1
EXHIBIT 10.4
CANDLEWOOD HOTEL COMPANY, L.L.C.
DEVELOPMENT AGREEMENT
2
CANDLEWOOD HOTEL COMPANY, L.L.C.
DEVELOPMENT AGREEMENT
TABLE OF CONTENTS
Page No.
--------
Recitals ..................................................................................................... 1
Article 1 Grant of Options............................................................................ 1
Article 2 Development Fee; Franchise Application Fees................................................. 3
Article 3 Development Schedule and Manner of Exercising Options....................................... 3
Article 4 Term and Right of First Refusal............................................................. 4
Article 5 Duties of the Parties....................................................................... 5
Article 6 Default..................................................................................... 6
Article 7 Transferability............................................................................. 7
Article 8 Covenants................................................................................... 7
Article 9 Notices..................................................................................... 8
Article 10 Independent Contractor and Indemnification.................................................. 8
Article 11 Approvals................................................................................... 9
Article 12 Non-Waiver.................................................................................. 9
Article 13 Severability and Construction............................................................... 10
Article 14 Entire Agreement - Applicable Law........................................................... 10
Article 15 Remedies and Disputes....................................................................... 11
Article 16 Developer Acknowledgments................................................................... 13
Guaranty...................................................................................................... 15
Attachment A Assigned Area .............................................................................. A-1
Attachment B Development Sch dule ....................................................................... X-0
Xxxxxxxxxx X Xxxxxxxxx Xxxxxxxxxxx....................................................................... X-0
Xxxxxxxxxx X Franchise Agreement ........................................................................ D-1
3
CANDLEWOOD HOTEL COMPANY, L.L.C.
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (the or this "Agreement") made and entered
into at Wichita, Kansas this 11 day of JUNE, 1996, by and between CANDLEWOOD
HOTEL COMPANY, L.L.C., a Delaware limited liability company (hereinafter
referred to as "CHC"), and Studio West Hotel Development Company, L.L.C.
(hereinafter referred to as "Developer"), whose principal business address is
000 Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000.
RECITALS
A. CHC has developed and owns a concept and distinctive system
(hereinafter, the "System") for the design, establishment, and operation of
hotels under the name "Candlewood Hotel" and "Candlewood/A Studio Hotel" (such
names and any other trade names, service marks, trademarks, logos, emblems, or
other indication of origin as are now or hereafter designated by CHC as part of
the System are hereinafter referred to as the "Proprietary Marks").
B. Developer wishes to obtain certain options for the development of
Candlewood Hotels in the area described in this Agreement.
C. CHC is relying upon the business skill, financial capacity, and
character of Developer and its principals, and the guarantee by the principals
of Developer's obligations, if applicable, as attached to this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the promises
contained herein, the parties agree as follows:
ARTICLE 1. GRANT OF OPTIONS.
A. CHC hereby grants to Developer, pursuant to the terms and conditions
of this Agreement, options to obtain franchises to establish and operate _______
Candlewood Hotels (the "Hotels") under the System within the area described in
Attachment A to this Agreement (hereinafter "Assigned Area").
- 1 -
4
B. Except as otherwise provided in this Agreement, CHC shall not
establish, nor franchise another to establish, any Candlewood Hotel under the
System (a "System Hotel") in the Assigned Area prior to the earlier of the
expiration of the development schedule set forth in Attachment B hereto (the
"Development Schedule") or Developer's default under this Agreement.
C. If at anytime prior to the earlier of the expiration of the
Development Schedule or Developer's default under this Agreement, CHC acquires
any hotels in the Assigned Area which it desires to convert to System Hotels
(hereinafter, whether one or more, "Conversion Hotels"), CHC shall provide
written notice to Developer within a reasonable time of its intent to convert
the Conversion Hotels into System Hotels. Such notice shall provide Developer
with a right of first refusal to acquire such Conversion Hotels from CHC on the
terms provided below if the sale by CHC of such hotels to Developer is allowed
by applicable law. Subject to the foregoing, Developer shall have the right and
option, exercisable within 30 days after receipt of such written notification,
to provide written notice to CHC that Developer desires to purchase the
Conversion Hotels and to convert all of such hotels to Hotels under the System.
In the event Developer elects to purchase and convert the Conversion Hotels,
Developer must close on such purchase and execute a Franchise Agreement in the
form attached hereto as Attachment D (which shall require payment of the initial
franchise fee) within 60 days from the date of notice to CHC of Developer's
election to purchase and convert. The purchase price to be paid by Developer for
the Conversion Hotels shall be the cash equivalent of the fair value to CHC for
each of the Conversion Hotels, as determined by an independent appraiser
selected and retained by CHC in CHC's sole discretion. In the event Developer
does not elect to purchase and convert the Conversion Hotels as provided in this
Paragraph, Developer shall have no further right or option to acquire such
Conversion Hotels, and CHC may sell such Conversion Hotels to another franchisee
under the System or Franchisor or its affiliates may own and operate the
Conversion Hotels under the System.
