Document:

Exhibit 4.6

 

ASHFORD HOSPITALITY TRUST, INC.
 ARTICLES OF AMENDMENT AND RESTATEMENT

 

FIRST:  ASHFORD HOSPITALITY TRUST, INC., a Maryland corporation (the “Corporation”), desires to amend and restate its Charter (the “Charter”) as currently in effect and as hereinafter amended.

 

SECOND:  The following provisions are all the provisions of the Charter currently in effect and as hereinafter amended:

 

ARTICLE I
 FORMATION

 

The Corporation is a corporation under the Maryland General Corporation Law (“MGCL”).

 

ARTICLE II
 NAME AND LIFE

 

Section 1.                  Name.  The name of the Corporation is Ashford Hospitality Trust, Inc.

 

Section 2.                  Life.  The Corporation shall have a perpetual existence.

 

ARTICLE III
 PURPOSES

 

The purposes for which the Corporation is formed are to engage in any lawful act or activity (including, without limitation or obligation, engaging in business as a real estate investment trust (a “REIT”) under Section 856 through 860 of the Internal Revenue Code of 1986, as amended or any successor statute (the “Code”)) for which corporations may be organized under the MGCL as now or hereafter in force.

 

ARTICLE IV
 PRINCIPAL OFFICE AND RESIDENT AGENT

 

The address of the principal office of the Corporation within the State of Maryland, is 300 E. Lombard Street, Baltimore, Maryland 21202.  The Corporation may have such other offices and places of business within or outside the State of Maryland as the Board of Directors of the Corporation (the “Board of Directors”) may from time to time determine.  The name of the resident agent of the Corporation within the State of Maryland is The Corporation Trust Incorporated, a Maryland corporation, and the address of such agent is 300 E. Lombard Street, Baltimore, Maryland 21202.

 

ARTICLE V
 STOCK

 

Section 1.                  Number of Authorized Shares.  The Corporation is authorized to issue an aggregate of 250,000,000 shares of stock (the “Capital Stock”), consisting of (a) 200,000,000

 

 

shares of common stock, $0.001 par value per share (the “Common Stock”) and (b) 50,000,000 shares of preferred stock, $0.001 par value per share (the “Preferred Stock”).  The aggregate par value of all of the shares of all of the classes of stock of the Corporation is $250,000.  The Board of Directors by resolution may classify or reclassify any unissued shares of the Common Stock or the Preferred Stock by setting or changing in any one or more respects, from time to time before issuance of such shares, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption of such shares.

 

Section 2.                  Common Stock.  Subject to the rights of the holders of the Preferred Stock, if any, and any other class of stock hereinafter created by the Corporation:

 

(a)         the holders of the Common Stock shall have the exclusive right to vote for the election of directors and on all other matters requiring stockholder action, each share being entitled to one vote;

 

(b)         distributions may be declared and paid or set apart for payment upon the Common Stock out of any assets or funds of the Corporation legally available for the payment of distributions, but only when, as, and if, authorized by the Board of Directors; and

 

(c)          upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock.

 

Section 3.                  Preferred Stock.  Prior to issuance of any shares of Preferred Stock, the Board of Directors by resolution shall:

 

(a)         designate that class or series to distinguish it from all other classes and series of stock of the Corporation;

 

(b)         specify the number of shares to be included in the class or series;

 

(c)          establish, subject to the provisions of Article VI and subject to the express terms of any class or series of stock of the Corporation outstanding at the time, the preferences, conversion or other rights, voting powers, restrictions (including, without limitation, restrictions on transferability), limitations as to distributions, qualifications and terms and conditions of redemption for each class or series; and

 

(d)         cause the Corporation to file articles supplementary with the State Department of Assessments and Taxation of Maryland containing a description of the stock as set or changed by the Board of Directors.

 

Section 4.                  Authorization by Board of Stock Issuance.  Except as otherwise specifically provided herein, the Board of Directors may:

 

(a)         authorize the issuance from time to time of shares of stock of the Corporation of any class or series, whether now or hereafter authorized, or securities or rights

 

2

 

convertible into shares of its stock of any class or series, whether now or hereafter authorized, for such consideration as the Board of Directors may deem advisable (or without consideration in the case of a stock split or stock dividend);

 

(b)         classify or reclassify any unissued shares of stock from time to time in one or mores classes or series of stock; and

 

(c)          set or change the preferences, conversion or other rights, voting powers, restrictions (including without limitation, restrictions on transferability), limitations as to distributions, qualifications, or terms or conditions of redemption of any series of Preferred Stock, subject to such restrictions or limitations, if any, as may be set forth in the Charter, the Bylaws of the Corporation (the “Bylaws”) or as may otherwise be provided by contract.

 

Section 5.                  Fractional Shares of Stock.  The Corporation may, without the consent or approval of any stockholder, issue fractional shares of capital stock.

 

Section 6.                  Charter and Bylaws. All persons who shall acquire capital stock of the Corporation shall acquire the same subject to the provisions of this Charter and the Bylaws, as this Charter and the Bylaws may be amended from time-to-time.

 

ARTICLE VI
 RESTRICTION ON TRANSFER AND OWNERSHIP OF 
 SHARES OF CAPITAL STOCK

 

Section 1.                  Definitions.  For the purpose of this Article VI, the following terms shall have the following meanings:

 

Beneficial Ownership.  The term “Beneficial Ownership” shall mean ownership of shares of Capital Stock by a Person, whether the interest in the shares of Capital Stock is held directly or indirectly (including by a nominee), and shall include (in addition to direct ownership and indirect ownership through a nominee or similar arrangement) interests that would be treated as owned through the application of Section 544 of the Code, as modified by Section 856(h) of the Code.  The terms “Beneficial Owner,” “Beneficially Owns” and “Beneficially Owned” shall have the correlative meanings.

 

Benefit Plan Investor.  The term “Benefit Plan Investor” shall have the meaning provided in 29 C.F.R. § 2510.3-101(f)(2), or any successor regulation thereto.

 

Business Day.  The term “Business Day” shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York, New York are authorized or required by law, regulation or executive order to close.

 

Charitable Beneficiary.  The term “Charitable Beneficiary” shall mean one or more beneficiaries of the Charitable Trust as determined pursuant to Section 3.7 of this Article VI, provided that each such organization must be described in Sections 501(c)(3), 170(b)(1)(A) (other than clause (vii) or (viii) thereof) and 170(c)(2) of the Code and contributions to each such

 

3

 

organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.

 

Charitable Trust.  The term “Charitable Trust” shall mean any trust provided for in Section 2.1(b)(i) and Section 3.1 of this Article VI.

 

Charitable Trustee.  The term “Charitable Trustee” shall mean the Person, unaffiliated with the Corporation and a Prohibited Owner, that is appointed by the Corporation from time to time to serve as trustee of the Charitable Trust.

 

Closing Price.  The “Closing Price” on any date shall mean the last sale price on such date for such shares of Capital Stock, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for such shares of Capital Stock, in either case as reported on the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if such shares of Capital Stock are not listed or admitted to trading on the NYSE, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such shares of Capital Stock are listed or admitted to trading or, if such shares of Capital Stock are not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices, in the over-the-counter market, as reported by the NASDAQ Stock Market or, if such system is no longer in use, the principal other automated quotation system that may then be in use or, if such shares of Capital Stock are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such shares of Capital Stock selected by the Board of Directors or, in the event that no trading price is available for such shares of Capital Stock, the fair market value of such shares, as determined in good faith by the Board of Directors; provided, if the date for which such determination is to be made is a day that the NYSE is not open for trading, such determination shall be made for the most recent day for which the NYSE was open for trading.

 

Constructive Ownership.  The term “Constructive Ownership” shall mean ownership of shares of Capital Stock by a Person, whether the interest in shares of Capital Stock is held directly or indirectly (including by a nominee), and shall include any interests that would be treated as owned through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code.  The terms “Constructive Owner,” “Constructively Owns” and “Constructively Owned” shall have the correlative meanings.

 

ERISA Investor.  The term “ERISA Investor” shall mean any holder of shares of Capital Stock that is (i) an employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), (ii) a plan as defined in Section 4975(e) of the Code (any such employee benefit plan or “plan” described in clause (i) or this clause (ii) being referred to herein as a “Plan”), (iii) a trust which was established pursuant to a Plan, or a nominee for such trust or Plan, or (iv) an entity whose underlying assets include assets of a Plan by reason of such Plan’s investment in such entity.

 

4

 

Excepted Holder.  The term “Excepted Holder” shall mean a stockholder of the Corporation for whom an Excepted Holder Limit is created by the Board of Directors pursuant to Section 2.7 of this Article VI.

 

Excepted Holder Limit.  The term “Excepted Holder Limit” shall mean, provided that (and only so long as) the affected Excepted Holder complies with all of the requirements established by the Board of Directors pursuant to Section 2.7 of this Article VI, and subject to adjustment pursuant to Section 2.8 of this Article VI, the percentage limit established by the Board of Directors pursuant to Section 2.7 of this Article VI.

 

Initial Date.  The date upon which the Articles of Amendment and Restatement containing this Article VI are filed with the State Department of Assessments and Taxation of Maryland.

 

Market Price.  The term “Market Price” on any date shall mean, with respect to any class or series of outstanding shares of Capital Stock, the Closing Price for such shares of Capital Stock on such date.

 

NYSE.  The term “NYSE” shall mean the New York Stock Exchange, Inc.

 

Ownership Limit.  The term “Ownership Limit” shall mean (i) with respect to shares of Common Stock, 9.8% (in value or number of shares, whichever is more restrictive) of the outstanding Common Stock of the Corporation; and (ii) with respect to any class or series of shares of Preferred Stock or other stock, 9.8% (in value or number of shares, whichever is more restrictive) of the outstanding shares of such class or series of Preferred Stock or other stock of the Corporation.

 

Person.  The term “Person” shall mean an individual, corporation, partnership, estate, trust (including a trust qualified under Sections 401(a) or 501(c)(17) of the Code), portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company, limited liability company, or other entity and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

 

Prohibited Owner.  The term “Prohibited Owner” shall mean any Person who, but for the provisions of Section 2.1 of this Article VI, would Beneficially Own or Constructively Own shares of Capital Stock, and if appropriate in the context, shall also mean any Person who would have been the record owner of shares of Capital Stock that the Prohibited Owner would have so owned.

 

Publicly Offered Securities.  The term “Publicly Offered Securities” shall have the meaning provided in 29 C.F.R Section 2510.3-101(b)(2), or any successor regulation thereto.

 

Restriction Termination Date.  The term “Restriction Termination Date” shall mean the first day after the Initial Date on which the Board of Directors determines that it is no longer in the best interests of the Corporation to attempt to, or continue to, qualify as a REIT or that compliance with the restrictions and limitations on Beneficial Ownership, Constructive

 

5

 

Ownership and Transfers of shares of Capital Stock set forth herein is no longer required in order for the Corporation to qualify as a REIT.

 

Transfer.  The term “Transfer” shall mean any issuance, sale, transfer, gift, assignment, devise or other disposition, as well as any other event (or any agreement to take any such actions or cause any such events) that causes any Person to acquire Beneficial Ownership or Constructive Ownership of shares of Capital Stock or the right to vote or receive dividends on shares of Capital Stock, including without limitation, (a)  a change in the capital structure of the Corporation, (b) a change in the relationship between two or more Persons which causes a change in ownership of shares of Capital Stock by application of either Section 544 of the Code, as modified by Section 856(h) of the Code or Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code, (c) the grant or exercise of any option or warrant (or any disposition of any option or warrant, or any event that causes any option or warrant not theretofore exercisable to become exercisable), pledge, security interest or similar right to acquire shares of Capital Stock, (d) any disposition of any securities or rights convertible into or exchangeable for shares of Capital Stock or any interest in shares of Capital Stock or any exercise of any such conversion or exchange right, and (e) Transfers of interests in other entities that result in changes in Beneficial Ownership or Constructive Ownership of shares of Capital Stock.  For purposes of this Article VI, the right of a limited partner in Ashford Hospitality Limited Partnership (or any successor thereto), to require the partnership to redeem such limited partner’s units of limited partnership interest pursuant to Section 7.4 of the Agreement of Limited Partnership of Ashford Hospitality Limited Partnership shall not be considered to be an option or similar right to acquire shares of Capital Stock of the Corporation so long as such Section 7.4 is not amended in a manner that would grant to a limited partner a legal right to require that either Ashford Hospitality Limited Partnership (or any successor thereto) or the Corporation issue to such limited partner shares of Capital Stock and so long as the restrictions in Section 7.4 of such Agreement apply to the exercise of the rights set forth in such Section 7.4.  The terms “Transferring” and “Transferred” shall have the correlative meanings.

 

Section 2.                  Restrictions on Ownership and Transfer of Shares.

 

Section 2.1                                    Ownership Limitations.  During the period commencing on the Initial Date and ending at the close of business on the Restriction Termination Date:

 

(a)         Basic Restrictions.

 

(i)                                     (1) No Person, other than an Excepted Holder, shall Beneficially Own shares of Capital Stock in excess of the Ownership Limit, and (2) no Excepted Holder shall Beneficially Own shares of Capital Stock in excess of the Excepted Holder Limit for such Excepted Holder.

 

(ii)                                  No Person shall Beneficially Own or Constructively Own shares of Capital Stock to the extent that (1) such Beneficial Ownership of shares of Capital Stock would result in the Corporation being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year), (2) such Constructive Ownership would cause either the Corporation to be considered to constructively own after

 

6

 

application of the constructive ownership rules of Section 856(d)(5) of the Code an interest in a tenant that is described in Section 856(d)(2)(B) of the Code for purposes of applying Section 856(c) of the Code or Ashford Hospitality Limited Partnership (or any successor thereto) to be considered to constructively own after application of the constructive ownership rules of Section 856(d)(5) of the Code, as modified by the rules of Section 7704(d) of the Code, an interest in a tenant that is described in Section 856(d)(2)(B) of the Code for purposes of applying Section 7704(d) of the Code, or (3) such Beneficial Ownership or Constructive Ownership of shares of Capital Stock would result in the Corporation otherwise failing to qualify as a REIT or Ashford Hospitality Limited Partnership (or any successor thereto) to fail to qualify as a partnership for federal income tax purposes.

 

(iii)                               No Person shall Transfer any shares of Capital Stock if, as a result of the Transfer, the outstanding shares of all classes and series of Capital Stock would be Beneficially Owned by less than 100 Persons (determined without reference to the rules of attribution under Section 544 of the Code).  Subject to Section 5 of this Article VI and notwithstanding any other provisions contained herein, any Transfer of shares of Capital Stock (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system) that, if effective, would result in outstanding shares of all classes and series of Capital Stock being Beneficially Owned by less than 100 Persons (determined under the principles of Section 856(a)(5) of the Code) shall be void ab initio, and the intended transferee shall acquire no rights in such shares of Capital Stock.

 

(b)         Transfer in Trust.  If any Transfer of shares of Capital Stock (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system) occurs which, if effective, would result in any Person Beneficially Owning or Constructively Owning shares of Capital Stock in violation of Section 2.1(a)(i) or 2.1(a)(ii) of this Article VI, as applicable,

 

(i)                                     then that number of shares of Capital Stock the Beneficial Ownership or Constructive Ownership of which otherwise would cause such Person to violate Section 2.1(a)(i) or 2.1(a)(ii) (rounded upward to the nearest whole share) shall be automatically transferred to a Charitable Trust for the benefit of a Charitable Beneficiary, as described in Section 3, effective as of the close of business on the Business Day prior to the date of such Transfer, and such Person shall acquire no rights in such shares of Capital Stock; or

 

(ii)                                  if the transfer to the Charitable Trust described in clause (i) of this sentence would not be effective for any reason to prevent the violation of Section 2.1(a)(i) or 2.1(a)(ii), as applicable, then the Transfer of that number of shares of Capital Stock that otherwise would cause any Person to violate Section 2.1(a)(i) or 2.1(a)(ii), as applicable, shall be void ab initio, and the intended transferee shall acquire no rights in such shares of Capital Stock.

