FINANCING
INITIAL FEE INSTALLMENT NOTE
At our sole discretion and on
approval of your credit, we may finance up to ''A of the Affiliation Fee at an
interest rate of 8%, with the other Vi of the Affiliation Fee due when
the Membership Agreement is signed. In that event, you must sign an installment
note, see Exhibit H. Note payments are due on a monthly basis for a maximum of
12 months with the first payment (amount financed + 12) generally due one month
after the note is signed. The note may be accelerated upon default and provides
for a waiver of presentment, demand for payment, notice of dishonor, protest,
and includes a confession of judgment clause. Personal guarantees may be
required. The note contains no pre-payment penalty.
MINORITY DEVELOPER INCENTIVE
PROGRAM
- Development Loan
We are currently offering an
incentive program to encourage African-American, Hispanic-Latino and Native
American entrepreneurs to franchise our brands ("Minority Developer
Incentive Program"). The Minority Developer Incentive Program is intended
to address the historic under-representation of these groups in the hospitality
industry and involves our commitment of capital to provide development loans to
qualifying franchisees that commit to either building an ASCEND COLLECTION
Hotel, or converting an existing hotel to an ASCEND COLLECTION Hotel.
To qualify for the Minority
Developer Incentive Program, you must meet all of the following conditions: you
must request the Minority Developer Incentive at the time of application; you
must meet our then-current qualifications for new franchisees (including our
standard credit review); you must own the Hotel; if you are an individual, you
must be a member of one of the minority groups identified above; if you are a
legal entity, you must be at least 51% legally and beneficially owned by
persons of one or more of the minority groups identified above; and the
Minority Developer Incentive may not be combined with any other incentive
program that we may be offering at the time of your application. We may
discontinue the Minority Developer Incentive Program at any time.
Each development loan we make
for an ASCEND COLLECTION Hotel will be for $1,500 per room in the Hotel
(maximum of $125,000 with a limit of one development loan under the Minority
Developer Incentive per individual franchisee, franchisee entity, or their
affiliates). Each loan will be evidenced by a 10-year forgivable promissory
note (attached as Exhibit I to this Disclosure Document (the
"Note")). We will pay the loan proceeds to you only after the Opening
Date of your Hotel. You may use the proceeds of the Note for any purpose related
to the Hotel. We do not require any security for this Note, but may require
personal guaranties. Forgiveness of the Note will be amortized over 10 years
(beginning on the Opening Date of your Hotel) using a straight-line method, so
that the Note will be completely forgiven if you do not commit certain defaults
under your Membership Agreement for 10 years after the Hotel opens. The Note is
structured to provide for 1 payment at the end of 10 years; however, you do not
have to make payments on the Note if you remain in good standing under your
Membership Agreement. If you default in payments due us under your Membership
Agreement, your Membership Agreement is terminated, you sell the Hotel, you die
or you file for bankruptcy, then the entire remaining unforgiven principal
balance is immediately due along with interest (accruing on the remaining
unforgiven balance only) from the original date of the Note at an interest rate
of prime plus 2%. Under the Note, you must waive demand, presentment for
payment, protest, notice of dishonor and your right to a jury trial. On your
default, you also must pay all reasonable expenses, costs and attorneys'' fees
that we incur in collecting the Note.
In addition, neither you nor
Choice may terminate the Membership Agreement, without cause, until the 10th
anniversary of the Opening Date. Accordingly, you and Choice must waive your
respective rights to terminate the Membership Agreement, without cause, on the
5th anniversary of the Opening Date. See the Minority Developer
Incentive Addendum attached as Exhibit I and Item 17.a, d and e of this
Disclosure Document for additional information.
MINORITY DEVELOPER INCENTIVE - Reduced Affiliation Fee
for Relicensed Hotels
If you: (1) qualify for the
Minority Developer Incentive Program; and (2) purchase a hotel that is a Choice
brand hotel operating as part of the Choice System of hotels at the time of
purchase; and (3) enter into a Membership Agreement with Choice to relicense
the hotel as a Choice brand hotel, you will be granted a 50% discount on the
then-current Affiliation Fee due in connection with your Membership Agreement.
PMC
We have entered into a
non-exclusive qualified vendor agreement with a third party named PMC
Commercial Trust (previously known as PMC Capital, Inc.) ("PMC")
under which PMC offers conventional and Small Business Administration
("SBA") financing to those of our franchisees that choose to use PMC
to finance some of the following costs: initial franchise fee, site
acquisition, construction or remodeling, equipment and/or fixtures, opening
inventory or supplies, ongoing inventory or supplies, replacement of equipment
of fixtures, and other continuing expenses. These loans are generally for up to
70% to 80% of the value of the collateral and range from $300,000 to $7,000,000
for acquisitions, refinances and construction/permanent loans.
