Hotel Revenue Sharing Lease Agreement

Exhibit 10.18


HOTEL REVENUE SHARING LEASE AGREEMENT


THIS HOTEL REVENUE SHARING LEASE AGREEMENT (this "Agreement" or "Hotel Revenue Sharing Lease Agreement") is dated *3 and entered into by and between RoomSystem Technologies, Inc., ("RoomSystem") a Nevada corporation having its principal office and place of business at 3770 Howard Hughes Parkway, Suite 175, Las Vegas, Nevada, 89109 and *1 ("Hotel"), a *9 corporation, having its office and place of business at *2.


IN CONSIDERATION of the mutual agreements set forth hereinafter, the parties agree as follows:


1. Leased Equipment. This Agreement and each Equipment Schedule (as defined below) entered into under this Agreement shall describe the equipment leased under this Agreement and shall be subject to all terms and conditions of this Agreement as such Agreement may from time-to-time be amended. Each Equipment Schedule to be entered into between RoomSystem and Hotel pursuant to this Agreement shall be in the form annexed hereto as Attachment I (the "Equipment Schedule"). Each Equipment Schedule shall be enforceable according to the terms and conditions contained therein and such terms and conditions are incorporated into this Agreement. Capitalized terms not otherwise defined in this Agreement shall have the meanings ascribed to such terms in each Equipment Schedule. In the event of a conflict between the terms of this Agreement and any Equipment Schedule, the terms of the Equipment Schedule shall prevail with respect to that Equipment Schedule. RoomSystem agrees to place with Hotel, and Hotel agrees to accept and lease from RoomSystem, in accordance with the terms and conditions herein, the equipment and features together with all replacements, parts, repairs, additions, attachments and accessories related thereto (collectively called the "Equipment" and individually called a "Placed Item") described in each executed Equipment Schedule. Hotel shall have no right, title or interest in the Equipment, except as expressly set forth in this Agreement. RoomSystem and Hotel shall have no obligation hereunder until the execution and delivery of an Equipment Schedule by RoomSystem and Hotel.


2. Term Payments and Termination. The term (the "Term") of this Agreement shall commence on the date set forth above and shall continue thereafter so long as any Equipment Schedule entered into pursuant to this Agreement remains in effect.


The lease term and lease payment for the Equipment shall be as stated herein and in the respective Equipment Schedule(s). At the end of such lease term provided no Event of Default has occurred and is continuing, Hotel shall have the option exercisable on no less than 135 days prior written notice to RoomSystem to (A) purchase the Equipment for its then Fair Market Value (as hereinafter defined), or (B) renew the Equipment Schedule under mutually acceptable terms, or (C) terminate the Equipment Schedule according to its terms. Upon payment in full of the amount required to exercise Hotel's option to purchase the Equipment, RoomSystem shall transfer its right, title and interest in the Equipment to Hotel "AS-IS WHERE IS," without any express or implied representations or warranties whatsoever concerning the condition of the Equipment. If, upon the termination of the applicable Equipment Schedule as to any Placed Item, Hotel fails or refuses to return and deliver possession of Placed Item to RoomSystem pursuant to Section 15 hereof within ten (10) business days after the expiration of the term of the Equipment Schedule, in addition to all other rights and remedies available to RoomSystem, Hotel shall be liable to RoomSystem for the Fair Market Value of such Placed Items until returned to RoomSystem as well as all other damages incurred by RoomSystem.


All Payments (hereinafter defined) shall, unless otherwise directed by RoomSystem in writing, be made to RoomSystem on the Payment Date (hereinafter defined) by electronic transfer of funds, and Hotel shall execute all authorizations necessary for such electronic transfers. If the Payment Date is not a business day, Payments for such period shall be due on the next business day. Any Payment not made by the related Payment Date shall be subject to a late payment fee of ten percent (10%) of the outstanding Payment amount.