 

7

 

Section 2.2                                    Remedies for Breach.  If the Board of Directors or any duly authorized committee thereof shall at any time determine in good faith that a Transfer or other event has taken place that results in a violation of Section 2.1 of this Article VI or that a Person intends to acquire or has attempted to acquire Beneficial Ownership or Constructive Ownership of any shares of Capital Stock in violation of Section 2.1 (whether or not such violation is intended), the Board of Directors or a committee thereof shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, without limitation, causing the Corporation to redeem shares of Capital Stock, refusing to give effect to such Transfer on the books of the Corporation or instituting proceedings to enjoin such Transfer or other event; provided, however, that any Transfer or attempted Transfer or other event in violation of Section 2.1 shall automatically result in the transfer to the Charitable Trust described above, and, where applicable under Section 2.1(b)(ii), such Transfer (or other event) shall be void ab initio as provided above irrespective of any action (or non-action) by the Board of Directors or a committee thereof.

 

Section 2.3                                    Notice of Restricted Transfer.  Any Person who acquires or attempts or intends to acquire Beneficial Ownership or Constructive Ownership of shares of Capital Stock that will or may violate Section 2.1(a), or any Person who would have owned shares of Capital Stock that resulted in a transfer to the Charitable Trust pursuant to the provisions of Section 2.1(b), shall immediately give written notice to the Corporation of such event, or in the case of such a proposed or attempted transaction, give at least 15 days prior written notice, and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such acquisition or ownership on the Corporation’s status as a REIT.

 

Section 2.4                                    Owners Required To Provide Information.  During the period commencing on the Initial Date and ending at the close of business on the Restriction Termination Date:

 

(a)                                 Every stockholder of record of more than five percent (or such lower percentage as required by the Code or the Treasury Regulations promulgated thereunder) of the outstanding shares of Capital Stock, within 30 days after the end of each taxable year, shall give written notice to the Corporation stating the name and address of such owner, the number of shares Beneficially Owned, and a description of the manner in which such shares of Capital Stock are held; provided that a stockholder of record who holds outstanding shares of Capital Stock as nominee for another Person, which other Person is required to include in gross income the dividends received on such shares (an “Actual Owner”), shall give written notice to the Corporation stating the name and address of such Actual Owner and the number of shares of Capital Stock of such Actual Owner with respect to which the stockholder of record is nominee.  Each such stockholder of record and each Actual Owner shall provide to the Corporation such additional information as the Corporation may request in order to determine the effect, if any, of such Beneficial Ownership on the Corporation’s status as a REIT and to ensure compliance with the Ownership Limit.

 

8

 

(b)                                 Each Person who is a Beneficial Owner or Constructive Owner of shares of Capital Stock and each Person (including the stockholder of record) who is holding shares of Capital Stock for a Beneficial Owner or Constructive Owner shall provide to the Corporation such information as the Corporation may request, in good faith, in order to determine the Corporation’s status as a REIT and to comply with requirements of any taxing authority or governmental authority or to determine such compliance.

 

Section 2.5  Remedies Not Limited.  Subject to Section 5 of this Article VI, nothing contained in this Section 2 shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable to protect the Corporation and the interests of its stockholders in preserving the Corporation’s status as a REIT.

 

Section 2.6  Ambiguity.  In the case of an ambiguity in the application of any of the provisions of this Section 2, Section 3 or any definition contained in Section 1 of this Article VI, the Board of Directors shall have the power to determine the application of the provisions of this Section 2 or Section 3 with respect to any situation based upon the facts known to it.  If Section 2 or 3 requires an action by the Board of Directors and the Charter of the Corporation fails to provide specific guidance with respect to such action, the Board of Directors shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of Sections 1, 2 or 3 of this Article VI.

 

Section 2.7  Exceptions.

 

(a)                                 The Board of Directors, in its sole and absolute discretion, may grant to any Person who makes a request therefor an exception to the Ownership Limit (or one or more elements thereof) with respect to the ownership of any series or class of Capital Stock of the Corporation, subject to the following conditions and limitations:  (A) the Board of Directors shall have determined that (x) assuming such Person would Beneficially Own or Constructively Own the maximum amount of shares of Common Stock and stock of the Corporation (other than Common Stock) permitted as a result of the exception to be granted and (y) assuming that all other Persons who would be treated as “individuals” for purposes of Section 542(a)(2) of the Code (determined taking into account Section 856(h)(3)(A) of the Code) would Beneficially Own or Constructively Own the maximum amount of shares of Common Stock and stock of the Corporation (other than Common Stock) permitted under this Article VI (taking into account any exception, waiver or exemption granted under this Section 2.7 to (or with respect to) such Persons), the Corporation would not be “closely held” within the meaning of Section 856(h) of the Code (assuming that the ownership of shares of Capital Stock is determined during the second half of a taxable year) and would not otherwise fail to qualify as a REIT; and (B) such Person provides to the Board of Directors such representations and undertakings, if any, as the Board of Directors may, in its sole and absolute discretion, determine to be necessary in order for it to make the determination that the conditions set forth in clause (A) above of this Section 2.7(a) have been and/or will continue to be satisfied (including, without limitation, an agreement as to a reduced Ownership Limit or Excepted Holder Limit for such Person with respect to the Beneficial Ownership or Constructive Ownership of one or more other classes or series of shares of Capital Stock not subject to the exception), and such Person agrees that any violation of such

 

9

 

representations and undertakings or any attempted violation thereof will result in the application of the remedies set forth in Section 2 of this Article VI with respect to shares of Capital Stock held in excess of the Ownership Limit or the Excepted Holder Limit (as may be applicable) with respect to such Person (determined without regard to the exception granted such Person under this subparagraph (a)).  If a member of the Board of Directors requests that the Board of Directors grant an exception pursuant to this subparagraph (a) with respect to such member, or with respect to any other Person if such member would be considered to be the Beneficial Owner or Constructive Owner of shares of Capital Stock owned by such other Person, such member of the Board of Directors shall not participate in the decision of the Board of Directors as to whether to grant any such exception.

 

(b)                                 In addition to exceptions permitted under subparagraph (a) above, the Board of Directors, in its sole and absolute discretion, may grant to any Person who makes a request therefor (a “Requesting Person”) an exception from the Ownership Limit (or one or more elements thereof) if:

 

(i)                                     such Person submits to the Board of Directors information satisfactory to the Board of Directors, in its reasonable discretion, demonstrating that such Requesting Person is not an individual for purposes of Section 542(a)(2) of the Code (determined taking into account Section 856(h)(3)(A) of the Code);

 

(ii)                                  such Requesting Person submits to the Board of Directors information satisfactory to the Board of Directors, in its reasonable discretion, demonstrating that no Person who is an individual for purposes of Section 542(a)(2) of the Code (determined taking into account Section 856(h)(3)(A) of the Code) would be considered to Beneficially Own shares of Capital Stock in excess of the Ownership Limit by reason of the Requesting Person’s ownership of shares of Capital Stock in excess of the Ownership Limit pursuant to the exception granted under this subparagraph (b);

 

(iii)                               such Requesting Person submits to the Board of Directors information satisfactory to the Board of Directors, in its reasonable discretion, demonstrating that neither clause (2) nor clause (3) of subparagraph (a)(ii) of Section 2.1 will be violated by reason of the Requesting Person’s ownership of shares of Capital Stock in excess of the Ownership Limit pursuant to the exception granted under this subparagraph (b); and

 

(iv)                              such Requesting Person provides to the Board of Directors such representations and undertakings, if any, as the Board of Directors may, in its sole and absolute discretion, require to ensure that the conditions in clauses (i), (ii) and (iii) hereof are satisfied and will continue to be satisfied throughout the period during which such Requesting Person owns shares of Capital Stock in excess of the Ownership Limit pursuant to any exception thereto granted under this subparagraph (b), and such Requesting Person agrees that any violation of such representations and undertakings or any attempted violation thereof will result in the application of the remedies set forth in Section 2 of this Article VI with

 

10

 

respect to shares of Capital Stock held in excess of the Ownership Limit with respect to such Requesting Person (determined without regard to the exception granted such Requesting Person under this subparagraph (b)).

 

(c)          Prior to granting any exception or exemption pursuant to subparagraph (a) or (b), the Board of Directors may require a ruling from the IRS or an opinion of counsel, in either case in form and substance satisfactory to the Board of Directors, in its sole and absolute discretion as it may deem necessary or advisable in order to determine or ensure the Corporation’s status as a REIT; provided, however, that the Board of Directors shall not be obligated to require obtaining a favorable ruling or opinion in order to grant an exception hereunder.

 

(d)         Subject to Section 2.1(a)(ii), an underwriter that participates in a public offering or a private placement of shares of Capital Stock (or securities convertible into or exchangeable for shares of Capital Stock) may Beneficially Own or Constructively Own shares of Capital Stock (or securities convertible into or exchangeable for shares of Capital Stock) in excess of the Ownership Limit, but only to the extent necessary to facilitate such public offering or private placement; and provided, that the ownership of shares of Capital Stock by such underwriter would not result in the Corporation being “closely held” within the meaning of Section 856(h) of the Code, or otherwise result in the Corporation’s failing to qualify as a REIT.  In this regard, at no time may either (x) an underwriter, or (y) any Person who would Constructively Own shares of Capital Stock owned by an underwriter Constructively Own, concurrently, 10% or more of the outstanding securities of any class or series of (i) the Corporation and any tenant or lessee of the Corporation, or (ii) the Corporation and any Person that would be considered to Constructively Own or Beneficially Own 10% or more of any tenant or lessee of the Corporation.

 

(e)          The Board of Directors may only reduce the Excepted Holder Limit for an Excepted Holder: (1) with the written consent of such Excepted Holder at any time or (2) pursuant to the terms and conditions of the agreements and undertakings entered into with such Excepted Holder in connection with the establishment of the Excepted Holder Limit for that Excepted Holder.  No Excepted Holder Limit shall be reduced to a percentage that is less than the Ownership Limit.

 

Section 2.8  Increase or Decrease in Ownership Limit.  The Board of Directors may from time to time increase or decrease the Ownership Limit, subject to the limitations provided in this Section 2.8.

 

(a)                                 Any decrease may be made only prospectively as to subsequent holders (other than a decrease as a result of a retroactive change in existing law, in which case such change shall be effective immediately); and further, any decrease may be made only to ensure the Corporation’s status as a REIT.

 

(b)                                 The Ownership Limit may not be increased if, after giving effect to such increase, five Persons who are considered individuals pursuant to Section 542 of the Code, as modified by Section 856(h)(3) of the Code (taking into account all of the

 

11

 

Excepted Holders), could Beneficially Own, in the aggregate, more than 49.5% of the value of the outstanding shares of Capital Stock.

 

(c)                                  Prior to the modification of the Ownership Limit pursuant to this Section 2.8, the Board of Directors may require such opinions of counsel, affidavits, undertakings or agreements as it may deem necessary or advisable in order to determine or ensure the Corporation’s status as a REIT if the modification in the Ownership Limit were to be made.

 

Section 2.9  Legend.  Each certificate for shares of Capital Stock (or securities exercisable for or convertible into shares of Capital Stock) shall bear substantially the following legend:

 

The shares of Capital Stock represented by this certificate are subject to restrictions on Beneficial Ownership and Constructive Ownership and Transfer primarily for the purpose of the Corporation’s maintenance of its status as a real estate investment trust (a “REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”).  Except as expressly provided in the Corporation’s Charter, (i) no Person may Beneficially Own or Constructively Own shares of Common Stock of the Corporation in excess of 9.8 percent (in value or number of shares, whichever is more restrictive) of the outstanding Common Stock of the Corporation unless such Person is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (ii) with respect to any class or series of shares of Capital Stock other than Common Stock, no Person may Beneficially Own or Constructively Own more than 9.8 percent (in value or number of shares, whichever is more restrictive) of the outstanding shares of such class or series of such stock of the Corporation (collectively, (i) and (ii) are referred to herein as the “Ownership Limit”), unless such Person is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (iii) no Person may Beneficially Own or Constructively Own shares of Capital Stock that would result in the Corporation being “closely held” under Section 856(h) of the Code, would cause either the Corporation to be considered to constructively own after application of the constructive ownership rules of Section 856(d)(5) of the Code an interest in a tenant that is described in Section 856(d)(2)(B) of the Code for purposes of applying Section 856(c) of the Code or Ashford Hospitality Limited Partnership (or any successor thereto) to be considered to constructively own after application of the constructive ownership rules of Section 856(d)(5) of the Code, as modified by the rules of Section 7704(d) of the Code, an interest in a tenant that is described in Section 856(d)(2)(B) of the Code for purposes of applying Section 7704(d) of the Code, or otherwise would cause the Corporation to fail to qualify as a REIT under the Code; and (iv) no Person may Transfer shares of Capital Stock if such Transfer would result in shares of Capital Stock of the Corporation being owned by fewer than 100 Persons.  An “Excepted Holder” means a stockholder of the Corporation for whom an Excepted

 

12

 

Holder Limit is created by the Board of Directors. Any Person who Beneficially Owns or Constructively Owns or attempts to Beneficially Own or Constructively Own shares of Capital Stock which cause or will cause a Person to Beneficially Own or Constructively Own shares of Capital Stock in excess or in violation of the above limitations must immediately notify the Corporation.  If any of the restrictions on Transfer are violated, the shares of Capital Stock represented hereby will be automatically transferred to a Charitable Trustee of a Charitable Trust for the benefit (except as otherwise provided in the Charter of the Corporation) of one or more Charitable Beneficiaries.  In addition, upon the occurrence of certain events, attempted Transfers in violation of the restrictions described above may be void ab initio.  A Person who attempts to Beneficially Own or Constructively Own shares of Capital Stock in violation of the Transfer restrictions described above shall have no claim, cause of action or any recourse whatsoever against a transferor of such shares of Capital Stock.  All capitalized terms in this legend have the meanings defined in the Corporation’s charter, as the same may be amended from time to time, a copy of which, including the restrictions on Transfer, will be furnished to each holder of shares of Capital Stock of the Corporation on request and without charge.

 

Instead of the foregoing legend, the certificate may state that the Corporation will furnish a full statement about certain restrictions on transferability to a stockholder on request and without charge.

 

Section 3.                  Transfer of Shares of Capital Stock in the Corporation.

 

Section 3.1  Ownership in Trust.  Upon any purported Transfer or other event described in Section 2.1(b) that would result in a transfer of shares of Capital Stock to a Charitable Trust, such shares of Capital Stock shall be deemed to have been transferred to the Charitable Trustee as trustee of a Charitable Trust for the exclusive benefit of one or more Charitable Beneficiaries (except to the extent otherwise provided in Section 3.5).  Such transfer to the Charitable Trustee shall be deemed to be effective as of the close of business on the Business Day prior to any purported Transfer or other event that otherwise results in the transfer to the Charitable Trust pursuant to Section 2.1(b).  The Charitable Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with the Corporation and any Prohibited Owner.  Each Charitable Beneficiary shall be designated by the Corporation as provided in Section 3.7.

