FRANCHISE AGREEMENT between HYATT PLACE FRANCHISING, L.L.C. and ENTITY NAME CAPS
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FRANCHISE AGREEMENT between HYATT PLACE FRANCHISING, L.L.C. and ENTITY NAME CAPS
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HYATT PLACE FRANCHISING, L.L.C.
ENTITY NAME CAPS
TABLE OF CONTENTS
HYATT PLACE HOTEL
This Franchise Agreement (“Agreement” or “Franchise Agreement”) is made and entered into as of , 20 (the “Effective Date”) (regardless of the dates of the parties’ signatures) by and between HYATT PLACE FRANCHISING , L.L.C. , a Delaware limited liability company having its principal business address at 200 West Monroe, 8th Floor, Chicago, Illinois 60606 (“we,” “our,” or “us”), and ENTITYNAMECAPS, a ENTITY having an address at ENTITYADDRESS (“you” or “your”).
1 . The Franchise.
We have the exclusive right to license and franchise a concept and system (the “Hotel System”) associated with the establishment and operation of hotels under the name “HYATT ® PLACE” and other Proprietary Marks (defined below) (collectively, “Hyatt Place Hotels”). Before signing this Agreement, you read our Uniform Franchise Offering Circular and independently investigated and evaluated the risks of investing in the hotel industry generally and acquiring a Hyatt Place Hotel franchise specifically. Following your investigation and recognizing the benefits that you may derive from being identified with the Hotel System, you wish to enter into this Agreement to obtain a franchise to use the Hotel System to operate a Hyatt Place Hotel located at HOTELADDRESS1, HOTELADDRESS2 (the “Hotel”).
A. The Hotel . The Hotel includes all structures, facilities, appurtenances, furniture, fixtures, equipment, entrances, exits, and parking areas located on the real property identified on Attachment A or any other real property we approve for Hotel expansion, signage, or other facilities. You may not make any material changes to the Hotel’s existing or planned construction without our prior written consent, including any change in the number of guest rooms at the Hotel (collectively “Guest Rooms”).
B. The Hotel System . We and our affiliates have designed the Hotel System so that the public associates Hyatt Place Hotels with high quality standards. The Hotel System now includes: (a) the trade names, trademarks, and service marks “Hyatt Place” and such other trade names, trademarks, service marks, logos, slogans, trade dress, domain names, and other designations of source and origin (including all derivatives of the foregoing) that we periodically develop and designate for use in connection with the Hotel System (collectively, the “Proprietary Marks”); (b) all copyrightable materials that we periodically develop and designate for use in connection with the Hotel System, including the Manual (as defined below), videotapes, CDs/DVDs, marketing materials (including advertising, promotional, and public relations materials), architectural drawings (including all architectural plans, designs, and layouts such as, without limitation, site, floor, plumbing, lobby, electrical, and landscape plans), building designs, and business and marketing plans, whether or not registered with the U.S. Copyright Office (“Copyrighted Materials”); (c) all materials and other information that we designate as “confidential” orally or in writing or which, under the circumstances surrounding disclosure, ought to be treated as confidential, including all operations information, confidential manuals, revenue information, specifications, procedures, and business, marketing and other plans, as more fully identified in Section 5F of this Agreement (collectively, “Confidential Information”); (d) a national toll-free number for, and other aspects of, the central reservation system, as we renovate and modify it from time to time (“CRS”); (e) a global distribution system, as we renovate and modify it from time to time (“GDS”); (f) the national directory of Hyatt Place Hotels (which, at our option, also may be associated with any other hotel brand or other business that we or our affiliates own, operate, franchise, license or manage) (the “National Directory”); (g) management, personnel, and operational training programs, materials, and procedures; (h) standards, specifications, procedures, and rules for operations, marketing, construction, equipment, furnishings, and quality assurance (collectively, “System Standards”) described in our confidential
manuals, as amended from time to time (collectively, the “Manual”), or in other written or electronic communications; and (i) marketing, advertising, and promotional programs. Although we retain the right to establish and periodically to modify System Standards for the Hotel that you agree to implement and maintain, and. to modify the Hotel System as we deem best for Hyatt Place Hotels, you retain the right to control, and responsibility for, the Hotel’s day-to-day management and operation and implementing and maintaining System Standards at the Hotel. In addition, our mandatory System Standards do not include any personnel or security-related policies or procedures that we (at our option) make available to you in the Manual or otherwise for your optional use. You will determine to what extent, if any, these optional policies and procedures should apply to your Hotel’s operations. You acknowledge that we do not dictate or control labor or employment matters for franchisees and their employees and will not be responsible for the safety and security of Hotel employees or patrons.
2 . Grant
A. Term . Commencing on the Effective Date and continuing during the term provided in Section 10A (the “Term”), we hereby grant you, and you hereby accept, the non-exclusive right and franchise to use the Hotel System to build or convert and operate the Hotel at the site specified in Attachment A (the “Site”) in accordance with this Agreement’s terms. Your right to operate the Hotel will cease upon termination or expiration of this Agreement.
