Exhibit 10.11
STANDARD FORM
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
DEVELOPMENT AGREEMENT
MARCUS RESTAURANTS, INC.
APRIL 8, 1994
A PORTION OF THE CHICAGO, ILLINOIS A.D.I.
TABLE OF CONTENTS
RECITALS . . . . . . . . . . . . . . . . . . . . . . . 1
1. GRANT OF DEVELOPMENT RIGHTS . . . . . . . . . . 2
2. INITIAL DEVELOPMENT SCHEDULE . . . . . . . . . . 2
3. SUBSEQUENT DEVELOPMENT SCHEDULE;
DEVELOPMENT OBLIGATIONS GENERALLY . . . . . . . 4
4. FRANCHISE FEE AND ROYALTY RATE . . . . . . . . . 5
5. SITE APPROVALS: PLANS AND SPECIFICATIONS . . . 7
6. FEES AND FRANCHISE AGREEMENTS . . . . . . . . . 8
7. DEVELOPER ORGANIZATION, AUTHORITY,
FINANCIAL CONDITION AND SHAREHOLDERS . . . . . . 8
8. TRANSFER . . . . . . . . . . . . . . . . . . . . 10
9. TERMINATION . . . . . . . . . . . . . . . . . . 13
10. PREREQUISITES TO OBTAINING FRANCHISES
FOR INDIVIDUAL RESTAURANT UNITS . . . . . . . . 15
11. RESTRICTIONS . . . . . . . . . . . . . . . . . . 16
12. DEVELOPMENT PROCEDURES . . . . . . . . . . . . . 18
13. NO WAIVER OF DEFAULT . . . . . . . . . . . . . . 19
14. FORCE MAJEURE . . . . . . . . . . . . . . . . . 19
15. CONSTRUCTION, SEVERABILITY, GOVERNING
LAW AND JURISDICTION . . . . . . . . . . . . . . 20
16. MISCELLANEOUS . . . . . . . . . . . . . . . . . 21
SCHEDULE 1: RESTAURANT LOCATIONS FOR WHICH FRANCHISE
AGREEMENTS HAVE BEEN PREVIOUSLY ISSUED
APPENDIX A: TERRITORY
APPENDIX B: FORM OF FRANCHISE AGREEMENT
APPENDIX C: STATEMENT OF OWNERSHIP INTERESTS
APPENDIX D: REVIEW AND CONSENT WITH RESPECT TO TRANSFERS
APPENDIX E: CONFIDENTIALITY AGREEMENT AND COVENANT NOT
TO COMPETE
APPENDIX F: CONFIDENTIALITY AGREEMENT
APPENDIX G: EXISTING COMPETITIVE RESTAURANTS
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
DEVELOPMENT AGREEMENT
This Agreement is made this ________ day of _____________________,
19_____, by and between APPLEBEE'S INTERNATIONAL, INC., a Delaware
corporation ("FRANCHISOR"), MARCUS RESTAURANTS, INC., a Wisconsin
corporation ("DEVELOPER") and N/A
(collectively, the "PRINCIPAL SHAREHOLDERS" and, individually, a
"PRINCIPAL SHAREHOLDER" of Developer).
WITNESSETH:
RECITALS
A. Franchisor has acquired rights to develop and operate a unique
system of restaurants which specialize in the sale of high quality,
moderately priced food and alcoholic beverages in an attractive, casual
setting, which include proprietary rights in certain valuable trade names,
service marks and trademarks, including the service mark Applebee's
Neighborhood Grill & Bar and variations of such mark, designs, decor and
color schemes for restaurant premises, signs, equipment, procedures and
formulae for preparing food and beverage products, specifications for
certain food and beverage products, inventory methods, operating methods,
financial control concepts, a training facility and teaching
techniques (the "System").
B. Franchisor has determined to establish, through its own
development and operation, and through the granting of franchises, a chain
of Applebee's Neighborhood Grill & Bar restaurants which are distinctive;
which are similar in appearance, design and decor; and which are uniform
in operation and product consistency.
C. The value of Franchisor's trade names, service marks and
trademarks is based upon: (1) the maintenance of uniform high quality
standards in connection with the preparation and sale of
Franchisor-approved food and beverage products, (2) the uniform high
standards of appearance of the individual restaurant units in the System,
(3) the use of distinctive trademarks, service marks, building designs and
advertising signs representing a uniformly high quality of product and
services, and (4) the assumption by Franchisor and its franchisees of the
obligation to maintain and enhance the goodwill and public acceptance of
the System (and of Franchisor's trade names, service marks and trademarks)
by strict adherence to the high standards required by Franchisor.
D. Developer desires to obtain the exclusive right to develop
restaurant units franchised by Franchisor within the geographic area
specified in Appendix A hereto ("Territory"), for the period specified in
Subsection 1.1, pursuant to the terms, conditions and provisions which are
set forth in this Agreement.
NOW, THEREFORE, in consideration of Franchisor granting to Developer the
exclusive right to develop restaurant units franchised by Franchisor which
employ the System ("Restaurants") in the Territory for such period, and in
consideration of the mutual obligations which are provided for herein, it
is hereby agreed as follows:
1. GRANT OF DEVELOPMENT RIGHTS
1.1 Franchisor grants Developer the exclusive right to develop
Restaurants only in the Territory for a period commencing on the date
hereof and expiring on November 27, 2009, unless sooner terminated as
hereinafter provided. Developer has no rights under this Agreement to
develop Restaurants outside of the Territory.
1.2 During the term of this Agreement, Franchisor shall not
operate a restaurant utilizing the System or license any other person to
operate a restaurant utilizing the System in the Territory.
1.3 After this Agreement expires or is terminated, Franchisor
shall have the complete and unrestricted right to operate or license other
persons to operate a restaurant utilizing the System in the Territory.
2. INITIAL DEVELOPMENT SCHEDULE
2.1 Developer shall develop a total of ten (10)* Restaurants
franchised by Franchisor in the Territory during the period commencing on
the date hereof and expiring on December 31, 1997, in accordance with the
following development schedule:
*This figure does not include eight (8) Restaurants located in the
Territory for which franchise agreements have been previously issued, the
locations of said Restaurants being more specifically described on
Schedule 1, attached hereto and incorporated herein by reference.
(a) During the first Initial Development Period under this
Agreement, Developer shall develop at least two (2) Restaurants within
the Territory, each of which shall be open for operation and doing
business on December 31, 1994 (the end of the first Initial
Development Period under this Agreement).
(b) During the second Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within
the Territory necessary to result in the existence of three (3) such
Restaurants developed by Developer which are open for operation and
doing business on June 30, 1995 (the end of the second Initial
Development Period under this Agreement).
(c) During the third Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within
the Territory necessary to result in the existence of four (4) such
Restaurants developed by Developer which are open for operation and
doing business on September 30, 1995 (the end of the third Initial
Development Period under this Agreement).
(d) During the fourth Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within
the Territory necessary to result in the existence of five (5) such
Restaurants developed by Developer which are open for operation and
doing business on December 31, 1995 (the end of the fourth Initial
Development Period under this Agreement).
(e) During the fifth Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within
the Territory necessary to result in the existence of six (6) such
Restaurants developed by Developer which are open for operation and
doing business on June 30, 1996 (the end of the fifth Initial
Development Period under this Agreement).
(f) During the sixth Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within
the Territory necessary to result in the existence of seven (7) such
Restaurants developed by Developer which are open for operation and
doing business on September 30, 1996 (the end of the sixth Initial
Development Period under this Agreement).
(g) During the seventh Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within
the Territory necessary to result in the existence of eight (8) such
Restaurants developed by Developer which are open for operation and
doing business on December 31, 1996 (the end of the seventh Initial
Development Period under this Agreement).
(h) During the eighth Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within
the Territory necessary to result in the existence of nine (9) such
Restaurants developed by Developer which are open for operation and
doing business on June 30, 1997 (the end of the eighth Initial
Development Period under this Agreement).
(i) During the ninth Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within
the Territory necessary to result in the existence of ten (10) such
Restaurants developed by Developer which are open for operation and
doing business on December 31, 1997 (the end of the ninth Initial
Development Period under this Agreement).
Each of the periods specified in Subparagraphs (a) through (i) hereof is
sometimes referred to hereinafter as an "Initial Development Period."
2.2 During any Initial Development Period, subject to the
provisions of this Agreement, Developer is free to develop more than the
total minimum number of Restaurants which Developer is required to develop
during that Initial Development Period. Any such Restaurants developed,
open for operation and doing business during an Initial Development Period
in excess of the minimum number required to be developed during that
Initial Development Period shall be applied to satisfy Developer's
development obligation during the next succeeding Initial Development
Period or next succeeding Subsequent Development Period (as defined in
Section 3 hereof), if any, as the case may be. Notwithstanding the above,
Developer shall not develop more than the total number Restaurants
approved by Franchisor for development under this Agreement.
2.3 Strict compliance with the development schedule specified in
Subsection 2.1 hereof is of the essence of this Agreement. If Developer
fails to fulfill its specified development obligation with respect to any
of the Initial Development Periods specified in Subsection 2.1 hereof,
this Agreement shall terminate sixty (60) days after the end of the
Initial Development Period in question, unless by the end of such
sixty (60) day period Developer has fulfilled the development obligation
relating to such Initial Development Period.
3. SUBSEQUENT DEVELOPMENT SCHEDULE; DEVELOPMENT
OBLIGATIONS GENERALLY
3.1 During the period commencing on January 1, 1998 and expiring
on November 27, 2009, Developer shall develop and open for business in the
Territory, from time to time in accordance with the development schedule
established under Subsection 3.2, that number of additional Restaurants as
is required to achieve at the end of such period a total number of
Restaurants open for business within the Territory which, after including
the Restaurants developed during the Initial Development Periods, would be
equal to (a) one (1) Restaurant for every twenty-five thousand (25,000)
households within the Territory having an income of twenty-five thousand
dollars ($25,000) or more, or (b) one (1) Restaurant for every
seventy-five thousand (75,000) individuals within the Territory who are
between the ages of twenty (20) and forty-nine (49) years old, whichever
computation results in a lesser number of Restaurants.
