Master Services Agreement - Hilton Hotels Corp. and LodgeNet Entertainment Corp.
MASTER SERVICES AGREEMENT
THIS MASTER SERVICES AGREEMENT (this "Agreement") dated October 9,
2000, is made by and between Hilton Hotels Corporation, a Delaware corporation
(hereinafter referred to as "Hilton"), and LodgeNet Entertainment Corporation, a
Delaware corporation (hereinafter referred to as "LodgeNet").
W I T N E S S E T H:
WHEREAS, Hilton is the owner, manager and/or licensor of numerous
hotel chains including, but not limited to: Hilton hotels, Embassy Suites,
Hampton Inns, Homewood by Hilton, Hampton Inn & Suites, Doubletree,
University Hotels, Harrison Conference Centers, Hilton Garden Inn, and Red
Lion Hotels, which consist of existing and new construction hotels. Each
chain hotel is either (a) owned and operated by Hilton ("Owned Hotel"), (b)
owned by a third party owner in which Hilton may or may not have an interest
and managed by Hilton ("Managed Hotel") or (c) licensed and operated by an
independent third party owner (a "Licensed Hotel," and together with the
Owned Hotels and Managed Hotels, the "Hotels");
WHEREAS, LodgeNet is engaged in the business of providing movies and
video games, together with interactive television guest services and
information, and other types of cable and Internet programming and content to
lodging facilities and their lodging guests on a pay-per-view, pay-per-day,
subscription or other basis by means of LodgeNet's current video on demand
services, incorporating equipment supplied, owned and/or maintained by
LodgeNet (such network, interface and equipment hereinafter referred to as
the "Equipment");
WHEREAS, LodgeNet intends to offer the services set forth on
Schedule A hereto (the "VOD Services") to various Hotels;
WHEREAS, Hilton and LodgeNet desire to enter into an agreement,
pursuant to which Hilton agrees to use on behalf of the Owned Hotels, and
both Hilton and LodgeNet shall use certain agreed efforts to cause the
Managed and Licensed Hotels to use (collectively, all such Owned Hotels,
participating Managed Hotels and Licensed Hotels are referred to herein as
the "Participating Hotels"), the VOD Services, and LodgeNet will pay a
percentage of the revenues derived from the VOD Services to the Participating
Hotels;
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NOW, THEREFORE, the parties agree as follows:
Section 1 SERVICES AND OBLIGATIONS
1.1 SERVICES.
(a) Hilton and LodgeNet hereby agree that, for the
Term (as defined in Section 4 hereof) of this Agreement:
(i) LodgeNet shall provide the VOD
Services to the Participating Hotels within the United States and Canada,
including, but not limited to, the free-to-guest services specified on
Schedule C-1 (the "Free-to-Guest Services") and shall, subject to the terms
and conditions hereof, be the exclusive distributor of the VOD Services to
the Participating Hotels in the United States and Canada (other than
Free-To-Guest Services). Each of LodgeNet, Hilton and the Participating
Hotels shall have the right to modify the programming provided via the VOD
Services upon written notice at any time for legal or other bona fide
purposes, provided, however, that the programming remains of equal quality as
currently existing. In such instance, LodgeNet and such Participating Hotel
shall endeavor, in good faith, to make the economic return to LodgeNet from
the programming to be of equal economic value.
(ii) LodgeNet shall pay to the
Participating Hotels, or the Participating Hotels shall have the right to
retain from LodgeNet revenues collected, as applicable, the percentage of
revenues derived from the VOD Services, pursuant to the terms specified on
Schedule C.
(iii) LodgeNet shall be responsible to
provide, install, support, operate and maintain the Equipment, as well as the
additional hardware, software, networks, interfaces, content and services
necessary for the VOD Services and such other Equipment as is listed on
Schedule D (collectively, the "CEP Platform," and together with the Equipment
the "LodgeNet Equipment").
1.2 HOTEL SERVICE LICENSE AGREEMENT; ORDERS; TRACKING
SYSTEM. LodgeNet shall enter into a Hotel Service License Agreement in
substantially the form attached as Exhibit 1 (the "Hotel Service License
Agreement") with each Participating Hotel for VOD Services. LodgeNet shall be
responsible for processing all Hotel orders and collecting all payments from
each Participating Hotel relating to the VOD Services.
1.3 PROMOTION OF SERVICES. LodgeNet shall, at its
expense, promote the VOD Services to the Hotels using its standard marketing
materials (the "Marketing Materials"). All such Marketing Materials shall be
consistent with this Agreement and shall not display the logo or mark of any
Participating Hotel or non-Hilton brand.
1.4 CUSTOMER SERVICE TELEPHONE NUMBER(S). LodgeNet
shall provide, at its sole cost and expense, a 24/7 toll-free telephone
number(s) for Hilton and individual Participating Hotel inquiries, including
customer service and instructions for ordering VOD Services.
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1.5 NO COMMERCIAL OR MARKETING INFORMATION. Upon
written notice from Hilton, which notice shall be reasonably specific,
LodgeNet shall cease to broadcast through the LodgeNet Equipment or the VOD
Services, or cause to be presented in the Participating Hotel(s), any
commercial or marketing messages, information or services promoting LodgeNet
or any other entity, service or product. LodgeNet shall remove from the
Participating Hotel(s), within ten (10) days of receipt of the notice, any
objectionable content specified in such notice.
1.6 PROGRAM TITLES. Program titles and all other
programming, including game selections and music titles, to be made available
through the VOD Services shall be selected by LodgeNet following the
guidelines mutually and reasonably agreed upon by LodgeNet and Hilton.
1.7 NEW PRODUCTS AND SERVICES.
(a) LodgeNet will provide Hilton with CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION exclusive advance window for release of each significant new
product or service related to the VOD Services.
(b) In the event LodgeNet releases new products or
services to another hotel or company, CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, LodgeNet agrees
to make such products or services CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION available to Hilton
and the Participating Hotels CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1.8 EXECUTORY CONTRACTS. LodgeNet recognizes that any
Hotel with an executory contract for VOD Services as of the date of this
Agreement shall not be required to purchase the VOD Services unless and until
such pre-existing contractual obligations shall have expired or terminate
without any obligation of such Hotel to make an extraordinary payment to the
vendor for or in respect of a termination fee, liquidated damages or
equipment removal fees. Further, to the extent this Agreement is terminated
with respect to any individual Hotel, such Hotel shall be permitted to obtain
services similar to VOD Services from another vendor.
1.9 ACKNOWLEDGMENT. LodgeNet acknowledges that Hilton
is the owner, manager or licensor of the Hotels. Except with respect to the
Owned Hotels, Hilton does not purchase VOD Services for its own use and
cannot compel or guarantee any level of sales of VOD Services to or by any
Participating Hotel. LodgeNet further acknowledges that, although Hilton will
take (a) with respect to the Managed Hotels, the actions set forth on
Schedule H2 hereto, and (b) with respect to the Licensed Hotels, the actions
set forth on Schedule H1 hereto, each Participating Hotel will be making an
independent buying decision. In addition, Hilton and its affiliates shall in
no event be responsible for any amounts or obligations owed to LodgeNet by
any Managed or Licensed Hotel.
1.10 HOTEL SATISFACTION SURVEYS. LodgeNet will conduct
semi-annual Hotel Satisfaction surveys at all Participating Hotels. LodgeNet
will be responsible for developing the
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survey, conducting the survey at each Participating Hotel according to the
guidelines below, summarizing the results, sharing results with Hilton no
later than two weeks after the Participating Hotel's scheduled completion
date, and tracking their own improvement. LodgeNet is additionally
responsible for addressing any survey findings with the Participating Hotel
or Hilton, as appropriate. LodgeNet is encouraged to utilize a third party
company to conduct and summarize the survey. Hilton reserves the right to
review, to provide feedback, and to approve the survey prior to its initial
distribution. The survey should address, but is not limited to, the following
subjects: installation, communication with LodgeNet staff or contracted
LodgeNet representatives, sales, equipment failures, service response, guest
feedback, perceived guest satisfaction, and overall hotel satisfaction.
LodgeNet will create the initial survey and the dissemination and tracking
process within four (4) months of signing this Master Services Agreement. The
survey will be sent to the General Manager of each Participating Hotel. The
first Hotel Satisfaction survey should be completed no later than six (6)
months after the signing of the Master Services Agreement. Thereafter,
LodgeNet will conduct Hotel Satisfaction surveys every six months (e.g. July
31, 2001, January 31, 2002).
Section 2 LICENSED AREAS
2.1 OWNED HOTELS. Hilton hereby agrees that the Owned
Hotels shall use the VOD Services, at the earliest reasonably practicable
date with respect to each such Owned Hotel, and LodgeNet hereby agrees to
provide the VOD Services and install and distribute the LodgeNet Equipment to
the Owned Hotels. Hilton hereby licenses to LodgeNet, and LodgeNet hereby
licenses from Hilton, the nonexclusive right to use certain areas and
existing cable and electrical wiring reasonably necessary for the
installation and operation of the LodgeNet Equipment in a non-public area to
be reasonably determined from time to time by Participating Hotel and
LodgeNet (the "Licensed Area").
2.2 MANAGED HOTELS. With respect to Managed Hotels,
Hilton hereby agrees to take the actions specified on Schedule H2 attached
with respect to the use by such Managed Hotels of the VOD Services.
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
2.3 LICENSED HOTELS. With respect to Licensed Hotels,
Hilton hereby agrees to take the actions specified on Schedule H1 attached
hereto with respect to the use by such Licensed Hotels of the VOD Services.
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
2.4 THE LICENSED AREAS. The Licensed Areas shall be
furnished in "AS IS" condition by each Participating Hotel.
Section 3 USE OF LICENSED AREA
The Licensed Area shall be used by LodgeNet only for the VOD
Services. No other service or use of the Licensed Area by LodgeNet is
permitted without the Participating Hotel's prior written approval.
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Section 4 TERM
The term of this Agreement shall be for seven (7) years commencing
on the date hereof (the "Term"), unless terminated sooner pursuant to Section
20 hereof.
Section 5 FEES
5.1 WARRANT. In consideration for Hilton's entering
into this Agreement, concurrently herewith, LodgeNet shall execute and
deliver to Hilton a Warrant in the face amount of two million one hundred
thousand (2,100,000) shares of LodgeNet Common Stock in the form attached
hereto as Exhibit 2, such number of shares being subject to adjustment as set
forth therein.
5.2 FEE AND PAYMENT TERM PROCEDURE.
(a) LodgeNet shall implement and maintain,
throughout the Term, a system to track, record and report on all
Participating Hotel orders and sales. For each calendar month during the
Term, LodgeNet shall furnish to Hilton a written report detailing the total
sales made to Guests in such calendar month, and to each Participating Hotel
a report for such Participating Hotel with the same information as to such
Participating Hotel. The report shall be itemized on a "per Participating
Hotel account" basis and a "per Service" basis. For each account, LodgeNet
shall identify the applicable contact information including the Participating
Hotel's name and designated account number, together with any other
information reasonably requested by Hilton.
(b) Based upon daily information reported by the
VOD Services tracking equipment (the "Services Tracking System") (provided
and installed by LodgeNet at no cost to Hilton or any Participating Hotel) to
the Participating Hotel's property management system (the "PMS"), the
Participating Hotels shall charge its guests (the "Guests") on a per-use or
other basis for access to the VOD Services an amount (the "Usage Fee") based
on the pricing schedule set forth on Schedule C-2 and subject to change based
on the mutual agreement by LodgeNet and Hilton. Usage Fees shall include
set-up fees, access fees, and/or other billed amounts derived directly from
or in relation to use of the VOD Service by Guests.
(c) The VOD Services Tracking Equipment shall
generate an accurate record ("Access Record") of the usage and access to the
VOD Services by any Guests, including a record of the usage charges for VOD
Services for each individual Guest's bill or account. LodgeNet shall be
responsible for the costs associated with the programming of the computer
within the VOD Services Tracking Equipment to enable it to provide the
aforesaid data. All costs and arrangements related to the PMS shall be
subject to the same terms and conditions as those contained in Hilton's
standard PMS-related agreements with its other vendors; provided, however,
that LodgeNet shall be responsible for no more than CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION per
occurrence for actual costs associated with ensuring that the LodgeNet
Equipment properly interfaces with the PMS, which shall not be payable more
than CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION in any calendar year.
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(d) LodgeNet shall make available to Hilton and
each Participating Hotel, and be responsible for the accuracy of, information
sufficient to ensure proper billing of Guests and other information on
Services usage reports as the Hilton may reasonably request to track Service
usage.
(e) LodgeNet may review and use the Access Record
only for the provision of the VOD Services, and LodgeNet shall not disclose
any such information to third parties without the prior written consent of
Hilton, except (i) in the aggregate with the entire LodgeNet system base or
other logical divisions of said base, but only the extent such disclosure (A)
would not permit Hilton-specific data to be derived from said report or
disclosure and (B) is used strictly for marketing, trade shows and similar
purposes or (ii) as otherwise required by law. In the event of any such
disclosure by or through LodgeNet, LodgeNet shall indemnify and hold harmless
the Hotels and Hilton from all claims, loss, damages or actions arising from
such disclosure.
(f) LodgeNet and Hilton hereby acknowledge that
the Participating Hotels, in their sole discretion but in accordance with
Hilton brand policy, may adjust the Usage Fee as to any Guest of the Hotel in
conjunction with any dispute with such Guest in which case the "Usage Fee"
shall mean the Usage Fee for such Guest as so adjusted. LodgeNet and Hilton
understand and agree that the Hotel generally shall refund the Usage Fee to
the Guest in the event the Guest disputes the charge or expresses
dissatisfaction with the VOD Services.
(g) During the Term of the Agreement, the Hotels
shall be responsible for billing and collection of Usage Fees from Guests,
and remitting the same to LodgeNet, less the commissions set forth on
Schedule C within twenty (20) days of the Participating Hotel's receipt of a
monthly invoice from LodgeNet; provided, however, that all of the LodgeNet
Equipment is functioning properly with respect to the Participating Hotel's
ability to charge Guests. In the event the LodgeNet Equipment is not
functioning properly, LodgeNet shall be responsible for billing and
collection of Usage Fees from Guests for the period of said failure and
remitting agreed percentages to the Participating Hotels until such time as
the LodgeNet Equipment is in proper working order. Usage Fees shall be
allocated to the Participating Hotels and LodgeNet respectively, in
accordance with the percentages set forth on Schedule C and Schedule C-1. The
Participating Hotels shall provide to LodgeNet a monthly statement of any
credits issued to Guests.
(h) If a Participating Hotel collects Usage Fees
through a collection agency or through legal action, such Participating Hotel
need only remit to LodgeNet the net amount collected after deducting the
Participating Hotel's costs of and fees for collection and the Participating
Hotel's appropriate allocation of Usage Fees.
(i) In addition to collecting the Usage Fees, the
Participating Hotels shall also collect from Guests any and all federal,
state and local taxes applicable to the Usage Fees, and shall directly remit
the same to the applicable taxing authority as required by law. The LodgeNet
Equipment shall be capable of and shall calculate such taxes and LodgeNet is
solely responsible for the accuracy thereof.
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5.3 ADJUSTMENT OF USAGE FEES. Notwithstanding anything
to the contrary contained in this Agreement, the schedules, or exhibits
hereto, the parties agree to adjust Usage Fees as necessary at either the
individual Participating Hotels or collectively as the case may be to
accurately reflect the "market rate" for the VOD Services.
Section 6 CONFERENCES; PUBLICATIONS & PROGRAMS
LodgeNet may participate as an exhibitor at each national conference
that Hilton requires (or each regional conference held in lieu of a single
national conference) and shall participate with an interactive demonstration
booth that showcases the capability of the VOD Services. LodgeNet shall be
obligated to follow all rules and procedures established for each conference
in which it participates. LodgeNet shall be responsible for booth costs and
all other costs relating to its participation in the conferences and booth
set-up, as well as Hilton's standard fee. Hilton's fee charged LodgeNet will
not exceed CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION for national and regional conference fees
in any calendar year, and shall in no event be a fee or charge in excess of
the fee charged to others for similar attendance.
