EXHIBIT 10.3
[GRAPHIC OMITTED]
BOULDER, COLORADO
PROMUS HOTELS, INC
755 CROSSOVER LANE
MEMPHIS, TENNESSEE 38117
99-hom/co
HOMEWOOD SUITES
LICENSE AGREEMENT
DATED JUNE 30, 2000 BETWEEN PROMUS HOTELS, INC., A DELAWARE CORPORATION
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("LICENSOR"), AND APPLE SUITES MANAGEMENT, INC., A VIRGINIA CORPORATION
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("LICENSEE"), WHOSE ADDRESS IS 306 EAST MAIN STREET, RICHMOND, VIRGINIA 23219 .
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THE PARTIES AGREE AS FOLLOWS:
1. THE LICENSE.
Licensor owns, operates and licenses a system designed to provide a
distinctive, high quality hotel service to the public under the name
"Homewood Suites" (the "SYSTEM"). High standards established by
Licensor are the essence of the System. Future investments may be
required of Licensee under this License Agreement ("AGREEMENT").
Licensee has independently investigated the risks of the business to be
operated hereunder, including current and potential market conditions,
competitive factors and risks, has read Licensor's "Franchise Offering
Circular," and has made an independent evaluation of all such facts.
Aware of the relevant facts, Licensee desires to enter into this
Agreement in order to obtain a license to use the System in the
operation of a Homewood Suites hotel located at 4950 BASELINE ROAD,
BOULDER, COLORADO 80303 (the "HOTEL") subject to the terms of this
Agreement.
A. THE HOTEL. The Hotel comprises all structures, facilities,
appurtenances, furniture, fixtures, equipment, and entry,
exit, parking and other areas from time to time located on the
site approved for the Hotel and acknowledged by Licensor in
anticipation of the execution of this Agreement, or located on
any land from time to time approved by Licensor for additions,
signs or other facilities. No change in the number of approved
guest suites ("GUEST SUITES") reflected on Attachment B (the
"RIDER") and no other significant change in the Hotel may be
made without Licensor's prior approval. Redecoration and minor
structural changes that comply with Licensor's standards and
specifications will not be considered significant. Licensee
represents that it is entitled to possession of the Hotel
during the entire License Term without restrictions that would
interfere with anything contemplated in this Agreement.
B. THE SYSTEM. The System is composed of elements, as designated
from time to time by Licensor, designed to identify "Homewood
Suites hotels" to the consuming public and/or to contribute to
such identification and its association with quality
standards. The System at present includes the service mark
"Homewood Suites" and such other service marks and such
copyrights, trademarks and similar property rights as may be
designated from time to time by Licensor to be part of the
System; access to a reservation service; distribution of
advertising, publicity and other marketing programs and
materials; the furnishing of training programs and materials,
standards, specifications and policies for construction,
furnishing, operation, appearance and service of the Hotel,
and other requirements as stated or referred to in this
Agreement and from time to time in the Manual (as defined
herein) or in other communications to Licensee; and programs
for inspecting the Hotel and consulting with Licensee.
Licensor may add elements to the System or modify, alter or
delete elements of the System (including the trade name and/or
brand name of the Hotel) at its sole discretion from time to
time. Licensee is only authorized to use "Homewood Suites"
service marks and trademarks at or in connection with the ----
Hotel.
C. THE MANUAL. Licensee acknowledges the receipt of a current
Homewood Suites Standards Manual ("MANUAL"). The Manual
contains, among other matters, minimum standards and
requirements for constructing, equipping, furnishing,
supplying, operating, maintaining and marketing the Hotel.
Licensor shall have the right to change the Manual from time
to time and Licensee agrees to abide by the Manual as changed.
The Manual shall at all times remain the sole property of
Licensor. Licensee shall use all reasonable efforts to
maintain the confidentiality of the Manual. Licensee shall not
make or distribute copies of the Manual or any portion
thereof.
D. APPLICATION OF MANUAL. All hotels operated within the System
will be subject to the Manual, as it may from time to time be
modified or revised by Licensor. Licensor may, in its sole
discretion, grant limited exceptions from compliance with the
Manual which may be made based on local conditions or special
circumstances. Each material change in the Manual will be
explained in writing to Licensee at least 30 days before it
goes into effect. Licensee is responsible for the costs of
implementing all changes required because of modification to
the Manual.
Licensor may require that particular models or brands of
furniture, fixtures, equipment, food, and other items
(collectively, the "SUPPLIES") be used in the operation of the
Hotel or be purchased from Licensor or from a source
designated by Licensor. Otherwise, Licensee may purchase all
Supplies from any source as long as the standards and
specifications in the Manual are met, which standards and
specifications may be changed by Licensor from time to time.
Licensee will be responsible for the costs, if any, associated
with the purchase of Supplies or changing brands, models or
sources of supply.
2. GRANT OF LICENSE.
Licensor hereby grants to Licensee a nonexclusive license (the
"LICENSE") to use the System only at the Hotel, only in connection with
the operation of a Homewood Suites hotel, only in accordance with this
Agreement and only during the "License Term" beginning with the date
hereof and terminating as provided in Paragraph 13. The License applies
to the location of the Hotel specified herein and no other. This
Agreement does not limit Licensor's right, or the rights of any parent,
subsidiary, division or affiliate of Licensor ("ENTITIES"), to use or
license to others the System or any part thereof or to engage in or
license any business activity at any other location. Licensee
acknowledges that Licensor and its Entities are and may in the future
be engaged in other business activities including activities involving
transient lodging and related activities which may be or may be deemed
to be competitive with the System; that facilities, programs, services
and/or personnel used in connection with the System may also be used in
connection with such other business activities of Licensor and its
Entities; and that Licensee is acquiring no rights hereunder other than
the non-exclusive right to use the System in connection with a Homewood
Suites hotel as specifically defined herein in accordance with the
terms of this Agreement.
3. LICENSOR'S RESPONSIBILITIES.
A. TRAINING. During the License Term, Licensor will specify
required and optional training programs and provide these
programs at various locations. Licensee may be charged for (i)
required training services and materials and (ii) for optional
training services and materials if provided to Licensee.
Travel, lodging and other expenses of Licensee and its
employees will be borne by Licensee.
B. RESERVATION SERVICES. During the License Term, so long as
Licensee is in full compliance with the obligations set forth
in this Agreement, Licensor will afford Licensee access to
reservation services for the Hotel.
C. CONSULTATION. Licensor will, from time to time at Licensor's
sole discretion, make available to Licensee consultation and
advice in connection with operations, facilities and
marketing. Licensor shall have the right to establish fees in
advance for its advice and consultation on a
project-by-project basis.
D. ARRANGEMENTS FOR MARKETING, ETC. Licensor will use the
Marketing/Reservation Contribution for costs associated with
advertising, promotion, publicity, market research and other
marketing programs and related activities, including
reservation programs and services. Licensor may enter into
arrangements for development, marketing, operations,
administrative, technical and support
functions, facilities, programs, services and/or personnel
with any other entity and may use any facilities, programs,
services and/or personnel used in connection with the System
in connection with any business activities of its Entities.
Licensor is not obligated to expend funds for marketing or
reservation services in excess of the amounts received from
Licensees using the System. Licensor and its designees shall
have no obligation in administering any marketing and
reservation activities to make expenditures for Licensee which
are equivalent or proportionate to Licensee's payments, or to
ensure that any particular hotel benefits directly or
proportionately from such expenditures.
E. INSPECTIONS/COMPLIANCE ASSISTANCE. Licensor has the right to
inspect the Hotel at any time, with or without notice to
Licensee, to determine if the Hotel is in compliance with the
standards and rules of operation set forth in the Manual. If
the Hotel fails to comply with such standards and rules of
operation, Licensor may, at its option and at Licensee's cost,
require an action plan to correct the deficiencies. Licensee
must then take all steps necessary to correct any deficiencies
within the times established by Licensor. Licensor's approval
of an action plan does not waive any rights it may have under
this Agreement nor does it relieve Licensee of any obligations
under this Agreement.
4. PROPRIETARY RIGHTS.
A. OWNERSHIP OF THE SYSTEM. Licensee acknowledges and will not
contest, either directly or indirectly, Licensor's (or its
affiliates', as the case may be) unrestricted and exclusive
ownership of the System and any element(s) or component(s)
thereof, and acknowledges that Licensor has the sole right to
grant licenses to use all or any element(s) or component(s) of
the System. Licensee specifically agrees and acknowledges that
Licensor (or its affiliates) is the owner of all right, title
and interest in and to the service mark "Homewood Suites", its
distinguishing characteristics, trade names, service marks,
trademarks, logos, copyrights, slogans, etc., and all other
marks associated with the System ("Marks") together with the
goodwill symbolized thereby and that Licensee will not contest
directly or indirectly the validity or ownership of the Marks
either during the term of this Agreement or at any time
thereafter. All improvements and additions whenever made to or
associated with the System by the parties to this Agreement or
anyone else, and all service marks, trademarks, copyrights,
and service mark and trademark registrations at any time used,
applied for or granted in connection with the System, and all
goodwill arising from Licensee's use of the Marks shall inure
to the benefit of and become the property of Licensor (or its
applicable affiliate). Upon expiration or termination of this
Agreement, no monetary amount shall be assigned as
attributable to any goodwill associated with Licensee's use of
the System or any element(s) or component(s) of the System
including the name or Marks.