D. Notwithstanding Paragraph B and Paragraph C of this Article,
Developer acknowledges and agrees that CHC's members and the subsidiaries and
affiliates, shareholders, and owners of CHC and its members including without
limitation Doubletree Corporation, a Delaware corporation, and its affiliates
(hereinafter, the "Affiliated Companies") have and retain the right to develop,
acquire, participate in, and operate and license others to develop, acquire,
participate in, and operate hotels, lodging facilities, or other business
operations of any type whatsoever, including locations within the Assigned Area
and locations adjacent, adjoining, or proximate to the Assigned Area, including,
without limitation, hotels using any of the Proprietary Marks or any other trade
name including, but not limited to, any of the following specific trade names:
Doubletree, Doubletree Guest Suites, Club Hotels by Doubletree, Residence Inn by
Marriott, and The Residence Inn. Notwithstanding anything to the contrary in
the foregoing CHC may operate within the Assigned Area any hotel, motel, or
other business that provides lodging accommodations on a daily-stay basis with
kitchen facilities and limited (not on a daily basis) maid service at a moderate
to economy price when an option has been declined by Developer under Paragraph C
of
- 2 -
5
Article 1 or Paragraph B of Article 4, or as otherwise provided in this
Agreement. Developer also agrees that CHC and the Affiliated Companies are not
restricted from using the System or engaging in or licensing any business
activity including System Hotels or other hotels at any location not within the
Assigned Area. Developer understands that such business operations may compete
with and adversely affect the operation of any Hotels developed by Developer
pursuant to this Agreement. Developer agrees that CHC and the Affiliated
Companies may exercise any and all such rights from time to time without notice
to Developer and Developer covenants that it shall not take any action,
including a cause of action in a court of law or equity, which may interfere
with the exercise of such rights by either CHC or any of the Affiliated
Companies.
ARTICLE 2. DEVELOPMENT FEE; FRANCHISE APPLICATION FEES.
In consideration of the development rights granted herein, Developer
shall pay to CHC upon execution of this Agreement a development fee of $1.00.
For each Hotel developed pursuant to this Agreement, Developer shall pay by
certified check a franchise application fee equal to the greater of (a) $40,000
or (b) $400 times the number of rooms of the Hotel as specified in the Franchise
Application for the Hotel. Upon payment by Developer of the franchise
application fee upon submission of the Franchise Application, the initial
franchise fee for the Hotel set forth in Section 4.1.A of the Franchise
Agreement shall be deemed paid in full, unless the number of rooms of the Hotel
specified in Exhibit A to the Franchise Agreement exceeds the number of rooms of
the Hotel specified in the Franchise Application for the Hotel, and in such
case, the balance of the initial franchise fee shall be paid to CHC by Developer
contemporaneously with Developer's execution and delivery of the Franchise
Agreement for the Hotel.
ARTICLE 3. DEVELOPMENT SCHEDULE AND MANNER OF EXERCISING OPTIONS.
A. Developer shall exercise each development option granted hereunder
in the manner specified in Paragraph B below. Recognizing that time is of the
essence, Developer agrees to exercise its options in accordance with the
Development Schedule set forth in Attachment B hereto. Any failure by Developer
to exercise any option within the time specified for such option in the
Development Schedule shall constitute a material default under this Agreement
allowing CHC to terminate this Agreement under Article 6 and to exercise the
remedies for default described in Article 6.C, but CHC shall not have a right of
action against Developer for money damages for failure to exercise options to
develop Hotels in compliance with the times established in the Development
Schedule.
B. To exercise a development option for a site in the Assigned Area,
Developer shall submit to CHC for its approval a Franchise Application, in the
form attached hereto as Attachment
- 3 -
6
C, together with a market feasibility study for the site as described in the
Franchise Application, and such other information or materials as CHC may
reasonably require, including, but not limited to, a copy of a letter of intent
or other evidence satisfactory to CHC which confirms Developer's favorable
prospects for obtaining the site. The Franchise Application shall also be
accompanied by the franchise application fee for the Hotel. CHC shall have 30
days after receipt of the Franchise Application and all other such information
and materials required by CHC to approve or disapprove the Franchise Application
for any reason. If CHC rejects the Franchise Application, CHC shall retain
$5,000 of the franchise application fee to compensate CHC for its administrative
and other expenses in reviewing the Franchise Application, and shall return the
balance of the franchise application fee to Developer and Developer shall have
90 days to submit and obtain approval of another Franchise Application for the
exercise of that option. If a second Franchise Application is submitted, it will
be subject to the same terms and conditions stated above, including payment of
the full Franchise Application Fee, and will be approved or disapproved under
the same terms and conditions described above. Franchisor shall have no
obligation to consider more than two Franchise Applications for any hotel
required by the development schedule. No extensions under this Paragraph shall
extend any other time periods specified in the Development Schedule for the
exercise of options by Developer. Within ten days of obtaining CHC's approval of
the Franchise Application, Developer shall provide CHC an originally executed
Franchise Agreement in the form of Attachment D hereto for the site approved in
the Franchise Application. Developer acknowledges that CHC's approval of the
Franchise Application and the site does not in any way guarantee that the site
will become a profitable Hotel. Developer expressly acknowledges that CHC's
approval of the Franchise Application and the site shall not be deemed to be or
construed as a warranty or guarantee, express or implied, as to the potential
volume, profits, or success of the Hotel to be located on the site.