Section 7 LODGENET EQUIPMENT
7.1 REMOTE CONTROL TRANSMITTERS. As part of the
LodgeNet Equipment, LodgeNet will furnish each Participating Hotel at no cost
with fully functioning remote control transmitters ("Remotes") initially
equal in number to one hundred five percent (105%) of the total number of
Guest rooms at each such Participating Hotel, and thereafter annually upon
each anniversary of this Agreement during the Term in number equal to two
percent (2%) of the total number of Guest rooms at each such Participating
Hotel. Each Participating Hotel shall agree to use reasonable efforts to
maintain, at all times during the term of this Agreement, one fully
functioning Remote in each guest room so interconnected. In the event that
additional Remotes are necessary to meet the foregoing requirement, each
Participating Hotel shall agree to request additional Remotes, and LodgeNet
shall supply them at a cost to such Participating Hotel of CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
7.2 NINTENDO GAME HAND CONTROLS. LodgeNet will furnish
each Participating Hotel with fully functioning, exclusive, proprietary
Nintendo game hand controls ("Nintendo Controls") initially equal in number
to one hundred five percent (105%) of the total number of Guest rooms at each
such Participating Hotel, and thereafter annually upon each anniversary of
this Agreement during the Term in number equal to two percent (2%) of the
total number of Guest rooms at each such Participating Hotel. Each
Participating Hotel shall agree to use reasonable efforts to maintain, at all
times during the term of this Agreement, one fully functioning Nintendo
Control in each guest room so interconnected. In the event that additional
Nintendo Controls are necessary to meet the foregoing requirement, each
Participating Hotel shall agree to request additional Nintendo Controls, and
LodgeNet shall supply them at a cost to such Participating Hotel of
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
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7.3 INTERACTIVE TELEVISION-BASED INTERNET BROWSING
SERVICE ("IETV") KEYBOARD. LodgeNet will provide each Participating Hotel
fully functioning IETV infrared keyboards ("Keyboards") initially equal in
number to one hundred five percent (105%) of the total number of Guest rooms
at each such Participating Hotel, and thereafter annually upon each
anniversary of this Agreement during the Term in number equal to two percent
(2%) of the total number of Guest rooms at each such Participating Hotel.
Each Participating Hotel shall agree to use reasonable efforts to maintain,
at all times during the term of this Agreement, one fully functioning
Keyboard in each Guest room so interconnected. In the event that additional
Keyboards are necessary to meet the foregoing requirement, each Participating
Hotel shall agree to request additional Keyboards, and LodgeNet shall supply
them at a cost to such Participating Hotel of CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
7.4 NEW SOFTWARE SYSTEM RELEASES; NEW REMOTES,
NINTENDO CONTROLS, AND KEYBOARDS. Following the initial installation, the
Participating Hotels will receive software upgrades, new software releases
and new product releases (including, without limitation, systems software,
firmware and LodgeNet applications software) (together, "New Releases").
Hilton and the Participating Hotels shall be entitled to such New Releases at
terms no less favorable than those offered or made available to the market.
To the extent LodgeNet upgrades its software or implements any New Releases
that require upgrades to the Remotes, Nintendo Controls or Keyboards,
LodgeNet shall promptly provide such upgrades or provide new Remotes,
Nintendo Controls and/or Keyboards, as applicable, at CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION to
the Participating Hotels.
7.5 PROMOTIONAL MATERIALS. LodgeNet will supply to
Hilton and the Participating Hotels, at LodgeNet's sole cost and expense,
such suitable advertising and promotional material about the VOD Services and
other programs and services available through the LodgeNet System as LodgeNet
may reasonably determine. Each Participating Hotel shall agree to use
reasonable efforts to ensure that such material is placed and appropriately
displayed in each guest room at all times.
Section 8 INSTALLATION AND OPERATING PROCEDURES
8.1 INSTALLATION OF LODGENET EQUIPMENT. LodgeNet, at
its sole cost and expense, shall be responsible for all costs and expenses
relating to the LodgeNet Equipment, including, without limitation, all
services and products necessary to install, operate, repair, support, upgrade
and replace the LodgeNet Equipment and construct any other improvements
necessary including connections for power and telephone lines. As further
defined in this Section 8, LodgeNet shall commence and complete installation
of the LodgeNet Equipment in the Licensed Area of each Participating Hotel
(a) in the event of an Emergency Installation (as defined on Schedule E and
to be determined by Hilton in its reasonable discretion), in the time period
specified on Schedule E or (b) as quickly as possible, but in no event later
than one hundred twenty (120) days after the execution by LodgeNet
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and each Participating Hotel of the Hotel Service License Agreement.
Notwithstanding the foregoing, each Participating Hotel, in its sole
discretion, may permit LodgeNet to commence and complete installation of the
LodgeNet Equipment more than one hundred twenty (120) days after the
execution by LodgeNet and each Participating Hotel of the Hotel Service
License Agreement. LodgeNet's installation shall include inspection of each
Participating Hotel room against technical and performance standards mutually
agreed upon by Hilton and LodgeNet (the "Agreed Standards"), including the
master antenna or cable television system and related communications network
systems and components including, but not limited to, cabling, amplifiers,
color television receivers or monitors, and other equipment related thereto
(collectively, "CNS"). If the CNS meets or exceeds the Agreed Standards,
LodgeNet will install interactive television at the Participating Hotel at
LodgeNet's own expense. In the event LodgeNet's inspection against Agreed
Standards determines the CNS to be inadequate and the cost to repair same
exceeds an aggregate of an average of CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION per room of a
Participating Hotel, LodgeNet will notify the Participating Hotel of the
same, specify the deficiencies in the CNS at such Participating Hotel, and
furnish an estimate of the costs to repair the deficiencies. LodgeNet shall
pay the cost of such repairs up to CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION per room at all
Participating Hotels. To the extent the cost of repairs is less than
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION for any room at any Participating Hotel, then such excess
amount shall be available to be utilized to repair any other room at such
Participating Hotel, such that the aggregate repair cost to LodgeNet for such
repairs shall be equal to the product of CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION times the number
of rooms at such Participating Hotel ("CNS Obligation"). CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. The Participating Hotel has the option, in such event, of
retaining LodgeNet to perform the necessary repairs to or correction of the
CNS or of retaining another qualified firm to perform such work; provided,
however, that in the event a firm other than LodgeNet performs such work,
LodgeNet shall have the right to conduct a follow-up technical inspection of
the CNS to determine whether the CNS meets the Agreed Standards. If the
Participating Hotel elects not to repair the CNS pursuant to LodgeNet's
requirements, or if the repairs completed by an outside firm do not meet the
Agreed Standards, LodgeNet shall have the option to repair the CNS at
LodgeNet's sole cost and expense to make such CNS adequate and compatible for
interconnection with the Interactive TV. CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. After
completion of the initial installation of the interactive television, any
modifications to the interactive television required due to any change in or
modification of the CNS by any person or entity other than LodgeNet or due to
any changes in the interactive television channels shall be made by LodgeNet
at the Participating Hotel's expense.
8.2 COMPLIMENTARY GUEST ROOMS. During the installation
period, the Participating Hotel shall provide, based on its availability, up
to the number of complimentary guest rooms specified on Schedule C-3, if
necessary, to LodgeNet for installation personnel and such other space as may
be reasonably required for equipment storage.
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8.3 KEY DEPARTMENT; REPAIRS.
(a) Each Participating hotel shall assign
responsibility for the day-to-day operations of LodgeNet System to its
engineering staff (hereinafter referred to as the "Key Department").
(b) The Key Department shall, at no cost to
LodgeNet, replace any failed room units with spare room units, if any,
furnished by LodgeNet. If a technical problem arises other than the
replacement of in-room television hardware, the integrated terminal, set-top
box, set-back box, Remote, Nintendo Control or Keyboard (collectively, the
"Room Unit"), Participating Hotel shall contact LodgeNet by telephone within
twelve (12) hours of discovery by such Participating Hotel. If necessary,
LodgeNet will dispatch a technician to make required repairs.
(c) Any repairs to or replacements of any portion
of the LodgeNet System made necessary because of willful or grossly negligent
acts of a Participating Hotel, any of its employees, contractors or agents,
will be performed by LodgeNet; provided however, that Participating Hotel
shall promptly reimburse LodgeNet for the reasonable costs of repair.
8.4 IN-ROOM TELEVISIONS.
(a) MAINTENANCE OF IN-ROOM TELEVISIONS. LodgeNet
shall arrange for and administer a television maintenance program for the
Participating Hotels. Pursuant to the program, the costs of television
maintenance for all in-room television sets CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION or less in
Participating Hotels, other than maintenance caused by the abuse of a guest,
employee or agent of a Participating Hotel, shall be paid by LodgeNet; provided,
however, that CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION between the Participating Hotel and LodgeNet
as set forth on Schedule C attached hereto. The cost of all other television
maintenance shall be the cost and responsibility of the Participating Hotel.
(b) INSTALLATION OF IN-ROOM TELEVISIONS. LodgeNet
shall install any and all new televisions at any Participating Hotel, at no
charge to Hilton or such Participating Hotel, during such time as it initially
installs the LodgeNet Equipment at such Participating Hotel.
8.5 TRAINING. LodgeNet shall, at no cost to Hilton or
the Participating Hotels, provide proper training to Participating Hotel
personnel during normal working hours regarding the promotion, daily
operation, and maintenance of the Service.
8.6 ELECTRICAL POWER. Costs for use of electrical
power shall be at the Participating Hotels' sole cost and expense.
8.7 COMPLIANCE WITH GOVERNMENT RULES AND REGULATIONS.
LodgeNet shall operate the LodgeNet Equipment during the Term hereof in
compliance with all present and future rules and regulations imposed by any
local, state or federal authority having jurisdiction with respect thereto
(including, without limitation the rules and regulations of the Federal
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Communications Commission (the "FCC") and the Federal Aviation Administration
(the "FAA"). LodgeNet, upon written request by Hilton or any Participating
Hotel, promptly shall forward to Hilton or such Participating Hotels, as
applicable, copies of all applications for all FCC operating licenses (if
required) and copies of other licenses which it has been issued pertinent to
this Agreement. LodgeNet shall have at all times any licenses, permits and
approvals necessary for the installation or operation of the Equipment.
8.8 MODIFICATIONS OR CHANGES TO, OR REMOVAL OF,
LODGENET EQUIPMENT. Prior to installation of the LodgeNet Equipment, or any
modifications or changes to or removal of the LodgeNet Equipment, if any,
LodgeNet shall comply with the following:
(a) LodgeNet shall submit in writing all plans for
such installations, modifications or changes for the Participating Hotel's
approval, except with respect to changes or modifications (i) that are
conducted in LodgeNet's ordinary course of business, (ii) that do not
interfere with the Participating Hotel's systems or operations and (iii) do
not affect the amount of space the LodgeNet Equipment occupies in the
Licensed Area. No other equipment shall be added to the Licensed Area without
the Participating Hotel's prior written consent.
(b) Prior to commencement of any work, LodgeNet
shall obtain the Participating Hotel's prior written approval and any
required approvals of all federal, state and local agencies. If requested,
LodgeNet shall promptly deliver to the Participating Hotel or Hilton, as
applicable, written proof of compliance with any specific applicable federal,
state and local laws, rules and regulations in connection with any
installations, modifications or changes to or removal of the LodgeNet
Equipment (together, "Modifications").
(c) All of such Modifications shall conform to the
Participating Hotel's design specifications, weight and windload
requirements, and shall not interfere with any other vendor's, licensee's or
tenant's preexisting radio communications systems and equipment located in
and upon the Licensed Area, and shall be in compliance with all applicable
local, state and federal government requirements, including but not limited
to zoning, FAA and FCC specifications. Notwithstanding the foregoing, such
Modifications shall not interfere with any Participating Hotel systems or
operations, regardless of whether such systems or operations existed prior or
subsequent to the Modifications. In the event that (i) any Modifications do
interfere with a Participating Hotel's systems or operations and (ii) such
systems or operations did not exist prior to the Modifications, LodgeNet
shall pay up to CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION of the actual cost per Participating Hotel
to remedy such interference ("Interference Fee"); provided, however, that
LodgeNet shall not pay the Interference Fee more than two (2) times per
Participating Hotel during the Term of this Agreement.
(d) All of the LodgeNet Equipment shall be marked
clearly with waterproof labels to show LodgeNet's name, address, and
telephone number, FCC call sign, frequency and location (if any). All coaxial
cable relating to the LodgeNet Equipment shall be identified in the same
manner at the bottom and top of the line. All LodgeNet Equipment shall be
installed in a manner so as to be reasonably inaccessible to unauthorized
persons and to pose no hazard to safety of life or property with respect to
persons or property on or about the site.
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(e) Hilton and the Participating Hotels each
reserve the absolute right to withhold approval in all matters where their
approval is required, if they should determine (in their sole discretion),
that a reasonable possibility or a threat of interference or other disruption
to the business of the Participating Hotel or Hilton or to the Guests exists.
(f) In the event a zoning variance is required at
any Participating Hotel in connection with the installation or modification
of LodgeNet's Equipment, the Participating Hotel shall have the right, at its
sole discretion, either to (i) cancel this Agreement as to that specific
Participating Hotel, or (ii) allow LodgeNet at LodgeNet's sole cost and
expense, to obtain such variance. Should LodgeNet not obtain such variance
within CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION, the Participating Hotel shall have the
right to cancel this Agreement with respect to such Participating Hotel at
the end of such CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
(g) All work performed at the site in connection
with the installation and modification of LodgeNet's Equipment shall be
performed in a workmanlike manner by LodgeNet employees or contractors (which
LodgeNet employees or contractors shall be subject to the Participating
Hotel's approval), at LodgeNet's sole cost and expense. All LodgeNet
employees, contractors and subcontractors shall be properly licensed.
(h) If LodgeNet requires access to the Licensed
Area, LodgeNet shall provide twenty-four (24) hours prior notice to the
Director of Property Operations or the Manager on Duty at such Participating
Hotel for such access. In the event of an emergency, LodgeNet may have access
to the LodgeNet Equipment on a twenty-four (24) hour basis with reasonable
notice to the above Participating Hotel officials. The Participating Hotels
shall not unreasonably deny access to LodgeNet.
Section 9 INTERFERENCE
9.1 LODGENET INTERFERENCE EVENT.
(a) The installation, operation, maintenance
and/or removal (together, the "Installation/Maintenance") of the LodgeNet
Equipment shall not interfere in any way, including but not limited to by way
of any transmission or emission by electromagnetic, radio, wireless,
satellite, cellular, analog or digital transmissions or microwave, in any
manner whatsoever, including but not limited to health, mechanical, physical
or electrical effects, with (i) the respective Participating Hotel's
preexisting equipment, facilities, operations or guests; (ii) any present or
future guest or present tenant in the respective Participating Hotel in which
a Licensed Area is located; or (iii) any other third party in operation at
the time of the installation of the LodgeNet Equipment, including, but not
limited to, any radio or other systems operated by Hilton, the respective
Participating Hotel, the FAA, any other governmental or quasi-governmental
agencies operating in or about the respective Participating Hotel's, no
matter where or when such systems are installed (any such interference shall
be referred to herein as a "LodgeNet Interference Event").
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(b) If a LodgeNet Interference Event occurs and is
not rectified within thirty (30) days:
(i) Hilton or the respective
Participating Hotel, upon the expiration of the thirty (30) day cure period,
at its option, may terminate this Agreement at the specific Participating
Hotel, disconnect power and require LodgeNet, at LodgeNet's sole cost and
expense, to remove any and all of the Equipment; or
(ii) Hilton or the respective
Participating Hotel, at its option, may (without termination of the
Agreement) eliminate or remedy such interference at LodgeNet's sole cost and
expense. LodgeNet's duty to pay all fees required under this Agreement shall
continue through any cure period and despite any suspension of LodgeNet's
operations pursuant to this paragraph.