B. USE OF NAME. Licensee will not use the word "Homewood" or
"Homewood Suites" or any similar word(s) in its corporate,
partnership, business or trade name, or in any Internet
related name (including a domain name) except as provided in
this Agreement or the Manual, nor authorize or permit such
word(s) to be used by anyone else.
5. TRADEMARK AND SERVICE MARK.
A. TRADEMARK DISPUTES. Licensor will have the sole right and
responsibility to handle disputes with third parties
concerning use of all or any part of the System, and Licensee
will, at its reasonable expense, extend its full cooperation
to Licensor in all such matters. All recoveries made as a
result of disputes with third parties regarding use of the
System or any part thereof shall be for the account of
Licensor. Licensor need not initiate suit against alleged
imitators or infringers and may settle any dispute by grant of
a license or otherwise. Licensee will not initiate any suit or
proceeding against alleged imitators or infringers or any
other suit or proceeding to enforce or protect the System.
B. PROTECTION OF NAMES AND MARKS. Both parties will make every
effort consistent with the foregoing to protect and maintain
the Marks and name "Homewood Suites" and its distinguishing
characteristics as standing for the System and only the
System. Licensee agrees to execute any documents deemed
necessary by Licensor or its counsel to obtain protection for
Licensor's Marks or to maintain their continued validity and
enforceability. Licensee agrees to use such names and Marks
only in connection with the operation of a Homewood Suites
hotel and in the manner authorized by Licensor. Licensee
acknowledges that any unauthorized use of the names or Marks
shall constitute infringement of Licensor's rights. Licensee
must notify Licensor immediately, in writing, of any
infringement or challenge to Licensee's use of the Marks or of
any unauthorized use or possible misuse of Licensor's Marks or
Licensor's proprietary information.
6. LICENSEE'S RESPONSIBILITIES.
A. OPERATIONAL AND OTHER REQUIREMENTS. During the License Term,
Licensee will:
(1) promptly pay to Licensor all amounts due Licensor and
its Entities as royalties or fees or for goods or
services purchased by Licensee;
(2) maintain the Hotel in a clean, safe and orderly manner
and in first class condition;
(3) provide efficient, courteous and high-quality service
to the public;
(4) operate the Hotel 24 hours a day every day, except as
otherwise permitted by Licensor based on special
circumstances;
(5) strictly comply in all respects with the Manual and
with all other policies, procedures and requirements of
Licensor which may be from time to time communicated to
Licensee;
(6) strictly comply with Licensor's reasonable requirements
to protect the System and the Hotel from unreliable
sources of supply;
(7) strictly comply with Licensor's requirements as to:
(a) the types of services and products that either
must or may be used, promoted or offered at the
Hotel;
(b) use, display, style and type of signage;
(c) directory and reservation service listings of the
Hotel;
(d) training of persons to be involved in the
operation of the Hotel;
(e) participation in all marketing, reservation
service, advertising, training and operating
programs designated by Licensor as System-wide (or
area-wide) programs based on Licensor's assessment
of the long-term best interests of hotels using
the System, considering the interest of the System
overall;
(f) maintenance, appearance and condition of the
Hotel;
(g) quality and types of services offered to customers
at the Hotel, and
(h) its 100% Satisfaction Guarantee rule of operation,
and any similar rules of operation designed to
maintain or improve relationships with past,
present and potential guests and other hotel
customers, as such rule or rules are in effect or
as they may be established or revised hereafter;
(8) use such automated guest service and/or hotel
management and/or telephone system(s) which Licensor
deems to be in the best interests of the System based
on Licensor's assessment of the long-term best
interests of hotels using the System, considering the
interests of the System overall, including any
additions, enhancements, supplements or variants
thereof which may be developed during the term hereof;
(9) participate in and use those reservation services which
Licensor deems to be in the best interests of the
System based on Licensor's assessment of the long-term
best interests of hotels using the
System, considering the interests of the System
overall, including any additions, enhancements,
supplements or variants thereof which may be developed
during the term hereof;
(10) adopt improvements or changes to the System as may be
from time to time designated by Licensor;
(11) strictly comply with all governmental requirements,
including the filing and maintenance of any required
trade name or fictitious name registrations, paying all
taxes, and maintaining all governmental licenses and
permits necessary to operate the Hotel in accordance
with the System;
(12) permit inspection of the Hotel by Licensor's
representatives at any time and give them free lodging
for such time as may be reasonably necessary to
complete their inspections;
(13) upon request by Licensor, provide to Licensor
statistics on Hotel operations in the form specified by
Licensor and using definitions specified by Licensor;
(14) promote the Hotel on a local or regional basis subject
to Licensor's requirements as to form, content and
prior approvals;
(15) ensure that no part of the Hotel or System is used to
further or promote another lodging facility or any
business that competes with any business Licensor or an
affiliate engages in at any time during the Agreement
(including, but not limited to, the timeshare resort or
vacation ownership business), except for those approved
by Licensor, its parent, subsidiaries or affiliates;
(16) use every reasonable means to encourage use of Homewood
Suites facilities everywhere by the public; provided,
however, this will not prohibit Licensor from requiring
Licensee's participation in programs designed to refer
prospective customers to other hotels (in the System or
otherwise);
(17) in all respects use Licensee's best efforts to reflect
credit upon and create favorable public response to the
name "Homewood Suites";
(18) comply with Licensor's requirements concerning
confidentiality of information;
(19) not at any time during the term of this Agreement,
through itself or any member of an affiliated group (as
defined by the Internal Revenue Code) own, in whole or
in part, or be the licensor of, a hotel brand,
tradename, system or chain without the written consent
of Licensor in its sole discretion. Hereafter, any
entity that, through itself or any affiliate, owns in
whole or in part, or is the licensor of a hotel brand,
tradename, system or chain shall be referred to as a
COMPETITOR"; and
(20) maintain possession and control of the Hotel and Hotel
site.
B. UPGRADING OF THE HOTEL. Licensor may at any time during the
License Term require substantial modernization, rehabilitation
and other upgrading of the Hotel to meet the then current
standards specified in the Manual as long as those standards
apply to a majority of the hotels operated by Licensor and its
licensees in the same brand or category as the Hotel. Nothing
in this paragraph shall be construed to relieve Licensee from
the obligation to maintain acceptable product quality ratings
at the Hotel and maintain the Hotel in accordance with the
Manual at all times during the Agreement. Limited exceptions
from those standards may be made by Licensor based on local
conditions or special circumstances. If the upgrading
requirements contained in this Paragraph 6b cause Licensee
undue hardship, Licensee may terminate this Agreement by
paying a fee computed according to Paragraph 13f.
C. STAFF AND MANAGEMENT. Licensee is at all times responsible for
the management of the Hotel's business. Licensee may fulfill
this responsibility by retaining a third party management
company ("MANAGER"); provided, however, Licensee shall not
enter into any lease, management agreement or other similar
arrangement for the operation of the Hotel or any part thereof
with any entity without the prior written consent of Licensor
in Licensor's sole discretion (there being no obligation on
the part of
Licensor to approve a third party management company).
Licensee understands that Licensor will not normally approve a
Competitor to manage the Hotel, or any entity that (through
itself or an affiliate) is the exclusive manager for a
Competitor. If a Manager becomes a Competitor at any time
during the term of the Agreement, Licensee shall have 90 days
to retain a substitute manager suitable to Licensor. As a
prerequisite for Licensor's approval of a Manager, the
proposed management agreement must provide (1) that the
Manager has authority for the day-to-day management of the
Hotel; (2) that the Manager has the authority to perform the
obligations of the Licensee under this Agreement; and (3) that
in the case of any conflict between this Agreement and the
management agreement, this Agreement prevails.
7. FEES.
A. Commencing on the opening date of the Hotel as a Homewood
Suites hotel and continuing for the full term of this
Agreement, for each month (or part of a month), Licensee will
pay to Licensor by the 15th of the following month:
(1) a royalty fee equal to 4 percent of the gross revenues
attributable to or payable for rental of Guest Suites
at the Hotel with deductions for sales and room taxes
only ("GROSS SUITES REVENUE"); and
(2) a "MARKETING/RESERVATION CONTRIBUTION" equal to 4
percent of Gross Suites Revenue. The
Marketing/Reservation Contribution is subject to change
by Licensor from time to time, which
Marketing/Reservation Contributions do not include the
cost, installation or maintenance of reservation
services equipment or training; and
(3) all amounts due Licensor for any other miscellaneous
fees or invoices or for goods or services purchased by
or provided to Licensee or paid by Licensor on
Licensee's behalf; and
(4) an amount equal to any sales, gross receipts or similar
tax imposed on Licensor for the receipt of the payments
required in (1), (2) and (3) of this Paragraph above,
unless the tax is an optional alternative to an income
tax otherwise payable by Licensor.
