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10-06-2011 VACATION RENTAL COMPLIANCE SERVICE PURCHASE AGREEMENTMemo To: Honorable Mayor and Town Council Thru: Larry Brooks, Town Manager Initials Legal: Eric Heil, Town Attorney From: Scott Wright, Asst. Town Manager — Finance Date: October 6, 2011 Re: VR Compliance Service Purchase Agreement Summary VR (Vacation Rental) Compliance is a company that is working with local Colorado resort communities and the Colorado Association of Ski Towns (CAST) to help identify short-term rental properties that are being advertised in their areas. The services provided will assist the Town in keeping abreast of new and updated properties, link properties to listings for documentation purposes, and allow the Town to assess compliance with our short-term rental codes and improve efficiency in this area. Discussion: There are literally dozens of listings on the Internet for short-term rentals in the Avon area. Non - compliant properties are extremely difficult to track down and manage. VR Compliance takes the Town's database of properties currently in compliance and compares it with properties it has identified through the use of search algorithms on the internet. VR Compliance then assists the Town in managing this list of non - compliant properties. There has been correspondence from attorneys representing one online travel and vacation rental company, HomeAway.com demanding that CAST cease and desist efforts to obtain information from its website (see attachment). I have also attached an e -mail from CAST to its members in response to this correspondence. Should the Town of Avon enter into this contract with VR Compliance, it is protected from legal action under the indemnification clause contained in the agreement. In addition to the attachments included as related to VR Compliance, I have also attached a copy of an article from the Vail Daily as well as the class action complaint brought by the Page 1 Service Purchase Agreement This Service Purchase Agreement ( "SPA ") shall incorporate by reference the vrcompliance.com Terms of Use Agreement ( "Agreement "), attached as Exhibit 1, and all terms, conditions, definitions are hereby incorporated by reference hereto. 1. System Service Description VRCompliance will provide access to vrcompliance.com, a web - accessible platform that will help communities identify the property owners that are advertising their rental on various vacation rental websites and match /compare these property owners with existing tax records for each community, therefore yielding a comprehensive list of property owners who list their vacation rentals but are not registered for the appropriate licenses and tax accounts. This platform will continue to monitor VRBO rentals in each community, and also provide valuable advanced list management functions, including support for outbound education and compliance campaigns. (Collectively, "Services ") 2. Service Payment Provisions The Services subscription will be billed monthly. (a) You agree to pay, by credit card, check, or EFT, all fees and charges, including applicable taxes, you have incurred through your account, including the subscription charges to access the subscription -based Services. VRCompliance reserves the right to increase fees and surcharges, including fees for subscription -based Services, or to institute new fees at any time, upon reasonable notice posted in advance on this Website or sent to you based on contact information you have provided. Notwithstanding the foregoing, if you purchase a subscription -based Service, your rate remains in effect throughout the subscription period, and is subject to increase only for subsequent subscription periods. (b) Unless you take action to cancel your auto - renewing subscription, VRCompliance will automatically renew your subscription -based Services. VRCompliance will send you a reminder about the renewal, which will contain the applicable subscription rate, to the email address designated by you before your subscription is renewed. 3. Service Pricing Options You have the option of several pricing models, each designed to reflect differing compliance circumstances. [ ] One -Time Fee per New Property and Monthly Fee for Monitoring /Management per Property For each successfully identified new property our fee will be $25. In order to eliminate charges for properties that are already compliant, you should provide property and property owner information (including phone numbers and home and rental address) for compliant properties in your community. We will remove this information from our search effort. We will also provide ongoing monitoring and management capabilities for $1 per month per rental property (identified by either you or us). Example: Assuming 500 listings in your community with 25% not in compliance, and a 50% match rate on our part, then the resulting fee would be 500 * 25% * 50% * $25 = $1,562.50. Assuming ongoing monitoring and management for 500 properties, then the resulting additional fee would be 500 * $1 * 12 months = $6,000. Combined, the approximate cost represented by this option is $7,562.50. [ J Revenue Share on New Properties with Paring of Known Properties For each successfully identified new property our fee will be 40% of the property's taxes, fees, and licenses (as described below) collected for its first full year of compliance. For efficiency and audit purposes, you should provide property and property owner information (including phone numbers and home and rental address) for compliant properties in your community. Ongoing monitoring and management capabilities for all rental properties in your jurisdiction are included in the 40% fee. Example 0 2011 VRCompliance LLC Our process identifies 625 properties that are not currently complying with sale and lodging tax requirements. We turn that list over to you. In 2011, 300 of those properties comply. We receive 40% of the associated tax for 2011 for those 300 properties. If choosing this option, please describe the nature, frequency, amount, and other salient details of the taxes, fees, or licenses involved with this compliance effort, including whether you are a home rule community (if applicable): J One -Time Fee per New Property and Fixed Monthly Fee for Monitoring /Management per Community For each successfully identified new property our fee will be $75. In order to eliminate charges for properties that are already compliant, you should provide property and property owner information (including phone numbers and home and rental address) for compliant properties in your community. We will remove this information from our search effort. We will also provide ongoing monitoring and management capabilities for $100 per month for rental properties in your community. Example: Assuming 500 listings in your community with 25% not in compliance, and a 50% match rate on our part, then the resulting fee would be 500 * 25% * 50% * $75 = $4,687.50. Assuming a fixed ongoing monitoring and management fee of $100 per month, then the resulting additional fee would be $100 * 12 months = $1,200. Combined, the approximate cost represented by this option is $5,887.50. 4. Additional Fees We will submit for reimbursement the cost of purchasing property tax records from each jurisdiction. 5. Subscription Term The subscription term is one year. 6. Addendum This Service Purchase Agreement shall be subject to the Attached Addendum No. 1 which is hereby incorporated into this Service Purchase Agreement. The provisions and terms contained in Addendum No. 1 shall control and prevail in the event of any conflict with any other provision in this Service Purchase Agreement. [signature page follows] 0 2010 VRCompliance LLC Mutual Confidentiality Agreement THIS AGREEMENT is made by and between VRCompliance LLC ( "VRCompliance "), a limited liability company organized and existing under the laws of the Commonwealth of Virginia, and Town of Avon( "You," "your ") a Colorado municipal corporation with offices at l Lake Street, Avon, CO 81620 (collectively, the "Parties "). WHEREAS, VRCompliance desires to discuss the Tax Compliance Program (the "Program ") and may further desire to discuss payment for, specifications of, and other attributes of the Program (the "Business Purpose "). WHEREAS, the Parties believe that they would mutually benefit by having a Party owning or having requisite rights to certain confidential information (the "Owner ") share such information with the other Party (the "Recipient ") for a Period of Authorized Use (as defined herein) and believe it is in their mutual interest to ensure that such confidential information will be safeguarded. NOW THEREFORE, for consideration the adequacy of which is hereby acknowledged and intending to be legally bound, the Parties hereby agree as follows: 1. Acknowledgment of Confidentialit 1.1 General. The Recipient hereby acknowledges that it has been or may be exposed to confidential and proprietary information belonging to the Owner or relating to its business operation. Such information may include: (a) Technical Information, including functional and technical specifications, designs, drawings, analysis, research, processes, computer programs, methods, ideas, "know how" and the like; (b) Business Information, including sales, product development and marketing research, materials, strategies, plans, accounting and financial information, personnel records and the like; and (c) other valuable information of Owner designated as Confidential Information under Section 1.4 (collectively, "Confidential Information "). 1.2 Confidentiality of Discussions. Unless otherwise agreed in writing or as required by Section 3.2, the existence and Business Purpose of this Agreement and the fact that Confidential Information may be exchanged by the Parties shall itself be treated as Confidential Information. 1.3 Certain Exceptions. Confidential Information does not include information which the Recipient can demonstrate: (i) was already known or has been independently developed by the Recipient without reference to the Owner's Confidential Information; (ii) was already in the public domain or becomes publicly known through no wrongful act of the Recipient; (iii) is rightfully received by the Recipient from a third party who was free to disclose it, or (iv) is designated by the Owner in writing as no longer Confidential Information. 1.4 Method of Designation. The Owner shall make reasonable effort to mark Confidential Information by appropriate legend at the time of disclosure or within a reasonable time thereafter. Verbal and visual communications and information not expressly marked may nevertheless be deemed Confidential Information if disclosed in connection with or as a result of the Business Purpose under circumstances in which it should reasonably be understood by the Recipient to be Confidential Information, either by the nature of the information or from the context in which it is provided. 2. Authorized Users Recipient may not, during the Period of Non - Disclosure, disclose the Confidential Information to any person or entity, except strictly on a "need to know" basis to its own employees, Affiliates and employees of its Affiliates (a "Downstream Recipient ") directly involved in carrying out the stated Business Purpose. Each individual Downstream Recipient must be bound by law or written agreement to restrictions at least as protective as this Agreement. The Recipient shall use due diligence to ensure that each Downstream Recipient complies with the foregoing restrictions. For purposes of this Agreement, the term "Affiliate" means any person or legal entity that controls, is controlled by or is under common control with a Party. 3. Management Responsibilities 3.1 Standard of Care. The Recipient shall use at least the same degree of care, including technical and physical security measures, in protecting the Confidential Information from unauthorized access, interception, use, or disclosure as it uses in protecting its own confidential and proprietary information of a similar nature, but in no event shall the Recipient exercise less 0 2011 VRCompliance LLC than due diligence and care. 3.2 Legal Process. The Recipient may disclose Confidential Information as required by legal process or court order, or if required to enforce its rights under this Agreement. However, the Recipient shall first give written notice to the Owner and cooperate fully in any effort by the Owner to obtain a protective order or otherwise restrict the scope of use to prevent unnecessary disclosure of the Confidential Information. 4. Proprietary Rights Legend Recipient shall not alter or remove from any Confidential Information any proprietary rights legend, copyright notice, trademark or trade secret legend, or any other mark identifying the material as proprietary or confidential. 5. Term & Termination This Agreement shall become effective as of the Effective Date set forth in the first paragraph above and shall continue in frill force and effect as follows: 5.1 Period of Authorized Use. The Recipient may use the Confidential Information until the authorized Business Purpose is completed or such additional period as the Owner may agree in writing ( "Period of Authorized Use "). The Owner may in its sole discretion terminate the Period of Authorized Use at any time upon written notice to the Recipient. 5.2 Period of Non - Disclosure. The restriction on disclosure of Confidential Information shall apply during, and shall survive the termination or expiration of the Period of Authorized Use, and continue in full force and effect until such Disclosed Confidential Information ceases to be Confidential Information pursuant to Section 1.3 ( "Period of Non- Disclosure "). 5.3 Post - Termination Covenant. Upon termination or expiration of the Period of Authorized Use the Recipient shall: (i) cease all further use of the Confidential Information, unless licensed or purchased under a separate agreement, and (ii) at any time at the direction of the Owner, except if licensed or purchased under a separate agreement, fully account for and return or destroy the original and all copies of the Confidential Information (including permanently deleting any electronic copies of the Confidential Information from any systems and storage devices). Recipient shall secure the return or destruction of any Confidential Information in the possession or under the control of Downstream Recipients. The Recipient shall upon request certify and cause its Downstream Recipients to certify compliance with this provision. 6. Warranty & Indemnity 6.1 Third Parry Claims. The Owner represents and warrants at the time of delivery that it owns or has requisite rights to provide the Confidential Information to the Recipient for the stated Business Purpose and will defend, indemnify and hold the Recipient harmless from any costs, damages, liability and expense (including reasonable legal fees) arising from any third party claim to the contrary ( "Third Party Claim ") to the extent permitted by law. The foregoing indemnity is conditioned upon the Owner receiving prompt notice of the claim, having control over the proceedings necessary to litigate and negotiate any settlement (provided any settlement will not adversely affect Recipient without its consent) and receiving Recipient's reasonable cooperation in the proceeding at Owner's expense. 62 Disclaimer. Except as stated in Section 6.1 above, all confidential information is provided strictly on an "as-is" and "as available" basis and all warranties of merchantability, fitness, integration, and quality, are disclaimed. Owner has no responsibility for errors or omissions in the confidential information or for any decisions made by the Recipient in reliance on it. 7. Limitation of Liability Except for (i) Owner's indemnity against Third Party Claims and (ii) any violation by Recipient of the restrictive covenants of this Agreement, neither Party is liable for any claim arising out of or relating to this Agreement for indirect, incidental, special, exemplary or consequential damages even if notified in advance of the possibility of such damages. 8. Choice of Law & Forum This agreement is governed by and shall be construed in accordance with the substantive laws of the United States and the State ® 2011 VRCompliance LLC of Colorado without regard to principles of conflicts of law. In any such action, the parties irrevocably waive and will not assert any defense based on personal jurisdiction, inconvenient forum, or improper venue. 9. Reservation of Riehts Each Party reserves all rights not expressly granted or undertaken by this Agreement. Nothing herein shall be construed as: (a) granting any right, title or license to any existing or future intellectual property, development or business of a Party, or (b) inherently limiting a Party's right to pursue independent business interests or opportunities in competition with the other Party, or to assign or reassign personnel within its own organization, so long as reasonable protections are taken to ensure this Agreement is not violated. Nothing herein requires either party to enter into any further transaction or agreement that might be contemplated in the furnishing of the Confidential Information. 10. General Provisions This document executed by the Parties, constitutes the entire and exclusive agreement between the Parties with respect to, and supersedes all other agreements and communications, whether written or oral regarding this subject matter. This Agreement is expressly limited to its terms and may be modified or amended only by a writing signed by an authorized representative of the Party against whom enforcement is sought. Neither this Agreement, nor any rights or obligations hereunder may be transferred or assigned without the other Party's prior written consent and any attempt to the contrary shall be void. Any provision hereof found by a court of competent jurisdiction to be illegal or unenforceable shall be automatically conformed to the minimum requirements of law and all other provisions shall remain in full force and effect. Waiver of any provision hereof in one or more instances shall not preclude enforcement of it on future occasions. Headings are for reference purposes only and have no substantive effect. 11. Enforcement The Recipient agrees that the unauthorized use or disclosure of the Confidential Information will cause irreparable harm and damage that will be difficult to measure or ascertain. Therefore, the Owner may not have adequate remedy at law. The Recipient understands and agrees that, in the event of its violation of this Agreement, the Owner shall be entitled to obtain injunctive or equitable relief, without necessity of posting bond or showing actual damage, to restrain the unauthorized use, reproduction, disclosure, or competition prohibited by this Agreement as well as monetary damages. The Parties agree that if either Party should breach this Agreement, then the breaching Party shall pay all costs that the non- breaching Party may incur to enforce this Agreement or seek damages for breach, including reasonable attorneys' fees. These rights shall be cumulative and in addition to any other rights or remedies to which the non - breaching Party may be entitled. 10. Addendum This Mutual Confidentiality Agreement shall be subject to the Attached Addendum No. 1 which is hereby incorporated into this Mutual Confidentiality Agreement. The provisions and terms contained in Addendum No. 1 shall control and prevail in the event of any conflict with any other provision in this Mutual Confidentiality Agreement. ]signature page follows] 0 2011 VRComplianceLLC IN WITNESS WHEREOF, for adequate consideration and intending to be legally bound, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives. Signature: Name: I C Q Title: Date: r�pW N OFq�'O •,2 �RADO V-� Camp I(C" f)ce- Signature: Name: Title: Date: 0 2010 VRCompliance LLC IN WITNESS WHEREOF, for adequate consideration and intending to be legally bound, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives. VRCompliance LLC Signature: Name: Title: Date: Town of Avon Signature: Name: CG CGiC c7V Title: Date: �pWN OF� S \� #.' a • =i 0 2011 VRCompliance LLC Terms of Use Agreement VRCompliance LLC ( "VRCompliance "), a limited liability company organized and existing under the laws of the Commonwealth of Virginia, provides the vrcompliance.com website and its various related products and services (collectively, the "System ") to you, the user, ( "Licensee," "You," "Your ") subject to your compliance with all the terms, conditions, and notices contained or referenced on the System (the "Agreement "), as well as any other written agreement between us and you, including any Mutual Confidentiality Agreement or Services Purchase Agreement, all of which are expressly incorporated herein. VRCompliance shall have no obligation to provide any services through the System until You have assented to such services and these Terms of Use through a valid, current, and paid -up Service Purchase Agreement ( "SPA "). VRCompliance expressly reserve the right to change the Agreement from time to time without notice to you, though it is our policy to offer a summary of material modifications in advance of the effective date of such a change for your review and consideration if circumstances allow it. It is your responsibility to review and familiarize yourself with any updates and alterations to these terms of use. Your continued use of this System after such modifications will constitute acknowledgement of the modified Agreement and assent to abide and be bound by the modified Agreement. Your sole remedy in the event of issue with any modified Agreement shall be expedited termination as described herein. WHEREAS, VRCompliance has designed and developed this Internet - accessible System to assist law enforcement agencies ( "Agencies ") of the United States, states thereof, and subdivisions of said states investigate tax and registration compliance through the System's ability to correlate, analyze, and manage tax and registration data provided over the Internet; and WHEREAS, VRCompliance desires to grant to Licensee a non - exclusive license for the use of the System presently available at the URL http:Hwww.vrcompliance.com; and WHEREAS, Licensee is a government entity, which may include the United States, states thereof, and subdivisions of said states, desiring to investigate tax and registration compliance; and WHEREAS, Licensee desires to obtain from VRCompliance a non - exclusive license for the use of the System in connection with a lawfully authorized investigation of a law enforcement officer, agency, or governmental employee deriving authority from Licensee to acquire information related to compliance with financial laws and regulations; and WHEREAS, VRCompliance is willing to provide certain support services for the System and in training Licensee's employees in the use of the System subject to the terms of this Agreement. NOW THEREFORE, in consideration of the mutual promises contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Definitions 1.1. "Licensee" shall mean You, and Your successors and assigns. 1.2. "VRCompliance" shall mean VRCompliance LLC, its successors and assigns. 1.3. "System" shall mean the software system(s) currently marketed by VRCompliance for correlating, analyzing, and managing tax and registration compliance data available at the URL http: /hvw%N,.vrcoinpliance.com and the physical site httt):H/ vww.vrcomnliance.com. 2. License VRCompliance hereby grants, and Licensee hereby accepts, a nontransferable, and non - exclusive license to access and use the System and all related documentation during the term of this Agreement under the price and terms specified in the SPA in current form and as updated from time -to -time and without notice. Any rights not expressly granted herein shall be reserved for VRCompliance. The System shall be used only in Licensee's own business. Licensee shall not permit any third party to use the System except as specifically authorized in writing by VRCompliance. ® 2011 VRCompliance LLC 3. VRCompliance Services 3.1. Training, Installation, and Consulting. VRCompliance may provide training services in use of the System. Training services shall be provided to the extent agreed upon by the parties according to the terms contained in the Agreement and at the fees set forth in the SPA or as prominently posted on the System. 3.2. Software Operation and Maintenance. So long as Licensee is current in payment of the Fees described herein, VRCompliance shall provide normal and reasonable operation and maintenance of the System. The correction of System malfunctions ( "bugs ") is deemed to be normal and reasonable maintenance. 4. Proprietary Rights and Restrictions on Use 4.1. Description of Proprietary Rights. Licensee recognizes that the System and all related information, including but not limited to any and all updates, improvements, modifications, enhancements, and information related to the System, are proprietary, and that all rights thereto, including copyright, are owned by VRCompliance. 4.2. Disclosure. While this Agreement is in effect, or while Licensee has access to the System, Licensee will not provide or make the System available to any person or entity other than employees or agents of Licensee who have a need to know consistent with Licensee's use thereof under this Agreement; Login credentials (e.g., access information, passwords, etc.) related to the System shall be securely maintained, under reasonable and customary access and use restrictions. Licensee shall be strictly liable for any unauthorized use of the System pursuant to login credentials related to Licensee. 4.3. Unauthorized Use. Licensee agrees to notify VRCompliance forthwith if it obtains information as to any unauthorized possession, use or disclosure of the System by any person or entity, and further agrees to cooperate with VRCompliance at VRCompliance's expense, in protecting VRCompliance's proprietary rights. 4.4. Injunctive Relief. In addition to other remedies available to VRCompliance, Licensee agrees that VRCompliance shall be entitled to injunctive relief in the event Licensee breaches this Agreement. 5. Fees and Payments 5.1. License Fees. Licensee shall pay to VRCompliance all applicable fees ( "Fees ") specified in the SPA. Such Fees are payable in full upon execution of this Agreement. Such initial Fees are payable in full upon execution of this Agreement and other applicable fees shall be due on a rolling basis for such duration as Licensee makes use of the System pursuant to this agreement 5.2. Additional Fees. Licensee shall pay training, installation and support, and all other fees at the rates prominently posted on the System. 6. Your Conduct and Warranties 6.1 Inappropriate Behavior. Your use of the System is subject to all applicable laws and regulations of your locality, state, nation and other relevant governing bodies. You are solely responsible for the substance and means of your communications to and from the System. By using the System or any service or feature that may be available to you on or through the System, you agree that you will not do the following: • distribute visual or audible content that is unlawful, threatening, abusive, harassing, defamatory, libelous, deceptive, fraudulent, invasive of another's privacy, tortious, racist, sexist, profane, contains explicit or graphic descriptions or accounts of sexual acts (including but not limited to sexual language of a violent or threatening nature directed at another individual or group of individuals), pornographic, or otherwise violates our rules or policies; • victimize, harass, degrade, or intimidate an individual or group of individuals on the basis of religion, gender, sexual orientation, race, ethnicity, age, or disability; • infringe on any patent, trademark, trade secret, copyright, mask work, right of publicity, or other proprietary right of any party; • distribute unauthorized or unsolicited advertising, junk or bulk email (also known as "spamming "), chain letters, short messages (SMS) or any other form of unauthorized solicitation; 0 2011 VRCompliance LLC • distribute or expose content that contains software viruses or any other computer code, files, or programs that are designed or intended to disrupt, damage, or limit the functioning of any software, hardware, or telecommunications equipment or to damage or obtain unauthorized access to any data or other information of any third party; • participate in any or any form of lottery, sweepstakes, or gambling; • impersonate any person or entity, including any of our employees or representatives; • use your account to breach security of another account or attempt to gain unauthorized access to another network or server; • conceal your identity or intentions for the purpose of performing an activity or achieving an objective prohibited under these Terms of Use; or • interfere with anyone else's use and enjoyment of the System or other similar services. We may actively monitor this System to ensure that your conduct and material is appropriate and consistent with our standards. We neither endorse nor assume liability for the contents of any expressive material uploaded or submitted by third -party users of the System. Although we generally do not pre- screen, monitor, or edit material that may be available on or through this System, we have the right at our sole discretion to remove any content that, in our sole judgment, does not comply with this Agreement or other statement of rules by us. We are not responsible for any failure or delay in removing such content. You hereby consent to such removal and waive any claim against us arising out of such removal of content. 