B. Area of Protection . We grant you a geographic area of protection, which is described in Attachment B (the “Area of Protection”), in which to construct and operate your Hotel. Subject to the one exception below, neither we nor any of our affiliates will open and operate, or authorize any other party to open and operate, any other Hyatt Place Hotels the physical premises of which are located within the Area of Protection. The one exception to this restriction is that, if we or any of our affiliates acquire (whether through purchase, sale, merger, consolidation, or other transaction) another chain, franchise system, group or portfolio of at least four (4) hotels, or acquire the right to operate or manage another chain, franchise system, group or portfolio of at least four (4) hotels, one (1) or more of which hotels are located in the Area of Protection (as we have the right to do), we and/or our affiliates then will have the unrestricted right to convert, or cause to be converted, the acquired hotel(s) within the Area of Protection from its (or their) original trade identity to the Hotel System and then to operate, or authorize any other party to operate, such hotel(s) as Hyatt Place Hotels using the Hotel System, even if one (1) or more of the other acquired hotels, whether operating within or outside the Area of Protection, are not converted to Hyatt Place Hotels.
Except for the limited exclusivity provided above, there are no restrictions on us or our affiliates, your rights under this Agreement are nonexclusive in all respects, the Hotel has no territorial protection whatsoever, and we and our affiliates have the right without any restrictions at all to engage in any and all activities we and they desire (including any and all types of lodging facilities), at any time and place, whether or not using the Proprietary Marks or any aspect of the Hotel System, whether or not those activities compete with your Hotel, and whether or not we or our affiliates start those activities ourselves or purchase, merge with, acquire, or affiliate with businesses that already engage in such activities. We and our affiliates may engage in all activities not expressly prohibited in this Agreement. We and our affiliates may use or benefit from common hardware, software, communications equipment and services, administrative systems, reservation systems, franchise application procedures, central purchasing, approved vendor lists, and personnel. You agree that you will have no right to pursue any claims, demands, or damages as a result of these activities, whether under breach of contract, unfair competition, implied covenant of good faith and fair dealing, divided loyalty, or other theories, because you have expressly allowed us and our affiliates to engage in all such activities without restriction.
You acknowledge that our affiliates operate other franchise and non-franchised systems for lodging facilities (including time-share or interval ownership facilities and vacation clubs) that use different brand names, trademarks, and service marks, including those with the “Hyatt” name as part of their brand name, some of which might operate and have facilities in the Area of Protection, that will compete directly with you. None of those activities, even other uses of the “Hyatt” name, will constitute a violation of this Agreement. Only the operation of a “Hyatt Place” Hotel the physical premises of which are located within the Area of Protection would constitute a violation of this Agreement, unless the one exception noted above applies.
C. Opening . You have no right to open the Hotel for business under the Hotel System unless and until we authorize you to do so in writing. The date on which you first open the Hotel for business shall be deemed the “Opening Date.” You must not open the Hotel for business and begin operating the Hotel until: (1) you have properly developed and equipped the Hotel according to our System Standards and in compliance with all applicable laws, rules and regulations; (2) all pre-opening training for the Hotel’s personnel has been completed to our satisfaction; (3) all amounts then due to us and our affiliates have been paid; (4) you have obtained all required certificates of occupancy, licenses and permits to operate the Hotel; (5) you have given us copies of all insurance policies required under this Agreement, or such other evidence of insurance coverage and payment of premiums as we request; and (6) we have conducted a pre-opening inspection and approved the Hotel for opening. Our determination that you have met all of our pre-opening requirements will not constitute a representation or warranty, express or implied, that the Hotel complies with any laws or a waiver of your non-compliance, or of our right to demand full compliance, with such pre-opening requirements.
3 . Your Responsibilities.
A. Operational and Other Requirements . During the Term, you agree to do the following (many of which requirements also are addressed in more detail elsewhere in this Agreement):
B. Performance of the Work . As a primary inducement for us to enter into this Agreement, you agree to perform the work listed on Attachment C (the “Work”) in strict accordance with our specifications and this Agreement’s other applicable terms and conditions.
C. Hotel Upgrading . We may require you at any time and from time to time during the Term to upgrade or renovate the Hotel to comply with then current building decor, appearance, and trade dress standards that we have established and require for Hyatt Place Hotels generally, and this upgrading or renovation may obligate you to invest additional capital in the Hotel and/or incur higher operating costs. You agree to implement such upgrading and renovation, and any other changes in System Standards, within the time period we request, regardless of their cost or the point during the Term when we require you to do so, as if they were part of this Agreement as of the Effective Date. Your failure to do so within the timeframe we specify may result in our issuing a quality default notice that could lead to the termination of this Agreement and your obligation to pay liquidated damages under Section 10E of this Agreement.
D. Fees .
In addition, if we and you agree to add additional Guest Rooms to the Hotel during the Term, then you must pay us an additional Application Fee in an amount equal to Four Hundred Dollars ($400) multiplied by the number of additional Guest Rooms. When you request our approval of your plans to develop the additional Guest Rooms, you must pay us a non-refundable Property Improvement Plan (“PIP”) fee of Five Thousand Dollars ($5,000.00). We will apply this PIP fee toward the additional Application Fee if we approve your
plans. The remaining portion of the additional Application Fee is due, fully earned by us, and non-refundable on the date we approve your plans to develop the additional Guest Rooms.