3.2 (a) Each consecutive twelve (12) month period, commencing
with the period beginning on January 1, 1998, is hereafter referred to as
a "Subsequent Development Period." Each period consisting of two (2)
consecutive Subsequent Development Periods, commencing with the period
beginning on January 1, 1998, is hereinafter referred to as a "Calculation
Period."
(b) Franchisor and Developer shall agree in writing on or
before the commencement of each Calculation Period on the number of
Restaurants which Developer must develop, each of which shall be open for
operation and doing business, during each of the two (2) Subsequent
Development Periods included in such Calculation Period; provided that
such agreement is subject to the following minimum and maximum development
requirements: (i) Minimum development requirements: Developer hereby
agrees to develop during each Subsequent Development Period at least that
number of Restaurants, each of which shall be open for operation and doing
business, which will be equal to one-third (1/3) of the total number of
Restaurants (rounded to the nearest whole number) which were required to
be developed by Developer during all prior Initial Development and
Calculation Periods; and (ii) Maximum development requirements:
Notwithstanding the minimum development requirements, Developer shall not
be required to develop during any Subsequent Development Period more than
that number of Restaurants which, when added to the number of Restaurants
which were required to be developed by Developer during all prior Initial
Development and Calculation Periods, would exceed the number of
Restaurants prescribed by the formula set forth in Subsection 3.1, if such
formula had been applied to determine the total number of Restaurants
required to service the Territory immediately prior to the Calculation
Period in question. No later than sixty (60) days prior to the
commencement of each Calculation Period, Franchisor shall provide
Developer with census data necessary for Developer to ascertain, for
purposes of the maximum development requirements, the number of
Restaurants which would be required in the Territory by application of the
formula. Franchisor shall use census figures provided by National
Decision Systems, or such other generally recognized demographic service
as Developer and Franchisor shall reasonably designate.
3.3 Strict compliance with the development schedule established in
accordance with Subsection 3.2 hereof is of the essence of this Agreement.
If Developer shall fail to fulfill its specified development obligation
with respect to any Subsequent Development Period, this Agreement shall
automatically terminate sixty (60) days after the end of the Subsequent
Development Period in question, unless by the end of such sixty (60) day
period Developer has fulfilled the development obligation relating to such
Subsequent Development Period.
3.4 If, during the term of this Agreement, (a) Developer transfers
or disposes of any Restaurant developed hereunder in accordance with the
provisions hereof, or for any other reason ceases to operate any
Restaurant developed hereunder, and (b) after such transfer or other
cessation of operation the premises no longer are utilized for the
operation of a Restaurant, Developer's development obligation in the
Initial or Subsequent Development Period in which such transfer or other
cessation of operations occurred shall increase, subject to the general
limitations on Developer's development obligations set forth in Section 2
and Section 3, by the number of Restaurants which Developer so
transferred, disposed of or which otherwise ceased to operate.
3.5 Franchisor represents that it is the sole owner of the service
mark Applebee's Neighborhood Grill & Bar. If Franchisor determines that a
third person has rights under the law of any state with respect to such
mark which precludes Developer from fulfilling any portion of its
development obligations pursuant to this Agreement, Franchisor and
Developer shall negotiate in good faith for a revision of those
development obligations, a redefinition of the Territory, or such other
modifications of this Agreement as may be reasonable in the circumstances.
4. FRANCHISE FEE AND ROYALTY RATE
4.1 Developer shall pay Franchisor a franchise fee of $35,000 with
respect to each Restaurant which is developed pursuant to this Agreement
during the Initial Development Periods. Thereafter, Developer shall pay
Franchisor a franchise fee in an amount which is equal to the amount of
the franchise fee then in effect at the time of the issuance of the
franchise agreement for each additional restaurant to be opened during any
Subsequent Development Period. The amount of the franchise fee shall be
set forth in the franchise offering circular received by the Developer
from Franchisor immediately preceding the issuance of such franchise
agreement. Simultaneously with the execution of this Agreement, Developer
shall pay to Franchisor, by certified check, the amount of $35,000
("Franchise Fee Deposit"). Said Franchise Fee Deposit shall be equal to
the greater of (a) the franchise fee for one of the Restaurants to be
developed during the Initial Development Periods, or (b) ten percent (10%)
of the entire franchise fees covering the ten (10) Restaurants to be
developed during the first nine (9) Initial Development Periods pursuant
to this Agreement (as reduced by a credit of $6,000 based on Developer's
prior payment, if so paid, of a non-refundable $6,000 application fee).
The remaining balance of the franchise fees for each of the Restaurants to
be developed during the nine (9) Initial Development Periods shall be paid
by certified check as follows: one-half (1/2) of the balance shall be
paid upon signing a franchise agreement for that Restaurant and the
remaining balance shall be paid fourteen (14) days prior to the scheduled
opening of the Restaurant. The Franchise Fee Deposit shall be
proportionately allocated to the franchise fee due with respect to each
Restaurant to which it applies. The franchise fee with respect to each
Restaurant to be developed during a Subsequent Development Period or with
respect to any additional Restaurants developed during the Initial
Development Periods shall be paid by certified check in the same manner.
4.2 Except as provided in this Subsection 4.2 and in
Subsection 19.1 of the form of franchise agreement which is attached
hereto as Appendix B, Developer shall have no right to recover from
Franchisor, directly or indirectly, any of the franchise fees which are
prepaid pursuant to Subsection 4.1 hereof. If Developer's failure to
develop the total number of Restaurants specified in Subsection 2.1 of
this Agreement is the result of the assertion of rights by a third party
as described in Subsection 3.5 hereof, those prepaid franchise fees which
relate to the Restaurants which cannot be so developed shall be refunded
to Developer in cash.
4.3 As partial consideration for the rights granted to Developer
pursuant to the franchise agreements covering the Restaurants which
Developer develops hereunder, Developer (as franchisee under each such
franchise agreement) shall pay Franchisor a monthly royalty fee as
determined by Franchisor, not to exceed five percent (5%) of each calendar
month's gross sales (as that term is defined in the form of franchise
agreement which is attached hereto as Appendix B).
4.4 Pursuant to its obligations hereunder and under the applicable
franchise agreements, Franchisor will make various expenditures in
connection with the development of prospective Restaurant sites by
Developer, including expenditures for travel, lodging, meals, obtaining of
information about prospective sites, demographic information, traffic
counts, and inquiries into local laws and ordinances. Developer shall
promptly notify Franchisor of a decision to cease development of a
prospective Restaurant site. In the event that Developer fails to open a
restaurant at any such site, in lieu of the payment of the franchise fee
therefor, Franchisor in its sole discretion may require Developer to
reimburse Franchisor for Franchisor's expenditures with respect to that
site. In such event, Franchisor shall provide Developer with an itemized
list of Franchisor's expenditures with respect to that site within
thirty (30) business days after Franchisor receives notice that Developer
no longer intends to develop a Restaurant at that site, and Developer
shall reimburse Franchisor for such costs within thirty (30) days after
receiving such list.
5. SITE APPROVALS: PLANS AND SPECIFICATIONS
5.1 Developer assumes all cost, liability, expense and
responsibility for locating, obtaining, financing and developing sites for
Restaurants, and for constructing and equipping Restaurants at such sites.
To assist Developer in the site selection process, Franchisor will provide
Developer with certain demographic information regarding the site, will
conduct an on-site inspection and will review any lease or contract under
negotiation for the prospective site, such services to be provided to
Developer at no additional cost. The development of a Restaurant at any
site must be approved by Franchisor in accordance with its then-existing
site approval procedure. In connection with a request for approval of a
proposed site for a Restaurant, Franchisee shall provide a related
contract of sale or lease agreement and such other information and
material as the Franchisor may reasonably require. Franchisor's approval
of a prospective Restaurant site shall not be unreasonably withheld.
Franchisor shall notify Developer whether it approves a proposed site and
the related contract of sale or lease agreement within thirty (30)
business days of receiving Developer's request for approval. Failure of
Franchisor to so notify Developer within such thirty (30) business day
period shall be deemed to be an approval of such site and the related
contract of sale or lease agreement. Developer acknowledges that
Franchisor's approval of a prospective site for a Restaurant does not
constitute a representation, promise or guarantee by Franchisor that a
Restaurant operated at that site will be profitable or otherwise
successful. Developer shall not make any binding commitment to a
prospective vendor or lessor of real estate with respect to a site for a
Restaurant unless Franchisor has approved that site in accordance with
Franchisor's then-existing site approval procedure. After Franchisor has
approved a site for a Restaurant, Franchisee shall provide Franchisor with
a copy of the executed contract of sale or lease, as applicable, relating
to the site within a reasonable period of time.
5.2 For each Restaurant which Developer develops pursuant to this
Agreement, Franchisor will make available to Developer Franchisor's
specifications for a typical Restaurant. Developer will obtain
architectural and engineering services independently and at its own
expense. Franchisor shall have the right to review all such architectural
and/or engineering plans which Developer obtains and to prohibit the
implementation of any plan, or part thereof, which Franchisor, in its sole
and absolute discretion, believes is not consistent with the best
interests of the System. In the event that Franchisor desires to prohibit
the implementation of any such plan, or part thereof, Franchisor shall so
notify Developer within thirty (30) business days of receiving such
architectural and/or engineering plans for review. Failure of Franchisor
to so notify Developer within such thirty (30) business day period shall
be deemed to be an approval of such plans. In the event Franchisor does
object to any such plan, Franchisor shall provide Developer with a
reasonable detailed list of changes necessary to make such plans
acceptable to Franchisor. Franchisor shall, upon resubmission of such
plans, with such changes as Developer has prepared, notify Developer
within fifteen (15) business days of receiving such plans whether they are
acceptable. Failure to so notify Developer within such fifteen (15)
business day period shall be deemed to be an approval of such amended
plans.
5.3 If Developer acquires a leasehold interest in a site, that
leasehold interest shall be for a term which is at least as long as the
term of the form of franchise agreement which is attached hereto as
Appendix B, and the lease shall provide that if the applicable franchise
agreement is terminated prior to the expiration of that term for whatever
reason, Developer may assign the lease to Franchisor without the lessor
having any right to impose conditions on such assignment or to obtain any
payment in connection therewith.