Interest rates are either fixed
or variable and are at PMC''s discretion. You are not required to use PMC as
your lender. If you choose to use PMC as your lender, you must enter into
agreements with PMC, substantially in the form attached as Exhibit J. The loan
will be for 15 to 20 years and will require monthly payments, with the amount
of the payments based on the agreed upon terms. You must grant a first lien on
land and building, a first lien on furniture, fixtures and equipment and, if
necessary, a lien on your personal assets. PMC will require that you personally
guarantee the loan. The loans can be pre-paid, but there may be a pre-payment
penalty.
If your payment is not received
within the time period allowed by the loan documents, you must pay a late fee
for all payments of the lesser of 5% of the unpaid amount of the payment, or
the maximum permitted by law. If you default on the note, the entire remaining
principal balance becomes due. You must waive your rights to presentment for
payment, demand, protest, notice of non-payment or dishonor, notices of protest
and all other demands or notices. On default, the note will bear interest at
the maximum rate permitted by applicable law. You must also pay PMC all the
costs of collection or costs of exercising its remedies, including attorneys''
fees. You must waive your right to object to jurisdiction in the courts of Dallas, Texas as the venue for the resolution of disputes and must waive your right to a
trial by jury. See the sample documents in Exhibit J for PMC''s additional
rights and remedies.
In consideration of Choice''s
agreement with PMC, Choice will receive a flat payment annually. In addition,
Choice will receive from PMC a fee of .125% of service transactions with Choice
franchisees.
AMERICAN FINANCIAL GROUP
We have entered into a
non-exclusive qualified vendor agreement with a third party named American
Financial Group, Inc. ("American Financial Group") under which
American Financial Group offers financing to those of our franchisees that
choose to use American Financial Group to finance some of the following costs:
initial franchise fee, site acquisition, construction or remodeling, equipment
and/or fixtures, replacement of equipment of fixtures, and other continuing
expenses. These loans or leases are generally for up to 100% of the value of
the collateral and range from $10,000 to $2,000,000 for acquisitions,
refinances and construction/permanent loans.
Interest rates are fixed and
are at American Financial Group''s discretion. You are not required to use
American Financial Group as your lender. If you choose to use American Financial
Group as your lender, you must enter into an Equipment Finance Agreement with
American Financial Group, substantially in the form attached as Exhibit J. The
loan or lease will be for 5 to 7 years and will require monthly payments, with
the amount of the payments based on the terms agreed upon. You must grant a
lien on furniture, fixtures and equipment and, if necessary, on your personal
assets. American Financial Group will require that you personally guarantee the
loan. The loans can be pre-paid, and there may be a pre-payment penalty.
If your payment is not received
within the time period allowed by the loan documents, you must pay a late fee
for all payments of the lesser of 15% of the unpaid amount of the payment plus
an interest charge of 1.5% of the amount outstanding per month for every month
after a part of a payment is late, or the maximum permitted by law. If you
default on the note, American Financial Group may take any or all of the
following actions without notice to you: (1) at your expense, repossess any
equipment without court order or other legal process; (2) sell the equipment at
a public or private sale and credit you for the proceeds (after deducting any
costs associated with the sale); (3) accelerate all sums due under the Equipment
Finance Agreement; (4) start a legal action against you for all sums due under
the Equipment Finance Agreement as liquidated damages; (5) pursue any remedy
available under Article 9 of the Uniform Commercial Code or law or equity;
and/or (6) require you to pay American Financial Group''s costs of collection
and enforcing the agreement, including reasonable attorneys'' fees and court
costs. You must also pay American Financial Group all the costs of collection
or costs of exercising its remedies, including attorneys'' fees. You must waive
your right to object to jurisdiction in the courts of the state of Illinois as the venue for the resolution of disputes and must waive your right to a trial
by jury. American Financial Group will not be responsible for incidental or
consequential damages under any circumstances. See the sample documents in
Exhibit J for American Financial Group''s additional rights and remedies.
In consideration of Choice''s
agreement with American Financial Group, Choice will receive a flat payment
annually. In addition, Choice will receive from American Financial Group a fee
of .125% of service transactions with Choice franchisees.
*������� * *
We have not sold, assigned or
discounted commercial paper to anyone, nor do we intend to, although we are
permitted to do so. Except as stated, Choice does not offer direct/indirect
financing or guarantee any note, lease or obligation.