C. CHC agrees that the personal guaranty referenced in Recital C is
not applicable to this Agreement so long as Developer submits to CHC with each
Franchise Application satisfactory evidence that Developer has received equity
capital contributions of at least $2 million dollars for each Hotel for which a
Franchise Application is submitted or has irrevocable commitments for
contributions of that amount in installments due to be paid in full not later
than completion of construction of such Hotel. This requirement shall terminate
when Developer has submitted evidence satisfactory to CHC that Franchisee has
received cash or cash-equivalent, non-refundable, equity capital contributions
totaling $15 million. If Developer does not maintain compliance with the
capital requirements stated in this paragraph, Franchisor will not be obligated
to consider any further Franchise Applications unless Developer submits a
Guaranty in the form included in the Candlewood Uniform Franchise Offering
Circular dated April 29, 1996, executed and delivered by Xxxx X. Xxxxxxxx, III
and Xxxxx X. Xxxxxxxx. This paragraph does not release Xx. Xxxxxxxx and Xx.
Xxxxxxxx from being required to sign a Covenant Agreement upon request pursuant
to Section 11.7 of the Candlewood Franchise Agreement.
- 4 -
7
D. CHC has under purchase contract a proposed Hotel site in Hillsboro,
Oregon (the Hillsboro Property), which is within Developer's Assigned Area.
Developer shall have the option to purchase the Hillsboro Property on the terms
stated herein. If Developer fails to purchase the Hillsboro Property, the
Candlewood Hotel at this location will be excluded from, and may be developed
and operated without violating, Developer's rights in the Assigned Area under
the Development Agreement.
The terms of purchase of the Hillsboro, Oregon Property shall be as
follows:
(1) Closing shall occur on or before the close of business on July 15,
1996.
(2) The consideration for the purchase shall consist of (a)
reimbursing CHC for every item of expense incurred in acquiring the property for
hotel development, including all purchase money, title costs, attorneys fees,
recording fees, permits, architects, engineers, environmental, and other
expenses directly related to the development and construction of the Hotel
(including time and compensation of CHC employees in connection with the
Hillsboro Property determined by multiplying the hourly cost to CHC of the
employees, compensation and benefits times the hours spent in connection with
the Hillsboro Property, plus interest at the rate of 10% per annum from the
date of CHC's expenditures through the closing date of sale to Developer), and
(b) assuming sole liability for all obligations due or to become due under any
outstanding contracts relating to acquisition and construction of the Hotel on
the Hillsboro Property, including professional contracts, construction
contracts, and other types of agreements customarily associated with such a
real estate development and construction project. Developer shall have the
right, prior to and as a condition of, its obligation to close, to conduct such
inspections of the Hillsboro Property as it deems appropriate, and to review
all contracts and records of CHC pertaining the Hillsboro Property.
(3) Conveyance of the Hillsboro Property from CHC to Developer shall
be by nonrecourse assignment of its rights under the purchase contract and/or
by quitclaim deed. CHC will make no representations or warranties of any
nature, it being understood that Developer will assume the same rights and
liabilities with respect to the Hillsboro Property as if it had been the
contracting party and/or real estate owner continuously from the date that CHC
acquired any right or title in the Hillsboro Property.
ARTICLE 4. TERM AND RIGHT OF FIRST REFUSAL.
A. Unless sooner terminated in accordance with the terms of this
Agreement, the term of this Agreement and all rights granted hereunder (except
for the right of first refusal provided in Paragraph B of this Article) shall
expire on the date of CHC's acceptance and execution of a
- 5 -
8
Franchise Agreement for the last of the Hotels to be established pursuant to
the Development Schedule.
