Exhibit 10.18
ASSIGNMENT AND ASSUMPTION AGREEMENT
This "Agreement" is made and entered into as of April 24, 1997 by and
among MOTEL ASSOCIATES OF WESTERVILLE, INC., ("Assignor"), JANUS INDUSTRIES,
INC., a Delaware corporation ("Assignee"), and KNIGHTS FRANCHISE SYSTEMS, INC.,
a Delaware corporation (the "Company").
Recitals. Assignor is the Franchisee under a Franchise Agreement, dated as
of September 1, 1991, with Knights Franchise Systems, Inc., successor in
interest as franchisor (the "Company"). The Franchise Agreement, will be called
the "Agreements." The Agreements are attached to this Agreement as Exhibit A and
relate to the granting of a Knights System license for a lodging facility
designated as Xxxx Xx. 0000 located at 00 Xxxxxxxxxxx Xxxxx, Xxxxxxxx, Xxxx
00000 (the "Facility"). Assignor is conveying the Facility to Assignee. Assignor
desires to assign the Agreements to Assignee, which desires to assume and accept
the rights and obligations under the Agreements, effective as of the date of
this Agreement.
IN CONSIDERATION of the premises, the mutual promises in this Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which are acknowledged by the parties, it is agreed as follows:
1. Assignor assigns, transfers, bargains, sells, and delegates to Assignee
all of its rights, title and interest in and to the Agreements, and its
obligations existing and arising in the future, under the Agreements.
2. Assignee accepts and assumes the rights, benefits and obligations of
the Franchisee under the Agreements, effective as of the date of this Agreement,
including all existing and future obligations to pay and perform under the
Agreements. Assignor shall remain secondarily liable for payment and performance
of the Agreements. The owners of Assignee have executed the Guaranty attached to
this Agreement.
3. To induce the Company to consent to this Agreement and the assignment
of the Agreements, Assignee adopts and makes to the Company the representations
and warranties of Franchisee set forth in Section 23 of the Franchise Agreement
as of the effective date of this Agreement. Assignee is the owner of fee simple
title to the Facility as of the effective date of this Agreement. Assignee's
owners are shown on Exhibit B attached to this Agreement.
4. Assignee will deliver, together with this Agreement, evidence of
insurance meeting System Standards, as contemplated under the Agreements and the
Knights System Standards Manuals.
5. This Agreement shall be deemed a supplement to and modification of the
Agreements. All references to "the Agreement" contained therein shall mean and
refer to the original form of Franchise Agreement or Reservation Equipment
Agreement as the case may be, as modified by any prior amendments and addenda
and this Agreement. Except as expressly stated, no further supplements to or
modifications of the Agreements are contemplated by the parties. There are no
oral or other written arrangements between the Company and Assignor, except as
expressly stated in the Agreements and
any written amendment or addendum thereto included as part of Exhibit "A". The
Agreements, as previously modified, are incorporated by this reference.
6. Assignor and Assignee acknowledge that the Company has not participated
in the negotiation and documentation of the transfer transaction between the
parties, and neither has made any representation or warranty, nor furnished any
information to either party. Assignee waives any and all claims against the
Company, its general partner and their respective officers, directors, limited
partners, shareholders, affiliated corporations, employees and agents arising
out of the transfer of the Facility. Assignee expressly acknowledges that
neither the Company nor its general partner was a participant in such
transaction and that neither the Company nor its general partner have any
liability in connection therewith. Assignee acknowledges that it has made such
investigations of Assignor and the Facility as it believes appropriate.
7. Any notice required under the Agreements to be sent to Assignee shall
be directed to:
Janus Industries, Inc.
0000 Xxxx Xxxxxx Xxxx
Xxxxxxxxxx, Xxxx 00000
Attn: Xxxxxxx Xxxxxx
8. The Company consents to the assignment and assumption of the Agreements
as provided in this Agreement. No waivers of performance or extensions of time
to perform are granted or authorized. The Company will treat Assignee as the
Franchisee under the Agreements.
{THE BALANCE OF THIS PAGE IS INTENTIONALLY BLANK}
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement effective as of the date first above written.
THE COMPANY:
KNIGHTS FRANCHISE SYSTEMS, INC.
By: Attest:
------------------------------- -------------------------------
Xxxxxxx X. Xxxxxxxxxx (Assistant) Secretary
Vice President
Franchise Administration
ASSIGNOR:
MOTEL ASSOCIATES OF WESTERVILLE, INC.
By: /s/ Xxxxx X. Xxxx Attest: /s/ [ILLEGIBLE]
------------------------------- -------------------------------
Xxxxx X. Xxxx (Assistant) Secretary
ASSIGNEE:
JANUS INDUSTRIES, INC.
By: /s/ [ILLEGIBLE] Attest: /s/ [ILLEGIBLE]
------------------------------- -------------------------------
(Assistant) Secretary
Exhibit "A" - Franchise Agreement and related Agreements.
Exhibit "B" - Owners of Assignee
Guaranty
EXHIBIT A
THE AGREEMENTS
Copies of Franchise Agreement, and other related documents follow this page.
RECEIVED
OCT 03 1991
ELS FRANCHISE
KNIGHTS INN
FRANCHISE AGREEMENT
Motel Associates of Westerville Inc.