The “First Year” means the calendar twelve (12) month period beginning on the first (1 st ) day of the calendar month during which the Opening Date occurs, and the “Second Year” means the calendar twelve (12) month period beginning on the first (1 st ) anniversary of the first (1 st ) day of the calendar month during which the Opening Date occurs;
On the date Royalty Fees and Contributions are due, you shall report to us by telephone, electronic means, or in written form, as we direct, pursuant to our standard transmittal procedures, information regarding your Gross Rooms Revenue and any additional information we request. Funds must be available in your account to cover our withdrawals. You may not change your bank, financial institution, or account without first telling us.
E. Cooperative Advertising Programs . We may identify a region in which two (2) or more Hyatt Place Hotels are located in order to establish a local or regional advertising cooperative (a “Cooperative”). We may form, change, dissolve and merge Cooperatives. The Cooperative’s purpose will be to collect funds from its members and to plan, discuss, organize, develop, utilize, produce, disseminate, and implement advertising and promotional programs and materials on a collective basis (and to cover related expenses) for the sale of services at participating Hyatt Place Hotels. We will not require you to participate in a Cooperative. However, if you choose to participate in the Cooperative, you must do so according to the Cooperative’s rules, including by paying your Hotel’s allocable share of any advertising, marketing, promotional and other programs that the Cooperative conducts. All restrictions under this Agreement relating to any advertising, marketing or promotional programs that you conduct also apply to any such programs that the Cooperative conducts.
F. Management of the Hotel . Unless we consent in writing, you must at all times retain and exercise direct management control over the Hotel’s business. You may not enter into any lease, management agreement, or other similar arrangement with any independent entity for all or a part of the Hotel’s operation (a “Management Arrangement”) without our prior written consent, which we will not unreasonably withhold if the independent entity meets our minimum qualifications, attends and satisfactorily completes required training programs, agrees to sign the documents we require to protect our Proprietary Marks, Copyrighted Materials, and Confidential Information, and agrees to perform its
management responsibilities in compliance with this Agreement. Nevertheless, we may refuse to approve a management company which is, or that has an affiliate which is, a Brand Owner. Under this Agreement, “Brand Owner” means any entity that is a franchisor or owner, or is affiliated with or manages hotels exclusively for the franchisor or owner, of a hotel concept that in our opinion competes with Hyatt Place Hotels, irrespective of the number of hotels operating under that concept’s trade name. Even after we approve a Management Arrangement, we may at our option revoke that approval, and upon delivery of written notice to you require you to terminate the Management Arrangement, if the independent entity or any of its affiliates at any time becomes a Brand Owner or otherwise fails to meet our minimum qualifications or to comply with this Agreement.
G. Guest Room Rates . You will establish the Hotel’s room rates and submit them to us promptly upon our request. Except for special event periods, you may not charge any rate exceeding the rate you submit in writing for sale by the CRS.
4 . Our Responsibilities
A. Orientation and Training .
B. Services . If you are in full compliance with your obligations under this Agreement, you shall have access to the CRS, listings in advertising publications, and the National Directory. You must participate in, connect with, and use the CRS and GDS in the manner we periodically designate for offering, booking, modifying, and communicating Guest Room and meeting space reservations for the Hotel and bear all related costs and expenses. We or our representative will provide data installation services relating to the initial set-up of the CRS and GDS at the Hotel. You must honor and give first priority on available rooms to all confirmed reservations that the CRS or GDS refers to the Hotel. The CRS and GDS are the only reservation system or service that your Hotel may use for outgoing reservations that the Hotel refers to other hotels. You are solely responsible for notifying the reservation center of any changes in your Hotel’s room rates. You may not charge any guest a rate higher than the rate that the reservations center specifies to the guest at the time he or she makes the reservation. We may suspend your access to and listings in these sources while you are in default under this Agreement.
C. Guidance and Assistance . During the Term, we may advise you from time to time regarding the Hotel’s operation based on your reports or our evaluations and inspections and may guide you with respect to
We may guide you in the Manual; in bulletins or other written materials; by electronic media; by telephone consultation; and/or at our headquarters or the Hotel. If you request, and we agree to provide,
additional or special guidance, assistance, or training, you agree to pay our then applicable charges, including our personnel’s per diem charges and travel and living expenses.
D. Marketing, Central Reservations and Technology Fund . We or our designee will administer a Marketing, Central Reservations and Technology Fund for the Hotel System (the “Fund”). You must make the Contributions specified in Section 3D(4)(b) above. For administrative convenience, we may (but are not required to) collect the Contributions before passing them on to the Fund. Hyatt Place Hotels that we or our affiliates own and operate will contribute to the Fund on the same percentage basis as franchisees. We also have the right to collect for deposit into the Fund any advertising, marketing, or similar allowances paid to us by suppliers who deal with Hyatt Place Hotels and with whom we agree to so deposit these allowances.