6.2. General Terms. In requesting an account to use the System, you represent and warrant to VRCompliance that: • You are 18 years of age or older; • You are a human user (account registration or use by automated methods is not permitted); • You will not assert or imply any affiliation with or endorsement by VRCompliance relating to the conduct of your business; • You will not modify, adapt, or "hack" the System or System Services (or even attempt to do so); • You will not make excessive API requests of the System, to be determined by VRCompliance in its sole, subjective discretion; • You own or have the right to use or access all material you upload to the System; • For expressive materials posted by you on the System meant to be accessible to the public, you warrant to the best of your knowledge that the use, reproduction, distribution, and transmission of the resource at any URL you post to the System, or any information or materials contained in it, does not: (i) infringe or misappropriate any copyright, patent, trademark, trade secret, or any other proprietary rights of a third party; (ii) violate any criminal laws; (iii) constitute false advertising, unfair competition, defamation, an invasion of privacy, violate a right of publicity; or (vi) violate any other law or regulation of any locality or organization in which you may be lawfully subjected to litigation (collectively, "Violate or Infringe "); and • For resources not generally meant to be accessible to the public, or otherwise having restricted access (including company websites restricted to employee use, subscription websites available only to customers, and the like), you strictly warrant that the use, reproduction, distribution, and transmission of the resource at any URL you post to the System, or any information or materials contained in it, does not Violate or Infringe and that to the best of your knowledge, constructive or actual, any use of the System by you does not Violate any access restriction placed upon you or another party acting under your direction. 6.3. Additional Terms for Government Use. In requesting a governmental account to use the System in an official capacity, you represent and warrant to VRCompliance that, in addition to the General Terms above: You are authorized to use System Services on behalf of a government agency, federal, state, or local government and will only use the System Services for proper, authorized governmental functions. 6.4. Warranty of Proper Government Use. Licensee hereby warrants that it is using the System solely in connection with a lawfully authorized investigation of a law enforcement officer, an agency, or governmental employee deriving authority from Licensee as a governmental body to acquire information related to compliance with financial laws and regulations ( "Authorized Use "). Indemnification for Licensee under this Agreement shall be contingent upon the objective truth of the Authorized Use. Licensee shall provide all documents, papers, things, and testimony necessary to establish, affirm, and reaffirm the objective 0 2011 VRCompliance LLC Truth of the Authorized Use. All such obligations to provide documents, papers, things, and testimony shall be subject to, and covered by, the indemnification of this Agreement. 7. VRCompliance Warranties 7.1. Intellectual Property Warranty. VRCompliance warrants that, to the best of its knowledge, it is either the sole owner of the System or has the right to sublicense the System and that there are no known infringements or claims of infringement with respect to the patent, copyright or other proprietary rights of third parties. 7.2. Indemnity for Authorized Uses of the System a. Scope. VRCompliance agrees to hold harmless and indemnify Licensee against any Damages (as defined in Section 7.2(b)) incurred by Licensee with respect to any Proceeding (as defined in Section 7.2(c)) to which Licensee is made a party or in which Licensee is otherwise involved (including, but not limited to, as a witness). b. Indemnified Amounts. If Licensee is or is threatened to be made a party to, or is otherwise involved (including, but not limited to, as a witness) in, any Proceeding, VRCompliance shall hold harmless and indemnify Licensee from and against any and all losses, claims, damages, costs, expenses and liabilities incurred in connection with investigating, defending, being a witness in, participating in or otherwise being involved in (including on appeal), or preparing to defend, be a witness in, participate in or otherwise be involved in (including on appeal), such Proceeding, including but not limited to reasonable attorneys' fees, judgments, fines, penalties, amounts paid in settlement, and other expenses (collectively, "Damages "), including all interest, assessments or charges paid or payable in connection with or in respect of such Damages. c. Definition of Proceeding. For purposes of this Agreement, "Proceeding" shall mean any actual, pending, threatened or completed action, suit, claim, investigation, hearing or proceeding (whether civil, criminal, administrative or investigative, and whether formal or informal) in which Licensee is, has been, or becomes involved, or regarding which Licensee is threatened to be made a named defendant or respondent, based in whole or in part on or arising out of the fact that Licensee is using the System in a manner authorized by these Terms of Use, whether the basis of such action, suit, claim, investigation, hearing or proceeding is an alleged action or omission by Licensee. "Proceeding" shall not, however, include any action, suit, claim, investigation, hearing or proceeding instituted by or at the direction of Licensee. d. Notifications i. Promptly after receipt by Licensee of notice of the commencement (including a threatened assertion or commencement) of any Proceeding, Licensee will notify VRCompliance (the "Indemnification Advice "). A failure to notify VRCompliance in accordance with this subsection (d)(i) that materially prejudices VRCompliance's ability to defend the Proceeding shall relieve VRCompliance from any indemnification obligation under this Agreement. To the extent commercially practicable, the form of the Indemnification Advice shall describe with reasonable specificity the nature of and the basis for the indemnification claim, including any relevant supporting documentation; the identification of all parties and potential witnesses known at that time to Licensee; a description of facts and available evidence known at that time to the Licensee; and a good faith estimate of potential losses associated with the claim. ii. At the same time, or from time to time thereafter, Licensee may further notify, including requesting payment or reimbursement by, VRCompliance, by delivery of a supplemental notice (the "Indemnification Claim "), of any amounts associated with any Proceeding for which indemnification is being sought under this Agreement. The form of the Indemnification Claim shall include the content of the initial Indemnification Advice, updated as required, together with an itemized listing of Damages and potential Damages associated with the Proceeding, and a description of the status of the Proceeding, if known. e. Determination of Entitlement. VRCompliance shall indemnify Licensee against all Damages listed in an Indemnification Claim within thirty (30) days of receipt, unless during such thirty (30) day period VRCompliance delivers to Licensee a written notice challenging that Indemnification Claim (the "Contest Notice ") or a portion thereof, which Contest Notice shall state with particularity the reasons for the challenge and the evidence VRCompliance would present in any forum in which Licensee might seek review of such challenge. VRCompliance shall pay any amount not disputed in the Contest Notice. f. Indemnification Contingencies. The failure of Licensee to materially abide by any obligation of this Agreement, particularly, but without limitation, the warranties of Section 6, the defense of claim strictures of Section 7.3, and the notification of Section 7.2(d), shall absolve VRCompliance of any indemnification obligation under this Agreement. 7.3. Defense of Claim 0 2011 VRCompliance LLC With respect to any Proceeding: a. VRCompliance shall have the right to participate therein at VRCompliance's own expense and sole discretion. b. VRCompliance shall have the right to assume complete control of the defense of any Proceeding at VRCompliance's own expense and sole discretion, with counsel reasonably satisfactory to Licensee. After assumption by VRCompliance of the defense thereof, VRCompliance shall not be liable to Licensee under this Agreement for any legal fees or other expenses subsequently incurred by Licensee in connection with the defense thereof unless the employment of counsel by Licensee or the incurring of such expenses is necessary as a result of any conflict of interest or has been authorized by VRCompliance. c. VRCompliance shall not be liable for any amounts paid in settlement of any Proceeding effected without its written consent. d. VRCompliance shall not settle any Proceeding in any manner that would impose any penalty or limitation on Licensee without Licensee's written consent. e. Neither VRCompliance nor Licensee will unreasonably withhold its or his or her consent to any proposed settlement of any Proceeding. f. In the event that a counterclaim or other right of action against an adverse party in any Proceeding is successful and results in a net positive recovery in the Proceeding, including damages, costs, and fees (less recovery of actual damages to Licensee proven at trial, which shall be paid to Licensee), VRCompliance shall be entitled to retain such net positive recovery. 7.4. Partial Indemnification. If Licensee is entitled under any provision of this Agreement to indemnification by VRCompliance for some or a portion of any Damages in connection with a Proceeding, but not for the total amount thereof, VRCompliance shall nevertheless indemnify Licensee for the portion of such Damages to which Licensee is entitled. 7.5. Performance Warranty. VRCompliance warrants AS ITS SOLE OPERATIONAL WARRANTY that System shall substantially conform in all material respects, as to all operational features, to VRCompliance's current specifications as published and reasonably revised from time -to -time in VRCompliance's documentation for the System and that when properly utilized will be free of material defects which adversely affect system performance. The System will be available to Internet users approximately 24 hours a day, except during previously scheduled maintenance windows and unforeseen hardware, software, or communications problems. Maintenance windows will generally occur outside of regular business hours and will generally be announced seven (7) or more days in advance. VRCompliance will utilize commercially reasonably technologies and procedures for the storage, backup, and redundancy of system data, including that data provided by You and by other parties, for the purposes of restoring system data and normal system function in the event of a failure of a system component. The use of backup data to recover data deleted or modified by Licensee is not supported. 7.6. Remedy On Breach of Performance Warranty; Limitation of Liability. The Licensee must notify VRCompliance in writing, within 30 days of recognition, actual or constructive, of any defect in the System characterized by Licensee as related to its claim of any breach of the warranty set forth in Section 7.5. If VRCompliance determines that such breach has occurred, VRCompliance's sole obligation under this warranty is to remedy such defect in a manner consistent with VRCompliance's regular business practices which shall mean that for a defect which materially adversely affects the performance of the System ( "major defect "), VRCompliance shall use its best efforts to cure such defect as soon as reasonably practicable after receipt of Licensee's notice, and that for minor defects, VRCompliance shall use its best efforts to correct such minor defects in the next release of its System; provided, however, that if VRCompliance is unable to cure a major defect within 30 days of receipt of Licensee's notice, Licensee shall have the option to terminate this Agreement whereupon VRCompliance's sole obligation shall be to refund only the System license fees paid hereunder for any time period during which Licensee has not used (in the case of any fees paid in advance) or could not use (in the case of a breach) the System. 7.7 Use Warranty: VRCompliance warrants that, to the best of its knowledge, Licensee's use of the System in a manner authorized by this Agreement does not (i) infringe or misappropriate any copyright, patent, trademark, trade secret, or any other proprietary rights of a third party; (ii) violate any criminal laws; (iii) constitute false advertising, unfair competition, defamation, an invasion of privacy, violate a right of publicity; or (vi) violate any other law or regulation of any locality or organization in which you may be lawfully subjected to litigation ® 2011 VRCompliance LLC 5 THE WARRANTIES SET FORTH IN THIS SECTION 7 ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND ANY OTHER STATUTORY OR COMMON -LAW WARRANTY. VRCOMPLIANCE AND ITS SUPPLIERS ON THEIR BEHALF HEREBY EXPRESSLY DISCLAIM AND EXCLUDE ANY AND ALL SUCH OTHER REPRESENTATIONS AND WARRANTIES. EXCEPT AS DESCRIBED IN SUBSECTIONS 7.2 -7.4 AND HEREIN, LIABILITY OF VRCOMPLIANCE AND ITS SUPPLIERS TO LICENSEE, IF ANY, FOR BREACH OF WARRANTY ARISING OUT OF CONTRACT, NEGLIGENCE OR STRICT LIABILITY IN TORT, OR ANY OTHER CLAIM RELATING TO THIS AGREEMENT SHALL BE LIMITED TO THE TOTAL AMOUNT OF SOFTWARE LICENSE FEES PAID BY LICENSEE TO VRCOMPLIANCE. IN NO EVENT SHALL VRCOMPLIANCE BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSS OF BUSINESS OR PROFITS, SPECIAL OR INDIRECT DAMAGES OF ANY NATURE WHATSOEVER 7.8 Right to Replace and Modify System. If all or any part of the System is, or in the opinion of VRCompliance may become, the subject of a Proceeding, VRCompliance may at its expense promptly, either (i) replace the System with a compatible, functionally equivalent, lawfully - compliant System, (ii) modify the System or take other action so that the System becomes non - infringing or compliant with applicable laws, or (iii) procure the right of Licensee to continue using the System, all without any additional cost to Licensee. 8. Relationship 8.1. Independent Contractor. VRCompliance and Licensee will be and shall act as an independent contractor and not as an agent or partner of, or joint venture with the other party for any purpose and neither party by virtue of this Agreement shall have any right, power, or authority to act or create any obligation, express or implied, on behalf of the other party. 8.2. Expenses. Except as otherwise provided herein, or as may hereafter be established by an agreement in writing executed by the parties hereto, all expenses incurred by each party in performing its obligations hereunder shall be borne by the party incurring the expense; except that in the event of a breach of this Agreement by Licensee, VRCompliance shall be entitled to all costs of collection and enforcing its rights hereunder, including reasonable attorneys' fees. 9. Duration and Term 9.1. Term. Unless sooner terminated pursuant to other terms of this Agreement, this Agreement shall be the term period specified in the SPA unless earlier terminated under this Section 9. 9.2. Default, Bankruptcy. This Agreement and the license created hereby may, at VRCompliance's sole option, terminate and any and all rights granted to Licensee hereunder shall expire; (1) Upon 15 days' written notice to Licensee that it, its officers, employees or agents violated any provision of this Agreement, including, but not limited to confidentiality and payment provisions; or (2) Should Licensee, its successors or permitted assigns, suspend business, make an absolute assignment of the bulk of its assets for the benefit of creditors, consent to the appointment of a trustee, custodian or receiver, or be declared insolvent or bankrupt; or if a trustee, custodian or receiver is appointed for Licensee for a substantial part of its property without its consent and is not discharged within 30 days of such appointment; or if bankruptcy, reorganization, arrangement, insolvency, or liquidation proceedings are instituted by or against Licensee and are not dismissed within 30 days of the commencement thereof. 9.3 Expedited Termination. A party may terminate this Agreement for cause. (1) VRCompliance may terminate the Agreement with Licensee upon seven days notice to Licensee upon Licensee's material failure to perform any obligation or respect any condition of this Agreement that is not cured within such seven day notice period. (2) Licensee may terminate the Agreement with VRCompliance upon VRCompliance's material breach of the Warranties of Sections 7.5 and 7.7 pursuant to the conditions of Section 7.6. ® 2011 VRCompliance LLC 6 (3) Licensee may terminate the Agreement with VRCompliance after seven days notice to VRCompliance upon VRCompliance's material failure to perform any obligation or respect any condition of this Agreement not covered under Section 9.3(2) that remains uncured within such seven day notice period. (4) Licensee may terminate the Agreement with VRCompliance after seven days notice to VRCompliance within seven days of modification of the present Agreement, when such modification materially and detrimentally affects Licensee's business operations generally or its legal relationship with VRCompliance and if VRCompliance does not offer a commercially reasonable accommodation during such seven day cure period that obviates the material and detrimental effects of said modification. Any notice provided to VRCompliance under this Section 9.3(4) shall state with great particularity the material and detrimental effects of such modification. Your sole remedy upon termination under this Section 9.3(4) shall be a pro rata refund of Fees paid. 9.4. Obligations Upon Termination. (1) In the event of termination by reason of the Licensee's failure to comply with any provision of this Agreement, or upon any act which shall give rise to VRCompliance's right to terminate, VRCompliance shall have the right, at any time, to terminate the license(s). Termination under this paragraph shall not relieve Licensee of its obligations regarding confidentiality contained in this Agreement. (2) Without limiting any of the above provisions, in the event of termination as a result of Licensee's failure to comply with any of its obligations under this Agreement, Licensee shall continue to be obligated for any payments due. Termination of the license(s) shall be in addition to and not in lieu of any additional remedies available to VRCompliance. 10. Notices Notices, correspondence, and invoicing related to this Agreement shall occur by electronic mail and shall be deemed to have been delivered upon transmission by e -mail. Notice shall be sent to VRCompliance to the electronic mail address indicated on the System as expressly designated for notices. Licensee shall be obligated to maintain in its access credentials electronic mail addresses, which will be used to receive notices under this Agreement. 11. Complete Agreement 11.1. Complete Agreement; Amendments. This Agreement, together with all documents incorporated herein by reference (including all notices, terms, SPAS, and provisions of the System and attached Schedules hereto), constitutes the complete and exclusive statement of the Agreement between the parties hereto and supersedes any and all prior express or implied agreements or understandings between the parties hereto concerning the subject matter hereof. No amendment, waiver or other alteration of this Agreement may be made except by mutual agreement in writing. 11.2. Partial Invalidity. If any provision of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected thereby. 12. Restrictions on Transfer This Agreement shall not be assigned, sublicensed or in any other manner transferred to any other person or entity by Licensee without the prior written consent of VRCompliance. 13. Governing Law This Agreement shall be construed in accordance with the laws of the Commonwealth of Virginia. 14. Headings The various headings in this Agreement are inserted for convenience only, and shall not affect the meaning or interpretation of this Agreement or any paragraph or provision hereof. 0 2011 VRCompliance LLC ADDENDUM NO. 1: MUNICIPAL PROVISIONS TO THE AGREEMENTS BETWEEN VRCOMPLIANCE AND THE TOWN OF AVON. In the event the terms and conditions of this Addendum No. 1 conflict in whole or in part with the terms and conditions of the Service Purchase Agreement and the Mutual Confidentiality Agreement between VRCompliance LLC and the Town of Avon, dated day of , 2011, the terms and conditions of this Addendum No. 1 shall control. A.I. No Waiver of Governmental Immunity: Nothing in this Agreement shall be construed to waive, limit, or otherwise modify any governmental immunity that may be available by law to the Town, its officials, employees, contractors, or agents, or any other person acting on behalf of the Town and, in particular, governmental immunity afforded or available pursuant to the Colorado Governmental Immunity Act, Title 24, Article 10, Part 1 of the Colorado Revised Statutes. A.2. Affirmative Action: Contractor will not discriminate against any employee or applicant for employment because of race, color, religion, sex or national origin. Contractor will take affirmative action to ensure applicants are employed, and employees are treated during employment without regard to their race, color, religion, sex or national origin. Such action shall include, but not be limited to the following: employment, upgrading, demotion or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. A.3. Article X, Section 20/TABOR: The Parties understand and acknowledge that the Town is subject to Article X, § 20 of the Colorado Constitution ( "TABOR "). The Parties do not intend to violate the terms and requirements of TABOR by the execution of this Agreement. It is understood and agreed that this Agreement does not create a multi - fiscal year direct or indirect debt or obligation within the meaning of TABOR and, therefore, notwithstanding anything in this Agreement to the contrary, all payment obligations of the Town are expressly dependent and conditioned upon the continuing availability of funds beyond the term of the Town's current fiscal period ending upon the next succeeding December 31. Financial obligations of the Town payable after the current fiscal year are contingent upon funds for that purpose being appropriated, budgeted, and otherwise made available in accordance with the rules, regulations, and resolutions of Town of Avon, and other applicable law. Upon the failure to appropriate such funds, this Agreement shall be terminated. A.4. Employment of or Contracts with Illegal Aliens: Contractor shall not knowingly employ or contract with an illegal alien to perform work under this Agreement. Contractor shall not contract with a subcontractor that fails to certify that the subcontractor does not knowingly employ or contract with any illegal aliens. By entering into this Agreement, Contractor certifies as of the date of this Agreement it does not knowingly employ or contract with an illegal alien who will perform work under the public contract for services and that the contractor will participate in the e- verify program or department program in order to confirm the employment eligibility of all employees who are newly hired for employment to perform work under the public contract for services. The Contractor is prohibited from using either the e- verify program or the department program procedures to undertake pre- employment screening of job applicants while this Agreement is being performed. If the Addendum No. 1: Town of Avon VR Compliance and Town of Avon Page 1 of 3 third party, including any agent, sub - consultant or sub - contractor of Contractor. Absolutely no third party beneficiaries are intended by this Agreement. Any third -party receiving a benefit from this Agreement is an incidental and unintended beneficiary only. A.10.Governing Law, Venue, and Enforcement: This Agreement shall be governed by and interpreted according to the law of the State of Colorado. Venue for any action arising under this Agreement shall be in the appropriate court for Eagle County, Colorado. To reduce the cost of dispute resolution and to expedite the resolution of disputes under this Agreement, the Parties hereby waive any and all right either may have to request a jury trial in any civil action relating primarily to the enforcement of this Agreement. The Parties agree that the rule that ambiguities in a contract are to be construed against the drafting party shall not apply to the interpretation of this Agreement. If there is any conflict between the language of this Agreement and any exhibit or attachment, the language of this Agreement shall govern. A.11.Survival of Terms and Conditions: The Parties understand and agree that all terms and conditions of the Agreement that require continued performance, compliance, or effect beyond the termination date of the Agreement shall survive such termination date and shall be enforceable in the event of a failure to perform or comply. A.12.Assignment and Release: All or part of the rights, duties, obligations, responsibilities, or benefits set forth in this Agreement shall not be assigned by Contractor without the express written consent of the Town Council for the Town of Avon, which shall not be unreasonably withheld. Any written assignment shall expressly refer to this Agreement, specify the particular rights, duties, obligations, responsibilities, or benefits so assigned, and shall not be effective unless approved by resolution or motion of the Town Council for the Town of Avon. No assignment shall release the Contractor from performance of any duty, obligation, or responsibility unless such release is clearly expressed in such written document of assignment. A.13.Severability: Invalidation of any of the provisions of this Agreement or any paragraph sentence, clause, phrase, or word herein or the application thereof in any given circumstance shall not affect the validity of any other provision of this Agreement. Addendum No. 1: Town of Avon VR Compliance and Town of Avon Page 3 of 3 TAYLORIANDERSON LLP December 10, 2010 Page 2 managing or control of the individual properties or the transactions between the property owner or manager and potential renters. VRBO maintains a Privacy Policy with each of its customers which prevents VRBO from disclosing any information concerning its customers to third parties. By using or accessing the site, all users agree to such Privacy Policy and the other Terms and Conditions that govern the site. HomeAway has consistently and repeatedly informed any third party seeking customer information that the restricted information sought, including VRBO's customers' names, addresses and phone numbers, is confidential proprietary information and will not be disclosed. By CAST's own admission, CAST, CAST's agents and its related and retained entities (including but not limited to Eye Street Solutions and collectively referred to herein as the "Third Parties ") have been unlawfully "scraping" VRBO's website in an effort to obtain proprietary trade secret information about VRBO's customers. Specifically, CAST, its agents, and its related and retained entities have employed software programs whose aim it is to infiltrate the VRBO website to gain access to VRBO's proprietary trade secret information. This attempt to hack into VRBO servers constitutes unauthorized use of the VRBO website and is unlawful under federal and state laws, constitutes blatant interference with contract, copyright infringement and is an unfair and deceptive trade practice. In addition, such acts violate the Colorado Uniform Trade Secrets Act ( "CUTSA "). CUTSA prevents the improper misappropriation or disclosure of trade secrets by a person or entity who has acquired such information by improper means absent express or implied consent. C.R.S. § 7 -74 -102 (2010). CAST, its agents and its related and retained entities are attempting to or already have infiltrated the VRBO website to obtain VRBO's confidential proprietary trade secret information in order to disclose that information to third parties. Moreover, it is axiomatic that information about IlomeAway'sNRBO's customer list is a trade secret as defined by the Colorado