9.2 PARTICIPATING HOTEL INTERFERENCE EVENT.
(a) Notwithstanding the foregoing,
Installation/Maintenance of the LodgeNet Equipment shall not interfere in any
way, including but not limited to by way of any transmission or emission by
electromagnetic, radio, wireless, satellite, cellular, analog or digital
transmissions or microwave, in any manner whatsoever, including but not
limited to health, mechanical, physical or electrical effects, with any
Participating Hotels' systems or operations, regardless of whether such
Participating Hotels' systems or operations were installed prior or
subsequent to the LodgeNet Equipment. In the event that (i) any
Installation/Maintenance interferes with a Participating Hotel's systems or
operations, (ii) such systems or operations did not exist prior to the
Installation/Maintenance and (iii) such interference is caused by a
Participating Hotel system or operation and is not the result of interference
by a third party vendor or supplier (a "Participating Hotel Interference
Event"), LodgeNet shall pay up to the Interference Fee to remedy such
interference; provided, however, that LodgeNet shall not pay the Interference
Fee more than two (2) times per Participating Hotel during the Term of this
Agreement.
(b) If a Participating Hotel Interference Event
occurs and, after payment by LodgeNet of the Interference Fee, is not
rectified within thirty (30) days:
(i) Hilton or the respective
Participating Hotel, upon the expiration of the thirty (30) day cure period,
at its option, may terminate this Agreement at the specific Participating
Hotel, disconnect power and require LodgeNet to remove any and all of the
Equipment; or
(ii) Hilton or the respective
Participating Hotel may (without termination of the Agreement) eliminate or
remedy such interference. LodgeNet's duty to pay all fees required under this
Agreement shall continue through any cure period and despite any suspension
of LodgeNet's operations pursuant to this paragraph.
In the event Hilton or a Participating Hotel terminates
this Agreement pursuant to Section 9.2(b)(i) above as a result of a
Participating Hotel Interference Event, then such Participating Hotel shall
reimburse LodgeNet CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
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(c) In the event that a Participating Hotel
Interference Event occurs, LodgeNet acknowledges that its sole remedy, in
lieu of any and all other remedies at law, or in equity, shall be the remedy
specified in this Section 9.2.
9.3 ACKNOWLEDGMENT AND WAIVER. LodgeNet hereby
acknowledges that Hilton and/or the respective Participating Hotel has
licensed, and/or will continue to license access for other types of equipment
and services at such Participating Hotel. LodgeNet accepts this Agreement
with this knowledge and, subject to Sections 9.1 and 9.2 above, waives any
and all claims against Hilton or the respective Participating Hotel resulting
from or attributable to interference caused by presently existing facilities
or methods of operation employed by Hilton in its business upon the site.
LodgeNet also waives any and all claims against Hilton or the respective
Participating Hotel and against any other licensee, vendor or tenant of
Hilton or such Participating Hotel because of interference resulting to
LodgeNet by virtue of equipment, facilities or operations employed by Hilton
or such Participating Hotel or by any other licensee, vendor or tenant of
Hilton's or of such Participating Hotel's in its business upon the premises
of any Participating Hotel. In the event this Agreement is terminated
pursuant to Section 9.1 or 9.2 above, LodgeNet shall pay to Hilton and the
respective Participating Hotel any fees due for the period up to the
termination of this Agreement. Any advance fee payments for periods after the
termination of this Agreement will be reimbursed to LodgeNet. The foregoing
notwithstanding, Hilton and the respective Participating Hotel shall use
commercially reasonable efforts to prevent future installations from
interfering with LodgeNet's Equipment or the provision of the Services.
Section 10 MAINTENANCE AND REMOVAL OF LODGENET'S EQUIPMENT;
SITE MAINTENANCE
10.1 MAINTENANCE OF LODGENET EQUIPMENT AND
IMPROVEMENTS. LodgeNet, at its sole cost and expense, shall be responsible
for the maintenance of the LodgeNet Equipment and improvements, if any, at
the Participating Hotels and shall keep all areas neat and clean, in
accordance with all applicable laws and regulations and this Agreement.
LodgeNet shall not create any nuisance, interfere with, annoy or disturb any
other contractor or licensed vendor of Hilton or any contractor, licensee,
vendor, tenant or guest of the Participating Hotels. The Participating
Hotels, at their sole cost, shall maintain the Licensed Areas in good repair
to permit LodgeNet to use the Licensed Areas at the Participating Hotels as
intended by the parties as embodied in this Agreement. Neither Hilton nor the
Participating Hotels shall have any obligation to obtain licenses for
LodgeNet or maintain, insure, operate or safeguard the LodgeNet Equipment.
All maintenance work shall be performed by LodgeNet employees and contractors
(which LodgeNet employees or contractors shall be subject to the
Participating Hotel's approval). In the event the Participating Hotel, in its
reasonable opinion, determines that any structural modifications or repairs
need to be made to any portion of a specific Participating Hotel as a result
of the presence of the LodgeNet Equipment or other LodgeNet improvements, the
Participating Hotel shall notify LodgeNet of needed modifications and
repairs. LodgeNet, at its sole cost and expense, shall have the right to
immediately make all such noticed modifications or repairs in accordance with
the terms of this Agreement. In the event LodgeNet elects not to exercise
such right, or its exercise is unreasonably denied, Hilton or the
Participating Hotel shall have the right to terminate this Agreement as to
that specific Participating Hotel by giving thirty (30) days written notice
to LodgeNet of such termination.
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10.2 REMOVAL OF LODGENET EQUIPMENT. Other than during
any default by LodgeNet in the performance of its obligations hereunder, at
the expiration of this Agreement or earlier termination thereof, LodgeNet may
remove all the LodgeNet Equipment at LodgeNet's sole cost and expense in
accordance with the terms of this Agreement. Any and all removal of the
LodgeNet Equipment shall be performed by LodgeNet employees and contractors
(which LodgeNet employees or contractors shall be subject to the
Participating Hotel's approval) and in accordance with a previously approved
removal plan, performed in a workmanlike manner, without creating any
interference, damage or destruction to any other equipment, structures or
operations at the Participating Hotels or to any other equipment of other
vendor, contractor or licensee thereon ordinary wear and tear excepted. If
LodgeNet fails to remove such LodgeNet Equipment within sixty (60) days
following termination of this Agreement, the Participating Hotel may in each
instance remove the LodgeNet Equipment at LodgeNet's sole cost and expense.
If LodgeNet causes any damage to the equipment of the respective
Participating Hotel or other licensees or vendors, such damage shall be
immediately repaired or eliminated by LodgeNet. In the event LodgeNet fails
to make such repairs within five (5) days, the Participating Hotel may
perform all the necessary repairs at LodgeNet's sole cost and expense and
such sum shall be immediately due upon the rendering of an invoice as an
additional fee hereunder. The foregoing notwithstanding, LodgeNet shall not
remove installed or fixed wiring, including installed in electrical closets,
conduits, subceilings or attic spaces. In all instances, such wiring shall
become property of the respective Participating Hotels.
Section 11 HAZARDOUS SUBSTANCES
11.1 LodgeNet represents, warrants and covenants that
it will conduct its activities at the Participating Hotels in compliance with
all applicable Environmental Laws (as hereinafter defined).
11.2 LodgeNet agrees to defend, indemnify and hold
Hilton and its affiliates harmless from and against any and all claims,
causes of action, demands and liability including but not limited to,
damages, costs, expenses, assessments, penalties, fines, losses, judgments
and attorneys' fees that Hilton, the Participating Hotels or their affiliates
may suffer due to the existence or discovery of any Hazardous Substance (as
hereinafter defined) at the Participating Hotels or the migration of any
Hazardous Substance to other properties or released into the environment,
that are caused by or result from LodgeNet's activities at the Participating
Hotels.
11.3 The indemnification in this Section 11 shall
survive the expiration or earlier termination of this Agreement.
11.4 As used in Section 11, "Environmental Laws" means
all federal, state and local environmental laws, rules, regulations,
ordinances, judicial or administrative decrees, orders, decisions
authorizations or permits pertaining to the protection of human health and/or
the environment, including but not limited to, the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Emergency Planning and Community Right to Know Act,
42 U.S.C. Section 1101 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq., the Oil Pollution
Control Act, 33 U.S.C. and any other comparable local, state or federal
statute or ordinance pertaining to the environment or natural
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resources and all regulations pertaining thereto. This definition includes
all federal, state and local land use laws dealing with environmental
sensitivity, including, but not limited to, laws regarding wetlands, steep
slopes, aquifers, critical or sensitive areas, shore lines, fish and wildlife
habitats or historical or archeological significance.
11.5 As used in this Section 11, "Hazardous Substance"
means any hazardous substances as defined by the Comprehensive Environmental
Response, Compensation and Liability Act, as amended from time to time; any
hazardous waste as defined by the Resource Conservation and Recovery Act of
1976, as amended from time to time; any and all materials or substances
defined as hazardous pursuant to any federal, state or local laws or
regulations or orders and any substance which is or becomes regulated by any
federal, state or local governmental authority; any oil petroleum products
and their by-products.
Section 12 INSURANCE
12.1 For each Participating Hotel, LodgeNet shall
maintain in force during the term of this Agreement, at its own expense, with
responsible insurance companies that have an A.M. Best Company rating of "A
VIII" or better, liability insurance policies, including commercial general
and automobile liability insurance in an amount not less than Five Million
Dollars ($5,000,000) per occurrence. LodgeNet shall also provide worker's
compensation in an amount not less than the statutory requirements required
by the State and employers liability coverage in the amount of Five Million
Dollars ($5,000,000) per accident, per disease policy limit and per disease
per employee covering all employees of LodgeNet
12.2 All policies will name Hilton, its affiliates and
subsidiaries, and the respective Participating Hotels and officers and
directors as "Additional Insureds." All policies of insurance shall be
considered primary of any existing similar insurance carried by Hilton, and
Participating Hotel or LodgeNet. LodgeNet shall provide Hilton with
Certificates of Insurance carried by LodgeNet. If requested by Hilton or the
Participating Hotels, LodgeNet shall furnish certified copies of insurance
carried. Copies of said Certificates of Insurance or certified policies of
insurance shall be delivered to the offices of Hilton and/or the
Participating Hotels by LodgeNet and must be kept current during the term of
this Agreement. No Policy of Insurance shall be canceled or materially
changed without thirty (30) days prior written notice to Hilton and/or the
Participating Hotels.
Section 13 INDEMNIFICATION
13.1 INDEMNIFICATION BY LODGENET. LodgeNet hereby
agrees to indemnify, defend and hold Hilton, the Participating Hotels, and
their respective partners, subsidiaries, affiliates, licensees, and allied
companies and each of their officers, directors, agents, contractors,
subcontractors and employees (collectively, "Hilton Indemnitees") harmless
from and against any and all claims, liabilities, losses, judgments,
settlements, awards, damages, fines, penalties and costs of whatsoever nature
(including legal fees, expert witness fees and other expenses and including
the value of the services of in-house counsel) ("Losses"), and whether or not
occurring during the term hereof or occasioned or contributed to by the
negligence or misconduct of Hilton, a Participating Hotel, or any agent or
employee of the Hilton Indemnitees, or any of them (except and to the extent
(a) as otherwise prohibited by applicable law or (b) as
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determined by a final and non-appealable judgment by a court of competent
jurisdiction that such Losses were occasioned by the gross negligence or
willful misconduct of such Hilton Indemnitee), and whether by reason of death
of or injury to any person or loss of or damage to any property or otherwise,
arising out of or in any way connected with actions or omissions of LodgeNet
under this Agreement, including without limitation, (i) a breach of
LodgeNet's representations, warranties, covenants agreements and licenses
hereunder, (ii) any claim arising out of the VOD Services provided by
LodgeNet or any of its subcontractors hereunder, (iii) any claim arising out
of the possession or use of the VOD Services or the LodgeNet Equipment or any
other hardware, software networks, interfaces or content provided by
LodgeNet, (iv) any claim arising out of showing non-theatrical programming or
(v) any related act or failure to act by LodgeNet, its agents, contractors,
subcontractors, servants employees or invitees, including without limitation
the use of the Licensed Areas and any allegation that the LodgeNet Equipment
or services or any part of the LodgeNet Equipment or services infringes any
rights of any other person, including without limitation copyright, patent,
trade secret, trademark, artist rights, droit moral, privacy, publicity or
other intellectual property laws and any claim of unfair competition, whether
or not occurring during the term hereof or occasioned or contributed to by
the negligence of a Hilton Indemnitee or an agent or employee of the Hilton
Indemnitees, or any of them (except and to the extent (a) as otherwise
prohibited by applicable law or (b) as determined by a final and
non-appealable judgment by a court of competent jurisdiction that such Losses
were occasioned by the gross negligence or willful misconduct of such Hilton
Indemnitee). In the event that any claim is made or any action or proceeding
is brought against the Hilton Indemnitees, or any of them, arising out of or
connected with this Agreement, any such Indemnitee may by notice to LodgeNet,
elect to require LodgeNet, at LodgeNet's sole cost and expense, to resist
such claim or take over the defense of any such action or proceeding and
employ counsel for such purpose, such counsel to be subject to the prior
approval of such Hilton Indemnitee. A Hilton Indemnitee making such claim
shall provide LodgeNet with notice of such claim within one hundred eighty
(180) days of such Hilton Indemnitee obtaining actual knowledge of such claim.
13.2 INDEMNIFICATION BY HILTON. Hilton hereby agrees to
indemnify, defend and hold LodgeNet and its partners, subsidiaries,
affiliates, licensees, and allied companies and each of their officers,
directors, agents, contractors, subcontractors and employees (collectively,
"LodgeNet Indemnitees") harmless from and against any and all Losses and
whether or not occurring during the term hereof or occasioned or contributed
to by the negligence of LodgeNet or any agent or employee of the LodgeNet
Indemnitees, or any of them (except and to the extent (a) as otherwise
prohibited by applicable law or (b) as determined by a final and
non-appealable judgment by a court of competent jurisdiction that such Losses
were occasioned by the gross negligence or willful misconduct of LodgeNet
Indemnitee), arising out of or in any way connected with a claim by On
Command Corporation of tortious interference with business relationship
unrelated in any manner to LodgeNet. In the event that any claim is made or
any action or proceeding is brought against the LodgeNet Indemnitees, or any
of them, arising out of or connected with this Agreement, any such LodgeNet
Indemnitee may by notice to Hilton, elect to require Hilton, at Hilton's sole
cost and expense, to resist such claim or take over the defense of any such
action or proceeding and employ counsel for such purpose, such counsel to be
subject to the prior approval of such LodgeNet Indemnitee. A LodgeNet
Indemnitee making such claim shall provide Hilton with notice of such claim
within one hundred eighty (180) days of such LodgeNet Indemnitee obtaining
actual knowledge of such claim.
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Section 14 LIENS
In every instance, LodgeNet covenants and agrees to keep the
equipment and property of Hilton and the Participating Hotels and the
Licensed Areas free and clear from any and all liens for work performed or
materials furnished hereunder, other than Permitted Liens (as defined below),
such failure shall represent a material default of this Agreement, subject to
the cure provisions in Section 20.1, and LodgeNet agrees to indemnify the
Hilton Indemnitees from and against any and all costs, expenses, losses and
all damage resulting from the filing of any such liens against Hilton and the
Participating Hotels or the Licensed Areas of Hilton and the Participating
Hotels. As a condition to payment hereunder, LodgeNet shall from time to
time, upon request by Hilton or the Participating Hotel, furnish waivers or
releases of such liens or receipts in full for all claims for such work or
materials and an affidavit that all such claims have been fully satisfied.
"Permitted Liens" shall mean (i) mechanics liens arising in the ordinary
course of business securing amounts that are not delinquent outside of the
ordinary course of business, and (ii) liens for taxes not yet due and payable.
Section 15 OWNERSHIP
15.1 LODGENET EQUIPMENT. Ownership of the LodgeNet
Equipment shall be and remain vested in LodgeNet at all times. The Equipment
shall not under any circumstances constitute, be or be deemed to be fixtures
annexed to Hilton's or the Participating Hotels' real property and the
LodgeNet Equipment shall at all times be and remain free and clear of any
claims, liens, or encumbrances created by Hilton or the Participating Hotels.
