Preferred Vendor Agreement

13/92


AMENDED AND RESTATED


PREFERRED VENDOR AGREEMENT


THIS AMENDED AND RESTATED PREFERRED VENDOR AGREEMENT is made effective as of the 15th day of May, 1992 by and between Holiday Inns, Inc. ("HII") and Encore Systems, Inc. ("Vendor") as an amendment to and complete restatement of that certain Preferred Vendor Agreement between the parties hereto executed on August 23, 1991 (the "Original Agreement").


WHEREAS, Vendor is in the business of providing automated computerized property management systems to hotels such as the hotels owned, managed or licensed by HII, Holiday Inns Franchising, Inc. or Affiliates (as that term is defined herein); and


WHEREAS, Vendor desires to provide current and future hotels owned, managed or licensed by Holiday Inns, Inc., Holiday Inns Franchising, Inc. or their Affiliates (such hotels are referred to individually as a "Hotel" and collectively as the "Hotels") with its property management system software by licensing certain software and providing certain services to those Hotels and by developing software to allow Vendor's property management system to interface with Holidex and with certain third party systems so as to provide capabilities to Hotels that are currently provided by HII's Hotel Management System (HMS) and Basic Front Desk System (BFDS); and


WHEREAS, HII is willing to provide certain interface specifications to Vendor and utilize Vendor's property management systems at Hotels pursuant to the terms and conditions of this Agreement;


WHEREAS, HII intends to implement a program whereby HII will provide the Hotels with a basic Property Management System, including Vendor's property management system software and certain computer hardware and devices, and HII desires for Vendor to provide maintenance, training and support for such software.


NOW THEREFORE, for good and valuable consideration, including the additional covenants and obligations of each party created under this amendment to the Original Agreement, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:


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ARTICLE I


DEFINITIONS


1.1 ACCEPTANCE TEST/CERTIFICATION. HII's criteria for evaluating and approving interfaces for use with Holidex. Each specification delivered to Vendor will include the Acceptance Test/Certification criteria for the software to be developed pursuant to the specification. Such criteria may be modified from time to time by HII within its reasonable discretion. The test procedures are outlined on Exhibit 1.1.


1.2 AFFILIATE. Any person or entity that directly or indirectly controls, is ultimately controlled by, or is under common control with HII or Holiday Inns Franchising, Inc., the parent entity or ultimate group parent of either such corporation (or the successors of either such corporation), as well as any partnership, joint venture or other business organization in which HII or Holiday Inns Franchising, Inc. or any person or entity that directly or indirectly controls, is ultimately controlled by, or is under common control with HII or Holiday Inns Franchising, Inc., the parent entity or ultimate group parent of either such corporation (or the successors of either such corporation) is the general partner, the holder of a majority of the limited partnership or other equity interests, or a joint venturer. For purposes of this Section 1.2, a person or entity shall be deemed to control another person or entity (and the persons or entities which it controls) if:


(a) It holds at least twenty percent of the outstanding shares of voting
stock (or securities convertible into at least twenty percent of the
outstanding shares of voting stock);


(b) It has the ability to elect at least one-third of the members of the
Board of Directors or other governing body of the entity; or


(c) It has the right or ability to control or directly influence the
management activities or objectives of the entity.


The term "Affiliate" shall also mean any third party engaged by HII or any other Affiliate to provide installation, training, or implementation with respect to the System Software.


1.3 BASIC PMS SYSTEM. The hardware, software and services provided to the Hotels by HII, or which the Hotels are required by HII to obtain, including Vendor's front desk system software, One Way Interface, the Two Way Interface (as those terms are defined herein), an approved Point of Sale interface, an approved


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Call Accounting interface and support services. The Basic PMS System is more particularly described on Exhibit 1.3.


1.4 HOLIDAY INN TELECOMMUNICATIONS NETWORK. A system of the computerized hardware, software, satellite equipment and services, as may be modified from time to time, owned or licensed to Holiday Inns, Inc. or its Affiliate, including but not limited to the Holidex Reservation System. For purposes of this Agreement, the Holiday Inn Telecommunications Network shall be referred to as "Holidex". Holidex capabilities include, but are not limited to, the handling of reservations (recording, modifying and cancelling), electronic funds transfers, credit authorizations, and travel agent commission payments.


1.5 MIP (MULTIPLE INTERFACE PROCESSOR). Software owned by HII that enables approved third party hotel automation systems to interface with certain LAN based property management systems at Hotels so that data can be sent and received by each system in usable form.