Uniform Trade Secrets Act. See Hertz v. Luzenac Group, 576 F. 3d 1125 (10th Cir. 2009). We hereby demand that CAST immediately CEASE AND DESIST and cause all related Third Parties to CEASE AND DESIST, all efforts to obtain VRBO's confidential proprietary trade secret information, including but not limited to VRBO's customer names, addresses and phone numbers. If CAST has organized or plans to organize the scraping of any other site operated by HomeAway, Inc., we demand that CAST also immediately cease and desist such efforts. We also hereby demand that, no later than December 20, 2010, CAST; 1. Confirm in writing that it has ceased and caused all Third Parties to cease, all efforts to scrape VRBO and any other site operated by HomeAway, Inc.; 100006673 } TAYLORIANDERSON LLP December 10, 2010 Page 4 Please do not hesitate to contact me in furtherance of a more productive discussion. KST /df Very truly yours, Kevin S. Taylor cc: Eye Street Solutions, LLC 1602 Village Market Blvd. SE, Ste. 260 Leesburg, VA 20175 {00006673 } FISH & RICHARDSON P.C. Ms. Joyce Burford September 28, 2011 Page 2 from my board regarding in what direction we want to head this project before we talk." (See your attached email to Mr. Shepherd dated January 25, 2011). It now has become evident to HomeAway that the "direction" your board determined to take was to continue to violate the HomeAway Websites Terms and Conditions and Privacy Policy and state and federal laws. A recent article (attached) quoted you as saying, "We always knew we were going to move forward ... We just had to finalize some stuff. We temporarily hit the pause button (so we could) work out some kinks." That article also made clear that CAST and its members continue to work with an outside vendor that uses automated "scraper" technology to remove information from the HomeAway Websites illegally and provide it to CAST's members and others. The article also makes clear that you are recommending that other Colorado taxing entities engage this same vendor to engage in this illegal activity. HomeAway demands that CAST, its members, agents and contractors immediately cease and desist from further engaging in this illegal activity and account for and purge all content and data that was extracted, copied or stolen from VREO.com and its users. HomeAway is committed to keeping the VRBO site and services a safe and neutral place for its users to interact and share information. As users of any HomeAway Website, CAST, its members, and their respective agents and contractors are bound by the Terms and Conditions, which provide: The license to use the site granted to users in these Terms does not include any right of collection, aggregation, copying, scraping, duplication, display or derivative use of the Site nor any right of use of data mining, robots, spiders or similar data gathering and extraction tools without our prior written permission; provided, however, that a limited exception from the foregoing exclusion is provided to general purpose internet search engines and non- commercial public archives that use tools to gather information for the sole purpose of displaying hyperlinks to the Site, provided they each do so from a stable IP address or range of IP addresses using an easily identifiable agent and comply with our robots. txt file. FISH & RICHARDSON P.C. Ms. Joyce Burford September 28, 2011 Page 4 2. Confirm in writing that it, its members, and their respective agents and contractors, shall not engage in such efforts, whether directly or indirectly, in the future; 3. Deliver to the undersigned all information obtained from VRBO.com and any other HomeAway site as a result of scraping such sites; and 4. Confirm in writing that it, its members, and their respective agents and contractors, have destroyed or caused the destruction of all other records and copies thereof of such scraped information. The unlawful scraping activity and the disclosure of such proprietary and confidential customer information will cause HomeAway, its customers and its potential customers irreparable harm and damages which may not be easily quantified but that could exceed millions of dollars. If CAST; CAST's agents and related and retained persons, organizations, or business or governmental entities do not immediately cease and desist all efforts to unlawfully obtain this confidential proprietary trade secret information, HomeAway will respond with frill legal force against CAST, its members and their respective agents and contractors and all related and retained entities, and will pursue all relief available, including but not limited to injunctive relief, claims for actual, treble and punitive damages, as well as all other remedies available to it under the law. HomeAway reserves all rights to pursue any and all legal remedies available to it with respect to damages and harm it may have already suffered. Please note that we are sending a copy of this notice letter to each of the CAST members, and this letter is intended to put each of them on notice of the foregoing paragraphs in their entirety. Finally, if you or your legal representatives wish to communicate about these serious concerns, all such communications should be directed to me, not to HomeAway. FISH & RICHARDSON P.C. Ms. Joyce Burford September 28, 2011 Page 6 Mayor John Warner Manager Tim Gagen Town of Breckenridge 150 Ski Hill Road Breckenridge, CO 80424 Mayor Leah Williams Manager Susan Parker Town of Crested Butte P.O. Box 39 Crested Butte, CO 81224 Mayor Michael Hancock Erin Trapp City of Denver 1437 Bannock St,, Suite 350 Denver, CO 80202 Council Member Tim Westerberg Manager Devin Granberry Town of Dillon 275 Lake Dillon Dr. Dillon, CO 80435 Mayor Leigh Meigs Manager Ron LeBlanc City of Durango 949 E. 2nd Ave. Durango, CO 81301-5109 Mayor Bill Pinkham Manager Jacqueline Halburnt Town of Estes Park 170 MacGregor Avenue P.O. Box 1200 Estes Park, CO 80517 FISH & RICHARDSON P.C. Ms. Joyce Burford September 28, 2011 Page 8 Mayor William Buck Manager Joe Fitzpatrick Town of Mt. Crested Butte P.O. Box 5800 Mt. Crested Butte, CO 81225 Mayor Bob Delves Manager Kim Montgomery Town of Mountain Village 455 Mountain Village Blvd., Suite A Mountain Village, CO 8 143 5 City Manager Tom Bakaly Asst. City Manager Michael Kovacs Park City Municipal Corporation 445 Marsac P.O. Box 1480 Park City, UT 84060 Mayor Dave Koop Manager Kevin Batchelder Town of Silverthorne 601 Center Circle P.O. Box 1309 Silverthorne, CO 80498 Administrator Jason Wells Town of Silverton 1360 Greene St. Silverton, CO 81433 Mayor Bill Boineau Manager Russell Forrest Town of Snowmass Village P.O. Box 5010 Snowmass Village, CO 81615 County Manager Gary Martinez Summit County P.O. Box 68 Breckenridge, CO 80424 Vacation rental website claims Colorado towns' tax hunt is "illegal" - The Denver Post denverpost.com ATTACHMENT D Newsletter: Sign In I Register Commenting: Sign In I Register Thursday, October 06, 2011 l 1W 0 llq, rfl 0 1 �O�Z300% Home > Business News POPULAR TALKERS EMAILED VOTED YEAR AGO BUSINESS aPRINT [)EMAIL Vacation rental website claims Colorado Q 19 COMMENTS towns' tax hunt is "illegal" By 3ason Blevins The Denver Post 11, - r' , JI'UAftU: h9 /in ;!071 09 71.31 AM 1,11,1 The co- founder of HomeAway.com, the nation's largest online vacation - rental site, says the effort by several Colorado towns to scour the company's websites for homeowners who might not be paying local and state lodging taxes is "patently illegal" and constitutes intellectual - property theft. "We simply cannot allow the violation of the privacy of our customers," said Carl Shepherd, who this week sent cease - and - desist letters to several towns and the Colorado Association of Ski Towns. " 'Scraping' — and that's what this is — is illegal. Most of the time we are scraped, it's by nefarious guys in Bulgaria or Nigeria who want to do us harm or steal from us. This is an interesting approach by an entity working for governments, saying it's OK to break the law if you are finding people who might not be paying their taxes." "Scraping" called a violation A snowboafdef enjoys 6" of new ;now, Monday but 03, 2011, at L11- :ken,idge. As the busy nohuay ,ra;on comes to a r lo;r fo, :ire,i ski -esorrs, Ihr• hea,'y snm, amounts that 'he rbloratlo nioimtfilns saw dllllnq •h-n rime •:as a w,•L:omr sight fop JlsltO,s I Kl Sartyostl, The Uenvet Post I Shepherd's letters demand that the Colorado Association of Ski Towns direct its members Winter Park, Grand Lake, Breckenridge, Dillon, Silverthorne and Frisco to cancel contracts with Virginia -based VR Compliance, which is searching several online vacation - rental sites, including HomeAway's, for homeowners who are not paying taxes. Shepherd argues that the "scraping" violates a "fundamental privacy right" between his company and the Colorado users who advertise through its sites, which include VRBO.com and va ationr .ntals..nm. When the association first contacted HomeAway.com with its plans to search for rogue renters, Shepherd's team said the plan was illegal, Shepherd said. The company offered to help inform its users about local and state tax codes. "They said they would help educate people, which we think is truly bunk," said Tim Gagen, town manager for Breckenridge, where VRBO.com first sprouted in 1995. "We don't want education. We want information" The association, which is an organization of 25 mountain towns that merely directed its members to VR Compliance, and the six towns that are testing the rental search program will not stop their searching. "VR Compliance assured us they are not in violation of those federal or state scraping laws," said Gagen, who expects the issue is headed to court. Assertion "interesting" Katina Banks, an intellectual - property lawyer with Dorsey & Whitney LLP in Denver who is not involved in ittp: / /www.denverpost.com /business /ci_19008674[10/6/2011 9:05:52 AM] • The Day in Pictures updated daily • Photos: Reader photos of Colorado's autumn colors • Photos: Mug shots from around Colorado • At Wild Catch, the chef behind Masterpiece Deli takes the plunge with an • Facebook and the new face of grieving • Cheesman Perk mailboxes in Denver deliver fairy-tale 'romance' • The next, best step for runner? Pilates Davidson: A Diplomats Bell with bounce Davidson: Runway's on fire for calendar- release fete Skiwear makers show off attention- getting gear at Denver convention Husted: Haunted -house operators Chris Stafford & Warren Conrad on sic Color Photos of America's Great Depression, 1939 -1943 Top 10 things to do in Colorado before you die Reeen IA - i9im ■.� ©Create an account or log in to see what your friends are doing. In Facebook soC1a1 pn,gm Printable ATTACHMENT s E Page 1 of 2 Summit County hires company to track under -the -table rentals Compliance LLC contracted to help county find renters ducking taxes AUGUST, 26 2011 BY CADDIE NATH SUMMIT DAILY NEWS Summit County has signed on with a private company to begin seeking short -term rental properties not properly registered or paying lodging taxes within the county. Compliance LLC, a private third -party vendor recommended by the Colorado Association of Ski Towns (CAST) was contracted by the county in early August to help identify properties booking rooms under the radar so the county can follow up to ensure they are properly registered and paying taxes. "Basically, what the communities are paying for (is identification) of short -term rental owners in their jurisdiction," CAST executive director Joyce Burford said. "The communities are paying for new leads of unidentified properties ... Then it's up to the community with their enforcement laws to contact that owner." In the past, the county tried to bring private short -term rental owners into compliance and collect the taxes independently, but that effort was largely unsuccessful. "The assessor's office did hire a temp person to do that," county finance director Marty Ferris said. "The issue is you have to constantly be looking at (rental) websites. That's why we went with this outside company, because they will be doing regular checks on those websites." Because the contract with Compliance is so new, it is still unclear how many homeowners are renting their properties under the table, or how much the county and towns are losing to the practice. Reports from the contractor over the next few months are expected to paint a better picture of the scope of the problem, Ferris said. The county's contract includes intergovernmental agreements with the towns, which allows Compliance to search for violators in the other municipalities as well. The contract is the most recent attempt to correct a problem identified locally in a 2009 study by the Town of Breckenridge. The study results indicated a large number of second -home owners were using online sites such as vrbo.com or craigslist.org to rent out their properties, but had not registered with local governments, applied for business licenses or paid required lodging taxes on the overnight rentals. Breckenridge was able to collect taxes from every property owner they contacted following the study, bringing in a total of about $10,000. Work between CAST and Compliance was put on hold earlier this year, when Home Away, the parent company of vrbo.com, threatened to take CAST to court for using software it claimed "scraped" personal information from its website, violating its terms of use. CAST backed off the project temporarily in February but resumed working with Compliance a couple months later. "We always knew we were going to move forward," Burford said. "We just had to finalize some stuff. We temporarily hit the pause button (so we could) work out some kinks." http: / /www. summitdaily ,com/apps /pbes.dll/article? AID= /20110827/NEWS/110829847/100... 9/5/2011 ATTACHMENT ID F Scott Wright From: Larry Brooks Sent: Tuesday, October 04, 20115:48 AM To: Scott Wright Subject: FW: HomeAway, Inc. Attachments: 2011 -09 -28 Ltr to Burford fr Jacks with attachments- 3.pdf; ATT00001.htm Scott, I am recommending that you cover these points in your council packet submittal because Rich is definitely tuned in to this dispute From: Joyce Burford jmailto:ioyceb(�)coskitowns.com] Sent: Monday, October 03, 20113:57 PM Subject: HomeAway, Inc. Dear CAST members, If you haven't already, you should be receiving a copy of the attached Cease and Desist letter from HomeAway, Inc. Whether or not you're under contract with VRCompliance, LLC, I wanted to give you some information and suggestions that you might find helpful: 1. Let your legal counsel know. 2. If you're under contract with VRCompliance, LLC, please remember that you are protected from legal action under the indemnification agreement. 3. For those of you considering going under contract with VRCompliance, LLC, there is an indemnification agreement provided. 4. We urge you to follow your legal counsel's advice, however CAST's legal counsel has advised us that CAST or our member communities are under no legal obligation to respond, because this is just a demand letter. Each community has the choice of whether to respond or not. 5. CAST and VRCompliance, LLC are communicating and working together to draft a response to HomeAway outlining that HomeAway's assertions and allegations are completely false. This response will be shared with all member communities. 6. The reason that I (CAST) did not respond to Mr. Shepherd's "overtures" was that we were advised by counsel not to. And it was CAST that initially reached out to HomeAway, not the other way around. 7. If you should be contacted by the media regarding this (local or otherwise), please do not respond and send all inquiries to me. If your legal counsel should have any questions, please have them contact: Nancy Cornish Rodgers, Esq. or Ken Fellman, Esq. Kissinger & Fellman, P.C. Ptarmigan Place, Suite 900 3773 Cherry Creek North Drive Denver, Colorado 80209 303 - 320 -6100 nancyCa.kandf.com kfeliman _kandf.com a6"*U THE VAIL DAILY II. 970. 949.0555 II vaildaily.com own of Vail could sue o cl-,, c travel o e ­?�A P. Town to consldert � • Vail'could ;becoine' one oE80 Colorado r? =t ;a;� towns'and cities toloin in on the lawsuit becomrngr part Of a although;tlie`Va 1 T w gCoun"cil +tabled a rri r ra r•i .> . r resolution" Tuesday that would have class action. Iamu it allowed the town to have aftorney- client confidentiality privileges with Rothberger, By Lauren Glendenning Johnson & L ;ons LLP, the Denver law firm LG LEND ENNINGQVAILDAILYCOM re resentIn yBr`eciceririd a iii the suit. Th'e•Vail Town Councigliad:inore ques- VAIL The, town .of Vail could :become tions about the costs assoclated with sign - part or a class- acdori:lawsuit against mul_ tiple, online. travel companies that are accused of not paying full sales'and lodg= ing, Tc amounts due toimunicipalities: The defendant include popular website companies`such as Expedia; Hotwire " ", drb- itz, Hotels com, Priceline and Travelbci.ty; among otTiers.. The 'town of Breckenridge filed the'class- action lawsuit in July and is named as.the primary plam" tiff,in the case. The lawsuit claims miinicipalities could be owed back taxes covering the span of 10 or more years. ing onfor such a suit; -as w,.ell:as what the to-wns potential recovery from the suit could tbtal Town'Atto'rney Matt Mir i.advised the council to table they resolution, which would make ° Vii l a: partso e lawsuit, until representatives frorn;tli'e Denver law, firm could; be present to answer specific questions. Community Editor Lauren Glendenning can be reached at 970 - 748 -2983 or 181endenning @vaildaily.com. Firm: Rothgerber Johnson & Lyons LLP Address: One Tabor Center, Suite 3000 1200 Seventeenth Street Denver, Colorado 80202 Tel: 303.623.9000 Fax: 303.623.9222 I CLASS ACTION COMPLAINT I For its Class Action Complaint ( "Complaint ") against Defendants, Plaintiff, the Town of Breckenridge, Colorado, by and through its undersigned counsel and on behalf of itself and other similarly situated Colorado home rule municipalities, states: PARTEES 1. Plaintiff TOWN OF BRECKENRIME, COLORADO (hereafter "Breckenridge ") is located in Summit County, Colorado. Plaintiff is a home rule municipality incorporated in 1880. 2. Defendant COLORADO TRAVEL COMPANY, LLC (hereafter "Colorado Travel Company ") is a Colorado limited liability corporation with its principal place of business in Denver, Colorado. 3. Defendant EGENCIA, LLC (hereafter "Egencia ") is a Nevada limited liability corporation with its principal place of business in Bellevue, Washington. 4. Defendant EXPEDIA, INC. (hereafter "Expedia ") is a Washington corporation with its principal place of business in Bellevue, Washington. 5. Defendant HOTELS.COM, L.P. (hereafter "Hotels.com, L.P. ") is a Texas limited partnership with its principal place of business in Dallas, Texas. 6. Defendant HOTELS.COM GP, LLC (hereafter "Hotels.com, GP ") is a Texas limited liability corporation with its principal place of business in Dallas, Texas. 7. Defendant HOTWIRE, INC. (hereafter "Hotwire ") is a Delaware corporation with its principal place of business in San Francisco, California. 8. Defendant INTERNETWORK PUBLISHING CORP. (d/b /a/ LODGING.COM) (hereafter "Lodging.com ") is a Florida corporation with its principal place of business in Boca Raton, Florida. 9. Defendant LOWEST FARE.COM, INC. (hereafter "Lowestfare.com ") is a Delaware corporation with its principal place of business in Norwalk, Connecticut. 2 of 18 ( 00951 150 /1) 22. Upon information and belief, some of the Defendants, including some or all DOE defendants, at all times herein mentioned, were acting as the agent, servant and employee of some or all of the other Defendants and within the scope of said agency and employment (collectively the "Agent Defendants "). Upon information and belief, at the time and place of the matters described, each of the Agent Defendants, their agents, servants and/or employees became liable to Plaintiff for one or more of the reasons described herein. VENUE AND NATURE OF CLAIMS 23. Venue is proper in this Court pursuant to Colo. R. Civ. P. 98 because, inter alia, the acts underlying this action arose in this jurisdiction and include claims for recovery of a penalty imposed by statute. 24. This action is brought to remedy violations of local ordinances in connection with Defendants' failure to remit taxes to the named Plaintiff and other similarly situated municipalities located in the State of Colorado. Defendants failed to remit taxes due and owing under similar hotel or other lodging occupancy tax ordinances and/or similarly intentioned excise and/or sales taxes to the Plaintiff and the Class. FACTUAL ALLEGATIONS 25. Article XX of the Colorado Constitution delineates home rule for cities and towns. Article XX, Section 6 grants home rule municipalities all powers necessary to administer local and municipal powers. Colorado law recognizes the exclusive right of a home rule municipality to govern themselves in matters of local and municipal concern. The constitutional grant of power to home rule cities contained in Article XX, Sec. 6 includes a right to levy and collect a tax to raise revenue with which to conduct the affairs and business of a city. 26. Breckenridge imposes a 3.4% `Breckenridge Public Accommodation Tax" on the price paid for the leasing or rental of any hotel room, motel room, or other accommodation in the town. (See Breckenridge Town Code, Title 3, Chapter 4, Section 3 -4 -3.) 27. It is unlawful "for any lessee or renter" of a hotel room, motel room, or other accommodation in the Town of Breckenridge to fail to pay or collect the tax. (See Breckenridge Town Code, Title 3, Chapter 4, Section 3 -4 -4.) 28. Class Members similarly levy and collect taxes on lodging or overnight accommodations. This tax may be denominated as a hotel occupancy, lodgers tax, lodging tax, accommodation tax, and/or excise tax imposed upon any sale of lodging or overnight accommodations (collectively defined as "Excise Tax "). Regardless of how the tax is titled, it is correctly calculated as a percentage of the retail rate that each consumer occupant pays for lodging ('Retail Rate "), including service costs (the "Excise Tax Amount "). 29. Defendants are online travel companies and their affiliates or related companies ( "OTC "). Specifically, they are online sellers and/or online resellers of hotel rooms or other 4 of 18 (009511 so i 1) 41. Under the "merchant model," the only contract or agreement at the time the taxes at issue are being assessed and collected is between the Defendants and the Consumer. 42. The Defendants sell rooms to Consumers and collect payments, including taxes from the Consumer at the time of booking. Under the "merchant model," the Defendants have been or are currently controlling Hotels. 43. Defendants are charging and collecting amounts as Excise Taxes and fees from Consumers in Colorado, but are not remitting the Excise Tax Amounts to the appropriate Class Members. 44. Instead, Plaintiff Class Members only receive tax amounts based upon the lower, Wholesale Rate (the "Wholesale Tax Amount "). Each Defendant then retains for its own use and benefit the difference between the correct Excise Tax Amount and the incorrect Wholesale Tax Amount. 45. For example, Expedia negotiates with a Hotel for rooms at the lower Wholesale Rate and pays the Hotel a flat rate for each room sold, for instance $60.00 for a room in Breckenridge, Colorado. Under the "merchant model" Expedia then controls the price offered to the Consumer. Expedia then sells the same room to the Consumer for a marked up price, for example $100. Expedia charges taxes and fees that would approximately cover the taxes owed, which should be based upon the Retail Rate of $100. The amount of tax due in this example is 3.4% of $100 or $3.40. (See Breckenridge Town Code, Title 3, Chapter 4, Section 3 -4 -3). 46. However, the amount of Excise Tax remitted to Plaintiff and other Class Members has been based on the lower Wholesale Rate. In this example, Plaintiff would only receive $2.04 (3.4% of $60.00), an underpayment of the tax liability by $1.36. Thus, in this single example transaction, Plaintiffs collected tax would be 40% less than the collected and the proper Excise Tax Amount of $3.40. 47. In this manner, Defendants failed to remit the Excise Taxes due and owing to the Plaintiff and all putative Class Members. 48. Defendants have also failed to properly file required tax reports. Every person required to collect Excise Taxes must report such taxes collected on forms prescribed by the Town and remit said taxes to the Town. (See Breckenridge Town Code, Title 3, Chapter 4, 3 -4 -6.) 49. Defendants are collecting taxes from Consumers but, upon information and belief, have not obtained a Town License in any of the Class Member municipalities and have not reported such taxes to Plaintiff or any Class Members. 50. While a limitation period normally applies to a suit or action to collect such taxes, proceedings for collection of taxes may be commenced at any time in a case, such as this one, 6 of 18 [00951150/ 1 58. Defendants require that the Hotels not reveal to the Consumer what Defendants paid for the Lodging. Likewise, the Hotels do not know what the Consumer paid Defendants for the Lodging. . 59. Only the Defendants collect taxes from the Consumer in the "merchant model." The Consumer is the taxpayer, and the Defendants are the tax collectors. 60. Under the "merchant model," the Hotels never collect the required Sales Tax and Excise Tax from the Consumer. 61. Under the "merchant model" and contained in the language of the contracts between the Defendants and the Hotels, it is the Defendants' responsibility to calculate the taxes and collect all monies, including tax monies, from the Consumer at the time of booking. 62. The only way for the Hotel to pay the correct Excise and/or Sales Tax to the Plaintiffs is if Defendants remit the additional tax owed (and which was actually paid by the Consumer to Defendants) to the Class Members. 63. The Defendants' failure to itemize taxes violates basic principles of tax transparency and further supports Plaintiffs claims of the Defendants' tax liability, and specifically violates express code provisions of many of the Plaintiff Class Members. 64. Due to the contractual or factual relationship between the Defendants and the Hotels, the Defendants and the Hotels act on behalf of each other to provide /sell customers Lodging, and are thus agents of one other. As such, they operate as joint enterprise members and have joint enterprise membership liability. 65. Defendants have a physical presence in the State of Colorado, including within the Class Member municipalities. Such presence includes, but is not limited to, providing and/or selling rooms in Hotels, serving as agents for Hotels for purposes of selling or providing rooms in those Hotels and, upon information and belief, by having employees or agents travel to Class Member municipalities within Colorado to negotiate and enter into contracts with Hotels to review and rate those Hotels. Manny Defendants Are Affidlated Through A Common Corporate Parent. 66. Defendants Expedia, Hotels.com, L.P., Hotels.com GP, Hotwire, Inc., Travelscape and TravelNow.com are affiliated business entities, related through a common corporate parent Expedia, Inc., a Delaware corporation. Expedia's parent company is IAC/Interactive Corp. 67. Defendants Travelport; Orbitz, Inc.; Orbitz, LLC; Cheaptickets.com; and Lodging.com are affiliated business entities, related through the common corporate parent, Avis Budget Group. S of 18 (00951150/ 1) 77. Upon information and belief, sometime between 1990 and the present, Cheaptickets.com and Lodging.com shared hotel room inventory. Specifically, Cheaptickets.com sold Lodging.com's hotel room inventory. 78. Upon information and belief, sometime during 2004 or thereafter, Cendant Corporation, the predecessor to Travelport, entered into agreements with Expedia, Inc. and Hotels.com to share hotel room inventory. 79. Upon information and belief, sometime in 2000 or thereafter Site59.com entered into marketing agreements with other entities, including Travelocity LP, Orbitz, Inc. or Orbitz, LLC, Cheaptickets.com and Priceline.com affiliated companies (whose subsidiaries include Defendants Lowestfare.com and Travelweb). 80. Upon information and belief, sometime during 2005 or earlier, Orbitz, Inc. and/or Orbitz, LLC and Priceline.com entered into a marketing agreement related to Priceline.com's hotel business unit. 81. Upon information and belief, sometime prior to the institution of this suit, Expedia entered into a partnership agreement with Hotels.com L.P. and/or Hotels.com GP and Hotwire regarding its online hotel room booking business. 82. Upon information and belief, sometime prior to the institution of this suit, Hotels.com entered into a partnership agreement with Hotwire and TravelNow.com regarding its online hotel room booking business. 83. Upon information and belief, sometime prior to the institution of this suit, Hotwire.com entered into a partnership agreement with LAC/Interactive Corp., Expedia and Hotels.com L.P. and/or Hotels.com GP regarding its online hotel room booking business. 