 

Section 3.2  Status of Shares of Capital Stock Held by the Charitable Trustee.  Shares of Capital Stock held by the Charitable Trustee shall be issued and outstanding shares of Capital Stock of the Corporation.  The Prohibited Owner shall have no rights in the shares of Capital Stock held by the Charitable Trustee.  The Prohibited Owner shall not benefit economically from ownership of any shares of Capital Stock held in trust by the Charitable Trustee (except to the extent otherwise provided in Section 3.5), shall have no rights to dividends or other distributions, and shall not possess any rights to vote or other rights attributable to the shares of Capital Stock held in the Charitable Trust.  The

 

13

 

Prohibited Owner shall have no claim, cause of action or other recourse whatsoever against the purported transferor of such shares of Capital Stock.

 

Section 3.3  Dividend and Voting Rights.  The Charitable Trustee shall have all voting rights and rights to dividends or other distributions with respect to shares of Capital Stock held in the Charitable Trust, which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary (except to the extent otherwise provided in Section 3.5).  Any dividend or other distribution paid prior to the discovery by the Corporation that shares of Capital Stock have been transferred to the Charitable Trustee shall be paid with respect to such shares of Capital Stock to the Charitable Trustee upon demand and any dividend or other distribution authorized but unpaid shall be paid when due to the Charitable Trustee.  Any dividends or distributions so paid over to the Charitable Trustee shall be held in trust for the Charitable Beneficiary.  The Prohibited Owner shall have no voting rights with respect to shares of Capital Stock held in the Charitable Trust and, subject to Maryland law, effective as of the date that shares of Capital Stock have been transferred to the Charitable Trustee, the Charitable Trustee shall have the authority (at the Charitable Trustee’s sole discretion) (i) to rescind as void any vote cast by a Prohibited Owner prior to the discovery by the Corporation that shares of Capital Stock have been transferred to the Charitable Trustee and (ii) to recast such vote in accordance with the desires of the Charitable Trustee acting for the benefit of the Charitable Beneficiary; provided, however, that if the Corporation has already taken irreversible action, then the Charitable Trustee shall not have the power to rescind and recast such vote.  Notwithstanding the provisions of this Article VI, until the Corporation has received notification that shares of Capital Stock have been transferred into a Charitable Trust, the Corporation shall be entitled to rely on its share transfer and other shareholder records for purposes of preparing lists of stockholders entitled to vote at meetings, determining the validity and authority of proxies, and otherwise conducting votes of stockholders.

 

Section 3.4  Rights Upon Liquidation.  Upon any voluntary or involuntary liquidation, dissolution or winding up of or any distribution of the assets of the Corporation, the Charitable Trustee shall be entitled to receive, ratably with each other holder of shares of Capital Stock of the class or series of shares of Capital Stock that is held in the Charitable Trust, that portion of the assets of the Corporation available for distribution to the holders of such class or series (determined based upon the ratio that the number of shares of such class or series of shares of Capital Stock held by the Charitable Trustee bears to the total number of shares of Capital Stock of such class or series of shares of Capital Stock then outstanding).  The Charitable Trustee shall distribute any such assets received in respect of the shares of Capital Stock held in the Charitable Trust in any liquidation, dissolution or winding up or distribution of the assets of the Corporation, in accordance with Section 3.5.

 

Section 3.5  Sale of Shares by Charitable Trustee.

 

(a)         Within 20 days of receiving notice from the Corporation that shares of Capital Stock have been transferred to the Charitable Trust, the Charitable Trustee of the Charitable Trust shall sell the shares of Capital Stock held in the Charitable Trust

 

14

 

(together with the right to receive dividends or other distributions with respect to such shares of Capital Stock as to any shares of Capital Stock transferred to the Charitable Trustee as a result of the operation of Section 2.1(b)) to a person, designated by the Charitable Trustee, whose ownership of the shares of Capital Stock will not violate the ownership limitations set forth in Section 2.1(a).  Upon such sale, the interest of the Charitable Beneficiary in the shares of Capital Stock sold shall terminate and the Charitable Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and to the Charitable Beneficiary as provided in this Section 3.5.

 

(b)         A Prohibited Owner shall receive the lesser of (1) the net price paid by the Prohibited Owner for the shares of Capital Stock or, if the Prohibited Owner did not give value for the shares of Capital Stock in connection with the event causing the shares of Capital Stock to be held in the Charitable Trust (e.g., in the case of a gift, devise or other such transaction), the Market Price of the shares of Capital Stock on the day of the event causing the shares of Capital Stock to be held in the Charitable Trust, and (2) the net sales proceeds per share received by the Charitable Trustee from the sale or other disposition of the shares of Capital Stock held in the Charitable Trust.  Any net sales proceeds in excess of the amount payable to the Prohibited Owner shall be immediately paid to the Charitable Beneficiary.  If, prior to the discovery by the Corporation that shares of Capital Stock have been transferred to the Charitable Trustee, such shares of Capital Stock are sold by a Prohibited Owner, then (i) such shares of Capital Stock shall be deemed to have been sold on behalf of the Charitable Trust and (ii) to the extent that the Prohibited Owner received an amount for such shares of Capital Stock that exceeds the amount that such Prohibited Owner was entitled to receive pursuant to this Section 3.5, such excess shall be paid to the Charitable Trustee upon demand.

 

Section 3.6  Purchase Right in Shares of Capital Stock Transferred to the Charitable Trustee.  Shares of Capital Stock transferred to the Charitable Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Charitable Trust (or, in the case of a devise, gift or other such transaction, the Market Price of the shares of Capital Stock on the day of the event causing the shares of Capital Stock to be held in the Charitable Trust) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer.  The Corporation shall have the right to accept such offer until the Charitable Trustee has sold the shares of Capital Stock held in the Charitable Trust pursuant to Section 3.5.  Upon such a sale to the Corporation, the interest of the Charitable Beneficiary in the shares of Capital Stock sold shall terminate and the Charitable Trustee shall distribute the net proceeds of the sale to the Prohibited Owner.

 

Section 3.7  Designation of Charitable Beneficiaries.  By written notice to the Charitable Trustee, the Corporation shall designate from time to time one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Charitable Trust such that (i) shares of Capital Stock held in the Charitable Trust would not violate the restrictions set forth in Section 2.1(a) in the hands of such Charitable Beneficiary and (ii) each such organization must be described in Sections 501(c)(3), 170(b)(1)(A) or

 

15

 

170(c)(2) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.

 

Section 4.                  Restrictions on Ownership and Transfer of Shares of Capital Stock by Benefit Plans.

 

Section 4.1  Ownership Limitations.  Notwithstanding any other provisions herein, if and to the extent that any class or series of shares of Capital Stock do not constitute Publicly Offered Securities, then Benefit Plan Investors may not, on any date, hold, individually or in the aggregate, 25 percent or more of the value of such class or series of shares of Capital Stock.  For purposes of determining whether Benefit Plan Investors hold, individually or in the aggregate, 25 percent or more of the value of such class or series of shares of Capital Stock, the value of shares of Capital Stock of such class held by any director or officer of the Corporation, or any other Person who has discretionary authority or control with respect to the assets of the Corporation, or any Person who provides investment advice for a fee to the Corporation in connection with its assets, or an “affiliate” of such person, as defined in 29 C.F.R. Section 2510.3-101(f)(3), or any successor regulation thereto, shall be disregarded.

 

Section 4.2  Remedies for Violations by Benefit Plan Investors.  If the Board of Directors or any duly authorized committee thereof shall at any time determine in good faith that (i) a Transfer or other event has taken place that results in a violation of Section 4.1 or will otherwise result in the underlying assets and property of the Corporation becoming assets of any ERISA Investor or (ii) that a Person intends to acquire or has attempted to acquire or hold shares of Capital Stock in a manner that will result in a violation of Section 4.1 or will otherwise result in the underlying assets and property of the Corporation becoming assets of any ERISA Investor, the Board of Directors or a committee thereof shall take such action as it deems advisable to mitigate, prevent or cure the consequences that might result to the Corporation from such Transfer or other event, including without limitation, refusing to give effect to or preventing such Transfer or event through redemption of such shares of Capital Stock or refusal to give effect to the Transfer or event on the books of the Corporation or instituting proceedings to enjoin such Transfer or other event.

 

Section 4.3  Information on Benefit Plan Status.  Any Person who acquires or attempts or intends to acquire or hold shares of Capital Stock shall provide to the Corporation such information as the Corporation may request in order to determine whether such acquisition or holding has resulted or will result in a violation of Section 4.1 or otherwise has resulted or will result in the underlying assets and property of the Corporation becoming assets of any ERISA Investor, including the name and address of any Person for whom a nominee holds shares of Capital Stock and whether the underlying assets of such Person include assets of any Benefit Plan Investor.

 

Section 5.                  NYSE Transactions.  Nothing in this Article VI shall preclude the settlement of any transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system.  The fact that the settlement of any transaction takes place shall not negate the effect of any other provision of this Article VI and

 

16

 

any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Article VI.

 

Section 6.                  Enforcement.  The Corporation is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of this Article VI.

 

Section 7.                  Non-Waiver.  No delay or failure on the part of the Corporation or the Board of Directors in exercising any right hereunder shall operate as a waiver of any right of the Corporation or the Board of Directors, as the case may be, except to the extent specifically waived in writing.

 

Section 8.                  Enforceability.  If any of the restrictions on transfer of shares of Capital Stock contained in this Article VI are determined to be void, invalid or unenforceable by any court of competent jurisdiction, then the Prohibited Owner may be deemed, at the option of the Corporation, to have acted as an agent of the Corporation in acquiring such shares and to hold such shares on behalf of the Corporation.

 

Section 9.                  Amendments.  Notwithstanding any other provisions of the MGCL or the Charter of the Corporation to the contrary, the affirmative vote of stockholders holding at least two-thirds of all of the votes entitled to be cast thereon shall be required to amend, alter, change, repeal, or adopt any provisions inconsistent with, the provisions of this Article VI.

 

ARTICLE VII
 DIRECTORS

 

Section 1.                  General.  All powers of the Corporation shall be exercised by or under the direction of the Board of Directors except as otherwise provided herein or required by law.

 

Section 2.                  Election of Directors.  Directors of the Corporation shall be elected by a plurality of the votes cast at any meeting of stockholders at which directors are to be elected and at which a quorum is present.  Election of directors need not be by written ballot.

 

Section 3.                  Number and Terms of Directors.  The number of directors of the Corporation shall initially be fixed at two (2), which number may be increased or decreased pursuant to the Bylaws, but shall never be less than the minimum number required by the MGCL.  The directors shall be elected at the annual meeting of the stockholders and each director shall be elected to serve for a term of one year and until his successor shall be elected and shall qualify or until his earlier resignation or removal.  The names of the directors who shall serve until the first annual meeting of stockholders or until their successors are duly elected and qualify are:

 

Archie Bennett, Jr., Chairman of the Board
 Montgomery J. Bennett

 

Section 4.                  Nominations of Director Candidates.  Advance notice of nominations for the election of directors, other than by the Board of Directors or a committee thereof, shall be given in the manner provided in the Bylaws.

 

17

 

Section 5.      Committees.  Subject to the MGCL, the directors may establish such committees as they deem appropriate, in their discretion.

 

Section 6.      Vacancies.  Subject to the provisions of the MGCL, any vacancy occurring in the Board of Directors, including any vacancy created by reason of any increase in the number of directors or resulting from death, resignation, disqualification, removal or other cause, may be filled by the affirmative vote of a majority of the remaining directors then in office, even though there may be less than a quorum of the Board of Directors.  Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the new directorship so created or of the directorship with respect to which such vacancy occurred, as the case may be, and until such director’s successor shall have been elected and qualified.  No decrease in the number of directors shall shorten the term of any incumbent director.  In the event of vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board of Directors until the vacancy is filled.

 

Section 7.      Resignation. Any director may resign by written notice to the Board of Directors, effective upon execution and delivery to the Corporation of such written notice or upon any future date specified in the notice.

 

Section 8.      Voting.  At all meetings of the Board of Directors or of any committee of the Board of Directors, except as otherwise provided for by law, this Charter or the Bylaws, any action required or permitted to be taken by the Board of Directors shall be by the affirmative vote of a majority of the directors then present for quorum purposes; provided, however, that a majority of the disinterested directors shall approve any transaction or agreement involving the Corporation, its wholly-owned subsidiaries or Ashford Hospitality Limited Partnership and a director or officer of the Corporation or an Affiliate or Associate of any director or officer of the Corporation.  The proviso in the preceding sentence, however, shall not apply to the fixing by the Board of Directors of reasonable compensation for a director.

 

Section 9.      Determinations by the Board of Directors.  The determination as to any of the following matters, made in good faith by or pursuant to the direction of the Board of Directors consistent with the Charter and in the absence of actual receipt of an improper benefit in money, property or services or active and deliberate dishonesty established by a court, shall be final and conclusive and shall be binding upon the Corporation and every holder of shares of its stock:  the amount of the net income of the Corporation for any period and the amount of assets at any time legally available for the payment of dividends, redemption of its stock or the payment of other distributions on its stock; the amount of paid-in surplus, net assets, other surplus, annual or other net profit, net assets in excess of capital, undivided profits or excess of profits over losses on sales of assets; the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any obligation or liability for which such reserves or charges shall have been created shall have been paid or discharged); the fair value, or any sale, bid or asked price to be applied in determining the fair value, of any asset owned or held by the Corporation; and any matters relating to the acquisition, holding and disposition of any assets by the Corporation.

 

Section 10.    Business Combination Statute.  Notwithstanding any other provision of these Articles of Amendment and Restatement or any contrary provision of law, the Maryland

 

18

 

Business Combination Statute, found in Title 3, subtitle 6 of the MGCL, as amended from time to time, or any successor statute thereto, shall not apply to any “business combination” (as defined in Section 3-601(e) of the MGCL, as amended from time to time, or any successor statute thereto) of the Corporation and any Person.

 

Section 11.    Control Share Acquisition Statute.  Notwithstanding any other provision of these Articles of Amendment and Restatement or any contrary provision of law, the Maryland Control Share Acquisition Statute, found in Title 3, subtitle 7 of the MGCL, as amended from time to time, or any successor statute thereto shall not apply to any acquisition of securities of the Corporation by any Person.

 

Section 12.    Unsolicited Takeovers.  Notwithstanding any other provision of these Articles of Amendment and Restatement or any contrary provision of law, Title 3, subtitle 8 of the MGCL, as amended from time to time, or any successor statute thereto, shall not apply to the Corporation.

 

ARTICLE VIII
 LIMITATION OF LIABILITY

 

Section 1.      Limitation of Director Liability.  To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of directors and officers of a corporation, no director or officer of the Corporation shall be liable to the Corporation or its stockholders for money damages.  Neither the amendment nor repeal of this Article VIII, nor the adoption or amendment of any other provision of this Charter or the Bylaws inconsistent with this Article VIII shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.

 

ARTICLE IX
 INDEMNIFICATION

 

The Corporation (a) shall indemnify its directors to the fullest extent provided by the general laws of the State of Maryland now or hereafter in force, including the advance of expenses under the procedures provided by such laws and (b) may indemnify its officers to the extent it shall deem appropriate and as shall be authorized by the Board of Directors, consistent with law.  The foregoing shall not limit the authority of the Corporation to indemnify other employees and agents consistent with law.

 

ARTICLE X
 AMENDMENT OF BYLAWS

 

The Bylaws of the Corporation may be altered, amended or repealed, and new bylaws adopted, by the vote of a majority of the entire Board of Directors or by a vote of a majority of the voting power of the common stock of the Corporation.

