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Exhibit 10.6
AMENDMENT NO. 5
TO
LICENSE AGREEMENT
THIS AMENDMENT NO. 5 TO LICENSE AGREEMENT (the "Amendment") is entered
into this 25th day of October, 1996, by and between SHONEY'S INVESTMENTS, INC.,
a Nevada corporation with offices at Suite 1400, 300 South Fourth Street, Las
Vegas, Nevada 89101 ("Licensor"), and SHOLODGE FRANCHISE SYSTEMS, INC.
(formerly known as Shoney's Lodging, Inc.), a Tennessee corporation with
offices at 217 West Main Street, Gallatin, Tennessee 37066 ("Licensee").
SHOLODGE, INC. (formerly known as Gulf Coast Development, Inc.), a Tennessee
corporation with offices at 217 West Main Street, Gallatin, Tennessee 37066
and the parent corporation of Licensee ("ShoLodge"), is executing this
Amendment for the purposes set forth in the Existing License Agreement (as
hereinafter defined) as amended hereby.
W I T N E S S E T H:
WHEREAS, Licensor and Licensee entered into that certain License
Agreement on October 25, 1991 (the "Original License Agreement") pursuant to
which Licensor granted to Licensee a license to use the service mark SHONEY'S
INN (and design) which was registered on February 16, 1982 with the United
States Patent and Trademark Office (the "USPTO") at Registration No. 1,190,289;
and
WHEREAS, Licensor and Licensee entered into that certain Amendment No.
1 to License Agreement on September 16, 1992 (the "First Amendment") pursuant
to which Licensor added the service mark SHONEY'S INN (block letters) which was
registered by Licensor on August 4, 1992 with the USPTO at Registration No.
1,705,676 to be licensed to Licensee pursuant to the terms and conditions of
the Original License Agreement; and
WHEREAS, Licensor and Licensee entered into that certain Amendment No.
2 to License Agreement on March 18, 1994 (the "Second Amendment") pursuant to
which certain Tennessee counties were added to the "Territory" covered by the
Original License Agreement; and
WHEREAS, Licensor and Licensee entered into that certain Amendment No.
3 to License Agreement on March 31, 1995 (the "Third Amendment") pursuant to
which Licensor added the service mark SHONEY'S SUITES (block letters) for which
an intent-to-use application was filed with the USPTO on January 23, 1995 and
the service mark SHONEY'S INN & SUITES (block letters) for which an
intent-to-use application was filed with the USPTO on February 6, 1995 to be
licensed to Licensee pursuant to the terms and conditions of the Original
License Agreement; and
WHEREAS, Licensor and Licensee entered into that certain Amendment No.
4 to License Agreement on June 26, 1996 (the "Fourth
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Amendment") (the Original License Agreement as amended by the First Amendment,
the Second Amendment, the Third Amendment and the Fourth Amendment is
hereinafter referred to as the "Existing License Agreement") pursuant to which,
among other things, the parties revised certain provisions of Section 4.5(d) of
the Original License Agreement regarding the provision of food items to guests
at Motels operated or licensed by Licensee;
WHEREAS, the parties hereto desire to modify and amend the Existing
License Agreement in certain other respects as set forth herein;
NOW, THEREFORE, in consideration of the premises and covenants
contained herein and in the Existing License Agreement, the payment by Licensee
to Licensor of the sum of Five Million Two Hundred Fifty Thousand and No/100
Dollars ($5,250,000) on even date herewith, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Licensor and Licensee agree as follows:
1. The Existing License Agreement is hereby amended by:
(a) deleting the existing Section 1.5 in its entirety.
(b) deleting the existing Section 4.1 in its entirety.
(c) deleting the existing Section 4.2 in its entirety.
(d) deleting the text of existing Section 4.4(a) in its
entirety and inserting in lieu thereof the following:
(a) Licensee shall display and shall
require that its franchisees display the
Licensed Mark only in the styles, shapes,
colors and forms set forth in Schedule 1,
attached hereto and incorporated herein by
reference, in all signs, literature,
packages, labels, artwork, advertising or
promotional materials prepared by or for
Licensee or its franchisees. Any alteration
or deviation from the displays set forth in
Schedule 1 must be approved in advance by
Licensor. Licensor shall have thirty (30)
days to approve or disapprove such
alterations or deviations. If Licensor fails
to notify Licensee in writing of its
objection to such alterations or deviations
within such thirty (30) day period, such
alterations or deviations shall be deemed to
have been approved. Licensee shall require
that each of its franchisees
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agree to allow Licensor or its authorized
representative at any time to enter upon the
premises of any Motel and remove any signs or
advertising materials that display the mark
in a manner that has not been approved.
Licensee agrees to refrain, and to require
its franchisees to refrain, from using the
Licensed Mark in any fashion which would cast
disfavor upon the Licensor. Licensee will
permit, and require its franchisees to
permit, Licensor or its authorized
representatives to inspect the premises of
all Motels during business hours for the
purpose of ascertaining or determining
compliance with the terms of the Agreement.