6. FEES AND FRANCHISE AGREEMENTS
Not later than ninety (90) days prior to the scheduled opening of any
Restaurant which has been developed pursuant to this Agreement, Developer
shall deliver to Franchisor an executed franchise agreement substantially
in the form which is attached hereto as Appendix B, provided however, that
the franchise agreement which Developer executes shall require the payment
of a franchise fee in the amount described in Subsection 4.1, royalty fees
as described in Subsection 4.3, and advertising payments at the rates then
established by Franchisor with respect to new Restaurants, except that in
no event shall such rates exceed five percent (5%) of a Restaurant's gross
sales (as defined in Subsection 9.3 of the form of a franchise agreement
which is attached hereto as Appendix B).
7. DEVELOPER ORGANIZATION, AUTHORITY, FINANCIAL
CONDITION AND SHAREHOLDERS
7.1 Developer and each Principal Shareholder represent and warrant
that: (a) Developer is a corporation duly incorporated, validly existing
and in good standing under the laws of the state of its incorporation;
(b) Developer is duly qualified and is authorized to do business and is in
good standing as a foreign corporation in each jurisdiction in which its
business activities or the nature of the properties owned by it requires
such qualification; (c) the execution and delivery of this Agreement and
the transactions contemplated hereby are within Developer's corporate
power; (d) the execution and delivery of this Agreement have been duly
authorized by the Developer; (e) the articles of incorporation and by-laws
of Developer delivered to Franchisor are true, complete and correct, and
there have been no changes therein since the date thereof; (f) the
certified copies of the minutes electing the officers of Developer and
authorizing the execution and delivery of this Agreement are true, correct
and complete, and there have been no changes therein since the date(s)
thereof; (g) the specimen stock certificate delivered to Franchisor is a
true specimen of Developer's stock certificate; (h) the financial
statement of Developer and financial statements of its Principal
Shareholders, heretofore delivered to Franchisor, are true, complete and
correct, and fairly present the financial positions of Developer and each
Principal Shareholder, respectively, as of the date thereof; (i) such
financial statements have been prepared in accordance with generally
accepted accounting principles; and (j) there have been no materially
adverse changes in the condition, assets or liabilities of Developer or
Principal Shareholders since the date or dates thereof.
7.2 Developer and each Principal Shareholder covenant that during
the term of this Agreement: (a) Developer shall do or cause to be done
all things necessary to preserve and keep in full force its corporate
existence and shall be in good standing as a foreign corporation in each
jurisdiction in which its business activities or the nature of the
properties owned by it requires such qualification; (b) Developer shall
have the corporate authority to carry out the terms of this Agreement; and
(c) Developer shall print, in a conspicuous fashion on all certificates
representing shares of its stock when issued, a legend referring to this
Agreement and the restrictions on and obligations of Developer and
Principal Shareholders hereunder, including the restrictions on transfer
of Developer's shares.
7.3 Prior to development of the first Restaurant pursuant to this
Agreement, Developer shall maintain an average monthly balance of five
hundred thousand dollars ($500,000) in liquid assets. For purposes of
this Agreement, "liquid assets" shall consist of cash, cash available to
Developer pursuant to an irrevocable line of credit issued by a commercial
bank in favor of Developer, marketable securities, or any other similar
asset in which Franchisor's Chief Financial Officer designates in writing
as a liquid asset. After development of the first Restaurant pursuant to
this Agreement, and at any time thereafter in which Developer is operating
one (1) Restaurant in the Territory, Developer shall maintain an average
monthly balance of three hundred twenty-five thousand dollars ($325,000)
in liquid assets. After development of the second Restaurant pursuant to
this Agreement, and thereafter, so long as Developer is operating at least
two (2) Restaurants in the Territory, Developer shall maintain an average
monthly balance of one hundred fifty thousand dollars ($150,000) in liquid
assets. At all times Developer shall maintain the necessary financial
resources to satisfy its development obligations hereunder.
7.4 In addition to its obligations pursuant to Subsections 7.1 and
7.3 hereof, Developer and Principal Shareholders shall provide Franchisor
with such financial information as Franchisor may reasonably request from
time to time, including, on an annual basis, copies of the then-most
current financial statements of Developer and each Principal Shareholder,
dated as of the end of the last preceding fiscal year of the Developer or
Principal Shareholder, said statements to be delivered to Franchisor no
later than April 15 of each year.
7.5 Developer and each Principal Shareholder represent, warrant
and covenant that all Interests (as defined in Subsection 8.4 hereto) in
Developer are owned as set forth on Appendix C hereto, that no Interest
has been pledged or hypothecated (except in accordance with Section 8 of
this Agreement), and that no change will be made in the ownership of any
such Interest other than as permitted by this Agreement, or otherwise
consented to in writing by Franchisor. Developer and Principal
Shareholders agree to furnish Franchisor with such evidence as Franchisor
may request, from time to time, for the purpose of assuring Franchisor
that the Interests of Developer and Principal Shareholders remain as
represented herein.
7.6 Each Principal Shareholder, jointly and severally, hereby
personally and unconditionally guarantees each of Developer's financial
obligations to Franchisor (including, but not limited to, all obligations
relating to the payment of fees by Developer to Franchisor). Each
Principal Shareholder agrees that Franchisor may resort to such Principal
Shareholder (or any of them) for payment of any such financial obligation,
whether or not Franchisor shall have proceeded against Developer, any
other Principal Shareholder or any other obligor primarily or secondarily
obligated to Franchisor with respect to such financial obligation. Each
Principal Shareholder hereby expressly waives presentment, demand, notice
of dishonor, protest, and all other notices whatsoever with respect to
Franchisor's enforcement of this guaranty. In addition, each Principal
Shareholder agrees that if the performance or observance by Developer of
any term or provision hereof is waived or the time of performance thereof
extended by Franchisor, or payment of any such financial obligation is
accelerated in accordance with any agreement between Franchisor and any
party liable in respect thereto or extended or renewed, in whole or in
part, all as Franchisor may determine, whether or not notice to or consent
by any Principal Shareholder or any other party liable in respect to such
financial obligations is given or obtained, such actions shall not affect
or alter the guaranty of each Principal Shareholder described in this
Subsection.
8. TRANSFER
8.1 There shall be no Transfer of any Interest of Developer, or of
a Principal Shareholder in Developer, in whole or in part (whether
voluntarily or by operation of law), directly, indirectly or contingently,
except in accordance with the provisions of this Section 8. "Transfer"
and "Interest" are defined in Subsections 8.2, 8.3 and 8.4.
8.2 Except as provided in Subsection 8.3, "Transfer" shall mean
any assignment, sale, pledge, hypothecation, gift or any other such event
which would change ownership of or create a new Interest, including, but
not limited to:
(a) any change in the ownership of or rights in or to any
shares of stock or other equity interest in Developer which would
result from the act of any shareholder of Developer ("Shareholder"),
such as a sale, exchange, pledge or hypothecation of shares, or any
interest in or rights to any of Developer's profits, revenues or
assets, or any such change which would result by operation of law; and
(b) any change in the percentage interest owned by any
Shareholder in the shares of stock of Developer, or interests in its
profits, revenues or assets which would result from any act of
Developer such as a sale, pledge or hypothecation of any Restaurant
assets (other than a pledge of assets to secure bona fide loans made
or credit extended in connection with acquisition of the assets
pledged, provided that immediately before and after such transaction
Developer satisfies the applicable liquid asset requirement described
in Subsection 7.3 of this Agreement); any sale or issuance of any
shares of Developer's stock; the retirement or redemption of any
shares of Developer's stock; or any sale or grant to any person of any
right to participate in or otherwise to share or become entitled to
any part of Developer's profits, revenues, assets or equity.
8.3 "Transfer" shall not include (a) a change in the ownership of
or rights to any shares or other equity interest in Developer pursuant to
a public offering of Developer's securities registered under the
Securities Act of 1933, or (b) a change in the ownership of or rights to
any securities or other equity interest in Developer pursuant to a private
offering of Developer's securities exempted from registration under such
Act, provided that Developer provides Franchisor with a copy of its S-1
prospectus and/or offering memorandum ten (10) days prior to its filing
with the Securities and Exchange Commission or circulation to third
parties so that Franchisor may comment and, if necessary, correct any
information concerning Franchisor and/or the System, and further provided
that after giving effect to any such public or private offering, the
Principal Shareholders, or any of them, "control" Developer. For purposes
of this Section 8, "control" means either (1) holding fifty-one
percent (51%) or more of the outstanding voting securities of Developer,
or (2) having the contractual power presently to designate a majority of
the directors of Developer.
8.4 "Interest" shall mean: when referring to interests or rights
in Developer, any shares of Developer's stock, and any other equitable or
legal right in or to any of Developer's stock, revenues, profits or
assets; when referring to rights or assets of Developer, Developer's
rights under and interest in this Agreement, any Restaurant and its
revenues, profits and assets.
8.5 (a) The Interest of a Principal Shareholder may be
transferred to such Principal Shareholder's spouse or children or to a
person designated in such Principal Shareholder's will or trust
(individually and collectively referred to as "Successor"), upon such
Principal Shareholder's death or permanent incapacity, without
Franchisor's approval, provided that such Successor shall agree to be
bound by the restrictions contained in this Section 8, and the other
agreements and covenants of the Principal Shareholders contained in this
Agreement.
(b) The Interest of a Principal Shareholder may not be
transferred to another Principal Shareholder without Franchisor's
approval, which approval will not be unreasonably withheld.
(c) The Interest of a Successor may only be transferred in
accordance with Subsection 8.5(b) or 8.8, regardless of whether such
Transfer is for consideration or by gift or will or other device.
8.6 If at any time the Principal Shareholders desire to dispose of
all or substantially all of the Interests of the Principal Shareholders in
Developer, or the Principal Shareholders (or Developer) desire to dispose
of all or substantially all of Developer's Interest in this Agreement or
in the assets which Developer has acquired pursuant to this Agreement, the
Principal Shareholders or Developer, as the case may be, shall notify
Franchisor of that desire, in writing, thirty (30) days before announcing
that fact publicly or engaging the services of a broker or sales agent.