15.2 VOD SERVICES. Hilton and the Participating Hotels
agree that the VOD Services are subject to certain copyright agreements and
other restrictions. Hilton and the Participating Hotels agree not to
knowingly permit anyone other than a Guest (or the Guest's invitees or
guests) to view the VOD Services, or to allow any viewing or access to the
VOD Services other than in guest rooms. Hotel shall also not knowingly allow
any taping or copying of any VOD Services.
Section 16 RIGHT TO ENTER OR GRANT ENTRY
Hilton and each of the respective Participating Hotels shall have
the right, without liability to LodgeNet, to allow a duly authorized officer
or agent of a federal, state or local governmental agency, admittance to the
Licensed Areas at any time and from time to time, as needed or requested by
such agency. It is specifically understood that such agency need not obtain a
search warrant or provide a subpoena.
Section 17 LODGENET'S PROPERTY
All property belonging to LodgeNet, its employees, agents, or
invitees of the Licensed Areas that is in the Participating Hotels, or the
Licensed Areas, shall be there at the risk of LodgeNet or other person only,
and neither Hilton nor the Participating Hotels shall be liable for damage
thereto for theft or misappropriation thereof or any other loss or damage.
Further, LodgeNet shall indemnify and hold harmless Hilton and the
Participating Hotels from any claims, causes of action arising from theft or
misappropriation of the property belonging to the aforementioned. Nothing
herein to the contrary shall require LodgeNet to indemnify or hold
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harmless Hilton for the gross negligence or intentional tortious acts of
Hilton's employees or agents. The burden of proving such intent shall be upon
LodgeNet.
Section 18 CONFIDENTIALITY
18.1 HILTON CONFIDENTIAL INFORMATION. As a result of
LodgeNet's engagement by Hilton, LodgeNet agrees and acknowledges that it has
access to Hilton Confidential Information (as defined in Exhibit 3 which is
hereby incorporated into this Agreement by this reference) that is
proprietary to Hilton and highly sensitive in nature. Further, LodgeNet
agrees and acknowledges that it occupies a position of trust and confidence
in respect to Hilton's affairs and business. Accordingly, LodgeNet hereby
agrees to take the steps set forth in Section 18.3 to preserve the
confidential and proprietary nature of the Hilton Confidential Information.
18.2 LODGENET CONFIDENTIAL INFORMATION. As a result of
LodgeNet's engagement by Hilton, Hilton agrees and acknowledges that it has
access to LodgeNet Confidential Information (as defined below) that is
proprietary to LodgeNet and highly sensitive in nature. Accordingly, Hilton
hereby agrees to take the following steps to preserve the confidential and
proprietary nature of the LodgeNet Confidential Information. For purposes of
this Agreement, "LodgeNet Confidential Information" means information or
material that (a) is not generally known by personnel outside of LodgeNet,
(b) relates to the VOD Services, the LodgeNet Equipment, or the business of
LodgeNet, (c) is conspicuously marked "confidential" on each individual page
delivered, (d) is delivered to a Senior Vice President or President of
Hilton, (e) is accepted by a Senior Vice President or President of Hilton and
(f) shall be deemed to include the terms of this Agreement.
18.3 TREATMENT OF HILTON CONFIDENTIAL INFORMATION
(a) NO DISCLOSURE During and after LodgeNet's
engagement with Hilton, LodgeNet will not use, disclose or otherwise permit
any person or entity access to any of the Hilton Confidential Information
other than as required in the performance of LodgeNet's duties with Hilton.
Further, LodgeNet will not sell, license or otherwise exploit any products or
services (including software in any form) that embody in whole or in part any
Hilton Confidential Information. Hilton Confidential Information will be used
solely for the purpose of fulfilling its duties under this Agreement and will
be kept confidential by LodgeNet and its officers, directors, employees and
advisors (collectively, "LodgeNet Parties").
(b) EXCEPTIONS. Hilton Confidential Information
may be disclosed (i) to LodgeNet Parties who need to know such information
for the purpose of fulfilling their duties under this Agreement, (ii) as
required by a final, nonappealable order, provided Hilton has the opportunity
to contest such order at its expense (unless the order relates to or arises
from a breach of this Agreement by a LodgeNet Party, in which event such
contest shall be at LodgeNet's sole cost and expense), and (iii) as required
pursuant to the rules and regulations of the Securities and Exchange
Commission.
(c) PREVENT DISCLOSURE. LodgeNet will take all
reasonable precautions to prevent disclosure of Hilton Confidential Information
to unauthorized persons or entities.
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(d) RETURN ALL MATERIALS. Upon termination of
LodgeNet's engagement with Hilton for any reason whatsoever, LodgeNet will
deliver to Hilton all tangible materials embodying, containing or reflecting the
Hilton Confidential Information, including, without limitation, any
documentation, records, listings, notes, scores, drafts, data, sketches,
drawings, memoranda, models, accounts, reference materials, samples,
machine-readable media and equipment that in any way relate to the Hilton
Confidential Information. Further, LodgeNet agrees not to retain any copies,
extracts or other reproductions of the above materials.
(e) INJUNCTIVE RELIEF.
(i) LodgeNet understands that monetary
damages will not be sufficient to avoid or compensate for the unauthorized
use or disclosure of any of the Hilton Confidential Information and that
injunctive relief would be appropriate to prevent any actual or threatened
use or disclosure of such Hilton Confidential Information.
(ii) LodgeNet further understands that
the rights granted and services to be provided to Hilton hereunder are of a
special, unique, unusual, extraordinary and intellectual character, giving
them peculiar value, the loss of which cannot be reasonably or adequately
compensated in damages; a breach by LodgeNet hereunder or the failure by
LodgeNet to render services hereunder would cause Hilton irreparable injury
and damage. Accordingly, Hilton shall be entitled to injunctive or other
equitable relief to prevent such breach.
(iii) All rights granted to Hilton are
irrevocable and without right of rescission by LodgeNet or reversion to
LodgeNet under any circumstances whatsoever, and if Hilton elects to
terminate (or purports to terminate) this Agreement (and even if such
termination or purported termination is ultimately determined by a court to
have been without proper legal cause or it is ultimately determined by such
court that Hilton committed any material breach of this Agreement),
LodgeNet's rights and remedies in any event whatsoever shall be strictly
limited, if otherwise available, to the recovery of damages and in no event
shall LodgeNet have the right to rescind this Agreement, revoke any of the
rights herein granted, or enjoin or restrain the exploitation of the project
for which LodgeNet is rendering services hereunder or other project or work
based on such project.
18.4 TREATMENT OF LODGENET CONFIDENTIAL INFORMATION
(a) NO DISCLOSURE During and after Hilton's
engagement with LodgeNet , Hilton will not use, disclose or otherwise permit
any person or entity access to any of the LodgeNet Confidential Information
other than as required in the performance of Hilton's duties with LodgeNet.
Further, Hilton will not sell, license or otherwise exploit any products or
services (including software in any form) that embody in whole or in part any
LodgeNet Confidential Information. LodgeNet Confidential Information will be
used solely for the purpose of fulfilling its duties under this Agreement and
will be kept confidential by Hilton and its officers, directors, employees
and advisors (collectively, "Hilton Parties").
(b) EXCEPTIONS. LodgeNet Confidential Information
may be disclosed (i) to Hilton Parties who need to know such information for
the purpose of fulfilling their duties
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under this Agreement, (ii) as required by a final, nonappealable order,
provided LodgeNet has the opportunity to contest such order at its expense
(unless the order relates to or arises from a breach of this Agreement by a
Hilton Party, in which event such contest shall be at Hilton's sole cost and
expense) and (iii) as required pursuant to the rules and regulations of the
Securities and Exchange Commission.
(c) PREVENT DISCLOSURE. Hilton will take all
reasonable precautions to prevent disclosure of LodgeNet Confidential
Information to unauthorized persons or entities.
(d) RETURN ALL MATERIALS. Upon termination of
Hilton's engagement with LodgeNet for any reason whatsoever, Hilton will
deliver to LodgeNet all tangible materials embodying, containing or
reflecting the LodgeNet Confidential Information, including, without
limitation, any documentation, records, listings, notes, scores, drafts,
data, sketches, drawings, memoranda, models, accounts, reference materials,
samples, machine-readable media and equipment that in any way relate to the
LodgeNet Confidential Information. Further, Hilton agrees not to retain any
copies, extracts or other reproductions of the above materials.
(e) INJUNCTIVE RELIEF.
(i) Hilton understands that monetary
damages will not be sufficient to avoid or compensate for the unauthorized
use or disclosure of any of the LodgeNet Confidential Information and that
injunctive relief would be appropriate to prevent any actual or threatened
use or disclosure of such LodgeNet Confidential Information.
(ii) Hilton further understands that the
rights granted and services to be provided to LodgeNet hereunder are of a
special, unique, unusual, extraordinary and intellectual character, giving
them peculiar value, the loss of which cannot be reasonably or adequately
compensated in damages; a breach by Hilton hereunder or the failure by Hilton
to render services hereunder would cause LodgeNet irreparable injury and
damage. Accordingly, LodgeNet shall be entitled to injunctive or other
equitable relief to prevent such breach.
(iii) All rights granted to LodgeNet are
irrevocable and without right of rescission by Hilton or reversion to Hilton
under any circumstances whatsoever, and if LodgeNet elects to terminate (or
purports to terminate) this Agreement (and even if such termination or
purported termination is ultimately determined by a court to have been
without proper legal cause or it is ultimately determined by such court that
LodgeNet committed any material breach of this Agreement), Hilton's rights
and remedies in any event whatsoever shall be strictly limited, if otherwise
available, to the recovery of damages and in no event shall Hilton have the
right to rescind this Agreement, revoke any of the rights herein granted, or
enjoin or restrain the exploitation of the project for which Hilton is
rendering services hereunder or other project or work based on such project.
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Section 19 ADDITIONAL COVENANTS OF LODGENET
19.1 NOTICE COVENANTS.
(a) NOTICE OF BREACH ETC. Promptly upon any
officer of LodgeNet obtaining knowledge (a) of any condition or event that
constitutes a condition or event that, with notice or the passage of time, or
both, would permit Hilton to terminate this Agreement pursuant to Section
20.1 hereof, (b) that any person or entity has given notice to LodgeNet or
taken any other action with respect to a claimed default or event or
condition of the type referred to in Section 20.1 hereof or (c) of any
condition or event having or which could reasonably be expected to have a
material adverse effect on LodgeNet or this Agreement, then LodgeNet shall
deliver to Hilton a certificate signed by its President specifying the nature
and period of existence of such condition or event, or specifying the notice
given or action taken by such person or entity and the nature of the event or
condition, and what action LodgeNet has taken, is taking and proposes to take
with respect thereto.
(b) OTHER INFORMATION. LodgeNet agrees to provide
Hilton, with reasonable promptness, such other information and data with
respect to LodgeNet (i) as required in this Agreement, including, without
limitation pursuant to Section 19.1(a), and (ii) as from time to time may be
requested by Hilton in its reasonable discretion.
19.2 MILESTONES. LodgeNet agrees to meet and maintain
the milestones set forth set forth on Schedule E. Notwithstanding the
foregoing, LodgeNet shall be excused from liability for the failure to meet
the milestones set forth on Schedule E by reason of any act of God, fire,
flood, explosion, earthquake, or other natural forces (together "Natural
Disasters"). Such excuse from liability shall be effective only to the extent
and duration of the event(s) causing the failure or delay in performance.
19.3 DEBT COVENANTS. During the entire Term, LodgeNet
hereby makes to Hilton and agrees to meet and maintain each of the covenants
set forth in that certain $150,000,000 Second Amended and Restated Credit
Agreement dated as of February 25, 1999 by and among LodgeNet, National
Westminster Bank PLC, as Administrative Agent, BankBoston, N.A and Morgan
Stanley Senior Funding, Inc. as Syndication Agents, and the Lenders Named
Therein, as amended or superseded from time to time, which covenants are
incorporated herein by reference.
19.4 DISABLING OF SOFTWARE; CESSATION OF SERVICES.
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
Section 20 TERMINATION
20.1 TERMINATION BY HILTON. This Agreement shall be
subject to termination by Hilton either at each applicable Participating
Hotel or in total as defined below upon the occurrence of any of the
following events:
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(a) With respect to the applicable Participating
Hotel if LodgeNet fails to pay the sums to the applicable Participating Hotel
called for in Section 5 hereof and such failure continues for three (3) days
after written notice that the same is due.
(b) In total, if LodgeNet fails to pay any sums
owing Hilton and such failure continues for three (3) days after written
notice that the same is due.
(c) In total, if LodgeNet shall, in any material
respect, violate or breach any of the terms, conditions or covenants hereof
and shall not remedy such violation or breach within ten (10) days after
receipt of written notice by LodgeNet of such violation or breach; provided;
however, that if such violation or breach pertains to Sections 27.6(a) or
27.6(b) hereof, and such violation or breach is curable but the same cannot
with due diligence be cured within ten (10) days, LodgeNet shall not be
deemed to be subject to termination, if it shall within such ten (10) day
period commence curing and thereafter diligently prosecutes the same to rapid
completion); provided, further, that if Hilton is adversely affected as a
result of LodgeNet's inability to cure such breach within such ten (10) day
period, Hilton shall be able, to the extent such violation or breach has not
been cured in its entirety, upon the expiration of such ten (10) day period,
terminate this Agreement in total regardless of whether the violation or
breach in question is in fact curable.
(d) At the applicable Participating Hotel, if
LodgeNet's operation and use of the Licensed Area shall at any time violate
or fail to conform to covenants, conditions, standards or practices
established herein regarding the use or operation of the Licensed Area or as
may be modified or supplemented generally with respect to all vendors by the
Participating Hotel from time to time in writing to LodgeNet, and such
noncompliance is not cured within ten (10) days after written notice by the
Participating Hotel to LodgeNet of such noncompliance.
(e) At each applicable Participating Hotel, if any
state or local statute, ordinance, rule or regulation hereafter promulgated
by any legislative body or agency having jurisdiction over LodgeNet or the
VOD Services shall have material negative impact on the VOD Services or the
Participating Hotel.
(f) In total, if any federal statute, ordinance,
rule or regulation hereafter promulgated by any legislative body or agency
having jurisdiction over LodgeNet or the VOD Services shall have material
negative impact on the VOD Services, Hilton or the Participating Hotels in
the aggregate.
(g) At each applicable Participating Hotel, in the
event that: (i) the premises upon which the Licensed Area is located should
be sold; (ii) Hilton or the Participating Hotel should assign its rights to
the site to a third party, or (iii) the Participating Hotel proposes, or is
required for any reason, to renovate or demolish the Participating Hotel or a
substantial portion thereof which includes all or a portion of the Licensed
Area, then the Participating Hotel shall have the right, upon not less than
one hundred eighty (180) days prior written notice to LodgeNet, to terminate
this Agreement. In such event Hilton shall reimburse LodgeNet's CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION per installed room (Guest or meeting).
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LodgeNet shall notify the Participating Hotel of such costs in writing no
later than ninety (90) days after installation.
(h) In total, if LodgeNet shall make an assignment
for the benefit of creditors or file a voluntary petition in bankruptcy or be
adjudged insolvent or shall admit in writing its inability to meet its
obligations as they mature, or if a permanent receiver of all or any portion
of LodgeNet's property shall be appointed in any judicial proceeding, or
there shall be entered against it an order adjudicating it a bankrupt or
insolvent or an order appointing a liquidator, receiver or trustee for it or
all or substantially all of its assets or approving as properly filed against
it a petition seeking reorganization, arrangement or other proceeding under
any bankruptcy or other law for the relief of debtors, which order shall
continue unstayed and in effect for, or which proceeding shall not be
terminated and LodgeNet released from such proceeding within thirty (30)
days, or if LodgeNet shall attempt to assign or encumber this Agreement or
permit any other person, firm or corporation to conduct the business or
Services provided for hereunder.