B. If at any time within 5 years following the expiration of the
Development Schedule, CHC determines that it is desirable to establish
additional Hotels under the System in the Assigned Area, and provided that
Developer has opened all of the Hotels described in the Development Schedule and
is then in compliance with all terms and conditions of all Franchise Agreements
between Developer and CHC, Developer shall have a right of first refusal to
purchase the options to establish such additional Hotels upon CHC's then-current
terms and conditions. In that event, CHC shall submit to Developer a development
agreement offering such options, which agreement shall supersede in all
respects this Agreement, and Developer shall have 30 days after receipt to
execute and return the agreement to CHC. In the event that Developer does not
exercise this right of first refusal, CHC may thereafter elect to establish
additional Hotels itself or grant options to others to do so in the Assigned
Area.
C. In addition to the number of Hotels included in the Development
Schedule, Developer may develop additional Hotels in the Assigned Area by
submitting applications, paying franchise fees, obtaining approvals, and
executing Franchise Agreements for additional Hotels in the manner provided in
Article 3 of the Development Agreement. The Development Schedule shall not be
deemed to have expired for purposes of the territorial protection provided in
Article 1 of the Development Agreement so long as Developer exercises an option
for at least one additional Hotel in the Territory in the manner provided in
Article 3 of the Development Agreement every six months after the expiration of
the initial Development Schedule.
Notwithstanding the time limitations stated in Articles 1.C and 4.B of
the Development Agreement, Developer shall continue to have first refusal
rights on all Conversion Hotels and additional Hotels in Developer's Assigned
Area for a period of five years after Developer has been offered and has
declined to exercise first refusal rights for an additional Hotel on three (3)
occasions (each being an "Occasion"). An Occasion may occur only once per
six-month period and only in a period when Developer has not exercised an
option for an additional Hotel. An Occasion shall not be deemed to have
occurred unless CHC or its designee in fact develops such additional Hotel. In
addition to the first refusal procedures provided in Article 4.B of the
Development Agreement, CHC agrees that the offer of first refusal rights must
include reasonably specific identification of the location of the proposed
additional Hotel, together with evidence that real estate is available for
acquisition by sale or lease for the additional Hotel. Developer will have sixty
(60) days in which to execute a Franchise Agreement for the additional Hotel.
The parties further agree that the option price to Developer under
Article 1.C for the purchase of Conversion Hotels acquired by CHC as a single
hotel with readily determinable cost, or a group of hotels with a readily
determinable cost all within Developer's territory, shall be
- 6 -
9
CHC's cost plus interest at 10% per annum from the date CHC incurred such costs
until the closing date of developer's purchase of such Conversion Hotel or
Hotels.
ARTICLE 5. DUTIES OF THE PARTIES.
A. CHC shall furnish to Developer the following:
1. A Development Manual, on loan, setting forth site selection
guidelines, and containing a set of prototype plans and specifications
(not for construction) for a System Hotel.
2. On-site evaluation as CHC deems advisable in response to
Developer's request for site approval; provided, however, the CHC shall
not provide on-site evaluation for any proposed site prior to its
receipt from Developer of a market feasibility study for such site
prepared by Developer pursuant to Paragraph B of Article 3 of this
Agreement.
B. Developer accepts the following obligations:
1. Developer shall comply with all terms and conditions set
forth in this Agreement.
2. Developer shall at all times preserve in confidence the
Development Manual and any and all materials and information furnished
or disclosed to Developer by CHC and designated by CHC as confidential,
and Developer shall disclose such information or materials only to such
of its employees or agents who must have access to it in connection
with their employment. Developer shall not at any time, without CHC's
prior written consent, copy, duplicate, record, or otherwise reproduce
the Development Manual or other materials or information, in whole or
in part, nor otherwise make the same available to any unauthorized
person.
3. Developer shall comply with all requirements of federal,
state, and local laws, rules, ordinances, and regulations.
4. Developer shall comply with all terms and conditions set
forth in any Franchise Agreement, and any other related agreement or
instrument entered into by Developer in connection with any Hotel.
- 7 -
10
ARTICLE 6. DEFAULT.
A. The options and territorial rights granted to Developer in this
Agreement have been granted in reliance on Developer's representations and
assurances, among others, that the Development Schedule set forth in Attachment
B to this Development Agreement will be met by Developer in a timely manner.
B. Developer shall be deemed in default under this Agreement, and all
rights granted herein shall automatically terminate without notice, if Developer
is adjudicated a bankrupt, becomes insolvent, suffers temporary or permanent
count-appointed receivership of substantially all of Developer's property, makes
a general assignment for the benefit of creditors or suffers the filing of a
voluntary or involuntary bankruptcy petition which is not dismissed within 90
days after filing.
C. If Developer fails to comply with (i) the Development Schedule, (ii)
any terms and conditions of any Franchise Agreement, (iii) any other terms and
conditions of this Agreement, (iv) or any other agreement between Developer and
CHC or the Affiliated Companies, such action shall constitute a default under
this Agreement. Upon such default, CHC, in its discretion, may, without giving
Developer prior notice or the right to cure any such default, do any one or more
of the following:
1. Terminate this Agreement and all rights granted hereunder
without affording Developer any opportunity to cure the default,
effective immediately upon Developer's receipt of written notice from
CHC;
2. Reduce the number of options granted Developer in Article 1
of this Agreement;
3. Reduce the territory described in Article 1 of this
Agreement;
4. Terminate the territorial exclusivity granted Developer in
Article 1 of this Agreement.