3. Acceptance, Warranties and Limitation of Liability. Hotel shall execute and deliver to RoomSystem a certificate of acceptance (the "Certificate") in the form of Exhibit A to the Equipment Schedule with respect to each Placed Item installed at the Hotel, acknowledging its acceptance of each such Placed Item. Hotel represents and agrees that, as of the date each Placed Item is accepted pursuant to a Certificate ("Acceptance Date"), such Certificate shall be conclusive evidence that each Placed Item is of a size, design, capacity and manufacture selected by Hotel and that Hotel has inspected such Placed Item, found it to be in good order, and unconditionally accepts such Placed Item(s), subject to any right or remedy Hotel may have against the manufacturer or supplier thereof. Notwithstanding any relationship between RoomSystem and any manufacturer, supplier or Servicer of the Equipment, RoomSystem shall have no liability to Hotel for any claim, loss or damage caused or alleged to be caused directly, indirectly, incidentally or consequentially by the Equipment, by any inadequacy or deficiency thereof or, defect therein, by any incident whatsoever in connection therewith, or in any way related to or arising out of this Agreement whether arising


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in contract, strict liability, negligence or otherwise. Hotel shall not assert any claims, counterclaims, or defenses against RoomSystem for consequential, special or indirect damages, or for loss of use or loss of profits. RoomSystem makes no express or implied warranties of any kind, including those of merchantability, durability, or fitness for a particular purpose or use with respect to the Equipment and expressly disclaims the same. Hotel understands and agrees that: (A) RoomSystem, Inc. is the supplier of the Equipment; (B) Article 2A of the Uniform Commercial Code (or any state law equivalent) entitles Hotel to enforce against the supplier or manufacturer of the Equipment warranties made about the Equipment to RoomSystem; and (C) That Hotel may communicate with the supplier or manufacturer and receive a copy of the promises, warranties, or disclaimers made. Hotel will be entitled to the benefit of any applicable manufacturer's warranties, and to the extent assignable, such warranties are hereby assigned by RoomSystem for the benefit of Hotel, and Hotel shall take all reasonable action to enforce such warranties where available to Hotel.


4. Assignment, Obligation to Make Payments Unconditional. RoomSystem may assign or sell all or a portion of its right, title and interest in and to the Equipment, any Placed Item, this Agreement, and/or any Equipment Schedule, and/or grant a security interest in the Equipment, any Placed Item, this Agreement, and/or any Equipment Schedule, to any other party (any such party is referred to herein as "Assignee"); provided, however, any such assignment or sale shall not relieve RoomSystem of any of its obligations hereunder. Hotel hereby: (A) Consents to such sales, assignments and/or grants; (B) Agrees to execute promptly and deliver such further acknowledgments, agreements and other instruments as may be reasonably requested by RoomSystem or any Assignee to effect such assignments and/or grants; and (C) Agrees to comply fully with the terms of any such assignments and/or grants. In the event of an assignment, Assignee shall have all rights and benefits of RoomSystem under this Agreement, but Assignee shall not be obligated to perform the obligations of RoomSystem hereunder unless Assignee expressly agrees to do so in writing. Hotel agrees that its obligation to pay all Payments and other sums payable hereunder and the rights of RoomSystem and Assignee in and to such Payments, are absolute and unconditional and are not subject to any abatement, reduction, set off, defense, counterclaim or recoupment due or alleged to be due, to or by reason of, any past, present or future claims which Hotel may have against RoomSystem, Assignee, any manufacturer, supplier, seller or Servicer, defined hereinafter, of the Equipment, or against any person for any reason whatsoever. Hotel shall have no right to assign this Agreement, any Equipment Schedule, or the Maintenance Agreement, or to sublease the Equipment without the express prior written consent of RoomSystem, which consent shall not be unreasonably withheld.