(i) In total, if during the Term, (i) a Superior
Technology (as defined below) is developed and (ii) Hilton's core lodging
business is competitively disadvantaged because LodgeNet fails to implement,
at terms no less favorable than those offered or made available to other
hotel chains, such Superior Technology in the Participating Hotels within
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION after receiving written notice from Hilton; provided,
however, that if within such CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION period, LodgeNet has
not completed implementation of the Superior Technology but has commenced to
diligently implement such Superior Technology to rapid completion, LodgeNet
shall have up to an additional CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION period to complete
implementation of the Superior Technology. For purposes of this Agreement,
"Superior Technology" means a commercially available system, including
software, that has the operational or technical capacity to deliver services
that are substantially similar to the VOD Services in a manner that is more
reliable, has more functionality, has more or better content, or is less
expensive than the VOD Services. For example, the ability to deliver the VOD
Services with fast-forward, rewind or pause functions would be considered a
Superior Technology, assuming that the quality and price of the VOD Services
were substantially equivalent.
(j) In total, if during the Term, (i) LodgeNet
becomes unable to fulfill its obligations hereunder and cannot cure such
inability within thirty (30) days after receipt of written notice from Hilton
or (ii) LodgeNet reasonably believes that it may be unable to or intends not
to fulfill its obligations hereunder.
(k) In total, upon the failure by LodgeNet to meet,
in any material respect, any of the milestones set forth in Schedule E attached
hereto, provided that such failure is not remedied within thirty (30) days after
written notice of the occurrence of such failure; and
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(l) In total, upon the breach by the Company of
any of the debt covenants set forth in Section 19.3 hereof, provided that
such breach is not remedied within twenty (20) days after written notice of
the occurrence of such breach.
(m) In total if (i) at any time during the Term,
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION or more Participating Hotels in the aggregate terminate
their respective Hotel Service License Agreements as a result of a breach or
violation by LodgeNet of any term, condition or covenant of such Hotel
Service License Agreement, or (ii) at any time, beginning on the date that is
two (2) years after the date of this Agreement, if CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION or
more of the total installed room base at the Participating Hotels in the
aggregate has been terminated as a result of breach or violation by LodgeNet
of any term, condition or covenant of the applicable Hotel Service License
Agreements.
(n) In total if, the term of any other written
agreement between LodgeNet and any entity that is an affiliate of Hilton (not
including for this purpose Participating Hotels) shall be terminated as a
result of a violation, default or breach by LodgeNet of a term, condition or
covenant of such agreement, or LodgeNet shall breach, violate or otherwise
refuse to honor or fulfill any of its obligations under that certain Warrant
dated of even date herewith issued by LodgeNet to Hilton, Hilton reserves the
right, upon thirty (30) days written notice to LodgeNet, (i) to terminate
this Agreement, and (ii) to add any sums due Hilton and/or the Participating
Hotels under that agreement to the Usage Fees due under this Agreement.
(o) In total if, during the term, there is a
Change of Control of LodgeNet (as defined on Schedule G), and the surviving
entity or the entity controlling the surviving entity (i) is a competitor of
Hilton in its core lodging business, (ii) does not possess the same or
greater economic viability as LodgeNet currently possesses, (iii) is of such
character that its reputation could reasonably be expected to adversely
affect or otherwise harm Hilton's business or reputation, or (iv) lacks the
operational or technical expertise reasonably necessary to provide the VOD
Services.
LodgeNet acknowledges and agrees that upon the termination
of this Agreement pursuant to this Section 20.1, the Master Service License
Agreement between LodgeNet and each Participating Hotel shall become
terminable by the Participating Hotel in accordance with the terms of such
agreement. LodgeNet further acknowledges and agrees that Hilton shall, in its
sole and absolute discretion, be entitled to notify each Participating Hotel
of the termination of this Agreement and the reasons therefor without
limitation of any type whatsoever as to the form or substance pursuant to
which such notification is or shall be made. LodgeNet hereby releases Hilton
from and against and hereby waives any and all claims, losses, damages, fees
and expenses of every type whatsoever that it has or may in the future have
arising from related to or made or to be made in connection with such
notification and hereby covenants that it will not at any time make any claim
against Hilton or any of its affiliates with respect to any such notification.
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20.2 TERMINATION BY LODGENET.
(a) At each applicable Participating Hotel, the
Hotel Service License Agreement shall be subject to termination by LodgeNet
upon the occurrence of a material violation or breach of any of the terms,
conditions or covenants hereof by the Participating Hotel provided that the
Participating Hotel does not remedy such violation or breach within thirty
(30) days after written notice by LodgeNet of such violation.
(b) At each applicable Participating Hotel, if
such Participating Hotel shall make an assignment for the benefit of
creditors or file a voluntary petition in bankruptcy or be adjudged insolvent
or shall admit in writing its inability to meet its obligations as they
mature, or if a permanent receiver of all or any portion of such
Participating Hotel's property shall be appointed in any judicial proceeding,
or there shall be entered against it an order adjudicating it bankrupt or
insolvent or an order appointing a liquidator, receiver or trustee for it or
all or substantially all of its assets or approving as properly filed against
it a petition seeking reorganization, arrangement or other proceeding under
any bankruptcy or other law for the relief of debtors, which order shall
continue unstayed and in effect for, or which proceeding shall not be
terminated and the Participating Hotel released from such proceeding within
thirty (30) days.
(c) At each applicable Participating Hotel, if any
state or local statute, ordinance, rule or regulation hereafter promulgated
by any legislative body or agency having jurisdiction over LodgeNet or the
VOD Services shall have material negative impact on LodgeNet or the VOD
Services.
(d) In total, if any federal statute, ordinance,
rule or regulation hereafter promulgated by any legislative body or agency
having jurisdiction over LodgeNet or the VOD Services shall have material
negative impact on LodgeNet or the VOD Services.
Section 21 HOLDING OVER
21.1 HOLD-OVER WITH CONSENT. In every instance at the
Participating Hotels, if LodgeNet, with Hilton's or the Participating Hotel's
consent, leaves the LodgeNet Equipment in the Licensed Area after expiration
or termination of the Term, or after the date in any notice given by Hilton
or the Participating Hotel to LodgeNet terminating this Agreement, such event
shall be deemed to be a month-to-month holdover terminable on thirty (30)
days notice given at any time by either party. All provisions of this
Agreement except those pertaining to the term of this Agreement shall apply
to the month-to-month holdover.
21.2 HOLD-OVER WITHOUT CONSENT. In every instance at
the Participating Hotels and in total, if LodgeNet, without Hilton's or the
Participating Hotel's consent, leaves the LodgeNet Equipment in the Licensed
Area after expiration or termination of the term, or after the date in any
notice given by Hilton or a Participating Hotel to LodgeNet terminating this
Agreement or a Hotel Service License Agreement, (a) Hilton or the
Participating Hotel shall have the right to disconnect the LodgeNet Equipment
and terminate the VOD Services; (b) notwithstanding the provisions of Section
23 hereof, the Participating Hotel shall have the right to relocate the
LodgeNet Equipment, at LodgeNet's sole cost and expense, to another location
selected by the Participating Hotel, for which LodgeNet shall pay reasonable
storage rent,
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beginning thirty (30) days after the first day such LodgeNet Equipment is
left in the Licensed Area without the Participating Hotel's consent; and (c)
LodgeNet shall pay to the Participating Hotel fees CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, on
a pro rata basis, for the time the LodgeNet Equipment remains in the
Participating Hotel. In addition thereto, LodgeNet shall pay the
Participating Hotel all direct and consequential damages sustained by reason
of LodgeNet's retention of the Licensed Area, including the Participating
Hotel's attorneys' fees.
Section 22 SUBLICENSING AND ASSIGNMENT
22.1 NO SUBLICENSE OR ASSIGNMENT. LodgeNet may not
sublicense the Licensed Area or assign the Agreement or any rights and
obligations hereunder without the prior written consent of Hilton and the
respective Participating Hotel, which consent shall be given or withheld in
Hilton's and the Participating Hotel's sole discretion. Subject to the
foregoing, the conditions, covenants and agreements in the foregoing
Agreement to be kept and performed by the parties hereto shall bind and inure
to the benefit of their successors and assigns.
22.2 CONSENT BY HILTON. In connection with any such
transfer to which Hilton and/or the Participating Hotel may consent, LodgeNet
agrees to furnish Hilton and/or the Participating Hotel with copies of all
documents, and subsequent amendments thereto, executed in connection with
such transfer. Any consent of Hilton and/or the Participating Hotel to a
subletting, assignment or transfer of control shall be deemed to be a consent
only to that initial subletting, assignment or transfer of control and shall
not be deemed to be a consent to any further subletting, assignment or
transfer of control, unless otherwise specified in such initial subletting,
assignment or transfer of control. Further, notwithstanding any permitted
subletting or assignment, LodgeNet shall remain fully responsible and liable
for the payment of Usage Fees hereunder at all times and for compliance with
all of LodgeNet's obligations under the terms, provisions and covenants of
this Agreement.
Section 23 RELOCATION OF LICENSED AREA AND/OR THE LODGENET
EQUIPMENT
Each Participating Hotel, hereby reserves the right to require
LodgeNet, upon ninety (90) days notice, to relocate all or a portion of the
LodgeNet Equipment at any time during the Term as follows: (i) for the
relocation of the LodgeNet Equipment on one occasion per Participating Hotel
during the Term hereof, LodgeNet shall pay up to CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION,
and the Participating Hotel shall pay the remaining costs; or (ii) for any
subsequent relocation per Participating Hotel during the Term, the
Participating Hotel shall bear all the costs.
Section 24 NATURE OF LICENSE
The License granted hereby is a nonexclusive license for LodgeNet to
use the Licensed Areas solely as required to perform its obligations
hereunder, revocable according to the terms hereof. In no event shall this
Agreement be deemed or construed to run with the land or create or vest any
easements or other rights in Hilton or any of the Participating Hotels'
properties.
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LodgeNet agrees that no permanent or possessory interest shall accrue to
LodgeNet in Hilton or any of the Participating Hotels' properties at any time
or by exercise of the permission given hereunder, and that LodgeNet shall not
claim any such interest in Hilton or any of the Participating Hotels'
properties. THIS AGREEMENT DOES NOT CREATE ANY RECORDABLE INTEREST AND SHALL
NOT BE RECORDED IN ANY OFFICIAL RECORDS.
Section 25 NOTICES
All notices and other communications required or permitted under
this Agreement shall be in writing and shall be deemed given (a) when
delivered personally, or (b) three (3) business days after being deposited in
the United States mail, by certified and registered mail, return receipt
requested, or (c) on the first business day after timely deposit with a
reputable overnight courier service for next-day delivery, postage prepaid,
and addressed as follows:;
25.1 TO HILTON. If intended for Hilton, addressed to
the attention of General Counsel at
Hilton Hotels Corporation
9336 Civic Center Drive
Beverly Hills, CA 90210
(310) 278-4321
with copy to Allen Matkins Leck Gamble &
Mallory LLP 1999 Avenue of the
Stars, Suite 1800 Los Angeles, CA
90067
(310)788-2410
Attention: Mark J. Kelson, Esq.
or such other address as may from time to time hereafter be designated by Hilton
by like notice.
25.2 TO LODGENET. If intended for LodgeNet, addressed
to the attention of President at
LodgeNet Entertainment Corporation
3900 West Innovation Street
Sioux Falls, SD 57107-7002
(605) 988-1323
or to such other address as may from time to time hereafter be designated by
LodgeNet by like notice.
Section 26 ACCESS TO THE VOD SERVICES
26.1 UP TIMES. LodgeNet will provide the VOD Services
and the LodgeNet Equipment consistently and in good operation and make them
available to each Participating Hotel and its Guests at a minimum of
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION of the
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time (such that the VOD Services shall not be unavailable for more than
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION per year); provided, however, that the VOD Services shall
not be inoperable or otherwise unavailable, in whole or in part, for any
consecutive period of CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION during the Term. On a monthly
basis, LodgeNet will provide Hilton and the respective Participating Hotel
with a written report showing total detailed Service statistics, including
availability, and the total number of usage access connections attempted and
completed and failed.
26.2 FORCE MAJEURE. Except for the obligation to make
payment when due, LodgeNet shall be excused from liability for the failure or
delay in performance of its obligation under Section 26.1 above by reason of
any Natural Disaster. Such excuse from liability shall be effective only to
the extent and duration of the event(s) causing the failure or delay in
performance. Notwithstanding the foregoing, LodgeNet, at its sole cost and
expense, shall restore the VOD Services as soon as possible upon the
occurrence of any Natural Disaster. Without limiting the foregoing, LodgeNet
shall commence efforts to restore the VOD Service no later than CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION after the Natural Disaster and shall use best efforts to complete
restoration of the VOD Services no later than CONFIDENTIAL MATERIAL REDACTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION after such
Natural Disaster, provided the Participating Hotel is in operation.
Section 27 REPRESENTATIONS, WARRANTIES AND COVENANTS OF
LODGENET
LodgeNet represents, warrants and covenants as follows:
27.1 ORGANIZATION AND STANDING; CERTIFICATE OF
INCORPORATION AND BYLAWS. LodgeNet is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
LodgeNet has all requisite corporate power and authority to own and operate
its properties and assets, and to carry on its business as presently
conducted. LodgeNet is qualified to do business as a foreign corporation in
each jurisdiction where failure to be so qualified would have a material
adverse effect on LodgeNet's business as presently conducted.
27.2 CORPORATE POWER. LodgeNet has all requisite
corporate power and authority to execute and deliver this Agreement and any
other agreements being entered into by LodgeNet in connection with the VOD
Services and the LodgeNet Equipment and to carry out and perform its
obligations under the terms of such agreements.
27.3 NO CONFLICTS. There are no agreements or
arrangements, whether written or oral, that would be breached by LodgeNet
upon execution of this Agreement or that would impair or prevent LodgeNet
from performing its obligations hereunder, including, without limitation,
rendering the VOD Services and providing the LodgeNet Equipment to Hilton
during the term hereof. LodgeNet has and will maintain throughout the term
hereof all qualifications required to perform the VOD Services and provide
the LodgeNet Equipment hereunder and any
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other agreements being entered into by LodgeNet in connection with the VOD
Services and the LodgeNet Equipment, and it has not made and will not make
any commitment or do any act in conflict with this Agreement.
27.4 REQUESTED INFORMATION. LodgeNet shall promptly
provide Hilton with all information reasonably requested by Hilton with
respect to LodgeNet and its affiliates including their respective officers,
directors or shareholders. The information requested may include but not
necessarily be limited to financial condition, personal and family
background, litigation, indictment, criminal proceedings and the like in
which any of the aforementioned may have been involved (collectively, the
"Requested Information"), solely in order for Hilton to determine that the
Requested Information does not disclose any fact which might adversely
affect, in any manner, any gaming licenses or permits held by Hilton or its
affiliates or the current stature of Hilton or its affiliates with any gaming
commission, board or similar regulatory agency.
27.5 PERMITS; CONSENTS; APPLICABLE LAWS AND
REGULATIONS. LodgeNet shall secure and maintain (a) licenses, permits and
approvals required by governmental authorities having jurisdiction over
services to be performed by LodgeNet and (b) necessary patents, copyrights,
distribution rights, licenses, releases, waivers, other intellectual property
rights and other necessary consents of third parties. LodgeNet has and shall
continue to comply with all applicable regulations and laws pertaining to
censorship, importation or display of films at Participating Hotels, and
LodgeNet shall be solely responsible on a continuing basis to secure, at
LodgeNet's expenses, any and all permits and approvals respecting the
programs, copyrights, distribution rights, music rights, releases and any
other approvals as may be necessary for the purposes of this Agreement.
27.6 INTELLECTUAL PROPERTY RIGHTS.
(a) LodgeNet represents and warrants that the VOD
Services and the LodgeNet Equipment or any individual product or part
thereof, including, without limitation, any software interfaces, or use of
the VOD Services and the LodgeNet Equipment does not and shall not infringe
upon or violate any right of privacy or publicity of, or constitute a libel,
slander, or any unfair competition against, or infringe upon or violate any
common law or registered (U.S. or foreign) intellectual property rights
(including, without limitation, copyright, patent, trade secret, and/or
trademark rights) and/or any common law rights or any other rights of any
person, firm, corporation or other entity ("Third Party Intellectual Property
Rights").
