Franchise Agreement

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Sample Franchise Agreement

VALUE PLACE FRANCHISE SERVICES LLC

VALUE PLACE

LICENSE AGREEMENT

THIS LICENSE AGREEMENT (this "Agreement") is made and entered into at Wichita, Kansas this_____day of

____________________,_____, by and between Value Place Franchise Services LLC, a Kansas limited liability company

(hereinafter referred to as "VPFS"), and_____________________________(hereinafter referred to as "Licensee"), whose

principal business address is__________________________________________________________.

Recitals

A. VPFS has developed and owns a concept and distinctive system for the design, decor, establishment, operation, and image of short-term residential properties under the Proprietary Marks utilizing certain Trade Secrets in connection with providing short-term residential and hotel accommodations.

B. Licensee desires to establish and operate a Value Place short-term residential property ("STRP") under the System and wishes to obtain a license from VPFS for that purpose.

C. Licensee recognizes the benefits to be derived from being identified with and licensed to use the System and Licensee understands and acknowledges the importance of operating the short-term residential and hotel property licensed hereunder in strict conformity with VPFS' standards and specifications in order to enhance public acceptance of, and demand for, all System STRPs.

D. VPFS is relying upon the business skill, financial capacity, and character of Licensee and its principals, and the guarantee of Licensee's obligations by its principals, 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. Acknowledgments and Representations.

1.1 Licensee acknowledges and represents to VPFS, in order to induce VPFS to enter this Agreement, as follows:

Licensee has read this Agreement and VPFS" license disclosure document and understands and accepts the terms, conditions, and covenants contained in this Agreement as being reasonably necessary to maintain VPFS" standards of quality and service and the uniformity of those standards at each System STRP in order to protect and preserve the goodwill of the Proprietary Marks.

A. Licensee has conducted an independent investigation of the business contemplated by this Agreement. Licensee recognizes that the nature of the business conducted by VPFS may evolve and change over time; that an investment in a Value Place STRP involves business risks which have been considered by Licensee; and that the success of the venture depends primarily upon Licensee's business ability and efforts.

B. Licensee has not received or relied upon any guarantee, expressed or implied, about the revenues, profits, or success of the business venture contemplated by this Agreement.

C. No representations have been made by VPFS, or by its members, managers, officers, employees, directors, and/or agents, and Licensee has not relied on any representations that are contrary to or not contained in the terms contained in this Agreement.

D. VPFS has made no representations or warranties and has further disclaimed any warranties with regard to whether any of the Proprietary Marks are protectable or registerable and with regard to whether any of the Proprietary Marks infringe upon the rights of others.

E. In ail of their dealings with Licensee, the members, managers, officers, employees, directors, and/or agents of VPFS act only in a representative capacity, not in an individual capacity, and that this Agreement and all business dealings between Licensee and such individuals as a result of this Agreement are solely between Licensee and VPFS.

F. All information contained in the application made by Licensee to VPFS is true, correct, and complete. Licensee has made no incorrect statement in the application or failed to make any statement that would be necessary to make the statements in the application not misleading.

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1.2 The definitions applicable throughout this Agreement are set forth below:

A. "Affiliate" shall mean with respect to a person (including any legal person), (i) a person (including any legal person) that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such person; and (ii) any parent, spouse, lineal descendant or adopted child of such person, any spouse or adopted child of any such descendant or any child of such spouse, the executors, administrators, conservators or personal representatives of any such person or any person referred to in this clause (ii) and any person which, directly or indirectly, is owned or controlled by one or more of the persons referred to in this clause (ii).

B. "Approved Location" shall mean the street address set forth on Exhibit A hereto.

C. "Commencement of Construction," "Commence Construction," or "Construction Commencement" shall mean the date that footings are poured (or the equivalent thereof) at the Approved Location.

D. "Competing Business" shall mean any property, motel, or other business that provides economy lodging accommodations on a weekly-stay basis with kitchen facilities and limited (not on a daily basis) maid service.

E. "Construction Completion" shall have the meaning set forth in Article 5.4.

F. "Controlling Interest" shall mean more than 50% of the voting interest in an entity.

G. "Dispute" or "Disputes" shall have the meaning set forth in Article 19.1.

H. "FF&E" shall mean fixtures, equipment, furnishings, furniture, telephone system, frame (dedicated T-

1 line), facsimile machine, computer systems, reservation system, signs, supplies and other items used in the operation of the STRP.

I. "Incapacitated" or "Incapacity" means, in the reasonable opinion of VPFS, the inability of Licensee, or

its majority owner if an entity, to operate the Licensed Business in the ordinary course of business for 30 days or more in any consecutive 90 day period.

J. "Indemnitees" shall mean collectively VPFS and its members, its affiliated companies, and each of

their respective owners, shareholders, managers, agents, representatives, officers, directors, employees, partners, and other Affiliates.

K. "Initial License Fee" shall mean the fee due upon execution and delivery of this Agreement as

provided in Article 4.

L. "Licensed Business" shall mean the Value Place STRP licensed to Licensee under this Agreement.

M. "Licensed Interests" shali have the meaning set forth in Article 13.2.

N. "Liquidated Damages" shall mean the damages to be paid by Licensee pursuant to Article 15.12 for

premature termination of this Agreement.

0. "Manual" shall mean, collectively, the Operations Reference Manual, the Design Manual, and other

System standards or manuals (whether in written, machine readable, electronic, or any other form), as it may be modified, amended or supplemented by VPFS in its sole discretion, setting out the standards, methods, procedures, techniques and specifications of the System.

P. "Marketing Fee" shall mean the contribution to the Marketing Fund set forth in Article 4.1 .C.

Q. "Marketing Fund" shall mean the Marketing, Advertising, and Direct Sales Fund provided for in

Article 9.3.

R. "Opening" shall mean the date on which the STRP first opens for business.

S. "Payment" or "Payments" shall have the meaning set forth in Article 4.2.

T. "Proprietary Marks" shall mean the name "Value Place®" (and such names and any other trade

names, service marks, trademarks, logos, emblems, or other indication of origin as are now or hereafter designated by VPFS as part of the System).

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U. "Quality Assurance/Safety/Non-Compliance Review Fee" shall have the meaning set forth in Article

8.3.

V. "Room Revenues" shall mean revenues attributable to or payable for the use, occupancy or rental of

studios at the STRP, including barter and credit transactions (before commissions and discounts for credit cards), whether or not collected, proceeds from any business interruption insurance or other toss of income insurance applicable to loss of revenues due to the non-availability of studios, and proceeds for guaranteed no-show revenue which is collected, but excluding sales taxes, studio taxes or other taxes collected by you from customers for transmittal to appropriate taxing authorities. Room Revenues shall also exclude revenue derived from vending, laundry exchange, and laundry machines. Room Revenues shall be accounted for in accordance with the Uniform System of Accounts for The Lodging Industry. Ninth Revised Edition, 1996, as published by the Hotel Association of New York City, Inc., except as otherwise provided in the accounting procedures set forth in the Manual; subject, however, to the right of VPFS to designate any subsequent edition or to designate a reasonable alternative accounting system if, in VPFS' judgment, the 1996 edition is no longer authoritative or its use otherwise is not advisable under then-current hotel or other lodging accommodations accounting practice. Licensee shall not sacrifice Room Revenues to further any other business activity.

W. "Royalty Fee" shall mean the continuing royalty fee set forth in Article 4.1 .B.

X. "S-PAC" shall mean the Strategic-Partner Advisory Counsel, which was formerly referred to as the

"International Association of Value Place Owners" or "IAVPO".

Y. "S-PAC Marketing Committee" shall mean a committee of 3 to 7 persons selected by a majority vote

of the members of S-PAC in accordance with its bylaws.

Z. "STRP" shall mean the Value Place short-term residential hotel property operated by Licensee under

this Agreement. The STRP comprises all structures, facilities, appurtenances, FF&E, and entry, exit, parking and other areas located on the site of the Approved Location.

AA. "System" shall mean the distinctive design, decor, color scheme, and furnishings; the Proprietary Marks designated to be part of the System; standards, specifications, programs and procedures for operations; programs and procedures for quality control; training and assistance; and advertising, direct sales, and promotional programs developed by VPFS for the operation of a Value Place STRP under the Proprietary Marks utilizing the Trade Secrets providing value-oriented, long-term and short-term residential hotel accommodations. VPFS may add, change, modify, withdraw, or otherwise revise any element of the System in its sole discretion.

BB. "System STRPs" shall mean all Value Place STRPs.

CC. "Trade Secrets" shall mean confidential information, including, without limitation, (i) the design for System STRPs, (ii) methods of service and operations at System STRPs, (Hi) knowledge of sales and profit performance at any one or more System STRPs, (iv) knowledge of test programs, concepts, or results relating to operating, new advertising and promotional programs, (v) sources of suppliers of equipment, (vi) advertising, promotion, and marketing techniques, (vii) methods and information regarding the selection and training of managers and other employees for System STRPs; and (viii) the Manual.

DD. "Transfer by Licensee" shall mean the voluntary, involuntary, direct or indirect assignment, sale, gift, or other transfer of any Licensed Interest, including, without limitation, the following events: (i) the transfer of ownership of the stock or partnership or limited liability company ownership interest of Licensee; (ii) any merger, reorganization, consolidation, or issuance of additional securities representing a direct or indirect ownership Interest in Licensee or the STRP; (iii) any sale of a Controlling Interest in Licensee tn a single transaction or a related series of transactions; (iv) transfer of a Licensed Interest by declaration, division, or otherwise in a divorce, insolvency, corporate or partnership dissolution proceeding or otherwise by operation of law; (v) transfer of a Licensed Interest in the event of Licensee's death or the death of one of its owners with a Controlling Interest, by will, declaration of or transfer in trust, or under the laws of intestate succession; (vi) any change in ownership or control of the Licensed Interest by sale, gift, assignment, or otherwise; (vii) if Licensee or any owner with a Controlling Interest is a trust, any change in the trustees or the beneficial owners of the trust; or (viii) a pledge, hypothecation, or encumbrance of any Licensed Interest intended as security for an obligation.

EE. "VPFS" shall mean Value Place Franchise Services LLC, a Kansas limited liability company.

FF/ "Website" means an interactive electronic document, series of symbols, or otherwise that is contained in a network or computers, and/or devices linked by communications software, and includes, without limitation, the Internet and World Wide Web home pages.

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Article 2. Grant of License.

2.1 Subject to the terms and conditions of this Agreement, and to the continuous compliance by Licensee with the terms and conditions of this Agreement, VPFS hereby grants to Licensee the nonexclusive right, and Licensee undertakes the obligation, to operate a Value Place STRP In accordance with VPFS' standards and specifications, including the operational standards procedures and techniques as prescribed in the Manual, and to use the System (as it may be changed, improved, and further developed by VPFS ) and the Proprietary Marks in connection therewith.

2.2 Licensee shall operate the STRP at, and only at, the Approved Location, and the STRP shall have the number of studios specified on Exhibit A. Licensee agrees that VPFS and VPFS' members and the subsidiaries and Affiliates, shareholders, and owners of VPFS and its members are not restricted from using the System or engaging in or licensing any business activity including System STRPs or hotels or other lodging accommodations at any other location, except as otherwise set forth in Article 2.

2.3 Licensee agrees that (a) this license relates solely to the Approved Location, and (b) this Agreement does not entitle Licensee to any protected territory, territorial rights, or exclusivity except as otherwise set forth in Article 2. Licensee shall not expand or change the number of studios in the STRP without the prior written consent of VPFS and payment of the STRP Expansion Fee.