------------------------------------
FRANCHISEE
September 1, 1991
------------------------------------
DATE OF AGREEMENT
Columbus Westerville
------------------------------------
LOCATION
KNIGHTS INN
FRANCHISE AGREEMENT
TABLE OF CONTENTS
Page
----
1. RECITALS 1
2. ACKNOWLEDGMENTS 1
3. GRANT OF FRANCHISE 2
A. Franchise
B. Trademark License
C. Franchise Limitation
4. TERM OF THE FRANCHISE 2
A. Initial Term
B. Renewal
C. Conditions of Renewal
5. TRADEMARKS 3
A. Non-ownership of Trademarks
B. Acts in Derogation of Trademarks
C. Prohibition Against Disputing Franchisor's Rights
D. Prohibition Against Contracting Under Knights Inn
E. Notification of Infringement Claims
F. Discontinuance of Use of Trademarks
G. Indemnification of Franchisee
6. THE MOTEL PROPERTY 4
A. Acquisition
B. Leased Premises
C. Advertising Signs and Emblems
7. OPERATIONS MANUAL AND TRAINING 4
A. Operations Manual
B. Confidentiality of Operations Manual
C. Training
D. Innkeeper
E. Consultation
8. PAYMENTS TO FRANCHISOR 5
A. Initial Franchise Fee
B. Royalty Fee
X. Xxxxx Revenues
D. Other Fees
E. Application and Default
9. OBLIGATIONS OF FRANCHISEE 6
A. Payments to Franchisor
B. Alterations to Motel
C. Motel Operations
D. Compliance with Law
E. Employees
F. Insurance
10. RECORDS, REPORTS, AUDITS, INSPECTIONS 7
A. Accounting Records
B. Reports
C. Financial Statements
D. Audits
E. Inspections
11. MANAGEMENT AGREEMENT 8
12. MARKETING /RESERVATIONS CONTRIBUTION 8
A. General Conditions
B. Supplemental
13. TERMINATION OF THE FRANCHISE 8
A. Upon Notice
B. Opportunity to Cure
C. Notices Required by Law
14. OBLIGATIONS UPON TERMINATION
OR EXPIRATION OF THE FRANCHISE 9
A. Payment of Amounts Owed to Franchisor
B. Trademarks
C. Modification of Motel Design and Decor
D. Trade Secrets
E. Liquidated Damages
F. Continuing Obligations
15. ASSIGNMENT OF FRANCHISE; SALE OF PROPERTY 10
A. Assignment by Franchisor
B. Assignment by Franchisee
C. Franchisor's Right of First Refusal
D. Death of Franchisee
16. COVENANT NOT TO COMPLETE 11
A. Non-competition
B. Reformation
17. RELATIONSHIP OF THE PARTIES; INDEMNIFICATION 11
A. Independent Contractor
B. Notice to Customers
C. Indemnification
18. ARBITRATION AND ENFORCEMENT 12
A. Arbitration
B. Exception to Arbitration
C. Governing Law
D. Severability
19. DESTRUCTION OF PREMISES; EMINENT DOMAIN 12
A. Destruction of Premises
B. Eminent Domain
20. NOTICES AND PAYMENTS 13
A. Manner and Place of Notices
B. Payments
21. MISCELLANEOUS 13
A. Entire Agreement
B. Amendments
C. Effect of Waiver
D. Binding Effect
E. Titles
F. Counterparts
22. EFFECTIVENESS OF AGREEMENT 14
CARDINAL LODGING GROUP, INC.
ECONOMY LODGING SYSTEMS, INC.
FRANCHISE AGREEMENT
FOR AN KNIGHTS INN MOTEL
THIS AGREEMENT, made this first day of September, 1991 by and between
CARDINAL LODGING GROUP, INC., an Ohio Corporation, with offices at 0000 Xxxxxxxx
Xxxxxxx, Xxxxxxxx, Xxxx, hereinafter called "Franchisor" and Motel Associates of
Westerville Inc. hereinafter called "Franchisee";
1. RECITALS
A. As the result of the expenditure of time, effort and money, Franchisor
has acquired unique experience, special skills, technique and knowledge with
respect to the development, marketing, and operating of Knights Inn Motels.
B. Franchisor has devised a unique and uniform system for the operation of
motels with distinctive interior and exterior accessories, color scheme,
fixtures and equipment, which system is identified by the trademark "Knights
Inn" name and design (all collectively hereinafter referred to as "Trademarks").
C. Franchisor has developed and continues to develop unique processes for
the operation, marketing and development of motel units under the aforesaid
Trademarks.
D. Franchisor has operated motels using the Trademarks; and in connection
therewith, Franchisor has, by maintenance of uniformity and high standards of
quality and service, established a reputation, demand and goodwill for Knights
Inn Motels.
E. Franchisee desires a franchise to operate an Knights Inn Motel and
Franchisor is willing to grant such a franchise on the terms and conditions
hereinafter stated.
2. ACKNOWLEDGMENTS
Franchisee acknowledges and represents to Franchisor, as follows:
A. Franchisee is aware that all of the franchisor's assets used in
connection with the Knights System franchise businessare expected to be sold in
the near future.
B. Franchisee is aware that all of the franchisor's assets used in
connection with the Knights System franchise business are expected to be sold in
the near future.
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C.
D. Franchisee has conducted an independent investigation of the business
contemplated by this Agreement and recognizes that the nature of the business
conducted by Knights Inn Motels may evolve and change over time and that an
investment in an Knights Inn Motel involves business risks.
E. Franchisee has not received or relied upon any guarantee, expressed or
implied, about the revenues, profits, or success of the business venture
contemplated by this Agreement.
F. No representations have been made by Franchisor, or by its officers,
directors, shareholders, employees, or agents, that are contrary to the
statements made in the Disclosure Statement or to the terms contained in this
Agreement.
G. In all of their dealings with Franchisee, the officers, directors,
employees, and agents of Franchisor act only in a representative capacity, not
in an individual capacity, and that this Agreement and all business dealings
between Franchisee and such individuals as a result of this Agreement, are
solely between Franchisee and Franchisor.
3. GRANT OF FRANCHISE
A. Franchise. Franchisor hereby grants to Franchisee and Franchisee
accepts a franchise for the establishment and operation of an Knights Inn Motel
at the location set forth in Exhibit A to this Agreement, upon the terms and
conditions of this Agreement.
B. Trademark License. Franchisor grants to Franchisee and Franchisee
accepts a license to use and display Franchisor's Trademarks only in connection
with the Franchise granted in subsection 3.A. of this Agreement and for such
time as such franchise has not terminated or expired.