84. Upon information and belief, sometime prior to the institution of this suit, Defendant Orbitz, Inc. and/or Orbitz, LLC entered into a partnership agreement with Hotwire regarding its online hotel room booking business. 85. Upon information and belief, sometime prior to the institution of this suit, Defendants Hotels.com and Lowestfare.com entered into an agreement related to the sale or resale of hotel room inventory. 86. On information and belief, there are many other such marketing, distribution and partnership agreements between and among Defendants. Defendants' Conduct Arises Out of the Sams' Series of Transactions or Occurrences and Involves Common Questions of Law and 1FacL 87. Defendants' conduct arises out of the same series of transactions or occurrences and involves common questions of law and fact. The parties are all interested in the principal 10 of 18 (00951 150 i 1) violations of municipal ordinances and hotel occupancy tax schemes. The representative Plaintiff and the members of the Class were and are similarly or identically harmed by the same unlawful, deceptive, unfair, systematic and pervasive pattern of misconduct; v. the representative Plaintiff will fairly and adequately represent and protect the interests of the Class. There are no material conflicts between the claims of the representative Plaintiff and the members of the Class that would make a class certification inappropriate; and, vi. the counsel selected to represent the Class will fairly and adequately protect the interests of the Class. They are experienced trial lawyers who have experience in complex class action litigation and are competent counsel for this class action litigation. Counsel for the Class will vigorously assert the claims of all members of the Class. 94. This action is properly maintained as a class action pursuant to Colo.R.Civ.P. 23(b)(2) in that the Defendants have acted or refused to act on grounds generally applicable to the class, thus making appropriate declaratory relief with respect to the class as a whole. 95. This action is properly maintained as a class action pursuant to Colo.R.Civ.P. 23(b)(3) in that common questions of law and fact exist as to the members of the Class and predominate over any questions affecting only individual members, and a class action is superior to other available methods for the fair and efficient adjudication of the controversy, including consideration of i. the interest of the members of the Class in individually controlling the prosecution or defense of separate actions; ii. the extent and nature of any other proceedings concerning the controversy already commenced by or against members of the Class; iii. the desirability or undesirability of concentrating the claims in a single forum; and iv, the difficulties likely to be encountered in the management of a class action. 96. The members of the Class contemplate the eventual issuance of notice to the proposed Class Members which would set forth the subject and nature of the instant action. The Defendants' own business records and electronic media can be utilized for the contemplated notices. 97. Among the numerous questions of law and fact common to the Class are: i. whether Defendants use the "merchant model" for buying and selling Lodging in the state of Colorado; ii. whether under the "merchant model" Defendants mark up the price from the Wholesale Rate (paid to the Hotel) to the Retail Rate (paid by the Consumer); 12 of 18 (00951150/ 11 i. whether Defendants have a duty, under law, to collect Excise Taxes and/or Sales Taxes from Consumers who purchase from Defendants the right to occupy Lodging in the municipalities that comprise the Plaintiff Class; ii. whether the Excise Taxes and/or Sales Taxes are based on the Retail Rate; iii. whether Defendants have a duty to remit these taxes to Plaintiff and the Class; iv. whether Defendants have failed to fulfill their duty under law to remit these taxes to Plaintiff and the Class; and V. whether, under the appropriate ordinance and/or rule, the amount of tax due and owing to Plaintiff and the Class is to be calculated as a percentage of the Retail Rate, without regard to service fees, operating expenses and other amounts currently deducted by Defendants. SEC®i`i11D CLAIM FOR RELIDE1F VIOLATIONS OF MUNIICI PAL ORDINANCES (As Against aH Defendants) 101. Plaintiff incorporates each of the above allegations by reference as if fully rewritten herein. 102. Plaintiff and Class Members are municipalities which are authorized to levy and collect certain Excise and Sales Taxes. 103. At all times herein, Defendants acted individually or in concert to provide/sell Lodging to Consumers. 104. Defendants are obligated under the various municipal ordinances to collect Excise and/or Sales Taxes on Lodging and to remit such taxes to remit to Plaintiff and the Class Members. 105. Defendants are acting as retailers, vendors, lessors, and/or renters. 106. Defendants have failed to collect and remit to Plaintiff and the Class Members the amounts due and owing to them. 107. Defendants have failed to report taxes collected on Lodging to Plaintiff and Class Members. 108. As a result of their shared efforts, Defendants have a joint interest in the business of providing/selling Lodging to Consumers. 109. Upon information and belief, Defendants have either express or implied agreements to share in the profits and losses of such an enterprise and joint venture. Accordingly, at all times herein, a joint venture and joint enterprise existed between one or more Defendants. 14 of 18 (00951150i 1) 119. Defendants agreed by words or conduct to accomplish an unlawful goal including, but not limited to, depriving Plaintiff and Class Members of taxes owed under the municipal ordinances and Defendants performed one of more acts to accomplish that unlawful goal. 120. In addition or in the alternative, Defendants agreed by words or conduct to accomplish a lawful goal through unlawful means including, but not limited to, depriving Plaintiff and Class Members of taxes owed under the municipal ordinances and Defendants performed one or more unlawful acts to accomplish that goal. 121. As a direct and proximate cause of Defendants' conduct, Plaintiff and the Class have suffered and will continue to suffer damages in an amount to be proven at trial. FIFTH FTH C1LAIM FOR 1R)EILIEE))! UNJUST ENRICHMENT (Against a fi )[Defendants) 122. Plaintiff incorporates each of the above allegations by reference as if fully rewritten herein. 123. Defendants have benefitted from the sales of Lodging to Consumers under circumstances that would make it inequitable for Defendants to retain the benefit of those transactions without paying the required tax to Plaintiff and Class Members, and Defendants have been unjustly enriched thereby. 124. Plaintiff and Class Members are entitled to judgment against Defendants in an amount to be proven at trial, including but not limited to interest, costs, and pre- and post - judgment interest. 16 of 18 (00951 150 /1) Respectfully submitted this 25th day of July, 2011. ROTHGERBER JOHNSON & LYONS LLP Pursuant to Colo. R. Civ. P. 121§1-26, a duly signed original is on file at the offices of Rothgerber Johnson c& Lyons LLP By: slMichael D. Plachv Michael D. Plachy, Esq. Thomas M. Rogers III, Esq. Joy Allen Woller, Esq. One Tabor Center, Suite 3000 1200 Seventeenth Street Denver, CO 80202 Telephone: 303 -623 -9000 Facsimile: 303 - 623 -9222 mplachy@rothgerber.com trogers@rothgerber.com jwoller@rothgerber.com CRONGEYER LAW FIRM, P.C. John W. Crongeyer, M.D. 2170 DeFoor Hills Road Atlanta, GA 30318 Telephone: 404- 873 -4696 Facsimile: 404 -872 -3745 jcrongeyer@vclawfirm.com Pro Hac Vice Application to be Submitted THE BIRD LAW GROUP, P.C. William Q. Bird, Esq. 2170 DeFoor Hills Road Atlanta, GA 30318 Telephone: 404- 873 -4696 Facsimile: 404 -872 -3745 jwc@biz:dlawgroup.com Pro Hac Vice Application to be Submitted THE FINNELL FIRM Robert Finnell, Esq. P.O. Box 63 Rome, GA 30162 -0063 Pro Hac Vice Application to be Submitted Attorneys for the Town of Breckenridge, Colorado and Proposed Class 18 of 18 (00951150 /1{ • Memo To: Honorable Mayor and Town Council Thru: Larry Brooks, Town Manager Initials Legal: Eric Heil, Town Attorney From: Scott Wright, Asst. Town Manager — Finance Date: October 6, 2011 Re: VR Compliance Service Purchase Agreement Summary is VR (Vacation Rental) Compliance is a company that is working with local Colorado resort communities and the Colorado Association of Ski Towns (CAST) to help identify short-term rental properties that are being advertised in their areas. The services provided will assist the Town in keeping abreast of new and updated properties, link properties to listings for documentation purposes, and allow the Town to assess compliance with our short-term rental codes and improve efficiency in this area. Discussion: There are literally dozens of listings on the Internet for short-term rentals in the Avon area. Non - compliant properties are extremely difficult to track down and manage. VR Compliance takes the Town's database of properties currently in compliance and compares it with properties it has identified through the use of search algorithms on the intemet. VR Compliance then assists the Town in managing this list of non - compliant properties. There has been correspondence from attorneys representing one online travel and vacation rental company, HomeAway.com demanding that CAST cease and desist efforts to obtain information fr om its website (see attachment). I have also attached an e -mail from CAST to its members in response to this correspondence. Should the Town of Avon enter into this contract with VR Compliance, it is protected from legal action under the indemnification clause contained in the agreement. In addition to the attachments included as related to VR Compliance, I have also attached a • copy of an article from the Vail Daily as well as the class action complaint brought by the Page 1 Town of Breckenridge against a host of online travel companies for their failure to collect and remit lodging and sales taxes to municipalities. The Town of Avon, along with a number of • other municipalities, is evaluating whether or not to join in this class action. We will be providing Council with updates as we gather additional information. Financial Implications: There are several pricing options but staff s preferred option is the item marked as "One -Time Fee per New Property and Fixed Monthly Fee for Monitoring/Management per Community. It is estimated that the annual cost the first year would range from $3,50046,000. This cost will be covered by the Finance Department's line item budget for professional services. Our expectation is that the cost of these services will be offset by the recovery of sales and accommodation taxes collected from non - compliant properties. Recommendation: Staff recommends that the Town Council approve the attached agreements discussed above as presented. Town Manager Comments: • Attachments: A — Service Purchase Agreement, Mutual Confidentiality Agreement, and Addendum No. 1: Municipal Provisions, between the Town of Avon and VR Compliance, Inc. B — Correspondence from Taylor Anderson, Attorneys at Law, to Joyce Burford, Executive Director of the Colorado Association of Ski Towns (CAST). C — Correspondence from Fish & Richardson, Attorneys at Law, to Joyce Burford. D — DenverPost.com article dated October 6, 2011. E — Summit Daily News Article dated August 26, 2011. F — E -mail from Joyce Burford to CAST members. G — Vail Daily article H — Class Action Complaint by the Town of Breckenridge against various online travel companies. • Page 2 ATTACHMENT A 0 Service Purchase Agreement This Service Purchase Agreement ( "SPA ") shall incorporate by reference the vreompliance.com Terms of Use Agreement ("Agreement "), attached as Exhibit 1, and all terms; conditions, definitions are hereby incorporated by reference hereto. 1. System Service Description VRCompliance will provide access to vrcompliance.com, a web - accessible platform that will help communities identify the property owners that are advertising their rental on various vacation rental websites and match /compare these property owners with existing tax records for each community, therefore yielding a comprehensive list of property owners who list their vacation rentals but are not registered for the appropriate licenses and tax accounts. This platform will continue to monitor VRBO rentals in each community, and also provide valuable advanced list management functions, including support for outbound education and compliance campaigns. (Collectively, "Services ") Service Payment Provisions The Services subscription will be billed monthly. (a) You agree to pay, by credit card, check, or EFT, all fees and charges, including applicable taxes, you have incurred through your account, including the subscription charges to access the subscription -based Services. VRCompliance reserves the right to increase fees and surcharges, including fees for subscription -based Services, or to institute new fees at any time, upon reasonable notice posted in advance on this Website or sent to you based on contact information you have provided. Notwithstanding the foregoing, if you purchase a subscription -based Service, your rate remains in effect throughout the subscription period, and is subject to increase only for subsequent subscription periods. (b) Unless you take action to cancel your auto- renewing subscription, VRCompliance will automatically renew your subscription -based Services. VRCompliance will send you a reminder about the renewal, which will contain the applicable • subscription rate, to the email address designated by you before your subscription is renewed. 3. Service Pricing Options You have the option of several pricing models, each designed to reflect differing compliance circumstances. [ ] One -Time Fee per New Property and Monthly Fee for Monitoring /Management per Property For each successfully identified new property our fee will be $25. In order to eliminate charges for properties that are already compliant, you should provide property and property owner information (including phone numbers and home and rental address) for compliant properties in your community. We will remove this information from our search effort. We will also provide ongoing monitoring and management capabilities for $1 per month per rental property (identified by either you or us). Example: Assuming 500 listings in your community with 25% not in compliance, and a 50% match rate on our part, then the resulting fee would be 500 * 25% * 50% * $25 = $1,562.50. Assuming ongoing monitoring and management for 500 properties, then the resulting additional fee would be 500 * $1 * 12 months = $6,000. Combined, the approximate cost represented by this option is $7,562.50. [ ] Revenue Share on New Properties with Paring of Known Properties For each successfully identified new property our fee will be 40% of the property's taxes, fees, and licenses (as described below) collected for its first full year of compliance. For efficiency and audit purposes, you should provide property and property owner information (including phone numbers and home and rental address) for compliant properties in your community. Ongoing monitoring and management capabilities for all rental properties in your jurisdiction are included in the 40% fee. 0. Example: 0 2011 VRCompliance LLC Our process identifies 625 properties that are not currently complying with sale and lodging tax requirements. We turn that list over to you. In 2011, 300 of those properties comply. We receive 40% of the associated tax for 2011 for those • 300 properties. If choosing this option, please describe the nature, frequency, amount, and other salient details of the taxes, fees, or licenses involved with this compliance effort, including whether you are a home rule community (if applicable): J One -Time Fee per New Property and Fixed Monthly Fee for Monitoring /Management per Community For each successfully identified new property our fee will be $75. In order to eliminate charges for properties that are already compliant, you should provide property and property owner information (including phone numbers and home and rental address) for compliant properties in your community. We will remove this information from our search effort. We will also provide ongoing monitoring and management capabilities for $100 per month for rental properties in your community. Example: Assuming 500 listings in your community with 25% not in compliance, and a 50% match rate on our part, then the resulting fee would be 500 * 25% * 50% * $75 = $4,687.50. Assuming a fixed ongoing monitoring and management fee of $100 per month, then the resulting additional fee would be $100 * 12 months = $1,200. Combined, the • approximate cost represented by this option is $5,887.50. 4. Additional Fees We will submit for reimbursement the cost of purchasing property tax records from each jurisdiction. 5. Subscription Term The subscription term is one year. 6. Addendum This Service Purchase Agreement shall be subject to the Attached Addendum No. 1 which is hereby incorporated into this Service Purchase Agreement. The provisions and terms contained in Addendum No. 1 shall control and prevail in the event of any conflict with any other provision in this Service Purchase Agreement. [signature page follows] © 2010 VRCompliance LLC IN WITNESS WHEREOF, for adequate consideration and intending to be legally bound, the Parties hereto have caused this • Agreement to be executed by their duly authorized representatives. VRCompliance LLC Signature: Name: Title: Date: • 1� Town of Avon Signature: Name: Title: Date: 0 2010 VRCompliance LLC Terms of Use Agreement VRCompliance LLC ( "VRCompliance "), a limited liability company organized and existing under the laws of the • Commonwealth of Virginia, provides the vrcompliance.com website and its various related products and services (collectively, the "System ") to you, the user, ( "Licensee," "You," "Your ") subject to your compliance with all the terms, conditions, and notices contained or referenced on the System (the "Agreement "), as well as any other written agreement between us and you, including any Mutual Confidentiality Agreement or Services Purchase Agreement, all of which are expressly incorporated herein. VRCompliance shall have no obligation to provide any services through the System until You have assented to such services and these Terms of Use through a valid, current, and paid -up Service Purchase Agreement ("SPA "). VRCompliance expressly reserve the right to change the Agreement from time to time without notice to you, though it is our policy to offer a summary of material modifications in advance of the effective date of such a change for your review and consideration if circumstances allow it. It is your responsibility to review and familiarize yourself with any updates and alterations to these terms of use. Your continued use of this System after such modifications will constitute acknowledgement of the modified Agreement and assent to abide and be bound by the modified Agreement. Your sole remedy in the event of issue with any modified Agreement shall be expedited termination as described herein. WHEREAS, VRCompliance has designed and developed this Internet - accessible System to assist law enforcement agencies ( "Agencies ") of the United States, states thereof, and subdivisions of said states investigate tax and registration compliance through the System's ability to correlate, analyze, and manage tax and registration data provided over the Internet; and WHEREAS, VRCompliance desires to grant to Licensee a non - exclusive license for the use of the System presently available at the URL http: / /\vw\v.vrcompIiance.coin; and WHEREAS, Licensee is a government entity, which may include the United States, states thereof, and subdivisions of said states, desiring to investigate tax and registration compliance; and WHEREAS, Licensee desires to obtain from VRCompliance a non - exclusive license for the use of the System in connection • with a lawfully authorized investigation of a law enforcement officer, agency, or governmental employee deriving authority from Licensee to acquire information related to compliance with financial laws and regulations; and WHEREAS, VRCompliance is willing to provide certain support services for the System and in training Licensee's employees in the use of the System subject to the terms of this Agreement. NOW THEREFORE, in consideration of the mutual promises contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows: Definitions 1.1. "Licensee" shall mean You, and Your successors and assigns. 1.2. "VRCompliance" shall mean VRCompliance LLC, its successors and assigns. 1.3. "System" shall mean the software system(s) currently marketed by VRCompliance for correlating, analyzing, and managing tax and registration compliance data available at the URL http: / /wwNv.vrcoinpliance.com and the physical site http://N\,\\:w.vrcompliance.com. 2. License VRCompliance hereby grants, and Licensee hereby accepts, a nontransferable, and non - exclusive license to access and use the System and all related documentation during the term of this Agreement under the price and terms specified in the SPA in current form and as updated from time -to -time and without notice. Any rights not expressly granted herein shall be reserved for VRCompliance. The System shall be used only in Licensee's own business. Licensee shall not permit any third party to use the System except as specifically authorized in writing by VRCompliance. 0 2011 VRCompliance LLC • 3. VRCompliance Services is3.1. Training, Installation, and Consulting. VRCompliance may provide training services in use of the System. Training services shall be provided to the extent agreed upon by the parties according to the terms contained in the Agreement and at the fees set forth in the SPA or as prominently posted on the System. 3.2. Software Operation and Maintenance. So long as Licensee is current in payment of the Fees described herein, VRCompliance shall provide normal and reasonable operation and maintenance of the System. The correction of System malfunctions ( "bugs ") is deemed to be normal and reasonable maintenance. 4. Proprietary Rights and Restrictions on Use 4.1. Description of Proprietary Rights. Licensee recognizes that the System and all related information, including but not limited to any and all updates, improvements, modifications, enhancements, and information related to the System, are proprietary, and that all rights thereto, including copyright, are owned by VRCompliance. 4.2. Disclosure. While this Agreement is in effect, or while Licensee has access to the System, Licensee will not provide or make the System available to any person or entity other than employees or agents of Licensee who have a need to know consistent with Licensee's use thereof under this Agreement; Login credentials (e.g., access information, passwords, etc.) related to the System shall be securely maintained, under reasonable and customary access and use restrictions. Licensee shall be strictly liable for any unauthorized use of the System pursuant to login credentials related to Licensee. 4.3. Unauthorized Use. Licensee agrees to notify VRCompliance forthwith if it obtains information as to any unauthorized possession, use or disclosure of the System by any person or entity, and further agrees to cooperate with VRCompliance at VRCompliance's expense, in protecting VRCompliance's proprietary rights. 4.4. Injunctive Relief. In addition to other remedies available to VRCompliance, Licensee agrees that VRCompliance shall be entitled to injunctive relief in the event Licensee breaches this Agreement. • 5. Fees and Payments 5.1. License Fees. Licensee shall pay to VRCompliance all applicable fees ( "Fees ") specified in the SPA. Such Fees are payable in full upon execution of this Agreement. Such initial Fees are payable in full upon execution of this Agreement and other applicable fees shall be due on a rolling basis for such duration as Licensee makes use of the System pursuant to this agreement 5.2. Additional Fees. Licensee shall pay training, installation and support, and all other fees at the rates prominently posted on the System. 6. Your Conduct and Warranties 6.1 Inappropriate Behavior. Your use of the System is subject to all applicable laws and regulations of your locality, state, nation and other relevant governing bodies. You are solely responsible for the substance and means of your communications to and from the System. By using the System or any service or feature that may be available to you on or through the System, you agree that you will not do the following: • distribute visual or audible content that is unlawful, threatening, abusive, harassing, defamatory, libelous, deceptive, fraudulent, invasive of another's privacy, tortious, racist, sexist, profane, contains explicit or graphic descriptions or accounts of sexual acts (including but not limited to sexual language of a violent or threatening nature directed at another individual or group of individuals), pornographic, or otherwise violates our rules or policies; • victimize, harass, degrade, or intimidate an individual or group of individuals on the basis of religion, gender, sexual orientation, race, ethnicity, age, or disability; • infringe on any patent, trademark, trade secret, copyright, mask work, right of publicity, or other proprietary right of any party; • distribute unauthorized or unsolicited advertising, junk or bulk email (also known as "spamming "), chain letters, short is messages (SMS) or any other form of unauthorized solicitation; 0 2011 VRCompliance LLC • distribute or expose content that contains software viruses or any other computer code, files, or programs that are designed or intended to disrupt, damage, or limit the functioning of any software, hardware, or telecommunications • equipment or to damage or obtain unauthorized access to any data or other information of any third party; • participate in any or any form of lottery, sweepstakes, or gambling; • impersonate any person or entity, including any of our employees or representatives; • use your account to breach security of another account or attempt to gain unauthorized access to another network or server; • conceal your identity or intentions for the purpose of performing an activity or achieving an objective prohibited under these Terms of Use; or • interfere with anyone else's use and enjoyment of the System or other similar services. We may actively monitor this System to ensure that your conduct and material is appropriate and consistent with our standards. We neither endorse nor assume liability for the contents of any expressive material uploaded or submitted by third -party users of the System. Although we generally do not pre- screen, monitor, or edit material that may be available on or through this System, we have the right at our sole discretion to remove any content that, in our sole judgment, does not comply with this Agreement or other statement of rules by us. We are not responsible for any failure or delay in removing such content. You hereby consent to such removal and waive any claim against us arising out of such removal of content. 6.2. General Terms. In requesting an account to use the System, you represent and warrant to VRCompliance that: • You are 18 years of age or older; • You are a human user (account registration or use by automated methods is not permitted); • You will not assert or imply any affiliation with or endorsement by VRCompliance relating to the conduct of your business; • You will not modify, adapt, or "hack" the System or System Services (or even attempt to do so); • You will not make excessive API requests of the System, to be determined by VRCompliance in its sole, subjective discretion; • You own or have the right to use or access all material you upload to the System; • • For expressive materials posted by you on the System meant to be accessible to the public, you warrant to the best of your knowledge that the use, reproduction, distribution, and transmission of the resource at any URL you post to the System, or any information or materials contained in it, does not: (i) infringe or misappropriate any copyright, patent, trademark, trade secret, or any other proprietary rights of a third party; (ii) violate any criminal laws; (iii) constitute false advertising, unfair competition, defamation, an invasion of privacy, violate a right of publicity; or (vi) violate any other law or regulation of any locality or organization in which you may be lawfully subjected to litigation (collectively, "Violate or Infringe "); and • For resources not generally meant to be accessible to the public, or otherwise having restricted access (including company websites restricted to employee use, subscription websites available only to customers, and the like), you strictly warrant that the use, reproduction, distribution, and transmission of the resource at any URL you post to the System, or any information or materials contained in it, does not Violate or Infringe and that to the best of your knowledge, constructive or actual, any use of the System by you does not Violate any access restriction placed upon you or another party acting under your direction. 