8.7 (a) If at any time any of the Principal Shareholders or
Developer, as the case may be, obtains from a third party or third parties
a bona fide offer (the "Offer") in writing for the purchase of all or
substantially all of the Interests of the Principal Shareholders in
Developer or of all or substantially all of Developer's Interest in this
Agreement or in the assets which Developer has acquired pursuant to this
Agreement, the Principal Shareholders or Developer shall give notice (the
"Selling Notice") to Franchisor stating that the Principal Shareholders or
Developer, as the case may be, have received the Offer, identifying the
prospective purchaser by name and address, specifying the proposed
purchase price and attaching a true and complete copy of the Offer.
(b) Franchisor shall have an option (the "Option"), exercisable
within a period of forty-five (45) days after receipt of the Selling
Notice (the "Option Period"), to purchase such Interests at the price and
on the conditions set forth in the Offer, except that Franchisor shall not
be obligated to pay any finder's or broker's fee, and if the Offer
provides for payment of consideration other than cash, or if the Offer
involves certain intangible benefits, Franchisor may elect to purchase
such Interests by offering a reasonable cash substitute for the non-cash
part of the Offer.
(c) The Option shall be exercisable by Franchisor delivering to
the Principal Shareholders or Developer, as the case may be, within the
Option Period, a notice (i) stating that the Option is being exercised,
and (ii) specifying the time, date and place at which such purchase and
sale will take place, which date shall be within forty-five (45) days
after Franchisor delivers such notice. The forty-five (45) day limitation
described at the end of the preceding sentence shall not apply if at the
end of said forty-five (45) day period the only issue which prevents
completion of the purchase and sale is the need to effect transfers of the
applicable liquor licenses. In the event of such a delay, the purchase
and sale shall take place within seven (7) business days after those
liquor licenses have been transferred.
(d) If the Option is not exercised, the Principal Shareholders
or Developer, as the case may be, may sell the Interests in or of
Developer to the third party which made the Offer, on conditions no more
favorable to the third-party offerer than those set forth in the Offer,
provided that Franchisor approves the proposed transferee in accordance
with the criteria set forth in Appendix D and provided further that such
sale takes place within ninety (90) days after the expiration of the
Option Period. The ninety (90) day limitation described in the preceding
sentence shall not apply if at the end of said ninety (90) day period the
only issue which prevents completion of the purchase and sale is the need
to effect transfers of the applicable liquor licenses. In the event of
such a delay, the purchase and sale shall take place within seven (7)
business days after those liquor licenses have been transferred.
(e) If the Option is not exercised, the Principal Shareholders
or Developer, as the case may be, shall immediately notify Franchisor in
writing of any change in the terms of an Offer. Any material change in
the terms of an Offer shall cause it to be deemed a new Offer, conferring
upon Franchisor a new Option pursuant to this Subsection 8.7; the Option
Period with respect to the new Option shall be deemed to commence on the
day on which Franchisor receives written notice of a material change in
the terms of the original Offer.
8.8 (a) Developer understands and acknowledges that the rights
and duties set forth in this Agreement are personal to Developer and that
Franchisor has entered into this Agreement in reliance on the business
skill and financial capacity of Developer, and the business skill,
financial capability and personal character of each Principal Shareholder.
Except as otherwise provided in this Section 8, the Principal Shareholders
shall at all times retain control of Developer. Except as otherwise
provided in this Section 8, no Transfer of any part of Developer's
Interest in this Agreement, and no Transfer of any Interest of any
Principal Shareholder shall be completed except in accordance with this
Subsection 8.8. In the event of such a proposed Transfer of any part of
Developer's Interest in this Agreement, or of any Interest of any
Principal Shareholder, the party or parties desiring to effect such
Transfer shall give Franchisor notice in writing of the proposed Transfer,
which notice shall set forth the name and address of the proposed
transferee, its financial condition, including a copy of its financial
statement dated not more than ninety (90) days prior to the date of said
notice, and all the terms and conditions of the proposed Transfer. Upon
receiving such notice, Franchisor may (i) approve the Transfer, or
(ii) withhold its consent to the Transfer. Franchisor shall, within
forty-five (45) days of receiving such notice and all the information
required therein, advise the party or parties desiring to effect the
Transfer whether it (1) approves the Transfer, or (2) withholds its
consent to the Transfer, giving the reasons for such disapproval. Failure
of Franchisor to so advise said party or parties within that forty-
five (45) day period shall be deemed to be approval of the proposed
Transfer. Appendix D sets forth the criteria for obtaining Franchisor's
consent to a proposed Transfer.
(b) In the event that Franchisor approves the Transfer, and the
Transfer is not completed within ninety (90) days of the later of
(i) expiration of the forty-five (45) day notice period, or (ii) delivery
of notice of Franchisor's approval of the proposed Transfer, Franchisor's
approval of the proposed Transfer shall automatically be revoked. The
ninety (90) day limitation described in the preceding sentence shall not
apply if at the end of said ninety (90) day period the only issue which
prevents completion of the Transfer is the need to effect transfers of the
applicable liquor licenses. In the event of such a delay, the Transfer
shall take place within seven (7) business days after those liquor
licenses have been transferred. Any subsequent proposal to complete the
proposed Transfer shall be subject to Franchisor's right of approval as
provided herein. The party which desires to effect the proposed Transfer
shall immediately notify Franchisor in writing of any change in the terms
of a Transfer. Any material change in terms of a Transfer prior to
closing shall cause it to be deemed a new Transfer, revoking any approval
previously given by Franchisor and conferring upon Franchisor a new right
to approve such Transfer, which shall be deemed to commence on the day on
which Franchisor receives written notice of such change in terms.
8.9 In connection with any request for Franchisor's approval of a
proposed Transfer to this Section 8, the parties to the proposed Transfer
shall pay Franchisor a fee to defray the actual cost of review and the
administrative and professional expenses related to the proposed Transfer
and the preparation and execution of documents and agreements, up to a
maximum of two thousand five hundred dollars ($2,500).
9. TERMINATION
9.1 This Agreement shall expire on November 27, 2009, unless
sooner terminated pursuant to the terms hereof.
9.2 Franchisor shall have the right to terminate this Agreement
immediately upon written notice to Developer stating the reason for such
termination, and Developer shall no longer have any of the rights created
by this Agreement, in the event of:
(a) development by Developer of a Restaurant without first
obtaining approval from Franchisor of the Restaurant site or of
Developer's architectural and/or engineering plans in accordance with
Section 5 hereof;
(b) any breach or default of any of the provisions of
Sections 8 and 11 of this Agreement and Subsection 14.1 of any
franchise agreement entered into pursuant to this Agreement;
(c) the filing by Developer of a petition in bankruptcy, an
arrangement for the benefit of creditors, or a petition for
reorganization; the filing against Developer of a petition in
bankruptcy, an arrangement for the benefit of creditors, or petition
for reorganization, not dismissed within ninety (90) days of the
filing thereof; the making of an assignment by Developer for the
benefit of creditors; or the appointment of a receiver or trustee for
Developer, which receiver or trustee shall not have been dismissed
within ninety (90) days of such appointment;
(d) the discovery by Franchisor that Developer made any
material misrepresentation or omitted any material fact in the
information which was furnished to Franchisor in connection with this
Agreement;
(e) failure by Developer to locate and employ a Director of
Operations who is approved by Franchisor in accordance with
Subsection 12.2 within ninety (90) days of the date of this Agreement
or, with respect to a replacement Director of Operations, failure by
Developer to locate such a replacement who is approved by Franchisor
in accordance with Subsection 12.2 within one hundred eighty (180)
days of the date on which the last Director of Operations who was
approved by Franchisor ceased to be employed by Developer in that
capacity;
(f) any part of this Agreement relating to the payment of fees
to Franchisor, or the preservation of any of Franchisor's trade names,
service marks, trademarks, trade secrets or secret formulae licensed
or disclosed hereunder or under any franchise agreement between
Franchisor and Developer, for any reason being declared invalid or
unenforceable;
(g) Developer or any Principal Shareholder being convicted of
or pleading nolo contendere to a felony or any crime involving moral
turpitude; or
(h) the franchisee under any franchise agreement executed
pursuant to this Agreement committing a default subject to immediate
termination under the franchise agreement and Franchisor terminates
the franchise agreement.
9.3 Except as provided above in Subsection 9.2, if Developer
defaults in the performance or observance of any of its other obligations
hereunder or under any franchise agreement between Developer and
Franchisor, and any such default continues for a period of thirty (30)
days after written notice to Developer specifying such default, Franchisor
shall have the right to terminate this Agreement upon written notice to
Developer. If Developer defaults in the performance or observance of the
same obligation two (2) or more times within a twelve (12) month period,
Franchisor shall have the right to terminate this Agreement immediately
upon commission of the second act of default, upon written notice to
Developer stating the reason for such termination, without allowance for
any curative period.
9.4 This Agreement shall automatically terminate under the
conditions and at the times specified in Subsection 2.3 and 3.3.
10. PREREQUISITES TO OBTAINING FRANCHISES FOR INDIVIDUAL
RESTAURANT UNITS
10.1 Developer understands and agrees that this Agreement does not
confer upon Developer a right to obtain a franchise for any Restaurant,
but is intended by the parties to set forth the terms and conditions
which, if fully satisfied, shall entitle Developer to obtain such a
franchise, located within the Territory.
10.2 In the event that Developer shall have obtained Franchisor's
approval of a particular proposed site for a Restaurant, and if
Franchisor, in the exercise of its sole discretion, has granted Developer
operational, financial and legal approval, then Franchisor will grant
Developer a franchise for a Restaurant at the site in question. As used
herein, Franchisor will give Developer "operational", "financial" and
"legal" approval under the following circumstances:
"Operational" approval will be granted if Franchisor has determined,
in the exercise of its sole discretion, that Developer is conducting
the operation of each of its Restaurants, and is capable of conducting
the operation of the proposed Restaurant, including physical aspects
thereof, (a) in accordance with the terms and conditions of this
Agreement, (b) in accordance with the provisions of the respective
franchise agreements, and (c) in accordance with the standards,
specifications and procedures set forth and described in the Franchise
Operations Manual and in any other materials or manuals provided or
made available to Developer by Franchisor (collectively, the
"Manuals"), as such may be amended from time to time. Developer
understands that changes in said standards, specifications and
procedures may become necessary from time to time. Developer agrees
to accept said changes, and Developer further agrees that it is within
the sole discretion of Franchisor to make said changes.