C. Franchise Limitation. The franchise granted herein to the Franchisee
relates solely to the motel established at the location set forth in Exhibit A
and does not grant Franchisee any rights nor impose upon Franchisor any
obligations with respect to any other business, franchised or otherwise, engaged
in by Franchisor, either directly or through any other entity. Franchisor
specifically retains the right to grant other franchises for the operation of
Knights Inn Motels at such locations as Franchisor, in its sole discretion,
deems appropriate; provided, however, that Franchisor, within the term of this
franchise, will not establish another Knights Inn motel within a ten (10) mile
radius of the site set forth in Exhibit A, excluding, however, motels already
existing on the date of this Agreement.
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4. TERM OF THE FRANCHISE
A. Initial Term. Unless sooner terminated in accordance with the
provisions of this Agreement, the Franchise granted herein shall commence on the
effective date of this Agreement and shall terminate one (1) year thereafter
(the "Initial Term"). If applicable law requires that Franchisor give notice to
Franchisee with respect to the expiration of the Initial Term, this Agreement
shall remain in effect on a month-to-month basis after expiration of the Initial
Term until Franchisor has given the notice required by applicable law.
B. Renewal. Upon the expiration of the Initial Term, and subject to the
provisions of subsection 4.C. below, the term of the franchise will be
automatically renewed for a second term of one (1) year, at which time the term
will be automatically renewed for a third term of one (1) year; at which time
the term will be automatically renewed for a fourth term of one (1) year, at
which time the term will be automatically renewed for a fifth term of one (1)
year, at which time the term will be automatically renewed for a sixth term of
one (1) year; provided, however, that prior to each renewal term, either party
may cancel the renewal term by giving the other party written notice of
cancellation on or before thirty (30) days prior to the commencement of the
renewal term.
C. Conditions of Renewal. Notwithstanding the provisions of subsection 4.B
above, the franchise shall not be renewed beyond the Initial Term unless the
Franchisee has:
(i) substantially complied with all of the terms and conditions of this
Agreement;
(ii) agreed, in writing, to make such reasonable capital expenditures,
remodel and modernize the interior and exterior of the building,
furniture, fixtures and equipment in accordance with Franchisor's then
existing plans, standards and specifications so that Franchisee's motel
will reflect the then common image intended to be portrayed by Knights Inn
Motels; Capital expenditures, remodeling and modernization shall be done
by Franchisee over a reasonable period of time not to exceed thirty six
(36) months.
(iii)
(iv) entered into Franchisor's then current form of standard Franchise
Agreement and all other agreements and legal instruments and documents
then customarily used by Franchisor in the grant of franchises for Knights
Inn Motels; provided, that Franchisee shall not be required to pay another
initial franchise fee if Franchisee exercises its right to renew the
Franchise.
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5. TRADEMARKS
A. Non-Ownership of Trademarks. Franchisee has no right, title or interest
in or to any of the Trademarks, except for Franchisee's privilege and license
during the term hereof to display and use the Trademarks. Franchisee
acknowledges that Franchisee now asserts no claim and later shall assert no
claim to any goodwill, reputation or ownership of the Trademarks by virtue of
Franchisee's licensed or franchised use or both of them, or otherwise.
B. Acts in Derogation of the Trademarks. Franchisee agrees that it shall
not do any act in derogation of any of the rights of Franchisor in connection
with the Trademarks, either during the term of this Agreement or after, and that
Franchisee shall use the Trademarks only for the uses and in the manner licensed
or franchised or both under, and as provided in, this Agreement.
C. Prohibition Against Disputing Franchisor's Rights. During or after the
term of this Agreement, Franchisee shall not in any way dispute or impugn the
validity of the Trademarks, or the rights of Franchisor to them, or the rights
of Franchisor or other franchisees of Franchisor to use them.
D. Prohibition Against Contracting Under Knights Inn. Franchisee shall not
use the name "Knights Inn" in any corporate or partnership name nor enter into
any contractual relationship with any third-person under such name.
E. Notification of Infringements and Claims. Franchisee shall immediately
notify Franchisor of any apparent infringement of or challenge to Franchisee's
use of the Trademarks, or claim by any person of any rights in the Trademarks,
and Franchisee shall not communicate with any person other than Franchisor and
its counsel in connection with any such infringement, challenge, or claim.
Franchisor shall have sole discretion to take such action as it deems
appropriate and the right to exclusively control any litigation or Patent and
Trademark Office or other proceeding arising out of any such infringement,
challenge, or claim or otherwise relating to any Trademark. Franchisee agrees to
execute any and all instruments and documents, render such assistance, and do
such acts and things as may, in the opinion of Franchisor's counsel, be
necessary or advisable to protect and maintain the interest of Franchisor in any
litigation or Patent and Trademark Office or other proceeding or to otherwise
protect and maintain the interests of Franchisor in the Trademarks.
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F. Discontinuance of Use of Trademarks. If it becomes advisable at any
time, in Franchisor's sole discretion, to modify or discontinue use of any
Trademark, and/or one or more additional or substitute trade or service marks,
Franchisee agrees to comply with Franchisor's directions to modify or otherwise
discontinue the use of such Trademark within a reasonable time after notice
thereof by Franchisor. Franchisor shall not be obligated to compensate
Franchisee for any costs incurred by Franchisee in connection with any such
modification or discontinuance. unless it results from Franchisor losing its
right to the trademark.
G. Indemnification of Franchisee. Franchisor will indemnify Franchisee
against and reimburse Franchisee for damages for which Franchisee is held liable
in any proceeding arising out of Franchisee's use of any Trademark, pursuant to
and in compliance with this Agreement and for costs reasonably incurred by
Franchisee in the defense of any such claim brought against Franchisee or in any
such proceeding in which Franchisee is named as a party, provided that
Franchisee has timely notified Franchisor of such claim or proceeding an has
otherwise complied with this Agreement.
6. THE MOTEL PROPERTY
A. Acquisition. If Franchisee has acquired (or will acquire) ownership of
the real estate and improvements of the motel premises Franchisee shall
undertake to assure that the terms and conditions of this Agreement, and their
performance thereof, will not cause a breach or violation of any mortgage or
security interest against such property.
B. Leased Premises. If Franchisee has leased the motel premises from a
third party
(i)the term of the lease shall be for a period of not less than ten (10)
years unless Franchisor approves, in writing, a shorter term.
