Exhibit 6(ii)
Location: BATON ROUGE, LA Entity No.: Unit No.: 11730
VILLAGER FRANCHISE SYSTEMS, INC.
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT ("Agreement"), dated July 9, 1999 is between
VILLAGER FRANCHISE SYSTEMS, INC., a Delaware corporation("we", "our" or "us"),
and, GOLDEN OPPORTUNITY DEVELOPMENT, a corporation ("you"). The definitions of
capitalized terms are found in Appendix A. In consideration of the following
mutual promises, the parties agree as follows:
1. License. We have the exclusive right to license and franchise to you the
distinctive "Villager Lodge" System for providing economy, extended stay lodging
services. We grant to you and you accept the License, effective and commencing
on the Opening Date and ending on the earliest to occur of the Term's expiration
or a Termination. The License is effective only at the Location and may not be
transferred or relocated. You will call the Facility a "Villager Lodge." You may
adopt additional or secondary designations for the Facility with our prior
written consent, which we may withhold, condition, or withdraw on written notice
in our sole discretion.
2. Protected Territory. We will not own, operate, lease, manage, or license
anyone but you to operate a Chain Facility of the same name (Villager Lodge) in
the "Protected Territory", defined in Appendix A, while this Agreement is in
effect. We may own, operate, lease, manage, franchise or license anyone to
operate any Chain Facility located anywhere outside the Protected Territory
without any restriction or obligation to you. We may grant protected Territories
for other Chain Facilities that overlap your Protected Territory. You will use
any information obtained through the Reservation System to refer guests,
directly or indirectly, only to Chain Facilities. This Section does not apply to
any Chain Facility located in the Protected Territory on the Effective Date,
which we may renew, relicense, allow to expand, or replace with a replacement
Facility located within the same trading area having not more than 120% of the
guest rooms of the replaced Chain Facility if its franchise with us terminated
or is not renewed. The Protected Territory fairly represents the Facility's
trading area, and you acknowledge that. There are no express or implied
territorial rights or agreements between the parties except as stated in this
Section. The covenants in this Section are mutually dependent; if you breach
this Section, your Protected Territory will be the Location only.
3. Your Improvement and Operating Obligations. Your obligations to improve,
operate and maintain the Facility are:
3.1 Improvements. You must select and acquire the Location and acquire, equip
and supply the Facility in accordance with System Standards. You must provide us
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with proof that you own or lease the Facility before or within 30 days after the
Effective Date. You must begin renovation of the Facility no later than thirty
(30) days after the Effective Date. The deadline for completing the pre-opening
phase of conversion and renovation, when the Facility must attain a satisfactory
preopening score under our quality assurance inspection system and be ready to
open for business under the System, is ninety (90) days after the Effective
Date. All renovations will comply with System Standards, the Approved Plans and
any Punch List attached to this Agreement. Your general contractor or you must
carry the insurance required under this Agreement during renovation. You must
complete the pre-opening renovation specified on the Punch List and the Facility
must pass its pre-opening quality assurance inspection before we consider the
Facility to be ready to open under the System. You must continue renovation and
improvement of the Facility after the Opening Date as the Punch List requires so
that the Facility attains a satisfactory score on its post-opening quality
assurance inspection given within nine (9) months after the Opening Date. We
may, in our sole discretion, terminate this Agreement by giving written notice
to you (subject to applicable law) if (1) you do not commence or complete the
pre-opening or post- opening improvements of the Facility by the dates specified
in this Section, or (2) you prematurely identify the Facility as a Chain
Facility or begin operation under the System name described in Schedule B in
violation of Section 3.3 and you fail to either complete the pre-opening
Improvement Obligation or cease operating and/or identifying the Facility under
the Marks and System within five days after we send you written notice of
default. Time is of the essence for the Improvement Obligation. We may, however,
in our sole discretion, grant one or more extensions of time to perform any
phase of the Improvement Obligation. You will pay us a non-refundable extension
fee of $1.50 per room for each day of any extension of the deadline for
completing pre-opening improvements. This fee will be payable to us after each
30 days of the extension. You will pay us the balance of the extension fee
outstanding when the Facility opens under the System 10 days after the Opening
Date. The grant of an extension will not waive any other default existing at the
time the extension is granted.
3.2 Improvement Plans. You will create plans and specifications for the work
described in Section 3.1 (based upon the System Standards and this Agreement) if
we so request and submit them for our approval before starting improvement of
the Location. We will not unreasonably withhold or delay our approval, which is
intended only to test compliance with System Standards, and not to detect errors
or omissions in the work of your architects, engineers, contractors or the like.
Our review does not cover technical, architectural or engineering factors, or
compliance with federal, state or local laws, regulations or code requirements.
We will not be liable to your lenders, contractors, employees, guests, others,
or you on account of our review or approval of your plans, drawings or
specifications, or our inspection of the Facility before, during or after
renovation or construction. Any material variation from the Approved Plans
requires our prior written approval. You will promptly provide us with copies of
permits, job progress reports, and other information as we may reasonably
request. We may inspect the work while in progress without prior notice.
3.3 Pre-Opening. You may identify the Facility as a Chain Facility prior to the
Opening Date, or commence operation of the Facility under a Xxxx and using the
System, only after first obtaining our approval or as permitted under and
strictly in accordance with the System Standards Manual. If you identify the
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Facility as a Chain Facility or operate the Facility under a Xxxx before the
Opening Date without our express written consent, then in addition to our
remedies under Sections 3.1 and 1 1.2, you will begin paying the Royalty to us,
as specified in Section 7. 1, from the date you identify or operate the Facility
using the Xxxx. We may delay the Opening Date until you pay the Royalty accruing
under this Section.
3.4 Operation. You will operate and maintain the Facility continuously after the
Opening Date on a year-round basis as required by System Standards and offer
extended stay lodging and other services of the Facility (including those
specified on Schedule B) to the public in compliance with the law and System
Standards. You will keep the Facility in a clean, neat, and sanitary condition.
You will clean, repair, replace, renovate, refurbish, paint, and redecorate the
Facility and its FF&E as and when needed to comply with System Standards. The
Facility will accept payment from guests by all credit and debit cards we
designate in the System Standards Manual. You may add to or discontinue the
amenities, services and facilities described in Schedule B, or lease or
subcontract any service or portion of the Facility, only with our prior written
consent which we will not unreasonably withhold or delay. Your front desk
operation, telephone system, parking lot, swimming pool and other guest service
facilities may not be shared with or used by guests of another lodging or
housing facility.
3.5 Training. The Facility's general manager will attend the training program
described in Section
4.1. You will train or cause the training of all Facility personnel as and when
required by System Standards and this Agreement. You will pay for all tuition,
travel, lodging, meals and compensation expenses of the people you send for
training programs, other reasonable charges we may impose for training under
Section 4. 1, and all travel, lodging, meal and facility and equipment rental
expenses of our representatives for training provided at the Facility.
3.6 Marketing. (a) You will participate in System marketing programs, including
the Directory and the Reservation System. You will obtain and maintain the
computer and communications service and equipment we specify to participate in
the Reservation System. You will comply with our rules and standards for
participation, and will honor reservations and commitments to guests and travel
industry participants. You may implement, at your option and expense, your own
local advertising. Your advertising materials must use the Marks correctly, and
must comply with System Standards or be approved in writing by us prior to
publication. You will stop using any non-conforming, out-dated or misleading
advertising materials if we so request.
(b) You must place daily classified advertisements, meeting System
Standards, in the largest circulation daily newspaper serving the hotel trading
area for your Facility. You must perform all other advertising and marketing
activities that we require on a Chain-wide basis.
3.7 Governmental Matters. You will obtain as and when needed all governmental
permits, licenses and consents required by law to construct, acquire, renovate,
operate and maintain the Facility and to offer all services you advertise or
promote. You will pay when due or properly contest all federal, state and local
payroll, withholding, unemployment, beverage, permit, license, property, ad
valorem and other taxes, assessments, fees, charges, penalties and interest, and
will file when due all governmental returns, notices and other filings.
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3.8 Inspections and Audits. You will permit our representatives to perform
quality assurance inspections of the Facility and audit your financial and
operating books and records (including tax returns) particularly those relating
to the Facility and any related business, with or without prior
notice of the inspection or audit. The inspections and audits will commence
during normal business hours, although we may observe Facility operation and
accounting activity at any time. You, the Facility staff and your other agents
and employees will cooperate with our inspectors and auditors in the performance
of their duties. You will pay us any underpayment of, and we will pay you or
credit your Recurring Fee account for any overpayment of, Recurring Fees
discovered by the audit. If the Facility does not pass an inspection, you refuse
to cooperate with our inspectors or our auditors when they arrive for an audit
at a time scheduled at least 3 business days in advance or the audit reveals
that you paid us less than 97% of the correct amount of Recurring Fees for a
fiscal year or longer, you will pay us the Audit Fee described in Section 4.8,
or the reasonable costs of travel, lodging and meal expenses for reinspection
and any reinspection fee we may impose. We may publish or disclose the results
of quality assurance inspections.