We will determine and direct all programs that the Fund finances, with sole control over the creative concepts, materials, and endorsements used and their geographic, market, and media placement and allocation, including by determining on our own the amounts to be spent for the various purposes identified in this Section. The Fund may pay for preparing and producing video, audio, and written materials and electronic media; developing, implementing, maintaining and improving the Hotel System’s website and/or related strategies; developing, implementing, operating, maintaining and improving the CRS, GDS, and National Directory and any other related or successor programs or systems; developing, implementing, maintaining and improving any video, computer-related or other technology for use or sale by Hyatt Place Hotels; planning, coordinating and conducting various sales efforts for Hyatt Place Hotels; market research and other research and development activities relating to improving the Hotel System; administering regional and multi-regional marketing and advertising programs, including purchasing trade journal and other media advertising and using advertising, promotion, and marketing agencies and other advisors to provide assistance; and supporting public relations and other advertising, promotion, and marketing activities. The Fund periodically will give you samples of advertising, marketing, and promotional formats and materials at no cost. We will sell you multiple copies of these materials at our direct cost of producing them, plus any related shipping, handling, and storage charges.
We will account for the Fund separately from our other monies (but we need not segregate the Fund from our assets). We will not use the Fund for any of our general operating expenses. However, we may use the Fund to pay the reasonable salaries, benefits and expenses of personnel who manage, administer and/or perform services for or on behalf of the Fund, including those who account for Contributions; the Fund’s other administrative costs; travel expenses of personnel while they are on Fund business; meeting costs; rent, utilities, other overhead costs, and other costs for equipment, supplies and other materials relating or allocable to Fund business; and other expenses that we incur in activities reasonably related to administering or directing the Fund and its programs, including conducting market research and other research and development activities, public relations, preparing advertising, promotion, and marketing materials, collecting and accounting for Contributions, paying Providers for services relating to the CRS and GDS, and paying for technical and support functions.
The Fund will not be our asset. Although the Fund is not a trust, we will hold all Contributions for the benefit of the contributors and use Contributions only for the purposes described in this Section. We do not owe any fiduciary obligation to you for administering the Fund or any other reason. The Fund may spend in any fiscal year more or less than the total Contributions in that year, borrow from us or others (paying reasonable interest) to cover deficits, or invest any surplus for future use. We will use all interest (if any) earned on Contributions to pay costs before using the Fund’s other assets.
We will prepare an annual, unaudited statement of Fund collections and expenses and give you a copy of the statement upon written request. We may have the Fund audited periodically, at the Fund’s expense, by an independent certified public accountant. We may incorporate the Fund or operate it
through a separate entity whenever we deem appropriate. The successor entity will have all of the rights and duties specified in this Section.
We intend the Fund to maximize recognition of the Proprietary Marks, patronage of Hyatt Place Hotels, and the productive and efficient operation of the CRS and GDS, any related or successor programs or systems, and other technologies. Although we will try to use the Fund in a manner that will benefit all Hyatt Place Hotels, we need not ensure that Fund expenditures in or affecting any geographic area are proportionate or equivalent to Contributions by Hyatt Place Hotels operating in that geographic area or that any Hyatt Place Hotel benefits directly or in proportion to its Contributions from the programs and other products and services that the Fund finances.
We have the right, but no obligation, to use collection agents and institute legal proceedings at the Fund’s expense to collect Contributions. We also may forgive, waive, settle, and compromise all claims by or against the Fund. Except as expressly provided in this Section, we assume no direct or indirect liability or obligation to you for collecting amounts due to, maintaining, directing, or administering the Fund.
We may at any time defer or reduce Contributions of a Hyatt Place Hotel franchisee and, upon thirty (30) days’ prior written notice to you, reduce or suspend Contributions and operations for one or more periods of any length and terminate (and, if terminated, reinstate) the Fund. If we terminate the Fund, we will distribute all unspent monies to our franchisees, and to us and our affiliates, in proportion to their and our respective Contributions during the preceding twelve (12) month period.
E. Application of Manual . You must comply with the terms of the Manual (other than any personnel and security-related policies and procedures, which are for your optional use). Because complete and detailed uniformity under many varying conditions might not be possible or practical, you acknowledge that we specifically reserve the right and privilege, as we deem best, to vary System Standards for any franchisee based upon the peculiarities of any condition or factors that we consider important to that franchisee’s successful operation. You have no right to require us to grant you a similar variation or accommodation.
The Manual may include audiotapes, videotapes, compact disks, computer software, other electronic media, and/or written materials. It contains System Standards and information on your other obligations under this Agreement. We may modify the Manual periodically to reflect changes in System Standards. You agree to keep your Manual current and in a secure location at the Hotel. If there is a dispute over its contents, our master copy of the Manual controls. You agree that the Manual’s contents are confidential. If your copy of the Manual is lost, destroyed, or significantly damaged, you agree to obtain a replacement copy at our then applicable charge.