1.6 ONE WAY INTERFACE. A two-way communications link between Holidex and Vendor's system that enables data to be transferred from Holidex to Vendor's systems in a form that is usable by Vendor's System. The specifications for the One Way Interface will be developed by HII.


1.7 PMS SOFTWARE. Vendor's Front Desk System Software, including DB/C, as more particularly described on Exhibit 1.3.


1.8 PREFERRED VENDOR. A vendor of software, hardware and services that meets and maintains HII requirements as set forth in this Agreement, including software development and support requirements and HII's Customer Service Standards. HII's Customer Service Standards are set forth on Exhibit 1.8.


1.9 REVENUE AND OCCUPANCY TRANSMISSION. Daily transmission of a data file containing revenue and occupancy information which is produced by the night audit process in a format specified by HII.


1.10 ROLLOUT. HII's implementation of its plan to provide a Basic PMS System to existing Hotels, commencing on or about June 1, 1992 and continuing thereafter for a period of approximately 28 months.


1.11 SYSTEM SOFTWARE. The Vendor software included and to be included in the Basic PMS System distributed to the Hotels and Affiliates by HII, including PMS Software and the interfaces and software to be developed by Vendor pursuant to this Agreement.


1.12 THIRD PARTY INTERFACE. A two-way communications link between Vendor's system and other vendors' systems that provide


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additional automation to hotel operational functions (e.g. Point of Sale systems, in-room movie systems, credit card readers, energy efficiency systems). Such Third Party Interface will enable data to be transferred to and from Vendor's system and the third party systems in usable form.


1.13 TWO WAY INTERFACE. A two-way communications link between Holidex and Vendor's system that enables data, including but not limited to detailed checkout data and inventory updates data, to be transferred to and from Holidex in a form that is usable by Holidex and by Vendor's system. Time frames for HII's delivery of the specifications for Phase I of the Two Way Interface (for Data Collection/Detailed Checkout) and for the joint development of the specifications for Phase II of the Two Way Interface (for Inventory Updates) are set forth in Article IV.


1.14 SEAMLESS INTERFACE. A communications link between Holidex and Vendor's system that enables all required functions to be performed, including, but not limited to, the functions performed by the Two Way Interface, and that eliminates any and all bridging between Holidex and Vendor's system.


ARTICLE II


PURPOSE


The parties understand and agree that this Agreement has been entered into for the two separate but related purposes described below.


2.1 PMS SYSTEM: ROLLOUT. Vendor will assist HII with the Rollout and the distribution of the System Software by making available to HII the System Software and services to be included within the Basic PMS System to be provided to the Hotels by HII, and by establishing the terms and conditions pursuant to which Vendor and HII will provide training, installation and support services to HII and the Hotels throughout the term of this Agreement. Under this Agreement, the above described services and assistance by Vendor shall relate to hotels located in the United States, Canada and Mexico.


2.2 SOFTWARE DEVELOPMENT. Vendor will develop software to interface with only certain parts of Holidex as specified by HII and only those functions that HII may specifically provide for in this Agreement. This Agreement sets forth the terms and conditions upon which HII will (i) supply specifications to allow Vendor to create the interface software which will become a part of the Basic PMS System, (ii) consult with Vendor in the development of its software, and (iii) test and certify such software for use with Hotels.


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Vendor understands and agrees that Holidex is not only one of the most advanced systems in the hotel industry but that it represents a substantial investment on the part of HII and is in fact one of the primary features that gives value to the Holiday Inn hotel license. Vendor also understands and agrees that the integrity and proper functioning of Holidex is of the utmost importance to HII and that damage to Holidex caused by the interconnection and/or operation of other software or computers could cause severe financial and other harm to HII's business. For this reason, HII will not allow such interconnection without prior testing and written certification by HII of the interface software.


Vendor understands that HII has not previously developed the Two Way Interface and other specifications or testing methods being provided hereunder and is doing so as an accommodation to Vendor.


ARTICLE III


ROLLOUT AND DISTRIBUTION OF PMS SYSTEM


3.1 GENERAL. This Article III addresses the terms and conditions pursuant to which HII and Vendor will cooperate to provide HII's Basic PMS System to the Hotels, including installation and implementation of such system and training of employees and agents of HII and the Hotels, as well as ongoing support and maintenance of the System Software.