2.4 The license granted hereby to use the Proprietary Marks is nonexclusive, and Licensee agrees that such Proprietary Marks are and shall remain the property of VPFS and shall not be contested as to ownership or validity by Licensee. Licensee understands and agrees that the grant of the license to use the Proprietary Marks is conditioned upon Licensee's agreement that: (a) the Proprietary Marks shall be used only in connection with the Licensed Business and only in the manner authorized by VPFS; (b) Licensee will not use the Proprietary Marks as part of its corporate or other legal name, will identify itself as a Licensee, and will comply with all fictitious name and other statutes in connection with its use of the Proprietary Marks; (c) Licensee will cooperate with VPFS in protecting and defending the Proprietary Marks; and (d) Licensee will comply with VPFS' designations of additions, deletions, and changes in the Proprietary Marks.

2.5 During the five year period from the date of this Agreement, VPFS will not, without Licensee's consent, and provided Licensee is in full compliance with the terms and conditions of this Agreement, operate itself or through an Affiliate or grant a license or franchise to, or otherwise authorize, any other person or entity to establish an STRP using the System within Licensee's Trade Area as set forth in Exhibit C, attached hereto.

A. If Licensee is not in compliance with the terms and conditions of this Agreement, VPFS shall be free . to operate, directly or indirectly, or to authorize or license another person or entity to operate additional STRPs within the Trade

Area.

B. Notwithstanding the foregoing, if at anytime before the earlier of the expiration of this Agreement or Licensee's default under this Agreement (after the expiration of any applicable cure period), VPFS acquires any chain or system of properties, or multiple units (more than 4) of a chain or system, and such purchase includes properties in the Trade Area which VPFS desires to convert to System Properties {hereinafter, whether one or more, "Conversion Properties"), VPFS shall provide written notice to Licensee within a reasonable time of its intent to convert the Conversion Properties into System Properties. Such notice shall provide Licensee with a right of first refusal to acquire such Conversion Properties from VPFS on the terms provided below if the sale by VPFS of such properties to Licensee Is allowed by applicable law. Subject to the foregoing, Licensee shall have the right and option, exercisable within 90 days after receipt of such written notification, which notification shall include the proposed purchase price and, if available, property specific financial statements for the previous 3 years or the period the property has been in operation, if less than 3 years, to provide written notice to VPFS that Licensee desires to purchase the Conversion Properties and to convert all of such properties to Properties under the System. In the event Licensee elects to purchase and convert the Conversion Properties, Licensee must close on such purchase and execute the then current License Agreement (which shall require payment of the initial License Fee) within 60 days from the date of notice to VPFS of Licensee's election to purchase and convert. The purchase price to be paid by Licensee for the Conversion Properties shall be the cash equivalent of the fair market value for each of the Conversion Properties, as determined by an independent appraiser selected and retained by VPFS. In the event Licensee does not elect to purchase and convert the Conversion Properties as provided in this Paragraph, Licensee shall have no further right or option to acquire such Conversion Properties and VPFS may sell such Conversion Properties to another Licensee under the System or VPFS or its Affiliates may own and operate the Conversion Properties under the System.

Article 3. Term

3.1 Unless sooner terminated or modified as hereinafter provided, the term of this License shall be 20 years from

the date of Opening of the STRP and this Agreement will expire without notice on such date, unless renewed as provided in Article 3.

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3.2 Licensee is granted the option to renew this Agreement for one additional term of 10 years, provided Licensee compiles with all of the following conditions before each such renewal:

A. Licensee shall not then be in default of any provision of this Agreement, any amendment hereof, or successor hereto, or any other agreement between Licensee and VPFS or any of VPFS" Affiliates, and shall have substantially complied with all of the terms and conditions of such agreements during the initial and/or any prior renewal terms thereof.

B. Licensee shall have satisfied all monetary obligations owed by Licensee to VPFS and any of VPFS' Affiliates, and shall have timely met those obligations throughout the term of this Agreement.

C. Licensee shall submit a renewal application to VPFS not less than 24 months nor more than 36 months prior to the end of the initial term and shall pay with its renewal application a renewal fee of 1/2 of the then-current Initial License Fee being charged by VPFS for new development, computed on a per studio basis.

D. Not less than 12 months prior to the end of the initial term, Licensee shall execute VPFS' then-current form of commitment agreement for a renewal License Agreement, which may require, among other things, that Licensee's property manager and other employees comply with VPFS' then-current training requirements and that Licensee upgrade, at Licensee's expense, the STRP to conform to the then-current standards and specifications of VPFS, including, without limitation, such structural changes, remodeling, and redecoration and such modifications to existing improvements as may be necessary to do so.

E. Licensee, and any Affiliate of Licensee operating one or more STRPs, shall execute a general release, In a form prescribed by VPFS, of any and all claims against VPFS and all of VPFS' Affiliates, and each of their respective members, owners, shareholders, managers, directors, officers, agents, and/or employees; provided, however, that all rights enjoyed by the Licensee and any causes of action arising in its favor from the provisions of any applicable license laws and regulations shall remain In force; it being the intent of this proviso that any non-waiver provisions of such laws be satisfied.

Upon expiration of the initial term of this Agreement and provided Licensee has met the foregoing conditions and has complied with the upgrading and other requirements specified in the commitment agreement, VPFS shall issue to Licensee, VPFS' then-current License Agreement for a ten-year renewal term. The then-current License Agreement shall supersede in all respects this Agreement, and the terms may differ from the terms of this Agreement including, without limitation, that there may be no renewal term, and that the royalty and marketing fees may be higher or different; provided, however, that the renewal fee paid pursuant to this Article shall be in lieu of any initial License Fee provided for in the then-current License Agreement of VPFS.

Article 4. Fees And Royalties.

4.1 In consideration of the rights and license granted herein, Licensee shall pay to VPFS each of the following:

A. Upon the execution and delivery of this Agreement by Licensee, Licensee shall pay an Initial License Fee equal to the greater of (i) $48,400 or (ii) $400 times the number of studios in the STRP as specified on Exhibit A hereto. If VPFS approves Licensee to develop an STRP at the Approved Location with more than 121 studios subsequent to the execution of this Agreement, Licensee shall pay to VPFS as an additional Initial License Fee of $400 for each additional studio that has been approved. The additional Initial License Fee shall be payable at the time of approval of the increased number of studios. Licensee acknowledges and agrees that such Initial License Fee has been fully earned and is nonrefundable In consideration of. expenses incurred, rights granted, services rendered, and other valuable consideration, the receipt and sufficiency of which Is acknowledged by Licensee.

B. A continuing Royalty Fee of 5% of Licensee's Room Revenues during the term of this Agreement.

C. A Marketing Fee contribution to the Marketing Fund, administered by the S-PAC Marketing Committee for the System as provided in Article 9 below, on a calendar month basis in an amount not to exceed 2.5% of Licensee's Room Revenues at the STRP ("Marketing Fee"). The amount of the Marketing Fee contribution may be adjusted upon a majority vote by members of S-PAC. S-PAC members in good standing under the rules governing the association shall be provided at least 30 days advance notice of, and an opportunity to vote on, any proposed adjustment. A majority vote, as required to approve any adjustment in the Marketing Fee contribution to the Marketing Fund, shall mean a number of votes equal to or greater than the majority of all open and operating System STRPs. VPFS shall provide to Licensee at least 60 days notice prior to the effective date of any adjustment so approved.

4.2 All payments required by Article 4, and all other payments due to VPFS on a continuing basis ("Payments"), shall be due to VPFS by the fifteenth (15th) day after the end of the calendar month in which such Room Revenues were received by Licensee, provided that, VPFS may, upon notice to Licensee, collect such payments more frequently than monthly. If any payment is overdue, Licensee shall pay to VPFS immediately upon demand the overdue amount together with a late

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charge on such amount from the date it was due until paid, at the lesser of one and 1.5% per month or the maximum rate permitted by law. Alt Payments shall be made by wire transfer or electronic funds transfer. Licensee acknowledges that nothing contained in this Article 4 shall constitute an agreement by VPFS to accept such payments after the same are due or a commitment by VPFS to extend credit to, or otherwise finance Licensee's operation of, the STRP. Licensee acknowledges that Licensee's failure to pay all such amounts when due shall constitute grounds for termination of this Agreement, as provided in Article 14 of this Agreement, notwithstanding the provisions of this Article. The entitlement to such late charge shall be in addition to any other remedies VPFS may have.

Article 5. STRP Construction and Opening.

5.1 Prior to commencing construction of the STRP under this Agreement, Licensee shall have completed or

satisfied all of the following:

A. If Licensee is obtaining the site for the STRP by lease or installment land contract, Licensee shall submit to VPFS with a request for approval, prior to execution by Licensee, a copy of the lease or installment land contract for the proposed site, which must not contain any provision that is inconsistent with or interferes with the performance of any provision of this Agreement (which lease or installment land contract must Include provisions (i) authorizing VPFS to enter the premises and make any modifications necessary to protect the Proprietary Marks, (ii) granting to VPFS the right (but not the duty) to assume the lease or installment land contract if Licensee is in default under its terms and provisions and/or if this Agreement expires or is terminated, (iii) requiring concurrent notice from lessor or vendor to VPFS of any default or termination, and (iv) in the case of a lease, providing for a term of at least 20 years, which lease or installment land contract, when approved by VPFS, shall not thereafter be materially modified without the prior written consent of VPFS. Under no circumstances shall VPFS have any obligation or liability under such lease or installment land contract.

B. Inform VPFS by written notice, not less than 30 days prior to commencing construction of the STRP, of the name of the general contractor to be used for the construction of the STRP, and such other information about the general contractor as VPFS may deem necessary.

C. Submit to VPFS with a request for approval, prior to preparation of the schematic design development documents for the building, preliminary site plans showing (i) the dimensions of the site at the Approved Location; (ii) the location of the site in relation to streets and other thoroughfares and adjoining properties; (iii) placement of the STRP on the site; (iv) proposed drives, parking, and service areas; (v) proposed location of exterior signage including size, type, height, etc.; and (vi) such other Information as may be reasonably required by VPFS, which preliminary site plans, when approved by VPFS, shall not thereafter be materially modified without the prior written consent of VPFS.

D. Submit to VPFS with a request for approval, prior to the preparation of the final building plans and specifications, the schematic design development documents for the building prepared by a registered architect or engineer in compliance with all applicable laws, regulations, ordinances, and VPFS standards, which schematic design development documents, when approved by VPFS, shall not thereafter be materially modified without the prior written consent of VPFS.

E. Submit to VPFS with a request for approval, after the schematic design development documents for the buildings have been approved by VPFS, final building plans and specifications prepared by a registered architect or engineer in compliance with all applicable laws, regulations, ordinances and VPFS standards which plans and specifications, when approved by VPFS, shall not thereafter be materially modified without the prior written consent of VPFS.

F. Provide to VPFS satisfactory evidence that all permits, licenses, and certifications required for the lawful construction and operation of the proposed STRP, including, without limitation, all applicable building permits, zoning access, sign and fire requirements, have been obtained.

G. Provide to VPFS insurance certificates satisfying the applicable requirements set forth In Article 12 of this Agreement.

H. Provide to VPFS evidence that Licensee possesses or has obtained adequate financing for

constructing, furnishing, and operating the STRP.