At our option, we may post some or all of the Manual on a restricted website or extranet to which you will have access. If we do so, you agree to monitor and access the website or extranet for any updates to the Manual, System Standards, or other aspects of the Hotel System. Any passwords or other digital identifications necessary to access the Manual on a website or extranet will be deemed to be part of Confidential Information. We may require you to return a portion or the entire copy of the Manual given to you in paper or other tangible form after we post the Manual on a restricted website or extranet.
F. Other Arrangements . We may arrange for development, marketing, operations, administration, technical, and support functions, facilities, services, and/or personnel with any other entity. We and our affiliates may use any facilities, programs, services, and/or personnel used in connection with the Hotel System in our and our affiliates’ other business activities, even if these other business activities compete with the Hotel or the Hotel System. You agree that we have the right to
delegate the performance of any portion or all of our obligations under this Agreement to third-party designees, whether these designees are our affiliates, agents, or independent contractors with whom we contract to perform these obligations. If we do so, the third-party designees will be obligated to perform the delegated functions for you in compliance with this Agreement.
G. Inspections/Compliance Assistance and Quality Assurance Program . We may inspect your Hotel at any time, with or without notice to you, to determine whether you and the Hotel are complying with the Hotel System, System Standards, and other terms and conditions of this Agreement. If you or the Hotel fails to comply with such obligations, we may require you, at your own cost (and in addition to our other rights and remedies), to correct the deficiencies within the reasonable time we establish. Your Hotel must participate in the quality assurance program that we develop and periodically modify (the “Quality Assurance Program”). As part of the Quality Assurance Program, we and/or our representatives and designees may evaluate whether the Hotel is complying with the Hotel System and System Standards. The primary means of operating the Quality Assurance Program will be evaluations conducted through stays at Hyatt Place Hotels. If we determine that the Hotel is not complying with the Hotel System, System Standards, and other terms and conditions of this Agreement and then instruct you to correct those deficiencies, we may charge you One Thousand Five Hundred Dollars ($1,500) for each follow-up or re-evaluation visit until the deficiencies have been fully corrected.
H. Annual Conventions . We may, at our option, hold an annual convention for Hyatt Place Hotels or all Hyatt Select Hotels Group hotels (which currently include Hyatt Place Hotels and Hyatt Summerfield Suites hotels and may include other hotel brands in the future) (the “Annual Convention”) at a location we designate. We may require your general manager and other key Hotel personnel to attend the Annual Convention. You must pay us our then current attendance fee for each person from your Hotel who attends the Annual Convention. You also must pay all expenses your attendees incur to attend the Annual Convention.
I. Exercise of Our Judgment . We have the right to develop, operate, and change the Hotel System in any manner not specifically prohibited by this Agreement. Whenever we have reserved in this Agreement a right to take or to withhold an action, or to grant or decline to grant you the right to take or omit an action, we may, except as otherwise specifically provided in this Agreement, make our decision or exercise our rights based on information readily available to us and our judgment of what is in the best interests of us, Hyatt Place Hotel franchisees generally, or the Hotel System at the time our decision is made, without regard to whether we could have made other reasonable or even arguably preferable alternative decisions or whether our decision promotes our financial or other individual interest.
5. Proprietary Rights.
A. Ownership and Goodwill of Proprietary Marks, Copyrighted Materials, and Confidential Information . Our affiliate has licensed the Proprietary Marks, Copyrighted Materials, and Confidential Information to us to use and sublicense in franchising, developing, and operating Hyatt Place Hotels. Your right to use the Proprietary Marks, Copyrighted Materials, and Confidential Information is derived only from this Agreement and is limited to your operating the Hotel according to this Agreement and all System Standards we prescribe during the Term. Your unauthorized use of the Proprietary Marks, Copyrighted Materials, and Confidential Information is a breach of this Agreement and infringes our and our affiliate’s rights in the Proprietary Marks, Copyrighted Materials, and Confidential Information. You acknowledge and agree that your use of the Proprietary Marks, Copyrighted Materials, and Confidential Information and any goodwill established by that use are exclusively for our and our affiliate’s benefit and that this Agreement does not confer any goodwill or other interests in the Proprietary Marks, Copyrighted Materials, and Confidential Information upon you (other than the right to operate the Hotel under this Agreement). You may not at any time during or after the Term contest or assist any other
person in contesting the validity, or our and our affiliate’s ownership, of the Proprietary Marks, Copyrighted Materials, and Confidential Information.
B. Limitations on your Use of Proprietary Marks . You agree to use the Proprietary Marks as the Hotel’s sole identification, except that you must identify yourself as its independent owner in the manner we periodically specify. You may not use any Proprietary Mark (1) as part of any corporate or legal business name, (2) with any prefix, suffix, or other modifying words, terms, designs, or symbols (other than logos we license to you), (3) in providing or selling any unauthorized services or products, (4) as part of any domain name, homepage, meta tags, keyword, electronic address, or otherwise in connection with a website or other electronic media (unless we have approved such use in advance), or (5) in any other manner we have not expressly authorized in writing. If we discover your unauthorized use of the Proprietary Marks, in addition to our other rights and remedies under this Agreement and applicable law, we may require you to destroy (with no reimbursement from us) all offending items reflecting such unauthorized use.