3.9 Reports and Accounting. You will prepare and submit timely monthly reports
containing the information we require about the Facility's performance during
the preceding month. You will prepare and submit other reports and information
about the Facility as we may reasonably request from time to time or in the
System Standards Manual. You will prepare and maintain any reports required
under the System Standards Manual in the Facility's property management or
reservation computer system, including the name and address of Facility guests,
if collected, and send them to us or allow us to access them by means of a
telephone datalink. You will allow us access to the reports and data stored on
the Facility's property management or reservation computer system via telephone,
provided that we will not unreasonably interfere with normal functioning of the
property management or reservation computer system. You will maintain accounting
books and records in accordance with generally accepted accounting principles
and the American Hotel & Motel Association Uniform System of Accounts for
Hotels, as amended, subject to this Agreement and other reasonable accounting
standards we may specify from time to time. You will prepare and submit to us if
we so request your annual and semi-annual financial statements. We do not
require that your financial statements be independently audited, but you will
send us a copy of your audited statements if you have them audited and we ask
for them.
3.10 Insurance. You will obtain and maintain during the Term of this Agreement
the insurance coverage required under the System Standards Manual from insurers
meeting the standards established in the Manual. Unless we instruct you
otherwise, your liability insurance policies will name Villager Franchise
Systems, Inc., Cendant Finance Holding Corporation and Cendant Corporation,
their successors and assigns as additional insureds.
3.11 Conferences. You or your representative will attend each annual Chain
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conference and pay the Conference Fee we set for the Chain franchisees, if and
when we determine to hold an annual Chain conference. The Fee will be the same
for all Chain Facilities that we license in the United States. You will receive
reasonable notice of a Chain conference.
3.12 Purchasing. You will purchase or obtain certain items we designate as
proprietary or that bear Marks, such as signage, only from suppliers we approve.
You may purchase any other items for the Facility from any competent source you
select, so long as the items meet or exceed System Standards.
3.13 Good Will. You will use reasonable efforts to protect, maintain and promote
the name "Villager Lodge" and its distinguishing characteristics, and the other
Marks. You will not permit or allow your officers, directors, principals,
employees, representatives, or guests of the Facility to engage in, conduct
which is unlawful or damaging to the good will or public image of the Chain or
System. You will participate in Chain-wide guest service and satisfaction
guaranty programs we require in good faith for all Chain Facilities. You will
follow System Standards for identification of the Facility and for you to avoid
confusion on the part of guests, creditors, lenders, investors and the public as
to your ownership and operation of the Facility, and the identity of your
owners.
3.14 Facility Modifications. You may materially modify, diminish or expand the
Facility (or change its interior design, layout, FF&E, or facilities) only after
you receive our prior written consent, which we will not unreasonably withhold
or delay. You will pay our Rooms Addition Fee then in effect for each guest room
you add to the Facility. If we so request, you will obtain our prior written
approval of the plans and specifications for any material modification, which we
will not unreasonably withhold or delay. You will not open to the public any
material modification until we inspect it for compliance with the Approved Plans
and System Standards.
3.15 Courtesy Lodging. You will provide lodging at the "Employee Rate"
established in the System Standards Manual from time to time (but only to the
extent that adequate room vacancies exist) to our representatives traveling on
business, but not more than three standard guest rooms at the same time.
3.16 Minor Renovations. Beginning three years after the Opening Date, we may
issue a "Minor Renovation Notice" to you that will specify reasonable Facility
upgrading and renovation requirements (a "Minor Renovation") to be commenced no
sooner than 60 days after the notice is issued, having an aggregate cost for
labor, FF&E and materials estimated by us to be not more than the Minor
Renovation Ceiling Amount. You will perform the Minor Renovations as and when
the Minor Renovation Notice requires. We will not issue a Minor Renovation
Notice within three years after the date of a prior Minor Renovation Notice, or
if the three most recent quality assurance inspection scores of the Facility
averaged at least 425 points or equivalent and the most recent quality assurance
inspection score for the Facility was at least 400 points or equivalent when the
Facility is otherwise eligible for a Minor Renovation.
4. Our Operating and Service Obligations. We will provide you with the following
services and assistance:
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4.1 Training.
4.1.1 Management Training. Between 30 days prior to the projected Opening Date
and 120 days afterwards, we will offer at a location in the United States we
designate and your general manager must complete a training program to our
satisfaction. The training program will not exceed ten days in duration and will
cover such topics as System Standards, services available from us, and operating
a Chain Facility. Any replacement or supplemental general manager of the
Facility must complete the management training program to our satisfaction
within 120 days after assuming his responsibilities. Attendance is optional for
other members of your staff. We charge you tuition of $250 for each trainee. You
must also pay for your trainee's travel, lodging, meals, incidental expenses,
compensation and benefits.
4.1.2 New Property On-Site Training. We will provide at the Facility a "New
Property On-Site Training Program" (at our discretion as to length and
scheduling) to assist you in opening the Facility. There is no tuition for the
Program. However, we reserve the right to charge you for the reasonable expenses
for travel, room, board and other out-of-pocket costs of our representatives.
4.1.3 Recurrent Training. We may provide additional training for you and the
Facility's general manager if we determine that additional mandatory training
for franchisees and general managers is necessary in the future. Training will
be held in our corporate office or other locations. You will pay for your
representative's travel, lodging, meals, incidental expenses, compensation and
benefits for this training directly or through an ancillary services fee to us.
4.1.4 Supplemental Training. We may offer mandatory or optional training
programs without charge or for tuition. We may offer or sell to you video tapes,
computer discs or other training aids and materials, or require you to buy them
at reasonable prices.
4.1.5 A portion of the Advertising and Reservation Fee proceeds, determined in
our sole discretion, will be allocated to our training activities and related
direct and indirect overhead expenses.
4.2 Reservation System. We will operate and maintain (directly or by
subcontracting with an affiliate or one or more third parties) a computerized
Reservation System or such technological substitute(s) as we determine, in our
discretion. The Facility will participate in the Reservation System, commencing
with the Opening Date for the balance of the Term. We have the right to provide
reservation services to lodging facilities other than Chain Facilities or to
other parties. We will not offer callers to our general consumer toll free
reservation telephone number in the United States the opportunity to make
reservations for other lodging chains.
4.3 Marketing.
4.3.1 We will use Marketing Fees as specified in Schedule C, allocated in our
discretion, to promote public awareness and usage of Chain Facilities by
implementing advertising, promotion, publicity, market research and other
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marketing programs, for training programs and related activities, for the
production and distribution of Chain publications and directories of hotels, and
for the acquisition, development, support, equipping, maintenance, improvement
and operation of the Reservation System. We will determine in our discretion:
(i) The nature and type of media placement; (ii) The allocation (if any) among
international, national, regional and local markets; and (iii) The nature and
type of advertising copy, other materials and programs. We or an affiliate may
be reimbursed from Marketing Fees for the reasonable direct and indirect costs,
overhead or other expenses of providing marketing services. We are not obligated
to supplement the Marketing Fees or to advance funds to pay for System marketing
activities. We do not promise that the Facility or you will benefit directly or
proportionately from System marketing activities.
4.3.2 We may, at our discretion, implement special international, national,
regional or local promotional programs (which may or may not include the
Facility) and may make available to you (to use at your option) media
advertising copy and other marketing materials for prices which reasonably cover
the materials' direct and indirect costs.
4.3.3 We will use the System Assessment Fees to publish the Chain Directory. We
will include the Facility in the Chain Directory after it opens if you submit
the information we request on time, and you are not in default under this
Agreement at the time we must arrange for publication. We will supply
Directories to you for display at locations specified in the System Standards
Manual or policy statements. We may assess you a reasonable charge for the
direct and indirect expenses (including overhead) of producing and delivering
the Directories.
4.4 Purchasing. We may offer optional assistance to you with purchasing items
used at or in the Facility. Our affiliates may offer this service on our behalf
We may restrict the vendors authorized to sell proprietary or Xxxx-bearing items
in order to control quality, provide for consistent service or obtain volume
discounts. We will maintain and provide to you lists of suppliers approved to
xxxxxxx Xxxx-bearing items, or whose products conform to System Standards.