5. Installation, Maintenance and Repair. Hotel, at its expense, shall be responsible for the delivery, installation, de-installation, redelivery, maintenance and repair of the Equipment, all of which shall be effected by the Servicer (defined in this paragraph) or such other party acceptable to RoomSystem. Hotel agrees, at all times during the Term of this Agreement, at its sole expense, to keep the Equipment in good repair, condition and working order, and to furnish all parts, mechanisms or devices which may be required in the course of so doing. Hotel will at all times during the Term of this Agreement, maintain in force a Hotel Installation, Maintenance and License Agreement (the "Maintenance Agreement"), covering the Equipment with the manufacturer or supplier of the Equipment, or such other party as may be acceptable to RoomSystem (such party the "Servicer"). RoomSystem or Assignee will have the right, but not the obligation, to inspect the Equipment during reasonable business hours. Hotel shall provide Servicer access to the Equipment to install at no charge to Hotel engineering changes which RoomSystem or Servicer deems necessary to keep the Equipment at current engineering levels. As a material inducement for RoomSystem to enter into this Agreement with Hotel on a "revenue sharing basis" Hotel shall:


(A) Purchase and maintain an inventory level of Merchandise so as to maximize the revenue generating capability of the Equipment;


(B) Review the "restocking report" and inspect each Placed Item which has been used within one (1) day after a guest has checked out of the Hotel premises and prior to allowing the room to be occupied by a new guest, but not less than once every month;


(C) Determine during each such inspection whether: (i) such Placed Item requires refilling of Merchandise to reach full capacity; (ii) such Placed Item is ready for the next guest as outlined in the operation and procedures manual provided by Servicer (the "Manual"); and/or (iii) any Merchandise is missing from a Placed Item and not reported as a sale, and shall then record missing Merchandise as a sale to any guest's folio as outlined in the Manual;


(D) Fully stock to at least minimum restock level each Placed Item with Merchandise prior to allowing the room to be occupied by a new guest;


(E) Provide all point-of-sale and printed menus as required by Servicer to maximize sales volumes;


(F) Provide and maintain the necessary dedicated telephone lines and internet access, if available, at Hotel's sole expense, and to provide a MATV and/or telephone system that meets the specifications of Servicer


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permitting communication of data between the Equipment, the required computer to operate the Equipment (the "System") and Servicer's (or its affiliates) central office;


(G) Provide grounded outlets within six feet (6'), and a MATV connector or RJ-45 direct-connect socket within twelve feet (12') of the location of each Placed Item in each guest room on the Hotel premises (the "Premises");


(H) Be responsible for the unloading of the Equipment upon delivery and promptly placing the Equipment into the guest rooms upon arrival;


(I) Take all actions and pay all costs necessary to cause the System to interface with Hotel's computer system;


(J) During the Term of this Agreement, permit the employees and/or representatives of RoomSystem or Servicer to stay as a guest in the Hotel, in a standard double occupancy room, free of charge for room and reasonable board, for a total of three (3) days per Contract Year (as hereinafter defined) when visiting the Hotel for the purpose of inspecting the Equipment, and at other times for a total of five (5) days per Contract Year at a rate equal to fifty percent of the corporate discount room rate, subject to availability, upon at least one days' prior notice to Hotel; provided, however, such room and board shall not include long distance phone calls, use of personal laundry valet, in-room movies, gift shop purchases, alcoholic beverages, or any other charges other than room and reasonable board;


(K) Remove all vending machines from the floors that might compete with the Equipment; and


(L) Perform all of the above obligations in a manner satisfactory to RoomSystem.