B. Licensee will operate the Hotel so as to maximize Gross Suites
Revenue consistent with sound marketing and industry practice
and will not engage in any conduct which is likely to reduce
Gross Suites Revenue in order to further other business
activities.
C. Royalties may be charged on revenues (or upon any other basis,
if so determined by Licensor) from any activity conducted at
the Hotel if added by mutual agreement and if: (i) not now
offered at hotels within the System generally and is likely to
benefit significantly from or be identified significantly with
the Homewood Suites name or other aspects of the System or
(ii) designed or developed by or for Licensor.
D. Licensor may charge for optional products or services accepted
by Licensee from Licensor either in accordance with current
practice or as developed in the future.
E. A Guest Suite addition fee for guest suite additions to a
hotel set forth in Licensor's then current "FRANCHISE OFFERING
CIRCULAR" shall be paid by Licensee to Licensor on Licensee's
submission of an application to add any Guest Suites to the
Hotel. As a condition to Licensor granting its approval of
such application, Licensor may require Licensee to upgrade the
Hotel, subject to Paragraph 6b.
F. Local and regional marketing programs and related activities
may be conducted by Licensee, but only at Licensee's expense
and subject to Licensor's requirements. Reasonable charges may
be made by Licensor for optional advertising materials ordered
or used by Licensee for such programs and activities.
G. Licensee shall participate in Licensor's travel agent
commission program(s) as it may be modified from time to time
and shall reimburse Licensor on or before the 15th of each
month for call costs associated with such programs including,
but not limited to, travel agent commissions and third party
reservation service charges (such as airline reservation
systems).
H. Each payment paid by Licensor under this Paragraph 7 shall be
accompanied by the monthly statement referred to in Paragraph
8. Licensor may apply any amounts received under this
Paragraph 7 to any amounts due under this Agreement. If any
amounts are not paid when due, such non-payment shall
constitute a breach of this Agreement and, in addition, such
unpaid amounts will accrue a service charge beginning on the
first day of the month following the due date of 1 1/2 percent
per month but not to exceed the maximum amount permitted by
applicable law.
8. RECORDS AND AUDITS.
A. DAILY AND MONTHLY REPORTS. At the request of Licensor,
Licensee shall prepare and deliver daily reports to Licensor,
which reports will contain information reasonably requested by
Licensor on a daily basis, such as daily rate and room
occupancy, and which may be used by Licensor for its
reasonable purposes. At least monthly, Licensee shall prepare
a statement which will include all information concerning
Gross Suites Revenue, other revenues generated at the Hotel,
suite occupancy rates, reservation data and other information
required by Licensor (the "DATA"). The Data will be
permanently recorded and retained as may be reasonably
required by Licensor. By the 15th of each month, Licensee will
submit to Licensor a statement setting forth the Data for the
previous month and reflecting the computation of the amounts
then due under Paragraph 7. The statement will be in such form
and detail as Licensor may reasonably request from time to
time, and may be used by Licensor for its reasonable purposes.
B. MAINTENANCE OF RECORDS. Licensee shall, in a manner and form
satisfactory to Licensor and utilizing accounting and
reporting standards as reasonably required by Licensor,
prepare on a current basis (and preserve for no less than four
years), complete and accurate records concerning Gross Suites
Revenue and all financial, operating, marketing and other
aspects of the Hotel, and maintain an accounting system which
fully and accurately reflects all financial aspects of the
Hotel and its business. Such records shall include books of
account, tax returns, governmental reports, register tapes,
daily reports, and complete quarterly and annual financial
statements (profit and loss statements, balance sheets and
cash flow statements).
C. AUDIT. Licensor may require Licensee to have the Gross Suites
Revenue or other monies due hereunder computed and certified
as accurate by a certified public accountant. During the
License Term and for two years thereafter, Licensor and its
authorized agents shall have the right to verify information
required under this Agreement by requesting, receiving,
inspecting and auditing, at all reasonable times, any and all
records referred to above wherever they may be located (or
elsewhere if reasonably requested by Licensor). If any such
inspection or audit discloses a deficiency in any payments due
hereunder, Licensee shall immediately pay to Licensor (i) the
deficiency, (ii) a service charge thereon as provided in
Paragraph 7h, and (iii) all inspection and audit costs
(including travel, lodging, meals, salaries and other expenses
of the inspecting or auditing personnel). Licensor's
acceptance of Licensee's payment of any deficiency as provided
for herein shall not waive Licensor's right to terminate this
Agreement as provided for herein in Paragraph 13. If the audit
discloses an overpayment, Licensor shall refund the
overpayment to Licensee within 30 days.
D. ANNUAL FINANCIAL STATEMENTS. Licensee will submit to Licensor
complete year-end financial statements for the Hotel, Licensee
and/or any guarantors as soon as available but not later than
90 days after the end of Licensee's fiscal year. Licensee will
certify them to be true and correct and to have been prepared
in accordance with generally accepted accounting principles
consistently applied, and any false certification will be a
breach of this Agreement.
E. All of the information provided to Licensor pursuant to this
paragraph or any other part of this Agreement, or pursuant to
any agreement ancillary to this Agreement (including
agreements relating to the System 21 business system or other
property management system provided by Licensor) (the
"INFORMATION"), shall be the property of Licensor. HOWEVER,
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT,
INFORMATION, SUCH AS FINANCIAL STATEMENTS, PREPARED FOR THE
HOTEL, LICENSEE AND/OR GUARANTORS, WHICH ANY SUCH PARTIES ARE
REQUIRED BY LAW OR BY THEIR NORMAL BUSINESS PRACTICES TO USE
FOR OTHER PURPOSES (SUCH AS IN FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION OR OTHER GOVERNMENTAL AUTHORITIES OR FOR
TRANSMISSION TO SHAREHOLDERS) MAY BE USED BY THEM FOR SUCH
PURPOSES, AND SUCH PARTIES SHALL RETAIN OWNERSHIP IN SUCH
INFORMATION TO THE EXTENT NECESSARY TO
PERMIT SUCH USE. NEVERTHELESS, LICENSOR SHALL OWN THE COPIES
OF ANY SUCH INFORMATION PROVIDED BY ANY SUCH PARTIES IN
ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. Licensor will use
reasonable efforts to sort, categorize, classify and otherwise
analyze the information to help licensees market their hotels.
The Information will remain the proprietary information of
Licensor which Licensor will share with licensees only as
determined by Licensor in its sole discretion. Licensor and
its affiliates may use the Information for any reason
whatsoever, including an earnings claim in Licensor's offering
circular.
9. INDEMNITY.
SUBJECT TO THE PROVISIONS OF ANY MANAGEMENT AGREEMENT BETWEEN LICENSOR
(AS MANAGER THEREUNDER) AND LICENSEE (AS OWNER THEREUNDER), Licensee
will indemnify, during and after the term of this Agreement, Licensor
and its affiliates, and their respective officers, directors,
employees, agents, predecessors, successors and assigns ("INDEMNIFIED
PARTIES") against, hold them harmless from, and promptly reimburse them
for, all payments of money (fines, damages, legal fees, expenses, etc.)
by reason of any claim, demand, tax, penalty, or judicial or
administrative investigation or proceeding (even where negligence of
Licensor and/or its Entities and/or their Indemnified Parties is actual
or alleged) arising from any claimed occurrence at the Hotel or arising
from, as a result of, or in connection with the development or
operation of the Hotel (including, but not limited to, the design,
construction, financing, furnishing, equipment, acquisition of supplies
or operation of the Hotel in any way), or any other of Licensee's acts,
omissions or obligations or those of anyone associated or affiliated
with Licensee or the Hotel in any way arising out of or related to this
Agreement. At the election of Licensor, Licensee will also defend
Licensor and/or its Entities and/or their Indemnified Parties against
the same. In any event, Licensor will have the right, through counsel
of its choice, to control any matter to the extent it could directly or
indirectly affect Licensor and/or its Entities and/or their Indemnified
Parties financially. Licensee will also reimburse Licensor for all
expenses, including attorneys' fees and court costs, reasonably
incurred by Licensor to protect itself and/or its Entities and/or their
Indemnified Parties from, or to remedy Licensee's defaults or to
collect any amounts due under this Agreement.