(b) If the VOD Service's system or the LodgeNet
Equipment or any part thereof, furnished by LodgeNet to the Participating
Hotels becomes, or in the opinion of LodgeNet or Hilton may become, the
subject of any claim, suit or proceeding for infringement of any Third Party
Intellectual Property Rights, or if the use, lease or sale of such product or
part is enjoined, LodgeNet shall implement one of the following actions at
LodgeNet's option, and LodgeNet's sole cost and expense: (i) procure for the
Participating Hotel the right under such patent or copyright to use, lease or
sell, as appropriate, such system or part, or (ii) replace, modify, or remove
such system or part. If the Participating Hotels or Hilton determine, in
their reasonable discretion, that such replacement, modification, or removal
of the system or part has or will have a significant negative impact on the
overall functioning of the VOD Service, the Participating Hotels or Hilton
each have the right to terminate this Agreement or the Hotel
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Service License Agreement thirty (30) days after giving written notification
to LodgeNet of such intention to terminate if LodgeNet has not remedied such
violation or breach within thirty (30) days after such written notice. In the
event of termination hereunder, LodgeNet agrees to remove the VOD Service and
the LodgeNet Equipment as provided herein.
(c) LodgeNet represents and warrants that it has
full title to and ownership of or has licensed the software incorporated into
VOD Services and interfacing with the Hilton software (the "Software"), all
other LodgeNet products delivered hereunder and all intellectual property
rights embodied in or used in connection therewith (collectively, the
"LodgeNet Products"), free and clear of liens, claims and encumbrances, and
that it has full power and authority to grant the licenses hereinabove.
Hilton and the Participating Hotels' use of the LodgeNet Products will in no
way constitute an infringement of any Third Party Intellectual Property
Rights.
(d) LodgeNet hereby represents, warrants and
covenants that the Software shall contain no viruses, which shall mean any
computer code intentionally designed to disrupt, disable, harm, or otherwise
impede in any manner, including aesthetic disruptions or distortions, the
operation of the computer program, or any other associated software,
firmware, hardware, or computer system (including local area or wide-area
networks), in a manner not intended by the creator(s) of such software,
firmware, hardware, or computer system.
(e) LodgeNet acknowledges that this Agreement does
not confer upon LodgeNet any interest in or right to use any trademark,
service mark or other intellectual property right of Hilton or any affiliates
or subsidiaries (collectively referred to as the "Hilton Intellectual
Property Rights") in connection with the VOD Services unless LodgeNet
receives the prior written consent of Hilton which consent Hilton may grant
or withhold in its sole discretion. LodgeNet further agrees that upon
termination of this Agreement, LodgeNet shall immediately cease and
discontinue all use of the Hilton Intellectual Property Rights. Further, if
LodgeNet wishes to utilize the Hilton Intellectual Property Rights in
advertising or promotional materials, it must submit such materials to Hilton
for final approval before utilizing them. In no event may LodgeNet or any
affiliated or associated person or entity utilize the Hilton Intellectual
Property Rights in connection with any products or services other than the
VOD Services. LodgeNet further acknowledges that this Agreement does not
create or grant any rights in LodgeNet to use any intellectual property
rights owned or controlled by any Participating Hotel or Hilton affiliate, or
their affiliates.
(f) LodgeNet represents and warrants that the (i)
LodgeNet Products meet all specifications of the VOD Services and all other
statements or claims in published documentation or other documentation
delivered by LodgeNet regarding the VOD Services and (ii) the documentation
accompanying the VOD System fully describes the proper procedure for using
the VOD Services and the documentation is comprehensive enough to enable a
person of average intelligence to operate the VOD Services.
(g) LodgeNet represents, warrants, and covenants
that the Software includes design, performance and functionality such that
the Software will not generate any invalid and/or incorrect date-related
results when used during any year during or after the calendar year 2000.
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27.7 LITIGATION. There are no actions, suits,
proceedings or investigations pending, or, to LodgeNet's knowledge,
threatened, to which LodgeNet is a party or its property is subject which
reasonably might be expected to result in any material adverse change in the
business or financial condition of LodgeNet or any of its properties or
assets, or in any material impairment of the right or ability of LodgeNet to
carry on its business as now conducted or as proposed to be conducted, or in
any material liability on the part of LodgeNet, and none which question the
validity of this Agreement or any action taken or to be taken in connection
herewith.
27.8 FREE-TO-GUEST PRICING. The pricing of the
Free-to-Guest Programming set forth on Schedule C-1 is being made available
by LodgeNet to Hilton CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
27.9 DISCLOSURE. No representation or warranty of
LodgeNet contained in this Agreement or in any other document, certificate or
written statement furnished to Hilton by or on behalf of LodgeNet for use in
connection with the transactions contemplated by this Agreement contains any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. There
is no fact known (or which upon the reasonable exercise of diligence should
be known) to LodgeNet (other than matters of a general economic nature) that
has had, or could reasonably be expected to result in, (i) a material adverse
effect upon the business, operations, properties, assets, condition
(financial or otherwise) or prospects of LodgeNet, or (ii) the impairment of
the ability of LodgeNet to perform, or of Hilton to enforce, this Agreement.
Section 28 REPRESENTATIONS, WARRANTIES AND COVENANTS OF HILTON
Hilton represents, warrants and covenants as follows:
28.1 ORGANIZATION AND STANDING; CERTIFICATE OF
INCORPORATION AND BYLAWS. Hilton is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Hilton
has all requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted.
Hilton is qualified to do business as a foreign corporation in each
jurisdiction where failure to be so qualified would have a material adverse
effect on Hilton's business as presently conducted.
28.2 CORPORATE POWER. Hilton has all requisite
corporate power and authority to execute and deliver this Agreement and any
other agreements being entered into by LodgeNet in connection with the VOD
Services and the LodgeNet Equipment and to carry out and perform its
obligations under the terms of such agreements.
28.3 NO CONFLICTS. There are no agreements or
arrangements, whether written or oral, that would be breached by Hilton upon
execution of this Agreement or that would impair or prevent Hilton from
performing its obligations hereunder.
28.4 INTELLECTUAL PROPERTY RIGHTS. Hilton acknowledges
that this Agreement does not confer upon Hilton any interest in or right to
use any trademark, service mark or other
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intellectual property right of LodgeNet or any affiliates or subsidiaries
(collectively referred to as the "LodgeNet Intellectual Property Rights") in
connection with the VOD Services unless Hilton receives the prior written
consent of LodgeNet which consent LodgeNet may grant or withhold in its sole
discretion. Hilton further agrees that upon termination of this Agreement,
Hilton shall immediately cease and discontinue all use of the LodgeNet
Intellectual Property Rights. Further, if Hilton wishes to utilize the
LodgeNet Intellectual Property Rights in advertising or promotional
materials, it must submit such materials to Hilton for final approval before
utilizing them. In no event may Hilton or any affiliated or associated person
or entity utilize the LodgeNet Intellectual Property Rights in connection
with any products or services other than the VOD Services.
Section 29 INDEPENDENT CONTRACTOR
In connection with this Agreement each party is an independent
contractor and as such will not have any authority to bind or commit the
other. Nothing herein shall be deemed or construed to create a joint venture,
partnership or agency relationship between the parties for any purpose.
Section 30 DRAFTING AND PREPARATION
Each party has cooperated and participated in the drafting and
preparation of this Agreement. Therefore, if any construction is to be made
of this Agreement of any of its terms, both parties shall be construed to be
equally responsible for the drafting and preparation of same.
Section 31 INSPECTION RIGHTS
31.1 Hilton shall have the right no more than (a) one
(1) time in any calendar year for financial or monetary obligations and (b)
two (2) times in any calendar year for non-financial or non-monetary
obligations, including obligations under Section 1.7 hereof, at its sole cost
and expense, to hire an independent third party to inspect the books and
records of LodgeNet to determine if LodgeNet is performing its obligations in
accordance with the terms of this Agreement. If it is determined by the
inspection that there was an underpayment of an amount due to Hilton or any
Participating Hotel by LodgeNet, LodgeNet shall promptly pay the difference
to Hilton or such Participating Hotel and, in the event such underpayment
exceeds five percent (5%) of the amounts due under the Hotel Service License
Agreements, LodgeNet shall reimburse Hilton or such Participating Hotel for
the costs of the inspection. If it is determined by the inspection that
LodgeNet has defaulted in any of its non-monetary obligations under this
Agreement, then Hilton may, but shall not be obligated to, pursue its rights
and remedies against LodgeNet as permitted hereunder. In no event shall
Hilton's failure to enforce its rights upon learning of a default be deemed
to be a waiver of such default. Furthermore, if a default is uncovered as a
result of the inspection, LodgeNet shall promptly reimburse the inspecting
party for the costs of the inspection.
31.2 If reasonable cause exists to believe that a
Participating Hotel may have wrongfully underpaid amounts owing to LodgeNet
under the Hotel Service License Agreement, LodgeNet shall submit a written
request to Hilton to consent to the inspection by LodgeNet of the books and
records of such Participating Hotel pertaining to its monetary obligations to
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LodgeNet thereunder, which consent shall not be unreasonably withheld by
Hilton. Upon obtaining such consent, if any, LodgeNet may inspect, following
reasonable prior written notice and during normal business hours, at its sole
cost and expense, the books and records of such Participating Hotel to
determine if such Participating Hotel has wrongfully underpaid amounts due
LodgeNet under the Hotel Service License Agreement. Such inspection shall be
undertaken in a manner that shall not interfere with the normal business
operations of the Participating Hotel and shall cover a period of not less
than six (6) months and not more than twenty-four (24) months ("Audit
Period"). If it is determined by the inspection that there was an
underpayment of any amount due to LodgeNet by the Participating Hotel, such
Participating Hotel shall promptly pay the difference to LodgeNet, and if
such underpayment exceeds five percent (5%) of the aggregate amounts due
LodgeNet by the Participating Hotel in the Audit Period, such Participating
Hotel shall reimburse LodgeNet for the reasonable direct costs of the
inspection, not to exceed CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION. Notwithstanding the foregoing,
LodgeNet shall have the right to request and to inspect the books and records
of any Participating Hotel not more than once in any twelve (12) month period.
Section 32 MISCELLANEOUS
32.1 MODIFICATION, TERMINATION, WAIVER. This Agreement
is made subject to all local, state and federal laws and regulations now or
hereafter in force, and shall not be modified, extended or terminated (other
than as set forth, herein) except by an instrument duly signed by Hilton and
LodgeNet. Waiver of a breach of any provisions hereof under any circumstances
will not constitute a waiver of any subsequent breach of such provision, or
of a breach of any other provision of this Agreement.
32.2 NO BROKERS. Hilton and LodgeNet represent and
warrant to each other that no brokers were involved in connection with this
transaction and each party agrees to indemnify and hold the other harmless
from and against the claims of any broker (if any), made in connection with
this transaction.
32.3 CHOICE OF LAW; VENUE. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE SCHEDULES
AND EXHIBITS HERETO WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF
CONFLICTS, OF THE STATE OF CALIFORNIA. Any action or proceeding brought by
any party to this Agreement against another party, arising out of or related
to this Agreement shall be brought in a state or federal court of competent
jurisdiction located in the County of Los Angeles, State of California, and
the parties hereby submit to the IN PERSONAM jurisdiction of such courts for
purposes of any such action or proceeding.
32.4 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon the parties, and their permitted successors and assigns.
32.5 FURTHER ASSURANCES. Hilton and LodgeNet agree to
do any further acts and execute such additional documents as the other may
reasonably require to confirm this Agreement and carry out the purpose of
this Agreement.
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32.6 TITLES AND SUBTITLES. The titles and subtitles
used in this Agreement are used for convenience only and are not considered
in construing or interpreting this Agreement.
32.7 FAXED SIGNATURE PAGES. Any signature page
delivered by a fax machine or telecopy machine shall be binding to the same
extent as an original signature page, with regard to any agreement subject to
the terms hereof or any amendment thereto. Any party who delivers such a
signature page agrees to later deliver an original counterpart to any party
which requests it.
32.8 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be enforceable against the
parties actually executing such counterparts, and all of which together shall
constitute one instrument.
32.9 SEVERABILITY. It is agreed that if any provision
of this Agreement shall be determined to be void by any court of competent
jurisdiction, then such determination shall not affect any other provision of
this Agreement and all such other provisions shall remain in full force and
effect; and it is the intention of the parties hereto that if any provision
of the license is capable of two constructions, one of which would render the
provision void and the other of which would render the provision valid, then
the provision shall have the meaning which renders it valid.
32.10 ENTIRE AGREEMENT. This Agreement contains the
full and complete understanding of the parties concerning the subjects
contained herein and supersedes any and all prior written or oral agreements
between the parties and cannot be amended except in writing signed by both
parties.
32.11 ATTORNEYS' FEES. In the event Hilton or LodgeNet
breaches any of the terms of this Agreement, whereby the party not in default
employs attorneys to protect or enforce its rights hereunder and prevails,
then the defaulting party agrees to pay the other party reasonable attorneys'
fees so incurred by such other party.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of date first above written.
HILTON HOTELS CORPORATION, LODGENET ENTERTAINMENT CORPORATION,
a Delaware corporation a Delaware corporation
By: By:
----------------------------------- --------------------------------
Dieter H. Huckestein Scott C. Petersen
Its: Executive Vice President Its: President
36
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SCHEDULE A
VOD SERVICES
LodgeNet shall provide only the following expressly specified services:
1) Video on Demand ("VOD")
VOD content will be encoded and compiled by LodgeNet for LodgeNet's VOD
Services only and presented in digital format except for any content
that cannot be provided digitally due to content licensing restrictions
or in the case of limited trials of new content within the scope of
LodgeNet's offerings.
VOD content will include only:
a) Non-interactive, full-length 'hotel/airline' release motion
picture content usually licensed within 60-120 days of first
theatrical release ("Theatrical"), including previews of all
such Theatrical releases and short form fitness and
motivational content (e.g. Tae Bo; Tony Robbins). Some content
is re-released or released in later windows. These movies
generally have fixed starting and ending time for licensing
within the hotel space. Such content is accessed on a time or
session-based arrangement.
b) Sexually explicit content ("Non-theatrical"), which conforms
to national pay television standards, usually licensed at a
fixed cost for a fixed period of time. Such content is
accessed on a time or session-based arrangement and may not
exceed twenty-five percent of the total VOD content.
2) Games on Demand
Non-sexually explicit or non-violent (i.e. comparable to a G or PG-13
rating) dedicated hardware video game programming, which is currently
used, and the associated fees for said access. Games on demand services
shall specifically exclude Internet-based games and any form of
gambling.
3) Music on Demand
Music video and/or audio musical content on a selection, time or
session-based arrangement, not to include any internet-based music,
concert programming, special event programming, or any e-commerce or
t-commerce transaction revenues.
4) Guest services
Includes folio review, checkout with email receipt, guest survey, hotel
information channel, hotel open channel, multi-lingual welcome channel
and Guest User Interface with English, Japanese and Spanish language
options.
5) Parental Control
Allows the Guest to limit the access of Video on Demand and/or Games on
Demand Services in the Guest's room via the remote control and to
remove the blockage of the same services at any time during the Guest's
stay. Parental Controls may additionally be activated at the Front Desk
by the System terminal, upon the Guest's request. LodgeNet will provide
Hotel with Parental Control at no cost to Participating Hotels.
6) Six (6) channels shall be made available for hotel use, but for
Participating Hotels currently utilizes more channels than six, that
number of channels will be made available to such Participating Hotels.
SCHEDULE A
-1-
<PAGE>
7) Graphical Navigation System (viewer-controlled guide to the television
programming available in the hotel)
a) An entity to be formed in good faith by Hilton and LodgeNet
after the date hereof ("InnMedia LLC" or "InnMedia") shall
control branding and design, provided that LodgeNet's brand
and services are appropriately represented on the screen.