6. Representations and Warranties. Hotel represents and warrants for the benefit of RoomSystem and any Assignee (as defined hereinafter) and if requested by RoomSystem will provide an opinion of counsel and other supporting documents reasonably requested by RoomSystem to the effect that, at the time of execution of this Agreement and of each Equipment Schedule:


(A) Hotel is a legal entity, duly organized, validly existing and in good standing under the law of the jurisdiction where the Equipment will be located and has adequate power to enter into and perform this Agreement and each Equipment Schedule and Maintenance Agreement executed hereinafter;


(B) This Agreement and each Equipment Schedule and Maintenance Agreement executed hereinafter has been duly authorized, executed and delivered by Hotel and together constitute a valid, legal and binding agreement of Hotel, each enforceable in accordance with its terms;


(C) The entering into and performance of this Agreement and each Equipment Schedule and Maintenance Agreement executed hereinafter will not violate any provision of Hotel's articles of incorporation or bylaws, and to the best of Hotel's knowledge, will not violate any judgment, order, or result in any breach of, or constitute a default under, or result in the creation of any lien, charge, security interest or other encumbrance upon any assets of Hotel or on the Equipment of this Agreement pursuant to any instrument to which Hotel is a party or by which it or its assets may be bound pursuant to any law or regulation applicable to Hotel;


(D) To the best of Hotel's knowledge there are no actions, suits or proceedings pending or, threatened, before any court, administrative agency, arbitrator or government body which will, if determined adversely to Hotel, materially adversely affect its ability to perform its obligations under this Agreement, any Equipment Schedule or the Maintenance Agreement, executed hereinafter or any related agreement to which Hotel is a party;


(E) To the best of Hotel's knowledge, Hotel is not in any material default under any loan or lease agreement; and


(F) That all financial information and other information furnished to RoomSystem or any other party in connection with this Agreement was, at the time of delivery, true and correct in all respects; and that there has been no material adverse change with respect to such financial information from the date of delivery by the Hotel to the date of this Agreement.


7. Risk of Loss and Damage.


(A) Hotel agrees to bear the entire risk of loss with respect to any damage, destruction, loss, or theft of the Equipment and any Placed Item, whether insured or not, whether such loss is partial or complete and from any cause at all, whether or not through any default or neglect of Hotel (except if such damage, destruction, loss or theft arises from the gross negligence or willful misconduct of RoomSystem) from the Acceptance Date, until the later of the date such Placed Item is removed from the Hotel by RoomSystem or thirty (30) days after such Placed Item is returned pursuant to Section 15 hereof. Except as provided in this Section 7, no such event shall relieve Hotel of its obligation to make Payments hereunder.


(B) If any Placed Item is damaged and capable of repair, Hotel must promptly notify RoomSystem, and within sixty (60) days of such damage shall, at Hotel's expense, cause such repairs to be made as are necessary to return such Placed Item to its condition prior to such damage.


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(C) In the event any Placed Item is destroyed, damaged beyond repair, lost or stolen, (an "Event of Loss"), Hotel must promptly notify RoomSystem and Assignee and pay to RoomSystem or Assignee, as the case may be, on the second Payment Date following the Event of Loss, an amount equal to the Manufacturer's List Price (as defined in the relevant Equipment Schedule) and all Payments accrued on any such Placed Item up to such second Payment Date. Upon payment of such amounts in full, Hotel's obligation to pay any further Payments will cease with respect to such Placed Item(s) (but not with respect to any of the remaining Equipment) and Hotel will be entitled to receive any insurance proceeds or other recovery received by RoomSystem or Assignee in connection with such Event of Loss.