(ii) franchisee shall neither create nor purport to create any obligations
on behalf of Franchisor, nor grant nor purport to grant to the landlord
under the lease any rights against Franchisor, nor agree to any other
term, condition or covenant that is inconsistent with any provision of
this Agreement.
(iii) franchisee shall duly and timely perform all of the terms,
conditions, covenants and obligations imposed upon Franchisee under the
lease.
(iv) the lease shall provide that if there is any breach or claim of
breach of it by Franchisee, the landlord shall notify Franchisor in
writing at least thirty (30) days before terminating the lease, and that
Franchisor shall have the right, but not the obligation, to cure such
breach, and assume the lessee's obligations and accede to the lessee's
rights thereunder.
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(v) a fully executed copy of each such lease, complying with the above,
shall be delivered to Franchisor promptly following its execution.
C. Advertising Signs and Emblems. At Franchisee's expense Franchisor may
install advertising signs and emblems that reflects the motel as an Knights Inn
provided the parties mutually agree. Franchisee shall be responsible for
maintaining such signs and emblems in good and working order.
7. OPERATIONS MANUAL AND TRAINING
A. Operations Manual. Franchisor shall provide to Franchisee, one (1) copy
of Franchisor's current multi-volume guide and operations manual. The said guide
and operations manual, any amendments or additions thereto, and all supplemental
bulletins, notices, and memoranda which prescribe standard methods or techniques
of operation and which Franchisor may from time to time deliver to Franchisee,
shall be deemed collectively to constitute the "Operations Manual." Franchisor
retains the right to modify the Operations Manual. The provisions and
requirements set forth in the Operations Manual and any additions, deletions or
revisions thereto, may not in any event alter Franchisee's fundamental rights
and obligation under this Agreement.
B. Confidentiality of Operations Manual. Franchisee agrees to maintain the
confidentiality of the contents of the Operations Manual. The Operations Manual
is the property of the Franchisor, and may not be duplicated or copied in whole
or in part in any manner. Upon the termination of this Agreement, Franchisee
shall return to Franchisor all copies of the Operations Manual in its
possession.
C. Training. Franchisor shall offer initial training to any person,
designated by Franchisee, in the Knights Inn Motel system. Such training shall
be given at an Knights Inn Motel or training center designated by Franchisor,
over a period of approximately two to six weeks, or such other period of time
which Franchisor deems appropriate. Franchisee shall bear the cost of all
training expense including transportation, meals and lodging in connection with
such training.
D. Innkeeper. No person may serve as the Innkeeper (i.e., manager) of an
Knights Inn Motel unless he or she shall have completed such training to
Franchisor's satisfaction.
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X. Xxxxxxxxxxxx. Xxxxxxxxxx shall make itself available for consultation
and guidance of Franchisee in the operation and marketing of the Knights Inn
system. Franchisee shall have the right to ask Franchisor's headquarters staff
and its field representatives about problems relating to the operation of an
Knights Inn, by telephone or correspondence, and Franchisor shall use its best
efforts to respond diligently to such inquiries in order to assist Franchisee.
8. PAYMENTS TO FRANCHISOR
A. Initial Franchise Fee.
B. Royalty Fee. Franchisee shall pay a Royalty fee, which includes a
marketing services contribution, equal to four percent (4%) of gross revenues
and a reservation services contribution based on actual number of rooms rented
through the system. Such payment shall be made by the twentieth (20th) day of
each month from gross revenues in the preceding month.
X. Xxxxx Room Revenues. For purposes of this Section 8, the term, gross
room revenues, is defined as all revenues and income of every kind resulting
from the operation of the Motel and all of its facilities from guests,
subtenants, licensees, concessionaires and other persons occupying space or
rendering services in, at, on, or from the Motel, whether on a cash basis or on
credit, paid or unpaid, collected or uncollected, and without reserve or
deduction for failure or inability to collect, all as determined in accordance
with generally accepted accounting principles applied on a consistent basis;
provided, however, that there shall be deducted or excluded from "gross
revenues"
(i) cash or credit refunds paid to customers upon transactions included in
gross revenues;
(ii) the amount of any city, county, state or federal sales, use, room,
luxury or excise taxes on such sales which are required to be collected
from the customer (but included in the price or stated separately
therefrom) and paid to the taxing authorities;
(iii) proceeds of claims under any insurance policies other than rent or
business interruption insurance;
(iv) gains arising from the sale or other disposition of capital assets;
and
(v) any reversal of any contingency or tax reserve.
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D. Other Fees. Additional fees may be charged on revenues (or upon any
other basis, if so determined by the Franchisor) from any activity that is added
at the motel, and
(i) it becomes customary or appropriate within the general motel industry
for services rendered;
(ii) it is not now offered at Knights Inn Motels generally, and Knights
Inns are likely to benefit significantly from or be identified
significantly with such activity;
(iii) it is designed, manufactured or developed by or for the Franchisor.
E. Application and Default. Each payment under this section shall be
accompanied by the reports referred to in Paragraph 10.B. Franchisor may apply
any amounts received under this Paragraph to any amounts due under this
agreement. If any amounts are not paid when due, such nonpayment shall
constitute a breach of this agreement, and in addition such unpaid amounts will
accrue interest beginning on the first day of the month following the due date
at one and one half percent (1 1/2%) per month but not to exceed the maximum
interest permitted by applicable law.
9. OBLIGATIONS OF THE FRANCHISEE
A. Payments to Franchisor. In addition to all other payments required to
be made to Franchisor pursuant to this Agreement, Franchisee shall pay to
Franchisor, or its designee, the following:
(i) all amounts advanced by Franchisor or which Franchisor shall pay, or
for which Franchisor shall become obligated to pay, on behalf of
Franchisee for any reason whatsoever, and
(ii) all amounts for products, supplies or contracted services purchased
by Franchisee from Franchisor, or its designee.
B. Alterations to Motel. Franchisee shall not, without prior written
approval of Franchisor, materially alter or change the structural design or
color scheme of Franchisee's Knights Inn Motel, nor the surrounding premises,
driveways, parking spaces, and grounds.