You may not use any Proprietary Mark in advertising the transfer, sale, or other disposition of the Hotel or an ownership interest in you without our prior written consent, which we will not unreasonably withhold. You agree to display the Proprietary Marks prominently as we prescribe at the Hotel and on forms, advertising, supplies, and other materials we periodically designate. You agree to give the notices of trade and service mark registrations that we specify and to obtain any fictitious or assumed name registrations required under applicable law.
C. Notification of Infringements and Claims . You agree to notify us immediately of any apparent infringement or challenge to your use of any Proprietary Mark, Copyrighted Materials, or Confidential Information, or of any person’s claim of any rights in any Proprietary Mark, Copyrighted Materials, or Confidential Information, and not to communicate with any person other than us, our affiliates, and our and their attorneys, and your attorneys, regarding any infringement, challenge, or claim. We and our affiliates may take the action we and they deem appropriate (including no action) and control exclusively any litigation, U.S. Patent and Trademark Office proceeding, or other administrative proceeding arising from any infringement, challenge, or claim or otherwise concerning any Proprietary Mark, Copyrighted Materials, or Confidential Information. You agree to sign any documents and take any other reasonable action that, in the opinion of our and our affiliates’ attorneys, are necessary or advisable to protect and maintain our and our affiliates’ interests in any litigation or Patent and Trademark Office or other proceeding or otherwise to protect and maintain our and our affiliates’ interests in the Proprietary Marks, Copyrighted Materials, and Confidential Information. We or our affiliate will reimburse your reasonable out-of-pocket costs for taking any requested action.
D. Discontinuance of Use of Proprietary Marks . If it becomes advisable at any time for us and/or you to modify, discontinue using, and/or replace any Proprietary Mark and/or to use one or more additional, substitute, or replacement trade or service marks together with or in lieu of any previously-designated Proprietary Mark, you agree to comply with our directions within a reasonable time after receiving notice. Neither we nor our affiliates will reimburse you for your expenses of changing the Hotel’s signs, for any loss of revenue due to any modified or discontinued Proprietary Mark, or for your expenses of promoting a modified or substitute trademark or service mark.
Our rights in this Section 5D apply to any and all of the Proprietary Marks (and any portion of any Proprietary Mark) that this Agreement authorizes you to use. We may exercise these rights at any time and for any reason, business or otherwise, we think best. You acknowledge both our right to take this action and your obligation to comply with our directions.
E. Indemnification for Use of Proprietary Marks . We agree to reimburse you for all damages and expenses that you incur in any trademark infringement proceeding disputing your authorized use of any Proprietary Mark under this Agreement if you have timely notified us of, and comply with our directions in responding to, the proceeding. At our option, we and/or our affiliate(s) may defend and control the defense of any proceeding arising from your use of any Proprietary Mark under this Agreement.
F. Confidential Information . We and our affiliates possess (and will continue to develop and acquire) Confidential Information, some of which constitutes trade secrets under applicable law, relating to developing and operating Hyatt Place Hotels, including:
Confidential Information does not include information, knowledge, or know-how that you can demonstrate lawfully came to your attention before we or our affiliate provided it to you directly or indirectly; that, at the time we or our affiliate disclosed it to you, already had lawfully become generally known in the hotel industry through publication or communication by others (without violating an obligation to us or our affiliate); or that, after we or our affiliate disclose it to you, lawfully becomes generally known in the hotel industry through publication or communication by others (without violating an obligation to us or our affiliate). However, if we include any matter in Confidential Information, anyone who claims that it is not Confidential Information must prove that one of the exclusions provided in this paragraph is satisfied.
All ideas, concepts, techniques, or materials relating to a Hyatt Place Hotel, whether or not protectable intellectual property and whether created by or for you or your owners or employees, must be promptly disclosed to us and will be deemed to be our and our affiliate’s sole and exclusive property, part of the Hotel System, and works made-for-hire for us and our affiliate. If any item does not qualify as a “work made-for-hire” for us and our affiliate, by this paragraph you assign ownership of that item, and all related rights to that item, to us and agree to take whatever action (including signing assignment or other documents) we request to evidence our ownership or to help us obtain intellectual property rights in the item.
6. Records and Audits
A. Reports . At our request, you must prepare and deliver to us daily, monthly, quarterly, and annual operating statements, profit and loss statements, balance sheets, and other reports we require, prepared in the form, by the methods, and within the timeframes we specify in the Manual. The reports must contain all information we require and be certified as accurate in the manner we require. By the tenth (10 th ) day of each month, you agree to prepare and send us a statement for the previous month, certified by your chief financial or principal accounting officer, listing Gross Rooms Revenue, other Hotel revenues, room occupancy rates, reservation data, the amounts currently due under Section 3D, and other information we deem useful in connection with the Hotel System (the “Data”). The statement will be in the form and contain the detail we reasonably request, will be our property, and may be used by us for all reasonable purposes.
B. Preparation and Maintenance of Records . You agree to:
We reserve the right to access your computer system independently to obtain sales information, occupancy information, and other Data. You must send us upon our request any information that we do not access independently from your computer system.