"Financial" approval will be granted if (a) Developer is not in breach
of its obligations under Subsection 7.3 hereof and has been and is
faithfully performing all terms and conditions under each of its
existing franchise agreements with Franchisor, (b) Developer or its
affiliates is not in default of any money obligations owed to
Franchisor, and (c) Developer is not in default of any financial
obligation to any of its suppliers, unless any such obligation is
being disputed in good faith by the Developer. Developer acknowledges
and agrees that it is vital to Franchisor's interest that each of its
franchisees be financially sound to avoid failure of a franchised
business (which would adversely affect the reputation and good name of
Franchisor and the System). Developer acknowledges and agrees that it
is vital to Franchisor's interest and to the interests of the System
that Developer (in its capacity as franchisee) remain current in
satisfying its financial obligations to it suppliers.
"Legal" approval will be granted if Franchisor has determined, in the
exercise of its sole discretion, that Developer has submitted to
Franchisor, in a timely manner as requested, all information and
documents requested by Franchisor prior to and as a basis for the
issuance of individual franchises or pursuant to any right granted to
Franchisor by this Agreement or by any franchise agreement between
Developer and Franchisor, and has taken such additional actions in
connection therewith as may be requested from time to time.
10.3 It is understood and agreed that the foregoing criteria apply to
the operational, financial and legal aspects of any Restaurant franchised
by Franchisor in which Developer or any Principal Shareholder has any
legal or equitable interest. It is further understood and agreed that
Developer and Principal Shareholders have an ongoing responsibility to
operate each Restaurant in which Developer or any Principal Shareholder
has any legal or equitable interest in a manner which satisfies the
foregoing requirements for operational, financial and legal approval.
11. RESTRICTIONS
11.1 Developer and its Principal Shareholders acknowledge that over
the term of this Agreement they are to receive proprietary information
which Franchisor has developed over time at great expense, including, but
not limited to, methods of site selection, marketing methods, product
analysis and selection, and service methods and skills relating to the
development and operation of Restaurants. They further acknowledge that
this information, which includes, but is not necessarily limited to, that
contained in the Manuals, is not generally known in the industry and is
beyond their own present skills and experience, and that to develop it
themselves would be expensive, time-consuming and difficult. Developer
and Principal Shareholders further acknowledge that the Franchisor's
information provides a competitive advantage and will be valuable to them
in the development of their business, and that gaining access to it is
therefore a primary reason why they are entering into this Agreement.
Accordingly, Developer and its Principal Shareholders agree that
Franchisor's information, as described above, which may or may not be
"trade secrets" under prevailing judicial interpretations, is private and
valuable, and constitutes trade secrets belonging to Franchisor; and in
consideration of Franchisor's confidential disclosure to them of these
trade secrets, Developer and Principal Shareholders agree as follows:
(a) During the term of this Agreement, neither Developer nor
any Principal Shareholder, for so long as such Principal Shareholder
owns an Interest in Developer, may, without the prior written consent
of Franchisor, directly or indirectly engage in, or acquire any
financial or beneficial interest (including any interest in
corporations, partnerships, trusts, unincorporated associations or
joint ventures) in, advise, help, guarantee loans or make loans to,
any restaurant business whose menu or method of operation is similar
to that employed by restaurant units within the System which is either
(i) located in the Territory, (ii) located in the Area of Dominant
Influence (as defined and established from time to time by Arbitron
Ratings Company) of any Restaurant developed pursuant to this
Agreement, (iii) located within a five (5) mile radius of any
restaurant unit within the System, or (iv) determined by Franchisor,
exercising reasonable good faith judgment, to be a direct competitor
of the System.
(b) Neither Developer, for two (2) years following the
termination of this Agreement, nor any Principal Shareholder, for
two (2) years following the termination of all of his or her Interest
in Developer or the termination of this Agreement, whichever occurs
first, may directly or indirectly engage in or acquire any financial
or beneficial interest (including any interest in corporations,
partnerships, trusts, unincorporated associations or joint ventures)
in, advise, help, guarantee loans or make loans to, any restaurant
business whose menu or method of operation is similar to that employed
by restaurant units within the System which is located either (i) in
the Territory, (ii) in the Area of Dominant Influence (as defined and
established from time to time by Arbitron Ratings Company) of any
Restaurant developed pursuant to this Agreement, (iii) within a
five (5) mile radius of any restaurant unit within the System, or
(iv) within any area for which an active, currently binding
development agreement has been granted by Franchisor to another
franchisee as of the date of termination.
11.2 Neither Developer nor any Shareholder shall at any time
(a) appropriate or use the trade secrets incorporated in the System, or
any portion thereof, in any other restaurant business which is not within
the System, (b) disclose or reveal any portion of the System to any person
other than to Developer's employees as an incident of their training,
(c) acquire any right to use any name, mark or other intellectual property
right which may be granted pursuant to any agreement between Franchisor
and Developer, except in connection with the operation of a Restaurant, or
(d) communicate, divulge or use for the benefit of any other person or
entity any confidential information, knowledge or know-how concerning the
methods of development or operation of a restaurant utilizing the System,
which may be communicated by Franchisor in connection with the Restaurants
to be developed hereunder.
11.3 Developer and Principal Shareholders agree that the provisions
of this Section 11 are and have been a primary inducement to Franchisor to
enter into this Agreement, and that in the event of breach thereof
Franchisor would be irreparably injured and would be without an adequate
remedy at law. Therefore, in the event of a breach, or a threatened or
attempted breach, of any of such provisions Franchisor shall be entitled,
in addition to any other remedies which it may have hereunder or in law or
in equity (including the right to terminate this Agreement), to a
preliminary and/or permanent injunction and a decree for specific
performance of the terms hereof without the necessity of showing actual or
threatened damage, and without being required to furnish a bond or other
security.
11.4 The restrictions contained in Subsection 11.1 above shall not
apply to ownership of less than two percent (2%) of the shares of a
company whose shares are listed and traded on a national securities
exchange if such shares are owned for investment only, and are not owned
by an officer, director, employee or consultant of such publicly traded
company.
11.5 If any court or other tribunal having jurisdiction to determine
the validity or enforceability of this Section 11 determines that it would
be invalid or unenforceable as written, then the provisions hereof shall
be deemed to be modified or limited to such extent or in such manner as
necessary for such provisions to be valid and enforceable to the greatest
extent possible.
12. DEVELOPMENT PROCEDURES
12.1 Franchisor will use its reasonable efforts to furnish Developer
with advice and assistance in developing Restaurants and in selecting
sites therefor.
12.2 Developer shall designate an individual employee who shall be
personally responsible for Developer's activities during the term of this
Agreement, and who shall devote his or her full-time, best efforts and
constant personal attention, on a day-to-day basis, to Developer's
activities in the Territory (the "Director of Operations"). Developer
shall require that the Director of Operations maintain his or her
principal personal residence in the Territory. Franchisor reserves the
right to require that, as a condition of his or her employment, the
Director of Operations, as well as each supervisory employee referred to
in Subsection 12.3, must successfully complete Franchisor's interview
process and a psychological profile test in a manner which satisfies a
uniform standard established by Franchisor. The test shall be
administered by Franchisor, or by a testing agency designated by
Franchisor, at Developer's expense. Developer's designation of the first
Director of Operations, and any subsequent Director of Operations, shall
be subject to the written approval of Franchisor, which approval shall not
be arbitrarily withheld, and shall also be subject to the time limitations
described in Subsection 9.2(e) hereof. Franchisor shall notify Developer
in writing within fourteen (14) business days of receipt of Developer's
request whether Franchisor disapproves such person. Failure by Franchisor
to so notify Developer within that period shall be deemed to constitute
Franchisor's approval of such person.
12.3 In the event that Developer desires to designate an employee (in
addition to the Director of Operations) who will have supervisory
authority over the development of operation of more than one (1)
Restaurant within the Territory, Developer's designation of such a
supervisory employee shall be subject to the written approval of
Franchisor, which approval shall not be arbitrarily withheld. Franchisor
shall notify Developer in writing within fourteen (14) business days of
receipt of Developer's request whether Franchisor disapproves such person.
Failure by Franchisor to so notify Developer within that period shall be
deemed to constitute Franchisor's approval of such person. Developer
shall require that any such supervisory employee maintain his or her
principal personal residence in the Territory.
12.4 Developer shall require the Director of Operations to execute a
confidentiality agreement and covenant not to compete in the form attached
hereto as Appendix E. In addition, at Franchisor's request, Developer
shall obtain from the Director of Operations an agreement verifying his or
her employment status. Developer shall require that each other employee
of Developer who will have supervisory authority over the development or
operation of more than one (1) Restaurant execute a confidentiality
agreement in the form attached hereto as Appendix F. Developer shall be
responsible for compliance of its employees with the agreements identified
in this Subsection.
12.5 (a) Developer shall require its Director of Operations and any
other supervisory employee designated pursuant to Subsection 12.3 to
attend, and to successfully complete to Franchisor's reasonable
satisfaction, an operations training course provided by Franchisor. If
the Director of Operations or any such supervisory employee fails to
successfully complete Franchisor's operations training course, Franchisor
may require designation of a new Director of Operations or replacement
supervisory employee, as the case may be, and Developer shall designate a
new Director of Operations or replacement supervisory employee who shall
be required to successfully complete such training course.
(b) The Director of Operations and supervisory employees
designated pursuant to Subsection 12.3 shall, from time to time as
reasonably requested by Franchisor, attend and successfully complete to
Franchisor's reasonable satisfaction a Franchisor-provided refresher
course in restaurant operations.
12.6 With respect to each Restaurant within the Territory developed
by Developer, Developer's employees must satisfy the training requirements
described in Section 6 of Appendix B hereto. After Developer opens it
first Restaurant pursuant to this Agreement, Franchisor may at its option,
and subject to such conditions as Franchisor deems necessary, permit
Developer (at Developer's own expense) to conduct a portion of the
required training at one of Developer's existing Restaurants. In that
event, Developer will be required to provide qualified personnel to
administer training tests and to maintain records relating to the training
and performance of employees.