C. Motel Operations. Franchisee shall operate and maintain the motel in
accordance with the Operations Manual, specifically Franchisee will:
(i) maintain a high moral and ethical standard at the motel;
(ii) maintain the motel in a clean, safe and orderly manner and in first
class condition as set forth by Franchisor;
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(iii) provide efficient, courteous and high quality service to the public;
(iv) operate the motel twenty-four (24) hours a day every day except as
otherwise permitted by Franchisor based on special circumstances;
(v) strictly comply with all policies, procedures, specifications, and
other requirements of Franchisor which may be from time to time
communicated to Franchisee;
(vi) strictly comply with all reasonable Franchisor requirements as to:
a) types and quality of furniture, fixtures, equipment, services,
and supplies that may be used, promoted or offered at Knights Inn
Motels;
b) use, display, style and type of signage;
c) training and uniform dress requirements of staff persons to be
involved in the operation of motel;
d) participation in all marketing, reservation service, advertising,
promotional, training, quality assurance, operating systems and
programs designated by Franchisor as in the best interests of
Knights Inn Motels;
e) maintenance, appearance and conditions of the motel; and
f) quality and type of service offered to guests of the motel.
(vii) use every reasonable means to encourage use of Knights Inn Motel
facilities everywhere by the public, and
(viii) in all requests use Franchisee's best efforts to reflect credit
upon and create favorable community and public response to the Knights Inn
name and its Franchisor.
D. Compliance with Law. Franchisee shall secure and maintain in force in
its name all required licenses, permits, and certificates relating to the
operation of the motel. Franchisee shall operate the motel in full compliance
with all applicable laws, ordinances, and regulations, including, without
limitation, all government regulations relating to employment, occupational
hazards and health, worker's compensation insurance, unemployment insurance and
withholding, and payment of federal and state income taxes, social security
taxes, sales taxes, and all other applicable taxes.
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E. Employees. Franchisee shall hire all employees of the motel. Franchisee
shall be responsible for all obligations arising from or relating to the
employment of such individuals, including all compensation.
F. Insurance. Franchisee shall purchase and maintain in effect policies of
insurance which Franchisor requires (both as to coverage and amounts) for the
protection of Franchisee's business, including, but not limited to, fire, theft,
burglary, property damage, and public liability. At Franchisee's request, in
writing, Franchisor, or its designee, will purchase such policies in conjunction
with insurance provided to other owners of Knights Inn Motels. Franchisee
agrees, in such event, promptly to pay Franchisor all amounts charged for such
premiums.
10. RECORDS, REPORTS, AUDITS AND INSPECTIONS
A. Accounting Records. Franchisee shall keep complete and accurate books
and records for all business activities conducted at the motel, prepared in
accordance with generally accepted accounting principles, and in accordance with
such requirements as may be set forth in the Operations Manual.
B. Reports. Franchisee shall prepare and submit to Franchisor monthly
reports setting forth Gross Room Revenues and such other data as Franchisor may
reasonably request for business operations at the motel. In addition, Franchisee
shall submit to Franchisor a copy of any and all sales and use tax returns
within ten (10) days of the required filing date.
C.
D. Audits. Franchisor shall have the right at any time during ordinary
business hours to enter Franchisee's premises to inspect, audit and make copies
of books of account, bank statements, documents, records, sales tax returns,
papers and files of Franchisee relating to gross revenues, expenses, and
business transacted. Upon request by Franchisor, Franchisee shall make any such
materials available for examination at Franchisee's premises. If Franchisee
should at any time cause an audit of Franchisee's motel business to be made by
an accountant, Franchisee shall deliver to Franchisor a copy of such audit
report, without cost or expense to Franchisor.
E. Inspections. Franchisor may, at all reasonable times, inspect the
interior and exterior of the motel to determine its physical condition and
insure compliance by Franchisee with this Agreement. If Franchisor determines
that the motel, the surrounding premises, or the furnishings and equipment of
the motel
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are in need of repair, alteration or replacement, it shall give Franchisee a
written notice specifying what is required to put the motel in a good state of
repair. Such alterations, repairs or replacements shall be accomplished at
Franchisee's expense. Franchisee shall permit said inspections by Franchisor's
representatives and shall provide lodging at no cost for such time as may be
reasonably necessary to accomplish the inspection.
12. MARKETING/RESERVATION SERVICES
A. General Conditions. Franchisor agrees to maintain and administer an
Knights Inn collective marketing/reservation services program (including
advertising, promotion, public relations, research, design, and other marketing
related activities). And, during the agreement term, so long as Franchisee is in
full compliance with its material obligations, Franchisor will afford Franchisee
access to reservation services for the Knights Inn Motel, including additions,
enhancements, supplements or variants thereof which may be developed during the
term hereof. Such programs shall be financed from the contribution fees paid by
Franchisee (and other franchisees) pursuant to subsection 8.B. of this
agreement; however, Franchisor is not obligated to expend funds for
marketing/reservation services in excess of the amounts received from
Franchisees in the Knights Inn system.
B. Limitations. Local and regional marketing programs and related
activities may be conducted by Franchisee, but only at Franchisee's expense and
subject to Franchisor's requirements. Reasonable charges may be made by
Franchisor for optional advertising, promotional materials or services ordered
or used by Franchisee for such programs and activities. In all respects,
advertising and promotions instituted by Franchisee must be limited to
Franchisee's motel and contain a statement indicating that the advertising or
promotion does not apply to other motels.
13. TERMINATION OF THE FRANCHISE
A. Upon Notice. This Agreement shall immediately terminate on delivery of
written notice to Franchisee if Franchisee:
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(i) is declared bankrupt or judicially determined to be insolvent, or all
or a substantial part of Franchisee's assets are assigned to or for the
benefit of any creditor, or Franchisee admits inability to pay its debts
as they come due or actually fails to pay such debts, or has an
involuntary petition in bankruptcy filed against it.