4.5 The System. We will control and establish requirements for all aspects of
the System. We may, in our discretion, change, delete from or add to the System,
including any of the Marks or System Standards, in response to changing market
conditions. We may, in our discretion, permit deviations from System Standards,
based on local conditions and our assessment of the circumstances.
4.6 Consultations and Standards Compliance. We will assist you to understand
your obligations under System Standards by telephone, mail, during quality
assurance inspections, through the System Standards Manual, at training sessions
and during conferences and meetings we conduct. We will provide telephone and
mail consultation on Facility operation and marketing through our
representatives.
4.7 System Standards Manual and Other Publications. We will specify System
Standards in the System Standards Manual, policy statements or other
publications. We will lend you one copy of the System Standards Manual promptly
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after we sign this Agreement. We will send you any System Standards Manual
revisions and/or supplements as and when issued. We will send you all other
publications for Chain franchisees and all separate policy statements in effect
from time to time.
4.8 Inspections and Audits. We have the unlimited right to conduct unannounced
quality assurance inspections of the Facility and its operations, records and
Xxxx usage to test the Facility's compliance with System Standards and this
Agreement, and the audits described in Section 3.8. We have the unlimited right
to reinspect if the Facility does not achieve the score required on an
inspection. We may impose a reinspection fee and will charge you for our costs
as provided in Section 3.8. You will pay us an "Audit Fee" of $300.00 when we
invoice you for an Audit Fee under Section 3.8. We may increase the Audit Fee on
a Chain-wide basis to cover any increases in our audit costs to not more than
$500.00, effective any time after December 31, 2005. Our inspections are solely
for the purposes of checking compliance with System Standards.
5. Term. The Tenn begins on the Effective Date and expires on the day prior to
the fifteenth anniversary of the Opening Date. Some of your duties and
obligations will survive termination or expiration of this Agreement. You will
execute and deliver to us with this Agreement a notarized Declaration of
Franchise Agreement in recordable form. We will countersign and return one copy
of the Declaration to you. We may, at our option, record the Declaration in the
real property records of the county where the Facility is located. The
Declaration will be released at your request and expense when this Agreement
terminates or expires and you perform your post-termination obligations.
NEITHER PARTY HAS RENEWAL RIGHTS OR OPTIONS.
6. Application and Initial Fees. We should receive from you a non-refundable
Application Fee of $1,000.00 which will be credited towards the Initial Fee. You
will pay us a non-refundable Initial Fee in the amount of $10,200.00; $5,100.00
when you sign this Agreement and $5,100.00 as per the Initial Fee Note attached
hereto,
which is fully earned when we sign this Agreement.
7. Recurring Fees, Taxes and Interest.
7.1 You will pay us certain "Recurring Fees" payable in U.S. dollars (or such
other currency as we may direct if the Facility is outside the United States)
ten days after the month in which they accrue, without billing or demand.
Recurring Fees include the following:
7.1.1 A "Royalty" equal to five percent (5%) of Gross Room Revenues of the
Facility accruing during the calendar month, accrues from the earlier of the
Opening Date or the date you identify the Facility as a Chain Facility or
operate it under a Xxxx until the end of the Term.
7.1.2 A System Assessment Fee" comprised of the Marketing Fee and the
Reservation Fee, as stated in Schedule C, accrues from the Opening Date until
the end of the Term, including during suspension periods. After 60 days written
notice, we may change either or both of the components of the System Assessment
Fee to cover costs as described in Schedule C or to cover the cost of additional
services or programs for Chain Facilities. At our option, you will also pay or
reimburse us for travel and other agent commissions paid for certain
reservations at the Facility and a " GDS Fee" levied to pay for reservations for
the Facility originated or
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processed through the Global Distribution System, the Internet and other
reservation systems and networks. We may charge a reasonable service fee for
this service.
7.2 You will pay to us "Taxes" equal to any federal, state or local sales, gross
receipts, use, value added, excise or similar taxes assessed against us on the
Recurring Fees by the jurisdictions where the Facility is located, but not
including any income tax, franchise or other tax for the privilege of doing
business by us in your State. You will pay Taxes to us when due.
7.3 " Interest" is payable when you receive our invoice on any past due amount
payable to us under this Agreement at the rate of 1.5% per month or the maximum
rate permitted by applicable law, whichever is less, accruing from the due date
until the amount is paid.
7.4 Your transferee or you will pay us a "Relicense Fee" equal to the Initial
Fee we would then charge a new franchisee for the Facility if a Transfer occurs.
8. Indemnifications.
8.1 Independent of your obligation to procure and maintain insurance, you will
indemnify, defend and hold the Indemnitees harmless, to the fullest extent
permitted by law, from and against all Losses and Expenses, incurred by any
Indemnitee for any investigation, claim, action, suit, demand, administrative or
alternative dispute resolution proceeding, relating to or arising out of any
transaction, occurrence or service at, or involving the operation of, the
Facility, any breach or violation of any contract or any law, regulation or
ruling by, or any act, error or omission (active or passive) of, you, any party
associated or affiliated with you or any of the owners, officers, directors,
employees, agents or contractors of you or your affiliates, including when you
are alleged or held to be the actual, apparent or ostensible agent of the
Indemnitee, or the active or passive negligence of any Indemnitee is alleged or
proven. You have no obligation to indemnify an Indemnitee for damages to
compensate for property damage or personal injury if a court of competent
jurisdiction makes a final decision not subject to further appeal that the
Indemnitee engaged in willful misconduct or intentionally caused such property
damage or bodily injury. This exclusion from the obligation to indemnify shall
not, however, apply if the property damage or bodily injury resulted from the
use of reasonable force by the Indemnitee to protect persons or property.
8.2 You will respond promptly to any matter described in the preceding
paragraph, and defend the Indemnitee. You will reimburse the Indemnitee for all
costs of defending the matter, including reasonable attorneys' fees, incurred by
the Indemnitee if your insurer or you do not assume defense of the Indemnitee
promptly when requested, or separate counsel is appropriate, in our discretion,
because of actual or potential conflicts of interest. We must approve any
resolution or course of action in a matter that could directly or indirectly
have any adverse effect on us or the Chain, or could serve as a precedent for
other matters.
8.3 We will indemnify, defend and hold you harmless, to the fullest extent
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permitted by law, from and against all Losses and Expenses incurred by you in
any action or claim arising from your proper use of the System alleging that
your use of the System and any property we license to you is an infringement of
a third party's rights to any trade secret, patent, copyright, trademark,
service xxxx or trade name. You will promptly notify us in writing when you
become aware of any alleged infringement or an action is filed against you. You
will cooperate with our defense and resolution of the claim. We may resolve the
matter by obtaining a license of the property for you at our expense, or by
requiring that you discontinue using the infringing property or modify your use
to avoid infringing the rights of others.
9. Your Assignments, Transfers and Conveyances.
9.1 Transfer of the Facility. This Agreement is personal to you (and your owners
if you are an entity). We are relying on your experience, skill and financial
resources (and that of your owners and the guarantors, if any) to sign this
Agreement with you. You may finance the Facility and xxxxx x xxxx, security
interest or encumbrance on it without notice to us or our consent. If a Transfer
is to occur, the transferee or you must comply with Section 9.3. Your License is
subject to termination when the Transfer occurs. The License is not transferable
to your transferee, who has no right or authorization to use the System and the
Marks when you transfer ownership or possession of the Facility. The transferee
may not operate the Facility under the System, and you are responsible for
performing the post-termination obligations in Section 13. You and your owners
may, only with our prior written consent and after you comply with Sections 9.3
and 9.6, assign, pledge, transfer, delegate or grant a security interest in all
or any of your rights, benefits and obligations under this Agreement, as
security or otherwise. Transactions involving Equity Interests that are not
Equity Transfers do not require our consent and are not Transfers.
9.2 Public Offerings and Registered Securities. You may engage the first
registered public offering of your Equity Interests only after you pay us a
public offering fee equal to $15,000. Your Equity Interests (or those of a
person, parent, subsidiary, sibling or affiliate entity, directly or indirectly
effectively controlling you), are freely transferable without the application of
this Section if they are, on the Effective Date, or after the public offering
fee is paid, they become, registered under the federal Securities Act of 1933,
as amended, or a class of securities registered under the Securities Exchange
Act of 1934, as amended, or listed for trading on a national securities exchange
or the automated quotation system of the National Association of Securities
Dealers, Inc. (or any successor system), provided that any tender offer for at
least a majority of your Equity Interests will be an Equity Transfer subject to
Section 9. 1.