D. Upon termination of this Agreement by Developer's default, all
remaining options shall be null and void. Developer shall have no right to
establish or operate any Hotel for which a Franchise Agreement has not been
executed by CHC. Default under this Development Agreement shall not constitute a
default under any existing Franchise Agreement between the parties hereto.
E. No right or remedy herein conferred upon or reserved to CHC is
exclusive of any other right or remedy provided or permitted by law or equity.
- 8 -
11
ARTICLE 7. TRANSFERABILITY.
A. CHC shall have the right to transfer all or any part of its rights
or obligations herein to any person or legal entity.
B. Developer understands and acknowledges that the rights and duties
set forth in this Agreement are personal to Developer and are granted in
reliance upon the personal qualifications of Developer. Developer has
represented to CHC that Developer is entering into this Agreement with the
intention of complying with its terms and conditions and not for the purpose of
resale of the developmental rights hereunder. Neither Developer nor any partner,
member, or shareholder thereof shall, without CHC's prior written consent (which
consent shall not be unreasonably withheld), directly or indirectly, sell,
assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any
interest in this Agreement or in Developer. Any such proposed assignment
occurring by operation of law or otherwise, including any assignment by the
trustee in bankruptcy, without CHC's prior written consent (which consent shall
not be unreasonably withheld) shall be a material default of this Agreement.
CHC's consent to a transfer of any interest in this Agreement or in Developer
shall be subject to the terms and conditions set forth in Article 13 of the
Franchise Agreement (Attachment C hereto); provided, however, if a proposed
transfer hereunder would trigger the requirements of Section 13.2 of the
Franchise Agreement, the transferee, in lieu of complying with subsections F
through I of Section 13.2 of the Franchise Agreement, shall execute this
Agreement and any ancillary agreements and pay to CHC a transfer fee of $5,000.
Notwithstanding any provision to the contrary contained in this Article,
Developer may transfer not more than an aggregate of 25% of the outstanding
voting shares or ownership interest of a Developer operating as a corporation,
partnership, or limited liability company to employees of Developer who are
actively engaged in Developer's Hotel operations, if such transfers, alone or
together with other previous, simultaneous, or proposed transfers, do not have
the effect of transferring a controlling interest (as reasonably determined by
CHC) in the Developer. The ownership of such shares or ownership interest by
such employees will be subject to all of the terms and conditions set forth in
this Agreement and the Franchise Agreement, including, without limitation,
Articles 11 and 13 of the Franchise Agreement. Developer shall provide CHC with
written notice of any such proposed transfer and all pertinent information
regarding the same not later than 30 days prior to the proposed date of
transfer.
C. Notwithstanding the provisions of Article 7.B of the Development
Agreement and the provisions of the Franchise Agreement referred to therein,
the parties agree that equity ownership interests in Developer owned by passive
investors may be transferred in amounts not exceeding 10% of the outstanding
equity interests in Developer without prior notice to or approval from CHC. For
purposes of this Agreement, "passive investor" shall mean any natural or legal
person who (a) owns in the aggregate not more than 10% of the outstanding
equity interests in
- 9 -
12
Developer; (b) is not engaged directly, or indirectly through agents or
employees, in management or operations of the Developer as an officer,
director, manager, general partner, employee, consultant, or other similar or
analogous capacity; (c) has no agreements or understandings of any nature,
directly, or indirectly, to act in concert with any other person to participate
in management or act in concert in the purchase or sale or voting of equity
interests in Developer; and (d) is not related by blood or adoption to any
nonpassive investor or officer, director or manager of Developer as a parent,
child, grandparent, grandchild, brother or sister or by marriage to any person
of such degree of kinship. Notwithstanding this paragraph, Developer agrees to
provide to CHC at any reasonable time upon CHC's request the names, addresses,
and ownership interests of Developer's equity owners, and CHC shall have the
right to inspect Developer's stock ledgers or other ownership records at any
reasonable time upon request. Passive investors shall not be required to sign
CHC Covenant Agreements, provided, however, that their participation in any
business that would be prohibited by a CHC Covenant Agreement shall be limited
to activities that would satisfy the definition of "Passive Investor" as stated
above.
D. Developer agrees that it will not make a public offering of
securities unless and until (a) CHC has first made a public offering of its
securities or three years after the date of this Agreement, whichever is
sooner, and (b) Franchisee has opened and is operating at least five Candlewood
Hotels, and CHC agrees that it will not unreasonably withhold its consent to a
public offering by Developer at any time after these conditions are satisfied.