(e) deleting the existing Section 4.4(b) in its entirety.
(f) deleting the existing Section 4.4(c) in its entirety.
(g) deleting the phrase "subject to the limitations set
forth below" as it appears in the second sentence of
Section 4.4(d).
(h) deleting the fourth sentence of Section 4.4(d) in its
entirety and inserting the following in lieu thereof:
Licensor shall not object to a form of
agreement, offering circular or other
promotional items because of the fees,
royalties, advertising fees or similar
financial obligations proposed to be charged
thereunder.
(i) inserting the words "Upon Licensor's request" at the
beginning of the first sentence in Section 4.5(a).
(j) deleting the words "their execution" as they appear
in the first sentence of Section 4.5(a) and inserting
in lieu thereof the words "such request."
(k) deleting the second, third, fourth and fifth
sentences of Section 4.5(a).
(l) deleting the words "no more than three (3) breakfast
`breads' such as donuts, bagels, muffins, sweet
rolls, danish and similar items and one bowl
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containing one type of fresh whole fruit, and (iii)
so long as Licensee or its franchisee (as applicable)
shall have first offered the catering work to the
adjacent `Shoney's Restaurant' operator, if any," as
they appear in the second sentence of Section 4.5(d)
and inserting the following language in lieu thereof:
"hot or cold continental breakfast foods
consisting of breads, fruits, cereals,
waffles, pancakes, poptarts and other items
popularly known as `continental breakfast'
foods; provided, however, that, except as
provided above, in no event shall the term
`continental breakfast foods' be deemed to
include any other hot breakfast foods
including, without limitation: (a) any meat
or meat products (including pork and pork
products); and (b) eggs, and (iii)"
(m) deleting the third sentence in Section 4.5(d) in its
entirety and inserting in lieu thereof the following:
No food products showing brand names (such as
Dunkin' Donuts) shall be allowed, although
brand name products may be used as long as
the brand name itself is not displayed.
(n) deleting the fifth sentence in Section 4.5(d) in its
entirety and inserting in lieu thereof the following:
Licensee agrees, and shall require its
franchisees to agree, to place menus for the
adjacent "Shoney's Restaurant," if any,
(which must be approved by Licensor and any
expense borne by the adjacent restaurant
operator) in each guest room of all Motels
and shall not allow any other restaurant or
food service organization to place
promotional material in the guest rooms of
any Motels adjacent to a "Shoney's
Restaurant" without the prior written consent
of Licensor. For purposes of this Section
4.5(d) the term "adjacent to" shall mean
within a one mile radius."
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(o) deleting the text of existing Section 4.10 in its
entirety and inserting in lieu thereof the following:
Section 4.10. Assignment.
(a) Licensee shall not sublicense
(except to a franchisee as permitted herein),
sell, assign, transfer, convey or encumber
its rights and obligations hereunder or
suffer or permit any such assignment,
transfer or encumbrance to occur by operation
of law without the prior express written
consent of Licensor. In the event Licensee
is a corporation, limited partnership,
business trust, partnership or similar
association, the shareholders, limited
partners, beneficiaries, partners or
investors, as the case may be, may not sell,
assign or otherwise transfer their shares or
interests in such corporation, limited
partnership, business trust, partnership or
similar association, without the prior
written consent of Licensor. In the event
Licensee is a corporation, all stock
certificates shall have conspicuously
endorsed upon them a legend in substantially
the following form:
"A transfer of this stock is subject to
the terms and conditions of a
License Agreement between Shoney's
Investments, Inc. and ShoLodge
Franchise Systems, Inc. (then known
as Shoney's Lodging, Inc.) dated the
25th day of October, 1991, as
amended.
Licensor agrees that it will not unreasonably
withhold its consent to a sale, assignment,
transfer or conveyance contemplated by this
paragraph to a person or entity who has
experience in the operation of motels and who
is, in the sole judgment of Licensor, of good
character and reputation and capable,
financially and otherwise, of performing the
duties and obligations of Licensee hereunder.
Any approval by Licensor of such transfer or
assignment shall be
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subject to the assignee's agreement in
writing to assume and perform all of the
transferor's duties and obligations
hereunder.
(b) In the event of the death of
the Licensee or if the Licensee is a
corporation or similar entity, then in the
event of the death of any stockholder,
investor or similar person of Licensee,
Licensor shall not unreasonably withhold its
consent to a transfer or assignment of
Licensee's interest herein, or if Licensee is
a corporation, the transfer of the deceased
stockholder's stock in such corporation to a
descendant, heir or legatee of the decedent,
who shall in the sole judgment of Licensor be
capable of performing the duties and
obligations of Licensee hereunder, or to a
responsible bona fide purchaser acceptable to
Licensor. Any approval by Licensor of such
transfer or assignment shall be subject to
the assignee's agreement in writing to assume
and perform all of the transferor's duties
and obligations hereunder.