9.3 Conditions. We may, to the extent permitted by applicable law, condition and
withhold our consent to a Transfer when required under this Section 9 until the
transferee and you meet certain conditions. If a Transfer is to occur, the
transferee (or you, if an Equity Transfer is involved) must first complete and
submit our Application, qualify to be a franchisee in our sole discretion, given
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the circumstances of the proposed Transfer, provide the same supporting
documents as a new franchise applicant, pay the Application and Relicense Fees
then in effect, sign the form of Franchise Agreement we then offer in conversion
transactions and agree to renovate the Facility as if it were an existing
facility of similar age and condition converting to the System, as we reasonably
determine. We will provide a Punch List of improvements we will require after
the transferee's Application is submitted to us. We must also receive general
releases from you and each of your owners, and payment of all amounts then owed
to us and our affiliates by you, your owners, your affiliates, the transferee,
its owners and affiliates, under this Agreement or otherwise. Our consent to the
transaction will not be effective until these conditions are satisfied.
9.4 Permitted Transferee Transactions. You may transfer an Equity Interest or
effect an Equity Transfer to a Permitted Transferee without obtaining our
consent, renovating the Facility or paying a Relicense Fee or Application Fee.
No Transfer will be deemed to occur. You also must not be in default and you
must comply with the application and notice procedures specified in Sections 9.3
and 9.6. Each Permitted Transferee must first agree in writing to be bound by
this Agreement, or at our option, execute the Franchise Agreement form then
offered prospective franchisees. No transfer to a Permitted Transferee shall
release a living transferor from liability under this Agreement or any guarantor
under any Guaranty of this Agreement. You must comply with this Section if you
transfer the Facility to a Permitted Transferee. A transfer resulting from a
death may occur even if you are in default under this Agreement.
9.5 Attempted Transfers. Any transaction requiring our consent under this
Section 9 in which our consent is not first obtained shall be void, as between
you and us. You will continue to be liable for payment and performance of your
obligations under this Agreement until we terminate this Agreement, all your
financial obligations to us are paid and all System identification is removed
from the Facility. 9.6 Notice of Transfers. You will give us at least 30 days
prior written notice of any proposed Transfer or Permitted Transferee
transaction. You will notify us when you sign a contract to Transfer the
Facility and IO days before you intend to close on the transfer of the Facility.
We will respond to all requests for our consent and notices of Permitted
Transferee transactions within a reasonable time not to exceed 30 days. You will
notify us in writing within 30 days after a change in ownership of 25% or more
of your Equity Interests that are not publicly held or that is not an Equity
Transfer, or a change in the ownership of the Facility if you are not its owner.
You will provide us with lists of the names, addresses, and ownership
percentages of your owner(s) at our request.
10. Our Assignments. We may assign, delegate or subcontract all or any part of
our rights and duties under this Agreement, including by operation of law,
without notice and without your consent. We will have no obligations to you
after you are notified that our transferee has assumed our obligations under
this Agreement except those that arose before we assign this Agreement.
11. Default and Termination.
11. 1 Default In addition to the matters identified in Section 3. 1, you will be
in default under this Agreement if (a) you do not pay us when a payment is due,
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(b) you do not perform any of your other obligations when this Agreement and the
System Standards Manual require, or (c) if you otherwise breach this Agreement.
If your default is not cured within ten days after you receive written notice
from us that you have not filed your monthly report, paid us any amount that is
due or breached your obligations regarding Confidential Information, or within
30 days after you receive written notice from us of any other default (except as
noted below), then we may terminate this Agreement by written notice to you,
under Section 11.2. We will not exercise our right to terminate if you have
completely cured your default, or until any waiting period required by law has
elapsed. In the case of quality assurance default, if you have acted diligently
to cure the default but cannot do so and have entered into a written improvement
agreement with us within 30 days after the failing inspection, you may cure the
default within 90 days after the failing inspection. We may terminate the
License if you do not perform that improvement agreement.
11.2 Termination. We may terminate the License, effective when we send written
notice to you or such later date as required by law or as stated in the default
notice, when (1) you do not cure a default as provided in Section II. I or we
are authorized to terminate under Section 3.1, (2) you discontinue operating the
Facility as a "Villager Lodge", (3) you do or perform, directly or indirectly,
any act or failure to act that in our reasonable judgment is or could be
injurious or prejudicial to the goodwill associated with the Marks or the
System, (4) you lose possession or the right to possession of the Facility, (5)
you (or any guarantor) suffer the termination of another license or franchise
agreement with us or one of our affiliates, (6) you intentionally maintain false
books and records or submit a materially false report to us, (7) you (or any
guarantor) generally fail to pay debts as they come due in the ordinary course
of business, (8) you, any guarantor or any of your owners or agents misstated to
us or omitted to tell us a material fact to obtain or maintain this Agreement
with us, (9) you receive two or more notices of default from us in any one year
period (whether or not you cure the defaults), (10) a violation of Section 9
occurs, or a Transfer occurs before the relicensing process is completed, (I 1)
you or any of your Equity Interest owners contest in court the ownership or
right to franchise all or any part of the System or the validity of any of the
Marks, (12) you, any guarantor or the Facility is subject to any voluntary or
involuntary bankruptcy, liquidation, dissolution, receivership, assignment,
reorganization, moratorium, composition or a similar action or proceeding that
is not dismissed within 60 days after its filing, or (I 3) you maintain or
operate the Facility in a manner that endangers the health or safety of the
Facility's guests.
11.3 Casualty and Condemnation.
11.3.1 You will notify us promptly after the Facility suffers a Casualty that
prevents you from operating in the normal course of business, with less than 75%
of guest rooms available. You will give us information on the availability of
guest rooms and the Facility's ability to honor advance reservations. You will
tell us in writing within 60 days after the Casualty whether or not you will
restore, rebuild and refurbish the Facility to conform to System Standards and
its condition prior to the Casualty. This restoration will be completed within
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180 days after the Casualty. You may decide within the 60 days after the
Casualty, and if we do not hear from you, we will assume that you have decided,
to terminate this Agreement, effective as of the date of your notice or 60 days
after the Casualty, whichever comes first. If this Agreement so terminates, you
will pay all amounts accrued prior to termination and follow the
post-termination requirements in Section 13. You will not be obligated to pay
Liquidated Damages if the Facility will no longer be used as an extended stay or
transient lodging facility after the Casualty. 11.3.2 You will notify us in
writing within 10 days after you receive notice of any proposed Condemnation of
the Facility, and within IO days after receiving notice of the Condemnation
date. This Agreement will terminate on the date the Facility or a substantial
portion is conveyed to or taken over by the condemning authority.
11.3.3 The exclusive territory covenants in Section 2 will terminate when you
give us notice of any proposed Condemnation or that you will not restore the
Facility after a Casualty.
11.4 Our Other Remedies. We may modify the Protected Territory granted in
Section 2 if you violate your covenant in Section 2. We may suspend the Facility
from the Reservation System for any default or failure to pay or perform under
this Agreement, discontinue Reservation System referrals to the Facility for the
duration of such suspension, and may divert previously made reservations to
other Chain Facilities after giving notice of non-performance, non-payment or
default. You will continue to be liable for all Reservation Fees throughout the
suspension period. All Reservation System User Fees accrue during the suspension
period. Reservation service will be restored after you have fully cured any and
all defaults and failures to pay and perform. We may omit the Facility from the
Directory if you are in default on the date we must determine which Chain
Facilities are included in the Directory. You recognize that any use of the
System not in accord with this Agreement will cause us irreparable harm for
which there is no adequate remedy at law, entitling us to injunctive and other
relief We may litigate to collect amounts due under this Agreement without first
issuing a default or termination notice. Our consent or approval may be withheld
if needed while you are in default under this Agreement or may be conditioned on
the cure of all your defaults.
11.5 Your Remedies. If we fail to issue our approval or consent as and when
required under this Agreement within a reasonable time of not less than 30 days
after we receive all of the information we request, and you believe our refusal
to approve or consent is wrongful, you may bring a legal action against us to
compel us to issue our approval or consent to the obligation. To the extent
permitted by applicable law, this action shall be your exclusive remedy. We
shall not be responsible for direct, indirect, special, consequential or
exemplary damages, including, but not limited to, lost profits or revenues.