C. Audit . We may at any time during your regular business hours, and without prior notice to you, examine your and the Hotel’s business, bookkeeping, and accounting records, sales and income tax records and returns, and other records. You agree to cooperate fully with our representatives and independent accountants in any examination. If any examination discloses an understatement of the Hotel’s Gross Rooms Revenue, you agree to pay us, within fifteen (15) days after receiving the examination report, the Royalty Fees and Contributions due on the amount of the understatement, the late fee, and interest on the understated amounts from the date originally due until the date of payment. Furthermore, if an examination is necessary due to your failure to furnish reports, supporting records, or other information as required, or to furnish these items on a timely basis, or if our examination reveals a Royalty Fee or Contribution underpayment to us of three percent (3%) or more of the total amount owed during any six (6) month period, or that you willfully understated the Hotel’s Gross Rooms Revenue, you agree to reimburse us for the costs of the examination, including the charges of attorneys and independent accountants and the travel expenses, room and board, and compensation of our employees. These remedies are in addition to our other remedies and rights under this Agreement and applicable law.
D. Annual Financial Information . At our request, not later than ninety (90) days after the end of your fiscal year, you must send us one or more of the following as we may request, certified by your chief financial or principal accounting officer to be true and correct: complete financial statements for that fiscal year (including a balance sheet, statement of operations and statement of cash flow) prepared in accordance with generally accepted accounting principles consistently applied; your income tax returns for the Hotel for that year; and statements reflecting all Gross Rooms Revenue and all sources and amounts of other Hotel revenue generated during the year. Any false certification shall be a material breach of this Agreement. At our request from time to time, you also agree to provide us with those operating statistics for the Hotel that we specify. We may require you to have audited financial statements prepared annually during the Term.
7. Indemnity and Insurance.
A. Our and Your Relationship . We and you may not make any express or implied agreements, warranties, guarantees, or representations, or incur any debt, in the name or on behalf of the other or represent that our respective relationship is other than franchisor and franchisee. We will not be obligated for any damages to any person or property directly or indirectly arising out of the Hotel’s operation or the business you conduct under this Agreement.
B. Your Indemnification of Us . In addition to your obligation under this Agreement to procure and maintain insurance, you agree to indemnify, defend, and hold harmless us, our affiliates, and our and their respective owners, officers, directors, agents, employees, representatives, successors, and assigns (the “Indemnified Parties”) against, and to reimburse anyone or more of the Indemnified Parties
for, any and all claims, obligations, and damages directly or indirectly arising out of, resulting from, or in connection with
For purposes of this indemnification, “claims” include all obligations, damages (actual, consequential, or otherwise), and costs that any Indemnified Party reasonably incurs in defending any claim against it, including reasonable accountants’, arbitrators’, attorneys’, and expert witness fees, costs of investigation and proof of facts, court costs, travel and living expenses, and other expenses of litigation, arbitration, or alternative dispute resolution, regardless of whether litigation, arbitration, or alternative dispute resolution is commenced. Each Indemnified Party may defend any claim against it at your expense and agree to settlements or take any other remedial, corrective, or other actions, provided that the Indemnified Party will seek your advice and counsel, and keep you informed, with regard to any proposed or contemplated settlement.
The obligations under this Subsection will continue in full force and effect subsequent to and notwithstanding this Agreement’s expiration or termination. An Indemnified Party need not seek recovery from any insurer or other third party, or otherwise mitigate its losses and expenses, in order to maintain and recover fully a claim against you under this subparagraph. You agree that a failure to pursue a recovery or mitigate a loss will not reduce or alter the amounts that an Indemnified Party may recover from you under this Subsection.
If separate counsel is appropriate in our opinion because of actual or potential conflicts of interest, we may retain attorneys and/or independently defend any claim, action, or alleged claim or action at your sole expense. No party may settle any claim or action that could have an adverse effect on us, the Hotel System, or other franchisees without our prior approval.
You have no obligation to indemnify under this Subsection if a court of competent jurisdiction makes a final decision not subject to further appeal that we or our employees directly engaged in willful misconduct or intentionally caused the property damage or bodily injury that is the subject of the claim, so long as the claim is not asserted on the basis of theories of vicarious liability (including agency, apparent agency, or employment) or our failure to compel you to comply with this Agreement (which are claims for which we are entitled to indemnification under this Section 7B). You shall notify us immediately (but not later than five (5) days following your receipt of notice) of any claim, action, or potential claim or action naming any Indemnified Party as a defendant or potential defendant (the “Indemnification Notice”). The Indemnification Notice shall include copies of all correspondence or court papers relating to the claim or action. Your obligation to indemnify us shall not be limited in any way by reason of any insurance that we maintain.