10. INSURANCE.
A. Licensee will comply with Licensor's specifications for
insurance as to amount and type of coverage as may be
reasonably specified by Licensor from time to time in writing
and will in any event maintain as a minimum the following
insurance underwritten by an insurer approved by Licensor:
(1) employer's liability and workers' compensation
insurance as prescribed by applicable law; and
(2) liquor liability insurance, if applicable, naming
Licensor and its then current Entities and their
predecessors, successors and assigns as additional
insureds with single-limit coverage for personal and
bodily injury and property damage of at least
$10,000,000 for each occurrence; and
(3) commercial general liability insurance (with products,
completed operations and independent contractors
coverage) and comprehensive automobile liability
insurance, all on an occurrence and per location basis
naming Licensor, its Entities and their predecessors,
successors and assigns as additional insureds and
underwritten by an insurer approved by Licensor, with
single-limit coverage for personal and bodily injury
and property damage of at least $10,000,000 for each
occurrence; and
(4) in connection with all construction at the Hotel during
the License Term, Licensee will cause the general
contractor to maintain with an insurer approved by
Licensor commercial general liability insurance (with
products, completed operations, and independent
contractors coverage including workers' compensation
and automobile liability insurance for such independent
contractors) in at least the amount of $10,000,000 for
each occurrence for personal and bodily injury and
property damage with Licensor, its Entities and their
predecessors, successors and assigns as additional
insureds.
B. EVIDENCE OF INSURANCE/CHANGES. This coverage shall be
evidenced by original certificates of insurance submitted to
Licensor simultaneously herewith, annually hereafter and each
time a change is made in any insurance or insurance carrier,
Licensee will furnish to Licensor certificates of insurance
including the term and coverage of the insurance in force, the
persons insured, and a statement that the
coverage may not be cancelled, altered or permitted to lapse
or expire without 30 days advance written notice to Licensor.
Licensor will send Licensee notice of any policy or coverage
which Licensor, in its sole discretion, finds unacceptable and
upon receipt of such notice, Licensee will promptly undertake
to change such policy or coverage.
C. If Licensee fails or neglects to obtain or maintain the
insurance or policy limits required by this Agreement,
Licensor shall have the option, without notice, to obtain and
maintain such insurance for Licensee, and Licensee shall pay
immediately upon demand therefore, the premiums and the cost
incurred by Licensor in taking such action.
11. TRANSFER.
A. TRANSFER OF THIS AGREEMENT BY LICENSOR. Licensor shall have
the right to transfer or assign this Agreement or any of
Licensor's rights, obligations, or assets under this Agreement
to any person or legal entity provided that the transferee
assumes all of Licensor's obligations to Licensee under this
Agreement.
B. TRANSFERS BY LICENSEE.
(1) General Statement of Explanation and Intent. This
Agreement is not transferable by Licensee, and a change
in ownership of the Hotel or the licensed business
(i.e., either this Agreement, the Licensee or any
indirect ownership interest in the Licensee) is not
allowed under this Agreement. Certain intra-family
transfers of interest and (in the case of corporate
licensees) corporate restructurings are permitted as
long as the requirements described below are met.
However, Licensor has entered into this Agreement with
a particular Licensee or its owners. If the Licensee
wants to transfer the Hotel or its interest in the
licensed business, such a transfer will constitute a
"change of ownership". If the transferee wants to
continue to operate the Hotel as a Homewood Suites
hotel, the transferee will have to apply for a new
license which, if approved, will last at most for the
balance of the term of this Agreement. If the change of
ownership is not approved, or if the transferee does
not want to continue to operate the Hotel as a Homewood
Suites hotel, Licensor may refuse to consent to the
termination of this Agreement. If Licensor does consent
to termination, this Agreement will terminate and
Licensee will owe liquidated damages. In addition, if
the transfer is to a Competitor, Licensor has the right
to buy the Hotel. The foregoing explanation is more
fully described and qualified by the following specific
provisions.
(2) Licensee understands and acknowledges that the rights
and duties set forth in this Agreement are personal to
Licensee, and that Licensor has entered into this
Agreement in reliance on the business skill, financial
capacity, and personal character of Licensee (if
Licensee is an individual), and that of the partners,
members, or stockholders of Licensee (if Licensee is a
partnership, company, corporation, or other legal
entity). Accordingly, no direct or indirect interest in
the Hotel or in this Agreement, and no direct or
indirect Equity Interest (as defined herein) in
Licensee may be sold, leased, assigned, or transferred,
(such instances hereafter referred to collectively as a
"TRANSFER"), without the consent of the Licensor.
Nothing herein shall require Licensor's approval for
any pledge, mortgage, or hypothecation of all or any
part of the assets of the licensed business (other than
this Agreement or any Equity Interest in Licensee) to
banks or other lending institutions.
(3) Any purported Transfer, by operation of law or
otherwise, not in accordance with the provisions of
this Agreement shall be null and void and shall
constitute a breach of this Agreement, for which
Licensor may terminate this Agreement upon notice
without opportunity to cure pursuant to Paragraph 13d,
and as a result of which Licensee will owe liquidated
damages.
(4) References in this Agreement to "EQUITY INTERESTS"
shall mean any direct or indirect beneficial interest
in Licensee (an "INDIRECT" interest is an interest in
an entity other than the Licensee that either itself,
or through others, has an interest in the Licensee). In
addition, "PUBLICLY-TRADED EQUITY INTEREST" shall mean
any Equity Interest which is traded on any securities
exchange or is
quoted in any publication or electronic reporting
service maintained by the National Association of
Securities Dealers, Inc. or any of its successors. In
computing changes of Equity Interests, limited partners
will not be distinguished from general partners.
Licensor's judgment will be final if there is any
question as to the definition of Equity Interest or as
to the computation of relative Equity Interests, the
principal considerations being: direct and indirect (i)
power to exercise control over the affairs of Licensee;
(ii) right to share in Licensee's profits; and (iii)
exposure to risk in the Licensee's business.
(5) Licensee represents that the Equity Interests are
directly and (if applicable) indirectly owned as shown
on the Rider.
C. PROCEDURES FOR TRANSFERS. Licensee must provide written notice
to Licensor in advance of any proposed Transfer stating the
identity of the prospective transferee, purchaser, or lessee
and the terms and conditions of the conveyance. As a condition
to consenting to the transfer, Licensor may require any one or
more of the following to be met:
(1) Licensee will upon request provide a copy of any
proposed agreement of transfer and all other
information with respect thereto which Licensor may
reasonably require;
(2) Licensee will upon request provide documents showing
ownership structure of the Licensee, site control by
the Licensee, possession or management control by the
Licensee, financial statements of any participants, and
any other documents reasonably requested by Licensor;
(3) Licensee will upon request pay a processing fee to
Licensor of up to $5,000 to cover Licensor's costs to
review and consent to the Transfer; provided however,
in the case of a transfer of Equity Interests which
require registration under any federal or state
securities law, Licensee will pay a processing fee that
will not exceed $25,000;
(4) Licensee and all participants in any proposed public
offering (including the sale of partnership or
membership interests) (i) agree to fully indemnify
Licensor in connection with the registration, (ii)
furnish Licensor with all information requested, and
(iii) avoid using Licensor's service marks or
trademarks or otherwise implying Licensor's
participation in or endorsing of any public offering;
(5) Licensee will at all times adequately provide for the
management of the Hotel during any Transfer; or
(6) Licensor may require the transferee to promptly execute
a new license agreement on Licensor's then current
license agreement for the unexpired term of this
Agreement, and Licensor may require the guarantee of
the new license agreement by the same guarantors of
this Agreement (or substitute guarantors approved by
Licensor in its sole discretion).
D. PERMITTED TRANSFERS. Licensor will not unreasonably withhold
consent to any of the following Transfers provided Licensee
complies with all the requirements specified by Licensor
pursuant to Subparagraph c above (it being understood that if
Licensee is in default of any of its obligations under the
Agreement, it will not be unreasonable for Licensor to refuse
to consent to any of these Transfers):
(1) EQUITY INTERESTS WHICH ARE NOT PUBLICLY-TRADED MAY BE
TRANSFERRED, IF AFTER THE TRANSACTION, GLADE M. KNIGHT
OWNS, DIRECTLY OR INDIRECTLY, A BENEFICIAL INTEREST IN
THE GENERAL PARTNER OF LICENSEE AND CONTROLS THE
MANAGEMENT AND POLICIES OF SUCH GENERAL PARTNER AND NOT
LESS THAN 50% OF ALL EQUITY INTERESTS ARE OWNED,
DIRECTLY OR INDIRECTLY, BY GLADE M. KNIGHT AND, IN THE
CASE OF ANY SUCH PERMITTED TRANSFER, THE REQUIREMENTS
OF CLAUSES (3) AND (6) OF SUBPARAGRAPH C. ABOVE NEED
NOT BE COMPLIED WITH BY LICENSEE.
(2) Publicly-traded equity interests may be transferred
(without Licensor's consent and without notification)
if such transfer is exempt from registration under
federal securities law and if immediately before and
after the transfer, the transferor and transferee
respectively each own less than 25 percent of the
Equity Interests in Licensee.
(3) Licensee, if a natural person, may transfer its
interest in the License or Equity Interest in the
Licensee to one or more of Licensee's spouse, parents,
siblings, nephews, descendants or spouses' descendants
or to a corporation entirely owned by Licensee
("PERMITTED TRANSFEREES").