12. Liquidated Damages.
12.1 Generally. If we terminate this Agreement under Section 11.2, or you
terminate this Agreement (except under Section 11.3 or as a result of our
default which we do not cure within a reasonable time after written notice), you
will pay us within 30 days following the date of termination, as Liquidated
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Damages, an amount equal to the sum of accrued Royalties and System Assessment
Fees during the immediately preceding 24 full calendar months (or the number of
months remaining in the unexpired Tenn at the date of termination, whichever is
less). If the Facility has been open for less than 24 months, then the amount
shall be the average monthly Royalties and System Assessment Fees since the
Opening Date multiplied by 24. You will also pay any applicable Taxes assessed
on such payment. Liquidated Damages will not be less than the product of
$1,200.00 multiplied by the number of guest rooms in the Facility. If we
ten-ninate this Agreement under Section 3 before the Opening Date, you will pay
us within 10 days after you receive our notice of termination Liquidated Damages
equal to one-half the amount payable for termination under Section 11.2.
Liquidated Damages are paid in place of our claims for lost future Recurring
Fees under this Agreement. Our right to receive other amounts due under this
Agreement is not affected.
12.2 Condemnation Payments. In the event a Condemnation is to occur, you will
pay us the fees set forth in Section 7 for a period of six months after we
receive the initial notice of condemnation described in Section 11.3.2, or until
the Condemnation occurs, whichever is longer. You will pay us Liquidated Damages
equal to the average daily Recurring Fees for the six month period preceding the
date of your condemnation notice to us multiplied by the number of days
remaining in the six month notice period if the Condemnation is completed before
the six month notice period expires. This payment will be made within 30 days
after Condemnation is completed (when you close the Facility or you deliver it
to the condemning authority). If the Condemnation is completed after the six
month notice period expires you will pay no Liquidated Damages, but you must pay
the fees set forth in Section 7 when due until Condemnation is completed.
13. Your Duties At and After Termination. When the license or this Agreement
terminates for any reason whatsoever:
13.1 System Usage Ceases. You will immediately stop using the System to operate
and identify the Facility. You will remove all signage and other items bearing
any Marks and follow the other steps detailed in the System Standards Manual for
changing the identification of the Facility. You will promptly paint over or
remove the Facility's distinctive System trade dress, color schemes and
architectural features.
13.2 Other Duties. You will pay all amounts owed to us under this Agreement
within 10 days after termination. You will owe us Recurring Fees on Gross Room
Revenues
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accruing while the Facility is identified as a "Villager Lodge", including the
System Assessment Fees for so long as the Facility receives service from the
Reservation System. We may immediately remove the Facility from the Reservation
System and divert reservations as authorized in Section 11.4. We may also, to
the extent pen-nitted by applicable law, and without prior notice enter the
Facility and any other parcels, remove software (including archive and back-up
copies) for accessing the Reservation System, all copies of the System Standards
Manual, Confidential Information, equipment and all other personal property of
ours, and paint over or remove and purchase for $10.00, all or part of any
interior or exterior Xxxx-bearing signage (or signage face plates), including
billboards, whether or not located at the Facility, that you have not removed or
obliterated within five days after termination. You will promptly pay or
reimburse us for our cost of removing such items, net of the $10.00 purchase
price for signage. We will exercise reasonable care in removing or painting over
signage. We will have no obligation or liability to restore the Facility to its
condition prior to removing the signage. We shall have the right, but not the
obligation, to purchase some or all of the Facility's Xxxx-bearing FF&E and
supplies at the lower of their cost or net book value, with the right to set off
their aggregate purchase price against any sums then owed us by you.
13.3 Advance Reservations. The Facility will honor any advance reservations,
including group bookings, made for the Facility prior to termination at the
rates and on the terms established when the reservations are made and pay when
due all related travel agent commissions.
13.4 Survival of Certain Provisions. Sections 3.8 (as to audits, for 2 years
after termination), 3.9 (as to information relating to the Term, for 2 years
after termination), 3.13, 7 (as to amounts accruing through termination), 8,
11.4, 12, 13, 15, 16 and 17 survive termination of the License and this
Agreement, whether termination is initiated by you or us, even if ten-nination
is wrongful.
14. Your Representations and Warranties. You expressly represent and warrant
to us as follows:
14.1 Quiet Enjoyment. You own, or will own prior to commencing improvement, or
lease, the Location and the Facility. You will be entitled to possession of the
Location and the Facility during the entire Term without restrictions that would
interfere with your performance under this Agreement, subject to the reasonable
requirements of any financing secured by the Facility.
14.2 This Transaction. You have received, at least 10 business days prior to
execution of this Agreement and making any payment to us, our current Unifomi
Franchise Offering Circular for prospective franchisees. Neither we nor any
person acting on our behalf has made any oral or written representation or
promise to you that is not written in this Agreement on which you are relying to
enter into this Agreement. You release any claim against us or our agents based
on any oral or written representation or promise not stated in this Agreement.
You and the persons signing this Agreement for you have full power and authority
and have been duly authorized, to enter into and perform or cause performance of
your obligations under this Agreement. You have obtained all necessary approvals
of your owners, Board of Directors and lenders. Your execution, delivery and
performance of this Agreement will not violate, create a default under or breach
of any charter, bylaws, agreement or other contract, license, permit,
indebtedness, certificate, order, decree or security instrument to which you or
any of your principal owners is a party or is subject or to which the Facility
is subject. Neither you nor the Facility is the subject of any current or
pending merger, sale, dissolution, receivership, bankruptcy, foreclosure,
reorganization, insolvency, or similar action or proceeding on the date you
execute this Agreement and was not within the three years preceding such date,
except as disclosed in the Application. You will submit to us the documents
about the Facility, you, your owners and your finances that we request in the
Franchise Application (or after our review of your initial submissions) before
or within 30 days after you sign this Agreement.
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14.3 No Misrepresentations or Implied Covenants. All written information you
submit to us about the Facility, you, your owners, any guarantor, or the
finances of any such person or entity, was or will be at the time delivered and
when you sign this Agreement, true, accurate and complete, and such information
contains no misrepresentation of a material fact, and does not omit any material
fact necessary to make the information disclosed not misleading under the
circumstances. There are no express or implied covenants or warranties, oral or
written, between we and you except as expressly stated in this Agreement.
15. Proprietary Rights.
15.1 Marks and System. You will not acquire any interest in or right to use the
System or Marks except under this Agreement. You will not apply for governmental
registration of the Marks, or use the Marks or our corporate name in your legal
name, but you may use a Xxxx for an assumed business or trade name filing.
15.2 Inurements. All present and future distinguishing characteristics,
improvements and additions to or associated with the System by us, you or
others, and all present and future service marks, trademarks, copyrights,
service xxxx and trademark registrations used and to be used as part of the
System, and the associated good will, shall be our property and will inure to
our benefit. No good will shall attach to any secondary designator that you use.
15.3 Other Locations and Systems. We and our affiliates each reserve the right
to own, in whole or in part, and manage, operate, use, lease, finance, sublease,
franchise, license (as licensor or licensee), provide services to or joint
venture (i) distinctive separate lodging or food and beverage marks and other
intellectual property which are not part of the System, and to enter into
separate agreements with you or others (for separate charges) for use of any
such other marks or proprietary rights, (ii) other lodging, food and beverage
facilities, or businesses, under the System utilizing modified System Standards,
and (iii) a Chain Facility at or for any location other than the Location or, in
the case of a Chain Facility of the same name, in the Protected Territory. You
acknowledge that we are affiliated with or in the future may become affiliated
with other lodging providers or franchise systems that operate under names or
marks other than the Marks. We and our affiliates may use or benefit from common
hardware, software, communications equipment and services and administrative
systems for reservations, franchise application procedures or committees,
marketing and advertising programs, personnel, central purchasing, approved
supplier lists, franchise sales personnel (or independent franchise sales
representatives), etc.
15.4 Confidential Information. You will take all appropriate actions to preserve
the confidentiality of all Confidential Information. Access to Confidential
Information should be limited to persons who need the Confidential Information
to perform their jobs and are subject to your general policy on maintaining
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confidentiality as a condition of employment or who have first signed a
confidentiality agreement. You will not permit copying of Confidential
Information (including, as to computer software, any translation, decompiling,
decoding, modification or other alteration of the source code of such software).
You will use Confidential Information only for the Facility and to perform under
this Agreement. Upon termination (or earlier, as we may request), you shall
return to us all originals and copies of the System Standards Manual, policy
statements and Confidential Information " fixed in any tangible medium of
expression," within the meaning of the U.S. Copyright Act, as amended. Your
obligations under this subsection commence when you sign this Agreement and
continue for trade secrets (including computer software we license to you) as
long as they remain secret and for other Confidential Information, for as long
as we continue to use the information in confidence, even if edited or revised,
plus three years. We will respond promptly and in good faith to your inquiry
about continued protection of any Confidential Information.