 

19

 

ARTICLE XI
 AMENDMENT OF ARTICLES OF INCORPORATION

 

The Corporation reserves the right from time to time to make any amendment of this Charter, now or hereafter authorized by law, including any amendment which alters the contract rights, as expressly set forth in the Charter, of any of its outstanding stock.

 

ARTICLE XII
 DEFINITIONS

 

Except as otherwise defined in Article VI, for purposes of this Charter, the following terms shall have the following meanings:

 

“Affiliate” and “Associate” shall have the respective meanings set forth in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, or any subsequent provisions replacing such Act, rules and regulations.

 

“Business Day” shall mean each day, other than a Saturday or Sunday, which is not a day on which banking institutions in New York, New York are authorized or required by law, regulation or executive order to close.

 

“Group Acting in Concert” shall mean Persons seeking to combine or pool their voting or other interests in the securities of the Corporation for a common purpose, pursuant to any contract, understanding, relationship, agreement or other arrangement, whether written, oral or otherwise, or any group of Persons as described under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (or any subsequent provisions replacing such Act or the rules and regulations promulgated thereunder).  When Persons act together for any such purpose, their group is deemed to have acquired their stock as a “Group Acting in Concert”.

 

“Person” shall mean an individual or Group Acting in Concert, a corporation, a partnership, an association, a joint stock company, a trust, a business trust, a government or political subdivision, any unincorporated organization, or any other association or entity.

 

THIRD:  The foregoing Articles of Amendment and Restatement of the Charter, and the amendment set forth therein, were duly advised by the Board of Directors, and approved by the stockholders of the Corporation as required by law.

 

FOURTH:  The current address of the principal office of the Corporation is as set forth in Article IV of the foregoing amendment and restatement of the Charter.

 

FIFTH:  The name and address of the Corporation’s current resident agent is as set forth in Article IV of the foregoing amendment and restatement of the Charter.

 

SIXTH:  The number of directors of the Corporation and the names of those currently in office are as set forth in Article VII of the foregoing amendment and restatement of the Charter.  The undersigned President acknowledges these Articles of Amendment and Restatement to be the corporate act of the Corporation and as to all matters or facts required to be verified under oath, the undersigned President acknowledges that, to the best of his knowledge, information and

 

20

 

belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

 

21

 

IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment and Restatement to be signed in its name and on its behalf by its President and attested to by its Secretary on this 23rd day of July, 2003.

 

	
 
    	
ASHFORD   HOSPITALITY TRUST, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Montgomery J. Bennett
    
	
 
    	
 
    	
Montgomery   J. Bennett
    
	
 
    	
 
    	
President   and Chief Executive Officer
    

 

 

ATTEST:

 

	
By:
    	
/s/   David A. Brooks
    	
 
    
	
 
    	
David   A. Brooks, Secretary
    	
 
    

 

 

CERTIFICATE OF CORRECTION

 

TO CORRECT AN ERROR

 

IN

 

ASHFORD HOSPITALITY TRUST, INC.

ARTICLES OF AMENDMENT AND RESTATEMENT

 

Pursuant to the provisions of Section 1-207 of Corporations and Associations Articles, Annotated Code of Maryland, the undersigned execute(s) the following Certificate of Correction.

 

1.             The name of each party to the document being corrected is Montgomery J. Bennett and David A. Brooks.

 

2.             That Articles of Amendment and Restatement were filed with the Department of Assessments and Taxation of the State of Maryland on July 28, 2003 and that said document requires correction as permitted under the provisions of Section 1-207 of the Corporations and Associations Article of Annotated Code of Maryland.

 

3.             The error or defect in said document to be corrected is as follows:

 

In Article V, the par value per share for Common Stock and Preferred Stock was stated incorrectly as $0.001 per share

 

4.             The foregoing inaccuracy or defect in the document is corrected to read as follows:

 

The par value per share for Common Stock and Preferred Stock in Article V should be $0.01 per share

 

 

IN WITNESS WHEREOF, the undersigned corporation has caused this Certificate of Correction to be signed in its corporate name on its behalf by the President and Chief Executive Officer and attested by its Secretary on this 4th day of August 2003.

 

	
 
    	
ASHFORD   HOSPITALITY TRUST, INC.
    
	
 
    	
Name   of Corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Montgomery J. Bennett
    
	
 
    	
 
    	
Montgomery   J. Bennett
    
	
 
    	
 
    	
President   and Chief Executive Officer
    

 

 

ATTEST:

 

	
By:
    	
/s/   David A. Brooks
    	
 
    
	
 
    	
David   A. Brooks, Secretary
    	
 
    

 

 

AMENDMENT NUMBER ONE
 TO
 ARTICLES OF AMENDMENT AND RESTATEMENT

 

ASHFORD HOSPITALITY TRUST, INC. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Maryland, DOES HEREBY CERTIFY to the State Department of Assessments and Taxation of Maryland that:

 

FIRST: Article VII, Section 2 of the Articles of Amendment and Restatement of the Corporation is amended to read in its entirety as follows (the “Amendment”):

 

Section 2.  ELECTION OF DIRECTORS.  A nominee for director shall be elected to the Board of Directors if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election (with “abstentions” and “broker nonvotes” not counted as a vote cast either “for” or “against” that director’s election); provided however, that in the case of a contested election, directors shall be elected by a plurality of the votes cast (in which case stockholders shall not be permitted to cast votes against the election of directors). In the case of a plurality vote, each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. Cumulative voting is not permitted. For purposes of this article, a “contested election” shall mean any election of directors with respect to which (i) the Corporation receives notice that a stockholder has nominated an individual for election as a director in compliance with the requirements set forth in these articles and (ii) such nomination has not been withdrawn by such stockholder on or prior to the date the Corporation first mails its notice of meeting for such meeting to the stockholders, and, as a result of which, there are more nominees than directorships.

 

SECOND: The foregoing Amendment has been advised by the Board of Directors and approved by the stockholders of the Corporation.

 

[Remainder of Page Intentionally Left Blank]

 

 

IN WITNESS WHEREOF, on this 13th day of May, 2015, the Corporation has caused this Amendment to the Articles of Amendment and Restatement of the Corporation to be executed and acknowledged in its name and on its behalf by its Chief Financial Officer and attested to by its Secretary; and the Chief Financial Officer acknowledges that these Articles of Amendment of Articles of Incorporation are the act of the Corporation, and the Chief Financial Officer further acknowledges that, as to all matters or facts set forth herein that are required to be verified under oath, such matters and facts are true in all material respects to the best of his knowledge, information and belief, and that this statement is made under the penalties for perjury.

 

	
 
    	
By:
    	
/s/   Deric S. Eubanks
    
	
 
    	
 
    	
Deric   S. Eubanks, 
    
	
 
    	
 
    	
Chief   Financial Officer
    

 

 

ATTEST:

 

	
By:
    	
/s/   David A. Brooks
    	
 
    
	
 
    	
David   A. Brooks, SecretaryExhibit 10.2

 

ACKNOWLEDGEMENT OF FORM MASTER LICENSE AGREEMENT

On this 8th day of February, 2015, SH FRANCHISING & LICENSING, LLC, a New York limited liability company, and Southern Hospitality Licensee, LLC a Colorado limited liability company, acknowledge and agree that the following form Master License Agreement, which is attached hereto as Attachment 1, is the approved form of the parties. The parties further agree that they will not alter such form Master License Agreement without the prior written consent of the other party.

COMPANY:

SH FRANCHISING & LICENSING, LLC

By:  /s/ Nelson Braff    

Name:  Nelson Braff

Title: Member  

LICENSEE:

Southern Hospitality Licensee, LLC

By:  /s/ Mitchell Roth     

Name:  Mitchell Roth

Title:  President

ATTACHMENT 1

MASTER LICENSE AGREEMENT

SOUTHERN HOSPITALITY BBQ MASTER LICENSE AGREEMENT

(LIMITED SERVICE MODEL)

Address:          N/A              

Site#:          N/A              

SOUTHERN HOSPITALITY BBQ MASTER LICENSE AGREEMENT

TABLE OF CONTENTS

 

	
Section

	
Page

	 	
	
1.

	
GRANT OF LICENSE

	
2

	
2.

	
TERM AND RENEWAL

	
3

	
3.

	
LICENSE FEE AND ROYALTIES

	
4

	
4.

	
SITE ACCEPTANCE

	
5

	
5.

	
CONSTRUCTION OF RESTAURANT

	
5

	
6.

	
TIMING OF OPENING

	
6

	
7.

	
TRAINING

	
6

	
8.

	
BRANDING AND PUBLIC RELATIONS ASSISTANCE

	
6

	
9.

	
OPERATIONS AND MAINTENANCE OF RESTAURANT

	
7

	
10.

	
COMPUTER AND POINT OF SALE SYSTEMS

	
7

	
11.

	
ING27REDIENTS, MATERIALS, SUPPLIES AND SUPPLIERS

	
7

	
12.

	
ADVERTISING

	
10

	
13.

	
ACCOUNTING AND RECORDS SYSTEMS

	
10

	
14.

	
PERSONNEL OF THE LICENSED RESTAURANT

	
11

	
15.

	
COMPLIANCE WITH LAWS AND HEALTH STANDARDS

	
11

	
16.

	
INSPECTIONS OF THE RESTAURANT

	
12

	
17.

	
OWNERSHIP AND USE OF MARKS

	
12

	
18.

	
CASUALTY LOSSES

	
14

	
19.

	
INSURANCE

	
14

	
20.

	
CONFIDENTIAL INFORMATION

	
15

	
21.

	
TRANSFER OF INTEREST

	
15

	
22.

	
COMPANY’S RIGHT OF FIRST REFUSAL

	
18

	
23.

	
DEFAULT AND TERMINATION

	
19

	
24.

	
OBLIGATIONS UPON TERMINATION OR EXPIRATION

	
21

	
25.

	
COVENANTS AND RESTRICTIONS ON OTHER BUSINESS INTERESTS

	
23

	
26.

	
INDEPENDENT CONTRACTOR AND INDEMNIFICATION

	
23

	
27.

	
MISCELLANEOUS PROVISIONS

	
24

	
28.

	
ACKNOWLEDGMENTS

	
29

	
 

	
 

	
 

 

i

EXHIBITS:

 

	
 

	
Exhibit A

	
Location

	
 

	
Exhibit B

	
Currently Authorized Trademarks and Service Marks

	
 

	
Exhibit C

	
Company’s Proprietary Products

	
 

	
Exhibit D

	
Licensee’s Acknowledgment

	
 

	
Exhibit E

	
Mutual Confidentiality Agreement

 

 

 

ii

SOUTHERN HOSPITALITY BBQ

MASTER LICENSE AGREEMENT

(Limited Service Model)

THIS SOUTHERN HOSPITALITY BBQ MASTER LICENSE AGREEMENT (“Agreement”) is made between SH FRANCHISING & LICENSING, LLC, a New York limited liability company (hereinafter, “Company”), and Southern Hospitality Licensee, LLC, a Colorado limited liability company (hereinafter, “Licensee”). The Agreement is dated February 8, 2015 (the “Effective Date”).

RECITALS:

WHEREAS, Company and Licensee have and/or intend to expend significant time, effort and money to develop a distinctive system relating to the establishment and operation of a limited service restaurant model, featuring a specialized menu of barbecued meats, sandwiches, sides, salads and desserts, as well as other food and beverage items (hereinafter referred to as “System”); and

WHEREAS, the System expressly includes recipes and menu items, operations manuals, design plans, business plans, customer and supplier lists, equipment specifications, and cooking methods; and

WHEREAS, Company owns or has the right to use or sublicense or promote certain trade names, service marks, trademarks, domain names, celebrity affiliations, logos, emblems, and indicia of origin, including but not limited to, the mark “SOUTHERN HOSPITALITY” and such other trade names, service marks, trademarks, logos and indicia of origin that may be designated by Company in the future (hereinafter referred to as “Marks”); and

WHEREAS, the definition of “System” expressly excludes any right, title or interest in the Marks except for the limited license granted pursuant to this Agreement; and

WHEREAS, Company continues to develop, use and control the use of such Marks in order to identify for the public the source of services and products marketed under the Marks; and

 

1

WHEREAS, Licensee desires to enter into the business of operating up to five (5) restaurants (each a “Restaurant”) under the System and to obtain a license from Company to use the Marks in connection therewith; and

WHEREAS, Licensee understands and acknowledges the importance of maintaining Company’s high standards of quality, cleanliness, appearance and service and the necessity of operating the business licensed under this Agreement in conformity with Company’s standards and specifications and protecting any proprietary information provided to Licensee under this Agreement; and

WHEREAS, Licensee acknowledges that Licensee has conducted an independent investigation of the business contemplated by this Agreement and understands and acknowledges that the nature of the business conducted by Company may evolve and change over time, that an investment in a Restaurant involves business risks and that the success of the business is largely dependent upon the business abilities and efforts of Licensee; and

WHEREAS, Licensee acknowledges that Licensee has not received or relied upon any representation, warranty, or guaranty, express or implied, as to the income, sales volume, earnings, expenses, revenues, profits or success of Southern Hospitality restaurants or the business contemplated by this Agreement;

NOW, THEREFORE, the parties, in consideration of the undertakings and commitments set forth in this Agreement, agree as follows:

1.           GRANT OF LICENSE

1.1  Company grants to Licensee, upon the terms and conditions contained in this Agreement, the right to use and do business under the System and the Marks at locations (each a “Location”) mutually agreed to between Company and Licensee in the metropolitan areas of Denver, Colorado and Colorado Springs, Colorado (the “Territory”). This Agreement shall be executed for each Restaurant that Licensee develops in the Territory. The license permits Licensee to operate a Restaurant solely at the Location approved in advance in writing by Company, and to use the Marks solely in connection with that Restaurant.

1.2  This Agreement confers no sublicensing rights upon Licensee or the right to develop or operate a Restaurant under the Marks anywhere in the world except within the Territory.

 

2

1.3  This Agreement requires licensees to open a minimum of three (3) Restaurants under the Marks in the Territory, but in a number not to exceed five (5) Restaurants in the Territory on or before eighteen (18) months from the Effective Date. Company is not obligated to grant Licensee the right to open any Restaurants under the Marks in the Territory or elsewhere beyond the five (5) Restaurants specified in this paragraph. Provided, however, if Company refuses to permit Licensee to open more than five (5) Restaurants under the Marks after written request from Licensee, and Company utilizes the System, which is co‐owned by Company and Licensee as further set forth in Section 1.4 below, Company will pay Licensee a fee of $2,500 for each restaurant where the System is used up to a maximum of $250,000 (after which no additional compensation will be due to Licensee).

1.4  Co-Ownership of the System. The System shall be considered jointly-owned and developed by Company and Licensee, and each of Company and Licensee shall both have the right, without compensation to or approval from the other (except as provided in Section 1.3 above), to independently use, license, sublicense and convey each party’s ownership interest in the System.

1.5  Licensee acknowledges that this license is non‐exclusive, as described below:

1.5.1  At any time, Company may operate, or license others to operate, Restaurants under the Marks outside of the Territory.

1.5.2  After this Agreement expires or is terminated, Company may operate, or license others to operate, Restaurants under the Marks within the Territory.

1.6  Licensee acknowledges and agrees that Company may modify and update the Marks, in its sole discretion. Licensee acknowledges and agrees that Company may enter into co-branding relationships, marketing agreements, and other strategic alliances with other companies or entities, all of which may result in changes to the Marks. As the Marks change, Licensee may be required to purchase new equipment and/or signage, and make other investments in the Licensed Business. Licensee understands and agrees that it must develop and operate the Restaurant in accordance with the System and Marks, as they are modified, updated, improved and changed from time to time.