(4) If Licensee is a natural person, upon the Licensee's
death, the License or Licensee's Equity Interest in the
Licensee will pass in accordance with Licensee's will,
or, if Licensee dies intestate, in accordance with laws
of intestacy governing the distribution of the
Licensee's estate, as the case may be, provided the
transferee is one or more of the decedent's Permitted
Transferees (excluding corporations formerly owned by
the Licensee) and within one year after the death the
Permitted Transferees meet all Licensor's normal
requirements of an approved applicant.
(5) Licensee may sell or lease the Hotel, the Hotel site,
or any portion thereof if, in the reasonable judgment
of Licensor, after such transfer, Licensee will retain
possession and control of the Hotel site and management
control of the Hotel operations (which may be via third
party management contract pursuant to Paragraph 6c).
If, in the reasonable judgment of Licensor, the
transfer of the Hotel will result in the loss of
possession or control of the Hotel or Hotel site or
management of the Hotel, the transfer will constitute a
change of ownership as described in Subparagraph e.
E. CHANGE OF OWNERSHIP.
(1) Any Transfer that does not qualify as a permitted
transfer under Subparagraph d above shall constitute a
change of ownership. If in the case of a change of
ownership, the transferee desires to continue to
operate the Hotel as a Homewood Suites hotel, the
transferee must submit an application for a new license
agreement. The new license, if approved, will be at
most for the unexpired term of this Agreement. The
transferee shall be responsible for all normal fees and
costs (including application fees and costs of
improvements to the Hotel).
(2) Licensor shall process such change of ownership
application in good faith and in accordance with
Licensor's then current procedures, criteria and
requirements regarding upgrading of the Hotel, credit,
operational abilities and capabilities, prior business
dealings, market feasibility, guarantees, and other
factors deemed relevant by Licensor. If such change of
ownership application is approved, Licensor and the new
owner shall, upon surrender of this Agreement, enter
into a new license agreement. The new license agreement
shall be on Licensor's then current form and contain
Licensor's then current terms (except for duration),
and if applicable, the new license agreement will
contain specified upgrading and other requirements. If
the application is approved, Licensee submits a
voluntary termination of this Agreement and signs a
release (in a form satisfactory to Licensor) of all
claims against Licensor, and the proposed new owner
executes a new license within 30 days of the sale of
the Hotel, no liquidated damages described in Paragraph
13 will be owed by Licensee for the termination of this
Agreement.
(3) If a change of ownership application for the proposed
transferee is not approved by Licensor or the
transferee does not want to continue to operate the
Hotel as a Homewood Suites hotel, Licensor may refuse
consent to the transfer and reserve all remedies; if
Licensor does consent and the Transfer occurs, then
this Agreement shall terminate pursuant to Paragraph
13d hereof and Licensor shall be entitled to all of its
remedies including liquidated damages.
F. TRANSFER TO COMPETITOR. Notwithstanding any of the foregoing,
if the Licensee receives a bona fide offer from a Competitor
to purchase or lease the Hotel or to purchase Licensee or any
entity that controls Licensee, or to purchase an interest in
either, and Licensee or any person or entity that owns or
controls Licensee wishes to accept such offer, Licensee shall
give written notice thereof to Licensor, stating the name and
full identity of the prospective purchaser or tenant, as the
case may be, including the names and addresses of the owners
of the capital stock, partnership interests or other
proprietary interests of such prospective purchaser or tenant,
the price or rental and all terms and conditions of such
proposed transaction, together with all other information with
respect thereto which is requested by Licensor and reasonably
available to Licensee. Within 60 days after receipt by
Licensor of such written notice from Licensee, Licensor shall
elect by written notice to Licensee one of the following four
alternatives:
(1) If the proposed transaction is a sale or lease of the
Hotel, Licensor (or its designee) shall have
the right to purchase or lease the Hotel premises and
related property at the same price or rental and upon
the same terms and conditions as those set forth in
such bona fide offer from a Competitor. In such event
Licensee and Licensor (or its designee) shall promptly
enter into an agreement for sale or lease at the price
or rental and on terms consistent with such bona fide
offer.
(2) If the proposed transaction is a purchase of all or a
portion of the stock or assets (which includes the
Hotel) of Licensee or the person that owns or controls
Licensee, Licensor (or its designee) shall have the
right to purchase the Hotel premises and related
property. If the parties are unable to agree as to a
purchase price and terms within thirty days of
Licensor's election, the fair market value of the Hotel
premises and related property shall be determined by
arbitration as follows: Either party may by written
notice to the other appoint an arbitrator. Thereupon,
within 15 days after the giving of such notice, the
other shall by written notice to the former appoint
another arbitrator, and in default of such second
appointment the arbitrator first appointed shall be the
sole arbitrator. When any two arbitrators have been
appointed as aforesaid, they shall, if possible, agree
upon a third arbitrator and shall appoint him by notice
in writing, signed by both of them in triplicate, one
of which triplicate notices shall be given to each
party hereto; but if 15 days shall lapse without the
appointment of the third arbitrator as aforesaid, then
such third arbitrator shall be appointed by the
American Arbitration Association from its qualified
panel of arbitrators, and shall be a person having at
least ten (10) years' recent professional experience as
to the subject matter in question. Upon appointment of
the third arbitrator (whichever way appointed as
aforesaid), the three arbitrators shall meet and render
their decision. The decision of a majority of the
arbitrators so chosen shall be conclusive. Licensor (or
its designee) shall have the right, at any time within
30 days of being notified in writing of the decision of
the arbitrators as aforesaid, to purchase the Hotel
premises and related property at the valuation fixed by
the arbitrators. The parties shall share equally the
expense of such arbitration.
(3) To terminate this Agreement, in which event Licensee
shall be obligated to pay to Licensor liquidated
damages pursuant to a Special Termination as set forth
in Paragraph 13f.
(4) To refuse to consent to the Transfer, reserving all
remedies under the applicable law.
G. FINANCING. The construction and/or operation of the Hotel may
not be financed by a public offering of any right, title or
interest in the Hotel, the property upon which it is built or
the receipts from its operation without the prior review and
approval of the applicable documentation by Licensor. Licensee
shall submit a non-refundable $25,000 fee with said
documentation.
12. CONDEMNATION AND CASUALTY.
A. CONDEMNATION. Licensee shall, at the earliest possible time,
give Licensor notice of any proposed taking by eminent domain.
If Licensor agrees that the Hotel or a substantial part
thereof is to be taken, Licensor may, in its sole discretion
and within a reasonable time of the taking (within four
months) transfer this Agreement to a nearby location selected
by Licensee. If Licensor approves the new location and
authorizes the transfer and if within one year of the closing
of the Hotel Licensee opens a new hotel at the new location in
accordance with Licensor's specifications, then the new hotel
will be deemed to be the Hotel licensed under this Agreement.
If a condemnation takes place and a new hotel does not, for
whatever reason, become the Hotel under this Agreement in
strict accordance with this paragraph (or if it is reasonably
evident to Licensor that such will be the case), this
Agreement will terminate immediately upon notice thereof by
Licensor to Licensee, without the payment of liquidated
damages as calculated in Paragraph 13f.
B. CASUALTY. If the Hotel is damaged by fire or other casualty,
Licensee will expeditiously repair the damage. If the damage
or repair requires closing the Hotel, Licensee will
immediately notify Licensor, will repair or rebuild the Hotel
according to Licensor's standards, will commence
reconstruction within four months after closing, and will
reopen the Hotel for continuous business operations as soon as
practicable (but in any event within one year after the
closing of the Hotel), giving Licensor ample advance notice of
the date of reopening. If the Hotel is not reopened according
to this Paragraph, this Agreement will terminate immediately,
upon notice thereof by Licensor to Licensee, with the payment
of
liquidated damages as calculated in Paragraph 13f, provided
however, if Licensee's insurer fails to pay the applicable
insurance policy proceeds to Licensee, or if Licensee's
lender, pursuant to a valid agreement with Licensee, refuses
to allow the insurance proceeds to be used for repair or
rebuilding, the Agreement may be terminated by Licensee
without payment of the liquidated damages in Paragraph 13f. In
such case Licensee shall notify Licensor and provide any
reasonable proof requested by Licensor.
C. NO EXTENSIONS OF TERM. Nothing in this Paragraph 12 will
extend the License Term but Licensee shall not be required to
make any payments pursuant to Paragraph 7 for periods during
which the Hotel is closed by reason of condemnation or
casualty.
13. TERMINATION.
A. EXPIRATION OF TERM. Unless terminated earlier, this Agreement
will expire without notice 20 YEARS FROM THE EFFECTIVE DATE OF
THIS AGREEMENT, AS DEFINED ON ATTACHMENT B HEREIN.
B. PERMITTED TERMINATION PRIOR TO EXPIRATION OF TERM. Licensee
may terminate this Agreement on the tenth or fifteenth
anniversary date of the opening of the Hotel by giving at
least 12 but not more than 15 months advance notice to
Licensor accompanied by the payment as provided in Paragraph
13f herein.