15.5 Litigation. You will promptly notify us of (i) any adverse or infringing
uses of the Marks (or names or symbols confusingly similar), Confidential
Information or other System intellectual property, and (ii) or any threatened or
pending litigation related to the System against (or naming as a party) you or
us of which you become aware. We alone handle disputes with third parties
concerning use of all or any part of the System. You will cooperate with our
efforts to resolve these disputes. We need not initiate suit against imitators
or infringers who do not have a material adverse impact on the Facility, or any
other suit or proceeding to enforce or protect the System in a matter we do not
believe to be material.
16. Relationship of Parties.
16.1 Independence. You are an independent contractor. You are not our legal
representative or agent, and you have no power to obligate us for any purpose
whatsoever. We and you have a business relationship based entirely on and
circumscribed by this Agreement. No partnership, joint venture, agency,
fiduciary or employment relationship is intended or created by reason of this
Agreement. You will exercise full and complete control over and have full
responsibility for your contracts, daily operations, labor relations, employment
practices and policies, including, but not limited to, the recruitment,
selection, hiring, disciplining, firing, compensation, work rules and schedules
of your employees.
16.2 Joint Status. If you comprise two or more persons or entities
(notwithstanding any agreement, arrangement or understanding between or among
such persons or entities) the rights, privileges and benefit so this Agreement
may only be exercised and enjoyed jointly. Theliabilities and responsibilities
under this Agreement will be the joint and several obligations of all such
persons or entities.
17. Legal Matters.
17.1 Partial Invalidity. If all or any part of a provision of this Agreement
violates the law of your state (if it applies), such provision or part will not
be given effect. If all or any part of a provision of this Agreement is declared
invalid or unenforceable, for any reason, or is not given effect by reason of
66
of the prior sentence, the remainder of the Agreement shall not be affected.
However, if in our judgment the invalidity or ineffectiveness of such provision
or part substantially impairs the value of this Agreement to us, then we may at
any time terminate this Agreement by written notice to you without penalty or
compensation owed by either party.
17.2 Waivers, Modifications and Approvals. If we allow you to deviate from this
Agreement, we may insist on strict compliance at any time after written notice.
Our silence or inaction will not be or establish a waiver, consent, course of
dealing, implied modification or estoppel. All modifications, waivers, approvals
and consents of or under this Agreement by us must be in writing and signed by
our authorized representative to be effective.
17.3 Notices. Notices will be effective if in writing and delivered by facsimile
transmission with confirmation original sent by first class mail, postage
prepaid, by delivery service, with proof of delivery, or by first class, prepaid
certified or registered mail, return receipt requested, to the appropriate party
at its address stated below or as may be otherwise designated by notice. Notices
shall be deemed given on the date delivered or date of attempted delivery, if
refused.
Your name: GOLDEN OPPORTUNITY DEVELOPMENT
Your address: 000 Xxxx 000 Xxxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000
Your fax No.: 000-000-0000
Attention: Xxxxxx Xxxxxxx
Villager Franchise Systems, Inc.:
Our address: 0 Xxxxxx Xxx, X.X. Xxx 000, Xxxxxxxxxx, Xxx Xxxxxx 00000-0000,
Attention: Vice President-Franchise Administration; Fax No. (000) 000-0000
17.4 Remedies. Remedies specified in this Agreement are cumulative and do not
exclude any remedies available at law or in equity. The non-prevailing party
will pay all costs and expenses, including reasonable attorneys' fees, incurred
by the prevailing party to enforce this Agreement or collect amounts owed under
this Agreement. You consent and waive your objection to the nonexclusive
personal jurisdiction of and venue in the New Jersey state courts situated in
Xxxxxx County, New Jersey and the United States District Court for the District
of New Jersey for all cases and controversies under this Agreement or between we
and you.
17.5 Miscellaneous. This Agreement will be governed by and construed under the
laws of the State of New Jersey. The New Jersey Franchise Practices Act will not
apply to any Facility located outside the State of New Jersey. This Agreement is
exclusively for the benefit of the parties. There are no third party
beneficiaries. No agreement between us and anyone else is for your benefit. The
section headings in this Agreement are for convenience of reference only. We may
unilaterally revise Schedule C under this Agreement. This Agreement, together
with the exhibits and schedules attached, is the entire agreement (superseding
all prior representations, agreements and understandings, oral or written) of
the parties about the Facility.
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17.6 Waiver of Jury Trial. The parties waive the right to a jury trial in any
action related to this Agreement or the relationship between the franchisor, the
franchisee, any guarantor, and their respective successors and assigns.
17.7 Special Acknowledgements.
17.7.1 You received our Uniform Franchise Offering Circular ("UFOC") for
prospective franchisees at least 10 business days before, and a copy of this
Agreement and all other agreements we are asking you to sign at least 5 business
days before, signing this Agreement and paying the Initial Fee to us. You have
received our UFOC at least 10 business days before you paid any fee to us or
signed any contract with us.
17.7.2 Neither we nor any person acting on our behalf has made any oral or
written representation or promise to you on which you are relying to enter into
this Agreement that is not written in this Agreement. You release any claim
against us or our agents based on any oral or written representation or promise
not stated in this Agreement.
17.7.3 This Agreement, together with the exhibits and schedules attached, is the
entire agreement superseding all previous oral and written representations,
agreements and understandings of the parties about the Facility and the License.
17.7.4 You acknowledge that no salesperson has made any promise or provided any
information to you about projected sales, revenues, income, profits or expenses
from the Facility except as stated in Item 19 of the UFOC or in a writing that
is attached to this Agreement.
17.7.5 You understand that the franchise relationship is an arms' length,
commercial business relationship in which each party acts in its own interest.
18. Royalty Waiver. We will waive your obligation to pay the Royalty on Gross
Room Revenues accruing during the third License Year if (i) the Facility's
occupancy rate during the second License Year, determined by dividing the number
of occupied room nights (including complimentary rooms) by the number of
available room nights during the period, is less than 70%, (ii) you are not in
default under this Agreement at the beginning of the License Year and you cure
any default that occurs during the third License Year within the time period
permitted under this Agreement, (iii) you pay the System Assessment Fee when due
during the third License Year, (iv) you install the combination refrigerator,
microwave and dry storage unit in each guest room at or before the Opening Date,
(v) the Facility passes all quality assurance inspections during the second
License Year, and completes the entire Punch List when required, (vi) during the
second License Year, you insert and run our standard or a larger classified
advertisement in the largest circulation daily newspaper in your hotel trading
area, making your tear sheets and insertion orders available to us on request,
and (vii) you implement and continue during the second License Year the
mandatory local marketing and advertising activities specified in the Direct
Sales & Marketing Guide.
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19. Special Stipulations. The following special stipulations apply to this
Agreement and supersede any inconsistent or conflicting provisions. These are
personal to you and are not transferable or assignable except to a Permitted
Transferee.
19.1 Reduced Relicense Fee. If you are not then in default under this Agreement,
the Relicense Fee for a Transfer will be $5,000 if we receive the written
Transfer request before the third anniversary of the Opening Date. After that
anniversary, the Relicense Fee will be $7,500.00.
19.2 Liquidated Damages. Liquidated Damages payable upon Termination will be Six
Hundred Dollars ($600.00) for each guest room of the Facility you are authorized
to operate at the time of Termination.
19.3 Your Additional Termination Right. You may terminate the License without
cause or penalty effective only on the fifth or tenth anniversary of the Opening
Date provided you give us at least six (6) months prior written notice of
termination and you are not in default under this Agreement at the time notice
must be given or at the effective date of termination. You will pay no
Liquidated Damages if you satisfy the conditions of the preceding sentence and
you perform the post termination obligations specified in this Agreement within
10 days after the effective date of termination. Your rights under this Section
will automatically terminate without notice if and as of the date (i) a
Termination occurs, (ii) you fail to cure any default under this Agreement
within the time permitted, if any, in the notice of default we send you, or
(iii) after the Facility satisfies the Improvement Obligation, the Facility
scores less than 350 (or its then equivalent) on a quality assurance inspection
and then fails to achieve a score of at least 350 (or its then equivalent) in a
reinspection to be performed no sooner than 30 days after the initial
inspection.
19.4 Our Additional Termination Right. We may terminate the License without
cause or penalty effective only on the fifth or tenth anniversary of the Opening
Date provided we give you at least six (6) months prior written notice of
termination. You will perform the post termination obligations specified in this
Agreement within 10 days after the effective date of temiination. You will pay
no Liquidated Damages if we terminate the License under this Section and you
perform the post termination obligations specified in this Agreement within 10
days after the effective date of termination.