13. NO WAIVER OF DEFAULT
13.1 The waiver by any party to this Agreement of any breach or
default, or series of breaches or defaults, of any term, covenant or
condition herein, or of any same or similar term, covenant or condition
contained in any other agreement between Franchisor and any other person,
shall not be deemed a waiver of any subsequent or continuing breach or
default of the same or any other term, covenant or condition in this
Agreement, or in any other agreement between Franchisor and any other
person.
13.2 All rights and remedies of Franchisor shall be cumulative and
not alternative, in addition to and not exclusive of any other rights or
remedies which are provided for herein or which may be available at law or
in equity in case of any breach, failure or default or threatened breach,
failure or default of any term, provision or condition of this Agreement.
Franchisor's rights and remedies shall be continuing and shall not be
exhausted by any one (1) or more uses thereof, and may be exercised at any
time or from time to time as often as may be expedient; and any option or
election to enforce any such right or remedy may be exercised or taken at
any time and from time to time. The expiration or earlier termination of
this Agreement shall not discharge or release Developer or any Principal
Shareholder from any liability or obligation then accrued, or any
liability or obligation continuing beyond, or arising out of, the
expiration or earlier termination of this Agreement.
14. FORCE MAJEURE
14.1 As used in this Agreement, the term "Force Majeure" shall mean
any act of God, strike, lock-out or other industrial disturbance, war
(declared or undeclared), riot, epidemic, fire or other catastrophe, act
of any government and any other similar cause not within the control of
the party affected thereby.
14.2 If the performance of any obligation by any party under this
Agreement is prevented, hindered or delayed by reason of Force Majeure,
which cannot be overcome by use of normal commercial measures, the parties
shall be relieved of their respective obligations to the extent the
parties are respectively necessarily prevented, hindered or delayed in
such performance during the period of such Force Majeure. The party whose
performance is affected by an event of Force Majeure shall give prompt
notice of such Force Majeure event to the other party by telephone or
telegram (in each case to be confirmed in writing), setting forth the
nature thereof and an estimate as to its duration, and shall be liable for
failure to give such timely notice only to the extent of damage actually
caused.
15. CONSTRUCTION, SEVERABILITY, GOVERNING LAW AND
JURISDICTION
15.1 If any part of this Agreement shall for any reason be declared
invalid, unenforceable or impaired in any way, the validity of the
remaining portions shall remain in full force and effect as if this
Agreement had been executed with such invalid portion eliminated, and it
is hereby declared the intention of the parties that they would have
executed the remaining portion of this Agreement without including therein
any such portions which might be declared invalid; provided however, that
in the event any part hereof relating to the payment of fees to
Franchisor, or the preservation of any of Franchisor's trade names,
service marks, trademarks, trade secrets or secret formulae licensed or
disclosed hereunder or pursuant to any franchise agreement between
Franchisor and Developer is for any reason declared invalid or
unenforceable, then Franchisor shall have the option of terminating this
Agreement upon written notice to Developer. If any clause or provision
herein would be deemed invalid or unenforceable as written, it shall be
deemed to be modified or limited to such extent or in such manner as may
be necessary to render the clause or provision valid and enforceable to
the greatest extent possible in light of the interest of the parties
expressed in that clause or provision, subject to the provisions of the
preceding sentence.
15.2 DEVELOPER AND PRINCIPAL SHAREHOLDERS ACKNOWLEDGE THAT FRANCHISOR
MAY ENTER INTO OTHER DEVELOPMENT AGREEMENTS THROUGHOUT THE UNITED STATES
ON TERMS AND CONDITIONS SIMILAR TO THOSE SET FORTH IN THIS AGREEMENT, AND
THAT IT IS OF MUTUAL BENEFIT TO DEVELOPER AND PRINCIPAL SHAREHOLDERS AND
TO FRANCHISOR THAT THESE TERMS AND CONDITIONS BE UNIFORMLY INTERPRETED.
THEREFORE, THE PARTIES AGREE THAT TO THE EXTENT THAT THE LAW OF THE STATE
OF MISSOURI DOES NOT CONFLICT WITH LOCAL FRANCHISE STATUTES, RULES AND
REGULATIONS, MISSOURI LAW SHALL APPLY TO THE CONSTRUCTION OF THIS
AGREEMENT AND SHALL GOVERN ALL QUESTIONS WHICH ARISE WITH REFERENCE
HERETO; PROVIDED HOWEVER, THAT PROVISIONS OF MISSOURI LAW REGARDING
CONFLICTS OF LAW SHALL NOT APPLY HERETO.
15.3 THE PARTIES AGREE THAT ANY CLAIM, CONTROVERSY OR DISPUTE ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE PERFORMANCE THEREOF WHICH
CANNOT BE AMICABLY SETTLED, EXCEPT AS OTHERWISE PROVIDED HEREIN, MAY, AT
THE OPTION OF THE CLAIMANT, BE RESOLVED BY A PROCEEDING IN A COURT IN
JACKSON COUNTY, MISSOURI, AND DEVELOPER AND THE PRINCIPAL SHAREHOLDERS
EACH IRREVOCABLY ACCEPT THE JURISDICTION OF THE COURTS OF THE STATE OF
MISSOURI AND THE FEDERAL COURTS LOCATED IN JACKSON COUNTY, MISSOURI FOR
SUCH CLAIMS, CONTROVERSIES OR DISPUTES.
The parties agree that service of process in any proceeding arising
out of or relating to this Agreement or the performance thereof may be
made as to Developer and any Principal Shareholder by serving a person of
suitable age and discretion (such as the person in charge of the office)
at the address of Developer specified in this Agreement and as to
Franchisor by serving the president or a vice-president of Franchisor at
the address of Franchisor or by serving Franchisor's registered agent.
16. MISCELLANEOUS
16.1 All notices and other communications required or permitted to be
given hereunder shall be deemed given when delivered in person or mailed
by registered or certified mail addressed to the recipient at the address
set forth below, unless that party shall have given written notice of
change of address to the sending party, in which event the new address so
specified shall be used.
FRANCHISOR: Applebee's International, Inc.
4551 W. 107th Street, Suite 100
Overland Park, Kansas 66207
Attention: President
DEVELOPER: Marcus Restaurants, Inc.
250 E. Wisconsin Avenue, Suite 1600
Milwaukee, Wisconsin 53202-4223
Attention: President
PRINCIPAL SHAREHOLDERS: N/A
16.2 All terms used in this Agreement, regardless of the number and
gender in which they are used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context or sense of this Agreement may require,
the same as if such words had been written in this Agreement themselves.
The headings inserted in this Agreement are for reference purposes only
and shall not affect the construction of this Agreement or limit the
generality of any of its provisions. The term "business day" means any
day other than Saturday, Sunday, or the following national holidays: New
Year's Day, Martin Luther King Day, Washington's Birthday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and
Christmas.
16.3 This Agreement, the Uniform Franchise Offering Circular
currently in effect and the documents referred to herein constitute the
entire agreement between parties, superseding and canceling any and all
prior and contemporaneous agreements, understandings, representations,
inducements and statements, oral or written, of the parties in connection
with the subject matter hereof.
16.4 Except as expressly authorized herein, no amendment or
modification of this Agreement shall be binding unless executed in writing
both by Franchisor and by Developer and Principal Shareholders.
16.5 In the event that any party to this Agreement initiates any
legal proceeding to construe or enforce any of the terms conditions and/or
provisions of this Agreement, including, but not limited to, its
termination provisions, or to obtain damages or other relief to which any
party may be entitled by virtue of this Agreement, the prevailing party or
parties shall be paid its reasonable attorneys' fees and expenses by other
party or parties.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of
the date first above written.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Robert T. Steinkamp Name: Abe J. Gustin, Jr.
Title: Secretary Title: President
DEVELOPER:
ATTEST: MARCUS RESTAURANTS, INC.