ARTICLE 8. COVENANTS.
Developer covenants that, except as otherwise approved in writing by
CHC, Developer shall not do or engage in any act prohibited by Article 11 of the
Franchise Agreement (Attachment D). Developer further covenants that during the
term of this Agreement Developer shall not compete, or be associated, directly
or indirectly as an owner, shareholder, officer, director, employee, consultant,
manager, or otherwise, in any business in competition with the System, and, for
a period of two years after any transfer or termination of this Agreement for
any reason, Developer shall not compete, or be associated, directly or
indirectly as an owner, shareholder, officer, director, employee, consultant,
manager, or otherwise, in any hotel, motel, or any other business, that provides
lodging accommodations on a daily-stay basis with kitchen facilities and limited
(not on a daily basis) maid service at a moderate to economy price, anywhere in
the world, which shall expressly include, but shall not be limited to, the
United States of America and all its territories and possessions, and all other
countries in North America. Unless the context otherwise requires, the term
"Developer" as used in this Article shall include, individually and
collectively, all partners, officers, directors, and managers of Developer and
holders, directly or indirectly (and any partners, officers or directors of any
such holder), of five percent or more of the beneficial interest in Developer.
- 10 -
13
ARTICLE 9. NOTICES.
Any and all notices required or permitted under this Agreement shall be
in writing and shall be personally delivered or mailed by certified mail, return
receipt requested, to the respective parties at the following addresses unless
and until a different address has been designated by written notice to the other
party:
Notices to CHC: Candlewood Hotel Company, L.L.C.
0000 Xxxx Xxxxxxx
Xxxxxxx, Xxxxxx 00000
Attn: Franchise Department
Notices to Developer: Studio West Hotel Development
Company, L.L.C.
000 Xxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxx, III
Any notice by certified mail shall be deemed to have been given at the
date and time of mailing.
ARTICLE 10. INDEPENDENT CONTRACTOR AND INDEMNIFICATION.
A. It is understood and agreed by the parties hereto that this
Agreement does not create a fiduciary relationship between them, that nothing in
this Development Agreement is intended to constitute either party an agent,
legal representative, subsidiary, joint venturer,
partner, employee, or servant of the other for any purpose whatsoever. Each
party to this Agreement is an independent contractor, and neither shall be
responsible for the obligations, debts, or liabilities incurred by the other.
B. Developer shall hold itself out to the public to be an independent
contractor operating pursuant to this Agreement. Developer agrees to take such
reasonable actions as shall be necessary to that end.
C. Developer understands and agrees that nothing in this Development
Agreement authorizes Developer to make any contract, agreement, warranty or
representation on CHC's behalf, or to incur any debt or other obligation in
CHC's name; and that CHC assumes no liability for, nor shall be deemed liable by
reason of, any act or omission of Developer in Developer's
- 11 -
14
conduct under this Development Agreement, or any claim or judgment arising
therefrom. Developer shall indemnify and hold CHC and the Affiliated Companies
and CHC's and the Affiliated Companies' officers, directors, employees,
shareholders, owners, managers, agents, representatives, and affiliates harmless
against any and all such claims directly or indirectly from, as a result of, or
in connection with Developer's operations hereunder, as well as the costs,
including attorneys' fees, of defending against them.
ARTICLE 11. APPROVALS.
A. Whenever this Development Agreement requires the prior approval or
consent of CHC, Developer shall make a timely written request to CHC therefor;
and, except as otherwise provided herein, any approval or consent granted shall
be in writing.
B. CHC makes no warranties or guarantees upon which Developer may rely
and assumes no liability or obligation to Developer or any third party to which
it would not otherwise be subject, by providing any waiver, approval, advice,
consent, or services to Developer in connection with this Development Agreement,
or by reason of any neglect, delay, or denial of any request therefor.
ARTICLE 12. NON-WAIVER.
No failure of CHC to exercise any power reserved to it in this
Agreement or to insist upon compliance by Developer with any obligation or
condition in this Development Agreement, and no custom or practice of the
parties at variance with the terms hereof, shall constitute a waiver of CHC's
rights to demand exact compliance with the terms of this Agreement. Waiver by
CHC of any particular default shall not affect or impair CHC's right in respect
to any subsequent default of the same or of a different nature, nor shall any
delay, forbearance, or omission of CHC to exercise any power or right arising
out of any breach or default by Developer of any of the terms, provisions, or
covenants of this Agreement, affect or impair CHC's rights, nor shall such
constitute a waiver by CHC of any rights hereunder or rights to declare any
subsequent breach or default.
ARTICLE 13. SEVERABILITY AND CONSTRUCTION.