8. Insurance. Hotel, at its sole expense, shall insure the Equipment against all risks and in such amounts as RoomSystem reasonably requires (but not less than the aggregate Manufacturer's List Price, as defined in the relevant Equipment Schedule), of all Placed Items set forth in the Equipment Schedule(s) with carriers reasonably acceptable to RoomSystem and shall maintain a loss payable endorsement in favor of RoomSystem and Assignee affording them such additional protection as they reasonably require; and shall maintain liability insurance reasonably satisfactory to RoomSystem. Such insurance policies shall insure against, among other exposures, bodily and personal injury, property damage liabilities, and other risks customarily insured against by Hotel on equipment owned by Hotel. All such insurance policies must name RoomSystem, Hotel and Assignee as insured and loss payees, and must provide that such policies may not be canceled or altered without at least thirty (30) days prior written notice to RoomSystem and Assignee. Each insurer is hereby authorized and directed to make payment for any Loss directly to RoomSystem or its Assignee. If Hotel does not provide RoomSystem or its Assignee evidence of insurance acceptable to RoomSystem or its Assignees, RoomSystem has the right, but not the obligation, to obtain insurance covering the Equipment from an insurer of RoomSystem' choice. RoomSystem may add the costs of acquiring and maintaining such insurance and all fees for RoomSystem' services in placing and maintaining such insurance (collectively, "Insurance Charge") to the Payments due from Hotel under this Agreement. Hotel will pay the Insurance Charge in equal installments allocated to the remaining Payments (plus interest on such allocation at 1.5% per month or, if less, the maximum rate allowed by law). If RoomSystem purchases insurance, Hotel will cooperate with RoomSystem' insurance agent with respect to the placement of insurance and the processing of claims. Nothing in this Agreement will create an insurance relationship of any type between RoomSystem or its Assignee and any other person. Hotel acknowledges that RoomSystem and its Assignee are not required to secure or maintain any insurance, and RoomSystem and its Assignee will not be liable to Hotel if RoomSystem or its Assignee terminate any insurance coverage that RoomSystem or its Assignee arrange. If RoomSystem or its Assignee replace or renew any insurance coverage, RoomSystem or its Assignee are not obligated to provide replacement or renewal coverage under the same terms, cost, limits or conditions of the previous coverage.


9. Indemnity. Hotel agrees to indemnify, hold harmless and defend, RoomSystem, Assignee and Servicer and any of their officers, directors or employees and their successors and assigns (all such parties the "Indemnified Parties") from and against any and all claims, demands, actions, suits, proceedings, costs, expenses, damages and liabilities, at law or in equity, whether based on a theory of contract, negligence, strict liability or otherwise, including reasonable attorneys' fees related thereto, arising out of, connected with, or resulting from, this Agreement, any Equipment Schedule executed hereunder, the Maintenance Agreement or the Equipment, including without limitation, the manufacture, selection, purchase, delivery, possession, condition, use, lease, operation or return thereof, or any defects in the Equipment, except to the extent a claim has arisen from such Indemnified Party's own gross negligence or willful misconduct (as opposed to any vicarious liability). Hotel's obligations hereunder will survive the expiration of this Agreement with respect to acts or events occurring or alleged to have occurred prior to the return of the Equipment to RoomSystem at the end of the Term.


10. Liens and Taxes. RoomSystem owns and holds title to the Equipment. Hotel will, at its sole expense, keep the Equipment free and clear of all levies, liens and encumbrances. Hotel will declare and pay to the appropriate governmental authorities when due all license fees, registration fees, assessments, charges and taxes, whether municipal, state or federal (foreign and domestic), including but not limited to, sales and excise taxes, and penalties and interest with respect thereto, excluding, however, any use or property taxes or any taxes measured solely by RoomSystem' net income. Hotel shall provide evidence of any payment hereunder upon request of RoomSystem. Hotel's obligations hereunder will survive the expiration of this Agreement with respect to liens or taxes accruing or attaching or alleged to have accrued or attached prior to the return of the Equipment to RoomSystem at the end of the term of the applicable Equipment Schedule(s).


11. Hotel's Failure to Perform. After the occurrence of an Event of Default (as described hereinafter), RoomSystem has the right, but not the obligation, and without releasing Hotel from any obligation hereunder, to make or do the same, to pay, purchase, contest or compromise any encumbrance, charge or lien which, in the reasonable judgment of RoomSystem, appears to affect the Equipment or this Agreement and, in exercising any such rights, incur


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any liability and expend whatever amount in RoomSystem' reasonable discretion RoomSystem may deem necessary therefor. A ...