6.3. Additional Terms for Government Use. In requesting a governmental account to use the System in an official capacity, you represent and warrant to VRCompliance that, in addition to the General Terms above: You are authorized to use System Services on behalf of a government agency, federal, state, or local government and will only use the System Services for proper, authorized governmental functions. 6.4. Warranty of Proper Government Use. Licensee hereby warrants that it is using the System solely in connection with a lawfully authorized investigation of a law enforcement officer, an agency, or governmental employee deriving authority from Licensee as a governmental body to acquire information related to compliance with financial laws and regulations ("Authorized Use "). Indemnification for Licensee under this Agreement shall be contingent upon the objective truth of the Authorized Use. Licensee shall provide all documents, papers, things, and testimony necessary to establish, affirm, and reaffirm the objective C 2011 VRCompliance LLC • Truth of the Authorized Use. All such obligations to provide documents, papers, things, and testimony shall be subject to, and • covered by, the indemnification of this Agreement. 7. VRCompliance Warranties 7.1. Intellectual Property Warranty. VRCompliance warrants that, to the best of its knowledge, it is either the sole owner of the System or has the right to sublicense the System and that there are no known infringements or claims of infringement with respect to the patent, copyright or other proprietary rights of third parties. 7.2. Indemnity for Authorized Uses of the System. a. Scope. VRCompliance agrees to hold harmless and indemnify Licensee against any Damages (as defined in Section 7.2(b)) incurred by Licensee with respect to any Proceeding (as defined in Section 7.2(c)) to which Licensee is made a party or in which Licensee is otherwise involved (including, but not limited to, as a witness). b. Indemnified Amounts. If Licensee is or is threatened to be made a party to, or is otherwise involved (including, but not limited to, as a witness) in, any Proceeding, VRCompliance shall hold harmless and indemnify Licensee from and against any and all losses, claims, damages, costs, expenses and liabilities incurred in connection with investigating, defending, being a witness in, participating in or otherwise being involved in (including on appeal), or preparing to defend, be a witness in, participate in or otherwise be involved in (including on appeal), such Proceeding, including but not limited to reasonable attorneys' fees, Judgments, fines, penalties, amounts paid in settlement, and other expenses (collectively, "Damages "), including all interest, assessments or charges paid or payable in connection with or in respect of such Damages. c. Definition of Proceeding. For purposes of this Agreement, "Proceeding" shall mean any actual, pending, threatened or completed action, suit, claim, investigation, hearing or proceeding (whether civil, criminal, administrative or investigative, and whether formal or informal) in which Licensee is, has been, or becomes involved, or regarding which Licensee is threatened to be made a named defendant or respondent, based in whole or in part on or arising out of the fact that Licensee is using the System in a manner authorized by these Terms of Use, whether the basis of such action, suit, claim, investigation, hearing or proceeding is an alleged action or omission by Licensee. "Proceeding" shall not, however, include any action, suit, claim, investigation, hearing or proceeding instituted by or at the direction of Licensee. • d. Notifications. i. Promptly after receipt by Licensee of notice of the commencement (including a threatened assertion or commencement) of any Proceeding, Licensee will notify VRCompliance (the "Indemnification Advice "). A failure to notify VRCompliance in accordance with this subsection (d)(i) that materially prejudices VRCompliance's ability to defend the Proceeding shall relieve VRCompliance from any indemnification obligation under this Agreement. To the extent commercially practicable, the form of the indemnification Advice shall describe with reasonable specificity the nature of and the basis for the indemnification claim, including any relevant supporting documentation; the identification of all parties and potential witnesses known at that time to Licensee; a description of facts and available evidence known at that time to the Licensee; and a good faith estimate of potential losses associated with the claim. ii. At the same time, or from time to time thereafter, Licensee may further notify, including requesting payment or reimbursement by, VRCompliance, by delivery of a supplemental notice (the "Indemnification Claim "), of any amounts associated with any Proceeding for which indemnification is being sought under this Agreement. The form of the Indemnification Claim shall include the content of the initial Indemnification Advice, updated as required, together with an itemized listing of Damages and potential Damages associated with the Proceeding, and a description of the status of the Proceeding, if known. e. Determination of Entitlement. VRCompliance shall indemnify Licensee against all Damages listed in an Indemnification Claim within thirty (30) days of receipt, unless during such thirty (30) day period VRCompliance delivers to Licensee a written notice challenging that indemnification Claim (the "Contest Notice ") or a portion thereof, which Contest Notice shall state with particularity the reasons for the challenge and the evidence VRCompliance would present in any forum in which Licensee might seek review of such challenge. VRCompliance shall pay any amount not disputed in the Contest Notice. f. Indemnification Contingencies. The failure of Licensee to materially abide by any obligation of this Agreement, particularly, but without limitation, the warranties of Section 6, the defense of claim strictures of Section 7.3, and the notification of Section 7.2(d), shall absolve VRCompliance of any indemnification obligation under this Agreement. • 7.3. Defense of Claim. 0 2011 VRCompliance LLC With respect to any Proceeding: a. VRCompliance shall have the right to participate therein at VRCompliance's own expense and sole discretion. • b. VRCompliance shall have the right to assume complete control of the defense of any Proceeding at VRCompliance's own expense and sole discretion, with counsel reasonably satisfactory to Licensee. After assumption by VRCompliance of the defense thereof, VRCompliance shall not be liable to Licensee under this Agreement for any legal fees or other expenses subsequently incurred by Licensee in connection with the defense thereof unless the employment of counsel by Licensee or the incurring of such expenses is necessary as a result of any conflict of interest or has been authorized by VRCompliance. c. VRCompliance shall not be liable for any amounts paid in settlement of any Proceeding effected without its written consent d. VRCompliance shall not settle any Proceeding in any manner that would impose any penalty or limitation on Licensee without Licensee's written consent. e. Neither VRCompliance nor Licensee will unreasonably withhold its or his or her consent to any proposed settlement of any Proceeding. f. In the event that a counterclaim or other right of action against an adverse party in any Proceeding is successful and results in a net positive recovery in the Proceeding, including damages, costs, and fees (less recovery of actual damages to Licensee proven at trial, which shall be paid to Licensee), VRCompliance shall be entitled to retain such net positive recovery. 7.4. Partial Indemnification. If Licensee is entitled under any provision of this Agreement to indemnification by VRCompliance for some or a portion of any Damages in connection with a Proceeding, but not for the total amount thereof, VRCompliance shall nevertheless indemnify Licensee for the portion of such Damages to which Licensee is entitled. 7.5. Performance Warranty. VRCompliance warrants AS ITS SOLE OPERATIONAL WARRANTY that System shall substantially conform in all material respects, as to all operational features, to VRCompliance's current specifications as published and reasonably revised from time -to -time in VRCompliance's documentation for the System and that when properly utilized will be free of material defects which adversely affect system performance. The System will be available to Internet users • approximately 24 hours a day, except during previously scheduled maintenance windows and unforeseen hardware, software, or communications problems. Maintenance windows will generally occur outside of regular business hours and will generally be announced seven (7) or more days in advance. VRCompliance will utilize commercially reasonably technologies and procedures for the storage, backup, and redundancy of system data, including that data provided by You and by other parties, for the purposes of restoring system data and normal system function in the event of a failure of a system component. The use of backup data to recover data deleted or modified by Licensee is not supported. 7.6. Remedy On Breach of Performance Warranty; Limitation of Liability. The Licensee must notify VRCompliance in writing, within 30 days of recognition, actual or constructive, of any defect in the System characterized by Licensee as related to its claim of any breach of the warranty set forth in Section 7.5. If VRCompliance determines that such breach has occurred, VRCompliance's sole obligation under this warranty is to remedy such defect in a manner consistent with VRCompliance's regular business practices which shall mean that for a defect which materially adversely affects the performance of the System ( "major defect'), VRCompliance shall use its best efforts to cure such defect as soon as reasonably practicable after receipt of Licensee's notice, and that for minor defects, VRCompliance shall use its best efforts to correct such minor defects in the next release of its System; provided, however, that if VRCompliance is unable to cure a major defect within 30 days of receipt of Licensee's notice, Licensee shall have the option to terminate this Agreement whereupon VRCompliance's sole obligation shall be to refund only the System license fees paid hereunder for any time period during which Licensee has not used (in the case of any fees paid in advance) or could not use (in the case of a breach) the System. 7.7 Use Warranty: VRCompliance warrants that, to the best of its knowledge, Licensee's use of the System in a manner authorized by this Agreement does not (i) infringe or misappropriate any copyright, patent, trademark, trade secret, or any other proprietary rights of a third party; (ii) violate any criminal laws; (iii) constitute false advertising, unfair competition, defamation, an invasion of privacy, violate a right of publicity; or (vi) violate any other law or regulation of any locality or organization in which you may be lawfully subjected to litigation © 2011 VRCompliance LLC • THE WARRANTIES SET FORTH IN THIS SECTION 7 ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND • WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND ANY OTHER STATUTORY OR COMMON -LAW WARRANTY. VRCOMPLIANCE AND ITS SUPPLIERS ON THEIR BEHALF HEREBY EXPRESSLY DISCLAIM AND EXCLUDE ANY AND ALL SUCH OTHER REPRESENTATIONS AND WARRANTIES. EXCEPT AS DESCRIBED IN SUBSECTIONS 7.2 -7.4 AND HEREIN, LIABILITY OF VRCOMPLIANCE AND ITS SUPPLIERS TO LICENSEE, IF ANY, FOR BREACH OF WARRANTY ARISING OUT OF CONTRACT, NEGLIGENCE OR STRICT LIABILITY IN TORT, OR ANY OTHER CLAIM RELATING TO THIS AGREEMENT SHALL BE LIMITED TO THE TOTAL AMOUNT OF SOFTWARE LICENSE FEES PAID BY LICENSEE TO VRCOMPLIANCE. IN NO EVENT SHALL VRCOMPLIANCE BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSS OF BUSINESS OR PROFITS, SPECIAL OR INDIRECT DAMAGES OF ANY NATURE WHATSOEVER 7.8 Right to Replace and Modify System. If all or any part of the System is, or in the opinion of VRCompliance may become, the subject of a Proceeding, VRCompliance may at its expense promptly, either (i) replace the System with a compatible, functionally equivalent, lawfully - compliant System, (ii) modify the System or take other action so that the System becomes non - infringing or compliant with applicable laws, or (iii) procure the right of Licensee to continue using the System, all without any additional cost to Licensee. 8. Relationship 8.1. Independent Contractor. VRCompliance and Licensee will be and shall act as an independent contractor and not as an agent or partner of, or joint venture with the other party for any purpose and neither party by virtue of this Agreement shall have any right, power, or authority to act or create any obligation, express or implied, on behalf of the other party. 8.2. Expenses. Except as otherwise provided herein, or as may hereafter be established by an agreement in writing executed by the parties hereto, all expenses incurred by each party in performing its obligations hereunder shall be borne by the party incurring the expense; except that in the event of a breach of this Agreement by Licensee, VRCompliance shall be entitled to all • costs of collection and enforcing its rights hereunder, including reasonable attorneys' fees. 9. Duration and Term 9.1. Term. Unless sooner terminated pursuant to other terms of this Agreement, this Agreement shall be the term period specified in the SPA unless earlier terminated under this Section 9. 9.2. Default, Bankruptcy. This Agreement and the license created hereby may, at VRCompliance's sole option, terminate and any and all rights granted to Licensee hereunder shall expire; (1) Upon 15 days' written notice to Licensee that it, its officers, employees or agents violated any provision of this Agreement, including, but not limited to confidentiality and payment provisions; or (2) Should Licensee, its successors or permitted assigns, suspend business, make an absolute assignment of the bulk of its assets for the benefit of creditors, consent to the appointment of a trustee, custodian or receiver, or be declared insolvent or bankrupt; or if a trustee, custodian or receiver is appointed for Licensee for a substantial part of its property without its consent and is not discharged within 30 days of such appointment; or if bankruptcy, reorganization, arrangement, insolvency, or liquidation proceedings are instituted by or against Licensee and are not dismissed within 30 days of the commencement thereof. 9.3 Expedited Termination. A party may terminate this Agreement for cause. (1) VRCompliance may terminate the Agreement with Licensee upon seven days notice to Licensee upon Licensee's material failure to perform any obligation or respect any condition of this Agreement that is not cured within such seven day notice period. (2) Licensee may terminate the Agreement with VRCompliance upon VRCompliance's material breach of the Warranties of Sections 7.5 and 7.7 pursuant to the conditions of Section 7.6. • ® 2011 VRCompliance LLC 6 (3) Licensee may terminate the Agreement with VRCompliance after seven days notice to VRCompliance upon VRCompliance's material failure to perform any obligation or respect any condition of this Agreement not covered under Section 9.3(2) that • remains uncured within such seven day notice period. (4) Licensee may terminate the Agreement with VRCompliance after seven days notice to VRCompliance within seven days of modification of the present Agreement, when such modification materially and detrimentally affects Licensee's business operations generally or its legal relationship with VRCompliance and if VRCompliance does not offer a commercially reasonable accommodation during such seven day cure period that obviates the material and detrimental effects of said modification. Any notice provided to VRCompliance under this Section 9.3(4) shall state with great particularity the material and detrimental effects of such modification. Your sole remedy upon termination under this Section 9.3(4) shall be a pro rata refund of Fees paid. 9.4. Obligations Upon Termination. (1) In the event of termination by reason of the Licensee's failure to comply with any provision of this Agreement, or upon any act which shall give rise to VRCompliance's right to terminate, VRCompliance shall have the right, at any time, to terminate the license(s). Termination under this paragraph shall not relieve Licensee of its obligations regarding confidentiality contained in this Agreement. (2) Without limiting any of the above provisions, in the event of termination as a result of Licensee's failure to comply with any of its obligations under this Agreement, Licensee shall continue to be obligated for any payments due. Termination of the license(s) shall be in addition to and not in lieu of any additional remedies available to VRCompliance. 10. Notices Notices, correspondence, and invoicing related to this Agreement shall occur by electronic mail and shall be deemed to have been delivered upon transmission by e -mail. Notice shall be sent to VRCompliance to the electronic mail address indicated on the System as expressly designated for notices. Licensee shall be obligated to maintain in its access credentials electronic mail addresses, which will be used to receive notices under this Agreement. H. Complete Agreement • 11.1. Complete Agreement; Amendments. This Agreement, together with all documents incorporated herein by reference (including all notices, terms, SPAs, and provisions of the System and attached Schedules hereto), constitutes the complete and exclusive statement of the Agreement between the parties hereto and supersedes any and all prior express or implied agreements or understandings between the parties hereto concerning the subject matter hereof. No amendment, waiver or other alteration of this Agreement may be made except by mutual agreement in writing. 11.2. Partial Invalidity. If any provision of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected thereby. 12. Restrictions on Transfer This Agreement shall not be assigned, sublicensed or in any other manner transferred to any other person or entity by Licensee without the prior written consent of VRCompliance. 13. Governing Law This Agreement shall be construed in accordance with the laws of the Commonwealth of Virginia. 14. Headings The various headings in this Agreement are inserted for convenience only, and shall not affect the meaning or interpretation of this Agreement or any paragraph or provision hereof. 0 2011 VRCompliance LLC • Mutual Confidentiality Agreement • THIS AGREEMENT is made by and between VRCompliance LLC ( "VRCompliance "), a limited liability company organized and existing under the laws of the Commonwealth of Virginia, and Town of Avon( "You," "your ") a Colorado municipal corporation with offices at 1 Lake Street, Avon, CO 81620 (collectively, the "Parties "). WHEREAS, VRCompliance desires to discuss the Tax Compliance Program (the "Program ") and may further desire to discuss payment for, specifications of, and other attributes of the Program (the "Business Purpose "). WHEREAS, the Parties believe that they would mutually benefit by having a Party owning or having requisite rights to certain confidential information (the "Owner ") share such information with the other Party (the "Recipient ") for a Period of Authorized Use (as defined herein) and believe it is in their mutual interest to ensure that such confidential information will be safeguarded. NOW THEREFORE, for consideration the adequacy of which is hereby acknowledged and intending to be legally bound, the Parties hereby agree as follows: Acknowledgment of Confidentiality 1.1 General. The Recipient hereby acknowledges that it has been or may be exposed to confidential and proprietary information belonging to the Owner or relating to its business operation. Such information may include: (a) Technical Information, including functional and technical specifications, designs, drawings, analysis, research, processes, computer programs, methods, ideas, "know how" and the like; (b) Business Information, including sales, product development and marketing research, materials, strategies, plans, accounting and financial information, personnel records and the like; and (c) other valuable information of Owner designated as Confidential Information under Section 1.4 (collectively, "Confidential Information "). 1.2 Confidentiality of Discussions. Unless otherwise agreed in writing or as required by Section 3.2, the existence and Business Purpose of this Agreement and the fact that Confidential Information may be exchanged by the Parties shall itself be treated as Confidential Information. • 1.3 Certain Exceptions. Confidential Information does not include information which the Recipient can demonstrate: (i) was already known or has been independently developed by the Recipient without reference to the Owner's Confidential Information; (ii) was already in the public domain or becomes publicly known through no wrongful act of the Recipient; (iii) is rightfully received by the Recipient from a third party who was free to disclose it, or (iv) is designated by the Owner in writing as no longer Confidential Information. 1.4 Method of Designation. The Owner shall make reasonable effort to mark Confidential Information by appropriate legend at the time of disclosure or within a reasonable time thereafter. Verbal and visual communications and information not expressly marked may nevertheless be deemed Confidential Information if disclosed in connection with or as a result of the Business Purpose under circumstances in which it should reasonably be understood by the Recipient to be Confidential Information, either by the nature of the information or from the context in which it is provided. 2. Authorized Users Recipient may not, during the Period of Non - Disclosure, disclose the Confidential Information to any person or entity, except strictly on a "need to know" basis to its own employees, Affiliates and employees of its Affiliates (a "Downstream Recipient ") directly involved in carrying out the stated Business Purpose. Each individual Downstream Recipient must be bound by law or written agreement to restrictions at least as protective as this Agreement. The Recipient shall use due diligence to ensure that each Downstream Recipient complies with the foregoing restrictions. For purposes of this Agreement, the term "Affiliate" means any person or legal entity that controls, is controlled by or is under common control with a Party. Management Responsibilities 3.1 Standard of Care. The Recipient shall use at least the same degree of care, including technical and physical security measures, in protecting the Confidential Information from unauthorized access, interception, use, or disclosure as it uses in protecting its own confidential and proprietary information of a similar nature, but in no event shall the Recipient exercise less • 0 2011 VRCompliance LLC than due diligence and care. 3.2 Legal Process. The Recipient may disclose Confidential Information as required by legal process or court order, or if • required to enforce its rights under this Agreement. However, the Recipient shall first give written notice to the Owner and cooperate fully in any effort by the Owner to obtain a protective order or otherwise restrict the scope of use to prevent unnecessary disclosure of the Confidential Information. 4. Proarietary Rights Legend Recipient shall not alter or remove from any Confidential Information any proprietary rights legend, copyright notice, trademark or trade secret legend, or any other mark identifying the material as proprietary or confidential. 5. Term & Termination This Agreement shall become effective as of the Effective Date set forth in the first paragraph above and shall continue in full force and effect as follows: 5.1 Period of Authorized Use. The Recipient may use the Confidential Information until the authorized Business Purpose is completed or such additional period as the Owner may agree in writing ( "Period of Authorized Use "). The Owner may in its sole discretion terminate the Period of Authorized Use at any time upon written notice to the Recipient. 5.2 Period of Non - Disclosure. The restriction on disclosure of Confidential Information shall apply during, and shall survive the termination or expiration of the Period of Authorized Use, and continue in full force and effect until such Disclosed Confidential Information ceases to be Confidential Information pursuant to Section 1.3 ( "Period of'Non- Disclosure "). 5.3 Post - Termination Covenant. Upon termination or expiration of the Period of Authorized Use the Recipient shall: (i) cease all further use of the Confidential Information, unless licensed or purchased under a separate agreement, and (ii) at any time at the direction of the Owner, except if licensed or purchased under a separate agreement, fully account for and return or destroy the original and all copies of the Confidential Information (including permanently deleting any electronic copies of the Confidential • Information from any systems and storage devices). Recipient shall secure the return or destruction of any Confidential Information in the possession or under the control of Downstream Recipients. The Recipient shall upon request certify and cause its Downstream Recipients to certify compliance with this provision. 6. Warranty & Indemnity 6.1 Third Parry Claims. The Owner represents and warrants at the time of delivery that it owns or has requisite rights to provide the Confidential Information to the Recipient for the stated Business Purpose and will defend, indemnify and hold the Recipient harmless from any costs, damages, liability and expense (including reasonable legal fees) arising from any third party claim to the contrary ( "Third Party Claim ") to the extent permitted by law. The foregoing indemnity is conditioned upon the Owner receiving prompt notice of the claim, having control over the proceedings necessary to litigate and negotiate any settlement (provided any settlement will not adversely affect Recipient without its consent) and receiving Recipient's reasonable cooperation in the proceeding at Owner's expense. 62 Disclaimer. Except as stated in Section 6.1 above, all confidential information is provided strictly on an "as -is" and "as available" basis and all warranties of merchantability, fitness, integration, and quality, are disclaimed. Owner has no responsibility for errors or omissions in the confidential information or for any decisions made by the Recipient in reliance on it. 7. Limitation of Liability Except for (i) Owner's indemnity against Third Party Claims and (ii) any violation by Recipient of the restrictive covenants of this Agreement, neither Party is liable for any claim arising out of or relating to this Agreement for indirect, incidental, special, exemplary or consequential damages even if notified in advance of the possibility of such damages. 8. Choice of Law & Forum This agreement is governed by and shall be construed in accordance with the substantive laws of the United States and the State • ® 2011 VRCompliance LLC 2 of Colorado without regard to principles of conflicts of law. In any such action, the parties irrevocably waive and will not assert • any defense based on personal jurisdiction, inconvenient forum, or improper venue. 9. Reservation of Rights Each Party reserves all rights not expressly granted or undertaken by this Agreement. Nothing herein shall be construed as: (a) granting any right, title or license to any existing or future intellectual property, development or business of a Party, or (b) inherently limiting a Party's right to pursue independent business interests or opportunities in competition with the other Party, or to assign or reassign personnel within its own organization, so long as reasonable protections are taken to ensure this Agreement is not violated. Nothing herein requires either party to enter into any further transaction or agreement that might be contemplated in the furnishing of the Confidential Information. 10. General Provisions This document executed by the Parties, constitutes the entire and exclusive agreement between the Parties with respect to, and supersedes all other agreements and communications, whether written or oral regarding this subject matter. This Agreement is expressly limited to its terms and may be modified or amended only by a writing signed by an authorized representative of the Party against whom enforcement is sought. Neither this Agreement, nor any rights or obligations hereunder may be transferred or assigned without the other Party's prior written consent and any attempt to the contrary shall be void. Any provision hereof found by a court of competent jurisdiction to be illegal or unenforceable shall be automatically conformed to the minimum requirements of law and all other provisions shall remain in full force and effect. Waiver of any provision hereof in one or more instances shall not preclude enforcement of it on future occasions. Headings are for reference purposes only and have no substantive effect. 