1.7  Termination or expiration of this Agreement at a particular Location constitutes a termination or expiration of the license and any and all licenses granted under this Agreement at such Location.

 

3

2.           TERM AND RENEWAL

2.1  Except as otherwise provided herein, the Term of the License or the Marks for each Restaurant expires at the earlier of fifteen (15) years from the effective date for each Restaurant as shown in Exhibit A, or upon expiration or termination of Licensee’s right to remain in possession of, or operate, a Restaurant at the Location (“Initial Term”).

2.2  Company grants to Licensee an option to enter into a new license agreement for the Marks to each Restaurant for one (1) additional consecutive term of five (5) years or a shorter term that is coterminous with the term of the lease for the Location, subject to the following conditions:

2.2.1  Not less than twelve (12) months or more than eighteen (18) months before the end of the Initial Term, Licensee must have given Company written notice of Licensee’s election to exercise the option. If Licensee does not provide timely written notice of its election to exercise the option, Licensee will be deemed to have waived the option.

2.2.2  Licensee must sign Company’s then‐current form of license agreement, which will supersede this Agreement in all respects. The terms of that license agreement may differ from the terms of this Agreement. Excluded from differences shall be remuneration due to Company by Licensee, which is to be limited to two and one half percent of gross sales, subject to Section 3.2. Further fees such as, but not limited to, marketing, advertising or module fees shall be excluded from future agreements.

2.2.3  Licensee must confirm to Company that Licensee has the right to remain in possession of the Location for the entire additional term of the license.

2.2.4  Licensee must complete such renovation, modernization and improvement of the Restaurant premises and fixtures, furniture and equipment as Company may reasonably require. Such work may include, without limitation, replacement or addition of signs, equipment, furnishings, fixtures, finishes and décor items, and redesign of the layout of the Restaurant, to reflect the then‐current standards and image of the Southern Hospitality fast casual concept. The work must be substantially completed before the new license agreement is signed.

 

4

2.2.5  Licensee must not be in default beyond the cure period under any provision of this Agreement, any amendment or successor to this Agreement, or any other agreement between Licensee and Company.

2.2.6  Licensee must have timely met all monetary obligations to Company and its Affiliates. The term “Affiliate” means any entity that owns, is owned by, or is under common ownership with, the entity being referenced.

2.2.7  Licensee must not have received a notice of default more than three (3) times during the Initial Term; however, regardless of the number of prior notices of default, Company will not be obligated to grant a new license if, in its opinion, Licensee has not substantially complied with all of the terms and conditions of this Agreement or any other agreement between Licensee and Company.

2.2.8  The parties agree that the renewal of this Agreement indicates that that each party has substantially fulfilled their respective obligations during the Initial Term.

2.3  If Company chooses not to renew the license, Company will provide Licensee written notice stating the reasons for such refusal, no later than ninety (90) days before the expiration of the Initial Term of the license.

3.          LICENSE FEE AND ROYALTIES

3.1  Licensee shall pay Company an initial license fee of $0 for each of the first five (5) Restaurants opened pursuant to this Agreement.

3.2  During the term of this Agreement, Licensee will owe to Company a continuing monthly royalty fee equal to $2,500 or two and one half percent (2.5%) of Gross Sales from a Restaurant, whichever is greater (the “Royalty”). The Royalty will be payable to Company no later than the tenth (10th) day of a month based on Gross Sales from the prior month. Licensee will pay the Royalty in the form and manner directed by Company from time to time. The base minimum monthly royalty shall be subject to an upward adjust of 3% during each year of the Term or Renewal Term, as the case may be.

3.3  Any payment not actually received by Company on or before its due date will be deemed overdue. If any payment is overdue, Licensee must pay Company, in addition to the overdue amount, interest on such amount from the date it was due until paid, at the rate of eighteen percent (18%) per annum, or the maximum rate permitted by law, whichever is less. Company will be entitled to such interest in addition to any other remedies it may have.

 

5

3.4  “Gross Sales” includes all revenue from the sale of all food, beverage and products, and all other income of every kind and nature related to the Restaurant, including proceeds from business interruption insurance, and revenue from off-site events, whether for cash or credit and, in the case of credit, regardless of collection. “Gross Sales” does not include any sales taxes or other taxes collected from customers by Licensee for transmittal to the appropriate taxing authority or customer refunds.

4.          SITE ACCEPTANCE

Any proposed site in the Territory is subject to the mutual agreement of Company and Licensee. If a site for the Restaurant has not been agreed upon by the parties by the time this Agreement is signed, a site must be selected in accordance with the following provisions. Upon acceptance by Company, the site will be described in Exhibit A to this Agreement, and become the Location.

4.1  Before signing a lease for the Restaurant, Licensee must obtain Company’s acceptance of the site. No site will be deemed accepted unless it has been expressly accepted in writing by Company. The acceptance or disapproval of any site submitted by Licensee will be at the sole discretion of Company.

4.2  Neither Company’s examination or acceptance of a site, nor any information communicated to Licensee regarding the site, constitute a representation, guaranty or warranty, express or implied, of the successful operation of any restaurant at such location.

5.          CONSTRUCTION OF RESTAURANT

5.1  In the course of designing the Restaurant, Licensee must comply with all of the following requirements:

5.1.1  Licensee must employ a qualified, licensed architect and/or engineer.

5.1.2  Because the design of the Restaurant is crucial to the success of the Restaurant, Licensee must adhere to all design standards for the Restaurant as they change from time to time. Licensee shall only use trade dress, furniture, fixtures and equipment as preapproved by Company and specified in writing. Company recommends, but does not require Licensee to engage the services of Roy Nachum for design. If Licensee elects not to engage Roy Nachum for design services, Licensee and Company, collectively, shall pay the sum of $4,500 for each Restaurant in which he is not engaged for services with each party contributing 50% of the fee.

 

6

5.1.3  Licensee must obtain or prepare a schematic layout of the Restaurant site, which is subject to approval by Company. Licensee, at Licensee’s own expense, shall hire an architect or other independent contractor to prepare one. Licensee understands and agrees that Licensee bears sole responsibility for verifying the critical dimensions. Company has no liability for any consequences that may arise from any inaccuracy in the dimensions provided by Licensee or Licensee’s architect.

5.1.4  Licensee must provide to Company a schedule setting forth in detail the expected date on which Licensee will: (a) deliver the final construction plans for the Restaurant; (b) receive all necessary building permits; and (c) complete construction of the Restaurant.

5.1.5  Licensee’s architect and engineer must prepare construction plans for the site improvements based upon the schematic layout.

5.1.6  Licensee must submit the construction plans, including all engineering plans, to Company for written approval. Company may withhold approval of any construction plans in its sole discretion. Once approved by Company, such final plans must not thereafter be changed or modified without the prior written permission of Company. Company’s examination and approval of plans, or any information communicated to Licensee regarding the plans, does not constitute a representation, guaranty or warranty, express or implied, of the successful construction, operation or profitability of any restaurant. Such examination, approval and information indicate only that Company believes that the plans meet Company’s minimum criteria as they existed at the time of the evaluation.

5.1.7  Licensee must obtain all zoning classifications and clearances that may be required by state or local laws, ordinances or regulations, or that may be necessary or advisable due to any restrictive covenants relating to Licensee’s location.

5.2   Before beginning any construction of the Restaurant, Licensee must comply with all of the following requirements:

7

5.2.1  Licensee must engage a qualified, licensed general contractor to construct the Restaurant and to complete all site improvements.

5.2.2  Licensee must obtain the insurance required under Section 19 of the License Agreement, and maintain that insurance during the entire period of construction.

5.2.3  Licensee must obtain all permits and certifications required for the lawful construction of the Restaurant and, upon the request of Company, must certify in writing that all such permits and certifications have been obtained, or submit copies of such permits and certificates to Company.

5.3  At the time construction is completed, Licensee must comply with the following requirements:

5.3.1  Licensee must obtain all customary contractors’ sworn statements and partial and final waivers of lien for construction, remodeling, decorating and installation services.

5.3.2  Licensee must obtain all permits and certifications required for the lawful operation of the Restaurant, including but not limited to, a certificate of occupancy and health permits and, to the extent applicable, licenses to sell alcoholic beverages. Licensee must certify in writing, upon the request of Company, that all such permits and certifications have been obtained, or submit copies of such permits and certificates to Company.

5.3.3  Licensee must notify Company of the date of completion of construction. Licensee understands and acknowledges that Licensee may not open the Restaurant for business unless it receives the authorization of Company. Licensee further understands and agrees that Company’s authorization to open will be conditioned upon Licensee’s strict compliance with the specifications of the approved final plans and with the standards of the System. Company may not unreasonably prevent Licensee from opening for business, and may only do so on the grounds that the licensed business would have a material negative impact on Company or other licensed businesses. An example of the type of action this section is meant to prevent would be Licensee selling pizza.

6.          TIMING OF OPENING

Licensee must open the Restaurant within the following time lines. The parties agree that time is of the essence in the opening of the Restaurant.

 

8

6.1  Licensee must open the Restaurant for business within fifteen (15) days after the date of the approval of Company described in Subsection 5.3.3.

6.2  Licensee must open the Restaurant in compliance with all standards and specifications of Company within six (6) months after the execution of this Agreement, or as otherwise specified in writing.

7.         TRAINING

Company is not obligated to provide training of any kind to Licensee of its management or employees before or after the Restaurant opens for business to the public. Company may provide training and such other refresher courses, seminars and training programs as it, in its sole discretion, deems necessary or desirable, at the expense of Company..

8.         BRANDING AND PUBLIC RELATIONS ASSISTANCE

Company will provide to Licensee, from time to time, branding and public relations assistance and, as Company deems advisable, advice and written materials concerning techniques of managing and operating the Licensed Business, including new developments and improvements in restaurant equipment, food products, packaging and preparation.

9.         OPERATIONS AND MAINTENANCE OF RESTAURANT

9.1  Licensee understands and agrees that every detail of the Licensed Business is important to Licensee, Company, and other licensees in the effort to develop and maintain high operating standards, to increase the demand for the services and products sold under the Marks, and to protect the reputation and goodwill of Company. To ensure that the highest degree of quality and service is maintained, Licensee must operate the Restaurant in conformity with such methods, standards and specifications as Company may from time to time prescribe, including the following:

9.1.1  Licensee must use the Restaurant premises solely for the operation of the Licensed Business, and must not use, or permit the use of, the premises for any other purpose or activity at any time.

9.1.2  Licensee will obtain a liquor license to sell beer, wine and spirits at the Restaurant.

 

9

9.1.3  Licensee may accept such credit card, debit card, gift card/loyalty card (if possible and at a reasonable cost to Licensee); check verification, and electronic fund transfer as payment. Licensee may accept such methods of payment that Company authorizes or approves, which authorization or approval will not be unreasonably withheld, delayed, or conditioned.

9.1.4  Licensee must keep the business open and in normal operation for such hours and days as agreed upon between Licensee and Company.

9.2  After this Agreement has been in effect for five (5) years, Company may require Licensee to complete such renovation, modernization and improvement of the Restaurant premises and fixtures, furniture and equipment as Company may reasonably require. Such work may include, without limitation, replacement or addition of signs, equipment, furnishings, fixtures, finishes and décor items, both interior and exterior, and redesign of the layout of the Restaurant, to reflect the then-current standards and image of the then current Southern Hospitality fast casual concept.

10.         COMPUTER AND POINT OF SALE SYSTEMS

Company acknowledges and agrees that Licensee may use a point of sale system of its choosing, but must allow for electronic polling of such system by Company.

11.         INGREDIENTS, MATERIALS, SUPPLIES AND SUPPLIERS

11.1  Licensee must offer and sell in the Restaurant all proprietary food items, ingredients, supplies, materials and other products (collectively “Proprietary Products”) that Company from time to time requires or authorizes, and Licensee may not offer or sell any other products or services without Company’s written approval. Such Proprietary Products are provided on Exhibit C. Company may make reasonable modifications to Exhibit C to reflect current specifications and/or standards from time to time. Any food items, ingredients, supplies, materials and other products that are not included on Exhibit C shall be deemed as “Generic Products.” For the avoidance of doubt, Generic Products shall include those food items, ingredients, supplies, materials and other products that Licensee must offer and sell in the Restaurant that must meet Company’s specifications for the same. Company agrees that Licensee may purchase Generic Products from its own local or regional suppliers, manufacturers, and/or distributors so long as such Generic Products meet the applicable standard and specifications prescribed by Company from time to time, if any, provided that Company is satisfied that they meet Company’s food safety standards. Company agrees that Licensee shall have the right to receive and keep rebates or discounts on the purchase of such Generic Products from Licensee’s suppliers, manufacturers, and/or distributors.

 

10

11.2  Licensee must purchase all Proprietary Products used or offered for sale at the Restaurant solely from suppliers, distributors and other vendors (collectively, “Suppliers”) that have been approved in writing by Company, and have not thereafter been disapproved. From time to time or at Licensee’s request, Company will provide Licensee with a list of suppliers approved to supply Proprietary Products.

11.3  Licensee must use in the development and operation of the Restaurant only those brands, types and models of equipment, signs, fixtures and furnishings (collectively, “Equipment”) that meet Company’s standards and specifications. Licensee may purchase approved brands, types and models of Equipment that meet Company’s specifications only from Suppliers that have been approved by Company in writing, and have not thereafter been disapproved. From time to time or at Licensee’s request, Company will provide Licensee with a list of suppliers approved to supply Equipment.

11.4  Company may, in its sole discretion, designate certain Proprietary Products to be produced and/or prepared at the Restaurant. Company may, at any time, modify the list of these items.

11.5  Licensee must pay all Suppliers (and all other providers of services or products) according to agreed-upon terms of payment, so as not to impair the reputation of Company, other licensees or otherwise impair the Marks.

11.6  All advertising and promotional materials, signs, decorations, paper goods (including disposable food containers, napkins, menus and all forms and stationery used in the Licensed Business), and other items that may be designated by Company to bear the Marks, must be used in the form, color, location and manner prescribed by Company. All such items must be submitted to Company for approval, and must meet Company’s specifications regarding design, materials and manufacture.

11.7  Company may offer Licensee the opportunity to participate in the testing and development of new menu items that may be developed or conceived by Company. If Licensee agrees to participate in such testing and development, Licensee understands and agrees that Licensee may be required to purchase new Products and/or Equipment.

 

11

12.        ADVERTISING

The parties recognize the value of advertising and standardized advertising programs to the goodwill and public image of the Marks. Accordingly, the parties agree as follows:

12.1  LOCAL ADVERTISING AND PROMOTION

12.1.1  All local advertising and promotion by Licensee in any medium must be conducted in a dignified manner, and must conform to the standards and requirements of Company as set forth in writing by the Company. Licensee must not use any advertising and promotional plans and materials that have not been prepared, or previously approved in writing, by Company within the previous twelve (12) months. If Licensee wants to use any other plans or materials, Licensee must submit such plans and materials to Company and obtain written confirmation that the Company has received them. Company must approve or disapprove such plans and materials within fifteen (15) days after Company receives them. If the plans or materials are not disapproved within fifteen (15) days, they are deemed approved. Licensee must not use plans or materials unless and until Company approves them, and Licensee must promptly discontinue use of any advertising or promotional plans or materials upon notice from Company. Any and all costs associated with discontinuing the use of such plans and materials will be borne exclusively by Licensee.