C. TERMINATION OR SUSPENSION BY LICENSOR ON ADVANCE NOTICE. This
Agreement may be terminated if Licensee fails to satisfy any
obligations under this Agreement or any attachment hereto.
Except in the case of an immediate termination as provided in
subparagraph 13d below, this Agreement shall terminate if
Licensee fails to cure an Event of Default after the Licensor
furnishes adequate notice of termination based on the Event of
Default.
(1) An "EVENT OF DEFAULT" shall occur if the Licensee fails
to satisfy or comply with any of the requirements,
conditions, or terms set forth in (i) this Agreement or
any attachment including, but not limited to, any
provisions regarding: any transfer of the Hotel, or any
direct or indirect interest in the Agreement or
Licensee, any representation or warranty, any fee
obligation, any operational requirements (including the
standards in the Manual); trademarks usage; maintenance
of records, insurance and indemnity; or (ii) any other
agreement between Licensor (or an affiliate) and
Licensee relating to the Hotel, including, but not
limited to, any property management system agreement,
such as the System 21 business system agreement, or any
agreement to manage the Hotel.
(2) Notice of termination shall be adequate, if mailed
thirty (30) days (or such longer period required by
applicable law) in advance of the termination date.
(3) Licensor's notice of termination shall not relieve
Licensee of its obligations under this Agreement or any
attachment.
(4) As a result of Licensee's efforts to comply with the
terms and conditions contained on Attachment A and
elsewhere in this Agreement, Licensee will incur
substantial expense and expend substantial time and
effort. Licensee acknowledges and agrees that Licensor
shall have no liability or obligation to Licensee for
any losses, obligations, liabilities or expenses
incurred by Licensee if (i) Licensee commits an Event
of Default as described in Paragraph 13c(1); (ii) the
Hotel is not authorized by Licensor to Open as defined
in Attachment A or (iii) this Agreement is terminated
because Licensee has not complied with the terms and
conditions of this Agreement.
(5) Notwithstanding the foregoing, following an Event of
Default, Licensor may at any time, in its sole
discretion, suspend its obligations under this
Agreement (including reservation services).
D. IMMEDIATE TERMINATION BY LICENSOR. Notwithstanding the
foregoing paragraph, this Agreement may be immediately
terminated (or terminated at the earliest time permitted by
applicable law) if one or more of the following material
breaches to this Agreement or any Attachment occur:
(1) Any Event of Default where a prior Event of Default had
also occurred during the preceding 12 months, but the
License was not terminated because Licensee cured the
prior Event of Default;
(2) Licensee or any guarantor of Licensee's obligations
hereunder shall:
(a) generally not pay its debts as they become due or
shall admit in writing its inability to pay its
debts, or shall make a general assignment for the
benefit of creditors; or
(b) commence any case, proceeding or other action
seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or
its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors,
or seeking appointment of a receiver, trustee,
custodian or other similar official for it or for
all or any substantial part of its property; or
(c) take any corporate or other action to authorize
any of the actions set forth above in Paragraphs
(a) or (b).
(3) Any case, proceeding or other action against Licensee
or any such guarantor shall be commenced seeking to
have an order for relief entered against it as debtor,
or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its
debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking
appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial
part of its property, and such case, proceeding or
other action (i) results in the entry of an order for
relief against it which is not fully stayed within
seven business days after the entry thereof or (ii)
remains undismissed for a period of 45 days; or
(4) an attachment remains on all or a substantial part of
the Hotel or of Licensee's or any such guarantors
assets for 30 days; or
(5) Licensee or any such guarantor fails within 60 days of
the entry of a final judgment against Licensee in any
amount exceeding $50,000 to discharge, vacate or
reverse the judgment, or to stay execution of it, or if
appealed, to discharge the judgment within 30 days
after a final adverse decision in the appeal; or
(6) Licensee loses possession or the right to possession of
all or a significant part of the Hotel or Hotel site;
or
(7) Licensee fails to continue to identify the Hotel to the
public as a Homewood Suites hotel; or
(8) Licensee contests in any court or proceeding Licensor's
ownership of the System or any part of the System, or
the validity of any service marks or trademarks
associated with Licensor's business; or
(9) Any action is taken toward dissolving or liquidating
Licensee or any such guarantor, if it is a corporation
or partnership, except for death of a partner; or
(10) Licensee or any of its principals is, or is discovered
to have been convicted of a felony (or any other
offense if it is likely to adversely reflect upon or
affect the Hotel, the System, the Licensor and/or its
Entities in any way; or
(11) Licensee maintains false books and records of accounts
or submits false reports or information to Licensor.
(12) Licensee becomes a Competitor (as defined in Paragraph
6a(19).
E. DE-IDENTIFICATION OF HOTEL UPON TERMINATION. Upon termination
or expiration of the term, Licensee
will take whatever action is necessary to assure that no use
is made of any part of the System (including but not limited
to the Marks) at or in connection with the Hotel or otherwise.
Licensee shall return to Licensor the Manual and all other
proprietary materials, remove all distinctive System features
of the Hotel, including the primary freestanding sign down to
the structural steel, and take all other actions
("DE-IDENTIFICATION ACTIONS") required to preclude any
possibility of confusion on the part of the public that the
Hotel is still using all or any part of the System or is
otherwise holding itself out to the public as a Homewood
Suites hotel. If within 30 days after termination of this
Agreement Licensee fails to comply with this paragraph,
Licensor or its agents at Licensee's expense, may enter the
premises of the Hotel to perform the De-identification
Actions. The preceding sentence shall not in any way limit
Licensor's other rights or remedies under this Agreement.
F. LIQUIDATED DAMAGES. The parties recognize the difficulty of
ascertaining damages to Licensor resulting from premature
termination of this Agreement, and have provided for
liquidated damages, which represent the parties' best estimate
as to the damages arising from the circumstances in which they
are provided and which are only damages for the premature
termination of this Agreement, and not as a penalty or as
damages for breaching this Agreement or in lieu of any other
payment. If this Agreement is terminated other than by the
expiration of the term described in Paragraph 13a, Licensee
will pay Licensor, within 10 days of termination, liquidated
damages in an amount determined as follows:
(1) an amount equal to the amount payable under Paragraph 7
(regarding Fees) for the three years prior to
termination; or
(2) if the Hotel opened but has been Open for less than
three years, an amount equal to the greater of: (i) 36
times the monthly average payable under Paragraph 7, or
(ii) 36 times the amount payable under Paragraph 7 for
the last full month prior to termination; or
(3) if the Hotel opened, but has not been in operation for
one full month, an amount equal to $3,000 per Guest
Suite in the Hotel; or
(4) if the Agreement is terminated before the commencement
of construction or of the Work (as described in the
applicable attachment), an amount equal to the initial
application fee that would be due for a license
application according to Licensor's then current
franchise offering circular (in addition to any initial
application fee already paid); or
(5) if the Agreement is terminated after commencement of
construction or of the Work but before opening of the
Hotel, an amount equal to two times the initial
application fee; or
(6) if the Agreement is terminated pursuant to Paragraph
13b (permitted termination after 10th or 15th year)
only, an amount equal to the amount payable under
Paragraph 7 for the two years prior to notice of
termination.
Furthermore, Licensee recognizes the additional harm by way of
confusion with respect to national accounts, greater
difficulty in re-entering the market, and damage to goodwill
of the Marks that Licensor will suffer in the case of (i) a
Licensee who terminates two or more license agreements with
Licensor at approximately the same time (between either itself
or its affiliates and Licensor) or (ii) a license that
terminates as a result of the Hotel or Licensee being acquired
by a Competitor, and the Licensor is unable or elects not to
buy the Hotel pursuant to Paragraph 11f (each of these will be
referred to as a "SPECIAL TERMINATION"). Licensee agrees that
in the case of a Special Termination, the amount of liquidated
damages as calculated above will be doubled.
14. RENEWAL.
This Agreement is non-renewable.
15. RELATIONSHIP OF PARTIES.
A. NO AGENCY RELATIONSHIP. Licensee is an independent contractor.
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.
Licensor and Licensee expressly acknowledge that the
relationship intended by them is a business relationship based
entirely on, and defined by, the express provisions of this
Agreement and that no partnership, joint venture, agency,
fiduciary or employment relationship is intended or created by
reason of this Agreement.
B. LICENSEE'S NOTICES TO PUBLIC CONCERNING INDEPENDENT STATUS.
Licensee will take all necessary steps including those
reasonably requested by Licensor to minimize the chance of a
claim being made against Licensor for anything that occurs at
the Hotel, or for acts, omissions or obligations of Licensee
or anyone associated or affiliated with Licensee or the Hotel.