(ii) abandons the Franchise by failing to operate for five consecutive
business days, unless such failure is due to disaster or similar reasons
beyond Franchisee's control.
(iii) is convicted of or pleads no contest to a felony or engages in
conduct that reflects materially and unfavorably upon the operation and
reputation of the Franchisee's motel or the Knights Inn system.
(iv) is convicted of a felony or other criminal misconduct relevant to the
operation of the Franchise.
(v) attempts to make or makes an unauthorized transfer of the Franchise or
an ownership interest in the Franchise.
B. Opportunity to Cure. This Agreement shall terminate upon Franchisee's
failure to cure, upon:
(i) noncompliance with any lawful requirement in this Agreement or
prescribed by Franchisor pursuant to this Agreement, within thirty (30)
days after notice thereof is delivered to Franchisee or, if such failure
cannot reasonably be corrected within thirty (30) days after written
notice of such failure is delivered to Franchisee, failure to undertake
diligent efforts to comply and to furnish proof acceptable to Franchisor
of such efforts and the expected date of compliance within ten (10) days
after written notice is delivered to Franchisee;
(ii) noncompliance with any mandatory specification, standard, or
operating procedure prescribed by Franchisor relating to cleanliness or
sanitation of the motel, or violation of any health, safety, or sanitation
law, ordinance or regulation, within seven (7) days after written notice
thereof delivered to Franchisee;
(iii) failure to accurately report the Gross Room Revenues of the motel or
make payments of any amounts due Franchisor for Royalty fees, or any other
amounts due to Franchisor or its affiliates hereunder, within ten (10)
days after written notice of such failure is delivered to Franchisee.
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C. Notices Required by Law. If any valid applicable law or regulation of a
governmental authority having jurisdiction over this franchise and the parties
limits Franchisor's rights of termination (or refusal to renew) under this
Agreement or requires longer notice periods than those set forth herein, this
Agreement shall be deemed amended to conform to the minimum notice periods or
restrictions upon termination (or refusal to renew) required by such laws and
regulations. Franchisor shall not, however, be precluded from contesting the
validity, enforceability or application of such laws or regulations in any
action, arbitration, hearing or dispute relating to this Agreement or to its
termination (or refusal to renew).
14. OBLIGATIONS UPON TERMINATION OR EXPIRATION OF THE FRANCHISE
A. Payment of Amounts owed to Franchisor. Franchisee agrees to pay to
Franchisor within fifteen (15) days after the effective date of termination or
expiration of the Franchise, or such later date that the amounts due are
determined, such Royalty fees, amounts owed for purchases by Franchisee from
Franchisor or its affiliates, interest due on any of the foregoing, and all
other amounts owed to Franchisor or its affiliates which are then unpaid.
B. Trademarks. Franchisee agrees that after the termination or expiration
of the Franchise, Franchisee will:
(i) not directly or indirectly at any time or in any manner identify
himself or any business as a current or former Knights Inn Motel, or as a
franchisee or licensee of or as otherwise associated with Franchisor
(other than under other franchise agreements with Franchisor), or use any
Trademark, any colorable imitation thereof or other indicia of an Knights
Inn Motel in any manner or for any purpose, or service xxxx or other
commercial symbol that suggests or indicates a connection or association
with Franchisor;
(ii) remove, have removed, or at Franchisee's expense, permit Franchisor
to remove all Trademark or licensed materials unique to the operation of
an Knights Inn Motel, including but not limited to signs, emblems, and
systems reflecting any indicia of an Knights Inn Motel;
(iii) take such action as may be required to cancel all fictitious or
assumed name or equivalent registrations relating to its use of any
Trademark; and
(iv) furnish to Franchisor within thirty (30) days after the effective
date of termination or expiration, evidence satisfactory to Franchisor of
Franchisee's compliance with the foregoing obligations.
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C. Modification of Motel Design and Decor. Upon termination or expiration
of the Franchise without renewal Franchisee shall modify the design, decor, and
color scheme of the motel in a manner acceptable to Franchisor, so that it no
longer suggests or indicates a connection with an Knights Inn Motel. (See
Exhibit "B" attached.)
D. Trade Secrets. Upon termination or expiration of the Franchise,
Franchisee shall immediately cease to use any Trade Secret of Franchisor
disclosed to Franchisee pursuant to this Agreement in any business or otherwise
and return to Franchisor the Operating Manual and any other confidential
materials which have been loaned to Franchisee by Franchisor.
E. Liquidated Damages. If Franchisee fails to comply with the requirements
of subsections 14.B (i) and (ii). and C. above, Franchisee shall pay to
Franchisor, as liquidated damages, the sum of Two Hundred Dollars ($200.00) for
each day that Franchisee remains in such noncompliance.
F. Continuing Obligations. All obligations of Franchisor and Franchisee
that expressly or by nature survive the expiration or termination of this
Agreement shall continue in full force and effect subsequent to and
notwithstanding its expiration or termination and until they are satisfied in
full or by nature expire.
15. ASSIGNMENT OF FRANCHISE; SALE OF PROPERTY
A. Assignment by Franchisor. This Agreement is fully assignable or
transferable by Franchisor and shall inure to the benefit of any assignee or
other legal successor to the interest of Franchisor. Upon assignment, Franchisee
after thirty (30) days notification from Franchisor of assignment, may terminate
this Agreement.
B. Assignment by Franchisee. Subject to subsection 15.C. below, this
Agreement and any interest in the franchise may be assigned or otherwise
transferred by Franchisee only upon the Franchisor's written approval, which
approval shall not be unreasonably withheld. By way of illustration and not
limitation, the proposed assignee or transferee's lack of business experience,
financial resources, or failure prior to an assignment to complete a training
program as provided herein, shall be reasonable grounds for Franchisor to
withhold approval of a proposed assignment or transfer.
C. Franchisor's Right of First Refusal. Franchisor shall have an exclusive
right of first refusal to purchase the business and real estate of the motel
franchised herein, including, but not limited to, all structures, fixtures,
merchandise and equipment (hereinafter referred to as "Property"), in accordance
with the following procedure:
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(i) franchisee shall, by certified mail, deliver to Franchisor any bona
fide offer from a third party for the purchase of the Property
(ii) following receipt of such offer, franchisor shall have a period of
ten (10) days in which to exercise its rights of first refusal to purchase
said Property meeting the terms, provisions and conditions of said offer.