By:
Name: Thomas F. Kissinger Name: Stephen Marcus
Title: Secretary Title: President
SCHEDULE 1 TO DEVELOPMENT AGREEMENT
RESTAURANT LOCATIONS FOR WHICH
FRANCHISE AGREEMENTS
HAVE BEEN PREVIOUSLY ISSUED
Schuamburg, Illinois (Unit #8680)
Bloomingdale, Illinois (Unit #8719)
Deerfield, Illinois (Unit #8750)
Mt. Prospect, Illinois (Unit #8753)
Streamwood, Illinois
Hodgkins, Illinois
Naperville, Illinois
Crystal Lake, Illinois
APPENDIX A TO DEVELOPMENT AGREEMENT
TERRITORY
A PORTION OF THE CHICAGO, ILLINOIS A.D.I., CONSISTING OF:
In the state of Illinois, the counties of:
McHenry Kane La Salle
Kankakee Lake Cook
Kendall Grundy De Kalb
DuPage Will Livingston
Iroquois
In the state of Wisconsin, the county of:
Kenosha
APPENDIX B TO DEVELOPMENT AGREEMENT
STANDARD FORM
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
FRANCHISE AGREEMENT
___________________________________
(Location Address)
___________________________________
(Franchisee Name)
___________________________________
(Date)
TABLE OF CONTENTS
RECITALS . . . . . . . . . . . . . . . . . . . . . . . 1
1. FRANCHISE GRANT AND TERM . . . . . . . . . . . . 2
2. UNIFORM STANDARDS . . . . . . . . . . . . . . . 3
3. COMPLIANCE WITH THE SYSTEM . . . . . . . . . . . 4
4. GENERAL SERVICES OF FRANCHISOR . . . . . . . . . 4
5. RESTAURANT SYSTEM AND PROCEDURES . . . . . . . . 5
6. TRAINING . . . . . . . . . . . . . . . . . . . . 8
7. RESTAURANT MAINTENANCE . . . . . . . . . . . . . 8
8. ADVERTISING . . . . . . . . . . . . . . . . . . 9
9. FEES . . . . . . . . . . . . . . . . . . . . . . 12
10. RECORD KEEPING . . . . . . . . . . . . . . . . . 13
11. FRANCHISEE ORGANIZATION, AUTHORITY,
FINANCIAL CONDITION AND SHAREHOLDERS . . . . . . 14
12. TRANSFER . . . . . . . . . . . . . . . . . . . . 15
13. CONFIDENTIALITY; RESTRICTIONS . . . . . . . . . 18
14. INSPECTIONS . . . . . . . . . . . . . . . . . . 20
15. RELATIONSHIP OF PARTIES AND INDEMNIFICATION . . 21
16. INSURANCE . . . . . . . . . . . . . . . . . . . 23
17. DEBTS AND TAXES . . . . . . . . . . . . . . . . 24
18. TRADE NAMES, SERVICE MARKS AND TRADEMARKS . . . 24
19. EXPIRATION AND TERMINATION; OPTION TO
PURCHASE RESTAURANT; ATTORNEYS' FEES . . . . . . 26
20. NO WAIVER OF DEFAULT . . . . . . . . . . . . . . 31
21. CONSTRUCTION, SEVERABILITY,
GOVERNING LAW AND JURISDICTION . . . . . . . . . 32
22. INTERFERENCE WITH EMPLOYMENT RELATIONS . . . . . 33
23. LIQUOR LICENSE . . . . . . . . . . . . . . . . . 33
24. FORCE MAJEURE . . . . . . . . . . . . . . . . . 34
25. MISCELLANEOUS . . . . . . . . . . . . . . . . . 35
26. ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . 36
EXHIBIT 1: ROYALTY FEE
APPENDIX A: STATEMENT OF OWNERSHIP INTERESTS
APPENDIX B: REVIEW AND CONSENT WITH RESPECT TO TRANSFERS
APPENDIX C: CONFIDENTIALITY AGREEMENT
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
FRANCHISE AGREEMENT
This Agreement is made this ________ day of _____________________,
19______, by and between APPLEBEE'S INTERNATIONAL, INC., a Delaware
corporation ("FRANCHISOR"), _____________________________________________,
a (_______________ corporation, sole proprietorship, _______________
partnership, _______________ limited partnership [strike inappropriate
language]) ("FRANCHISEE") and ______________________________________
______________________________ (collectively, the "PRINCIPAL SHAREHOLDERS"
and, individually, a "PRINCIPAL SHAREHOLDER" of Franchisee if a
corporation or general partner if Franchisee is a limited partnership
having as its general partner a corporation) and
__________________________________________________________________________
_______
("GENERAL PARTNER" of Franchisee if Franchisee is a limited partnership).*
* (If Franchisee is not a corporation or a sole proprietorship, the
parties hereto hereby agree that an Addendum shall be attached to this
Agreement so as properly to reflect the responsibilities of the partners
of any general partnership, the general partner of any limited partnership
and the shareholders of any corporate general partner of any partnership.)
WITNESSETH:
RECITALS
A. Franchisor has acquired rights to develop and operate a unique
system of restaurants which specialize in the sale of high quality,
moderately priced food and alcoholic beverages in an attractive, casual
setting, which includes proprietary rights in certain valuable trade
names, service marks and trademarks, including the service mark Applebee's
Neighborhood Grill & Bar and variations of such mark, designs, decor and
color schemes for restaurant premises, signs, equipment, procedures and
formulae for preparing food and beverage products, specifications for
certain food and beverage products, inventory methods, operating methods,
financial control concepts, a training facility and teaching
techniques ("the System").
B. Franchisor has determined to establish, through its own
development and operation, and through the granting of franchises, a chain
of Applebee's Neighborhood Grill & Bar restaurants which are distinctive;
which are similar in appearance, design and decor; and which are uniform
in operation and product consistency.
C. The value of Franchisor's trade names, service marks and
trademarks is based upon: (1) the maintenance of uniform high quality
standards in connection with the preparation and sale of
Franchisor-approved food and beverage products, (2) the uniform high
standards of appearance of the individual restaurant units in the System,
(3) the use of distinctive trademarks, service marks, building designs and
advertising signs representing a uniformly high quality of product and
services, and (4) the assumption by Franchisor and its franchisees of the
obligation to maintain and enhance the goodwill and public acceptance of
the System (and of Franchisor's trade names, service marks and trademarks)
by strict adherence to the high standards required by Franchisor.
D. Franchisor, Franchisee and the Principal Shareholders have entered
into a Development Agreement dated __________________, 19______
("Development Agreement"), relating to the development by Franchisee of
Applebee's Neighborhood Grill & Bar restaurants.
E. Franchisee desires to use the System in connection with the
operation of an Applebee's Neighborhood Grill & Bar restaurant at the
location which is specified in Subsection 1.1 of this Agreement, pursuant
to the terms, conditions and provisions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual obligations contained
herein, it is hereby agreed as follows:
1. FRANCHISE GRANT AND TERM
1.1 Franchisor grants Franchisee, for the term stated below, the
right, license and privilege:
(a) to use the System incident to the operation of an
Applebee's Neighborhood Grill & Bar restaurant at
_____________________________________________________ (the
"Restaurant");
(b) to use the trade names, service marks and trademarks which
Franchisor shall from time to time designate as part of the System,
but only in connection with the sale at the Restaurant of those
products which Franchisor has designated and approved; and
(c) to hold itself out to the public as a Franchisee of
Franchisor.
1.2 The term of the franchise shall commence as of the
Commencement Date, as hereinafter defined, and shall end twenty (20) years
thereafter, unless this Agreement is terminated prior to that date in
accordance with its provisions. "Commencement Date," as used herein,
shall mean the date upon which the Restaurant opens for business. The
parties agree to affix to this Agreement an addendum expressly setting
forth the Commencement Date, which, when so affixed, shall become a part
of this Agreement.
1.3 At the expiration of the term hereof, Franchisee shall have an
option to operate the Restaurant for four (4) successive terms of five (5)
years (unless the franchise agreement with respect to that additional term
is sooner terminated in accordance with its provisions), provided that
immediately prior to each such five (5) year term (a) Franchisee satisfies
the requirements which Franchisor then-imposes on its new franchisees,
(b) all other restaurant units within the System which Franchisee then-
operates substantially comply, in the opinion of Franchisor, with
Franchisor's then-current standards, specifications, requirements and
instructions, and (c) Franchisee executes the form of franchise agreement
which Franchisor is then using with respect to new restaurants within the
System, with the amount of royalty and advertising fees payable at the
rates then-prevailing under the franchise agreements which Franchisor is
then using for new restaurants within the System, and Franchisee pays to
Franchisor for each of said five (5) year periods a franchise fee equal to
ten percent (10%) of the prevailing franchise fee paid by new franchisees
at that time. Any franchise agreement which Franchisee executes for such
additional term will also contain options to obtain an assignment of
Franchisee's lease with a third party and/or to purchase certain property
or to purchase or lease the Restaurant premises exercisable by Franchisor
upon termination thereof and an option to purchase or lease the Restaurant
premises exercisable by Franchisor upon expiration of the renewal term
(subject to any then-existing renewal rights of Franchisee). Such options
will contain provisions substantially similar to the provisions of
Franchisor's options described in Subsection 19.4 hereof. Franchisee
shall give Franchisor written notice of its desire to exercise its option
to operate the Restaurant for an additional term no earlier than
twelve (12) months, and no later than seven (7) months, prior to
expiration of the initial term. If Franchisee gives that notice,
Franchisor, in its sole discretion, reasonably exercised, shall determine
whether Franchisee has satisfied the foregoing requirements. Within
forty-five (45) days of receiving the notice described above, Franchisor
shall notify Franchisee in writing whether or not Franchisee is eligible
to exercise the option described in this Subsection.
1.4 During the period from the date of this Agreement to the
expiration or earlier termination of this Agreement, Franchisor shall not
establish a restaurant unit utilizing the System, or license another
franchisee to establish a restaurant unit utilizing the System, at any
location within the lesser of a three (3) mile radius of the Restaurant or
a radius from the Restaurant which includes either a daytime or
residential population of forty thousand (40,000) or more people.
1.5 Franchisee, in consideration of the benefits and privileges
provided to it by this Agreement, agrees to operate the Restaurant and
perform as required hereunder for the full term of this Agreement.
1.6 This Agreement is entered into pursuant to and subject to the
terms and conditions which are set forth in the Development Agreement.
2. UNIFORM STANDARDS
2.1 The System is a comprehensive restaurant system for the
retailing of certain uniform and quality food and beverage products
(including alcoholic beverages), emphasizing a varied menu of high
quality, moderately priced food products (including appetizers, creative
sandwiches, dinner entrees and desserts), a selection of alcoholic and
other beverages, and prompt and courteous service in a clean, wholesome,
casual atmosphere. The foundation of the System is the establishment and
maintenance of a reputation among the public for the operation of high
quality restaurant units. A fundamental requirement of the System, this
Franchise Agreement and franchises which Franchisor will grant to others
is adherence by all franchisees to Franchisor's standards and policies
providing for the uniform operation of all restaurant units within the
System, including, but not limited to, (a) selling only those products
which Franchisor has designated and approved, (b) using only Franchisor's
prescribed building layout and designs, equipment, signs, interior and
exterior decor items, fixtures and furnishings, (c) adhering strictly to
Franchisor's standards and specifications relating to the selection,
purchase, storage, preparation, packaging, service and sale of all food
and beverage products being sold at the Restaurant, and (d) satisfying all
of Franchisor's prescribed standards of quality, service and cleanliness.
Compliance by all franchisees with the foregoing standards and policies in
conjunction with the use of Franchisor's trade names, service marks and
trademarks provides the basis for the wide public acceptance of the System
and its valuable goodwill. Accordingly, strict adherence by all
franchisees to all aspects of the System is required at all times.
2.2 The provisions of the Agreement shall be interpreted to give
effect to the intent of the parties stated in this Section 2 to assure
that Franchisee shall operate the Restaurant in conformity with the
System, through strict adherence to Franchisor's standards and policies as
they now exist and as they may be modified from time to time.
3. COMPLIANCE WITH THE SYSTEM
Franchisee acknowledges that every component of the System is
important to Franchisor, to all franchisees and to the operation of the
Restaurant, including the requirements (a) that only those products
designated and approved by the Franchisor are sold at the Restaurant, and
(b) that there is uniformity of food and beverage specifications,
preparation methods, quality, appearance, building and interior design,
color and decor, landscaping, facilities and service among all restaurant
units in the System. Accordingly, Franchisee agrees to and shall comply
with all aspects of the System (as it now exists and as it may be modified
from time to time). Franchisee recognizes and agrees that Franchisor may
prohibit the use of the System and its trade names, notwithstanding the
granting of this Agreement, if Franchisee fails to design, construct,
equip or furnish its Restaurant in compliance with the specifications
designated by Franchisor, unless prior written approval has been received
from Franchisor.