3.2 DISTRIBUTION OF SYSTEM SOFTWARE. Subject to the terms and conditions set forth in this Agreement, and in addition to the rights and licenses granted elsewhere in this Agreement, Vendor hereby grants to HII the perpetual, exclusive right and license to (i) market and distribute site licenses and support agreements for the System Software to itself, the Affiliates and the Hotels, either separately or as a component of the Basic PMS System, and (ii) copy and distribute to each Hotel and Affiliate which has executed Vendor's site license agreement, one copy of the most recent version of the PMS Software and all other System Software, including the software and interfaces developed pursuant to this Agreement, any software created, licensed or owned by third parties necessary for the use of the System Software (other than DOS, UNIX or other operating systems, compilers other than DB/C, Novell or other LAN software or Holidex), in machine readable object code only and on such media as HII and the licensee deem appropriate, as well as one or more copies of the user manuals and support documentation associated therewith, one copy of such manuals and documentation to be furnished to HII at no additional cost by Vendor. HII understands that its right to market and distribute the System Software is limited to HII, the Affiliates and the Hotels and agrees not to market or distribute the System Software to any other party without the prior approval of Vendor.


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3.2.1 NUMBER OF SITE LICENSES. HII shall initially be entitled to market and distribute that number of site licenses as defined and set forth on Exhibit 3.2.1 hereto, and shall be entitled to distribute additional site licenses upon payment of the additional fees specified therefor on such Exhibit 3.2.1. HII shall be entitled to distribute copies of the System Software to its Affiliates involved in the training, installation or implementation of the Basic PMS System and any copies so distributed shall not be deducted from the number of licenses which may be distributed by HII without additional payment. Any Affiliate receiving the System Software for HII shall execute a Site License or similar agreement appropriately restricting its use to such purposes. Vendor's software modules not included within the System Software and other software and interfaces developed by Vendor pursuant to this Agreement may be licensed or distributed by HII to the Hotels and Affiliates pursuant to the terms of the Site License (as defined below) and upon the rates set forth in Exhibit 3.2.1.


3.2.2 LICENSE AGREEMENTS. The System Software shall be licensed pursuant to the terms and conditions contained in Vendor's site license agreement as set forth on Exhibit 3.2.2 hereto (the "Site License" ). The Site License specifies the terms and conditions under which an end user receives, holds and uses the System Software and the associated manuals and support documentation, as well as the respective obligations of the end user and Vendor. The Site License shall grant any and all appropriate rights to use software created, licensed or owned by third parties, other than DOS, UNIX or other operating systems, compilers other than DB/C, Novell or other LAN software or Holidex, that is necessary for the use of System Software. Neither Vendor nor HII shall change or modify the terms of the Site License without the written approval of the other, which approval will not be withheld unreasonably. Following the approval of any modified form of Site License, HII shall discontinue its use of the previous form of license and shall thereafter market and distribute the System Software only pursuant to the terms of the modified Site License. Vendor agrees to execute and deliver Site Licenses for the Hotels and HII and the Affiliates upon request and without payment of any additional consideration therefor.


3.2.3 RESTRICTIONS. HII shall make no representations or warranties to the Hotels or any third party attributable to Vendor with respect to the System Software or any other product of Vendor, except for those made expressly by Vendor in the Site License or Vendor's published user documentation. HII understands that any modification or addition to the System Software by HII, the Affiliates or


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any Hotel that is not performed in accordance with Section 4.4 of this Agreement will void Vendor's warranty for such software. Notwithstanding any provisions of this Agreement to the contrary, HII agrees that it will not distribute or license the System Software to any hotel other than hotels which are either owned or leased by or which use or are licensed to use the proprietary marks or logos of HII, Holiday Inns Franchising, Inc. or any Affiliate, unless Vendor approves in advance of the licensing or distribution of the System Software to such hotel, which approval shall not be unreasonably withheld, conditioned or delayed.


3.2.4 OPTIONAL RIGHT TO SUBLICENSE TO HOTELS. It is understood and agreed by the parties hereto that HII does not presently intend to sublicense the System Software, but will simply be distributing the System Software to the Hotels for the benefit of Vendor. Nevertheless, Vendor agrees that in the event HII desires to grant sublicenses to Hotels or Affiliates for the System Software, HII shall be entitled to do so upon advance notice to Vendor and provided that the terms and conditions of any such sublicense contain provisions substantially the same as those in the Site License which protect the proprietary rights of Vendor and do not expand the scope of Vendor's obligations beyond that included in the most recent version of the Site License and HII otherwise complies with the terms and conditions of this Agreement.