12.1.2  Licensee agrees to spend a commercially reasonable amount of Gross Sales on local advertising.

12.2  MARKETING AND PROMOTION. Licensee will not be required to make a contribution to the Southern Hospitality BBQ Marketing Fund (“Marketing Fund”), however, if Licensee requests and receives any marketing-related services and/or materials from or through the Company, Licensee hereby agrees to reimburse the Company for the reasonable costs associated with providing those services and/or materials.

13.         ACCOUNTING AND RECORDS SYSTEMS

13.1  With respect to the operation and financial condition of the Restaurant, Licensee must provide Company with daily sales reports and other reports requested from time to time. Licensee must also permit Company to remotely monitor Licensee’s point of sale system.

13.2  Licensee must prepare financial reporting materials in the form upon which the parties agree, and submit those materials to Company, as follows:

 

12

13.2.1  If requested by Company, Licensee shall provide Company with an annual statement of Gross Sales within ninety (90) days after the end of Licensee’s fiscal year. Licensee’s fiscal year ends on the last Friday in August. Licensee must submit by fax, mail or such other means as Company specifies a statement of Licensee’s Gross Sales for Licensee’s fiscal year.

13.3  Company or its designated agents may at any time enter and inspect Licensee’s place of business, and examine and copy, at Company’s expense Licensee’s official records related to Gross Sales. Company may also, at any time, have an audit made of Licensee’s Records of Gross Sales, and/or systems used to record those Gross Sales. If an inspection or audit reveals that any payments have been understated in any report to Company, then Licensee must pay to Company upon demand the amount understated, in addition to interest from the date such amount was due until paid, at the rate of eighteen percent (18%) per annum, or the maximum rate permitted by law, whichever is less. If an inspection or audit discloses an understatement in any report of two percent (2%) or more of Licensee’s Gross Sales for the audited period, Licensee must, in addition, reimburse Company for any and all costs and expenses connected with the inspection and audit, including, without limitation, travel, lodging and wage expenses, and reasonable accounting and reasonable legal costs. The foregoing remedies are in addition to any other remedies Company may have.

14.        PERSONNEL OF THE LICENSED RESTAURANT

14.1  Licensee must employ at all times at least one (1) General Manager at the Restaurant. Such General Manager shall have previous restaurant experience and meet such other criteria as Company reasonably requires as set forth in writing from time to time. The General Manager must dedicate his/her full efforts toward running the Restaurant. Company shall have the right to request the resume of potential General Manager candidates and other applicable background information.

14.2  Licensee must employ at all times a competent, conscientious, trained staff. Licensee must take all necessary steps to ensure that all of its employees preserve good customer relations and comply with any dress code of the System, as agreed upon by Company and Licensee.

 

13

15.        COMPLIANCE WITH LAWS AND HEALTH STANDARDS

15.1  Licensee must meet and maintain the highest health standards and ratings applicable to the operation of the Restaurant. Upon request and within ten (10) business days, Licensee must furnish to Company a copy of the most recent inspection report and/or warning, citation, certificate or rating applicable to the health or safety standards in the operation of the Restaurant.

15.2  Licensee must maintain the Restaurant in a high degree of sanitation, repair and condition. Subject to the reasonable requirements and timeframes of the Client, Licensee must make such additions, alterations, repairs and replacements at the Restaurant that Company deems necessary for that purpose. All such work must be completed within a reasonable time, as agreed upon by the parties. Such work may include, without limitation, periodic repainting, replacement of furnishings, equipment, décor, and obsolete signs, and repair of any damages to tables, countertops, floors, columns or other furnishings or fixtures visible to the customer.

15.3  Licensee must at all times, at its own expense, ensure the Restaurant conforms to and complies with all federal, state and local laws, ordinances and regulations, and payment card industry standards now in force or that are hereafter enacted affecting the operation of the Licensed Business. Company acknowledges that since the Client controls the Facility, Licensee cannot certify that the Facility or the Restaurant meet the requirements of the Americans with Disability Act (“ADA”) and any similar state law. If Company requests, Licensee shall use commercially reasonable efforts to acquire evidence of ADA compliance from its Client. It, however, shall not be a breach of this Agreement if Licensee is unable to acquire such evidence from the Client.

16.         INSPECTIONS OF THE RESTAURANT

16.1  Licensee must permit Company or its agents, at any reasonable time, to remove samples of food or non‐food items from Licensee’s inventory, or from the Restaurant, without payment therefor, in amounts reasonably necessary for testing by Company to determine whether said samples meet Company’s then‐current standards and specifications.

16.2  Licensee must allow Company and its agents to enter upon the Restaurant premises at any time for the purpose of conducting inspections and audits. Licensee must cooperate with Company’s representatives in such inspections and audits by rendering such assistance as they may reasonably request. Upon notice from Company or its agents, and without limiting Company’s other rights under this Agreement, Licensee must take such steps as necessary to immediately correct any deficiencies detected during any such inspection. If Licensee fails to correct such deficiencies within a reasonable time, as determined by Company, Company may correct such deficiencies. Licensee must reimburse Company for its reasonable expenses for doing so, payable by Licensee immediately upon demand.

 

14

16.3  Licensee acknowledges and agrees that it must adhere to all mandatory specifications, standards and operating and inspection procedures prescribed from time to time by Company. Licensee’s failure to adhere to such mandatory specifications, standards, operating procedures and inspection procedures, or to pass Company’s quality control inspections, constitutes grounds for termination of this Agreement.

17.       OWNERSHIP AND USE OF MARKS

17.1  Licensee understands and acknowledges that Company owns the Marks, that Licensee has no interest whatsoever in or to the Marks, and that Licensee’s right to use the Marks is derived solely from this Agreement, and is limited by the terms of this Agreement and all applicable specifications, standards and operating procedures prescribed by Company from time to time. Any unauthorized use of the Marks by Licensee will constitute an infringement of the rights of Company in and to the Marks.

17.2  Licensee agrees that any goodwill established by Licensee’s use of the Marks will inure to the exclusive benefit of Company, and Licensee acknowledges that this Agreement does not confer upon Licensee any goodwill or interests in the Marks.

17.3  Licensee must not, during the term of this Agreement or after its termination or expiration, contest the validity or ownership of any of the Marks or assist any other person in contesting the validity or ownership of any of the Marks.

17.4  All provisions of this Agreement applicable to the Marks will apply to any additional trademarks, service marks, logo forms and commercial symbols that Company hereafter authorizes Licensee to use in connection with the Licensed Business.

17.5  Licensee agrees to use the Marks as the sole identification of the Restaurant; however, Licensee must identify itself as the independent owner at the Restaurant in the manner prescribed by Company. Licensee agrees to display the Marks prominently and in the manner prescribed by Company on signs, menus and forms. Further, Licensee agrees to give such notices of trademark and service mark registrations and copyrights as Company specifies, and to obtain such fictitious or assumed name registrations as may be required under applicable law.

 

15

17.5.1  Licensee agrees to identify itself as the independent owner at the Restaurant during the course of business-to-business activities, though such identification is not intended to be made to consumers or the general public.

17.6  Licensee may not use any Mark as part of any corporate or trade name or with any prefix, suffix or other modifying words, terms, designs or symbols, or in any modified form. Licensee may not use any Marks in connection with any business or activity other than the Licensed Business or in any manner not explicitly authorized in writing by Company. Licensee may not establish a website or domain name that in any way uses or incorporates a Mark, or links to Company’s website, without the prior written consent of Company.

17.7  Failure to strictly comply with any and all provisions regarding use of the Marks in this Section 17 will be a breach of this Agreement and will be grounds for termination of this Agreement without the opportunity to cure, as more fully set forth in Section 23.

17.8  If Company determines, in its sole discretion, that it is advisable for Company and/or Licensee to modify or discontinue use of any Mark, or use one or more additional or substitute trademarks or service marks, Licensee agrees to comply with Company directives regarding the use of such Marks within a reasonable time as established by Company. The sole liability and obligation of Company in any such event will be to reimburse Licensee for the out‐of‐pocket costs of complying with this obligation.

17.9  Licensee must immediately notify Company in writing if Licensee becomes aware of any apparent infringement or imitation of any Mark, any challenge to Licensee’s use of any Mark, any claim by any person of any rights in any Mark, or existence of any similar trade name, trademark or service mark. Licensee may not communicate with any person, other than Licensee’s counsel and Company and its counsel, in connection with any infringement, challenge or claim, except as otherwise required by law. Company has the exclusive right to control any litigation, U.S. Patent and Trademark Office proceeding or other legal or administrative proceeding relating to any Mark, and sole discretion to take such action as it deems appropriate.

16

17.10  Company agrees to indemnify Licensee against, and to reimburse Licensee for, all damages for which he is held liable in any proceeding in which Licensee’s use of any Mark pursuant to and in compliance with this Agreement is held to constitute trademark infringement, unfair competition or dilution, and for all costs reasonably incurred by Licensee in the defense of any such claim brought against it or in any such proceeding in which it is named as a party, provided that Licensee has timely notified Company of such claim or proceeding, has otherwise complied with this Agreement, and has tendered complete control of the defense of such to Company. If Company defends such claim, Company will have no obligation to indemnify or reimburse Licensee with respect to any fees or disbursements of any attorney retained by Licensee.

17.11  All promotional materials, advertising materials, discoveries, inventions, ideas, business methods or improvements (whether or not patentable or capable of being copyrighted) relating to the Marks, whether created by Licensee, Licensee’s owners (if Licensee is not an individual) or their agents and independent contractors, must be promptly disclosed by Licensee to Company, and will be Company’s sole and exclusive property and, if applicable, will be deemed to be works made-for-hire for Company. Licensee and its owners (if applicable) will sign, and cause their agents and independent contractors to sign, whatever assignment or other documents Company requests to evidence Company’s ownership and to assist Company in obtaining copyright registrations or patent rights. Licensee and its owners (if applicable) will use such items solely in connection with activities permitted under this Agreement, and will not use any substantially similar material for any purpose during or after the term of this Agreement.

18.         CASUALTY LOSSES

If the Restaurant premises are damaged or destroyed by fire or other casualty, Licensee must repair or reconstruct the premises in accordance with Company’s then-current design standards. Such repair or reconstruction must be completed within a reasonable time in light of the circumstances. If the repairs or reconstruction cannot be completed within ninety (90) days after the casualty loss, then Licensee will have thirty (30) days after such event in which to apply for Company’s approval to relocate the Restaurant or for additional time to reconstruct the premises. Such approval will not be unreasonably withheld, but may be conditioned upon the payment of an agreed-upon minimum royalty while the restaurant is not in operation.

17

19.        INSURANCE

During the term of this Agreement, each party must obtain and maintain in full force and effect, at his own expense, such insurance coverages as provided below. Within ten (10) days after the Effective Date of this Agreement, Licensee must furnish to Company Certificates of Insurance showing that Licensee’s insurance coverages are in effect. Renewal Certificates of Insurance must be delivered to Company within thirty (30) days of the expiration date of all policies. Requirements as of the Effective Date hereof are:

19.1  Commercial General Liability insurance, including Products Liability coverage, and Broad Form Contractual Liability coverage, including liquor liability coverage (if applicable), written on a “per occurrence” policy form in an amount of not less than Three Million Dollars ($3,000,000) combined single limit per occurrence and aggregate. Such insurance must contain contractual liability coverage for liabilities assumed by the insured under a written contract.

19.2  Business automobile liability insurance, including owned, leased, non-owned and hired automobile coverage with a limit of not less than One Million Dollars ($1,000,000) per accident.

19.3  Workers’ Compensation insurance as required by law and Employer’s Liability insurance with a limit of not less than One Million Dollars ($1,000,000).

19.4  “All Risk” property insurance covering: (a) the furniture, fixtures, equipment, inventory and other tangible property that Licensee owns in the Restaurant and (b) Business Interruption/ Business Income insurance (at least one (1) year of actual loss sustained), including Extra Expense insurance, so as to re-establish normal business operations.

19.5  All insurance policies required under this Agreement: (a) must be primary and non-contributory; (b) must be issued by an insurance company(ies) with a rating of not less than “A-VII” in the current Best Insurance Rating Guide or approved by the other party; and (c) must name the other party and its Affiliates as “additional insureds” (or its equivalent), except workers’ compensation insurance and employers’ liability.

20.         CONFIDENTIAL INFORMATION

Unless otherwise mutually agreed between Company and Licensee, Company and Licensee each agree to preserve the confidentiality of any sensitive business information provided by the other and shall abide by the terms of the mutual confidentiality agreement attached hereto as Exhibit E and incorporated by reference herein.

18

21.         TRANSFER OF INTEREST

21.1TRANSFER BY COMPANY. Company may transfer or assign this Agreement and all or any part of its rights or obligations herein to any person or legally formed entity. Any such assignment will inure to the benefit of any assignee or other legal successor to the interest of Company. Notwithstanding the foregoing, if Company transfers or assigns its rights or obligations under this Agreement, the assignee or transferee shall agree in writing that it will fulfill Company’s obligations to Licensee under this Agreement.

21.2  TRANSFER BY LICENSEE

21.2.1  Licensee understands and acknowledges that the rights and duties set forth in this Agreement are personal to Licensee (or if Licensee is a legally formed entity, Licensee’s shareholders, partners or members), and that Company has granted this license in reliance on Licensee’s business skill, financial capacity and personal character. Accordingly, Licensee may not sell, assign, transfer, convey, give away, pledge, mortgage or otherwise encumber to a third party (hereinafter “Transfer”) any interest in Licensee, this Agreement or the Licensed Business, or permit such a Transfer, without the prior written consent of Company. Any purported Transfer, by operation of law or otherwise, not having the written consent of Company required by this Section 21 will be null and void, and will constitute a material breach of this Agreement. Furthermore, Licensee may not retain or otherwise contract with any entity that is not a party to this Agreement to provide management or administrative services for the Restaurant unless such entity is either an employee of Licensee or has been approved in writing by Company. Company may condition such approval on the receipt of a non-disclosure covenant from the third party.

21.2.2  Company may require any or all of the following as conditions of its approval of a transfer from Licensee to a third party:

21.2.2.1  All of the accrued monetary obligations and all other outstanding obligations of Licensee to Company and its Affiliates must have been satisfied.

21.2.2.2  Licensee must not be in material default of any provision of this Agreement, or any other agreement with Company or its Affiliates.

 

19

21.2.2.3  At the time of Transfer, the parties may sign a general release, in a form that is mutually satisfactory, releasing each other any and all claims against each other and their Affiliates, including officers, directors, shareholders and employees, in their corporate and individual capacities, including, without limitation, claims arising under federal, state and local laws, rules and ordinances, and unknown claims.

21.2.2.4  The third-party transferee must enter into a written assumption agreement in a form satisfactory to Company, assuming and agreeing to discharge all of Licensee’s obligations under this Agreement and such ancillary agreements as Company may require. Alternately, and at Company’s option, the transferee must sign (and upon Company’s request, must cause all interested parties to sign) the standard form license agreement then in use for a term ending on the expiration date of this Agreement, and with such renewal term as may be provided by this Agreement, and such ancillary agreements as Company may require, including a Confidentiality Agreement. The terms of these agreements may not differ from the terms of this Agreement and will supersede this Agreement in all respects. The transferee will not be required to pay any initial license fee.

21.2.2.5  The third-party transferee and the proposed Principal Owners and their spouses, as applicable, must guarantee the performance of all obligations under this Agreement in writing, in a form satisfactory to Company.

21.2.2.6  The third-party transferee must demonstrate to Company’s satisfaction that it meets Company’s then-existing financial, educational, managerial and business standards. This includes possessing a good moral character, business reputation and credit rating, having the aptitude and ability to conduct the Licensed Business (as may be evidenced by prior related business experience or otherwise), and having adequate financial resources and capital to operate the business.