11. Enforcement The Recipient agrees that the unauthorized use or disclosure of the Confidential Information will cause irreparable harm and damage that will be difficult to measure or ascertain. Therefore, the Owner may not have adequate remedy at law. The Recipient understands and agrees that, in the event of its violation of this Agreement, the Owner shall be entitled to obtain injunctive or • equitable relief, without necessity of posting bond or showing actual damage, to restrain the unauthorized use, reproduction, disclosure, or competition prohibited by this Agreement as well as monetary damages. The Parties agree that if either Party should breach this Agreement, then the breaching Party shall pay all costs that the non - breaching Party may incur to enforce this Agreement or seek damages for breach, including reasonable attorneys' fees. These rights shall be cumulative and in addition to any other rights or remedies to which the non- breaching Party may be entitled. 10. Addendum This Mutual Confidentiality Agreement shall be subject to the Attached Addendum No. 1 which is hereby incorporated into this Mutual Confidentiality Agreement. The provisions and terms contained in Addendum No. 1 shall control and prevail in the event of any conflict with any other provision in this Mutual Confidentiality Agreement. l signature page followsl • ® 2011 VRCompliance LLC IN WITNESS WHEREOF, for adequate consideration and intending to be legally bound, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives. • VRCompliance LLC Signature: Name: Title: Date: Town of Avon Signature: Name: Title: Date: 0 2011 VRCompliance LLC • • ADDENDUM NO. 1: MUNICIPAL PROVISIONS • TO THE AGREEMENTS BETWEEN VRCOMPLIANCE AND THE TOWN OF AVON. In the event the terms and conditions of this Addendum No. 1 conflict in whole or in part with the terms and conditions of the Service Purchase Agreement and the Mutual Confidentiality Agreement between VRCompliance LLC and the Town of Avon, dated day of , 2011, the terms and conditions of this Addendum No. 1 shall control. A.1. No Waiver of Governmental Immunity: Nothing in this Agreement shall be construed to waive, limit, or otherwise modify any governmental immunity that may be available by law to the Town, its officials, employees, contractors, or agents, or any other person acting on behalf of the Town and, in particular, governmental immunity afforded or available pursuant to the Colorado Governmental Immunity Act, Title 24, Article 10, Part 1 of the Colorado Revised Statutes. A.2. Affirmative Action: Contractor will not discriminate against any employee or applicant for employment because of race, color, religion, sex or national origin. Contractor will take affirmative action to ensure applicants are employed, and employees are treated during employment without regard to their race, color, religion, sex or national origin. Such action shall include, but not be limited to the following: employment, upgrading, demotion or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. A.3. Article X, Section 20/TABOR: The Parties understand and acknowledge that the Town is • subject to Article X, § 20 of the Colorado Constitution ( "TABOR "). The Parties do not intend to violate the terms and requirements of TABOR by the execution of this Agreement. It is understood and agreed that this Agreement does not create a multi - fiscal year direct or indirect debt or obligation within the meaning of TABOR and, therefore, notwithstanding anything in this Agreement to the contrary, all payment obligations of the Town are expressly dependent and conditioned upon the continuing availability of funds beyond the term of the Town's current fiscal period ending upon the next succeeding December 31. Financial obligations of the Town payable after the current fiscal year are contingent upon funds for that purpose being appropriated, budgeted, and otherwise made available in accordance with the rules, regulations, and resolutions of Town of Avon, and other applicable law. Upon the failure to appropriate such funds, this Agreement shall be terminated. A.4. Employment of or Contracts with Illegal Aliens: Contractor shall not knowingly employ or contract with an illegal alien to perform work under this Agreement. Contractor shall not contract with a subcontractor that fails to certify that the subcontractor does not knowingly employ or contract with any illegal aliens. By entering into this Agreement, Contractor certifies as of the date of this Agreement it does not knowingly employ or contract with an illegal alien who will perform work under the public contract for services and that the contractor will participate in the e- verify program or department program in order to confirm the employment eligibility of all employees who are newly hired for employment to perform work under the public contract for services. The Contractor is prohibited from using either the e- verify program or the department program procedures to undertake pre- employment screening of job applicants while this Agreement is being performed. If the • Addendum No. 1: Town of Avon VR Compliance and Town of Avon Page 1 of 3 Contractor obtains actual knowledge that a subcontractor performing work under this Agreement knowingly employs or contracts with an illegal alien, the Contractor shall be • required to notify the subcontractor and the Town within three (3) days that the Contractor has actual knowledge that a subcontractor is employing or contracting with an illegal alien. The Contractor shall terminate the subcontract if the subcontractor does not stop employing or contracting with the illegal alien within three (3) days of receiving the notice regarding Contractor's actual knowledge. The Contractor shall not terminate the subcontract if, during such three days, the subcontractor provides information to establish that the subcontractor has not knowingly employed or contracted with an illegal alien. The Contractor is required to comply with any reasonable request made by the Department of Labor and Employment made in the course of an investigation undertaken to determine compliance with this provision and applicable state law. If the Contractor violates this provision, the Town may terminate this Agreement, and the Contractor may be liable for actual and /or consequential damages incurred by the Town, notwithstanding any limitation on such damages provided by such Agreement. A.S. Ownership of Documents: Any work product, materials, and documents produced by the Contractor pursuant to this Agreement shall become property of the Town of Avon upon delivery and shall not be made subject to any copyright unless authorized by the Town. Other materials, methodology and proprietary work used or provided by the Contractor to the Town not specifically created and delivered pursuant to the Services outlined in this Agreement may be protected by a copyright held by the Contractor and the Contractor reserves all rights granted to it by any copyright. The Town shall not reproduce, sell, or otherwise make copies of any copyrighted material, subject to the following exceptions: (1) for exclusive use internally by Town staff and /or employees; or (2) pursuant to a request under the Colorado Open Records Act, § 24 -72 -203, C.R.S., to the extent that such • statute applies; or (3) pursuant to law, regulation, or court order. The Contractor waives any right to prevent its name from being used in connection with the Services. A.6. No Waiver of Rights: A waiver by any Party to this Agreement of the breach of any term or provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by either Party. The Town's approval or acceptance of, or payment for, services shall not be construed to operate as a waiver of any rights or benefits to be provided under this Agreement. No covenant or term of this Agreement shall be deemed to be waived by the Town except in writing signed by the Town Council or by a person expressly authorized to sign such waiver by resolution of the Town Council of the Town of Avon, and any written waiver of a right shall not be construed to be a waiver of any other right or to be a continuing waiver unless specifically stated. A.7. Binding Effect: The Parties agree that this Agreement, by its terms, shall be binding upon the successors, heirs, legal representatives, and assigns. A.B. Limitation of Damages: The Parties agree that Contractor's remedies for any claims asserted against the Town shall be limited to proven direct damages in an amount to exceed amounts due under the Agreement and that Town shall not be liable for indirect, incidental, special or consequential damages, including but not limited to lost profits A.9. No Third Party Beneficiaries: Nothing contained in this Agreement is intended to or shall create a contractual relationship with, cause of action in favor of, or claim for relief for, any Addendum No. 1: Town of Avon VR Compliance and Town of Avon Page 2 of 3 • third party, including any agent, sub - consultant or sub - contractor of Contractor. Absolutely is no third party beneficiaries are intended by this Agreement. Any third -party receiving a benefit from this Agreement is an incidental and unintended beneficiary only. A.10.Governing Law, Venue, and Enforcement: This Agreement shall be governed by and interpreted according to the law of the State of Colorado. Venue for any action arising under this Agreement shall be in the appropriate court for Eagle County, Colorado. To reduce the cost of dispute resolution and to expedite the resolution of disputes under this Agreement, the Parties hereby waive any and all right either may have to request a jury trial in any civil action relating primarily to the enforcement of this Agreement. The Parties agree that the rule that ambiguities in a contract are to be construed against the drafting party shall not apply to the interpretation of this Agreement. If there is any conflict between the language of this Agreement and any exhibit or attachment, the language of this Agreement shall govern. A.11.Survival of Terms and Conditions: The Parties understand and agree that all terms and conditions of the Agreement that require continued performance, compliance, or effect beyond the termination date of the Agreement shall survive such termination date and shall be enforceable in the event of a failure to perform or comply. A.12.Assignment and Release: All or part of the rights, duties, obligations, responsibilities, or benefits set forth in this Agreement shall not be assigned by Contractor without the express written consent of the Town Council for the Town of Avon, which shall not be unreasonably withheld. Any written assignment shall expressly refer to this Agreement, specify the particular rights, duties, obligations, responsibilities, or benefits so assigned, • and shall not be effective unless approved by resolution or motion of the Town Council for the Town of Avon. No assignment shall release the Contractor from performance of any duty, obligation, or responsibility unless such release is clearly expressed in such written document of assignment. A.U.Severability: Invalidation of any of the provisions of this Agreement or any paragraph sentence, clause, phrase, or word herein or the application thereof in any given circumstance shall not affect the validity of any other provision of this Agreement. • Addendum No. 1: Town of Avon VR Compliance and Town of Avon Page 3 of 3 TAYLORIANDERSON LLP 1331 Seventeenth Street, Suite 1050 Denver, Colorado 80202 303.551.6660 P 877.809.1253 F www,talawfirm.com Kevin S. Taylor ktaylor@talawfirm.com 303.551.6651 December 10, 2010 Via Certified Mail and E -Mail — joyceb(c coskitowns.com Ms. Joyce Burford Executive Director Colorado Association of Ski Towns P.O. Box 776189 Steamboat Springs, CO 80477 -6189 RE: HomeAway, Inc. Dear Ms. Burford: ATTACHMENT e OFFICE LOCATIONS • DENVER ORANGE COUNTY SCOTTSDALE SAN DIEGO COUNTY SACRAMENTO We are the attorneys for HomeAway, Inc., on behalf of its subsidiaries HomeAway.com, Inc. (herein referred to as "HomeAway.com ") and VRBO.com, Inc. (herein referred to as "VRBO" and, together with HomeAway.com and HomeAway, Inc., collectively referred to as "HomeAway "), which operate the websites www.homeaway.com and www.vrbo.com, respectively. As you know, the Colorado Association of Ski Towns (herein referred to as "CAST ") has organized efforts to "scrape" websites, including but not limited to VRBO.com, in an attempt to obtain VRBO's proprietary customer information. As discussed in this letter when we talk about "scraping" a website, we are referring to the unlawful use of technology to copy confidential information and customer lists from a protected computer server maintained by an independent business, resulting in a copy of that business' information being transferred to the "scraper" without the express consent of the business so "scraped." CAST has hired a technology company to write, test, and deploy a scraping program against HomeAway websites. This scraping effort violates federal and Colorado laws and the Terms and Conditions of VRBO.com, which govern all access or use of such website. The efforts to scrape VRBO.com and any other HomeAway website must stop immediately and the product of such scraping must be returned to its rightful owner, HomeAway, Inc. VRBO is simply an advertising venue. Neither VRBO, nor any other HomeAway site is an agent of any of the property owners or managers that advertise on its sites and has no role in • {00006673 ) • • TAYLORJANDERSON LLP December 10, 2010 Page 2 managing or control of the individual properties or the transactions between the property owner or manager and potential renters. VRBO maintains a Privacy Policy with each of its customers which prevents VRBO from disclosing any information concerning its customers to third parties. By using or accessing the site, all users agree to such Privacy Policy and the other Terms and Conditions that govern the site. HomeAway has consistently and repeatedly informed any third party seeking customer information that the restricted information sought, including VRBO's customers' names, addresses and phone numbers, is confidential proprietary information and will not be disclosed. By CAST's own admission, CAST, CAST's agents and its related and retained entities (including but not limited to Eye Street Solutions and collectively referred to herein as the "Third Parties ") have been unlawfully "scraping" VRBO's website in an effort to obtain proprietary trade secret information about VRBO's customers. Specifically, CAST, its agents, and its related and retained entities have employed software programs whose aim it is to infiltrate the VRBO website to gain access to VRBO's proprietary trade secret information. This attempt to hack into VRBO servers constitutes unauthorized use of the VRBO website and is unlawful under federal and state laws, constitutes blatant interference with contract, copyright infringement and is an unfair and deceptive trade practice. • In addition, such acts violate the Colorado Uniform Trade Secrets Act ( "CUTSA "). CUTSA prevents the improper misappropriation or disclosure of trade secrets by a person or entity who has acquired such information by improper means absent express or implied consent. C.R.S. § 7 -74 -102 (2010). CAST, its agents and its related and retained entities are attempting to or already have infiltrated the VRBO website to obtain VRBO's confidential proprietary trade secret information in order to disclose that information to third parties. Moreover, it is axiomatic that information about HomeAway'sNRBO's customer list is a trade secret as defined by the Colorado Uniform Trade Secrets Act. See Hertz v. Luzenuc Group, 576 F. 3d 1125 (10th Cir. 2009). We hereby demand that CAST immediately CEASE AND DESIST and cause all related Third Parties to CEASE AND DESIST, all efforts to obtain VRBO's confidential proprietary trade secret information, including but not limited to VRBO's customer names, addresses and phone numbers. If CAST has organized or plans to organize the scraping of any other site operated by HomeAway, Inc., we demand that CAST also immediately cease and desist such efforts. We also hereby demand that, no later than December 20, 2010, CAST: 1. Confirm in writing that it has ceased and caused all Third Parties to cease, all efforts to scrape VRBO and any other site operated by HomeAway, Inc.; (00006673 ) TAYLORIANDERSON LLP • December 10, 2010 Page 3 2. Confirm in writing that it shall not engage in such efforts, whether directly or indirectly, in the future; 3. Deliver to the undersigned all information obtained from VRBO.com and any other HomeAway, Inc. site as a result of scraping such sites; and 4. Confirm in writing that it has destroyed or caused the destruction of all other records and copies thereof of such scraped information. The unlawful scraping activity and the disclosure of such proprietary and confidential customer information will cause HomeAway, its customers and its potential customers irreparable harm and damages which may not be easily quantified but that could exceed millions of dollars. If CAST, CAST's agents and related and retained entities do not immediately cease and desist all efforts to unlawfully obtain this confidential proprietary trade secret information, HomeAway will respond with full legal force against CAST, its agents and all related and retained entities, and will pursue all relief available, including but not limited to injunctive relief, claims for actual and treble and punitive damages, as well as all other remedies available to it under the law. HomeAway reserves all rights to pursue any and all legal remedies available to it with respect to damages and harm it may have already suffered. Finally, more than 35 million travelers use HomeAway websites to find and book • vacation travel. The more than 155 thousand travelers who used HomeAway websites to travel to Colorado last year bought lift tickets, shopped in local stores, ate in local restaurants, attended area attractions, and in general were the source of significant revenue to the residents and the state of Colorado. Heavy handed attempts to threaten owners of vacation homes who use HomeAway websites to attract travelers to the state of Colorado may well drive these owners to choose not to rent to the public, all to the detriment of Colorado businesses and sales tax revenue. Breaching our obligations under the Privacy Policy and the misappropriation of the HomeAway customer lists will drive our customers to advertise on other venues, resulting in irreparable harm to HomeAway, Inc. Sharing of our customer list with any third party would be in violation of federal and state laws and our Privacy Policy and will result in irreparable harm to HomeAway. Further, by using a list, unlawfully taken from HomeAway by CAST or any other third party, CAST is also violating our Terms and Conditions and federal and state laws. It would be far more useful for CAST to ask HomeAway to assist it in educating the owners and professional managers of vacation homes in its jurisdiction so that they can understand their obligations and learn how to comply with Colorado state and local regulations and tax requirements. HomeAway would be open to such a discussion, but such a discussion cannot occur until CAST ceases and desists from using illegally obtained customer lists belonging to HomeAway and returns such lists to their rightful owner. {00006673 } • • • TAYLORIANDERSON LLP December 10, 2010 Page 4 Please do not hesitate to contact me in furtherance of a more productive discussion. KST /d f cc: Eye Street Solutions, LLC 1602 Village Market Blvd. SE, Ste. 260 Leesburg, VA 20175 {00006673 } Very truly yours, Kevin S. Taylor HomeAway's attorneys have corresponded with you previously about the serious violations of the Terms and Conditions and Privacy Policy of VRBO.com and all HomeAway websites (collectively, the "HomeAway Websites ") and of state and federal law committed by CAST and its agents on behalf of CAST's members. (See the attached letter to you from Kevin Taylor dated December 10, 2010). In addition, HomeAway's Co- Founder and Chief Strategy Officer, Carl Shepherd, has reached out to you to discuss ways in which HomeAway might work cooperatively with CAST and its members to help further CAST's legitimate aims without CAST's engaging in unlawful conduct. In your last message to Mr. Shepherd you told him: "I apologize, but I am going to have to put our call on hold for now. I need to get more direction • ATTACHMENT C ` FISH & RICHARDSON P.C. One Congress Plaza Suite 810 ress Avenue m Conngg • Austin, TX 78701 Frederick P. Fish 1855-1930 Telephone W.K. Richardson 512 472 -5070 1859 -1951 Facsimile 512 3zo-8935 September 28, 2011 Web Site www.fr.com Via Electronic Mail & Certified Mail /RRR Tommy Jacks 512 226 -8171 Ms. Joyce Burford Email Executive Director Jacks @fr.com Colorado Association of Ski Towns P.O. Box 776189 Steamboat Springs, CO 80477 -6189 oyeebncoskitowns.com joyeeb@coskitowns.com = AUSTIN BOSTON Re: HomeAway, Inc. DALLAS DELAWARE Dear Ms. Burford: HOUSTON We represent HomeAway, Inc., and its subsidiary HomeAway.com, Inc. • MUNICH ( "HomeAway.com "), which operates both www.homeaway.com and VRBO.com NEW YORK ( "VRBO "), collectively referred to in this letter. as "HomeAway." As I begin this SILICON VALLEY letter and to provide you some context, I want to make clear that HomeAway SOUTHERN CALIFORNIA supports fair regulation and the right of local governments to determine, implement, TWIN CITIES and manage the regulation of short-term rentals (also referred to as "vacation rentals ") WASHINGTON, DC in a manner their citizens support. As HomeAway has communicated to you previously, we are also willing to assist you in publicizing the existing regulations to our customers who rent their homes in CAST member counties. To date, you have not made any request of HomeAway in response to its overtures. HomeAway's attorneys have corresponded with you previously about the serious violations of the Terms and Conditions and Privacy Policy of VRBO.com and all HomeAway websites (collectively, the "HomeAway Websites ") and of state and federal law committed by CAST and its agents on behalf of CAST's members. (See the attached letter to you from Kevin Taylor dated December 10, 2010). In addition, HomeAway's Co- Founder and Chief Strategy Officer, Carl Shepherd, has reached out to you to discuss ways in which HomeAway might work cooperatively with CAST and its members to help further CAST's legitimate aims without CAST's engaging in unlawful conduct. In your last message to Mr. Shepherd you told him: "I apologize, but I am going to have to put our call on hold for now. I need to get more direction • FISH & RICHARDSON P.C. OMs. Joyce Burford September 28, 2011 Page 2 from my board regarding in what direction we want to head this project before we talk." (See your attached email to Mr. Shepherd dated January 25, 2011). It now has become evident to HomeAway that the "direction" your board determined to take was to continue to violate the HomeAway Websites Terms and Conditions and Privacy Policy and state and federal laws. A recent article (attached) quoted you as saying, "We always knew we were going to move forward ... We just had to finalize some stuff. We temporarily hit the pause button (so we could) work out some kinks." That article also made clear that CAST and its members continue to work with an outside vendor that uses automated "scraper" technology to remove information from the HomeAway Websites illegally and provide it to CAST's members and others. The article also makes clear that you are recommending that other Colorado taxing entities engage this same vendor to engage in this illegal activity. • HomeAway demands that CAST, its members, agents and contractors immediately cease and desist from further engaging in this illegal activity and account for and purge all content and data that was extracted, copied or stolen from VRBO.com and its users. HomeAway is committed to keeping the VRBO site and services a safe and neutral place for its users to interact and share information. As users of any HomeAway Website, CAST, its members, and their respective agents and contractors are bound by the Terms and Conditions, which provide: The license to use the site granted to users in these Terms does not include any right of collection, aggregation, copying, scraping, dicplication, display or derivative use of the Site nor any right of use of data mining, robots, spiders or similar data gathering and extraction tools without our prior written permission; provided, however, that a limited exception from the foregoing exclusion is provided to general purpose internet search engines and non- commercial public archives that use tools to gather information for the sole purpose of displaying hyperlinks to the Site, provided they each do so from a stable IP address or range of IP addresses using an easily identifiable agent and comply with our robots. txt file. • FISH & RICHARDSON P.C. Ms. Joyce Burford September 28, 2011 Page 3 CAST, its members, and their respective agents and contractors, were made aware of these Terms and Conditions previously and have intentionally violated this provision of the HomeAway Website Terms and Conditions, subjecting themselves to liability under both federal and state law. This illegal activity potentially subjects CAST, its members and their respective agents and contractors to civil liability under the Texas Theft Liability Act, Sec. 134.003, Texas Civil Practice & Remedies Code, the Federal Computer Fraud and Abuse Act, 28 U.S.C. Sec. 1030, as well as for copyright infringement under federal copyright law, and for breach of contract, misappropriation of trade secrets, civil conspiracy, conversion and trespass under state common law principles. • HomeAway assumes, at this point, that CAST, its members and its agents and contractors, are irreversibly committed to this illegal course of action, given that you have proceeded to act unlawfully after being fully warned that your conduct violates the HomeAway Websites Terms and Conditions and Privacy Policy and state and federal laws. However, in hopes that CAST, its members, and its agents and • contractors will reconsider their positions, let me reiterate the demands made previously: We hereby demand that CAST immediately CEASE AND DESIST and cause all related persons, organizations, or business or governmental entities to CEASE AND DESIST, all efforts to obtain VRBO's confidential proprietary trade secret information, including but not limited to VRBO's customer names, addresses and phone numbers. If CAST has organized or plans to organize the scraping of VRBO.com or any other site operated by HomeAway, we demand that CAST also immediately cease and desist such efforts and so instruct any vendor it has engaged or encouraged to do same. We also hereby demand that, no later than October 5, 2011, CAST: 1. Confirm in writing that it has ceased, and caused its members and their respective agents and contractors to cease, all efforts to scrape VRBO and any other site operated by HomeAway, Inc.; • FISH & RICHARDSON P.C. Ms. Joyce Burford September 28, 2011 Page 4 2. Confirm in writing that it, its members, and their respective agents and contractors, shall not engage in such efforts, whether directly or indirectly, in the future; 3. Deliver to the undersigned all information obtained from VRBO.com and any other HomeAway site as a result of scraping such sites; and 4. Confirm in writing that it, its members, and their respective agents and contractors, have destroyed or caused the destruction of all other records and copies thereof of such scraped information. The unlawful scraping activity and the disclosure of such proprietary and confidential customer information will cause HomeAway, its customers and its potential customers irreparable harm and damages which may not be easily quantified but that • could exceed millions of dollars. If CAST; CAST's agents and related and retained persons, organizations, or business or governmental entities do not immediately cease and desist all efforts to unlawfully obtain this confidential proprietary trade secret information, HomeAway will respond with full legal force against CAST, its members and their respective agents and contractors and all related and retained entities, and will pursue all relief available, including but not limited to injunctive relief, claims for actual, treble and punitive damages, as well as all other remedies available to it under the law. HomeAway reserves all rights to pursue any and all legal remedies available to it with respect to damages and harm it may have already suffered. Please note that we are sending a copy of this notice letter to each of the CAST members, and this letter is intended to put each of them on notice of the foregoing paragraphs in their entirety. Finally, if you or your legal representatives wish to communicate about these serious concerns, all such communications should be directed to me, not to HomeAway. FISH & RICHARDSON P.C. Ms. Joyce Burford September 28, 2011 Page 5 Sincerely, Tommy J s TZJ /dqs Enclosures cc: By Certified Mail / RRR Councilmember Steve Skadron Manager Steve Barwick City of Aspen 130 South Galena Street, 2nd Floor Aspen, CO 81611 Mayor Ron Wolfe Manager Larry Brooks Town of Avon P.O. Box 975 Avon, CO 81620 Council Member Jacque Whitsitt Manager Bill Kane Town of Basalt 101 Midland Avenue Basalt, CO 81621 Mayor Lindsay Backas Board Trustee Rob Waterman Town of Blue River 0110 Whispering Pines Drive Blue River Colorado 80424 • • • FISH & RICHARDSON P.C. Ms. Joyce Burford September 28, 2011 Page 6 Mayor John Warner Manager Tim Gagen Town of Breckenridge 150 Ski Hill Road Breckenridge, CO 80424 Mayor Leah Williams Manager Susan Parker Town of Crested Butte P.O. Box 39 Crested Butte, CO 81224 Mayor Michael Hancock Erin Trapp City of Denver 1437 Bannock St., Suite 350 • Denver, CO 80202 Council Member Tim Westerberg Manager Devin Granberry Town of Dillon 275 Lake Dillon Dr. Dillon, CO 80435 Mayor Leigh Meigs Manager Ron LeBlanc City of Durango 949 E. 2nd Ave. Durango, CO 81301 -5109 Mayor Bill Pinkham Manager Jacqueline Halburnt Town of Estes Park 170 MacGregor Avenue P.O. Box 1200 Estes Park, CO 80517 FISH & RICHARDSON P.C. Ms. Joyce Burford September 28, 2011 Page 7 Mayor Fran Cook Manager Jeff Durbin Town of Fraser P.O. Box 370 Fraser, CO 80442 Mayor Bill Pelham Manager Michael Penny Town of Frisco PO Box 4100 1 Main Street Frisco, CO 80443 Mayor Bruce Christensen Manager Jeff Hecksel City of Glenwood Springs 101 West 8th Street Glenwood Springs, CO 81601 Mayor Judy Burke Manager Shane Hale Town of Grand Lake 1026 Park Avenue Grand Lake, CO 80447 Mayor Mark Barron Manager Bob McLaurin Town of Jackson 150 E. Pearl P.O. Box 1687 Jackson, WY 83001 Mayor Gordon "Hawkeye" Flaherty Manager Jim White Town of Minturn P.O. Box 309 Minturn, CO 81645 • • J 0 FISH & RICHARDSON P.C. Ms. Joyce Burford September 28, 2011 Page 8 Mayor William Buck Manager Joe Fitzpatrick Town of Mt. Crested Butte P.O. Box 5800 Mt. Crested Butte, CO 81225 Mayor Bob Delves Manager Kim Montgomery Town of Mountain Village 455 Mountain Village Blvd., Suite A Mountain Village, CO 81435 City Manager Tom Bakaly Asst, City Manager Michael Kovacs Park City Municipal Corporation 445 Marsac P.O. Box 1480 • Park City, UT 84060 Mayor Dave Koop Manager Kevin Batchelder Town of Silverthorne 601 Center Circle P.O. Box 1309 Silverthorne, CO 80498 Administrator Jason Wells Town of Silverton 1360 Greene St. Silverton, CO 81433 Mayor Bill Boineau Manager Russell Forrest Town of Snowmass Village P.O. Box 5010 Snowrnass Village, CO 81615 County Manager Gary Martinez Summit County P.O. Box 68 is Breckenridge, CO 80424 FISH & RICHARDSON P.C. Ms. Joyce Burford September 28, 2011 Page 9 Council Member Walter Magill Manager Jon Roberts City of Steamboat Springs PO Box 775088 Steamboat Springs, CO 80477 Mayor Stuart Fraser Manager Greg Clifton Town of Telluride P.O. Box 397 Telluride, CO 81435 Mayor Dick Cleveland Manager Stan Zemler Town of Vail 75 S. Frontage Road Vail, CO 81657 Mayor Jim Myers Manager Drew Nelson Town of Winter Park P.O. Box 3327 50 Vasquez Road Winter Park, CO 80482 Colorado Ski Country USA President & CEO Melanie Mills 1444 Wazee Street, Suite 320 Denver, CO 80202 • • • Vacation rental website claims Colorado towns' tax hunt is "illegal" - The Denver Post i• • denverpost.com HOME I MEDIA KIT I SIGN UP FOR BREAKING NEWS EMAIL ALERTS I PHOTO GALLERIES Politics Sports Business Entertainment Lifestyles Opinion Travel Your Hub 1 1t (1 * 1 I Iacy8 Home > Business News BUSINESS SPRINT ©EMAIL Vacation rental website claims Colorado ­� 19 COMMENTS towns' tax hunt is "illegal" By Jason Blevins The Denver Post ,'U,r1D In/ :h /.'Ul1 Ill (in ou ilti MDT UPDATED: 09/30/2011 09:21:35 AM MDT' The co- founder of HomeAway.com, the nation's largest online vacation - rental site, says the effort by several Colorado towns to scour the company's websites for homeowners who might not be paying local and state lodging taxes is "patently illegal" and constitutes intellectual - property theft. "We simply cannot allow the violation of the privacy of our customers," EL %?