(c) In the event that a sale,
assignment, transfer or conveyance of the
stock of Licensee by the shareholder of
Licensee is approved in accordance with
Section 4.10(a) above, Licensor will (i)
amend this Agreement to delete (A) the
provisions of Section 7.2 hereof pertaining
to defaults caused by Gulf (now known as
ShoLodge, Inc.) and (B) all other references
to Gulf, including, without limitation, those
in Sections 6.1, 6.2, 6.4, 6.6, and 7.3
hereof, and to make conforming amendments in
connection with such deletions, and (ii)
terminate and cancel the Guaranty Agreement
except for obligations guaranteed by Gulf
thereunder relating to events occurring prior
to the effective date of such sale,
assignment, transfer or conveyance.
(p) deleting the phrase "that consent may be given by any
of Licensor's representatives to the board of
directors of Gulf or Licensee" as it appears in
Section 4.11(b) and inserting in lieu thereof the
words "a request for consent shall be made by
Licensee in writing addressed to the Secretary of
Licensor's parent corporation Shoney's, Inc. and
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written approval may be given by the Secretary,
Treasurer or Chief Financial Officer of Licensor's
parent corporation Shoney's, Inc."
(q) deleting the existing Section 5.1 in its entirety.
(r) deleting the date "October 27, 1991" as it appears in
Section 5.2 and inserting in lieu thereof the date
"October 25, 1996."
(s) inserting the words ", as amended" immediately
following the words "attached hereto" as they appear
in the second line of Section 5.3.
(t) deleting the existing Section 5.4 in its entirety.
(u) deleting the existing Section 5.5 in its entirety.
(v) inserting the words "subject to the provisions of
Section 4.10" immediately before the words "Gulf will
continue" as they appear in the third line of Section
6.1 and deleting the parenthetical "(except any
security interests granted to Licensor herein)" as it
appears in the sixth and seventh lines of Section 6.1.
(w) deleting the second and third sentences of Section
6.3.
(x) deleting Section 6.5 in its entirety.
(aa) deleting the words ", as modified by Section 5.1
hereof" as they appear in the last line of Section
6.6.
(bb) deleting the words "(except for the payment of any
royalty fees) or any other agreement between Licensor
and Licensee (including, without limitation, the
Security Agreement) executed contemporaneously with
the execution of this Agreement" as they appear in
Section 7.1(a).
(cc) deleting the existing Section 7.1(f) in its entirety.
(dd) deleting the existing Section 7.1(g) in its entirety.
(ee) deleting the word "report" as it appears in Section
7.1(h) and inserting in lieu thereof the word
"document."
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(ff) deleting the term "ten (10)" as it appears in Section
7.1(j) and inserting the term "thirty (30)" in lieu
thereof.
(gg) deleting the words "and the Stock Pledge Agreement"
as they appear in the parenthetical in the fourth
line of Section 7.2(a).
(hh) deleting the existing Section 7.2(f) in its entirety.
(ii) deleting the existing Section 7.2(g) in its entirety.
(jj) deleting the term "ten (10)" as it appears in Section
7.2(i) and inserting the term "thirty (30)" in lieu
thereof.
(kk) deleting the parenthetical "(with the exception of
those set forth in Section 7.4(f) hereof)" as it
appears in the third and fourth lines of Section
7.4(a).
(ll) deleting the words "assignment of all agreements then
existing between Licensee and any franchisee,
assignment of any leases for Motels in existence on
the date hereof and" as they appear in the
parenthetical in the last sentence of Section 7.4(a).
(mm) deleting the existing Section 7.4(c) in its entirety.
(nn) deleting the existing Section 7.4(d) in its entirety.
(oo) deleting the existing Section 7.4(f) in its entirety.
(pp) deleting the address for Licensor as it appears in
Section 8.6 and inserting the following address in
lieu thereof:
Shoney's Investments, Inc.
Suite 1400
300 South Fourth Street
Las Vegas, Nevada 89101
2. Except as herein specifically amended, all terms and
provisions of the Existing License Agreement shall remain in full force and
effect.
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3. This Amendment may be executed simultaneously in two (2) or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4. The terms of this Amendment shall be interpreted and construed
in accordance with the laws of the State of Nevada.
5. The parties hereto agree that the termination of the royalty
payment obligation created by this Amendment pertains only to future royalties
accruing after the date of this Amendment and that Licensee and ShoLodge shall
be liable for the payment of all royalties accrued through and including
October 25, 1996 in accordance with the terms of the Existing License
Agreement. Licensee shall pay such royalties to Licensor in such amounts, at
such times and otherwise in accordance with the terms of the Existing License
Agreement.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the undersigned have executed this Amendment all
as of the day and date first above written.
LICENSOR:
SHONEY'S INVESTMENTS, INC.
By: /s/ John H. Mowbray
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John H. Mowbray
Title: Assistant Secretary
LICENSEE:
SHOLODGE FRANCHISE SYSTEMS, INC.
By: /s/ Leon Moore
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Title: Chairman
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SHOLODGE, INC.
By: /s/ Leon Moore
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Title: President
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