Such steps may, for example, include giving notice in Guest
Suites, public rooms and advertisements, on business forms and
stationery, etc., making clear to the public that Licensor is
not the owner or operator of the Hotel and is not accountable
for what happens at the Hotel. Unless required by law,
Licensee will not use the words "Homewood", "Homewood Suites"
or any other names or mark associated with the System to incur
any obligation or indebtedness on behalf of Licensor. Licensee
shall not enter into or execute any contracts in the name
"Homewood Suites hotel", and all contracts for the Hotel's
operations and services at the Hotel shall be in the name of
Licensee or Licensee's management company. Likewise, the words
"Homewood", "Homewood Suites", or any similar words will not
be used to name or identify developments adjacent to or
associated with the Hotel, nor will Licensee use such names in
its general business in any manner separated from the business
of the Hotel.
16. MISCELLANEOUS.
A. SEVERABILITY AND INTERPRETATION. The remedies provided in this
Agreement are not exclusive. If any provision of this
Agreement is held to be unenforceable, void or voidable as
being contrary to the law or public policy of the jurisdiction
entitled to exercise authority hereunder, all remaining
provisions shall nevertheless continue in full force and
effect unless deletion of such provision(s) impairs the
consideration for this Agreement in a manner which frustrates
the purpose of the parties or makes performance commercially
impracticable. The provisions of this Agreement shall be
interpreted based on the reasonable intention of the parties
in the context of this transaction without interpreting any
provision in favor of or against any party whether or not such
party was the drafting party or by such party's position
relative to the other party. Any covenant, term or provision
of this Agreement which, in order to effect the intent of the
parties, must survive the termination of this Agreement, shall
survive any such termination.
B. CONTROLLING LAW. This Agreement shall become valid when signed
by the parties hereto. It shall be deemed made and entered
into in the State of Tennessee and shall be governed and
construed under and in accordance with the laws of the State
of Tennessee. In entering into this Agreement, Licensee
acknowledges that it has sought, voluntarily accepted and
become associated with Licensor who is headquartered in
Memphis, Tennessee, and that this Agreement contemplates and
will result in business relationships with Licensor's
headquarter's personnel. The choice of law designation
permits, but does not require that all suits concerning this
Agreement be filed in the State of Tennessee.
C. EXCLUSIVE BENEFIT. This Agreement is exclusively for the
benefit of the parties hereto, and it may not give rise to
liability to a third party, except as otherwise specifically
set forth herein. No agreement between Licensor and anyone
else is for the benefit of Licensee.
D. ENTIRE AGREEMENT. Licensor and the Licensee each acknowledge
and warrant to each other that they wish to have all terms of
this business relationship defined in this written agreement.
Neither Licensor nor Licensee wishes to enter into a business
relationship with the other in which any terms or obligations
are the subject of alleged oral statements or in which oral
statements serve as the basis for creating rights or
obligations different than or supplementary to the rights and
obligations set forth in this Agreement. Accordingly, Licensor
and Licensee agree that this Agreement and any Attachments
hereto and the documents referred to herein, shall be
construed together and shall supersede and cancel any prior
and/or contemporaneous discussions or writings (whether
described
as representations, inducements, promises, agreements or any
other term) between Licensor or anyone acting on its behalf
and Licensee or anyone acting on his, her or its behalf, which
might be taken to constitute agreements, representations,
inducements, promises or understandings (or any equivalent to
such terms) with respect to this Agreement or the relationship
between the parties and Licensor and Licensee each agree that
they have placed, and will place, no reliance on any such
discussions or writings. This Agreement (including any
Attachments and the documents referred to herein), is the
entire agreement between the parties and contains all of the
terms, conditions, rights and obligations of the parties with
respect to the Hotel or any other aspect of the relationship
between the parties. No future license or offer of a license
for additional locations or any other business activity have
been promised to Licensee and no such license or offer shall
come into existence, except by means of a separate writing,
executed by Licensor's officer or such other entity granting
the license and specifically identified as a License
Agreement. No change, modification, amendment or waiver of any
of the provisions of this Agreement will be effective and
binding upon Licensor unless it is in writing, specifically
identified as an amendment to this Agreement and signed by
Licensor's officer.
E. LICENSOR'S WITHHOLDING CONSENT. Licensor may withhold its
consent, wherever required under this Agreement, if any
default or breach by Licensee exists under this Agreement.
Approvals and consents by Licensor will not be effective
unless evidenced by a writing duly executed on behalf of
Licensor.
F. NOTICES. Any notice must be in writing and will be effective
on either (1) the day it is sent via facsimile with a
confirmation of receipt; or (2) the third day after it is
mailed by first class mail; or (3) the day it is delivered by
express delivery service; or (4) the third day after it is
sent by certified mail to the appropriate party at its address
first stated above or to such person and at such address as
may be designated by notice hereunder.
G. GENERAL RELEASE. Licensee and its respective heirs,
administrators, executors, agents, representatives and their
respective successors and assigns, hereby release, remise,
acquit and forever discharge Licensor and its Entities and
their officers, directors, employees, agents, representatives
and their respective successors and assigns from any and all
actions, claims, causes of action, suits, rights, debts,
liabilities, accounts, agreements, covenants, contracts,
promises, warrants, judgments, executions, demands, damages,
costs and expenses, whether known or unknown at this time, of
any kind or nature, absolute or contingent, if any, at law or
in equity, on account of any matter, cause or thing whatsoever
which has happened, developed or occurred at any time from the
beginning of time to and including the date of Licensee's
execution and delivery to Licensor of this Agreement and that
they will not institute any suit or action at law or otherwise
against Licensor directly or indirectly relating to any claim
released hereby by Licensee. This release and covenant not to
sue shall survive the termination of this Agreement. Licensee
shall take whatever steps are necessary or appropriate to
carry out the terms of this release upon Licensor's request.
H. DESCRIPTIVE HEADINGS. The descriptive headings in this
Agreement are for convenience only and shall not control or
affect the meaning or construction of any provision in this
Agreement.
I. WARRANTIES. Licensee warrants, represents and agrees that all
statements made by Licensee in the Application submitted to
Licensor in anticipation of this Agreement and all other
documents and information submitted by Licensee are true,
correct and complete as of the date hereof and will continue
to be updated so that they are true, correct and complete.
This warranty and representation shall survive the termination
of this Agreement.
J. TIME. Time is of the essence in this Agreement.
K. INCLUDING. Including shall mean including, without limitation.
L. COUNTERPARTS. This Agreement may be executed in counterparts,
and each copy so executed and delivered shall be deemed an
original.
M. AMENDMENTS. If an amendment to this Agreement is required
prior to its execution, said amendment shall be made a part of
this Agreement as an Attachment. If an amendment to this
Agreement is necessary after its execution, said amendment
shall be made a part of this Agreement in the form of a
separate document.
N. PERFORMANCE REQUIREMENTS/RESPONSIBILITIES. Attachment A is
hereby incorporated by reference and made a part of this
Agreement to set forth certain of Licensee's performance
conditions and requirements.
O. BUSINESS JUDGMENT. The parties hereto recognize, and any
mediator or judge is affirmatively advised, that certain
provisions of this Agreement describe the right of Licensor to
take (or refrain from taking) certain actions in the exercise
of its assessment of the long-term best interests of hotels
using the System, considering the interests of the System
overall. Where such decisions have been taken by Licensor and
are supported by the business judgment of Licensor, neither a
mediator nor a judge nor any other person reviewing such
decisions shall substitute his, her or its judgment for the
judgment so exercised by Licensor.
17. EXPIRATION OF OFFER.
This Agreement constitutes an offer which must be accepted by the
Licensee named on the signature page hereof by dating, executing and
returning to Licensor two copies hereof (and all attachments hereto,
including, if required, the Guaranty) on or before the date specified
on the Rider.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first stated above.
LICENSEE: LICENSOR:
APPLE SUITES MANAGEMENT, INC. PROMUS HOTELS, INC.
By: /s/ Glade M. Knight By: /s/ Thomas P. Powell
------------------------------- ---------------------------------------
Name: Glade M. Knight, President Name: Thomas P. Powell
----------------------------- -------------------------------------
Title: President Title: Vice President
--------------------------- ------------------------------------
Witness: Witness: Linda K. Hendrix
-------------------------- ----------------------------------
Date: Date: July 10, 2000
----------------------------- -------------------------------------
GUARANTY
Location: 4950 BASELINE ROAD, BOULDER, COLORADO
----------------------------------------------------------------------
As an inducement to Promus Hotels, Inc. ("LICENSOR") to execute the above
License Agreement, the undersigned, jointly and severally, hereby
unconditionally warrant to Licensor and its successors and assigns that all of
Licensee's representations in the License Agreement and the application
submitted by Licensee to obtain the License Agreement are true and guarantee
that all of Licensee's obligations under the above License Agreement, including
any amendments thereto whenever made (the "AGREEMENT"), will be punctually paid
and performed.
Upon default by Licensee or notice from Licensor, the undersigned will
immediately make each payment required of Licensee under the Agreement. Without
affecting the obligations of the undersigned under this Guaranty, Licensor may
without notice to the undersigned extend, modify or release any indebtedness or
obligation of Licensee, or settle, adjust or compromise any claims against
Licensee. The undersigned waive notice of amendment of the Agreement and notice
of demand for payment or performance by Licensee.