I. Such other information as VPFS may reasonably request.

5.2 Licensee shall commence construction of the STRP (i) within 240 days after the date of this Agreement, or (ii)

within 60 days of the point in time when a building permit for the STRP is ready for issuance, whichever occurs earlier. A building permit shall be deemed ready for issuance at the point in time when the issuing authority has taken ail steps necessary for issuance, and would issue the building permit upon the payment of the fee therefor. In VPFS' discretion, VPFS may grant Licensee up to 4 30-day extensions for a fee of $5,000.00 for each extension. Any extensions shall be granted only in VPFS'

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sole discretion and upon payment of such additional extension fees as VPFS deems appropriate in its sole discretion. Licensee shall pay VPFS a fee of $5,000 at the time the extension is requested. If the extension is not granted, the fee will be refunded. Licensee shall provide written notice to VPFS of the date of Commencement of Construction within 10 days after it occurs. Once commenced, such construction work shall continue uninterrupted (except for Interruption by reason of events constituting force majeure) until it is completed. Except for the occurrence of any events constituting force majeure, construction work shall be completed and the STRP shall be furnished, equipped, and otherwise be made ready to open in accordance with this Agreement not later than the date specified in Article 5.4. VPFS shall have the sole right to determine whether the construction work has been completed in accordance with this Agreement, the approved plans, and the Manual.

5.3 Licensee shall, within 30 days after Commencement of Construction In the case of subsection A and within 2 months after the Commencement of Construction in the case of subsection B:

A. Provide evidence of execution of contract for approved exterior signage with approved vendor.

B. Submit, pursuant to Article 8.1 .D., to VPFS a request for approval of any alternate FF&E products, including standards and specifications for FF&E, prepared by a qualified professional, which, if approved by VPFS, shall not be materially modified without the prior written consent of VPFS. As used in this Article the term "materially modified" shall mean any modification that would (a) change the size or dimensions of any public areas, studios, or amenities of the STRP, (b) affect the appearance or design of any portion of the STRP or the quality of the materials used therein, or (c) constitute a departure from the concept, standards or approved products or services of the System.

5.4 Licensee shall diligently and continuously prosecute the construction, furnishing, and equipping of the STRP (including its acquisition and installation of all FF&E, signs, supplies, and other items necessary for completion and opening of the STRP) in accordance with the plans previously approved by VPFS and in accordance with the Manual, but in any event the construction, furnishing, and equipping of the STRP shall be completed within 9 months after the date of Commencement of Construction of the STRP. Licensee acknowledges and understands that time is of the essence in the construction and opening of the STRP, and except for the occurrence of any events constituting force majeure, the constmction shall be completed and the STRP shall be furnished, equipped, and otherwise be made ready to open for business, and all governmental licenses and permits (including a certificate of occupancy) necessary to operate the STRP under the System shall have been obtained by Licensee, at the end of such 9-month period ("Construction Completion"). If Licensee has met the opening requirements set forth in this Article 5 and has received a certificate of occupancy for a portion of the STRP, Licensee may open the STRP for business as long as Licensee completes the construction, furnishing, and equipping of the balance of the STRP within the time period set forth herein or any extension granted hereunder, in VPFS' discretion, VPFS may allow Licensee up to 4 additional 30-day extensions of the construction completion date for a fee of $5,000 per extension. The fee for each extension shall be payable at the time Licensee applies for the extension. If the extension is not granted, the fee will be refunded. Any further extensions shall be granted only in VPFS' sole discretion and upon payment of such additional extension fees as VPFS deems appropriate in its sole discretion.

5.5 Licensee agrees that VPFS and its agents shall have the right (without, however, any duty or obligation to do so) to inspect the construction of the STRP at all reasonable times.

5.6 VPFS' exercise of its rights to approve the plans and specifications and to inspect construction of the STRP shall be solely for the purpose of assuring compliance with System standards and with the terms and conditions of this Agreement, and VPFS shall have no liability or obligation to Licensee or any other person with respect to construction of the STRP.

5.7 No later than 30 days prior to the expected opening of the STRP, Licensee shall submit to VPFS, for its prior approval, Licensee's direct sales and marketing plan if requested to do so by VPFS.

5.8 No later than 30 days prior to the expected opening of the STRP, Licensee shall employ a qualified property manager for the STRP.

5.9 The STRP shall be opened for business immediately upon satisfaction of all of the following requirements:

A. All FF&E required for the opening of the STRP in accordance with this Agreement and the standards

of VPFS shall have been installed or completed, and Licensee shall have submitted to VPFS a certificate of occupancy from appropriate regulatory authorities. Licensee may open on a floor by floor basis provided that all of the following requirements are satisfied as to all portions of the STRP premises to which guests will have access: (i) all life and safety code requirements have been met; (ii) Licensee has a certificate of occupancy or temporary certificate of occupancy for each floor opened, (iii) Licensee has provided written documentation to VPFS of such temporary certificate of occupancy, and (iv) Licensee is proceeding diligently toward completion of the full STRP facility in accordance with the terms of this Agreement.

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B. Licensee's property manager for the STRP shall have completed to VPFS' satisfaction a training program conducted by VPFS, and Licensee shall have employed qualified personnel sufficient to operate the STRP.

C. Licensee shall have paid all sums due VPFS and its affiliated companies.

D. Licensee is not in default under this Agreement, or any existing License Agreement or other agreement with VPFS or any of its Affiliated companies.

E. Licensee is in compliance with all requirements of the Americans with Disabilities Act and has provided proper evidence thereof to VPFS.

F. VPFS shall be satisfied as to Licensee's compliance with requirements necessary for opening the STRP by such on-site inspection and investigation as VPFS deems appropriate, which shall be made and completed within 30 days of receipt of the certificate of occupancy, or temporary certificate of occupancy as the case may be, of Licensee pursuant to this Agreement. Nothing under this Agreement shall in any manner relieve Licensee of the obligation of complying with the requirements of the approved plans or the terms of this Agreement.

5.10 Licensee acknowledges and understands that Licensee shall bear the entire cost of the development and construction of the STRP, including, without limitation, all costs applicable to design, engineering, and other professional services, contractors, financing, licenses, permits, equipment, furnishings, and supplies.

Article 6. Duties of VPFS.

In addition to the other obligations and duties set forth in this Agreement, VPFS agrees as follows:

6.1 VPFS shall provide to Licensee a set of then-current prototype ptans and specifications (not for construction) as determined by VPFS for a typical System STRP. These plans must be adapted to Licensee's site by the appropriate licensed architects.

6.2 Upon reasonable request, VPFS shall consult with and advise Licensee at VPFS' home office concerning the construction and operation of the STRP.

6.3 VPFS shall provide Licensee access to the Manual via the intranet or loan 1 hard copy of the Manual (whichever VPFS determines to be most appropriate) for the term of the Agreement setting forth standards of operation for the System and standards of quality, cleanliness, and service for the STRP. VPFS shall have the right to add to and otherwise modify the Manual to reflect changes in the business, authorized products or services (or specifications therefor), FF&E requirements, quality standards, and operating procedures of the STRP as determined by VPFS. Such additions or modifications may be made through various communications by VPFS, including policy statements, memoranda, bulletins, directives, instructions, intranet, electronic communications, or other material prepared by or on behalf of VPFS. The Manual and any additions or modifications may be provided in printed, machine readable, electronic, or any other form chosen by VPFS.

6.4 VPFS shall make available to Licensee and Licensee's employees such required and optional training courses, programs, conferences, seminars, and materials, as VPFS deems appropriate. All training shall be conducted at such locations and at such times as VPFS may designate and shall be subject to the terms and conditions set forth in this Agreement.

6.5 VPFS shall endeavor to maintain high standards of quality, cleanliness, appearance, and service for the System, and to that end shall conduct inspections of the System STRPs, evaluations of the services rendered therein, and interviews of employees, agents, and customers of System STRPs, all as VPFS deems advisable and appropriate.

6.6 VPFS will make available in electronic and/or printed format to all System STRPs a Value Place STRP Directory subject to the terms and conditions of Article 8 of this Agreement.

6.7 Licensee acknowledges and agrees that any duty or obligation imposed on VPFS by this Agreement may be performed by a designee, employee, or agent of VPFS, as VPFS may direct.

6.8 All of the obligations of VPFS under this Agreement are to Licensee only, and no other party is entitled to rely on, enforce, or obtain relief for breach of such obligations either directly or by subrogation.

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Article 7. General Duties of Licensee.

In addition to the other obligations and duties set forth in this Agreement, Licensee agrees as follows:

7.1 Licensee covenants and agrees to commence, diligently pursue, and complete construction of the STRP and open for business in accordance with Article 5 of this Agreement.

7.2 Licensee shall employ or retain qualified management personnel as prescribed in the Manual. All personnel employed or retained by Licensee in the position of property manager shall attend and successfully complete, to VPFS' satisfaction, VPFS' training program. The initial property manager shall complete their training prior to Opening and all other personnel, including any subsequent property manager, shall complete their training within 1 month of employment. The 1-month period may be extended if space In the training program Is not available to Licensee's personnel during the specified period. Licensee, or if Licensee is an entity, one or more of Licensee's principal owners, shall attend VPFS' annual {or biannual as VPFS may determine) Licensee conference and pay the non-refundable conference registration fee as the same may be designated by VPFS. VPFS may periodically make available other required or optional training courses to Licensee's personnel, other than those mentioned, as well as other programs, conferences, seminars, and materials, and Licensee shall ensure that such personnel, as VPFS may direct, satisfactorily complete any required training within the time specified. All training shall be provided at such locations as VPFS may designate and Licensee shall be responsible for Licensee's employees' travel expenses and room, board, and wages during the training. Licensee will not be charged tuition for the initial training of Licensee's first property manager for the STRP. Licensee will be charged reasonable tuition for all other training of Licensee's personnel. VPFS reserves the right to require, as a condition of providing training, that personnel employed or retained by Licensee execute confidentiality agreements prepared by VPFS. VPFS reserves the right to limit the availability of any optional training programs.

7.3 Licensee expressly acknowledges that adherence to each and every provision of the System is reasonable, necessary, and essential to maintain the uniform image and favorable reputation of each STRP and the System and the success of VPFS' license program. Accordingly, Licensee expressly agrees to comply with each and every requirement of the System during the term hereof, as the same may be modified or supplemented by VPFS in its sole discretion. Such modifications and supplementations may relate to, without limitation, compliance with any requirements for installing frame relay, customer information systems, reservations systems and other systems or technology programs, and to pay any fees or charges associated with any such System modifications or supplementations.

7.4 Licensee shall provide efficient, courteous, and high-quality service to the public and shall operate the STRP as outlined in the Manual except as otherwise permitted by VPFS in writing. Licensee shall cause the STRP to honor all credit cards specified by VPFS and enter into such credit card arrangements with the issuers of such cards as may be necessary to do so.

7.5 Licensee shall use the STRP premises solely for the operation of the Licensed Business and shall not use or allow the use of the premises for any other purpose or activity (including, without limitation, the promotion of any competing business) at any time without the prior written consent of VPFS, which may be granted or withheld in VPFS' sole discretion.

7.6 The STRP and everything located on the STRP premises shall be maintained by Licensee in a clean, safe, orderly, and first-class condition in accordance with the standards specified In the Manual, and consistent with the image of a clean, sanitary, attractive, safe, and efficiently operated value-oriented, short-term residential lodging accommodation, The STRP shall be constructed, maintained, and operated in compliance with all applicable fire, safety, health, and sanitation laws, ordinances, and regulations, and Licensee shall maintain the highest health standards and ratings applicable to the STRP and otherwise maintain high moral and ethical standards at the STRP.