A. Should any one or more parts of this Agreement be declared invalid
for any reason by a court of competent jurisdiction, such decision shall not
affect the validity of any remaining portions of the Agreement, which shall
remain in full force and effect as if the Agreement had been executed without
such invalid parts, except to the extent the absence of the provisions
- 12 -
15
invalidated would frustrate or make it impossible to achieve the purposes for
which the Agreement was made. Should the requirements of any applicable law or
regulation change or modify the terms of this Agreement or conflict with its
provisions, such change or modification shall not be applicable to this
Agreement unless such change is lawfully mandated by the authority making the
same, in which case only the provisions affected by such law or regulation shall
be affected, and the Agreement shall otherwise remain in full force and effect,
as modified to be consistent with such law or regulation.
B. Nothing in this Agreement shall confer upon any person or legal
entity other than CHC or Developer and such of their respective successors and
assigns as may be contemplated by Article 7 of this Agreement, any rights or
remedies under or by reason of this Agreement.
C. All captions in this Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provision hereof. Time is of the essence of this Agreement
in all respects.
D. All references herein to gender and number shall be construed to
include such other gender and number as the context may require, and all
acknowledgments, promises, covenants, agreements and obligations herein made or
undertaken by Developer shall be deemed jointly and severally undertaken by all
those executing this Agreement on behalf of Developer.
E. This Agreement may be executed in several parts, and each copy so
executed shall be deemed an original.
ARTICLE 14. ENTIRE AGREEMENT - APPLICABLE LAW.
This Agreement, the documents referred to herein, and the Attachments
attached hereto constitute the entire, full, and complete agreement between CHC
and Developer concerning the subject matter hereof and supersede any and all
prior agreements. No amendment, change, or variance from this Agreement shall
be binding on either party unless executed in writing. This Agreement shall be
governed by the laws of the State of Kansas.
ARTICLE 15. REMEDIES AND DISPUTES.
A. Developer and CHC agree to submit, prior to arbitration, all
unsettled claims, disputes, controversies, and other matters in question between
them arising out of or relating to this Agreement (including but not limited to
any claim that the Agreement or any of its provisions
- 13 -
16
is invalid, illegal, or otherwise voidable or void), the dealings or
relationship between Developer and CHC, or Developer's development of any Hotel
("Disputes") to mediation in Wichita, Kansas and in accordance with the
Commercial Mediation Rules of the American Arbitration Association currently in
effect. Demand for mediation shall be made within a reasonable time, not to
exceed thirty (30) days, after cessation of negotiations between Developer and
CHC.
1. Mediation shall be private, voluntary, and nonbinding. Any
party may withdraw from the mediation at any time before signing a
settlement agreement upon written notice to each other party and to the
mediator. The mediator shall be neutral and impartial. The mediator's
fees shall be shared equally by the parties. The mediator shall be
disqualified as a witness, consultant, expert, or counsel for either
party with respect to the matters in Dispute and any related matters.
2. Unless the parties agree otherwise, the entire mediation
process shall be confidential and without prejudice. The parties and
the mediator shall not disclose any information, documents, statements,
positions, or terms of settlement. Nothing said or done or provided by
the parties in the course of mediation shall be reported or recorded
or, except as ordered by a court of competent jurisdiction, placed in
any legal proceeding or construed for any purpose as an admission
against interest. Nevertheless, evidence otherwise discoverable or
admissible is not excluded from discovery or admission as a result of
its use in mediation.
If a Dispute cannot be resolved through mediation, the parties agree to submit
the Dispute to arbitration, subject to the terms and conditions of this Article.
B. Subject to Paragraph A of this Article, all Disputes between
Developer and CHC will be submitted for binding arbitration to the American
Arbitration Association on demand of either party. Such arbitration proceeding
will be conducted in Wichita, Kansas and, except as otherwise provided in this
Agreement, will be heard by one arbitrator in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect. All
matters relating to arbitration will be governed by the federal Arbitration Act
(9 U.S.C. Sections 1 et.seq.) and not by any state arbitration law.
1. The arbitrator will have the right to award or include in
his award any relief which he deems proper under the circumstances,
including, without limitation, money damages (with interest on unpaid
amounts from the date due), specific performance, injunctive relief,
and attorneys' fees and costs, provided that the arbitrator will not
have the right to declare any of CHC's proprietary marks, generic or
otherwise, invalid or to award exemplary or punitive damages. The award
and decision of the arbitrator will be conclusive and binding upon all
parties hereto, and judgment upon the award may be entered in any court
of competent jurisdiction.
- 14 -
17
2. Developer and CHC agree to be bound by the provisions of
any limitation on the period of time in which claims must be brought
under applicable law. Developer and CHC further agree that, in
connection with any such arbitration proceeding, each must submit or
file any claim which would constitute a compulsory counterclaim (as
defined by Rule 13 of the Federal Rules of Civil Procedure) within the
same proceeding as the claim to which it relates. Any such claim which
is not submitted or filed as described above will be forever barred.