8) Free-to-guest ("FTG") television programming, including but not limited
to the television channels carrying cable, satellite and network
programming as designated by the Participating Hotels, which LodgeNet
shall offer to each Participating Hotel at no less than the Hilton
minimum standard as it may be changed from time to time. LodgeNet will
provide FTG television programming under the terms outlined on Schedule
C-1 until and/or unless the Participating Hotels selects InnMedia or
their local cable television provider as the alternate free-to-guest
provider. LodgeNet will take all commercially reasonable steps
necessary to ensure that InnMedia can provide the FTG television
programming to Participating Hotels as soon as reasonably practicable
after the date that InnMedia enters the television programming market,
including, the assignment of contractual rights to provide such
programming, except to the extent such rights are expressly
unassignable.
SCHEDULE A
-2-
<PAGE>
SCHEDULE B
[INTENTIONALLY OMITTED]
SCHEDULE B
-1-
<PAGE>
SCHEDULE C
ALLOCATION OF USAGE FEES
The Participating Hotel's Allocation of Usage Fees shall be determined monthly
and shall be based on CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION. Usage Fees, as defined in Section 5 of
the Agreement, shall be allocated between the Participating Hotels and LodgeNet
as follows:
VIDEO ON DEMAND SERVICES
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
NOTES
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
MUSIC ON DEMAND SERVICES
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
GAMES ON DEMAND SERVICES
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
SCHEDULE C
-1-
<PAGE>
SCHEDULE C-1
FREE-TO-GUEST ("FTG") PROGRAMMING
1) FTG PROGRAMMING OPTIONS
Participating Hotels receiving FTG from LodgeNet shall have several programming
options designed to meet the Hilton Brand Standards for both Limited Service and
Full Service Participating Hotels: The "Standard Package" the programming
delineated in such being required in all Hilton Hotels is CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. The
FTG Programming Fees include hardware, installation and on-going service and
maintenance.
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
LodgeNet will provide the Participating Hotels with the following FTG
Programming options:
Standard Package
----------------
CNN
HBO
ESPN
ESPN 2
Cartoon
TBS
TNT
CNN Headline News
CNBC
TWC
Networks (ABC, NBC, CBS, FOX) via satellite when available on DIRECTV
at time of installation; PBS and one additional local channel via
industry standard off-air system
ENHANCED PROGRAMMING OPTIONS FOR FULL SERVICE HOTELS (FULL SERVICE PARTICIPATING
HOTELS RECEIVING FTG PROGRAMMING FROM LODGENET MUST CHOOSE ONE OF THE FOLLOWING
IN ADDITION TO THE STANDARD PACKAGE ABOVE).
ENHANCED PACKAGE #1
USA, CNN/SI, MSNBC, A&E and the History Channel for CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION
ENHANCED PACKAGE #2
SCHEDULE C-1
-1-
<PAGE>
Comedy Central, MTV, Nickelodeon/Nick at Nite, A&E and the History
Channel for CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION
ENHANCED PACKAGE #3
Discovery, Animal Planet, Fox Family, A&E and the History Channel for
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
SCHEDULE C-1
-2-
<PAGE>
3) OTHER AVAILABLE PROGRAMMING AND PRICING
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION INDICATED BY *** IN TABLE BELOW.
<CAPTION>
--------------------------------------------------------------------------------------------------------
Programming Service Rate Card Programming Service Rate Card
--------------------------------------------------------------------------------------------------------
A&E $ *** GalaVision $ ***
--------------------------------------------------------------------------------------------------------
All News Channel $ *** Gameshow $ ***
--------------------------------------------------------------------------------------------------------
AMC $ *** Golf Channel $ ***
--------------------------------------------------------------------------------------------------------
Animal Planet $ *** HBO $ ***
--------------------------------------------------------------------------------------------------------
BBC America $ *** HGTV $ ***
--------------------------------------------------------------------------------------------------------
BET $ *** History $ ***
--------------------------------------------------------------------------------------------------------
BLOOMBURG $ *** Ind Film $ ***
--------------------------------------------------------------------------------------------------------
Bravo $ *** LEARNING $ ***
--------------------------------------------------------------------------------------------------------
CARTOON $ *** MSNBC $ ***
--------------------------------------------------------------------------------------------------------
CINEMAX $ *** MTV $ ***
--------------------------------------------------------------------------------------------------------
CMT $ *** MTV2 $ ***
--------------------------------------------------------------------------------------------------------
CNBC $ *** Much Music $ ***
--------------------------------------------------------------------------------------------------------
CNN $ *** News World International $ ***
--------------------------------------------------------------------------------------------------------
CNN HL $ *** Nickelodeon/Nick at Night $ ***
--------------------------------------------------------------------------------------------------------
CNN SI $ *** Romance $ ***
--------------------------------------------------------------------------------------------------------
CNNfn/International $ *** SCI -FI $ ***
--------------------------------------------------------------------------------------------------------
Comedy Central $ *** Showtime $ ***
--------------------------------------------------------------------------------------------------------
Court TV $ *** Starz & Encore $ ***
--------------------------------------------------------------------------------------------------------
C-SPAN $ *** TBS $ ***
--------------------------------------------------------------------------------------------------------
C-SPAN 2 $ *** TNN $ ***
--------------------------------------------------------------------------------------------------------
DISCOVERY $ *** TNT $ ***
--------------------------------------------------------------------------------------------------------
Discovery People $ *** Travel $ ***
--------------------------------------------------------------------------------------------------------
DISNEY $ *** Trio $ ***
--------------------------------------------------------------------------------------------------------
E! Entertainment $ *** Turner Classic Movies $ ***
--------------------------------------------------------------------------------------------------------
ESPN $ *** TWC $ ***
--------------------------------------------------------------------------------------------------------
ESPN 2 $ *** Univision $ ***
--------------------------------------------------------------------------------------------------------
ESPN News $ *** USA $ ***
--------------------------------------------------------------------------------------------------------
FAMILY $ *** VH1 $ ***
--------------------------------------------------------------------------------------------------------
Food $ *** WGN $ ***
--------------------------------------------------------------------------------------------------------
FOX Family $ *** ZDTV $ ***
--------------------------------------------------------------------------------------------------------
Fxm: Fox movies $ ***
--------------------------------------------------------------------------------------------------------
Above pricing information ("Rate Card") does include hardware required
to deliver programming. LodgeNet shall use its commercially reasonably
best efforts to obtain lower Rate Card rates that those listed above.
The Rate Card rates listed above (1) shall be adjusted to reflect any
of LodgeNet's decreased costs and (2) may be adjusted to reflect any of
LodgeNet's increased costs directly related to the rate card from the
FTG programming provider or increases in hardware prices. In the event
any Participating Hotel's existing contract for FTG is more favorable
to such Participating Hotel than LodgeNet's proposed FTG, such
Participating Hotel shall have the right to maintain its existing
contract.
4) Many options are available to group certain programming content and
benefit from packaged discounts. LodgeNet will use commercially reasonable
efforts to assist Participating Hotels in making appropriate selections and
will apply any applicable discounts it receives.
SCHEDULE C-1
-3-
<PAGE>
5) PRICE STABILITY
Prices subject to change annually as of January 1st each year.
Contracted hotels rates may only change by the amount of any price
increase received by LodgeNet and on a dollar for dollar basis (i.e.
actual increase without profit margin may be passed on to hotel) not to
exceed an aggregate of CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION in any given
year.
SCHEDULE C-1
-4-
<PAGE>
SCHEDULE C-2
VOD SERVICES PRICING SCHEDULE
1) VOD PRICING SCHEDULE
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
2) MUSIC ON DEMAND PRICING SCHEDULE
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
3) GAMES ON DEMAND PRICING SCHEDULE
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
SCHEDULE C-2
-1-
<PAGE>
SCHEDULE C-3
COMPLIMENTARY ROOMS
Subject to the Participating Hotel's reasonable cooperation with
regard to room access, elevator availability, and the need to perform, no CNS
upgrade work in excess of the base amount per the Agreement. Additionally, in
union cities or union properties installation may take up to CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION longer than table below:
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
Any additional costs for security escorts shall be at the sole cost
and expense of the Participating Hotel.
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
Notwithstanding the requirements of Section 8.1 of this Agreement,
LodgeNet and Participating Hotel shall use commercially reasonable efforts to
schedule installations at a time when Participating Hotel occupancy is
expected to be less than 90%.
SCHEDULE C-3
-1-
<PAGE>
SCHEDULE C-4
TELEVISION LEASES
LodgeNet will provide televisions sold by Hilton-approved vendors and
incorporating Hilton-approved technology at the best available prices and
lease rates. LodgeNet will administer a television management program at no
cost to Hilton or the Participating Hotels.
At each Participating Hotel's discretion, LodgeNet will act as a service
bureau for lease payments (i.e. the monthly payment sent by a Participating
Hotel to LodgeNet for the usage fees specified in Schedule C will have
television lease payments added, and LodgeNet will pay such Participating
Hotel's television leases.)
LodgeNet will use commercially reasonable best efforts to retain a leasing
company to assume the risk of any questionable credit of any of the
Participating Hotels. CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
The Participating Hotels will have the option to purchase the televisions for
cash through LodgeNet at the preferred rates at any time during the term of
their respective Hotel Services & License Agreement.
SCHEDULE C-4
-1-
<PAGE>
SCHEDULE C-5
INCREASES IN COMMISSION
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
SCHEDULE C-5
-1-
<PAGE>
SCHEDULE D
EQUIPMENT (SYSTEMS, HARDWARE AND SOFTWARE)
TO BE PROVIDED TO HOTELS BY LODGENET
LodgeNet shall install or have available for the Participating Hotels all of
the other Equipment identified on this Schedule D, as may be amended from
time to time. Items marked with an "*" are the specific Equipment required to
distribute the New Media content and services (as defined in that certain
Content Carriage Agreement on even date herewith, by and between and InnMedia
and Hilton ) and VOD Services.
1) HOTEL EQUIPMENT
a) Head End Network Backbone with the following qualities:
Includes all switching equipment, head-end cabling and network
equipment necessary to provide communications between all the
devices within the hotel head end for services delivered on
the RF based coaxial network.
b) Digital Content Server with the following qualities:
i) Capable of storing and decoding video and audio files.
ii) Capable of generating a signal suitable for MATV system
distribution
iii) Capable of concurrently providing CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION of guest rooms
with VOD services.
iv) Configured for sufficient storage for VOD services
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
v) RAID fault protected storage.
vi) Configured with sufficient ports and input/output
(I/O) access speed to provide simultaneous ad
insertion CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION free to guest channels.
vii) Capable of providing fast forward, rewind and pause
functionality in the guest rooms.
c) Internet Enabled Interactive (IEI) ports with the following
qualities:
i) Capable of concurrently providing CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION of guest rooms
with interactive browsing or navigation services.
SCHEDULE D
-1-
<PAGE>
ii) Capable of generating a signal suitable for MATV
system distribution.
iii) Software operating on IEI ports will provide an
HTML-based interface system for navigation to the
various services including TV-based web access.
HTML content must be served from a web server that
may or may not reside on the Unix Host.
d) Nintendo 64 Gateway Array with the following qualities:
Capable of concurrently providing a minimum of CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION of guest rooms with N64 Games on Demand.
e) UNIX Host Computer (UHC) with the following qualities: Install
and utilize a control system to manage video resources,
control two-way communications, interface with the property
management system, and provide back office interfaces for
operations and accounting reports, server functions for
various content and navigation display functions.
f) Head end to Room RF Communications with the following
qualities: Includes modulators, cabling, keystroke router,
force tuners, RF Modem back channel, satellite receivers for
free-to-guest programming (if contracted, as per Schedule A),
any equipment and cabling necessary to modulate or transmit
data to hotel rooms over the RF network, as well as any
equipment that is distributed throughout the hotel (amps,
taps, and splitters). LodgeNet will be responsible for
upgrading and maintaining the hotel cable plant but will
charge the Participating Hotels for associated costs.
g) Video switch
h) Video Cassette Players with the following qualities: An
appropriate number of video cassette players sufficient to
handle video content for VOD Services that cannot be provided
digitally due to studio restrictions.
i) Music On Demand Jukebox Software Application
j) HTML-Based Graphical Navigation System
k) Local Asset Management Module Database containing the metadata
for any digital assets, e.g. language-specific data for
multi-lingual menuing, and a database containing a list of all
the assets installed on the system, with their associated
metadata and location information. The Local Asset Management
Module must be remotely accessible.
SCHEDULE D
-2-
<PAGE>
l) Remote Content Receiver Module
i) Server that receives digital assets from the Content
Management Module in the operations center; able to
deploy content onto the hotel head end.
ii) Initial installation of infrastructure will support
updates of its resident large file content stores via
satellite network.
iii) Secure IP terrestrial backup system.
m) Data Collection Module Receives and stores customer and
transactional data from VOD Services deployed in the Hotel.
2) GUESTROOM EQUIPMENT
a) RF Communications Module
The Guest Terminal (set top, set back or integrated terminal)
capable of force tuning and keystroke transport.
b) Remote control and game controller.
c) Wireless keyboard.
3) NETWORK OPERATIONS CENTER EQUIPMENT
a) Content Management System
i) Digital library that hosts all digital content,
allows deliverable or copyright assets to be
registered on the system, controls their deployment
to head ends/data centers, and tracks content stored
at each Participating Hotel.
ii) Produces content packages that are deployed and
unpacked at each Participating Hotel (content must be
encoded for remote transmission).
iii) Provides alternative delivery mechanism where secure
IP terrestrial and/or satellite delivery is not
accessible.
b) Digital Rights Management System Tracks royalty payments to
content providers (distributors/studios), records the terms of
content provision to the Participating Hotels(e.g.
pay-per-view, pay once - multiple view, etc.) for VOD
Services.
c) Electronic Copyright Management System
Electronically protects Services' content for distribution to
and within the Participating Hotels and manages encryption
keys for VOD Services.
d) Content Publishing System
SCHEDULE D
-3-
<PAGE>
Delivers content for VOD Services to remote properties and
groups of properties (queuing system that resolves whether
content is distributed terrestrially or via satellite to the
Participating Hotels).
e) Content Compilation System
Encodes and composes new digital assets, including quality
assurance and testing for VOD Services.
f) Reporting Module Produces and distributes reports to internal
departments and external institutions (e.g. guest behavior
data, movie purchases, financial data, etc.) for VOD Services.
g) Operations Center to Hotel Communications
Provides terrestrial and satellite connectivity from the
Network Operations Center to the Participating Hotels.
SCHEDULE D
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SCHEDULE E
MILESTONES
LodgeNet shall achieve the following targets in providing the Service to the
Participating Hotels:
1) Installation
LodgeNet shall install the VOD Services in the Participating Hotels in
accordance with the following:
a) Initial Installations
Within ninety days (90) of execution of this Agreement,
LodgeNet will commence installation of Hilton properties and
will have all properties currently on month-to-month contracts
installed within nine months of the execution of this
Agreement.
b) Scheduled Installations
Thereafter, the VOD Services as defined in Schedule A, shall
be installed and fully operational at each Participating Hotel
no later than 120 days after the Participating Hotel signs a
Hotel Services License Agreement. Provided, however, that in
the event that Participating Hotel's pre-existing contract for
VOD Services is still in force, LodgeNet shall install
concurrently with the de-installation of the prior VOD
Services vendor to ensure uninterrupted provision of FTG
programming and VOD Services installation in the guest room
will be accomplished at the rates delineated on the following
schedule subject to the cooperation of the Participating
Hotel. Additionally, in union cities or union properties
installation may take up to CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
longer than table below:
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
c) "Emergency" Installations
Emergency" Installations are required in Participating Hotels
that have pre-existing or month-to-month contracts for the VOD
Services with other vendors, and such vendors cease providing
the VOD Services on short notice, which would result in an
interruption of the VOD Services to the Participating Hotel.
FTG television programming shall be made available by LodgeNet
within (i) for Hilton's top 10 Participating Hotels (as listed
below), CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION and (ii) for all
other Participating Hotels, as soon as reasonably practicable
provided that LodgeNet shall use its best efforts to make such
FTG television programming available within CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
SCHEDULE E
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<PAGE>
of signing a Hotel Services License Agreement in the event
a Participating Hotel requires the VOD Service immediately
due to the departure of its previous VOD Service vendor.