C. Insurance . At your expense, you must procure and at all times during the Term maintain such insurance as may be required by the terms of any lease or mortgage on the premises where the Hotel is located, and in any event no less than the following:
We may periodically increase the amounts of coverage required under these insurance policies and/or require different or additional insurance coverage at any time to reflect inflation, identification of new risks, changes in law or standards of liability, higher damage awards or relevant changes in circumstances. You also must satisfy the following general insurance requirements:
A. Transfer by Us . You acknowledge that we maintain a staff to manage and operate the Hotel System and that staff members can change as employees come and go. You represent that you have not signed this Agreement in reliance on any particular owner, director, officer, or employee remaining with us in that capacity. We may change our ownership or form and/or assign this Agreement and any other agreement to a third party without restriction. After our assignment of this Agreement to a third party who expressly assumes the obligations under this Agreement, we no longer will have any performance or other obligations under this Agreement.
B. Transfer by You—Defined . You understand and acknowledge that the rights and duties this Agreement creates are personal to you and your owners and that we have granted you the franchise in reliance upon our perceptions of your and your owners’ collective character, skill, aptitude, attitude, business ability, and financial capacity. Accordingly, neither this Agreement (or any interest in this Agreement), the Hotel or substantially all of its assets, or an ownership interest in you or your owners (if such owners are legal entities) may be transferred without our prior written approval, which will not be unreasonably withheld if the conditions for transfer contained in this Section 8 are satisfied. A transfer of the Hotel’s ownership, possession, or control, or substantially all of its assets, may be made only with a transfer of this Agreement. Any transfer without our approval is a breach of this Agreement and has no effect, meaning that you will continue to be obligated to us for all of your obligations under this Agreement.
For purposes of this Agreement, a “Controlling Ownership Interest” in you or one of your owners (if that owner is a legal entity) means the greater of: (a) the percent of the voting shares or other voting
rights that results from dividing one hundred percent (100%) of the ownership interests by the number of owners. In the case of a proposed transfer of an ownership interest in you or one of your owners, the determination of whether a “Controlling Ownership Interest” is involved must be made as of both immediately before and immediately after the proposed transfer to see if a “Controlling Ownership Interest” will be transferred (because of the number of owners before the proposed transfer) or will be deemed to have been transferred (because of the number of owners after the proposed transfer); or (b) twenty percent (20%) of the voting shares or other voting rights. In addition, regardless of whether the thresholds in (a) or (b) are satisfied, any transfer of effective control of the power to direct or cause the direction of your (or your owners’) management and policies to someone who did not possess such control as of the Effective Date constitutes the transfer of a Controlling Ownership Interest.
In this Agreement, the term “transfer” includes a voluntary, involuntary, direct, or indirect assignment, sale, gift, or other disposition of any interest in this Agreement; you; the Hotel or substantially all of its assets; any of your owners (if such owner is a legal entity); or any right to receive all or a portion of the Hotel’s, your, or your owner’s profits or losses. An assignment, sale, gift, or other disposition includes the following events: (1) transfer of ownership of capital stock, a partnership or membership interest, or another form of ownership interest; (2) merger or consolidation or issuance of additional securities or other forms of ownership interest; (3) any sale of a security convertible to an ownership interest; (4) transfer of an interest in you, this Agreement, the Hotel or substantially all of its assets, your owner, or any right to receive all or a portion of the Hotel’s, your, or your owner’s profits or losses in a divorce, insolvency, or entity dissolution proceeding or otherwise by operation of law; (5) if one of your owners, or an owner of one of your owners, dies, a transfer of an interest in you, this Agreement, the Hotel or substantially all of its assets, your owner, or any right to receive all or a portion of the Hotel’s, your, or your owner’s profits or losses by will, declaration of or transfer in trust, or under the laws of intestate succession; or (6) pledge of this Agreement (to someone other than us) or of an ownership interest in you or one of your owners as security, foreclosure upon the Hotel, or your transfer, surrender, or loss of the Hotel’s possession, control, or management. You may mortgage the Hotel (but not this Agreement) to a lender that finances your acquisition, development, and/or operation of the Hotel without having to obtain our prior written approval. However, we may require the lender to agree to certain procedures or grant us certain rights if you default and the lender wishes to foreclose on its security interest.
C. Conditions for Approval of Transfer . If you (and your owners) are substantially complying with this Agreement, then, subject to the other provisions of this Section 8, we will approve a transfer that meets all of the requirements in this Section 8C. A non-Controlling Ownership Interest in you or your owners (determined as of the date on which the proposed transfer will occur) may be transferred if the proposed transferee and its direct and indirect owners (if the transferee is a legal entity) are of good character and otherwise meet our then applicable standards for owners of Hyatt Place Hotel franchisees. You also must pay us Seven Thousand Five Hundred Dollars ($7,500) for processing and related costs we incur.
If the proposed transfer is of this Agreement or a Controlling Ownership Interest in you or one of your owners, or is one of a series of transfers (regardless of the time period over which these transfers take place) that in the aggregate transfer this Agreement or a Controlling Ownership Interest in you or one of your owners, then all of the following conditions must be met before or concurrently with the effective date of the transfer:
We will process the Change of Ownership Application according to our then current procedures, including review of criteria and requirements regarding upgrading the Hotel, credit, background investigations, operations ability and capacity, prior business dealings, market feasibility, guarantees, and other factors concerning the proposed transferee(s) (and, if applicable, its owner(s)) we deem relevant. We have sixty (60) days from receipt of the completed and signed application to consent or withhold our