19.5. Special Combined Fees. Notwithstanding Section 7.1, you will pay the
"Combined Fee," consisting of the Royalty and the System Assessment Fee
(excluding agent and property to property commissions, Internet fees, guest
reward and affinity program fees, service fees and charges, guest complaint
assessments, and GDS Fees), to us at the rates set forth in this Section,
provided that the Facility opens in accordance with the deadline established by
the terms of this Agreement:
19.5.1 The Combined Fee shall be five percent (5.0%) of Gross Room Revenues
accruing during the first and second License Years; and
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19.5.2 The Combined Fee shall be five and one half percent (5.5 %) of Gross
Room Revenues accruing during the third License Year; and
19.5.3 The Combined Fee shall be six percent (6.0%) of Gross Room Revenues
accruing during the fourth License Year; and
19.5.4 The Royalty and System Assessment Fees shall be computed and paid at the
rates specified in Section 7.1 on Gross Room Revenues accruing after the fourth
License Year.
19.5.5 The rate changes set forth in this Section automatically terminate
without notice or opportunity to cure, and the Combined Fees shall reset to the
rates specified in Section 7, if and as of the date (i) a Termination occurs, or
we send you a notice of default and you fail to cure the default within the time
specified, if any, in the notice of default, or (ii) after you satisfy the
Improvement Obligation, the Facility receives a quality assurance inspection
score of less than 350 (or its then equivalent) and the Facility fails to
achieve a quality assurance inspection score of at least 350 in a reinspection
to be performed not less than 30 days after the initial inspection.
19.6 Mandatory Rooms Addition. You must construct, equip and operate when
completed under applicable System Standards and the approval procedures for
improvements set forth in Sections 3.1 and 3.2 of this Agreement, an addition
having at least 32 guest rooms (the "Addition") to the then existing Facility.
You will not be required to pay a Rooms Addition Fee for the Addition. You must
commence construction of the Addition within 90 days after the Effective Date
and then proceed diligently to construct the Addition. The Addition shall be
ready to open for business under the System, after obtaining our approval to
open (which we will not unreasonably withhold or delay), within eighteen months
after the Effective Date.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first stated above.
WE:
Villager Franchise systems, Inc.:
By: /s/ Attest: /s/
--------------------------- ------------------------------------
Vice President Assistant Secretary
YOU, as franchisee
GOLDEN OPPORTUNITY DEVELOPMENT
By: /s/ Attest: /s/
--------------------------- -------------------------------------
President
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APPENDIX A
DEFINITIONS
Agreement means this Franchise Agreement.
Application Fee means the fee you pay when you submit your Application under
Section 6. Approved Plans means your plans and specifications for constructing
or improving the Facility initially or after opening, as approved by us under
Section 3.
Casualty means destruction or significant damage to the Facility by act of God
or other event beyond your reasonable anticipation and control.
Chain means the network of Chain Facilities.
Chain Facility means a lodging facility we own, lease, manage, operate or
authorize another party to operate using the System and identified by the Marks.
Condemnation means the taking of the Facility for public use by a government or
public agency legally authorized to do so, permanently or temporarily, or the
taking of such a substantial portion of the Facility that continued operation in
accordance with the System Standards, or with adequate parking facilities, is
commercially impractical, or if the Facility or a substantial portion is sold to
the condemning authority in lieu of condensation.
Conference Fee means the fee we charge for your attendance at a conference for
Chain Facilities and their franchisees when and if held.
Confidential Information means any trade secrets we own or protect and other
proprietary information not generally known to the lodging industry including
confidential portions of the System Standards Manual or information we otherwise
impart to you and your representatives in confidence. Confidential Information
includes the " Rules of Operation Manual" and all other System Standards manuals
and documentation, including those on the subjects of employee relations,
finance and administration, field operation, purchasing and marketing, the
Reservation System software and applications software.
Declaration means the Declaration of Franchise Agreement you and we sign under
Section 5.
Design Standards mean standards specified in the System Standards Manual from
time to time for design, construction, renovation, modification and improvement
of new or existing Chain Facilities, including all aspects of facility design,
number of rooms, rooms mix and configuration, construction materials,
workmanship, finishes, electrical, mechanical, structural, plumbing, HVAC,
utilities, access, life safety, parking, systems, landscaping, amenities,
interior design and decor and the like for a Chain Facility.
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Directory means the general purpose directory we publish listing the names and
addresses of Chain Facilities, and at our discretion, other Villager Lodge
facilities located outside the United States, Canada and Mexico.
Effective Date means the date we insert in the Preamble of this Agreement after
we sign it.
Equity Interests shall include, without limitation, all forms of equity
ownership of you, including voting stock interests, partnership interests,
limited liability company membership or ownership interests, joint and tenancy
interests, the proprietorship interest, trust beneficiary interests and all
options, warrants, and instruments convertible into such other equity interests.
Equity Transfer means any transaction in which your owners or you sell, assign,
transfer, convey, pledge, or suffer or permit the transfer or assignment of, any
percentage of your Equity Interests that will result in a change in control of
you to persons other than those disclosed on Schedule B, as in effect prior to
the transaction. Unless there are contractual modifications to your owners'
rights, an Equity Transfer of a corporation or limited liability company occurs
when either majority voting rights or beneficial ownership of more than 50% of
the Equity Interests changes. An Equity Transfer of a partnership occurs when a
newly admitted partner will be the managing, sole or controlling general
partner, directly or indirectly through a change in control of the Equity
Interests of an entity general partner. An Equity Transfer of a trust occurs
when either a new trustee with sole investment power is substituted for an
existing trustee, or a majority of the beneficiaries convey their beneficial
interests to persons other than the beneficiaries existing on the Effective
Date. An Equity Transfer does not occur when the Equity Interest ownership among
the owners of Equity Interests on the Effective Date changes without the
admission of new Equity Interest owners. An Equity Transfer occurs when you
merge, consolidate or issue additional Equity Interests in a transaction which
would have the effect of diluting the voting rights or beneficial ownership of
your owners' combined Equity Interests in the surviving entity to less than a
majority.
Facility means the Location, together with all improvements, buildings, common
areas, structures, appurtenances, facilities, entry/exit rights, parking,
amenities, FF&E and related rights, privileges and properties existing at the
Location on the Effective Date or afterwards.
FF&E means furniture, fixtures and equipment.
FF&E Standards means standards specified in the System Standards Manual for FF&E
and supplies to be utilized in a Chain Facility.
Food and Beverage means any restaurant, catering, bar/lounge, entertainment,
room service, retail food or beverage operation, continental breakfast, food or
beverage concessions and similar services offered at the Facility.
Gross Room Revenues means gross revenues attributable to or payable for rentals
of guest rooms at the Facility, including all credit transactions, whether or
not collected, but excluding separate charges to guests for Food and Beverage,
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room service, telephone charges, key forfeitures and entertainment; vending
machine receipts; and federal, state and local sales, occupancy and use taxes.
Improvement Obligation means your obligation to either (i) renovate and upgrade
the Facility, or (ii) construct and complete the Facility, in accordance with
the Approved Plans and System Standards, as described in Section 3.
Indemnitees means us, our direct and indirect parent, subsidiary and sister
corporations, and the respective officers, directors, shareholders, employees,
agents and contractors, and the successors, assigns, personal representatives,
heirs and legatees of all such persons or entities.
Initial Fee means the fee you are to pay for signing this-lis Agreement as
stated in Section 6.
License means the non-exclusive license to operate the type of Chain Facility
described in Schedule B only at the Location, using the System and the Xxxx we
designate in Section 1.
License Year means the one year period beginning on the Opening Date and each
subsequent anniversary of the Opening Date and ending on the day preceding the
next anniversary of the Opening Date.
Liquidated Damages means the amounts payable under Section 12, set by the
parties because actual damages will be difficult or impossible to ascertain on
the Effective Date and the amount is a reasonable pre-estimate of the damages
that will be incurred and is not a penalty.
Location means the parcel of land situated at Baton Rouge, Louisiana, as more
fully described in Schedule A.
Losses and Expenses means all payments or obligations to make payments either
(i) to or for third party claimants by any and all Indemnitees, including guest
refunds, or (ii) incurred by any and all Indenmitees to investigate, respond to
or defend a matter, including without limitation investigation and trial
charges, costs and expenses, attorneys' fees, experts' fees, court costs,
settlement amounts, judgments and costs of collection.
Maintenance Standards means the standards specified from time to time in the
System Standards Manual for repair, refurbishment and replacement of FF&E,
finishes, decor, and other capital items and design materials in Chain
Facilities.