21.2.2.7  The third-party transferee or Licensee, at its expense, must upgrade the Restaurant to conform to the then-current standards and specifications of System restaurants, and must complete the upgrading and other requirements within the time specified by Company.

21.2.2.8  Licensee must remain liable for all of the obligations to Company in connection with the Licensed Business prior to the effective date of the transfer, and must sign any and all instruments reasonably requested by Company to evidence such liability.

20

21.2.2.9  At the transferee’s expense, the third-party transferee and (at Company’s request) third-party transferee’s personnel, must satisfactorily complete the training requirements set forth in Section 7, and must complete any training programs then in effect for licensees upon such terms and conditions as Company may reasonably require.

21.2.2.10  Except in the case of a Transfer to a corporation, limited liability company or partnership formed for the convenience of ownership, or Transfers among existing shareholders, Licensee (or third-party transferee) must pay a transfer fee equal to the lesser of five thousand dollars ($5,000.00) or Company’s actual out-of-pocket costs and expenses associated with reviewing the application to transfer, including, without limitation, legal and accounting fees.

21.2.2.11  Licensee and third-party transferee must agree that any note issued by the third-party transferee to Licensee in connection with the purchase of the Restaurant will be subordinate to third-party transferee’s obligations to pay royalties or any other amounts due Company or its Affiliates;

21.2.2.12  Licensee and third-party transferee must acknowledge in writing that Company’s approval of the proposed Transfer does not constitute a representation, guaranty or warranty, express or implied, of the suitability of the terms of the proposed Transfer or the successful operation of any Restaurant; however, Company may withhold consent to a transfer if it believes the terms and conditions of the proposed transfer would adversely affect the possibility of success of the business in light of the conditions under which it is to be purchased.

21.2.3  Licensee must not grant to a third party a security interest in the Licensed Business or in any of its assets unless the secured party agrees that if Licensee defaults under any documents related to the security interest, Company will have the right to prior notice and the option to be substituted as obligor to the secured party and to cure any default of third-party transferee.

21.2.4  Licensee acknowledges and agrees that each of the foregoing conditions is necessary to assure third-party transferee’s full performance of the obligations under this Agreement.

21.2.5  Company’s consent to a transfer of any interest in Licensee, this Agreement or the Licensed Business will not constitute a waiver of any claims it may have against the Licensee or the third-party transferring party, nor will it be deemed a waiver of Company’s right to demand exact compliance with any of the terms of this Agreement by the third-party transferee.

21

21.2.6  Company’s agrees that, upon thirty (30) days written notice, Licensee shall be permitted to transfer or assign this Agreement or the Licensed Business and all of its obligations to its parents or Affiliates without (a) the approval of Licensor, (b) payment of any associated fees, (c) having to enter into another agreement, and (d) having undergo training, provided that the transferee or assignee employs Licensee’s Key Operator(s).

22.         COMPANY’S RIGHT OF FIRST REFUSAL

22.1  Any party holding any interest in Licensee or in this license, and who desires to accept any bona fide offer from a third party to purchase all or part of such interest (hereinafter referred to as “Seller”), must notify Company in writing of each such offer forty-five (45) days before the proposed sale. Seller must provide such information and documentation relating to the proposed purchaser and the offer as Company may require. Company will have the right and option to purchase the Seller’s interest at Company’s sole discretion, at the price offered by the third party. Company will inform Seller of its intent to exercise the option within thirty (30) days after receipt of all of the information from Seller. If the proposed transaction includes assets of Licensee not related to the operation of the Licensed Business, Company may at its discretion exercise its option only with respect to the interest of the Licensed Business. In such event, an equitable purchase price will be allocated to each asset included in the proposed transaction. If Company elects to purchase the Seller’s interest, Company may require the purchase to close within thirty (30) days from the date of notice to the Seller of Company’s election to purchase.

22.2  Any material change in the terms of any offer prior to closing will constitute a new offer, and will be subject to Company’s right of first refusal as though it were an initial offer.

22.3  Failure of Company to exercise the option afforded by this Section 22 will not constitute a waiver of any other provision of this Agreement relating to proposed transfers, including any of the requirements of this Section 22.

22.4  If Company exercises its right of first refusal, the sale agreement must contain customary representations and warranties given by the Seller including, without limitation, representations and warranties as to ownership, condition of and title to stock and assets, liens and encumbrances relating to the stock and assets, validity of contracts and verification of financial statements.

22

23.        DEFAULT AND TERMINATION

23.1  IMMEDIATE TERMINATION. Licensee will be deemed to be in default under this Agreement, and all rights granted herein will immediately terminate automatically with respect to the particular Licensed Business and without notice to Licensee if any of the following events occur:

23.1.1  Licensee fails to open a Restaurant within twelve (12) months of the date of this Agreement.

23.1.2  Licensee makes a general assignment for the benefit of creditors;

23.1.3  Licensee commences a voluntary petition under bankruptcy, insolvency or any similar law; or an involuntary case under bankruptcy or insolvency or similar law is filed against Licensee and is either unopposed by Licensee or is not dismissed within thirty (30) days of filing; or an order or decree for relief under bankruptcy, insolvency or similar laws is entered regarding Licensee. Licensee expressly waives all rights under the provisions of the bankruptcy or other applicable laws and rules, and consents to the immediate termination of this Agreement as provided herein. Licensee agrees not to seek an order from any court, tribunal or agency in any jurisdiction relating to bankruptcy, insolvency, reorganization or any similar proceedings that would have the effect of staying or enjoining this provision.

23.1.4  A bill in equity or other proceeding for the appointment of a receiver of Licensee or other custodian for Licensee’s business or assets or real or personal property is filed by, consented to, or not opposed by Licensee;

23.1.5  Licensee becomes insolvent in that Licensee generally fails, or is generally unable, to pay its obligations as they become due in the regular course of business;

23.1.6If Licensee is a corporation, partnership or other legal entity and Licensee is dissolved or its existence otherwise terminated;

23.1.7  Licensee at any time ceases to operate the Licensed Business for a period of ten (10) consecutive days, or otherwise abandons the Licensed Business; it shall not, however, be deemed a breach of this Agreement if the Licensed Business is closed due to an emergency or force majeure event.

23

23.2  TERMINATION UPON NOTICE. Licensee will be deemed to be in default, and Company may, at its option, terminate this Agreement and all rights granted under this Agreement at a particular Licensed Business upon any of the following grounds. Termination will become effective immediately upon notice to Licensee.

23.2.1  The Company reasonably determines that a threat or danger to public health or safety is likely to result from the construction, maintenance or operation of the Restaurant.

23.2.2  Licensee is convicted of, or pleads no contest to, a felony, a crime involving moral turpitude, or any other crime or offense that Company reasonably believes likely to have an adverse effect on the Marks, the goodwill associated therewith, or Company’s interest therein.

23.2.3  Licensee discloses, makes any unauthorized duplicates of, or otherwise improperly divulges or uses the confidential information provided to Licensee by Company pursuant to this Agreement.

23.2.4  Licensee maintains false books or records, or submits any reports or information to Company that contains any materially inaccurate, incomplete or misleading statements, or omits any fact necessary in order to make the statements made not misleading.

23.2.5  Licensee makes any unauthorized use of the Marks as provided in this Agreement.

23.3  TERMINATION AFTER OPPORTUNITY TO CURE. Licensee will be deemed to be in default, and Company may, at its option, terminate this Agreement and all rights granted under this Agreement upon any of the following grounds. If the condition is susceptible of being cured, Licensee must correct the condition within the period specified below, or termination will be effective at the conclusion of the cure period.

23.3.1  Licensee fails to maintain and/or operate the Licensed Business in accordance with the standards and specifications, including, but not limited to, selling any product that Licensee knows or should know does not conform to Company’s specifications, or selling any product that is not approved by Company. Licensee will have five (5) days after receiving written notice to correct such condition.

24

23.3.2  Licensee loses the right to possession of the premises, Licensee will have fifteen (15) business days after receiving written notice to correct such condition.

23.3.3  Licensee or any partner or shareholder in Licensee purports to transfer any rights or obligations under this Agreement or any interest in Licensee to any third party in violation of this Agreement. Licensee will have five (5) days after receiving written notice to correct such condition.

23.3.4  Licensee denies Company’s right to inspect, examine or audit the Licensed Restaurant or the Licensee’s books. Licensee will have five (5) business days after receiving written notice to cure such condition.

23.3.5  Licensee fails to submit any report of Gross Sales and of product mix when required, or his submission is incorrect or incomplete. Licensee will have ten (10) days after receiving written notice to correct such condition.

23.3.6  Licensee fails to keep the business open and in normal operation for such hours and days as Licensee and Company determine. Licensee will have five (5) business days after receiving written notice to correct such condition.

23.3.7  Licensee fails to make any payment required under this Agreement. Licensee will have ten (10) days after receiving written notice to correct such condition.

23.3.8  Licensee fails to comply with any provision of this Agreement not specified in this Section 23. Licensee will have thirty (30) days after receiving written notice to correct such condition. If Licensee diligently begins to correct such condition but such correction cannot be achieved within the thirty-(30)-day period, Company shall grant Licensee an additional thirty (30) days to correct the condition.

23.4  If any applicable law or rule requires greater prior notice of termination, the prior notice required by such law or rule will be substituted for the notice requirements specified above.

25

24.         OBLIGATIONS UPON TERMINATION OR EXPIRATION

Upon termination or expiration of this Agreement, all rights granted under this Agreement to Licensee will immediately terminate, and Licensee has the following obligations:

24.1  Licensee must immediately cease to operate the Licensed Business and must not thereafter, directly or indirectly, represent itself to the public as a present licensee of Company.

24.2  Licensee must immediately and permanently cease to use, in any manner whatsoever, the Mark and all other Marks and distinctive forms, slogans, signs, symbols and devices associated with the Southern Hospitality Brand.

24.3  Licensee must take all necessary action to cancel any assumed name or equivalent registration that contains any service mark or trademark of Company, and Licensee must furnish Company with evidence satisfactory to Company of compliance with this obligation within five (5) days after termination or expiration of this Agreement.

24.4  Licensee must promptly upon termination or expiration of this Agreement, make such modifications or alterations to the premises as may be necessary to distinguish the appearance of said premises from that of other restaurants under the Marks, and Licensee must make such specific changes to the premises as Company may reasonably request for that purpose.

24.5  If Licensee continues to operate, or subsequently begins to operate, any other business, it must not use any reproduction, counterfeit, copy or colorable imitation of the Marks, either in connection with such other business or the promotion thereof, that is likely to cause confusion, mistake or deception, or that is likely to dilute Company’s rights in and to the Marks. Licensee further agrees not to use any designation of origin or description or representation that falsely suggests or represents an association or connection with Company.

24.6  Licensee must promptly pay all sums owing to Company and its Affiliates. In the event of termination for any default of Licensee, such sums will include all damages, costs and expenses, including reasonable attorneys’ fees, incurred by Company as a result of the default.

26

24.7Licensee must pay to Company all damages, costs and expenses, including reasonable attorneys’ fees, incurred by Company after the termination or expiration of this Agreement in obtaining i  njunctive or other relief for the enforcement of any provisions of this Agreement, if applicable.

24.8  Licensee must promptly deliver to Company all records and documents containing confidential information relating to proprietary practices exclusive to operating a Southern Hospitality fast casual store or stores.

24.9  Company has the option, to be exercised within thirty (30) days after termination, to purchase from Licensee any or all of the furnishings, signs, fixtures, supplies or inventory that Licensee owns relating to the operation of the Licensed Business, at their fair market value. “Fair market value” will be determined by taking into account the termination or expiration of the license granted under this Agreement and will not include any factor or increment for any trademarks, service marks or other commercial symbols used in connection with the operation of the Restaurant or any goodwill or “going concern” value for the Restaurant. If the parties cannot agree on a fair market value within a reasonable time, the parties will designate an independent appraiser whose determination will be binding. If Company elects to exercise the option provided in this Section 24, it may set off all amounts due from Licensee, and the cost of the appraisal, if any, against any payment to be made by Company.

24.10  All obligations of Company and Licensee that expressly or by their nature survive or are intended to survive the expiration, termination or assignment of this Agreement, including but not limited to provisions in Section 21 will continue in full force and effect after and notwithstanding its expiration or termination or assignment, until those obligations are satisfied in full or by their nature expire.

25.        COVENANTS AND RESTRICTIONS ON OTHER BUSINESS INTERESTS

Company and Licensee agree that if, after the initial five stores agreed to in this agreement, Company restricts Licensee from further developing additional units of Southern Hospitality fast casual restaurants, Licensee may develop a competitive, fast casual BBQ concept, however such new concept may not operate within 10,000 feet of a Southern Hospitality branded fast casual concept. Furthermore, should Company change the remuneration structure of additional Southern Hospitality fast casual stores granted to Licensee, Licensee may opt out of future development and pursue a competitive, fast casual BBQ concept. Such competitive concept must be aesthetically differentiated from Southern Hospitality, meaning the combination of distressed barn wood, brick, rusted neon signs and Marks to be present in Southern Hospitality fast casual stores.

27

26.  INDEPENDENT CONTRACTOR AND INDEMNIFICATION

26.1  It is understood and agreed by the parties that this Agreement does not create a fiduciary relationship between them, and that Company and Licensee are independent contractors. Nothing in this Agreement is intended to make either party an agent, legal representative, subsidiary, joint venturer, partner, employee or servant of the other for any purpose whatsoever.

26.2  During the term of this Agreement, Licensee must hold itself out in business-to-business dealings as an independent contractor operating the business pursuant to a license from Company. Licensee agrees to take such actions as may be necessary to do so. This section is not intended to create a distinction between Company owned stores and Licensee owned stores to the general public.

26.3  Nothing in this Agreement authorizes either party to make any contract, agreement, warranty or representation on the other’s behalf, or to incur any debt or other obligation in the other party’s name.

26.4  Licensee shall defend, indemnify and hold harmless Company and its Affiliates and their agents from all third party claims, demands, losses, obligations, costs, attorneys’ fees, expenses, liabilities, debts or damages (“Claims”) resulting from its negligent acts or willful misconduct in performance under this Agreement. If such Claims are asserted against Company or its Affiliates or their agents, Company will notify Licensee, and Licensee will assume the defense of such claims pursuant to its indemnification obligations set forth in this Section. If Licensee fails to assume the defense, then Company may defend in such manner as it deems appropriate. If there is a finding of fault on behalf of Licensee, Licensee must reimburse Company for all costs, including reasonable attorneys’ fees, and the reasonable value of time spent by corporate counsel, incurred by Company or its Affiliates in effecting such defense, in addition to any sum that Company or its Affiliates may incur by reason of any settlement or judgment.

28

27.  MISCELLANEOUS PROVISIONS

27.1  APPROVALS AND WAIVERS

27.1.1  Whenever this Agreement requires the prior approval or consent of Company, Licensee must make a timely written request to Company for such approval or consent. All such approvals or consents must be obtained in writing.

27.1.2  Company makes no warranties or guarantees upon which Licensee may rely in connection with this Agreement.

27.1.3  No delay, omission or forbearance on the part of Company to exercise any right, option, duty or power constitutes a waiver by Company to enforce any such right, option, duty or power as against Licensee; nor does any such delay, omission, or forbearance constitute a waiver of any subsequent breach or default by Licensee. Company’s acceptance of any payments due to it under this Agreement will not be deemed to be a waiver by Company of any preceding breach by Licensee of any terms, provisions, covenants or conditions of this Agreement.