3.2.5 CERTIFICATION OF BASIC PMS SYSTEM. Vendor has reviewed the configuration of the Basic PMS System described on Exhibit 1.3 hereto. Vendor represents and warrants that the System Software, when properly installed as part of the Basic PMS System will operate substantially in accordance with the specifications for the System Software as set forth in the System Highlights attached as Exhibit 3.2.5 hereto and as provided in the user documentation provided for such software. The foregoing warranty applies only to the Basic PMS System as described on Exhibit 1.3 and the equipment listed on the schedule of equipment set forth in Exhibit 3.2.5, which schedule may be amended from time to time as the parties both agree, and shall not apply to any additional software or hardware added to the system without the prior written approval of Vendor. Except for the above-described certification, Vendor makes no representation or warranty as to the equipment supplied by anyone other than Vendor.


3.2.6 AUTHORITY. Vendor represents and warrants to HII that it has the right and the authority to grant to HII, the Affiliates and the Hotels, the rights and licenses set forth in this Agreement and contemplated by the Exhibits attached hereto.


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3.3 DELIVERIES. Within ten (10) days following HII's request, Vendor shall deliver to HII, in machine readable form and on media acceptable to HII (i) two copies of the complete object code for the PMS Software and those interfaces that have passed the HII Acceptance Test and have been certified in writing by HII in a format which will enable HII to generate sufficient copies of executable versions of the System Software for distribution as contemplated by this Article III, (ii) one complete copy of the most recent version or edition of all end user documentation and manuals, and such additional copies of such materials as HII may request (provided that HII shall reimburse Vendor for its costs in preparing such copies), and (iii) two complete copies of all training manuals, materials, tutorials and other documents in Vendor's possession which are customarily used by Vendor in training new users of the PMS Software. Vendor will deliver to HII copies of all upgrades, enhancements and modifications to the System Software, together with one copy of any new or revised user documentation and other materials described in this Section 3.3, prior to their approval for general release. Vendor will provide HII with an additional copy of the user manual, training materials and other items described in this Section 3.3, promptly following each revision or modification thereto by Vendor.


3.3.1 RETROFITTING. The parties recognize that some Hotels have
purchased property management systems from Vendor previously, and that
other Hotels and Affiliates will take delivery of the Basic PMS System from
HII prior to completion of all required interface and software development
being performed by Vendor pursuant to Article IV hereof. At the time of
development completion of each interface or other component of the System
Software, HII shall determine the most efficient manner of distribution of
the newly developed interfaces and software to Hotels and HII and the
Affiliates who have executed Site Licenses for the System Software and such
distribution shall be implemented by Vendor in cooperation with HII as a
part of its software support obligations. All such software distributed to
licensees shall become a part of the "System Software" upon receipt by the
licensee. HII will pay the cost of distribution of the newly developed
interfaces and software (but not upgrades or enhancements to the System
Software) to such Hotels and Affiliates, including telephone expenses if
distribution is accomplished via telephone. Vendor will instruct Hotels and
Affiliates on the proper installation and usage of the software and
interfaces. If on-site visits by Vendor are necessary, as determined by
HII, Vendor will perform such on-site visits and either HII or the Hotels
and Affiliates will be billed according to Exhibit 3.3.1.


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3.3.2 UPGRADES AND ENHANCEMENTS. Pursuant to the Support Agreement to
be entered into by Vendor with each of the Hotels, Vendor will agree to
provide ongoing support and maintenance of the PMS Software and other
System Software developed pursuant to this Agreement. Vendor will provide
HII with advance notice and copies of all upgrades, enhancements and
modifications to the PMS Software and other System Software distributed by
HII or developed by Vendor pursuant to this Agreement, together with any
support documentation associated therewith. Vendor will not distribute such
upgrades, enhancements and modifications to the Hotels and Affiliates until
the same has been evaluated and approved by HII or its designee. If any
upgrades, modifications and enhancements to the System Software are
approved by HII, Vendor will provide HII with two copies of such software
and all associated user documentation therefore, and shall also deliver the
source code and other requisite materials into escrow as provided below.
Distribution to the Hotels and Affiliates of all upgrades, enhancements and
modifications approved by HII shall be performed by Vendor as a part of its
support obligations described in Section 3.5 below; provided, however, that
if such upgrade, enhancement or modification requires on-site installation
or training, Vendor shall provide such services only at the specific
request of HII at the rates set forth in Exhibit 3.3.1. Vendor shall
provide annually a minimum of one upgrade to the System Software.