7.7 Licensee shall perform such maintenance of the STRP as is required by VPFS to maintain the condition, appearance, and efficient operation of the STRP, including, without limitation, (a) continuous and thorough cleaning and sanitation of the interior and exterior of the STRP, (b) interior and exterior repair of the STRP, (c) maintenance of equipment at peak performance, (d) replacement of worn out or obsolete improvements, fixtures, furnishings, equipment, computer systems, software, and signs with approved Improvements, FF&E, computer systems, software, and signs, and (e) periodic painting and decorating. At VPFS' request, Licensee shall upgrade the STRP within the time specified by VPFS at Licensee's expense to conform to the building decor appearance and presentation of Proprietary Marks and trade dress consistent with VPFS' then-current public Image, including, without limitation, such structural changes, remodeling, and redecoration and such modifications to existing Improvements as may be deemed necessary by VPFS, as long as those same upgrading requirements apply to a majority of System STRPs operated by licensees or by VPFS or its Affiliates. Except as described above, Licensee shall make no additions, alterations, or replacements to the STRP or anything located on the STRP premises without the prior written consent of VPFS.

7.8 Licensee acknowledges and agrees (a) that this license and Licensee's right under this Agreement are granted for the number of studios specified herein on Exhibit A, and (b) that Licensee shall not expand the number of studios in

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the STRP without the prior written consent of VPFS. Should Licensee propose to increase the number of such studios, a fee equal to the then-current initial License Fee per studio for each additional studio shall then be paid to VPFS with Licensee's request for approval of such expansion. Such fee for the expansion shall become non-refundable upon VPFS' approval of the proposed expansion.

7.9 Licensee shall, at Licensee's expense, comply with all federal, state, and local laws, rules, ordinances, and regulations, and shall timely obtain, and keep in force as required throughout the term of this Agreement, any and all permits, certificates, licenses, and approvals necessary for the full and proper conduct of the Licensed Business.

7.10 Licensee shall notify VPFS in writing within 5 days of the commencement of any action, suit, or proceeding, and of the issuance of any inquiry, subpoena, order, writ, injunction, award, or decree of any court, agency, or other governmental instrumentality, arising out of, concerning, or which may affect the operation or financial condition of the Licensed Business, including, without limitation, any criminal action or proceeding brought by Licensee against employees, customers, or other persons.

7.11 Licensee shall pay when due all taxes levied or assessed in connection with the possession, ownership, or operation of the STRP and all taxes payable on royalties and other payments made to VPFS or to any of the affiliated companies (excluding income taxes payable by VPFS or any of its affiliated companies). In the event of any bona fide dispute respecting any tax assessed against Licensee, the STRP, any personal property located therein, or any payments due to VPFS or any of its Affiliates, Licensee may contest the validity or amount of the tax in accordance with procedures of the taxing authority; provided, however, that Licensee shall act with all due diligence and shall In no event permit a tax sale or seizure against the STRP or any equipment, goods, or property located therein, or any Impoundment of payments due to VPFS. Licensee recognizes that Licensee's failure or repeated delays in making prompt payment in accordance with the terms of any agreements, leases, invoices, or statements for purchase or lease of FF&E, inventories, supplies, travel agent services, or other goods and services will be detrimental to the reputation of Licensee, VPFS, and other System Licensees. Licensee shall timely pay when due all amounts owed by Licensee in connection with the operation of the STRP.

7.12 Licensor may make available to System STRPs a property management system. If required by Licensor, Licensee shall install, maintain, and use the automated property management system as developed and promulgated (In the Manual or otherwise in writing) by VPFS. Licensee shall either reimburse VPFS for Licensee's equitable pro rata share of VPFS' cost of developing and maintaining such software, including, without limitation, enhancements, additions, substitutions, or other modifications provided to the System by VPFS, purchase such system or pay such fee as VPFS may decide to charge for use of such property management or related system.

7.13 If Licensee is at any time a corporation, limited liability company, or partnership, Licensee agrees and represents that:

A. Licensee has the authority to execute and deliver this Agreement and to perform its obligations thereunder and is duly organized or formed and validly existing in good standing under the laws of the state of its formation or organization.

B. Licensee's organizational documents or partnership agreement will recite that the issuance and transfer of the ownership interests of Licensee are restricted by the terms and conditions of this Agreement, and all certificates and other documents representing an ownership interest in Licensee will bear a legend referring to the restrictions of this Agreement in form and language satisfactory to VPFS.

C. Exhibit B to this Agreement will at all times completely and accurately describe all of the owners of Licensee and their beneficial ownership interests in Licensee.

D. Licensee and its owners agree to sign and deliver to VPFS such revised Exhibit B as may be necessary to reflect any permitted changes in the information contained therein within 5 days following the occurrence thereof and to furnish such other information about Licensee's organization or formation as VPFS may request.

E. Licensee shall furnish VPFS with its articles or certificate of incorporation, bylaws, and partnership or limited liability documentation or similar organization documents, and any other documents VPFS may reasonably request, and any amendments thereto or restatements thereof.

7.14 If the STRP (or any of the premises on which the STRP is located) is condemned or damaged by casualty, Licensee agrees as follows:

A. Licensee shall, within 10 days of receipt, provide VPFS with a copy of any notice of any proposed

taking of the STRP or surrounding premises by eminent domain or condemnation. Such notice shall be sent by Licensee to

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VPFS by overnight courier service. If the STRP is condemned or so taken or such a substantial portion of the STRP Is condemned or so taken as to render impractical the continued operation of the STRP in accordance with System standards, then in such event, (i) this Agreement shall terminate upon notice by VPFS to Licensee, and (ii) VPFS shall be entitled to receive the payments due under Article 4 for as long as the STRP remains open for business or for a period of 1 year from the date Licensee notifies VPFS of the condemnation, whichever is longer. If the STRP ceases business operations prior to 1 year from the date VPFS receives notice of the condemnation, VPFS will be entitled to receive a payment from Licensee for the balance of the one-year period based on the average monthly fees from the trailing 12 months. If a non-substantial condemnation shall occur, then in such event, Licensee shall promptly make whatever repairs and restoration may be necessary to make the STRP conform substantially to its former character and appearance according to plans and specifications approved by VPFS, and the resumption of normal operation of the STRP shall not be unreasonably delayed by Licensee.

B. If the STRP is damaged or destroyed by fire or other casualty, Licensee shall repair the damage without delay. If the casualty requires closing the STRP, Licensee shall (i) immediately notify VPFS, (ii) commence reconstruction and repair as soon as practicable, but in any event within 180 days after the closing of the STRP, (iii) repair or rebuild the STRP in accordance with the then-current System standards and specifications, and (iv) reopen the STRP for continuous operations under the System as soon as practicable, but in any event within 12 months after closing the STRP. Licensee shall give VPFS at least 90 days advance written notice of the date of such reopening.

C. The closing of the STRP due to condemnation or casualty shall not extend the term of this Agreement.

7.15 Licensee acknowledges and agrees that, in addition to the rights granted VPFS under Article 10.6 hereof, VPFS may use the names of customers or guests of the STRP for any purpose, and agrees that VPFS may have access to Licensee's sales and customer data base for that purpose.

7.16 VPFS has established an Internet Website that provides information about the System and that facilitates reservations for all System STRPs. VPFS will have sole discretion and control over the Website (including timing, design, contents and continuation). VPFS may use part of the Marketing Fees it collects under Article 4.1 .C to pay or reimburse the costs associated with the development, maintenance and update of the Website. At Licensee's expense, VPFS will include at the Website an interior page containing information about Licensee's STRP. VPFS may require Licensee to prepare all or a portion of the page, at Licensee's expense, using a template that VPFS provides. All such information will be subject to VPFS' prior written approval prior to posting. Except for this interior page, you may not maintain a presence on the Internet for your STRP. VPFS has developed an Intranet network through which confidential brand standards and other materials may be posted and where VPFS and its Licensees can communicate by e-mail or similar electronic means. Licensee agrees to use the facilities of the Intranet in strict compliance with the standards, protocols and restrictions that VPFS includes in the Manual (including, without limitation, standards, protocols and restrictions relating to the encryption of confidential information and prohibitions against the transmission of libelous, derogatory or defamatory statements).

7.17 Licensee shall pay S-PAC's then-current dues, assessments, and conference fees to attend S-PAC meetings, regardless of whether Licensee attends such meetings.

Article 8. Quality Control and Supervision.

8.1 Licensee agrees that substantial uniformity of quality at all System STRPs is necessary and desirable for

purposes of establishing and protecting the shared identity, reputation, and goodwill associated with the System and the Proprietary Marks. In order to better accomplish these objectives, Licensee agrees that:

A. ' The STRP shall be operated in strict conformity with such standards, specifications, methods, and techniques as VPFS may, prescribe in the Manual, and Licensee shall refrain from deviating therefrom and from otherwise operating in any manner which adversely reflects on the System, the Proprietary Marks, the goodwill associated therewith, or VPFS' rights therein.

B. Licensee shall, at Licensee's expense, purchase or lease and install at the STRP all FF&E, property management or related systems, frame relay, customer information system, reservation system, and other systems and technology programs specified by VPFS. Licensee shall refrain from installing in, on or about the STRP, or permitting to be installed, without VPFS' prior written consent, any FF&E, electronic or video games or any other items or services not previously approved by VPFS. The size, form, color scheme, content (except for prices, charges or other rate information which are subject to Article 8.7 below), and location of all signs, advertisements and graphic materials displayed in any public area or studios at the STRP shall be as prescribed in the Manual or otherwise approved in writing by VPFS.

C. VPFS may require that particular FF&E items be purchased from vendors approved by VPFS. Otherwise, Licensee may purchase all FF&E used from any source as long as the standards and specifications in the Manual are met. If Licensee would like to purchase certain FF&E items from a vendor other than an approved vendor. Licensee must

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request in writing that VPFS approve an alternative vendor for a product or service. Licensee must submit whatever information, specifications, or samples VPFS requires and reimburse VPFS for its costs of review and testing the alternate vendor. VPFS will have sole discretion as to whether it will approve or not approve a proposed alternative vendor. Licensee must reimburse VPFS costs promptly upon receipt of an invoice.

D. If Licensee would like to use alternate products or services to FF&E items required by VPFS,

Licensee must first request in writing that VPFS approve the alternate product or service. Licensee must submit whatever information, specifications, or samples VPFS requires and must pay to VPFS a fee of $500 per product or service when the request is submitted. If the costs of VPFS for the review and testing of the product or service exceed $500, the Licensee must reimburse VPFS for such additional cost.

8.2 The Licensed Business shall be conducted In accordance with the Manual, as updated, supplemented, and modified. Licensee further acknowledges that establishing, maintaining, and protecting the goodwill, reputation, and uniformity of the System requires strict adherence to this Agreement and the Manual in all respects, it being agreed that every detail is significant and material. Licensee shall at all times ensure that Licensee's copy of the Manual is kept current and up-to-date, and in the event of any dispute as to the contents of the Manual, the terms of the master copy of the Manual maintained by VPFS at VPFS' home office shall be controlling. Licensee shall maintain the Manual in a safe and secure location and shall report the theft or loss of the Manual, or any portion thereof, immediately to VPFS.

8.3 Licensee hereby grants to VPFS and its agents the right to enter upon the premises of the STRP at any reasonable time for the purpose of conducting inspections. Licensee shall (a) provide lodging without charge to VPFS" agent during such time as may reasonably be necessary to complete such inspections; (b) cooperate fully with VPFS' agents during the inspections; and (c) take such steps as may be reasonably necessary to correct any deficiencies detected during such an inspection, upon the written request of VPFS or its agents, within such reasonable time as may be specified therein. Licensee shall provide all information requested by VPFS for the purpose of VPFS' conducting guest satisfaction audits and surveys. If Licensee fails an inspection or fails to meet brand standards, VPFS will charge Licensee a quality assurance/safety/non-compliance inspection fee of $4,000 for each follow-up evaluation that occurs as a result of Licensee's STRP failing to meet any quality or service requirements or brand standards ("Quality Assurance/Safety/Non-Compliance Review Fee"). Licensee must also pay the expenses of VPFS' representative(s) conducting such inspection. Licensee shall pay such Quality Assurance/Safety/Non-Compl lance Inspection Fee and expenses within 30 days of receipt of an invoice therefor.