(iii) in the event Franchisor determines to exercise its right of first
refusal, it shall give Franchisee written notice within said ten (10) day
period. Closing and payment of the consideration shall take place at such
time and in such manner as set forth in the bona fide offer previously
received by Franchisee. Upon Franchisor's purchase of the Property,
Franchisee's franchise shall terminate.
(iv) in the event Franchisor does not exercise its right of first refusal,
Franchisee may complete the sale with the third party, in accordance with
the terms, provisions and conditions of the aforesaid offer, provided,
however, that Franchisor may withhold approval of the assignment of this
Agreement and the franchise in accordance with subsection 15B. hereof.
However, if the terms of sale of the property are materially changed
thereafter, such changed terms shall be deemed a new offer and Franchisor
shall again have such right of first refusal with respect to the new
offer.
D. Death of Franchisee. Notwithstanding the provisions of subsection 15B.,
if Franchisee is an individual, then upon the death of the Franchisee the
Franchisee's surviving spouse, heirs or estate (the "Survivor") shall, for 180
days after such death, have the opportunity to participate in ownership of the
franchise subject to the following provisions:
(i) within such 180 days the Survivor shall satisfy all the then current
qualifications for a purchaser of a franchise, or shall, in compliance
with this Agreement's other provisions, sell, transfer or assign the
franchise to a person who satisfies such qualifications.
(ii) if the Survivor has not, within such 180 days, sold, transferred or
assigned the franchise, and has not, in Franchisor's judgment satisfied
all the then current qualifications for a purchase of a franchise, then
the Survivor shall, within 90 days after the end of such 180 day period,
sell, transfer or assign the franchise to a person who satisfies such
qualifications.
(iii) the surviving spouse, heirs or estate shall at all times maintain
all the standards and obligations of Franchisee under this Agreement.
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(iv) nothing in this subsection shall limit Franchisor's rights or reduce
the Franchisee's obligations under this Agreement, it being expressly
understood that the survivor shall operate the motel in strict compliance
with all of Franchisee's obligations under this agreement.
17. RELATIONSHIP OF THE PARTIES; INDEMNIFICATION
A. Independent Contractor. In all matters pertaining to the operation of
the motel, Franchisee is and shall be an independent contractor as to
Franchisor. Neither Franchisee nor any employee of Franchisee shall be deemed to
be an employee of Franchisor. Nothing contained in this Agreement shall be
construed so as to create a partnership, joint venture or agency; and neither
party to this Agreement shall be liable for the debts or obligations of the
other. Except as otherwise herein expressly provided, Franchisor shall not have
the power to hire or fire Franchisee's employees, may not control or have access
to Franchisee's funds or the expenditure of these funds, or any other way
exercise control over Franchisee's business.
B. Notice to Customers. Franchisee shall at all times during the operation
of the motel post a notice, in such form and manner as Franchisor may require,
that it is a franchisee of Franchisor.
C. Indemnification. Franchisee shall protect, defend and indemnify
Franchisor, its subsidiaries, affiliates and designees, and shall hold them
harmless, from and against any and all costs, expenses (including attorney's
fees and court costs), losses, liabilities, damages, claims and demands of every
kind or nature, arising in any way out of Franchisee's operation of the motel.
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18. ARBITRATION AND ENFORCEMENT
A. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or any breach of it, including, without limitation, any claim
that this Agreement, or any part of it, is invalid, illegal or otherwise
voidable or void, shall be submitted to final and binding arbitration before,
and in accordance with, the Commercial Rules of the American Arbitration
Association, and judgment upon the award may be entered in any court having
jurisdiction of it. The substantive law of the State of Ohio shall be applied in
such arbitration, and this requirement shall be deemed jurisdictional. This
arbitration provision shall be deemed self-executing, and if either party fails
to appear at any properly noticed arbitration proceeding, an award may be
entered against such party notwithstanding such failure to appear.
B. Execution to Arbitration. Any claim or dispute involving or contesting
the validity of any of the Trademarks shall not be submitted to Arbitration.
Furthermore, subsection 18.A shall not limit the right of Franchisor or
Franchisee to apply to any court of competent jurisdiction for an injunction,
attachment, eviction by summary proceedings, or similar provisional or equitable
relief.
C. Governing Law. Except to the extent governed by United States trademark
laws, this Agreement shall be interpreted in accordance with and governed by the
laws of the State of Ohio.
D. Severability. Nothing contained in this Agreement shall be construed as
requiring the commission of any act contrary to law. Whenever there is any
conflict between any provisions of this Agreement and any present or future
statute, law, ordinance or regulation contrary to which the parties have no
legal right to contract, the latter shall prevail, but in such event the
provision of this Agreement thus affected shall be curtailed and limited only to
the extent necessary to bring it within the requirement of the law. If any part,
article, paragraph, sentence or clause of this Agreement is held to be
indefinite, invalid or otherwise unenforceable, the entire Agreement shall not
fail on account of such holding, and the balance of this Agreement shall
continue in full force and effect.
19. DESTRUCTION OF PREMISES; EMINENT DOMAIN
A. Destruction of Premises. If the motel premises are damaged or destroyed
by fire, earthquake, flood, or other such occurrences, should Franchisee decide
to rebuild and/or repair Franchisee shall expeditiously repair and restore the
motel in accordance with the then-existing plans, standards and specifications
of Franchisor as soon as practicable, but in any event within six (6) months
after closing of the motel.