�i d Carl Shepherd, who this week sent cease - and - desist letters to 1&* veral towns and the Colorado Association of Ski Towns. "'Scra in 'Scraping' — A snowboarder enjoys 6" of new and that's what this is — is illegal. Most of the time we are scraped, it's snow, Monday )an. 03, 2011, at by nefarious guys in Bulgaria or Nigeria who want to do us harm or steal Breckenridge. As the busy holiday from us. This is an interesting approach by an entity working for season comes to a close for area ski governments, saying it's OK to break the law if you are finding people resorts, the heavy snow amounts that who might not be paying their taxes." the Colorado mountains saw during that time was a welcome sight for "Scraping" called a violation visitors (R) Sangoscl, The Denver Post) Shepherd's letters demand that the Colorado Association of Ski Towns direct its members Winter Park, Grand Lake, Breckenridge, Dillon, Silverthorne and Frisco to cancel contracts with Virginia -based VR Compliance, which is searching several online vacation- rental sites, including HomeAway's, for homeowners who are not paying taxes. Shepherd argues that the "scraping" violates a "fundamental privacy right" between his company and the Colorado users who advertise through its sites, which include VRBO.com and vacationrentals.com. When the association first contacted HomeAway.com with its plans to search for rogue renters, Shepherd's team said the plan was illegal, Shepherd said. The company offered to help inform its users about local and state tax codes. "They said they would help educate people, which we think is truly bunk," said Tim Gagen, town manager for Breckenridge, where VRBO.com first sprouted in 1995. "We don't want education. We want information" The association, which is an organization of 25 mountain towns that merely directed its members to VR Compliance, and the six towns that are testing the rental search program will not stop their searching. "VR Compliance assured us they are not in violation of those federal or state scraping laws," said Gagen, ho expects the issue is headed to court. sertion "interesting" Katina Banks, an intellectual - property lawyer with Dorsey & Whitney LLP in Denver who is not involved in http: / /www.denverpost.com /business /ci_19008674[10/6/2011 9:05:52 AM] ATTACHMENT D Newsletter: Sign In I Register Commenting: Sign In I Register Thursday, October 06, 2011 Search _. ! Site POPULAR TALKERS EMAILED VOTED YEAR AGO • The Day in Pictures updated daily • Photos: Reader photos of Colorado's autumn colors • Photos: Mug shots from around Colorado • At Wild Catch, the chef behind Masterpiece Deli takes the plunge with an • Facebook and the new face of grieving • Chessmen Park mailboxes in Denver deliver fairy-tale 'romance' • The next, best step for runner? 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Banks said it does not appear to be an infringement because the mountain towns and association are not using the information to solicit for property rentals or anything similar. "They are not reproducing it or distributing it, which would lead to a copyright claim. They are just using it and barring some inappropriate access or claim of theft. I don't believe there is a trade - secret issue here," Banks said. David Atherton, the owner of VR Compliance, said his program does not expose private data. As an owner of several small technology companies, Atherton said he is "philosophically opposed" to violating privacy agreements between companies and clients. "I can say without reservation that we don't scrape. We don't hack. We don't steal. We don't misappropriate or otherwise misuse any private data from his or any other website," said Atherton, who has not been contacted by HomeAway.com or seen the cease - and - desist letter. "We help municipalities level the taxation playing field," Atherton said. Staff writer Howard Pankratz contributed to this report. Jason Blevins: 303 - 954 -1374 or iblevinsCQDdenverpost. com B PRINT 0 EMAIL Q? RETURN TO TOP » GET HOME WE RECOMMEND Fired, Americano style: Starbucks boots brazen YouTube barista (The Denver Post - Business) DELIVERY » TERMS OF USE FROM AROUND THE WEB (SPONSORED) Bill Gates Just Bought $571 Million of This Stock (Street Authority) Cost of Colorado Powerball tickets to double (The Denver Post - Business) Colorado cougars routinely traverse urban areas, study finds (The Denver Post - News) Last bank shuts doors on Colorado pot dispensaries (The Denver Post - News) Tim Tebow billboard urges Denver Broncos coach to change quarterback (The Denver Post - Sports) Economist Who Predicted the 2008 Crash Gives Chilling 2012 Forecast. See the Evidence. 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By using our site you agree to our terms of use. b View all this article's 19 comments http: / /www.denverpost.com /business /ci_19008674[10/6/2011 9:05:52 AM] FRONT PAGE: BUSINESS NEWS • Apple chairman Steve Jobs, high -tech visionary, dies of pancreatic cancer at 56 • Stock -show move would cost Denver $31 million annually in visitor spending, study says • Tobaoco- rolling business fears it may be snuffed • Colorado law • Unions and students join Wall Street protesters MOST POPULAR: BUSINESS: PAST 3 DAYS • User reaction a mixed bag as Facebook revamps news feed • Colorado incomes fall sharply from 1999 to 2010, analysis says • Free juice for electric cars may not last long, experts say Wall Street sharply lower on fears about economy • More season -pass skiers buy insurance to get refunds in case of injury, • Fed is expected to take new action to lift economy • Parker. Craft -brew tours no deal for Internet coupon buyers Hard times make for soft targets in money scams • Lewis: Netflix moving a little too'Qwikster' Stocks open mixed ahead of Fed statement MOST - COMMENTED: BUSINESS: PAST 144 HOURS • Two weeks into anti -greed protest on Wall Street, movement is at a crossroads q 135 • Denver think tank endorses city initiative for paid sick leave; restaurant owners protest against it q 93 • Many baby boomers face retirement of tight budge f� fading dreams q 89 • Apple's iPhone AS gets rotten reviews at unveiling q 55 • Colorado in the running for 600 -job solar plant q 51 MOST - COMMENTED, PAST HOUR • Broncos CB Orton still No. 1 but starts to feel the heat q 29 • Rosen: A bridge too far (left) q 9 • Senate Democrats float millionaire surtax to pay for jobs bill q 9 • Colorado Symphony cancels 10 of 20 concerts scheduled this fall q 7 • Apple chairman Steve Jobs, high -tech visionary, dies of pancreatic cancer at 56 q 7 RECENTLY RECOMMENDED 1. Look for plenty of points when John F. Kennedy, D'Evelyn football teams collide (about 1 minute ago) 2. Editorial: Refreshing deal on metro water (about 58 minutes ago) 3. Rosen: A bridge too far (left) (about 1 hour ago) 4. Horizon High School football stages a comeback (about 1 hour ago) 5. Obama holding White House news conference Thursday (about 1 hour ago) r .. ............ . Printable ATTACHMENT t Page 1 of 2 • Summit County hires company to track under - the -table rentals Compliance LLC contracted to help county find renters ducking taxes AUGUST, 26 2011 BY CADDIE NATH SUMMIT DAILY NEWS Summit County has signed on with a private company to begin seeking short -term rental properties not property registered or paying lodging taxes within the county. Compliance LLC, a private third -party vendor recommended by the Colorado Association of Ski Towns (CAST) was contracted by the county in early August to help identify properties booking rooms under the radar so the county can follow up to ensure they are properly registered and paying taxes. "Basically, what the communities are paying for (is identification) of short- term'rental owners in their jurisdiction," CAST executive director Joyce Burford said. "The communities are paying for new leads of unidentified properties ... Then it's up to the community with their enforcement laws to contact that owner." In the past, the county tried to bring private short -term rental owners into compliance and collect the taxes independently, but that effort was largely unsuccessful. "The assessor's office did hire a temp person to do that," county finance director Marty Ferris said. "The issue is • you have to constantly be looking at (rental) websites. That's why we went with this outside company, because they will be doing regular checks on those websites." • Because the contract with Compliance is so new, it is stilt unclear how many homeowners are renting their properties under the table, or how much the county and towns are losing to the practice. Reports from the contractor over the next few months are expected to paint a better picture of the scope of the problem, Ferris said. The county's contract includes intergovernmental agreements with the towns, which allows Compliance to search for violators in the other municipalities as well. The contract is the most recent attempt to correct a problem identified locally in a 2009 study by the Town of Breckenridge. The study results indicated a large number of second -home owners were using online sites such as vrbo.com or craigslist.org to rent out their properties, but had not registered with local governments, applied for business licenses or paid required lodging taxes on the overnight rentals. Breckenridge was able to collect taxes from every property owner they contacted following the study, bringing in a total of about $10,000. Work between CAST and Compliance was put on hold earlier this year, when Home Away, the parent company of vrbo. com, threatened to take CAST to court for using software it claimed "scraped" personal information from its website, violating its terms of use. CAST backed off the project temporarily in February but resumed working with Compliance a couple months later. "We always knew we were going to move forward," Burford said. "We just had to finalize some stuff. We temporarily hit the pause button (so we could) work out some kinks." http: / /www.stunmitdaily,com /apps /pbes. dll/article? AID= /20110827/NEWS/110829847/100... 9/5/2011 Pfintable Page 2 of 2 N... Individuals who rent out their house or condominium for less than 30 days are required to pay a sales tax and, in • many local municipalities, a lodging tax on the rental, according to a statement from the Colorado Department of Revenue. Reid'Armstrong contributed to the reporting of this story. http; / /www,summitdaity.com/ apps /pbcs. dU/ article? AID =/ 20110827 / NEWS 111 0829a47/1001 Ettemplate= printart • is htlp : / /www,summitdaily.com/apps/ pbcs. dll /article? AID= /20110827/NEWS/I 10829847/100... 9/5/2011 ATTACHMENT *F Scott Wright From: Larry Brooks ent: Tuesday, October 04, 20115:48 AM To: Scott Wright Subject: FW: HomeAway, Inc. Attachments: 2011 -09 -28 Ltr to Burford fr Jacks with attach ments- 3.pdf, ATT00001.htm Scott, I am recommending that you cover these points in your council packet submittal because Rich is definitely tuned in to this dispute From: Joyce Burford [mai Ito: joycebC@coskitowns.comI Sent: Monday, October 03, 20113:57 PM Subject: HomeAway, Inc. Dear CAST members, If you haven't already, you should be receiving a copy of the attached Cease and Desist letter from HomeAway, Inc. Whether or not you're under contract with VRCompliance, LLC, I wanted to give you some information and suggestions that you might find helpful: 1. Let your legal counsel know. 2. If you're under contract with VRCompliance, LLC, please remember that you are protected from legal action under the indemnification agreement. • 3. For those of you considering going under contract with VRCompliance, LLC, there is an indemnification agreement provided. 4. We urge you to follow your legal counsel's advice, however CAST's legal counsel has advised us that CAST or our member communities are under no legal obligation to respond, because this is just a demand letter. Each community has the choice of whether to respond or not. 5. CAST and VRCompliance, LLC are communicating and working together to draft a response to HomeAway outlining that HomeAway's assertions and allegations are completely false. This response will be shared with all member communities. 6. The reason that I (CAST) did not respond to Mr. Shepherd's "overtures" was that we were advised by counsel not to. And it was CAST that initially reached out to HomeAway, not the other way around. 7. If you should be contacted by the media regarding this (local or otherwise), please do not respond and send all inquiries to me. If your legal counsel should have any questions, please have them contact: Nancy Cornish Rodgers, Esq. or Ken Fellman, Esq. Kissinger & Fellman, P.C. Ptarmigan Place, Suite 900 3773 Cherry Creek North Drive Denver, Colorado 80209 • 303 - 320 -6100 nancyCa.kandf.com kfellman(a-kandf.com Thanks, Joyce Burford Executive Director Colorado Association of Ski Towns P.O. Box 2973 Winter Park, CO 80482 970.485.2737 0oyceb(a�coskitowns. com I 1 �i • • • 40 THE VAIL DAILY II 970.949.0555. II vaildaily.com Town of Vail could sue online travel corn ani . p es Town to consider becoming part of a class- action lawsuit By Lauren Glendenning LGLENDENNING @VAILDAILY.COM VAIL — The town of Vail could become part of a class - action lawsuit against mul- tiple online travel companies that are accused of not paying full sales and lodg- ing tax amounts due to municipalities.. The defendants include popular website companies such as Expedia, Hotwire, Orb - itz, Hotels.com, Priceline and Travelocity, among others. The town of Breckenridge filed the class -action lawsuit in July and is named as the primary plaintiff in the case. The lawsuit claims municipalities could be owed back taxes covering the span of 10 or more years. Vail could become one of 80 Colorado towns and cities to join in on the lawsuit, although the Vail Town Council tabled a resolution' Tuesday that would have allowed the town to have attorney - client confidentiality privileges with Rothberger, Johnson & Lyons LLP, the Denver law firm representing Breckenridge in the suit. The Vail Town Council had more ques- tions about the costs associated with sign - ing on for such a suit, as well as what the town's potential recovery from the suit could total. Town Attorney Matt Mire advised the council to table the resolution, which would make Vail a part of the lawsuit, until'representatives from the Denver law. firm could be present to answer specific questions. Community Editor Lauren Glendenning can be reached at 970 - 748 -2983 or Ilendenning@vaildaily.com. r] • DISTRICT COURT, SUM%1IT COUNTY, COLORADO Court Address: Summit County Justice Center 501 North Park Ave., P.O. Box 269 Breckenridge, CO 80424 Plaintiff: TOWN OF BRECKENRIDGE, COLORADO ON BEHALF OF ITSELF AND OTHER SIMILARLY SITUATED COLORADO HOME RULE MUNICIPALITIES, VS. Defendants: COLORADO TRAVEL COMPANY, LLC; EGENCIA, LLC; EXPEDIA, INC.; HOTELS.COM, L.P.; HOTELS.COM GP, LLC; HOTWIRE, INC.; INTERNETWORK PUBLISHING CORP. (d/b /a/ LODGING.COM); LOWEST FARE.COM, INC.; ONETRAVEL, INC. (d/b /a/ onetravel.com); ORBITZ, INC.; ORBITZ, LLC; PRICELINE.COM, INCORPORATED; SITE 59.COM, LLC; TRAVELNOW.COM, INC.; TRAVELOCITY.COM, LP; TRAVELPORT INC. f/k/a CENDANT TRAVEL DISTRIBUTION SERVICES GROUP INC.; TRAVELSCAPE, LLC; TRAVELWEB, LLC; TRIP NETWORK, INC. (d/b /a Cheaptickets.com) and DOES 1 THROUGH 1000, INCLUSIVE, Attorneys for Plaintiff.- Name: Michael D. Plachy, #22014 (0095115011) Thomas M. Rogers III, #28809 Joy Allen Woller, #36011 R"wXy- y{ ♦ COURT USE ONLY A Case Number: Type No. Div.. Ctrm.. • Firm: Rothgerber Johnson & Lyons LLP Address: One Tabor Center, Suite 3000 1200 Seventeenth Street Denver, Colorado 80202 Tel: 303.623.9000 Fax: 303.623.9222 CLASS ACTION COMPLAINT For its Class Action Complaint ( "Complaint ") against Defendants, Plaintiff, the Town of Breckenridge, Colorado, by and through its undersigned counsel and on behalf of itself and other similarly situated Colorado home rule municipalities, states: PARTIES 1. Plaintiff TOWN OF BRECKENRIDGE, COLORADO (hereafter "Breckenridge ") is located in Summit County, Colorado. Plaintiff is a home rule municipality incorporated in 1880. 2. Defendant COLORADO TRAVEL COMPANY, LLC (hereafter "Colorado • Travel Company ") is a Colorado limited liability corporation with its principal place of business in Denver, Colorado. 3. Defendant EGENCIA, LLC (hereafter "Egencia ") is a Nevada limited liability corporation with its principal place of business in Bellevue, Washington. 4. Defendant EXPEDIA, INC. (hereafter "Expedia ") is a Washington corporation with its principal place of business in Bellevue, Washington. 5. Defendant HOTELS.COM, L.P. (hereafter "Hotels.com, L.P. ") is a Texas limited partnership with its principal place of business in Dallas, Texas. 6. Defendant HOTELS.COM GP, LLC (hereafter "Hotels.com, GP ") is a Texas limited liability corporation with its principal place of business in Dallas, Texas. 7. Defendant HOTWIRE, INC. (hereafter "Hotwire ") is a Delaware corporation with its principal place of business in San Francisco, California. 8. Defendant IN'TERNETWORK PUBLISHING CORP. (d/b /a/ LODGING.COM) (hereafter "Lodging.com ") is a Florida corporation with its principal place of business in Boca Raton, Florida. 9. Defendant LOWEST FARE.COM, INC. (hereafter "Lowestfare.com ") is a • Delaware corporation with its principal place of business in Norwalk, Connecticut. 2 of 18 J009511501 1 } • 10. Defendant ONETRAVEL, INC. (hereafter "OneTravel ") is a Texas corporation with its principal place of business in Las Vegas, Nevada. 11. Defendant ORBITZ, INC. (hereafter "Orbitz, Inc ") is a Delaware corporation with its principal place of business in Chicago, Illinois. 12. Defendant ORBITZ, LLC (hereafter "Orbitz, LLC ") is a Delaware limited liability corporation with its principal place of business in Chicago, Illinois. 13. Defendant PRICELINE.COM INCORPORATED (hereafter "Priceline.com ") is a Delaware corporation with its principal place of business in Norwalk, Connecticut. 14. Defendant STTE59.COM, LLC (hereafter "Site59.com ") is a Delaware limited liability corporation with its principal place of business in New York, New York. 15. Defendant TRAVELNOW.COM, INC. (hereafter "Travelnow.com ") is a Delaware corporation with its principal place of business in Springfield, Missouri. • 16. Defendant TRAVELOCITY.COM, LP (hereafter "Travelocity.com, LP ") is a Delaware partnership with its principal place of business in Southlake, Texas. 17. Defendant TRAVELPORT INC. f/k/a CENDANT TRAVEL DISTRIBUTION SERVICES GROUP INC. (hereafter "Travelport") is a Delaware corporation with its principal place of business in Parsippany, New Jersey. 18. Defendant TRAVELSCAPE, LLC (hereafter "Travelscape ") is a Nevada limited liability company with its principal place of business in Las Vegas, Nevada. 19. Defendant TRAVELWEB, LLC (hereafter "Travelweb ") is a Delaware limited liability corporation with its principal place of business in Dallas, Texas. 20. Defendant TRIP NETWORK, INC. (d/b /a Cheaptickets.com) (hereafter " Cheaptickets.com") is a Delaware corporation with its principal place of business in Parsippany, New Jersey. 21. The true names and capacities, whether individual, corporate, associate or otherwise, of each of the Defendants designated herein as a DOE are unknown to Plaintiff at this time and therefore said Defendants are sued by such fictitious names. Plaintiff will ask leave of the Court to amend this Complaint to show their true names and capacities when the same have been ascertained. Upon information and belief, each of the Defendants designated herein as a DOE is legally responsible in some manner and liable for the events and happenings herein • alleged and in such manner, proximately caused damages to Plaintiff as hereinafter further alleged. 3of18 100951150/ 1 22. Upon information and belief, some of the Defendants, including some or all DOE defendants, at all times herein mentioned, were acting as the agent, servant and employee of some or all of the other Defendants and within the scope of said agency and employment (collectively the "Agent Defendants "). Upon information and belief, at the time and place of the matters described, each of the Agent Defendants, their agents, servants and/or employees became liable to Plaintiff for one or more of the reasons described herein. VENUE AND NATURE OF CLAIMS 23. Venue is proper in this Court pursuant to Colo. R. Civ. P. 98 because, inter alia, the acts underlying this action arose in this jurisdiction and include claims for recovery of a penalty imposed by statute. 24. This action is brought to remedy violations of local ordinances in connection with Defendants' failure to remit taxes to the named Plaintiff and other similarly situated municipalities located in the State of Colorado. Defendants failed to remit taxes due and owing under similar hotel or other lodging occupancy tax ordinances and/or similarly intentioned excise and/or sales taxes to the Plaintiff and the Class. FACTUAL ALLEGATIONS 25. Article XX of the Colorado Constitution delineates home rule for cities and towns. Article XX, Section 6 grants home rule municipalities all powers necessary to administer local and municipal powers. Colorado law recognizes the exclusive right of a home rule municipality to govern themselves in matters of local and municipal concern. The constitutional grant of power to home rule cities contained in Article XX, Sec. 6 includes a right to levy and collect a tax to raise revenue with which to conduct the affairs and business of a city. 26. Breckenridge imposes a 3.4% `Breckenridge Public Accommodation Tax" on the price paid for the leasing or rental of any hotel room, motel room, or other accommodation in the town. (See Breckenridge Town Code, Title 3, Chapter 4, Section 3 -4 -3.) 27. It is unlawful "for any lessee or renter" of a hotel room, motel room, or other accommodation in the Town of Breckenridge to fail to pay or collect the tax. (See Breckenridge Town Code, Title 3, Chapter 4, Section 3 -4 -4.) r � L J 11 28. Class Members similarly levy and collect taxes on lodging or overnight accommodations. This tax may be denominated as a hotel occupancy, lodgers tax, lodging tax, accommodation tax, and/or excise tax imposed upon any sale of lodging or overnight accommodations (collectively defined as "Excise Tax "). Regardless of how the tax is titled, it is correctly calculated as a percentage of the retail rate that each consumer occupant pays for lodging ( "Retail Rate "), including service costs (the "Excise Tax Amount "). 29. Defendants are online travel companies and their affiliates or related companies • ( "OTC "). Specifically, they are online sellers and/or online resellers of hotel rooms or other 4 of 18 [00951150/ 1) • accommodations ( "Lodging ") to the general public (the "Consumers Occupants" or Consumers "). 30. OTCs, like Defendants, transact business under two models: the "agency model" and the "merchant model." 31. Under the "agency model" the OTCs act as traditional travel agents, facilitating reservations on behalf of a hotel and passing the reservation on to the hotel. The OTC will receive a commission as an agent under this model. 32. Under the "agency model," the transaction is between the hotel and the Consumer. Excise Taxes are calculated and collected by the hotel on the retail rate charged to the Consumer. The Consumers are the taxpayers, and the hotels are the tax collectors. The agency model is not at issue in this Complaint. 33. In 2000 or 2001, the OTCs began a pervasive use of the "merchant model." It is the "merchant model" that is the subject of this Complaint. 34. The "merchant model" adopted by Defendants is a uniform, nationwide model • that operates the same for all OTCs in all jurisdictions, including Colorado. 35. Under this "merchant model" the Defendant/ OTCs are the merchants of record in their transactions with the Consumers. 36. Under the "merchant model," the Defendants negotiate with hotels ( "Hotels ") for wholesale or "net" rates on Lodging. The price paid by Defendants to Hotels is referred to in this Complaint as the wholesale rate ( "Wholesale Rate. ") 37. Defendants then profit by contracting with Consumers for Lodging at the Retail Rate which is higher than the Wholesale Rate paid by Defendants to Hotels. 38. Under the "merchant model," Defendants determine the Retail Rate that the Consumer pays. The Defendants have broad discretion in establishing and charging the Retail Rate. The Defendants have control over the price they offer to the Consumer and, therefore, control the profit they make from the markup. 39. The "merchant model" is a prepaid model in which Defendants collect all monies up front from the Consumer at the time the on -line reservation is made and the Consumer's credit card is charged. 40. Under the "merchant model," the taxable transaction is between the Consumer and the Defendants for the purchase of Lodging. There is no taxable transaction between the • Hotel and the Consumer for the purchase of Lodging. 5of18 10095 1150 /1) • 41. Under the "merchant model," the only contract or agreement at the time the taxes at issue are being assessed and collected is between the Defendants and the Consumer. 