8.4 If Licensee develops any products, services, procedures, or inventions deemed by VPFS to be appropriate for use in other System STRPs, it is understood and agreed that VPFS shall be the owner of such products, services, procedures, or inventions without obligation to compensate Licensee, it being understood and agreed that the benefit to the Licensee from the overall enhancement of the System is sufficient consideration for granting this right to VPFS.

8.5 All marketing and promotion by Licensee shall be factual, ethical, and in good taste in the judgment of VPFS and shall be subject to VPFS' approval as provided in Article 9.1 of this Agreement. Licensee shall in all dealings with its customers, suppliers, VPFS, and the public adhere to the highest standards of honesty, integrity, fair dealing, and ethical conduct. Licensee agrees to refrain from any business or advertising practice which, in the subjective opinion of VPFS, may be injurious to the business of VPFS and the goodwill associated with the Proprietary Marks and other System STRPs.

8.6 Immediately upon receipt by Licensee of any report from any health department or other comparable agency, Licensee shall send a complete copy of such report to VPFS by overnight courier service. Licensee shall notify VPFS in writing within 5 days of the commencement of any action, suit, or proceeding, and of the issuance of any order, writ, injunction, award or decree of any court, agency, or other governmental instrumentality, which may adversely affect the operation or financial condition of Licensee or the STRP or of any notice of violation of any law, ordinance, or regulation relating to health or sanitation.

8.7 VPFS and Licensee recognize the value of pricing and marketing programs that facilitate the marketing of the System, the good will, reputation, and uniformity of the System and consumer acceptance and recognition of System STRPs. Licensee and VPFS agree that, in order to better accomplish these objectives, VPFS may from time to time in its sole judgment (a) require that rates for lodging accommodations shall start at levels no higher than those determined by VPFS (b)designate mandatory maximum charges for the goods and services offered by the Licensee at the STRP from time to time by VPFS, (c) require Licensees to offer some studios in the STRP at specified maximum prices, and (d) otherwise establish rates and prices to the extent permitted by applicable law.

Article 9. Advertising.

Licensee and VPFS recognize the value of advertising and the importance of the standardization of advertising programs to the furtherance of the goodwill and public image of the System. In order to better accomplish these objectives, the parties agree as follows:

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9.1 All advertising, marketing, and sales materials used by Licensee in any medium shall be conducted in such manner, and shall conform to such standards and requirements, as VPFS may specify. Licensee must submit to VPFS for its prior written approval samples of all advertising, marketing, and sales plans and materials and all other materials displaying the Proprietary Marks that Licensee desires to use which have not been prepared or previously approved by VPFS; provided, however, that no such deemed approval shall relieve Licensee from complying with the requirements of Article 8.5 of this Agreement.

9.2 Licensee shall obtain listings at Licensee's expense in the yellow and white pages of local telephone directories.

9.3 VPFS may establish a Marketing, Advertising, and Direct Sales Fund ("Marketing Fund"). The Marketing Fund, if established, will be administered by the S-PAC Marketing Committee. Licensee and all Licensees of the System shall be members of S-PAC and each member shall be entitled to the same number of votes as the number of STRPs for which such member then has open and operating. The members of the S-PAC Marketing Committee shall be elected at each annual meeting of the S-PAC. Any vacancies in the S-PAC Marketing Committee shall be filled by a person designated by the board of directors of the S-PAC. The Marketing Fund will be used by the S-PAC Marketing Committee to meet any and all costs of developing and preparing national, regional, point of sale, and local direct sales advertising materials for use within the System, including, without limitation, costs associated with developing, preparing, directing, administering, maintaining, and disseminating advertising, marketing, promotional, and public relations materials; conducting marketing research; maintaining a national sales and marketing staff and related expenses; joint promotional programs for all VPFS brands; and preparing, producing, broadcasting, and disseminating advertising and promotions, including, without limitation, radio, television, newspaper and magazine advertising, market surveys, public relations activities, and employment of advertising agencies. The S-PAC Marketing Committee shall choose and determine the nature, theme, and timing of advertising and the kind and quality of advertising materials to be provided to licensees through the Marketing Fund. All payments, plus income earned therefrom, shall be used exclusively for the above-stated purposes, shall be maintained in an account separate from VPFS funds, and shall not be used to defray any of VPFS' general operating expenses, except for reasonable salaries, administrative costs, travel expenses, overhead, and similar expenses VPFS may incur in activities related to the administration of the Marketing Fund and all costs of development and preparing national, regional, point of sale, and local advertising materials for use within the System. VPFS shall, for each of its company-owned System STRPs, make contributions to the Marketing Fund at the same percentage of Room Revenues required of Licensees within the System. The Marketing Committee or its designee shall direct all advertising, marketing, and direct sales promotional programs and activities, with sole discretion over the concepts, materials, and media used in such programs and activities and the placement and allocation thereof. Licensee acknowledges that the intent of the Marketing Fund shall be to maximize general public recognition, direct sales programs, and acceptance of the Proprietary Marks for the benefit of the System, and the Marketing Committee or its designee shall have no obligation in administering the Marketing Fund, to make expenditures for Licensee which are equivalent or proportionate to any payments by Licensee, or to ensure that any particular Licensee or any particular licensed location benefits directly or pro rata from advertising or promotion conducted under the Marketing Fund.

9.4 As long as this Agreement remains effective, Licensee shall be a member of S-PAC or such successor association or license advisory council as may be sanctioned by VPFS to serve as an advisory council to VPFS with respect to advertising, marketing, reservations, and other matters relating to System STRPs. All Licensees of the System and VPFS shall be members of S-PAC. As a member of S-PAC, Licensee shall have the following rights and obligations:

A. Licensee shall pay to S-PAC all dues, assessments, and conference fees authorized by S-PAC and shall otherwise maintain its membership in S-PAC in good standing ("good standing" means S-PAC dues and assessments are current and Licensee has not been given a notice of its default under this Agreement). Such fees shall be consistently applied to all licensees in the System and STRPs owned by VPFS or its Affiliates. As of the date of this Agreement, no dues have been authorized by S-PAC.

B. On all matters on which members of S-PAC in good standing are authorized to vote under this Agreement and Bylaws of S-PAC, each Licensee member shall be entitled to 1 vote for each System STRP it has in operation and VPFS shall be entitled to 1 vote for each System STRP operated by VPFS for itself or for parties who are not licensees.

C. VPFS will, as it deems advisable, seek the advice and counsel of S-PAC, its board of directors and committees. S-PAC's committees and their functions and membership will be subject to approval in writing by VPFS, which approval will not be unreasonably withheld. Recognizing that S-PAC must function in a manner consistent with all licensees of the System, the parties will cause the governing rules of S-PAC to be consistent with this Agreement.

9.5 Licensee agrees to list the STRP in the Value Place STRP Directory and to furnish to VPFS such information as VPFS may request for that purpose. Licensee understands and acknowledges that the success and utility of the Value Place STRP Directory may require that it contain information concerning rates for lodging accommodations; that Licensee shall have sole discretion in determining any rates for the STRP which appears in each Value Place STRP Directory; and that VPFS assumes no liability for, nor shall VPFS be deemed liable by reason of, any failure by Licensee or VPFS' other licensees to honor any Value Place STRP Directory rates for the period during which each Value Place STRP Directory is in effect. If rates

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are required to be included in the Value Place STRP Directory listing for the STRP, seasonal and other rate changes or differentials shall be specified, upon Licensee's request. Licensee agrees not to charge higher rates than those that Licensee causes to be published in the Value Place STRPs Directory and to comply with such other requirements with respect to the Value Place STRP Directory as may be specified in the Manual.

9.6 Licensor may make available to System STRPs a reservation system. Licensee shall participate in the Value Place STRP reservation system, and shall observe all terms and conditions of participation specified by VPFS. Licensee shall purchase, install, and maintain at the STRP all equipment necessary for participation in the reservation system required by VPFS, including a reservation terminal and related equipment and software and any future enhancements, additions, substitutions, or other modifications specified by VPFS in the Manual or otherwise in writing. Licensee shall also be responsible for telephone line or other communication infrastructure charges for connecting Licensee's reservation equipment to the reservation system and for the cost of supplies used in the operation of the equipment and for all other related expenses.

Article 10. Financial Reporting.

10.1 Licensee shall, in the manner and form specified by VPFS in the Manual or otherwise in writing, prepare on a current basts {and preserve for at least 5 years from the date of preparation) complete and accurate books and records in accordance with generally accepted accounting principles concerning Room Revenues and all financial, operating, marketing, and other aspects of the STRP and the Licensed Business, and maintain an accounting system that fully and accurately reflects all financial aspects of the STRP, the Licensed Business, and Licensee. Such books and records shall include, but not be limited to, books of account, tax returns, governmental reports, register tapes, daily and other periodic reports, and complete quarterly and annual financial statements (profit and loss statements, balance sheets, and cash flow statements). Licensee's obligation to preserve such books and records shall survive the termination or expiration of this Agreement.

10.2 On or before the 15th day of each calendar month, Licensee shall submit to VPFS a statement (in such form and detail as VPFS may require) reflecting the computation of all amounts then due under Article 4.1 of this Agreement, provided that, if fees will become due under this Agreement more frequently than monthly, upon notice to Licensee, VPFS may require reports to be submitted more frequently. The statement shall include information for the preceding month as to Room Revenues, other revenues, expenses, occupancy and studio rates data, reservation data, and such other information as VPFS may require. Any report required to be submitted hereunder not actually received by VPFS on or before the date the related payment was due shall be deemed overdue unless postmarked at least 5 days prior to the date it was due.

10.3 Licensee shall submit to VPFS as soon as available but not later than 90 days after the end of Licensee's fiscal year, at Licensee's expense, a full and complete reviewed financial statement in writing setting forth the Room Revenues and the computation of all amounts paid by Licensee under Article 4.1 of this Agreement for such fiscal year. Such statement shall be prepared In accordance with generally accepted accounting principles, consistently applied, and shall be accompanied by a report from an independent certified public accountant reasonably satisfactory to VPFS that the statement has been examined in accordance with generally accepted auditing standards. In addition, at VPFS' request, Licensee shall submit to VPFS true copies of all state sales tax returns relating to sales made at the STRP at the same time the returns are filed with state authorities, and such other records as VPFS may reasonably request, Including, without limitation, state and federal income tax returns of Licensee.

10.4 VPFS or its representatives, at VPFS' expense, shall at all reasonable times have the right to inspect or audit the books, accounts, records, returns, and statements of Licensee. The foregoing records may include, but are not limited to, state and federal Income tax returns, credit card or any other third party charge account statements, and any bank, savings and loan, brokerage, or other financial checking, money market, or savings account used for the Licensed Business. Licensee shall fully cooperate with VPFS and its representatives or agents conducting such inspections or audits and, upon request; Licensee shall submit a written response to any Issues raised In connection with said audits. In the event a discrepancy between reported Room Revenues and actual Room Revenues is uncovered in any audit conducted pursuant to this Article for any reporting period (monthly, quarterly, or annually), Licensee shall promptly pay the amount determined to be owing and, if the discrepancy exceeds 2% of reported Room Revenues, Licensee shall reimburse VPFS for all costs of the audit, including travel, lodging, and wages of personnel of VPFS or third parties required to conduct such audit. Licensee shall also promptly reimburse VPFS for the cost of any audit (including salaries, travel, and living expenses) necessitated by Licensee's failure to file any financial report due hereunder and any deficiency In royalties or Marketing Fund contributions disclosed by such audit. At VPFS' option, Licensee shall also immediately pay to VPFS a late charge on the understated amount due from the date such amount was due until paid at the lesser of 1.5% per month or the maximum rate permitted by applicable law. The foregoing remedies shall be in addition to any other remedies VPFS may have. Submission by Licensee of more than 2 written statements of Room Revenues which under-report Room Revenues for any reporting period by 2% or more (regardless of any subsequent cure) shall constitute a material breach of this Agreement entitling VPFS, at its option, the right to terminate this Agreement pursuant to Article 14.1.C. of this Agreement.