3. Developer and CHC agree that arbitration will be conducted
on an individual, not a class-wide, basis, and that an arbitration
proceeding between Developer and CHC may not be consolidated with any
other arbitration proceeding involving Developer or CHC and another
party.
C. Notwithstanding anything to the contrary contained in this Article,
Developer and CHC each have the right in a proper case to obtain temporary
restraining orders and temporary or preliminary injunctive relief from a court
of competent jurisdiction; provided, however, that Developer and CHC must
contemporaneously submit the Dispute for non-binding mediation under Paragraph A
of this Article and then for arbitration under Paragraph B of this Article on
the merits as provided herein if such Dispute cannot be resolved through
mediation. Developer acknowledges that a proper case to obtain temporary
restraining orders and temporary or permanent injunctive relief from a court of
competent jurisdiction contemporaneously with submitting the Dispute to
mediation and then to arbitration shall include, but not be limited to, the
following:
1. Any Dispute involving actual or threatened disclosure or
misuse of the contents of the Development Manual or any other
confidential information or trade secrets of CHC;
2. Any Dispute involving the ownership, validity, use of, or
right to use or license CHC's marks;
3. Any action by CHC to enforce the covenants set forth in
Article 7 and Article 8 of the Agreement; and
4. Any action by CHC to stop or prevent any threat or danger
to public health or safety resulting from the construction of a Hotel.
The provisions of Paragraphs A and B of this Article are intended to benefit and
bind certain third party non-signatories and will continue in full force and
effect subsequent to and notwithstanding the expiration or termination of this
Agreement.
-15-
18
D. In the event that Developer commences any action against CHC with
respect to any Dispute, such action shall be brought only in a federal or state
court sitting within Sedgwick County, Kansas. Developer consents to the exercise
of jurisdiction by courts within Sedgwick County, Kansas over any claims or
counterclaims against Developer.
E. In the event CHC incurs legal fees or costs or other expenses to
enforce any obligation of Developer under this Agreement, or to defend against
any claim, demand, action or proceeding by reason of Developer's failure to
perform or observe any obligation imposed upon Developer by this Agreement, then
CHC shall be entitled to recover from Developer the amount of all legal fees,
costs and expenses, including reasonable attorneys' fees, whether incurred prior
to, in preparation for, or contemplation of the filing of any claim, demand,
action, or proceeding or in connection with the prosecution or defense thereof.
F. Nothing contained in this Article shall bar CHC's right to obtain
injunctive relief against threatened conduct that will cause it loss or damage,
under the usual equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.
ARTICLE 16. DEVELOPER ACKNOWLEDGMENTS.
A. Developer acknowledges that the success of the business venture
contemplated by this Agreement involves substantial business risks and will be
largely dependent upon the ability of Developer as an independent business
person. CHC expressly disclaims the making of, and Developer acknowledges
Developer has not received, any warranty or guarantee, express or implied, as to
the potential volume, profits, or success of the business venture contemplated
by this Agreement.
B. Developer acknowledges that Developer received a copy of this
Agreement, the attachments thereto, if any, and agreements relating thereto, if
any at least five business days prior to the date this Agreement was executed;
and that CHC has accorded Developer ample time and opportunity to consult with
advisors of Developer's own choosing about the potential benefits and risks of
entering into this Agreement. Developer further acknowledged that Developer has
received a copy of CHC's franchise offering disclosure document required by the
trade regulation rule of the Federal Trade Commission at least ten business days
prior to the date this Agreement was executed.
C. The parties acknowledge that Developer has indicated that it may
wish to apply for a second Development Agreement for an additional Assigned
Area ant that CHC has indicated that it would consider such application when
and if made. Such statements are nonbinding expressions of present intent, and
CHC has no obligation to reserve territory for Developer,
-16-
19
except for the Assigned Area designated in this Agreement, and may reserve any
other area for itself or grant franchise rights to others in any other area
without obligation to Developer.
IN WITNESS WHEREOF, the parties hereto have duly executed, sealed, and
delivered this Agreement as of the day and year first above written.
CANDLEWOOD HOTEL COMPANY, L.L.C.
DATED: By: /s/ XXXX X. XxXXXX
---------------------------------
Xxxx X. XxXxxx
Its: President and Chairman
"CHC"
STUDIO WEST HOTEL DEVELOPMENT
COMPANY, L.L.C.
By /s/ XXXX X. XXXXXXXX III
----------------------------------
Xxxx X. Xxxxxxxx III
Its: Chairman and CEO
By /s/ XXXXX X. XXXXXXXX
----------------------------------
Xxxxx X. Xxxxxxxx
Its: President and COO
"Developer"
-17-