42. The Defendants sell rooms to Consumers and collect payments, including taxes from the Consumer at the time of booking. Under the "merchant model," the Defendants have been or are currently controlling Hotels. 43. Defendants are charging and collecting amounts as Excise Taxes and fees from Consumers in Colorado, but are not remitting the Excise Tax Amounts to the appropriate Class Members. 44. Instead, Plaintiff Class Members only receive tax amounts based upon the lower, Wholesale Rate (the "Wholesale Tax Amount "). Each Defendant then retains for its own use and benefit the difference between the correct Excise Tax Amount and the incorrect Wholesale Tax Amount. 45. For example, Expedia negotiates with a Hotel for rooms at the lower Wholesale Rate and pays the Hotel a flat rate for each room sold, for instance $60.00 for a room in Breckenridge, Colorado. Under the "merchant model" Expedia then controls the price offered to the Consumer. Expedia then sells the same room to the Consumer for a marked up price, for • example $100. Expedia charges taxes and fees that would approximately cover the taxes owed, which should be based upon the Retail Rate of $100. The amount of tax due in this example is 3.4% of $100 or $3.40. (See Breckenridge Town Code, Title 3, Chapter 4, Section 3 -4 -3). 46. However, the amount of Excise Tax remitted to Plaintiff and other Class Members has been based on the lower Wholesale Rate. In this example, Plaintiff would only receive $2.04 (3.4% of $60.00), an underpayment of the tax liability by $1.36. Thus, in this single example transaction, Plaintiffs collected tax would be 40% less than the collected and the proper Excise Tax Amount of $3.40. 47. In this manner, Defendants failed to remit the Excise Taxes due and owing to the Plaintiff and all putative Class Members. 48. Defendants have also failed to properly file required tax reports. Every person required to collect Excise Taxes must report such taxes collected on forms prescribed by the Town and remit said taxes to the Town. (See Breckenridge Town Code, Title 3, Chapter 4, 3 -4 -6.) 49. Defendants are collecting taxes from Consumers but, upon information and belief, have not obtained a Town License in any of the Class Member municipalities and have not reported such taxes to Plaintiff or any Class Members. 50. While a limitation period normally applies to a suit or action to collect such taxes, • proceedings for collection of taxes may be commenced at any time in a case, such as this one, 6 of 18 [00951150/ 11 • where a taxpayer fails to file a required return. (See Breckenridge Town Code, Title 3, Chapter 4,3-4-10.) 51. In addition to Excise Taxes, or in the alternative, Defendants are required to remit sales tax ( "Sales Tax ") on the Lodging they sell to the public. Plaintiff and many putative Class Members are entitled to a percentage of the Sales Tax owed based upon their local ordinance. 52. Defendants are charging and collecting Sales Taxes from Consumers in the same manner as they charge and collect Excise Taxes. 53. For example, if a Consumer agrees to buy a room in Breckenridge, Colorado from Expedia for $100.00, Expedia.com would add un- itemized taxes and fees that approximately would cover the taxes due on the Retail Rate ($100.00). Breckenridge imposes a two and one - half percent (2.5 %) sales tax upon gross receipts derived from sales of personal property and services. (See Breckenridge Town Code, Title 3, Chapter 1, Section 3 -1 -5). Expedia.com, however, obtains that room at the lower Wholesale Rate, $60.00 for instance. The proper amount of Sales Tax owed by Defendants in this example is $2.50. However, the amount of Sales Tax actually paid to Breckenridge has been based on the lower Wholesale Rate. In this example, only $1.50 (2.5% of $60.00), instead of the $2.50 (2.5% of $100.00) of the taxes and • fees actually owed is paid. Defendants then retain the difference of $1.00 (in this example). As in the previous example, Defendants' unlawful practice in this example would result in a Sales Tax deficiency of 40 percent. 54. In this manner, Defendants have failed to remit Sales Tax due and owing to the Plaintiff and the putative Class Members. 55. As stated, Defendants' business practices include charging Consumers un- itemized taxes and fees on each sale of Lodging. The Consumer is led to believe Defendants are remitting the correct amount of Sales Tax and Excise Tax to the Plaintiff. Defendants, however, are calculating the tax liability of the general public (and Defendants) based upon the Wholesale Rate Defendants paid the Hotel for the room, not upon the Retail Rate that the Consumer paid Defendants. As a result, the Sales and Excise Tax liabilities paid by the general public and owed to Plaintiff are underpaid/unpaid by the Defendants who unlawfully retain the difference. These practices deprive Plaintiff and the Class the full amounts due and owing to them from each sale of Lodging. 56. Also, as stated, in addition to failing to properly pay collected taxes, Defendants do not disclose to the general public the amounts being paid for each specific tax and the amounts, if any, being paid separately as "service fees." Defendants bundle the taxes and "service fees" as a way to keep the Wholesale Rate of the Lodging opaque. 57. Defendants will not disclose the amount of Sales Tax and Excise Tax being • assessed even if the Consumer asks them. 7 of 18 100951150/1) r � 58. Defendants require that the Hotels not reveal to the Consumer what Defendants paid for the Lodging. Likewise, the Hotels do not know what the Consumer paid Defendants for the Lodging. . 59. Only the Defendants collect taxes from the Consumer in the "merchant model." The Consumer is the taxpayer, and the Defendants are the tax collectors. 60. Under the "merchant model," the Hotels never collect the required Sales Tax and Excise Tax from the Consumer. 61. Under the "merchant model" and contained in the language of the contracts between the Defendants and the Hotels, it is the Defendants' responsibility to calculate the taxes and collect all monies, including tax monies, from the Consumer at the time of booking. 62. The only way for the Hotel to pay the correct Excise and/or Sales Tax to the Plaintiffs is if Defendants remit the additional tax owed (and which was actually paid by the Consumer to Defendants) to the Class Members. 63. The Defendants' failure to itemize taxes violates basic principles of tax transparency and further supports Plaintiffs claims of the Defendants' tax liability, and • specifically violates express code provisions of many of the Plaintiff Class Members. 64. Due to the contractual or factual relationship between the Defendants and the Hotels, the Defendants and the Hotels act on behalf of each other to provide /sell customers Lodging, and are thus agents of one other. As such, they operate as joint enterprise members and have joiutenterprise membership liability. 65. Defendants have a physical presence in the State of Colorado, including within the Class Member municipalities. Such presence includes, but is not limited to, providing and/or selling rooms in Hotels, serving as agents for Hotels for purposes of selling or providing rooms in those Hotels and, upon information and belief, by having employees or agents travel to Class Member municipalities within Colorado to negotiate and enter into contracts with Hotels to review and rate those Hotels. Many Defendants Are Affiliated Through A Common Corporate Parent. 66. Defendants Expedia, Hotels.com, L.P., Hotels.com GP, Hotwire, Inc., Travelscape and TravelNow.com are affiliated business entities, related through a common corporate parent Expedia, Inc., a Delaware corporation. Expedia's parent company is IAC/Interactive Corp. 67. Defendants Travelport; Orbitz, Inc.; Orbitz, LLC; Cheaptickets.com; and Lodging.com are affiliated business entities, related through the common corporate parent, Avis • Budget Group. 8of18 {00951150/1} 68. Defendants Site59.com and Travelocity.com LP are affiliated business entities, related though an common ultimate parent, Sabre Holdings Corporation, a Delaware corporation. 69. Defendants Priceline.com; Lowestfare.com, and Travelweb are all affiliated business entities, related through the common corporate parent Defendant Priceline.com, Incorporated, a Delaware corporation. 70. Defendant Lowestfare.com is a wholly owned subsidiary of Defendant Priceline.com. In 2002, Priceline.com, Inc. purchased the Internet URL and trademarks of Lowestfare.com and formed a subsidiary corporation, Defendant Lowestfare.com. Defendant Travelweb is a wholly owned subsidiary of Lowestfare.com. 71. Defendants, in public communications, and through the media, have taken the position that they are not liable for hotel occupancy taxes on the retail amount of their sales of hotel room occupancy. There is, therefore, an actual and live controversy between the parties. Defendants Have Entered into Agreements with Each Other to Market and Sell Hotel Room Inventory. • 72. All Defendants, at all times mentioned herein, were acting under common plans, schemes or methodologies, and from time to time entered into agreements and ventures for the common marketing, distribution and sale or resale of Lodging throughout the state of Colorado. 73. Upon information and belief, Defendants have shared products and customers and have entered into agreements and co- ventures for the sale or resale of hotel room inventory by cross - listing available hotel rooms on their respective Internet portals. Examples are listed in paragraphs 74 through 86 below. 74. Upon information and belief, sometime between 1990 and present, Orbitz Inc. and/or Orbitz, LLC entered into an agreement with Travelweb whereby Orbitz, hic. and/or Orbitz, LLC received prepaid hotel room inventory from Travelweb and other participating entities for display on Orbitz's website. Under this arrangement, Travelweb set the occupant price for the inventory and paid Orbitz, Inc. and/or Orbitz, LLC a commission for each hotel room rented online. 75. Upon information and belief, sometime between 1990 and the present, Hotels.com contracted with its sister company, Expedia, as well as Travelocity.com LP to implement and maintain cooperative ventures including certain cross - selling initiatives. Specifically, these agreements provided that the lodging inventory of Expedia and Hotels.com would be listed on Travelocity's website. 76. Upon information and belief, sometime during 2001 or earlier, Cheaptickets.com, • now owned by Defendant Travelport, entered into a private label agreement with Hotels.com that provided for the sharing of hotel room inventories for online booking by occupants. 9 of 18 {00951150/11 C7 77. Upon information and belief, sometime between 1990 and the present, Cheaptickets.com and Lodging.com shared hotel room inventory. Specifically, Cheaptickets.com sold Lodging.com's hotel room inventory. 78. Upon information and belief, sometime during 2004 or thereafter, Cendant Corporation, the predecessor to Travelport, entered into agreements with Expedia, Inc. and Hotels.com to share hotel room inventory. 79. Upon information and belief, sometime in 2000 or thereafter Site59.com entered into marketing agreements with other entities, including Travelocity LP, Orbitz, Inc. or Orbitz, LLC, Cheaptickets.com and Priceline.com affiliated companies (whose subsidiaries include Defendants Lowestfare.com and Travelweb). 80. Upon information and belief, sometime during 2005 or earlier, Orbitz, Inc. and/or Orbitz, LLC and Priceline.com entered into a marketing agreement related to Priceline.com's hotel business unit. 81. Upon information and belief, sometime prior to the institution of this suit, Expedia entered into a partnership agreement with Hotels.com L.P. and/or Hotels.com GP and Hotwire regarding its online hotel room booking business. • 82. Upon information and belief, sometime prior to the institution of this suit, Hotels.com entered into a partnership agreement with Hotwire and TravelNow.com regarding its online hotel room booking business. 83. Upon information and belief, sometime prior to the institution of this suit, Hotwire.com entered into a partnership agreement with IAC/Interactive Corp., Expedia and Hotels.com L.P. and/or Hotels.com GP regarding its online hotel room booking business. 84. Upon information and belief, sometime prior to the institution of this suit, Defendant Orbitz, Inc. and/or Orbitz, LLC entered into a partnership agreement with Hotwire regarding its online hotel room booking business. 85. Upon information and belief, sometime prior to the institution of this suit, Defendants Hotels.com and Lowestfare.com entered into an agreement related to the sale or resale of hotel room inventory. 86. On information and belief, there are many other such marketing, distribution and partnership agreements between and among Defendants. Defendants' Conduct Arises Out of the Same Series of Transactions or Occurrences and Involves Common Questions of Law and Fact. 87. Defendants' conduct arises out of the same series of transactions or occurrences • and involves common questions of law and fact. The parties are all interested in the principal 10 of 18 (00951150 / 1 ) • questions raised by this Complaint. Moreover, Defendants' affiliations with each other and their agreements to market, sell and distribute each other's hotel room inventory logically connect their respective conduct. As detailed above, Defendants have engaged and presently engage in a common practice and scheme of selling Lodging to Consumers at Retail Rates but remitting taxes based on their lower, negotiated Wholesale Rates. 88. Further, Defendants' memberships in Interactive Travel Services Association ( "ITSA ") further demonstrates the interrelatedness among Defendants and confirm common practices of Defendants in booking hotel rooms. According to ITSA's website, the following Defendants are members of the organization: Cheaptickets.com; Expedia; Orbitz.com; Priceline.com; Travelocity.com; and Travelportl. The ITSA website makes numerous representations regarding the manner in which online travel companies do business, the manner in which rooms are booked, and Defendants' tax liabilities as a whole. 89. Plaintiff and Class Members have suffered damages in an amount to be proven at trial. The amount in controversy with respect to one or more Class Members is less than $75,000. CLASS ALLEGATIONS • 90. Plaintiff respectfully requests that the Court certify this case as a class action. • 91. Pursuant to Colo. R. Civ. P. 23, the class is defined as follows: All Colorado home rule municipalities which have enacted and collect any tax of any kind on overnight accommodations or lodging denominated in any manner, including but not limited to, a hotel occupancy tax, lodgers tax, lodging tax, accommodations tax, local occupancy tax, excise tax, or sales tax, but excluding any tax that is calculated on a set dollar per night basis (as opposed to a percentage), and excluding Denver, Colorado. 92. The Class consists of more than fifty (50), but less than one - hundred (100), members. 93. The Class meets the prerequisites for the maintenance of a class action in that: i. the Class is so numerous that joinder of all Class Members is impractical; ii. the Class Members are readily identifiable; iii. there are questions of law and fact common to the Class; iv. the claims of the representative Plaintiff are typical of the claims of each member of the Class. Plaintiff, like all other members of the Class, has sustained damages arising from Defendants' violations of law, including ' See http://www.interactivetravel.org/AboutUs/List_OLMembers.asp (last reviewed July 25, 2011) 11 of 18 {00951150/ 11 U violations of municipal ordinances and hotel occupancy tax schemes. The representative Plaintiff and the members of the Class were and are similarly or identically harmed by the same unlawful, deceptive, unfair, systematic and pervasive pattern of misconduct; v. the representative Plaintiff will fairly and adequately represent and protect the interests of the Class. There are no material conflicts between the claims of the representative Plaintiff and the members of the Class that would make a class certification inappropriate; and, vi. the counsel selected to represent the Class will fairly and adequately protect the interests of the Class. They are experienced trial lawyers who have experience in complex class action litigation and are competent counsel for this class action litigation. Counsel for the Class will vigorously assert the claims of all members of the Class. 94. This action is properly maintained as a class action pursuant to Colo.R.Civ.P. 23(b)(2) in that the Defendants have acted or refused to act on grounds generally applicable to the class, thus making appropriate declaratory relief with respect to the class as a whole. 95. This action is properly maintained as a class action pursuant to Colo.R.Civ.P. 23(b)(3) in that common questions of law and fact exist as to the members of the Class and • predominate over any questions affecting only individual members, and a class action is superior to other available methods for the fair and efficient adjudication of the controversy, including consideration of: i. the interest of the members of the Class in individually controlling the prosecution or defense of separate actions; ii. the extent and nature of any other proceedings concerning the controversy already commenced by or against members of the Class; iii. the desirability or undesirability of concentrating the claims in a single forum; and iv. the difficulties likely to be encountered in the management of a class action. 96. The members of the Class contemplate the eventual issuance of notice to the proposed Class Members which would set forth the subject and nature of the instant action. The Defendants' own business records and electronic media can be utilized for the contemplated notices. 97. Among the numerous questions of law and fact common to the Class are: i. whether Defendants use the "merchant model" for buying and selling Lodging in the state of Colorado; ii. whether under the "merchant model" Defendants mark up the price from • the Wholesale Rate (paid to the Hotel) to the Retail Rate (paid by the Consumer); 12 of 18 (00951150/1) • • • iii. whether Defendants are the "merchant of record" in their transactions with the Consumer; iv. whether Defendants use the same basic charges, policies, and computer systems together nationwide and including in the state of Colorado; v. whether Defendants have a legal duty to collect Excise and/or Sales Taxes from the Consumers who purchase from Defendants the right to occupy Lodging in the state of Colorado; vi. whether Defendants have a legal duty to remit these Excise and/or Sales Taxes to Plaintiff and/or other Class Members; vii. whether Defendants have collected the at issue tax, in the form of a tax, from the Consumers, but failed to remit the same to the Class Members; viii. whether Defendants' conduct has sufficient nexus to the state of Colorado, including Class Member municipalities, to subject it to the at issue taxes; ix. whether Defendants have failed to remit the taxes at issue based on the Retail Rate; x. whether, under the appropriate municipal ordinance and/or rule in effect at the time of each transaction, the amount of tax due and owing to Plaintiff and the Plaintiff Class is to be calculated as a percentage of the Wholesale Rate or the Retail Rate; xi. whether by voluntarily inserting themselves into the taxing scheme, the Defendants have the legal duty to calculate, collect and remit the taxes upon the Retail Rate regardless of the statutory language of the appropriate municipal ordinances and/or rule in effect at the time of each transaction; xii. whether Defendants have committed acts of conversion; xiii. whether Defendants have been unjustly enriched; xiv. whether, and in what amount, the Plaintiff Class Members are entitled to recover court costs and attorneys' fees. 98. All conditions precedent to the maintenance of this action have been fulfilled. To the extent any administrative remedies have not been satisfied, such exhaustion is not required and would in fact be futile. CAUSES OF ACTION FIRST CLAIM FOR RELIEF DECLARATORY JUDGMENT PURSUANT TO COLO.R.CIV.P. 57 (Against All Defendants) 99. Plaintiff incorporates each of the above allegations by reference as if fully rewritten herein. 100. Plaintiff seeks a declaration of rights and/or duties with respect to all Defendants. An actual case or controversy exists between Plaintiff and these Defendants as to: {00951150/11 13 of 18 • i. whether Defendants have a duty, under law, to collect Excise Taxes and/or Sales Taxes from Consumers who purchase from Defendants the right to occupy Lodging in the municipalities that comprise the Plaintiff Class; ii. whether the Excise Taxes and/or Sales Taxes are based on the Retail Rate; iii. whether Defendants have a duty to remit these taxes to Plaintiff and the Class; iv. whether Defendants have failed to fulfill their duty under law to remit these taxes to Plaintiff and the Class; and V. whether, under the appropriate ordinance and/or rule, the amount of tax due and owing to Plaintiff and the Class is to be calculated as a percentage of the Retail Rate, without regard to service fees, operating expenses and other amounts currently deducted by Defendants. SECOND CLAIM FOR RELIEF VIOLATIONS OF MUNICIPAL ORDINANCES (As Against all Defendants) 101. Plaintiff incorporates each of the above allegations by reference as if fully rewritten herein. 102. Plaintiff and Class Members are municipalities which are authorized to levy and • collect certain Excise and Sales Taxes. 103. At all times herein, Defendants acted individually or in concert to provide/sell Lodging to Consumers. 104. Defendants are obligated under the various municipal ordinances to collect Excise and/or Sales Taxes on Lodging and to remit such taxes to remit to Plaintiff and the Class Members. 105. Defendants are acting as retailers, vendors, lessors, and/or renters. 106. Defendants have failed to collect and remit to Plaintiff and the Class Members the amounts due and owing to them. 107. Defendants have failed to report taxes collected on Lodging to Plaintiff and Class Members. 108. As a result of their shared efforts, Defendants have a joint interest in the business of providing/selling Lodging to Consumers. 109. Upon information and belief, Defendants have either express or implied agreements to share in the profits and losses of such an enterprise and joint venture. Accordingly, at all times herein, a joint venture and joint enterprise existed between one or more • Defendants. 14 of 18 100951150/ 1) r� U 110. Defendants are legally and constitutionally liable for the Excise Taxes and Sales Taxes due and owed to the Plaintiff and the Class Members under their respective municipal ordinances. Defendants are liable individually and also as joint venturers. 111. Failure to remit these taxes to Plaintiff and the Class is deemed a debt owed by Defendants individually and also as members of the joint venture to Plaintiff and the Class Members in an amount to be determined at trial. The taxes owed and penalties and interest hereby sought to be recovered is to be determined by and in accordance with these municipal ordinances. THIRD CLAIM FOR RELIEF CONVERSION (As Against all Defendants) 112. Plaintiff incorporates each of the above allegations by reference as if fully rewritten herein. 113. At all times alleged herein, Plaintiff and the Class were, and are, entitled to and have had the right to the immediate possession of charged and collected taxes due and owing to • them. 114. At all times alleged herein, the monies due and owing to Plaintiff and the Class were in the possession and under the control of one or more of the Defendants. Defendants have wrongfully exercised dominion and control over these monies for their own use and benefit, thereby permanently depriving Plaintiff and the Class of the use and benefit thereof. 115. At all times alleged herein, Defendants acted willfully, wantonly, with oppression, and with a conscious disregard of the rights of Plaintiff and the Class. 116. As a direct and proximate result of Defendants' conduct, Plaintiff and the Class have suffered and will continue to suffer damage in an amount to be determined according to proof at the time of trial. 117. As set forth above, Defendants are liable for the acts of conversion individually and as members of a joint venture. FOURTH CLAIM FOR RELIEF CIVIL CONSPIRACY (Against all Defendants) 118. Plaintiff incorporates each of the above allegations by reference as if fully rewritten herein. {0095115011) 15 of 18 • 119. Defendants agreed bywords or conduct to accomplish an unlawful goal including, but not limited to, depriving Plaintiff and Class Members of taxes owed under the municipal ordinances and Defendants performed one of more acts to accomplish that unlawful goal. 120. In addition or in the alternative, Defendants agreed by words or conduct to accomplish a lawful goal through unlawful means including, but not limited to, depriving Plaintiff and Class Members of taxes owed under the municipal ordinances and Defendants performed one or more unlawful acts to accomplish that goal. 121. Asa direct and proximate cause of Defendants' conduct, Plaintiff and the Class have suffered and will continue to suffer damages in an amount to be proven at trial. )FIFTH CLAIM FOR RELIEF UNJUST ENRICHMENT (Against all (Defendants) 122. Plaintiff incorporates each of the above allegations by reference as if fully rewritten herein. 123. Defendants have benefitted from the sales of Lodging to Consumers under • circumstances that would make it inequitable for Defendants to retain the benefit of those transactions without paying the required tax to Plaintiff and Class Members, and Defendants have been unjustly enriched thereby. 124. Plaintiff and Class Members are entitled to judgment against Defendants in an amount to be proven at trial, including but not limited to interest, costs, and pre- and post - judgment interest. • 16 of 18 (00951 > so i 1 } • PRAYER FOR RELIEF WHEREFORE, Plaintiff requests, on behalf of itself and the members of the Plaintiff Class, that this Court certify this suit under Rule 23 of the Colorado Rules of Civil Procedure, appoint Plaintiff as class representative, and appoint the below -named attorneys as counsel for the Class. Plaintiff further requests that, upon a final trial of this matter, judgment be entered in favor of the Plaintiff and the Class on all causes of action against the Defendants, including, without limitation, the following: i. An order certifying this case be maintained as a class action; ii. An order declaring the Defendants liable to Plaintiff and the Class Members for the wrongful acts, omissions, practices, and schemes described herein; iii. Pursuant to Colo.R.Civ.P. 57, a declaratory judgment determining that: Defendants have a duty to collect Excise Taxes and/or Sales Taxes from Consumers who purchase from Defendants the right to occupy Lodging in the municipalities that comprise the Plaintiff Class; that the Excise Taxes and/or Sales Taxes are based on the Retail Rate; that Defendants have a • duty to remit these taxes to Plaintiff and the Class; that Defendants have failed to fulfill their duty under law to remit these taxes to Plaintiff and the Class; and that, under the appropriate hotel occupancy tax statute, ordinance, and/or rule, the amount of tax due and owing to Plaintiff and the Class is to be calculated as a percentage of the Retail Rate, without regard to service fees, operating expenses and other amounts currently deducted by Defendants. iv. An order imposing a constructive trust on all property in the possession of Defendants that in equity and good conscience belongs to Plaintiff and the Class Members and does not belong to Defendants; v. Damages in an amount to be proven at trial; vi. Pre and post judgment interest, penalties and costs allowed by law; and vii. For such other and further relief as this Court may deem appropriate. • DENLAND FOR JURY TRIAL Plaintiff hereby demands a trial by jury on all issues so triable. (00951150i 1 17 of 18 • Respectfully submitted this 25th day of July, 2011. ROTHGERBER JOHNSON & LYONS LLP Pursuant to Colo. R. Civ. P. 121§1-26, a duly signed original is on file at the offices of Rothgerber Johnson & Lyons LLP By: sl Michael D. Plachv Michael D. Plachy, Esq. Thomas M. Rogers III, Esq. Joy Allen Woller, Esq. One Tabor Center, Suite 3000 1200 Seventeenth Street Denver, CO 80202 Telephone: 303 -623 -9000 Facsimile: 303 - 623 -9222 mplachy@rothgerber.com trogers@rothgerber.com jwoller @rothgerber.com CRONGEYER LAW FIRM, P.C. • John W. Crongeyer, M.D. 2170 DeFoor Hills Road Atlanta, GA 30318 Telephone: 404- 873 -4696 Facsimile: 404-872-3745 jcrongeyer@vclawfirm.com Pro Hac Vice Application to be Submitted THE BIRD LAW GROUP, P.C. William Q. Bird, Esq. 2170 DeFoor Hills Road Atlanta, GA 30318 Telephone: 404- 873 -4696 Facsimile: 404- 872 -3745 jwc@bii:dlawgroup.com Pro Hac Vice Application to be Submitted THE FINNELL FIRM Robert Finnell, Esq. P.O. Box 63 Rome, GA 30162 -0063 Pro Hac Vice Application to be Submitted Attorneys for the Town of Breckenridge, Colorado and • Proposed Class 18 of 18 [00951150/ 11