Attest:
Title: President By: /s/ Donna Carter
Print Name: Donna Carter
Title: Administrative Assistant
George A. Swift, Individually
MONTANA AMENDMENT TO AREA DEVELOPMENT AGREEMENT
This Montana Amendment to Area Development Agreement ("Montana Amendment") is
entered into as of the day of 17th day of December, 1999, by and between
GuestHouse International Franchise Systems, Inc. ("GuestHouse") a Georgia
corporation, Western Steel, Inc. ("Western"), a Washington corporation, and
George A. Swift, an individual residing in the state of Washington.
RECITALS
WHEREAS, GuestHouse International LLC and Western entered into an Area
Development Agreement, dated as of March 3, 1998 as modified by that certain
First Amendment to Area Development Agreement dated as of the 31st day of August
1999, (the Area Development Agreement combined with the First Amendment to Area
Development Agreement is hereafter referred to as "Area Development Agreement");
and
WHEREAS, GuestHouse International LLC assigned all of its right, title and
interest in the Agreement to GuestHouse, pursuant to the provisions of a certain
General Assignment and Bill of Sale, dated as of June 1, 1999; and
WHEREAS, GuestHouse and Western desire to clarify and modify certain provisions
of the Agreement;
NOW, THEREFORE, in consideration of the provisions contained herein, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree to amend the Area Development Agreement as
follows.
1. Western hereby agrees to develop, open and operate 3 GuestHouse
International Properties in the state of Montana within 3 years from
the date first written above. Provided that each Montana property is
framed and under roof, prior to the 3rd anniversary of this Montana
Amendment, GuestHouse International hereby agrees that the fees and
contributions for such 3 properties shall be as follows:
(a) $.63 per room per day Operating Fee, for the five
year initial term;
(b) $.25 per room per day Marketing Contribution for
brand awareness (non-property specific);
(c) all reservation charges paid directly by Franchisee;
(d) for ten year franchise agreements, years six through
ten shall have an Operating Fee of $1.13 per room per
day, and a Marketing Contribution of $.25 per room
per day for brand awareness (non-property specific).
2. Within thirty days hereafter, Western shall enter into the Franchise
Agreements for acceptable franchises in the following locations:
(a) Miles City, Montana;
(b) Fairbanks, Alaska
(c) Valdez, Alaska
(d) Dupont, Washington
Such Franchise Agreements shall be subject to the terms and conditions
of the Area Development Agreement, except that the Miles City, Montana
Franchise Agreement shall be subject to the terms and conditions of the
Area Development Agreement as modified by this Montana Amendment.
3. The terms of this Montana Amendment shall modify the terms of the Area
Development Agreement. Except as specifically provided to the contrary
in this Montana Amendment, the remaining provisions of the Area
Development Agreement are hereby reaffirmed and remain unchanged. The
provisions of the Montana Amendment shall be binding upon the parties
hereto, their successors and assigns.
IN WITNESS WHEREOF, the parties have entered into this Montana Amendment as of
the date first stated above.
WESTERN:
Western Steel, Inc.
By: /s/ George A. Swift Attest:
Print Name: George A. Swift By: /s/ Donna Carter
Title: President Print Name: Donna Carter
Title: Administrative Assistant
George A. Swift, Individually
/s/ George A. Swift
Witness:
By: /s/ Donna Carter
Print Name: Donna Carter
Title: Administrative Assistant
GUESTHOUSE:
GuestHouse International Franchise Systems, Inc.
By: /s/ Dan J. Berman Attest:
Print Name: Dan J. Berman By: /s/ Kevin Pfannes
Title: Executive Vice President Print Name: Kevin Pfannes
Title: Secretary
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/s/ George A. Swift
Witness:
By: /s/ Donna Carter
Print Name: Donna Carter
Title: Administrative Assistant
GUESTHOUSE:
GuestHouse International Franchise Systems, Inc.
By: /s/ Dan J. Berman Attest:
Print Name: Dan J. Berman By: /s/ Kevin Pfannes
Title: Executive Vice President Print Name: Kevin Pfannes
Title: Secretary
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