27.2  FORCE MAJEURE

Neither Company nor Licensee will be deemed to be in breach of this Agreement, or be liable for loss or damage if it fails to perform its obligations due to: (1) compliance with any law, ruling, order, regulation, requirement, or instruction of any federal, state, or municipal government or any department or agency thereof; (2) acts of God; (3) acts or omissions of the other party; (4) fires, strikes, embargoes, war, terrorism or riot; or (5) any other similar event or cause which are force majeure in nature. Any delay resulting from any of said causes will extend performance accordingly or excuse performance, in whole or in part, as may be reasonable.

27.3  APPLICATION OF PAYMENTS

Notwithstanding any designation by the Licensee, Company may in its discretion apply any payments made by Licensee to any of Licensee’s past indebtedness relating to royalties, the advertising fund, purchases, loans, interest or any other indebtedness to Company.

29

27.4  NOTICES

Any and all notices required or permitted under this Agreement must be made in writing, and must be personally delivered or mailed by certified or registered mail, return receipt requested, to the respective parties at the following addresses unless and until a different address has been designated by written notice to the other party:

	
 

	
Notices to Company: 

	
Southern Hospitality BBQ

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Attention: 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

 

	
 

	
With a copy to: 

	
Davis Wright Tremaine LLP

	
 

	
 

	
 

	

1300 SW Fifth Avenue, Suite 2400

Portland, OR 97201

Attention:    J. Riley Lagesen

	
 

 

	
 

	
Notices to Licensee:

	
Bourbon Brothers Holding Corp.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Attention: 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

 

 

	
 

	
With a copy to:

	
Burns, Figa and Will, P.C.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Attention: 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

 

Any notice by certified or registered mail will be deemed to have been given at the earlier of the (i) date and time of receipt, or (ii) first refusal.

27.5  ENTIRE AGREEMENT

The Recitals and Exhibits attached to this Agreement are hereby incorporated into and made part of this Agreement. This Agreement constitutes the entire, full and complete agreement between Company and Licensee concerning the license identified on Exhibit A, and supersedes any prior negotiations, understandings, representations or agreements relating to that License.

30

27.6  MODIFICATION

No amendment, change or variance from this Agreement will be binding on either party unless mutually agreed to by the parties, and signed by their authorized officers or agents in writing.

27.7  SEVERABILITY AND CONSTRUCTION

27.7.1  Except as expressly provided to the contrary in this Agreement, each portion, section, part, term and/or provision of this Agreement is severable. If, for any reason a court or agency having valid jurisdiction, determines any section, part, term or provision of this Agreement is invalid and contrary to, or in conflict with, any existing or future law or regulation, that decision will not impair the operation of, or have any other effect upon, such other portions, sections, parts, terms or provisions of this Agreement that remain intelligible. The latter will continue to be given full force and effect and bind the parties, and the invalid portions, sections, parts, terms or provisions will be deemed not to be a part of this Agreement.

27.7.2  Except as expressly provided to the contrary in this Agreement, nothing in this Agreement is intended, nor will be deemed, to confer upon any person or legal entity other than Licensee, Company, Company’s officers, directors and employees, and such successors and assigns as may be contemplated by this Agreement any rights or remedies under or by reason of this Agreement.

27.7.3  All captions in this Agreement are intended solely for the convenience of the parties, and none will be deemed to affect the meaning or construction of any provision hereof.

27.7.4  All references herein to the masculine, neuter or singular will be construed to include the masculine, feminine, neuter or plural, where applicable; and all acknowledgments, promises, covenants, agreements and obligations herein made or undertaken by Licensee will be deemed jointly and severally undertaken by all those executing this Agreement on behalf of Licensee.

31

27.8  DISPUTE RESOLUTION

27.8.1  AGREEMENT TO MEDIATE DISPUTES. Except as otherwise provided in this Agreement, neither party to this Agreement shall bring an action or proceeding to enforce or interpret any provision of this Agreement, or seeking any legal remedy based upon the relationship created by this Agreement or an alleged breach of this Agreement, until the dispute has been submitted to mediation conducted in accordance with the procedures stated in this Agreement.

27.8.1.1  The mediation shall be conducted pursuant to the rules of the National Franchise Mediation Program, a dispute resolution program for franchising administered under the auspices of the CPR Institute for Dispute Resolution (the “Mediation Service”). Either party may initiate the mediation (the “Initiating Party”) by notifying the Mediation Service in writing, with a copy to the other party (the “Responding Party”). The notice shall describe with specificity the nature of the dispute and the Initiating Party’s claim for relief. Thereupon, both parties will be obligated to engage in the mediation, which shall be conducted in accordance with the Mediation Service’s then-current rules, except to the extent the rules conflict with this Agreement, in which case this Agreement shall control.

27.8.1.2  The mediator must be either a practicing attorney with experience in business format franchising or a retired judge.

27.8.1.3  Except as otherwise provided in this Agreement: (i) the fees and expenses of the Mediation Service, including (without limitation) the mediator’s fee and expenses, shall be shared equally by the parties, and (ii) each party shall bear its own attorney’s fees and other costs incurred in connection with the mediation irrespective of the outcome of the mediation or the mediator’s evaluation of each party’s case.

27.8.1.4  The mediation conference shall begin as soon as possible with the goal of beginning the mediation within thirty (30) days after selection of the mediator. Regardless of whether Company or Licensee is the Initiating Party, the mediation shall be conducted at Company’s home office, unless the parties agree upon a mutually acceptable alternative location.

27.8.1.5  The parties shall participate in good faith in the entire mediation, including the mediation conference, with the intention of resolving the dispute, if at all possible. The parties shall each send at least one representative to the mediation conference who has authority to enter into a binding contract on that party’s behalf and on behalf of all principals of that party who are required by the terms of the parties’ settlement to be personally bound by it. The parties recognize and agree, however, that the mediator’s recommendations and decision shall not be binding on the parties.

32

27.8.1.6  If one party breaches this Agreement by refusing to participate in the mediation or not complying with the requirements for conducting the mediation, the non-breaching party may immediately file suit and take such other action to enforce its rights as permitted by law and the breaching party shall be obligated to pay: (i) the mediator’s fees and costs, (ii) the non-breaching party’s reasonable attorneys’ fees and costs incurred in connection with the mediation, and (iii) to the extent permitted by law, the non-breaching party’s reasonable attorneys’ fees and costs incurred in any suit arising out of the same dispute, regardless of whether the non-breaching party is the prevailing party. Additionally, in connection with (iii), the breaching party shall forfeit any right to recover its attorneys’ fees and costs should it prevail in the suit. The parties agree that the foregoing conditions are necessary in order to encourage meaningful mediation as a means for efficiently resolving any disputes that may arise.

27.8.2  EXCEPTIONS TO DUTY TO MEDIATE DISPUTE. The obligation to mediate shall not apply to any disputes, controversies or claims (i) where the monetary relief sought is under $10,000; (ii) in which a party seeks or applies for any kind of Provisional Remedies; or (iii) in which Company or the holder of rights under any lease or sublease seeks to enforce rights of unlawful detainer or similar remedies available to a landlord or for the enforcement of Company’s other rights under any Addendum to Lease with Debtor. The party that is awarded Provisional Remedies shall not be required to post bond or comparable security. Once Provisional Remedies are obtained, the parties agree to submit the dispute to, or continue, the mediation or action in accordance with this Agreement.

27.8.3  JUDICIAL RELIEF.

27.8.3.1  The parties agree that (i) all disputes arising out of or relating to this Agreement which are not resolved by negotiation or mediation, and (ii) all claims which this Agreement expressly excludes from mediation, shall be brought in the Supreme Court of New York located closest to Company’s home office, unless the subject matter of the dispute arises exclusively under federal law, in which event the dispute shall be submitted to the United States District Court located closest to Company’s home office. As of the date of this Agreement, the parties acknowledge that the Supreme Court of New York, and the United States District Court of the Southern District of New York are, respectively, the state and federal courts that are located closest to Company’s home office; however, the parties further acknowledge that Company may relocate its home office in its sole discretion at any time without notice to the undersigned party. The parties agree to submit to the jurisdiction of the courts mutually selected by them pursuant to this Section and mutually acknowledge that selecting a forum in which to resolve disputes arising between them is important to promote stability in their relationship.

33

27.8.3.2  To the fullest extent that it may effectively do so under Applicable Laws, Licensee waives the defense of an inconvenient forum to the maintenance of an action in the courts identified in this Section and agrees not to commence any action of any kind against Company, Company’s Affiliates and their respective officers, directors, shareholders, LLC managers and members, employees and agents or property arising out of or relating to this Agreement except in the courts identified in this Section.

27.8.4  WAIVER OF JURY TRIAL. COMPANY AND LICENSEE EACH HEREBY WAIVE THEIR RESPECTIVE RIGHT TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, COUNTERCLAIM OR CROSS-COMPLAINT IN ANY ACTION, PROCEEDING AND/OR HEARING BROUGHT BY EITHER COMPANY OR LICENSEE ON ANY MATTER WHATSOEVER ARISING OUT OF, OR IN ANY WAY CONNECTED WITH, THIS AGREEMENT, THE RELATIONSHIP OF THE PARTIES, THE USE OF THE MARKS, OR ANY CLAIM OF INJURY OR DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY LAW, STATUTE, REGULATION, EMERGENCY OR OTHERWISE, NOW OR HEREAFTER IN EFFECT, TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW.

27.8.5  CHOICE OF LAW. Except as otherwise provided in this Agreement with respect to the possible application of Local Laws, the parties agree that New York law shall govern the construction, interpretation, validity and enforcement of this Agreement and shall be applied in any mediation or judicial proceeding to resolve all disputes between them, except to the extent the subject matter of the dispute arises exclusively under federal law, in which event the federal law shall govern.

27.8.6  LIMITATIONS PERIOD. To the extent permitted by Applicable Laws, any legal action of any kind arising out of or relating to this Agreement or its breach, including without limitation, any claim that this Agreement or any of its parts is invalid, illegal or otherwise voidable or void, must be commenced by no later than one year after the act, event, occurrence or transaction which constituted or gave rise to the alleged violation or liability; provided, however, the applicable limitations period shall be tolled during the course of any mediation which is initiated before the last day of the limitations period with the tolling beginning on the date that the Responding Party receives the Initiating Party’s demand for mediation and continuing until the date the mediation is concluded.

34

27.8.7  PUNITIVE OR EXEMPLARY DAMAGES. Company and Licensee, on behalf of themselves and their respective Affiliates, directors, officers, shareholders, members, managers, guarantors employees and agents, as applicable, each hereby waive to the fullest extent permitted by law, any right to, or claim for, punitive or exemplary damages against the other and agree that, in the event of a dispute between them, each is limited to recovering only the actual damages proven to have been sustained by it.

27.8.8  ATTORNEY’S FEES. Except as expressly provided in this Agreement, in any action or proceeding brought to enforce any provision of this Agreement or arising out of or in connection with the relationship of the parties hereunder, the prevailing party shall be entitled to recover against the other its reasonable attorneys’ fees and court costs in addition to any other relief awarded by the court. As used in this Agreement, the “prevailing party” is the party who recovers greater relief in the action.

27.8.9  WAIVER OF COLLATERAL ESTOPPEL. The parties agree they should each be able to settle, mediate, litigate or compromise disputes in which they may be, or become, involved with third parties without having the dispute affect their rights and obligations to each other under this Agreement. Company and Licensee therefore each agree that a decision of an arbitrator or judge in any proceeding or action in which either Company or Licensee, but not both of them, is a party shall not prevent the party to the proceeding or action from making the same or similar arguments, or taking the same or similar positions, in any proceeding or action between Company and Licensee. Company and Licensee therefore waive the right to assert that principles of collateral estoppel prevent either of them from raising any claim or defense in an action or proceeding between them even if they lost a similar claim or defense in another action or proceeding with a third party

27.8.10  PERSONAL GUARANTY. J.W Roth, Gary Tedder, and any individual who owns 25% or more of Licensee shall furnish any financial information reasonably required by Company and execute Company’s form of personal guaranty in the form attached to this Agreement as Exhibit E.

35

28.        ACKNOWLEDGMENTS

28.1  Licensee’s initial investment, excluding any financing received from Company or an affiliate, and excluding the cost of unimproved land, totals at least One Million Dollars ($1,000,000).

28.2  Licensee is an existing Licensee of Company and Licensee and its principals are intimately acquainted with the business of Company.

28.3  Licensee acknowledges that it has conducted an independent investigation of the business licensed under this Agreement, and recognizes that the business venture contemplated by this Agreement involves business risks, and that its success will be largely dependent upon the ability of Licensee as an independent businessperson.

28.4  Licensee acknowledges that it has read and understood this Agreement, the attachment(s) hereto and agreements relating hereto, if any, and that Licensee has had ample time and opportunity to consult with advisors of Licensee’s own choosing about the potential benefits and risks of entering into this Agreement.

28.5  Licensee acknowledges that it has not received or relied upon, any representation, guaranty, or warranty express or implied, as to the sales volume, income, earnings, expenses, revenues, profits or success of Southern Hospitality BBQ Restaurants or the business venture contemplated by this Agreement.

28.6  Licensee acknowledges and agrees that Company’s officers, directors, employees and agents act only in a representative, and not in a personal, capacity in connection with any of their dealings with Licensee.

28.7  This License Agreement may be signed in one or more counterparts, all of which when taken together constitute one original document.

28.8  Neither party will use the other party’s (or Client’s) name, trademarks, or trade names whether registered or not, in any oral or written marketing-related communication to third parties, including publicity releases and advertising, or customer lists, without such party’s prior written consent.

[Signatures appear on following page]

 

 

36

IN WITNESS WHEREOF, the parties hereto have duly signed, sealed and delivered this Agreement on the day and year first above written.

COMPANY:

SH FRANCHISING & LICENSING, LLC

By:  /s/ Nelson Braff

Name:  Nelson Braff

Title:  Member

LICENSEE:

Southern Hospitality Licensee, LLC

By:  /s/ Mitchell Roth

Name:  Mitchell Roth

Title:  President

Exhibit A

LOCATION

The following is agreed upon as the Location in connection with the License Agreement for site #1 with an effective date of no later than 12/31/15.

Location address:

 

1000 South Colorado Blvd.

Glendale, CO   80246

The Protected Territory is the area within a       2        -mile radius of the Location.

COMPANY:

SH FRANCHISING & LICENSING, LLC

By: /s/ Nelson Braff

Name:  Nelson Braff

Title:  Member

LICENSEE:

Southern Hospitality Licensee, LLC

By:  /s/ Mitchell Roth

Name:  Mitchell Roth

Title:  President

A-1

Exhibit B

CURRENTLY AUTHORIZED

TRADEMARKS

 

 

 

  

A-2

Exhibit C

COMPANY’S PROPRIETARY PRODUCTS

 

 

 

 

 

 

 

A-3

Exhibit D

LICENSEE’S ACKNOWLEDGMENT

The license sale is for more than One Million Dollars ($1,000,000), excluding the cost of unimproved land and any financing received from the Company or an affiliate, and thus is exempted from the Federal Trade Commission’s Franchise Rule disclosure requirements pursuant to 16 CFR 436.8(a)(5)(i).

Date:  2/8/15

LICENSEE:

Southern Hospitality Licensee, LLC

By:  /s/ Mitchell Roth

Name:  Mitchell Roth

Title:  President

 

 

 

 

 

 

A-4

Exhibit E

MUTUAL CONFIDENTIALITY AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A-5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00245-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00245-of-00352.parquet"}]]