10.5 Licensee hereby authorizes all banks and/or other financial institutions with which Licensee does business to disclose to VPFS any requested financial information in their possession relating to the STRP. Licensee further authorizes VPFS to disclose such information to prospective licensees and state regulatory agencies; provided that such information is not

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identified as relating to the STRP unless required by law or regulation and then only if VPFS requests that such identification be held in confidence.

10.6 The Licensee agrees that VPFS or its affiliates may disclose to third parties data concerning and relating, directly or indirectly, to the Licensee and the operations of Licensee, including, but not limited to information about occupancy rates ("Operations Data"). Licensee waives any notice In connection with the disclosure of Operations Data. VPFS agrees, that it, or its affiliates, will from time to time disclose to the Licensee such operations data as it deems appropriate regarding other licensees of VPFS (Operations Data jointly with operations data of other licensees, "System Operations Data"). The Company may, in its sole discretion, determine when and what System Operations Data will be disclosed, and may, without prior notice to, or consent from Licensee, change the scope of the Systems Operations Data being disclosed to Licensee or when it is disclosed. Systems Operations Data disclosed to Licensee is disclosed solely for Licensee's internal business purposes and to enable Licensee to compare its results with those of other licensees of VPFS. The disclosed Operations Data and Systems Operations Data remains confidential information of VPFS. Licensee may not disclose Systems Operations Data to other licensees of VPFS, prospective licensees of VPFS, competitors of VPFS, prospective purchasers of Licensee or any of the Licensee's assets, financial institutions, or any other third parties. The Systems Operations Data so disclosed will be based on information provided to VPFS by its licensees. Such information will not be verified by VPFS or any of its affiliates. VPFS has no obligation to correct Systems Operations Data disclosed after it learns that it was incorrect or incomplete, or to inform Licensee thereof.

Article 11. Proprietary Marks and Trade Secrets; Competition.

11.1 Licensee acknowledges that ownership of all right, title, and interest in the System and all parts thereof, including, without limitation, the Proprietary Marks and the design, decor, and image of all System STRPs, is and shall remain vested solely in VPFS. Licensee expressly disclaims any right, title, or interest therein or in any goodwill derived therefrom. Licensee's license to use the System, and any part thereof, is personal to Licensee, and Licensee shall not license, sublicense, or allow the System, or any part thereof, to be used by any other person, firm, or business association without VPFS' prior written approval. All uses of the System by Licensee inure to the benefit of VPFS.

11.2 Licensee shall not, directly or indirectly, at any time during the term of this Agreement or thereafter, do, cause, or suffer to be done any act or thing disputing, attacking, or in any way impairing or tending to impair the right, title, or interest of VPFS in the Proprietary Marks or the System. Licensee shall immediately notify VPFS in writing of all infringements or imitations of the Proprietary Marks, and VPFS shall exercise absolute discretion in deciding what action, if any, should be taken. Licensee shall fully cooperate with VPFS in the prosecution of any action to prevent the infringement, imitation, or illegal use of the Proprietary Marks and agrees to be named as a party in any such action at VPFS' request. VPFS shall bear any and all legal expenses incident to Licensee's participation, at VPFS' request, in any action to prevent the infringement or Illegal use of the Proprietary Marks, except for the cost of any legal counsel separately retained by Licensee. Except as expressly provided in this Article, VPFS shall not be liable to Licensee for any damages, costs, expenses, loss of profits or business opportunities, or incidental or consequential damages of any kind or nature whatsoever relating to any action involving the Proprietary Marks.

11.3 Licensee shall use the Proprietary Marks as the sole identification of the STRP; provided, however, that in all public records and in its relationship with other persons, on stationery, business forms, checks, or as otherwise required by VPFS, Licensee shall indicate Licensee's independent ownership of the STRP. Licensee shall identify the STRP as being independently operated, such as Independently owned and operated by [Licensee] through a License Agreement with Value Place Franchise Services LLC." or This Value Place short-term residential property is independently owned and operated by [Licensee] through a License Agreement with Value Place Franchise Services LLC." Licensee shall file so-called assumed name or doing business certificates with local or state authorities, as required by applicable law, showing its independent ownership of the STRP. In no event shall Licensee use the Proprietary Marks in connection with the sale of any product or service not authorized for sale at the STRP. Licensee shall not license, sublicense, or allow the Proprietary Marks to be used by any other person or business entity without VPFS' prior written approval. In adopting any corporate, proprietorship, or partnership name, Licensee shall not use the Proprietary Marks or any variation or abbreviation thereof, or any words confusingly similar thereto. Licensee has no right to register any of the Proprietary Marks. If it becomes advisable at any time in VPFS' sole discretion for VPFS and/or Licensee to modify or discontinue use of the Proprietary Marks, and/or use one or more additional or substitute trade or service Proprietary Marks, Licensee agrees to comply therewith within a reasonable time after written notice thereof by VPFS.

11.4 Licensee further acknowledges and agrees as follows:

A. VPFS possesses certain Trade Secrets, and in general, methods, techniques, formats, specifications, programs, procedures, information systems, and knowledge, in the operation and franchising of STRPs and other lodging concepts.

B. VPFS will disclose the Trade Secrets to Licensee in furnishing Licensee with standard plans for the STRP, in the Manual and any other manuals, by providing training to Licensee hereunder, and in the performance of VPFS' other obligations and the exercise of its other rights under this Agreement. Licensee hereby agrees that all materials lent or

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otherwise made available to Licensee by VPFS and all disclosures made to Licensee hereunder including, without limitation, the Manual and other confidential commercial information identified as such by VPFS are Trade Secrets of VPFS and shall be kept confidential and used by Licensee only in the operation of the STRP. Licensee will not, nor permit anyone else to, reproduce, copy, access or exhibit any portion of the Manual or any other confidential or proprietary information received from VPFS. Licensee shall not divulge any such Trade Secrets to any person other than Licensee's employees and then only to the extent necessary for the operation of the STRP.

C. Licensee shall acquire no interest in the Trade Secrets, other than the right to utilize them in the development and operation of the STRP during the term of this Agreement. The use or duplication of the Trade Secrets in any other business will constitute an unfair method of competition. The Trade Secrets are proprietary and are disclosed to Licensee in confidence and solely on the condition that Licensee agrees, and Licensee hereby agrees that Licensee (i) will not use the Trade Secrets in any other business or capacity; (ii) will maintain the absolute confidentiality of the Trade Secrets during and after the term of this Agreement; (iii) will not make unauthorized copies of any portions of the Trade Secrets disclosed in written form, Including, without limitation, any plans, the Manual, bulletins or supplements, and additions thereto; and (iv) will operate and implement all reasonable procedures prescribed by VPFS to prevent the unauthorized use and disclosure of the Trade Secrets. Licensee shall immediately notify VPFS of any unauthorized use of disclosure of the Manual or any of the Trade Secrets or if the Manual or any other manuals or materials containing any Trade Secrets are lost or stolen.

D. The foregoing restrictions on Licensee's disclosure and use of Trade Secrets shall not apply to information, processes, or techniques that are or become generally known and used by other similar hotels or lodging concepts, other than through disclosure (whether deliberate or inadvertent) by Licensee, and disclosure of Trade Secrets in judicial or administrative proceedings to the extent that Licensee is legally compelled to disclose such information, provided, Licensee shall have used Licensee's best efforts, and shall have afforded VPFS the opportunity, to obtain an appropriate protective order or other assurance satisfactory to VPFS of confidential treatment for the information required to be so disclosed.

11.5 Unless the context otherwise requires, the term "Licensee" as used In this Article 11 shall include, individually and collectively, all partners, officers, directors, and managers of Licensee, and owners or holders, directly or indirectly (and any partners, officers, directors, and managers of any such holder), of 5% or more of the beneficial interest in Licensee.

11.6 At VPFS' request, Licensee shall require and obtain execution of a Confidentiality Agreement in a form acceptable to VPFS, (including a Confidentiality Agreement applicable upon the termination of a person's relationship with Licensee) from any or all of the following persons: (a) all officers, directors, and holders of a beneficial interest of 5% or more of the securities of (i) Licensee and (ii) any corporation directly or indirectly controlling Licensee, if Licensee is a corporation; (b) the general partners and any limited partners (Including any corporation or other entity, and the officers, directors, and holders of a beneficial interest of 5% or more of the securities of such corporation or other entity which controls, directly or indirectly, any general or limited partner), if Licensee is a partnership; and (c) the managers and members (including any corporation or other entity, and the officers, directors, and holders of a beneficial Interest of 5% or more of the securities of any corporation or other entity which controls, directly or indirectly, any member or manager), if Licensee is a limited liability company. Failure by Licensee to obtain execution of the Confidentiality Agreement required by this Article, or to deliver such Confidentiality Agreement to VPFS, shall constitute a material breach of this Agreement.

11.7 Licensee shall require every person employed as property manager of the STRP to devote full time to such employment and to agree to be bound by the restrictions set forth in this Article. Licensee shall also take all reasonable steps to require other employees to be bound by the confidentiality provisions of this Article. Upon VPFS' request, Licensee shall promptly provide copies of all such agreements to VPFS.

11.8 All use of the Proprietary Marks in electronic commerce, which includes all forms of electronic or computer communication, including Licensee's Website, must comply with the requirements set forth in the Manual. VPFS may require that various types of marketing or advertising utilize a specific template or format. Licensee must provide VPFS with copies of all proposed applications for registrations of any of the Proprietary Marks or any variation thereof for use in and for electronic commerce, including Licensee's Internet or Website address and domain name. Licensee must obtain VPFS' prior written approval to file any such application, which VPFS may withhold in its sole discretion. Upon expiration or termination of this Agreement, Licensee agrees to transfer its Internet or Website addresses and domain names to VPFS upon VPFS' written request. Licensee will not receive any compensation for such transfer.

11.9 In the event any provision of this Article is deemed by a court of competent jurisdiction to be more restrictive than permissible at law or equity, then Licensee agrees that the provisions hereof may be reformed and modified and enforced by such court to the maximum extent permissible under applicable law and principles of equity. Licensee agrees that specific performance and injunctive relief are necessary and appropriate remedies for violations of this Article and agrees to the enforcement of such remedies, but without prejudice to the right of VPFS to recover money damages, which are in no event a full and adequate remedy for such violations.

11.10 During the term of this Agreement and for a period of 2 years following the transfer or termination of this Agreement for any reason, Licensee shall not compete with VPFS and/or the System by being associated directly or indirectly

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as an owner, shareholder, officer, director, employee, consultant, manager, or otherwise, in any property, motel, or other business (except a System Property) that provides economy lodging accommodations on a weekly-stay basis with kitchen facilities and limited (not on a daily basis) maid service anywhere in the continental United States of America; provided, passive ownership of less than 2% of the outstanding voting securities of a publicly held corporation (which for purposes of this Agreement means a corporation registered under the Securities Exchange Act of 1934) shall not be deemed a violation of this Article.

Article 12. Insurance and Indemnity.