The balance of the VOD Services as defined in Schedule A
shall be installed and fully operational at the
Participating Hotel at the earliest opportunity but in no
event more than CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION from
the date the Participating Hotel signed the Hotel Services
License Agreement.
Hilton's top 10 Participating Hotels are: Hilton Washington &
Towers, The Capital Hilton, The Waldorf-Astoria, Hilton New
York & Towers, The Palmer House Hilton, Hilton Chicago O'Hare
Airport, Hilton Chicago & Towers, Hilton New Orleans
Riverside, Hilton San Francisco & Towers and Hilton Hawaiian
Village.
d) New Construction
For new construction sites, LodgeNet will commence
installation in full service properties on a schedule designed
to be fully operational by opening.
e) Converted Properties
For converted properties, LodgeNet will commence installation
of the free-to-guest systems, if any, in time for opening and
the interactive system within two weeks of opening.
2) Sales to Hotels
Hilton shall provide LodgeNet with expiration dates of current VOD
Service contracts. LodgeNet shall contact and solicit the Hotels to
sign property level contracts pursuant to this Master Services
Agreement at its earliest opportunity, but in no event later than 180
days prior to the date each respective Hotel's existing contract
expires.
3) Upgrade of Equipment in Hotels with Current LodgeNet Contracts
LodgeNet shall upgrade the equipment in Hotels to digital systems
(Synergy II) no later than the earlier of (a) CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION or (b) CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION; provided the Hotel
executes a new Hotel Services License Agreement.
4) Service Response Time
a) LodgeNet shall, at no cost to the Participating Hotel, provide
promptly all maintenance, repairs, and replacement of LodgeNet
System equipment and materials necessary to ensure
satisfactory operation of the LodgeNet System, including
satisfactory signal quality. The Participating Hotel shall
promptly repair, at the Participating Hotel's cost, any damage
to or destruction of all or any portion of the MATV System.
SCHEDULE E
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<PAGE>
b) LodgeNet shall provide, via its 24-hour TechConnection,
telephone access to a trained LodgeNet technician through a
toll-free access service, within no more than thirty (30)
minutes of Participating Hotel's request for assistance.
LodgeNet shall also provide regular preventive maintenance to
minimize system downtime.
c) LodgeNet shall keep a centralized database logging all service
requests and the outcome of said requests. Hilton shall have
the option of reviewing service request logs through the
LodgeNet Account Manager assigned to the account.
d) LodgeNet shall maintain a database that records the number
times guests are denied use of LodgeNet VOD Services as a
result of the system being oversubscribed. Such data will be
reported to Hilton on a monthly basis.
e) For service problems that cannot be resolved remotely,
LodgeNet shall dispatch a service technician according to the
following schedule. Technical personnel of LodgeNet will
respond to service calls twenty-four (24) hours a day.
i) Excepting adverse weather conditions and other
conditions reasonably out of LodgeNet's control,
LodgeNet will send technical personnel to the
Participating Hotel within CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION, but sooner if possible,
following a service call in the event of a total
LodgeNet System failure involving CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION of
Participating Hotel's rooms or programs served by
the LodgeNet system.
ii) Excepting adverse weather conditions and other
conditions reasonably out of LodgeNet's control,
LodgeNet will send technical personnel to the
Participating Hotel within CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION, but sooner if possible,
following a service call in the event of a LodgeNet
System failure involving CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION of Participating Hotel's rooms or
programs served by the LodgeNet system.
iii) Excepting adverse weather conditions and other
conditions reasonably out of LodgeNet's control,
LodgeNet will send technical personnel to the
Participating Hotel within CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION, but sooner if possible,
following a service call in the event of a total
LodgeNet System failure involving CONFIDENTIAL
MATERIAL REDACTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION of Participating
Hotel's rooms or programs served by the LodgeNet
system.
SCHEDULE E
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<PAGE>
SCHEDULE F
[INTENTIONALLY OMITTED]
SCHEDULE F
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<PAGE>
SCHEDULE G
CHANGE OF CONTROL
A Change of Control shall mean the occurrence of any of the following:
(1) any "person," as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than
LodgeNet or any of its affiliates), is or becomes the "beneficial owner" (as
defined in Rule 1 3d-3 under the Exchange Act), directly or indirectly, of
securities of LodgeNet (not including in the securities beneficially owned by
such person any securities acquired directly from LodgeNet) representing
fifty percent (50%) or more of the combined voting power of LodgeNet's then
outstanding securities; or
(2) the individuals who at the Issuance Date constitute the Board of
Directors of LodgeNet (the "Board"), and any new director whose election by
the Board or nomination for election by LodgeNet's stockholders was approved
by a vote of at least a majority of the Board then still in office who either
were members of the Board at the Issuance Date or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority thereof; or
(3) a merger or consolidation of LodgeNet with or the sale of LodgeNet to any
other entity and, in connection with such merger, consolidation or sale,
individuals who constitute the Board immediately prior to the time any
agreement to effect such merger or consolidation is entered into fail for any
reason to constitute at least a majority of the board of directors of the
surviving corporation following the consummation of such merger or
consolidation; or
(4) the liquidation or dissolution of LodgeNet or the sale or disposition by
LodgeNet of all or substantially all of LodgeNet's assets to an entity not
controlled by LodgeNet; or
(5) LodgeNet commences a voluntary case or similar proceeding under the U.S.
Bankruptcy Code or under any other applicable federal or state bankruptcy,
insolvency or similar law now or hereafter in effect (collectively,
"Insolvency Laws"); LodgeNet consents to or takes any other action that would
reasonably be expected to result in the entry of an order for relief under
any Insolvency Law; LodgeNet consents to the conversion of an involuntary
case or similar proceeding to a voluntary case or similar proceeding under
any Insolvency Law; or LodgeNet consents to the appointment or taking of
possession by a receiver, trustee or other custodian of all or a substantial
part of LodgeNet's property or otherwise making any assignment for the
benefit of LodgeNet's creditors.
SCHEDULE G
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<PAGE>
SCHEDULE H
STATEMENT OF OBLIGATION FOR LICENSED AND MANAGED HOTELS
This Statement is intended to serve as a listing of the specific obligations
called out in the Master Services Agreement (and associated schedules)
("Agreement") and more specifically, Sections 2.1 and 2.2, executed of equal
date by and between Hilton Hotels Corporation, a Delaware corporation
("Hilton") and LodgeNet Entertainment Corporation, a Delaware corporation
("LodgeNet" and collectively the "Parties"). It is understood by Hilton and
LodgeNet that over time these may change upon the agreement of the Parties
and this Schedule is primarily designed to cover the immediate start-up or
roll-out activities.
1) HILTON'S OBLIGATION TO LICENSED HOTELS
As to Licensed hotels, Hilton will:
a) Press Releases
i) Distribute at Hilton's sole expense the Hilton,
LodgeNet or InnMedia generated press releases
regarding LodgeNet, InnMedia, the VOD services and/or
the New Media services to ownership groups,
third-party management companies, all HHC hotel
General Managers, and Hilton corporate employees
(collectively, the "Hilton Constituents") following
signing of the MSA.
b) Internal Communications
Prepare (except as limited in (ii) below) and distribute at
Hilton's sole expense the following forms of communication to
Hilton Constituents
i) A special edition version of "Brands@Hilton"
featuring "VOD Questions and Answers with Bruce
Rosenberg"
ii) A four (4) color brochure highlighting VOD Services
and New Media Services (LodgeNet will prepare the
brochure at LodgeNet's sole expense; Hilton will
distribute the brochure to Hilton Constituents at
Hilton's sole expense)
iii) At least two (2) additional communications within the
first 120 days following signing of the MSA regarding
the VOD services offered by LodgeNet, separately or
as part of other system mailings. Communications may
also discuss additional services offered by other
vendors (e.g., HSIA vendor(s)), including the New
Media services offered by InnMedia.
iv) After the first 120 days, periodic communications
during the first two years of the Agreement
reiterating the existence of the
SCHEDULE H
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<PAGE>
program and containing information similar to that
set forth in (iii) above.
v) Invite LodgeNet to participate in the annual meetings
of the Licensed owners and/or managers to allow an
opportunity for LodgeNet to market the VOD Services
to said groups.
c) Team Member Support
i) Assign at least two (2) Hilton employees to serve as
internal contacts or reference points for LodgeNet's
Sales force (during the LodgeNet sales force's
initial introductory call to the HHC hotels regarding
such services as described above)
ii) Assign at least one (1) Hilton employee to serve as a
dedicated point person to field and respond to
incoming phone calls and questions from Hilton
Constituents
iii) Assign at least two (2) Hilton employees who will
attend at least one (1) regional cluster meeting or
General Manager's meeting for each Hilton brand to
present and/or demonstrate the VOD services to the
hotel managers
d) Financial Support
i) Commit up to CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION on other communications as needed
2) HILTON'S OBLIGATION TO MANAGED HOTELS
As to managed hotels, Hilton will perform the obligations in Schedule X
(1), excepting (1d), and also will:
a) Internal Communications
i) Prepare and distribute at Hilton's sole expense a
personalized letter from an HHC Senior Executive to
the General Manager of each managed hotel promoting
the benefits of the program and encouraging the
managed hotel to participate in the program.
ii) Review the template for the property-specific letter
LodgeNet will develop for each managed hotel (see
Schedule X (4 a i), below), including a customized
task list and timeline to advise each property of
necessary steps for implementation
iii) If reasonably requested by LodgeNet to assist it in
gaining participation by any managed property after
normal sales efforts by
SCHEDULE H
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<PAGE>
LodgeNet as specified in Schedule YY, a HHC Senior
Executive will place a personal call to the General
Manager and/or owner of said managed hotel property.
b) Team Member Support
i) Assign at least two (2) Hilton employees who will
attend the General Manager's meeting for each Hilton
brand to present and/or demonstrate the VOD services
to the HHC managed hotel General Managers
c) Financial Support
i) Commit up to an additional CONFIDENTIAL MATERIAL
REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION on other communications as needed
d) Corporate Budget Approval
i) Review and approve annual hotel budgets (including
forecast, CAPEX) and brand standards, and ensure the
VOD services are reviewed during the budgeting
process
e) Owner Meetings
i) Senior HHC executives will be prepared to visit or to
correspond with owners to encourage participation and
explain or answer questions about the VOD services
SCHEDULE H
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<PAGE>
SCHEDULE I
STATEMENT OF OBLIGATIONS FOR LICENSED AND MANAGED HOTELS
This Statement is intended to serve as a listing of the specific obligations
called out in the Master Services Agreement (and associated schedules)
("Agreement"), more specifically, Sections 2.1, 2.2 and 2.3, executed of equal
date by and between Hilton Hotels Corporation, a Delaware corporation ("Hilton")
and LodgeNet Entertainment Corporation, a Delaware corporation ("LodgeNet" and
collectively the "Parties"). It is understood by Hilton and LodgeNet that over
time these may change upon the agreement of the Parties and this Schedule is
primarily designed to cover the immediate start-up or roll-out activities.
LODGENET'S OBLIGATION WITH RESPECT TO ALL HOTELS
a) SALES & MARKETING
i) LodgeNet shall create and print, at its sole cost and expense
not to exceed CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION,
appropriate brochures, proposals and other such literature as
it deems reasonably required to effectively explain and
promote the VOD Services, New Media Services, and HSIA
Services to Participating Hotels; and, submit for review to
Hilton, appropriate brochures, proposals and other such
literature as the Parties deem reasonably required to
effectively explain and promote the VOD and New Media Services
to Participating Hotels ("Marketing Materials").
ii) CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
iii) LodgeNet shall, at its sole cost and expense and within the
guidelines of the Agreement, make personal sales calls as
required on Hilton owned, managed and licensed hotels at such
times as to facilitate conversion to and installation of VOD
systems at the earliest practicable time.
iv) LodgeNet shall, at its sole cost and expense, prepare and
distribute a property-specific letter (template to be approved
by Hilton) to each HHC managed hotel including a customized
task list and timeline to advise each property of necessary
steps for implementation.
v) LodgeNet shall commit up to CONFIDENTIAL MATERIAL REDACTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
on other communications as needed.
b) ROLL-OUT PLAN & TECHNICAL OPERATIONS
i) LodgeNet shall create and submit for review to Hilton a
detailed plan under which the known Participating Hotels with
currently expired contracts for VOD Services
SCHEDULE I
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<PAGE>
and those whose contracts expire within the next 180 days
are to be scheduled for installation ("Initial Roll-Out
Plan"). The Initial Roll-Out Plan will include target dates
by which time LodgeNet proposes to undertake the required
site survey and a corresponding date by which time LodgeNet
anticipates commencing installation of the VOD Equipment.
ii) LodgeNet shall create and issue to each such Participating
Hotel, as required, the appropriate Hotel License Agreement
for execution by said Participating Hotel and associated
Marketing Materials. LodgeNet shall follow-up either by
telephone or in person by a LodgeNet staff member and at
LodgeNet's sole expense, with the Participating Hotel's
general manager or other such person as may be designated by
said general manager to ensure prompt return of Hotel License
Agreement.
iii) As a matter of on-going business, LodgeNet shall place an
introductory call to each HHC hotel, followed by which
LodgeNet shall create and issue to each such Hotel, as
required and as they approach within 180 days or more of
expiration of existing VOD contracts, an explanatory cover
letter and the appropriate Hotel License Agreement for
execution by said Hotel and associated Marketing Materials.
LodgeNet shall follow-up either by telephone or in person by a
LodgeNet staff member and at LodgeNet's sole expense, with the
Participating Hotel's general manager or other such person as
may be designated by said general manager to ensure prompt
return of Hotel License Agreement. As executed Hotel License
Agreements are returned and approved, LodgeNet shall conduct
the appropriate site surveys and schedule installation
pursuant to the terms of the Agreement and Hotel License
Agreement.
c) INTERNAL COMMUNICATIONS:
i) LodgeNet shall create and distribute to all LodgeNet employees
and place on its internal web site a question and answer sheet
summarizing the terms and conditions of the Agreement between
the Parties as well as the Hotel License Agreement,
identifying internal points of contact, identifying how calls
and questions are to be handled and routed and, in general,
ensuring that calls from Hilton Hotels are handled in a
expeditious and extremely professional manner and all
questions are handled as promptly as reasonably practicable.
ii) CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
iii) LodgeNet shall conduct sales force training within forty-five
(45) days of closing of Agreement, with the specific purpose
of detailing the Agreement and Hotel License Agreement terms
and conditions and ensuring the sales staff is fully qualified
to promote both the VOD Services and New Media to
Participating Hotels and New Media to all LodgeNet customers
and prospects.
SCHEDULE I
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<PAGE>
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
LODGENET'S OBLIGATION TO LODGENET EXISTING CUSTOMER BASE
a) Sales & Marketing
i) LodgeNet shall, at its sole cost and expense, distribute the
LodgeNet, Hilton or InnMedia generated press releases
regarding Hilton, InnMedia, the VOD services and/or the New
Media services to ownership groups, third-party management
companies, and all General Managers in LodgeNet's existing
customer base (collectively, the "LodgeNet Constituents")
following signing of the MSA
b) Internal Communications
LodgeNet shall, at its sole cost and expense, prepare and distribute the
following forms of communication to LodgeNet Constituents no later than one
hundred eighty (180) days prior to expiration of the existing VOD Services
contract, or sooner, as may be required by the Agreement, except as specified
below:
i) Four (4) color brochure (prepared for HHC)
ii) Property-specific letter including a customized task list and
timeline to advise each property of schedule for system
upgrade and necessary steps for renewing contract, to
encourage renewal
iii) At least one (1) additional communication within the first 180
days following signing of the MSA, regarding the VOD services
offered by LodgeNet and additional services offered by other
vendors (e.g., HSIA vendor(s)), including the New Media
services offered by InnMedia, separately or as part of other
system mailings. This communication shall indicate that the
property may expect to receive additional information
approximately six (6) months prior to expiration of the
existing VOD Services contract.
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