3.3.3 ESCROW ARRANGEMENT. At the time of execution of this Agreement,
Vendor will place with an escrow agent acceptable to HII, to the extent
such materials are available, copies of all components of the System
Software consisting of the full source code language of each component of
the System Software, including, but not limited to, utilities and
interfaces in magnetic tape or other media specified by HII, together with
complete system programming, maintenance documentation, including, but not
limited to, system documentation describing the interrelationships and
functions of each module and component, and all other necessary and
available information which will enable a reasonably skilled computer
programmer or analyst to reconstruct, maintain, or enhance the System
Software without the aid of Vendor or any other person or reference to any
other materials. Similar materials relating to the interfaces and other
software developed by Vendor pursuant to this Agreement, and all upgrades,
modifications, enhancements and corrective releases shall be delivered to
the escrow agent promptly following acceptance by HII, but no later than
the next quarterly deposit date following the date of general release or
release to the Hotels. The foregoing information and materials are
hereinafter referred to as the "Materials". The Materials will be held in
escrow


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by the escrow agent pursuant to the terms of the escrow agreement in the
form attached as Exhibit 3.3.3 hereto (the "Escrow Agreement"). The escrow
agent may from time to time inspect and test the Materials to ensure that
the Materials are sufficient to allow a reasonably skilled computer
programmer or analyst to reconstruct, maintain, or enhance the System
Software without the aid of Vendor or any other person or reference to any
other materials. If the Materials deposited by Vendor are insufficient for
such purpose, Vendor shall deposit such additional Material as HII or the
Escrow Agent may request, regardless of whether or not such material is
readily available to Vendor or must be specifically created. Upon the
occurrence of any of the events described in Section 2(a) or Section 3 of
Article V of the Escrow Agreement, HII shall be entitled to obtain the
Materials from Vendor (at no cost to HII) or the escrow agent (pursuant to
the terms of the Escrow Agreement), and HII shall be entitled to use the
Materials as it may deem necessary or desirable in order to exercise any of
the rights and benefits afforded to HII, the Affiliates or the Hotels under
this Agreement or the Escrow Agreement. HII will pay the reasonable cost of
maintaining the Materials in escrow and will have title to the copies of
the Materials and full rights to use and license the System Software in
executable code to Hotels and Affiliates upon the occurrence of any of the
events set forth in Section 2(a) or Section 3 of Article V of the Escrow
Agreement; provided, however, in the event HII does license the System
Software, HII shall be required to pay the license fees set forth on
Exhibit 3.2.1 (for additional Site Licenses above the number for which HII
has prepaid), provided that Vendor has continued as a going concern or its
successor continues to fully support the System Software.


3.4 INSTALLATION AND TRAINING. Installation, implementation and training with respect to the System Software and the Basic PMS System will be performed either by Vendor or HII (or its subcontractors or other designees) in accordance with the following procedures.


3.4.1 INITIAL TRAINING BY VENDOR. In addition to services provided by
Vendor pursuant to Sections 3.4.2 and 3.4.4 below, commencing with the
beginning of the Rollout and continuing thereafter through the completion
of the training of HII personnel contemplated by Section 3.4.5 (but in any
event through January 31, 1994), Vendor will install and implement the
Basic PMS System, including the equipment and the System Software, and
train the designated employees of the Hotels and Affiliates in the use of
the Basic PMS System, but only for those Hotels and Affiliates designated
in writing by HII. Vendor acknowledges that such Hotels may consist of (i)
Hotels that were existing Holiday Inn brand


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hotels on March 31, 1992 and obtained the Basic PMS System from HII
pursuant to the Rollout ("Existing Hotels"), (ii) Hotels that become
Holiday Inn brand hotels after March 31, 1992 ("New Hotels"), and (iii)
Hotels that have obtained equipment and PMS Software from Vendor prior
to the date of this Agreement ("Vendor Supplied Hotels") but for which
installation, implementation and training has not yet commenced.
Vendor's installation, implementation and training services shall
include those services described in Exhibit 3.3.1 hereto and comply with
HII's service standards as set forth in Exhibit 1.8 to this Agreement.
Vendor will be available to provide installation, implementation and
training at the ...