12.1 During the term of this Agreement, Licensee shall comply with al! insurance requirements of any lease, mortgage, or deed of trust covering the STRP as well as all insurance requirements of VPFS as set forth in the Manual or on the VPFS intranet. All insurance shall be procured as the earliest possible time that Licensee has an insurable interest with respect thereto, and shall be written by insurance companies acceptable to VPFS. At a minimum, Licensee shall maintain the following:

A. Comprehensive or commercial general liability insurance, for any claims or losses arising or resulting or pertaining to the STRP or its operation. If the general liability coverage's contain a general aggregate limit, the Indemnitees shall be named as additional Insureds, and it shall apply in the aggregate to this STRP only. Such insurance shall be on an occurrence policy form and shall include premises and operations, independent contractors, blanket contractual, products and completed operations, advertising injury, employees as additional insureds, broad form property damage, personal injury, severability of interests, innkeeper's and safe deposit box liability, and explosion, collapse and underground coverage during any construction.

B. Business Auto Liability including owned, non-owned, and hired vehicles.

C. Umbrella excess liability Is required. VPFS shall have the right to require Licensee to increase the amount of coverage if, in VPFS' reasonable judgment, such an increase is warranted.

D. Insurance on the STRP (including furniture, fixtures, equipment, boiler, and machinery) against such risks as VPFS may specify, including fire, lightning, vandalism, malicious mischief, flood (if located in a flood hazard zone), earthquake (if available), and all other risks covered by the special extended coverage endorsements, in an amount equal to full replacement value thereof.

E. Business interruption covering loss of profits and necessary continuing expenses, Including coverage for payments of royalty fees and contributions to the Marketing Fund, for any interruption in Licensee's business operations.

F. Fidelity bond coverage on all STRP employees.

G. Worker's compensation insurance as required by applicable law, employer's liability insurance, and such other insurance as may be required by law.

H. During any significant construction at the STRP (including the initial construction of the STRP),

Licensee shall maintain or cause the general contractor to maintain with a reputable insurer, the following insurance:

(1) Comprehensive or commercial general liability insurance, for any claims or losses arising or resulting or pertaining to the STRP or its operation. If the general liability coverage's contain a general aggregate limit, it shall apply In the aggregate to this STRP only. Such insurance shall be on an occurrence policy form and shall include premises and operations, independent contractors, blanket contractual, products and completed operations, advertising injury, employees as additional insureds, broad form property damage, personal injury, incidental medical malpractice, severability of interests, innkeeper's and safe deposit box liability, and explosion, collapse and underground coverage during any construction.

(2) Workers' compensation as required by applicable law, employer's liability insurance, and such other insurance as may be required by law.

(3) Builder's risk property insurance of not less than the full contract price.

(4) Umbrella excess liability is required. VPFS shall have the right to require Licensee to increase the amount of coverage if, in VPFS' reasonable judgment, such an increase is warranted.

(5) Business auto liability including owned, non-owned and hired vehicles.

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I. Such other insurance as may be customarily carried by other hotel or other lodging operators on

hotels or other lodgings concepts similar to the STRP.

12.2 All policies of insurance (a) shall be written on a fully insured basis with no deductibles in excess of $25,000 nor any self-insured retentions, (b) shall name VPFS as an additional insured, (c) shall be specifically endorsed to provide that the coverages will be primary and that any insurance carried by any additional insured, including VPFS and/or the Indemnitees, shall be excess and non-contributory, (d) shall contain a waivor of any rights of subrogation against VPFS and the Indemnitees, and (e) shall contain a severability of interest provision in favor of VPFS and the Indemnitees. At all times during the term of this Agreement, Licensee will furnish to VPFS certificates of insurance evidencing the term and limits of coverage in force, names of applicable insurers, and persons insured, and a statement that coverage may not be canceled, altered, or permitted to lapse or expire without 30 days' advance written notice to VPFS. Revised certificates of insurance shall be forwarded to VPFS each time a change in coverage or insurance carrier is made by Licensee and/or upon renewal of expired coverages. At VPFS' option, Licensee may be required to provide certified insurance policy copies. VPFS may increase the minimum protection or coverage requirements of any policy required under this Article 12, and may require different or additional kinds of insurance at any time to reflect inflation, Identification of special risks, changes in law or standards of liability, higher damage awards, or other relevant changes in circumstances. Licensee acknowledges and understands that VPFS makes no representation or warranty with respect to the adequacy or sufficiency of the Insurance required under this Article, and that Licensee shall have the sole responsibility to determine whether additional insurance or higher limits are appropriate.

12.3 If Licensee does not obtain and maintain the insurance coverage required by this Agreement, as revised by the Manual or otherwise in writing, VPFS may, but shall not be obligated to, procure such insurance, and the cost or expense thereof, together with a reasonable fee for VPFS' expenses in so acting, shall be payable by Licensee immediately upon demand.

12.4 Licensee shall indemnify, hold harmless, and promptly reimburse VPFS and the Indemnitees for, from and against any and all fines, damages, legal fees, costs, expenses, and other liabilities suffered or incurred by VPFS and/or the Indemnitees by reason of any actual or threatened claim, demand, lawsuit, tax, penalty, investigation, or other proceeding (even where VPFS' and/or Indemnitee's negligence or other wrongful conduct is alleged) arising directly or indirectly from, as a result of, or in connection with (a) the application submitted to VPFS, (b) the development, construction, operation, condition, use, occupancy, or sale of the STRP, (c) any occurrence at or on the STRP premises, (d) any environmental matters of any kind pertaining to the STRP, (e) any breach of any terms and provisions of this Agreement by Licensee, and (f) any offering of securities, units, or other ownership interests of Licensee, including, without limitation, the violation of any federal and/or state securities laws. Upon VPFS' request, Licensee shall defend VPFS and/or Indemnitees against all such matters. In any event, VPFS shall have the right, through counsel of its choice, to control any matter to the extent VPFS reasonably determines that such matter may have a significantly adverse effect on VPFS and/or the Indemnitees. Licensee shall also indemnify and promptly reimburse VPFS for all expenses reasonably incurred by VPFS to protect itself from, or to remedy, any breach of this Agreement by Licensee. Licensee's indemnity obligations under this Agreement shall survive the expiration or other termination of this Agreement and shall be In addition to all other rights and remedies of VPFS. Licensee's obligations to indemnify VPFS under this Article shall not be limited in any way by reason of any insurance which may be maintained by VPFS, nor shall Licensee's performance of its obligation to maintain insurance relieve Licensee of liability under this indemnity provision or be construed to be a limitation on the amount of Licensee's indemnity obligations. The right of VPFS and the Indemnitees to indemnity under this Agreement shall arise notwithstanding that joint or concurrent liability may be imposed on VPFS and/or the Indemnitees by statute, ordinance, regulation, or other law.

12.5 Licensee shall notify VPFS in writing within 5 days of receipt of notice or knowledge of any claim, dispute, loss, or damage in the amount of $25,000 or more, real or alleged, arising from Licensee's activities in, at, or around the STRP, whether or not such claim names VPFS. A quarterly notice will be provided by Licensee to VPFS regarding any claim, dispute, loss, or damage. Licensee has no authority to, and shall not, accept any service of process on behalf of VPFS, any of its affiliated companies, or the Indemnitees.

Article 13. Transfer of Interest or Management.

13.1 VPFS shall have the right to transfer or assign all or any part of this Agreement, or all or any of its rights or obligations herein to any person or legal entity.

13.2 This Agreement is not transferable by Licensee except as permitted herein. The rights and duties set forth in this Agreement are personal to Licensee and are granted in reliance on the individual and collective business skill, financial capacity, and personal character of Licensee and its owners. Accordingly, neither this Agreement or the license granted hereunder, any part or all of any owner's direct or indirect ownership interest in Licensee, the STRP, nor a substantial portion of the STRP's assets (collectively, the "Licensed Interests"), may be transferred by Licensee without VPFS' prior written approval, and then only in accordance with the provisions of this Agreement. Any purported Transfer by Licensee, by operation of law or otherwise, which is not permitted hereunder, shall be null and void and shall constitute a material breach of this Agreement, for which VPFS may then terminate In accordance with Article 14.1 ,C. without opportunity to cure.

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13.3 Licensee shall grant no security interest, lien, mortgage, or deed of trust on any or ail of the real estate or fixtures of the STRP without the prior written consent of VPFS and then only if the secured party, lien holder, mortgagee or beneficiary of the deed of trust provides VPFS with a non-disturbance agreement as to such real estate and/or fixtures of the STRP in form and substance reasonably acceptable to VPFS; provided, however, that this provision shall not apply to Licensee's initial financing or any refinancing of its STRP.

13.4 In the event that Licensee is an Individual and proposes, subsequent to the execution of this Agreement, to transfer this Agreement to a corporation, partnership, or limited liability company formed by Licensee, VPFS' consent to such transfer shall be conditioned upon satisfaction of and compliance with Article 7.13 of this Agreement and to the following additional requirements:

A. Licensee shall be the owner of all of the voting stock, interests, or units of the corporation, partnership, or limited liability company; and, if Licensee is more than 1 individual, each individual shall have the same proportionate ownership interest in the corporation, partnership, or limited liability company as he or she had in Licensee prior to the transfer.

B. All transferors shall execute a written agreement personally guaranteeing the full payment and performance of Licensee's obligations to VPFS from the date of transfer and agreeing to be bound by all the terms and conditions of this Agreement.

13.5 Any transfer of any or all ownership interest in Licensee or of any or all of the assets of Licensee, which assets include this Agreement, except for a transfer made under Article 13.4, shall be subject to VPFS' right of first refusal to such interest or assets. Subject to the preceding sentence, if Licensee or any of its owners receive a bona fide offer for the sale of any or all ownership interest in Licensee or of any or all of the assets of Licensee, which assets include this Agreement, they shall notify VPFS of the offer, and VPFS shall have the right for a period of 30 days after the notice is submitted together with all other information requested by VPFS to exercise a right of first refusal and substitute itself for the proposed transferee in the transaction. If VPFS declines to do so and there is any change in the terms and conditions of the proposed transaction or the proposed transferee, Licensee shall promptly notify VPFS, and VPFS shall have the further right to exercise its right of first refusal over the revised transaction for a period of 30 days. Should VPFS exercise its right of first refusal, VPFS shall have not less than an additional 60 days to close the transaction, and VPFS shall have the right to substitute cash for any alternative form of consideration contemplated by the proposed transaction, if such substitution does not materially and adversely affect the tax impact of such proposed transaction on the owners of the Licensee. If VPFS does not exercise its right of first refusal, Licensee or the transferring owners may make a transfer on the terms and conditions of the offer considered by VPFS, if Licensee and its owners have complied with all of the provisions of this Article.

13.6 Upon Licensee's death or Incapacity, or, if Licensee is a corporation, partnership, or limited liability company, upon the death of an owner of a Controlling Interest or upon the determination by VPFS that the owner of a Controlling Interest is Incapacitated, Licensee's or such owner's executor, administrator, conservator, guardian, or other personal representative must transfer Licensee's interest in this Agreement or the owner's interest in Licensee to a third party. Such disposition of this Agreement or the interest in Licensee of an owner of a Controlling Interest (including, without limitation, transfer by bequest or inheritance) must be completed within a reasonable time, not to exceed 1 year from the date of death or Incapacity, and will be subject to all of the terms and conditions applicable to transfers contained in this Article 13. A failure to transfer Licensee's interest in this Agreement or the interest of an owner of a Controlling Interest in Licensee within this period of time constitutes a breach of this Agreement. Adequate provision must be made, in the sole discretion of VPFS, for management of the STRP during such period. Licensee's interest in this Agreement or any owner's interest in Licensee which is an entity may, with VPFS' consent, which will not be unreasonably withheld, be transferred to the decedent's spouse, parent, sibling, or direct descendant or to spouse's direct descendant.