Marketing Fee means the fee you pay to us under Section 7 and Schedule C, as
amended, for advertising, marketing, training and other services.
Marks means, collectively (i) the service marks associated with the System
published in the System Standards Manual from time to time including, but not
limited to, the name, design and logo for "Villager Lodge" and other marks (U.S.
Reg. Nos.: 1,664,513 and 1,761,888) and (ii) trademarks, trade names, trade
dress, logos and derivations, and associated good will and related intellectual
property interests.
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Marks Standards means standards specified in the System Standards Manual for
interior and exterior Xxxx-bearing signage, advertising materials, china,
linens, utensils, glassware, uniforms, stationery, supplies, and other items,
and the use of such items at the Facility or elsewhere.
Minor Renovation means the repairs, refurbishing, repainting, and other
redecorating of the interior, exterior, guest rooms, public areas and grounds of
the Facility and replacements of FF&E we may require you to perform under
Section 3.16.
Minor Renovation Ceiling Amount means $750.00 per guest room.
Minor Renovation Notice means the written notice from us to you specifying the
Minor Renovation to be performed and the dates for commencement and completion
given under Section 3.16.
Opening Date means the date on which we authorize you to open the Facility for
business identified by the Marks and using the System.
Operations Standards means standards specified in the System Standards Manual
for cleanliness, housekeeping, general maintenance, repairs, concession types,
food and beverage service, vending machines, uniforms, staffing, employee
training, guest services, guest comfort and other aspects of lodging operations.
Permitted Transferee means (i) any entity, natural person(s) or trust receiving
from the personal representative of an owner any or all of the owner's Equity
Interests upon the death of the owner, if no consideration is paid by the
transferee or (ii) the spouse or adult issue of the transferor, if the Equity
Interest transfer is accomplished without consideration or payment, or (iii) any
natural person or trust receiving an Equity Interest if the transfer is from a
guardian or conservator appointed for an incapacitated or incompetent
transferor.
Protected Territory means a seven (7) mile radius from the front door of the
Facility.
Punch List means the list of upgrades and improvements attached as part of
Schedule B, which you are required to complete under Section 3.
Recurring Fees means fees paid to us on a periodic basis, including without
limitation, Royalties, System Assessment Fees, and other reservation fees and
charges as stated in Section 7.
Relicense Fee means the fee your transferee or you pay to us under Section 7
when a Transfer occurs.
Reservation Fee means the fees you pay to us under Section 7 and Schedule C for
reservation services.
Reservation System or " Central Reservation System" means the system for
offering to interested parties, booking and communicating guest room
reservations for Chain Facilities described in Section 4.2.
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Rooms Addition Fee means the fee we charge you for adding guest rooms to the
Facility.
Royalty means the monthly fee you pay to us for use of the System under Section
7(a). Royalties means the aggregate of all amounts owed as a Royalty.
System means the comprehensive system for providing guest lodging facility
services under the Marks as we specify which at present includes only the
following: (a) the Marks; (b) other intellectual property, including
Confidential Information, System Standards Manual and knowhow; (c) marketing,
advertising, publicity and other promotional materials and programs; (d) System
Standards; (e) training programs and materials; (f) quality assurance inspection
and scoring programs; and (g) the Reservation System.
System Assessment Fee means the Marketing Fee and the Reservation Fee.
System Standards means the standards for the participating in the System
published in the System Standards Manual, including but not limited to Design
Standards, FF&E Standards, Marks Standards, Operations Standards, Technology
Standards and Maintenance Standards and any other standards, policies, rules and
procedures we promulgate about System operation and usage.
System Standards Manual means the Rules of Operations Manual, the Trademark
Identification Standards Manual and any other manual we publish or distribute
specifying the System Standards.
Taxes means the amounts payable under Section 7.3 of this Agreement.
Technology Standards means standards specified in the System Standards Manual
for local and long distance telephone communications services, telephone,
telecopy and other communications systems, point of sale terminals and computer
hardware and software for various applications, including, but not limited to,
front desk, rooms management, records maintenance, marketing data, accounting,
budgeting and interfaces with the Reservation System to be maintained at the
Chain Facilities.
Term means the period of time during which this Agreement shall be in effect, as
stated in Section 5.
Termination means a termination of the License under Sections I 1. I or 1 1.2 or
your termination of the License or this Agreement.
Transfer means (1) an Equity Transfer, (2) you assign, pledge, transfer,
delegate or grant a security interest in all or any of your rights, benefits and
obligations under this Agreement, as security or otherwise without our consent
as specified in Section 9.2, (3) you assign (other than as collateral security
for financing the Facility) your leasehold interest in (if any), lease or
sublease all or any part of the Facility to any third party, (4) you engage in
the sale, conveyance, transfer, or donation of your right, title and interest in
and to the Facility, (5) your lender or ecured party forecloses on or takes
possession of your
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interest in the Facility, directly or indirectly, or (6) a receiver or trustee
is appointed for the Facility or your assets, including the Facility. A Transfer
does not occur when you pledge or encumber the Facility to finance its
acquisition or improvement, you refinance it, or you engage in a Permitted
Transferee transaction.
"You" and "Your" means and refers to the party named as franchisee identified in
the first paragraph of this Agreement and its Permitted Transferees.
"We", "Our" and "Us" means and refers to Villager Franchise Systems, Inc., a
Delaware corporation, its successors and assigns.
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SCHEDULE A
(Legal Description of Facility)
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SCHEDULE B
PART 1: YOUR OWNERS:
Name Ownership Percentage Type of Equity Interest
Diversified Holdings 1, Inc. 74.6% stock
San Xxxxx Securities, Ltd. 12.7% stock
The Xxxxx Family Trust 12.7% stock
PART I: THE FACILITY:
Primary designation of Facility: Villager Lodge
Number of approved guest rooms: 134
Parking facilities (number of spaces, description): At least 134 Other
amenities, services and facilities:
PART III: DESCRIPTION AND SCHEDULE OF RENOVATIONS TO BE COMPLETED AS
THE IMPROVEMENT OBLIGATION:
[Punch List to be attached.]
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VILLAGER LODGE
VILLAGER FRANCHISE SYSTEMS, INC.
SCHEDULE C
The System Assessment Fee is a recurring, non-refundable payment. All or
any part of Fund proceeds received during an accounting period need not be
disbursed within that accounting period.
he Marketing Fee is 1% of Gross Room Revenues.
The Reservation Fee is 1% of Gross Room Revenues.
Notwithstanding the above, after 60 days written notice, either the
Marketing Fee or the Reservation Fee may be changed, in our sole discretion, on
a Chain-wide basis to cover costs (including reasonable direct or indirect
overhead costs) related to such services and. programs or the cost of additional
services or programs.
If you elect to participate in optional Internet reservation programs,
you will be charged a fee per net reservation originated through the Internet
that we may charge in our discretion. Internet-originated reservations carry
fees of either (i) $2.50 per gross reservation booked through the Chain's web
site or other Internet sources, or (ii) $7.00 per gross reservation booked over
the XxxxxxXxx.xxx Internet booking web site. If a reservation booked on the
Chain web site or other Internet source, or XxxxxxXxx.xxx, is canceled by the
guest using the same source or web site as was used to make the reservation, you
will not be charged the applicable fee. You may discontinue the Facility's
XxxxxxXxx.xxx listing only by giving us written notice. You must pay the
XxxxxxXxx.xxx fee on all reservations booked through that web site until
XxxxxxXxx.xxx makes the delisting request effective. We may charge additional
fees for creating or modifying the Facility's Website, Webpage or performing
other services.
If the number of guest complaints per 1,000 occupied room nights about
you or the Facility in a calendar year exceed the "Annual Facility Allotment" we
establish with the approval of the Villager Franchise Advisory Board, you will
be charged a "First Assessment" of $10.00 for each additional complaint received
during that year. You will be contacted when the complaint is received and you
will be responsible to resolve the complaint to the satisfaction of the guest.
If you do not respond to any complaint for which you have received a First
Assessment within 14 business days after referral to you and the guest contacts
us again to seek a response, you will be charged a "Second Assessment" of
$25.00, plus the costs we incur to settle the matter with the guest. If you
respond in a timely manner but the guest remains unsatisfied, you will be
charged the costs we incur to settle the matter with the guest. You will be
informed of your Annual Facility Allotment when it is established. The amounts
of the First and Second Assessments may be changed on a Chain-wide basis at any
time upon 60 days advance notice, with the approval of the Villager Franchise
Advisory Board.
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