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B. Eminent Domain. If during the term of this agreement, or any extension
or renewal thereof, all of the motel premises shall be condemned or taken by any
authority having the right to eminent domain, or if purchased by this authority
in lieu of condemnation of the premises, this agreement shall terminate as of
the date title to the premises vests in the authority which takes or purchases
the property or this authority exercises dominion over the property, whichever
occurs first. If this authority takes or purchases any substantial part of the
motel premises, either party may terminate this agreement by giving the other
party written notice of termination within sixty (60) days after the taking or
purchasing and the agreement shall terminate as of the date the notice of
termination is mailed. Termination under this section shall not relieve
Franchisee of his termination obligations. Franchisor shall have no interest in
or claim against the condemning authority for loss of damage incurred as a
result of the acquisition or taking of the motel premises.
20. NOTICES AND PAYMENTS
A. Manner and Place of Notice. All written notices required or permitted
under this Agreement shall be served upon the other party personally, or by
mail, return receipt requested, postage prepaid, and shall be deemed given when
received. Notices shall be addressed as follows:
(i) Notices to Franchisor:
00000 Xxxxx Xxxxxxx
Xxxxxxxxxxxx Xxx., Xxxx 00000
(ii) Notices to Franchisee:
0000 Xxxx Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000-0000
B. Payments. All payments required under this Agreement shall be made to
Franchisor at the address notified to Franchisee from time to time, or to such
other persons or places as Franchisor may direct from time to time.
21. MISCELLANEOUS
A. Entire Agreement. This agreement and all ancillary agreements executed
contemporaneously with it constitute the entire agreement between the parties
with reference to the subject matter of this Agreement and supersede all prior
negotiations, understandings, representations and agreements, if any.
B. Amendments. This Agreement may be amended only by a written instrument
signed by the parties.
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C. Effect of Waiver. No failure of Franchisor or Franchisee to exercise
any power reserved to it by this Agreement or to insist on strict compliance by
Franchisee or Franchisor with any obligation or condition under this Agreement,
and no custom or practice of the parties at variance with the terms of this
Agreement, shall constitute a waiver of Franchisor's or Franchisee's right to
demand exact compliance with any of the terms of this Agreement. Waiver by
Franchisor or Franchisee of any particular default by Franchisee or Franchisor
shall not affect or impair Franchisor's rights with respect to any subsequent
default of the same, similar, or different nature. Any delay, forbearance, or
omission of Franchisor or Franchisee to exercise any power or right arising out
of any breach or default by Franchisee of any of the terms, provisions, or
covenants of this Agreement, shall not affect or impair Franchisor's or
Franchisee's rights under this Agreement, or right to declare any subsequent
breach or default and to terminate this Agreement.
D. Binding Effect. This Agreement is binding upon the parties hereto. If
two or more persons are at any time Franchisees hereunder, their obligations and
liabilities to Franchisor shall be joint and several.
E. Titles. The titles and subtitles of the various sections and paragraphs
of this Agreement are inserted for convenience and shall not be deemed to affect
the meaning or construction of any of the terms, provisions, covenants and
conditions of this Agreement.
F. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
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22. EFFECTIVENESS OF AGREEMENT
This Agreement shall not become effective unless and until Franchisee has
been furnished by Franchisor such disclosure, in written form, as may be
required pursuant to applicable law.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year set forth above.
ATTEST: CARDINAL LODGING GROUP, INC.
/s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
-------------------------- --------------------------
Title: Ex. V.P.
-------------------------- -----------------------
ATTEST: FRANCHISEE
MOTEL ASSOCIATES OF WESTERVILLE INC.
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
-------------------------- --------------------------
/s/ [ILLEGIBLE]
-------------------------- --------------------------
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EXHIBIT B
Schedule "B" of the Franchise Agreement is hereby amended as follows:
1. Owners** (names, addresses and percentage equity interests; attach
separate exhibit if necessary):
Of Assignee: Type of Ownership Ownership %
------------ ----------------- -----------
Name: Xxxxx X. Xxxx equity 27.6%
Address: 0000 Xxxx Xxxxxx Xxxx
Xxxxxxxxxx, Xxxx 00000
Name: Xxxxx Xxxxxx equity 9.9%
Address: 0000 Xxxx Xxxxxx Xxxx
Xxxxxxxxxx, Xxxx 00000
----------
** The table above sets information with regard to each person that owns
more than 10% of the capital stock of the Assignee. There are approximately
3,566 beneficial owners of the remaining capital stock of the Assignee.
GUARANTY
To induce Knights Franchise Systems, Inc., its successors and assigns
("you") to accept the Assignment and Assumption Agreement (the "Agreement",
relating to the Franchise (License) Agreement attached to the Assignment and
Assumption Agreement) with the party named as the "Assignee," to which this
Guaranty is attached, the undersigned, personally, jointly and severally ("we,
"our" or "us"), irrevocably and unconditionally (i) warrant to you that
Assignee's representations and warranties in the Agreement are true and correct
as stated, and (ii) guaranty that Franchisee's obligations under the Agreement,
including any amendments and the Development Advance Note, will be punctually
paid and performed, from and after the time Assignee becomes the Franchisee
under the Franchise Agreement.
Upon default by Franchisee and notice from you we will immediately make
each payment and perform or cause Franchisee to perform, each unpaid or
unperformed obligation of Franchisee under the Agreement. Without affecting our
obligations under this Guaranty, you may without notice to us extend, modify or
release any indebtedness or obligation of Franchisee, or settle, adjust or
compromise any claims against Franchisee. We waive notice of amendment of the
Agreement. We acknowledge that the Agreement applies to this Guaranty.
Upon the death of an individual guarantor, the estate of the guarantor
will be bound by this Guaranty for obligations of Franchisee to you existing at
the time of death, and the obligations of all other guarantors will continue in
full force and effect.
We will not seek or accept indemnity, reimbursement or subrogation against
Franchisee for any amount paid under this Guaranty unless and until 367 days
have elapsed from the date you receive payment of such amount.
IN WITNESS WHEREOF, each of us has signed this Guaranty effective as of
the date of the Agreement.
Witnesses: Guarantors:
/s/ [Illegible] /s/ Xxxxx X. Xxxx (Seal)
------------------------- --------------------
Xxxxx X. Xxxx
/s/ [Illegible] /s/ Xxxxx X. Xxxxxx (Seal)
------------------------- --------------------
Xxxxx X. Xxxxxx