13.7 if, upon Licensee's death or Incapacity, or upon the death or Incapacity of an owner of a Controlling Interest in Licensee, the STRP is not being managed by an approved management company, Licensee's or the owner's executor, administrator, conservator, guardian, or other personal representative must within a reasonable time, not to exceed 15 days from the date of death or declaration of Incapacity, appoint an approved management company to operate the STRP. Such an approved management company may be appointed only with VPFS' prior written approval and will be required to complete training at Licensee's expense. Pending the appointment of an approved management company as provided above or if, in VPFS' judgment, the STRP is not being managed properly at any time after Licensee's death or declaration of Incapacity or after the death or declaration of Incapacity of an owner of a Controlling Interest in Licensee, VPFS has the right, but not the obligation, to appoint a property manager or management company for the STRP. All funds from the operation of the STRP during the management by VPFS' appointed property manager or management company will be kept in a separate account, and all expenses of the STRP, including compensation, other costs, and travel and living expenses incurred by the management company, will be charged to this account. VPFS also has the right to charge a reasonable management fee (in addition to the Royalty Fee and Marketing Fee payable under this Agreement) during the period that VPFS' appointed property manager or management company manages the STRP. Operation of the STRP during any such period will be on the transferee's behalf, provided that VPFS only has a duty to utilize commercially reasonable efforts and will not be liable to Licensee or its owners for any debts, losses or expenses, or obligations incurred by the STRP or to any creditors for any products, materials, supplies, or

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services the STRP purchases during any period it is managed by VPFS' appointed property manager or management company. The transferee will remain solely responsible for maintaining the STRP during any period in which VPFS' appointed property manager or management company is managing the STRP on the transferee's behalf.

13.8 Securities, units, or other ownership interests in Licensee may be offered by public or private offering, or otherwise, only with the prior written consent of VPFS (whether or not VPFS' consent is required under Article 13.2 of this Agreement). If Licensee requests consent for a public offering VPFS may grant or withhold its consent in its sole discretion based solely upon what VPFS deems to be in its best interests. If Licensee requests consent for a private offering, VPFS will not unreasonably withhold its consent. All materials required for such offerings by federal or state law shall be submitted to VPFS for review prior to their being filed with any governmental agency; and any materials to be used in any exempt offering shall be submitted to VPFS for review prior to their use. No Licensee offering shall imply (by use of the Proprietary Marks or otherwise) that VPFS Is participating in an underwriting, issuance, or offering of Licensee or VPFS securities, and VPFS" review of any offering shall be limited solely to the subject of the relationship between Licensee and VPFS. Licensee and the other participants in the offering must fully Indemnify VPFS in connection with the offering. For each proposed public offering, Licensee shall pay to VPFS a fee of $25,000, or such higher amount that covers VPFS' reasonable costs and expenses associated with reviewing the proposed offering, Including, without limitation, legal and accounting fees; VPFS at its discretion may refund any unused portion of such fee. For each private offering of securities, Licensee shall pay to VPFS a fee of $10,000 or such higher amount that covers VPFS' reasonable costs and expenses associated with reviewing the proposed private offering, including, without limitation, legal and accounting fees. Licensee shall give VPFS written notice at least 90 days prior to the date of commencement of any public offering and at least 30 business days prior to the date of commencement of any private offering or other transaction covered by this Article.

13.9 Notwithstanding any provision to the contrary contained in this Article, Licensee may transfer not more than an aggregate of 25% of the outstanding voting shares, units, or ownership interests of a Licensee operating as a corporation, partnership, or limited liability company to employees of Licensee who are actively engaged in the STRP operations, if such transfers, alone or together with other previous, simultaneous, or proposed transfers, do not have the effect of transferring a Controlling Interest in Licensee. The ownership of such shares, units, or ownership interests by such employees will be subject to all of the terms and conditions of this Agreement, including, without limitation, Article 11 and Article 13 of this Agreement. Licensee shall provide VPFS 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.

13.10 Any other purported Transfer by Licensee shall constitute a change of ownership requiring submittal of an application for a new license. VPFS will process such change of ownership application in accordance with VPFS' then-current procedures, criteria, and requirements regarding fees, upgrading of the STRP, credit, operational abilities and capabilities, prior business dealings, and other factors VPFS deems reasonable. If the Transfer by Licensee results in less than 50% change in ownership and does not have the effect of transferring a Controlling Interest in Licensee, no application fee or initial License Fee shall be required, but the Licensee shall be required to reimburse VPFS for reasonable expenses incurred by VPFS in the review of the proposed Transfer. If such change of ownership application is approved, VPFS and the new Licensee shall, upon surrender of this Agreement, enter into a new License Agreement for a new 20 year term and pay an initial License Fee. The new License Agreement shall be on VPFS' then-current form and contain such requirements as VPFS shall determine. If the change of ownership application Is not approved by VPFS and Licensee proceeds to transfer the STRP or securities, units, or other ownership interests in Licensee to the proposed new owner, then this Agreement shall terminate pursuant to Article 13 hereof and VPFS wilt be entitled to all of its remedies. Neither the Agreement, nor any rights hereunder shall be transferable in the event that the Licensee is In default under the Agreement.

13.11 Licensee shall not engage any management company to operate the STRP without the prior written approval by VPFS of the management company, which consent shall not be unreasonably withheld by VPFS. Nevertheless, in order to be approved by VPFS, a proposed management company must be deemed by VPFS, in Its reasonable judgment, qualified to manage the STRP. VPFS may refuse to approve any proposed management company which, in VPFS' reasonable judgment, is not financially capable or responsible, is inexperienced or unqualified in managerial skills or operational capacity or capability, or is otherwise unable to adhere fully to the obligations and requirements of this Agreement. VPFS may also withhold its approval if the proposed management company does not provide VPFS with all information that VPFS may reasonably request in order to reach such decision. It Is understood that confidential Information and materials are, In the normal course of business, imparted to System licensees and managers, and VPFS will be under no obligation to approve a proposed management company or replacement management company that is a franchisor or owner, or is affiliated or associated with the

' franchisor or owner, of a hotel or other lodging industry trade name that is competitive with VPFS, irrespective of the number of hotels operating under such trade name. When VPFS has approved in principle the management company nominated by Licensee, Licensee shall have the right to negotiate and execute a management agreement with such management company for the management and operation of the STRP, subject to the terms, conditions, and obligations of this Agreement. Prior to such manager's assuming rights thereunder, the management agreement shall be submitted to VPFS for VPFS' written approval, which shall not to be unreasonably withheld. Such management agreement shall include provisions providing that (a) the manager shall have the authority and responsibility for the day-to-day management of the STRP, (b) the STRP will be operated during the term of the management agreement in such a manner as shall not detract from or modify the requirements of this Agreement or otherwise adversely affect the operation and management of the STRP, (c) that the manager shall accept,

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abide by, and be subject to all rules, regulations, inspections, and requirements of VPFS set forth in this Agreement, and (d) that if there is a conflict between the management agreement and the terms of this Agreement, then this Agreement shall govern and control.

13.12 VPFS' consent to a Transfer by Licensee of any interest in the license granted herein shall not constitute a waiver of any claims it may have against the transferring party, nor shall It be deemed a waiver of VPFS' right to demand exact compliance with any of the terms of this Agreement by the transferee.

Article 14. Default and Termination.

14.1 This Agreement may not be terminated prior to the expiration of its term except as provided in this Article. Termination of this Agreement shall not relieve Licensee of any unfulfilled obligations to VPFS created hereunder unless it is so agreed by VPFS in writing. This Agreement may be terminated as follows:

A. By VPFS in the case of a condemnation of a substantial portion of the STRP in accordance with Section 7.14 of this Agreement.

B. Upon the mutual agreement of the parties in writing to a termination.

C. At VPFS' option, effective immediately upon the giving of written notice to Licensee, if Licensee (i) fails to open the licensed STRP and commence operations within the time schedule established under Article 5 of this Agreement; (li) ceases to operate the STRP or otherwise abandons the business, or forfeits the legal right to do business in the jurisdiction where the STRP is located; (iii) is convicted of a felony or other crime involving moral turpitude, consumer fraud, or crime or offense VPFS believes Is likely to have an adverse effect on Licensee's ability to carry out the duties Imposed by this Agreement or to have an adverse effect on the System and the goodwill associated therewith; (iv) transfers (including transfers following death or Incapacity) of any rights or obligations in violation of the terms of Article 13 of this Agreement; (v) misuses or discloses confidential information in violation of Article 11 of this Agreement; (vi) knowingly makes any false statements in any report or document submitted to VPFS; (vii) submits more than 2 written statements of Room Revenues which under-report Room Revenues for any reporting period by 2% or more; (viii) suffers a final judgment to remain unsatisfied or of record for 30 days or longer (unless supersedeas bond is filed), or has execution levied against Licensee's business or property, or any suit is filed to foreclose any lien or mortgage against the premises or equipment and not dismissed within 30 days; (ix), becomes insolvent or has a receiver appointed to take possession of Licensee's business or property or any part thereof or makes a general assignment for benefit of creditors; (x) engages in public conduct that reflects materially and unfavorably upon the operation of the System, the reputation of the System, or the goodwill associated with the Proprietary Marks; provided that engaging in legitimate political activity (including testifying, lobbying, or otherwise attempting to influence legislation) shall not be grounds for termination; (xi) is in default under any other license agreement or other agreement with VPFS or any of its Affiliates which is not curable, or, if such default is curable, has not cured such default within the applicable cure period; or (xii) or any Affiliate defaults under any license agreement or other agreement with VPFS or any of its Affiliates which is not curable, or if such default is curable, has not cured such default within the applicable cure period.

D. At VPFS' option, without notice, in the event Licensee shall become bankrupt or become subject to a proceeding under any chapter of the United States Bankruptcy Code, unless Licensee shall: (i) timely undertake to reaffirm the obligations under the Agreement, (ii) timely comply with all conditions as legally may be imposed by VPFS upon such an undertaking to reaffirm the Agreement, and (iii) timely comply with such other conditions and provide such assurance as may be legally required in or under relevant provisions of the United States Bankruptcy Code; provided, however, that the parties acknowledge that this Agreement constitutes a personal services contract made in reliance on the qualifications and personal characteristics of Licensee and its directors, officers, managers, shareholders, members, or partners, as the case may be, and in the expectation of a material degree of personal involvement in the management and operation of the Licensed Business, and consequently, the parties agree that any attempt by any other party, including a trustee in bankruptcy or any other third party, to assume or accept a transfer or assignment of this Agreement shall be void, and that in no event shall this Agreement or any rights or duties of Licensee hereunder, be transferred to any individual or entity who does not comply with all requirements for transfer specified in this Agreement.

E. At the election of VPFS, effective upon the expiration of 30 days after giving of written notice (10 days in the case of non-payment of any Payment or other financial obligation), in the event Licensee defaults, and does not cure to VPFS' reasonable satisfaction within the 30 day (or 10 day) notice period, in the performance of any other covenant or provision of this Agreement, including without limitation, the obligation to pay when due any financial obligation to VPFS, the obligation to make reports and provide information when due hereunder, or failure to maintain any of the standards or procedures prescribed for the Licensed Business in this Agreement, the Manual, or otherwise; provided, however, that Licensee shall be entitled to notice and opportunity to cure any such default only once in any 6-month period, and any subsequent occurrence of the same or substantially similar default within such 6-month period shall entitle VPFS, at its option, to terminate this Agreement effective immediately upon the giving of notice and without opportunity to cure.

■U54Q418W-3 (License Agreement)

MultlBtate (3/28/07)

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