Upon the death of an individual guarantor, the estate of such guarantor will be
bound by this Guaranty but only for defaults and obligations hereunder existing
at the time of death, and the obligations of the other guarantors will continue
in full force and effect.
The Guaranty constitutes a guaranty of payment and not of collection, and each
of the guarantors specifically waives any obligation of Licensor to proceed
against Licensee on any money or property held by Licensee or by any other
person or entity as collateral security, by way of set off or otherwise. The
undersigned further agree that this Guaranty shall continue to be effective or
be reinstated as the case may be, if at any time payment or any of the
guaranteed obligations is rescinded or must otherwise be restored or returned by
Licensor upon the insolvency, bankruptcy or reorganization of Licensee or any of
the undersigned, all as though such payment has not been made.
This Guaranty shall be governed and construed under and in accordance with the
laws of the State of Tennessee.
IN WITNESS WHEREOF, each of the undersigned has signed this Guaranty as of the
date of the above Agreement.
Witnesses: Guarantors:
Apple Suites, Inc.
/s/ [Illegible] By: /s/ Glade M. Knight (Seal)
- --------------------------- ----------------------------
Glade M. Knight, President
19
ATTACHMENT A - PERFORMANCE CONDITIONS
CHANGE OF OWNERSHIP
I. CONSULTATION. Licensee or its representative(s) shall meet with Licensor
at a location selected by Licensor, within 30 days following the date of
Licensee's receipt of a request from Licensor for consultation and
coordination with the project manager assigned to Licensee by Licensor.
II. WORK AND PURCHASE REQUIREMENT. Attachment C, the Product Improvement Plan
(the "PIP"), is incorporated by reference, attached to and made a part of
this Agreement. Licensee shall perform the renovation and/or construction
work and purchase the items described on the PIP (the "WORK") on or
before the completion date specified on the Rider. Whether or not
indicated on the PIP, the Work shall include Licensee's purchasing and/or
leasing and installing all fixtures, equipment, furnishings, furniture,
signs, computer terminals and related equipment, supplies and other items
which would be required of a new Homewood Suites licensee under the
Manual and such other equipment, furnishings and supplies as may be
required by Licensor in order to operate the Hotel. Licensee shall be
solely responsible for obtaining all necessary licenses, permits and
zoning variances required for the Hotel.
III. APPROVAL OF ARCHITECT/ENGINEER AND CONTRACTOR. Licensor shall have the
right to approve the architect/engineer, general contractor and major
subcontractors for the Work. The Work shall not commence until such
approval has been granted, which approvals may be conditioned on bonding
of the contractors. Prior to commencement of the Work, if requested by
Licensor, Licensee shall submit to Licensor, resumes and financial
statements of the architect/engineer, general contractor and any major
sub-contractors for the Work and such additional information concerning
their experience and financial responsibility as Licensor may request.
IV. APPROVAL OF PLANS. On or before the Plans submission date specified on
the Rider, Licensee shall submit to Licensor, Licensee's plans and
specifications and drawings for the Work, including the proposed
furnishings, fixtures, equipment and signs (collectively, "PLANS") for
approval. Licensor may supply Licensee with representative prototype
Guest Room and public area plans and schematic building plans as a guide
for preparation of plans and specifications for the Hotel. Once Licensor
has approved the Plans, no change shall be made to the Plans without the
advance consent of Licensor. In approving the Plans, Licensor does not in
any manner warrant the depth of its analysis or assume any responsibility
for the efficacy of the Plans or the resulting construction. Licensee
shall cause the Hotel renovation and/or construction to be in accordance
with this Agreement, the approved Plans, the Manual and the PIP.
V. COMMENCEMENT; COMPLETION. Licensee shall commence the Work on or before
the date specified on the Rider and shall continue the Work uninterrupted
(except for interruption by reason of events constituting force majeure)
until it is completed. Notwithstanding the occurrence of any events
constituting force majeure, or any other cause, the Work shall be
completed and the Hotel shall be furnished, equipped, and shall otherwise
be in compliance with this Agreement not later than the date specified on
the Rider. Licensor shall have the sole right to determine whether the
Work has been completed in accordance with this Agreement, the approved
Plans, the Manual and the PIP.
VI. INSPECTION. During the course of the Work, Licensee shall, and Licensee
shall cause the architect, engineer, contractors, and subcontractors to
cooperate fully with Licensor for the purpose of permitting Licensor to
inspect the Hotel in order to determine whether the Work is being done in
accordance with this Agreement and shall provide Licensor with samples of
construction materials, etc. as Licensor may request.
VII. REPORTS. Licensee shall submit to Licensor each month after the date
hereof (or more
Attachment A-1
frequently if Licensor shall so request) a report showing progress made
toward fulfilling the terms of this Agreement.
VIII. ACQUISITION OF EQUIPMENT, FURNISHINGS, AND SUPPLIES/STAFFING. Licensee
shall order, purchase and/or lease and install all fixtures, equipment,
furnishings, furniture, signs, computer terminals and related equipment,
supplies and other items required by Licensor, this Agreement, the
approved Plans, the Manual and the PIP.
In accordance with the Manual and such other instructions as are
furnished to Licensee by Licensor, Licensee shall cause to be hired a
staff to operate the Hotel, and all such personnel shall be trained as
required by the Manual. All costs and expenses incurred directly or
indirectly in hiring and training such staff shall be paid by Licensee,
except as expressly provided otherwise in the Manual.
IX. COST OF CONSTRUCTION AND EQUIPPING. Licensee shall bear the entire cost
of the Work, including the cost of the plans, professional fees, licenses
and permits, equipment, furniture, furnishings and supplies.
X. LIMITATION OF LIABILITY. Notwithstanding the right of Licensor to approve
the Plans, the architect, engineer and certain contractors, and to
inspect the Work and the Hotel, Licensor shall have no liability or
obligation with respect to the Work, or the design and construction of
the Hotel, as the rights of Licensor are being exercised solely for the
purpose of assuring compliance with the terms and conditions of this
Agreement. Licensor does not undertake to approve the Hotel as complying
with governmental requirements or as being safe for guests or other third
parties. Licensee should not rely upon Licensor's approval for any
purpose whatsoever except compliance with Licensor's then prevailing
standards and requirements of the Manual.
XI. CONDITIONAL AUTHORIZATION. Licensor may conditionally authorize Licensee
to continue to operate the Hotel as a Homewood Suites hotel even though
Licensee has not fully complied with the terms of this Agreement. Under
certain circumstances, Licensor may suspend services to the Hotel
(including reservation services) while the Work is being performed by
Licensee.
XII. PERFORMANCE OF AGREEMENT. Licensee agrees to satisfy all of the terms and
conditions of this Agreement, and to equip, supply and staff the Hotel in
accordance with this Agreement and to cooperate with Licensor in
connection therewith. As a result of Licensee's efforts to comply with
the terms and conditions of this Agreement, Licensee will incur
substantial expense and expend substantial time and effort. Licensee
acknowledges and agrees that Licensor shall have no liability or
obligation to Licensee for any losses, obligations, liabilities or
expenses incurred by Licensee if this Agreement is terminated because
Licensee has not complied with the terms and conditions of this
Agreement.
Attachment A-2
ATTACHMENT B
RIDER TO LICENSE AGREEMENT
1. Name and Address of Licensee: Apple Suites Management, Inc.
Attn: Glade M. Knight
306 East Main Street
Richmond, Virginia 23219
2. Location of Hotel: 4950 Baseline Road
Boulder, Colorado 80303
3. Number of Approved Guest Rooms: 112
4. Effective Date of License: Date Apple Suites, Inc. closes
the purchase of and obtains
possession and control of the
Hotel ("Closing").
It shall be a condition
precedent to the validity of
this Agreement, and this
Agreement shall be of no force
and effect and Licensee shall
have no rights hereunder unless
and until on or before December
13, 1999, Licensee shall have
submitted to Licensor, written
verification, in a form
satisfactory to Licensor, that
Closing has occurred. Within
five days of Closing, Licensee
shall submit to Licensor (i) a
copy of the deed, as recorded,
transferring the Hotel to Apple
Suites, Inc., (ii) a copy of the
lease agreement between Licensee
and Apple Suites, Inc., and
(iii) the franchise application
fee in the amount of $50,400
5. Term of License to Expire: 20 years from the date of
Closing
6. Plans Submission Dates: as required under the Product
Improvement Plan (Attachment C)
7. Construction or Work Commencement Date: upon Closing
8. Construction or Work Completion Date: within 180 days of Closing but
not later than March 30, 2001
9. Offer Expiration Date [Paragraph 17]: December 23, 1999
10. Ownership of Licensee: Apple Suites Management, Inc.100%
Stockholder:
-----------
Glade M. Knight 100%
Attachment B-1