4. GENERAL SERVICES OF FRANCHISOR
4.1 Franchisor shall advise and consult with Franchisee
periodically in connection with the operation of the Restaurant, and at
other reasonable times upon Franchisee's request. Franchisor will provide
to Franchisee such of its know-how, new developments, techniques and
improvements in areas of restaurant design, management, food and beverage
preparation, sales promotion and service concepts as may be pertinent to
the construction and operation of the Restaurant under the System.
Franchisor may provide the foregoing information (a) by sending
representatives to visit the Restaurant, (b) by providing written or other
material, (c) at meetings or seminars, and (d) at training sessions at
Franchisor's training facility and/or such other locations as may be
selected by Franchisor from time to time. Franchisor also shall make
available to Franchisee all additional services, facilities, rights and
privileges which Franchisor makes available from time to time to its
franchisees of the System generally.
4.2 For approximately eight (8) days prior to the opening of the
Restaurant and the first six (6) days that the Restaurant is open for
business, Franchisor shall provide Franchisee, at Franchisor's expense,
with the services of up to a maximum of six (6) of Franchisor's training
personnel to facilitate proper operation of the kitchen, bar and dining
room areas during that period and to assist in correcting any operational
problems which may arise.
4.3 From time to time during the term of this Agreement,
Franchisor will develop and test new menu items. The menu consists of
approved national food and beverage selections. Franchisee shall comply
with all menu changes which generally occur every six (6) months. The
menu may be modified to reflect food and beverage items peculiar to
Franchisee's local area, subject to Franchisor's testing and approval.
5. RESTAURANT SYSTEM AND PROCEDURES
5.1 Franchisor shall furnish Franchisee with advice and assistance
in managing and operating the Restaurant, and Franchisor's representatives
will visit the Restaurant periodically. Franchisor will assist Franchisee
in coordinating the Restaurant's pre-opening activities, and as noted more
particularly in Subsection 4.2 hereof, shall provide Franchisee with the
services of certain of Franchisor's personnel to facilitate proper
operation of the Restaurant when it opens for business.
5.2 Franchisee shall designate an employee who will supervise the
Restaurant, and devote his or her full time, best efforts and constant
personal attention to the day-to-day operation of the Restaurant (the
"General Manager"). Franchisee also shall designate an employee who will
supervise the Restaurant kitchen, and devote his or her full time, best
efforts and constant personal attention to the day-to-day operation of the
Restaurant kitchen (the "Kitchen Manager").
5.3 Franchisee shall require that the General Manager, the Kitchen
Manager and each of Franchisee's employees who serve as Restaurant
managers to maintain his or her principal personal residence within a
usual driving time of not more than approximately one (1) hour from the
Restaurant. Franchisor reserves the right to require that, as a condition
of his or her employment, the General Manager must successfully complete
Franchisor's interview process and a psychological profile test in a
manner which satisfies a uniform standard established by Franchisor. The
test shall be administered by Franchisor, or by a testing agency
designated by Franchisor, at Franchisee's expense.
5.4 Unless Franchisor shall have given its prior written approval,
Franchisee shall keep the Restaurant open for business only during the
hours which are specified by Franchisor in the Franchise Operations Manual
or in such other materials or manuals provided or made available by
Franchisor to Franchisee (collectively the "Manuals"), provided that such
hours do not conflict with state laws or local ordinances relating to the
sale of alcoholic beverages or governing the hours during which restaurant
establishments may be open for business. In addition, Franchisee
expressly agrees to:
(a) operate the Restaurant in a clean, safe and orderly manner,
providing courteous, first-class service to the public;
(b) diligently promote and make every reasonable effort to
increase the business of the Restaurant;
(c) advertise the business of the Restaurant by the use of the
Franchisor's trade names, service marks and trademarks and such other
insignia, slogans, emblems, symbols, designs and other identifying
characteristics as may be developed or established from time to time
by Franchisor and included in the Manuals, subject to the limitations
of Subsections 8.4 and 8.5 hereof;
(d) prohibit and, to the best of Franchisee's ability, prevent
the use of the Restaurant for any immoral or illegal purpose, or for
any other purpose, business activity, use of function which is not
expressly authorized hereunder or in the Manuals; and
(e) comply fully with all applicable laws and regulations,
including, but not limited to, those relating to building
construction, maintenance and safety, fire prevention, food safety,
and the sale of alcoholic beverages.
5.5 Franchisee hereby acknowledges receipt and loan of a copy of
the Manuals heretofore or hereinafter furnished to Franchisee, and agrees
to faithfully, completely and continuously perform, fulfill, observe and
follow all instructions, requirements, standards, specifications, systems
and procedures contained therein, including (a) those relating to the
construction, design, decor, building and equipping of the Restaurant,
(b) those relating to the selection, purchase, storage, preparation,
packaging, service and sale of all products being sold at the Restaurant,
(c) those relating to the maintenance and repair of Restaurant building,
grounds, equipment, signs, interior and exterior decor items, fixtures and
furnishings, and (d) those relating to employee uniforms and dress,
accounting, bookkeeping, record retention, and other business systems,
procedures and operations. The Manuals are incorporated herein by
reference and hereby made part of this Agreement. Franchisee acknowledges
and agrees that the materials contained in the Manuals are integral,
necessary and material elements of the System.
5.6 Franchisee understands, acknowledges and agrees that strict
conformity with the System, including the standards, specifications,
systems, procedures, requirements and instructions contained in this
Agreement and in the Manuals, is vitally important, not only to the
success of Franchisor, but to the collective success of all of
Franchisor's other franchisees, by reason of the benefits which Franchisor
and all of its franchisees will derive from uniformity in products sold,
identity, quality, appearance, facilities and service among all restaurant
units which are part of the System. Without limiting the generality of
the foregoing provisions, Franchisee agrees to adhere strictly to the
requirements in the Manuals relating (a) to the construction, design,
decor, building and equipping of the Restaurant, (b) to the maximum
permissible ratio of sales of alcoholic beverages to sales of food at the
Restaurant, and (c) to the limitations on the number of video games or
similar devices which may be placed on the Restaurant premises. Any
failure to adhere to the standards, specifications, systems, requirements
or instructions contained in this Agreement or in the Manuals shall
constitute a material breach of this Agreement.
5.7 Franchisor shall have the right, at any time and from time to
time, in the good faith exercise of its reasonable business judgment,
consistent with the overall best interests of the System generally, having
due regard for the financial burden which may be placed upon its
franchisees, to revise, amend, delete from and add to the System and the
material contained in the Manuals. Franchisee expressly agrees to comply
with all such revisions, amendments, deletions and additions.
5.8 Franchisee shall offer for sale from the Restaurant, at all
times when the Restaurant is open for business, only the products which
are expressly designated in the Manuals, except, as noted more
particularly in Subsection 4.3, to the extent that Franchisee has obtained
Franchisor's prior written consent to a modification of that requirement.
No product shall be offered or sold at or from the Restaurant under, or in
connection with, any trademark or service mark other than Franchisor's
designated trademarks and service marks without Franchisor's prior written
consent.
5.9 Franchisee shall obtain all food and beverage products,
equipments, signs, interior and exterior decor items, fixtures,
furnishings, supplies, and other products and materials required for the
operation of or sold at the Restaurant solely from suppliers (including
manufacturers, distributors and other sources) who demonstrate, to
Franchisor's continuing reasonable satisfaction, the ability to meet
Franchisor's then-current standards and specifications for such items; who
possess adequate quality controls and capacity to supply Franchisee's
needs promptly and reliably; and who have been approved in writing by
Franchisor and not thereafter disapproved. The Manuals contain a list of
approved suppliers. If Franchisee desires to purchase any items from an
unapproved supplier, Franchisee shall submit to Franchisor a written
request for such approval, which approval shall not be unreasonably
withheld, or shall request the supplier itself to do so. Franchisor shall
have the right to inspect the supplier's facilities, and to require that
samples from the supplier be delivered, at Franchisor's option, either to
Franchisor or to an independent, certified laboratory designated by
Franchisor for testing. Franchisee or the supplier shall pay the costs of
any such test. Franchisor shall notify Franchisee in writing within
forty-five (45) days of receiving any such request whether it disapproves
the supplier. Failure by Franchisor to so notify Franchisee within that
period shall be deemed to constitute Franchisor's approval of such
supplier. Franchisor reserves the right, at its option, to reinspect the
facilities and retest products of any such approved supplier at any time
and to revoke its approval upon the supplier's failure to continue to meet
any of Franchisor's criteria. Notwithstanding the foregoing, any supplier
of goods having any trademark, trade name, service mark, logo or symbol
owned by Franchisor shall not be approved to supply Franchisee such goods
until such supplier has entered a written agreement with Franchisor
regarding the production, use and sale of such goods.
5.10 No food or beverage product, interior or exterior decor item,
sign, item of equipment, fixtures, furnishings or supplies, or other
product or material required for the operation of the Restaurant, which
bears any of Franchisor's trade names, service marks or trademarks, shall
be used or sold in or upon the Restaurant premises unless the same shall
have been first submitted to and approved in writing by Franchisor.
5.11 The Manuals and all related material furnished to Franchisee
hereunder are and shall remain the property of Franchisor, and must be
returned to Franchisor, along with any copies made thereof, immediately
upon request or upon the expiration or earlier termination of this
Agreement.
6. TRAINING
6.1 Franchisor shall make its operations training course available
to the General Manager, the Kitchen Manager, and Franchisee's Assistant
Managers and other Restaurant managers.
6.2 Before the Restaurant opens for business, and thereafter as
replacement personnel are employed by Franchisee, the General Manager, the
Kitchen Manager and each Assistant Manager shall attend Franchisor's
operations training facility for such period of time as Franchisor shall
deem reasonably necessary, and shall successfully complete that course to
Franchisor's reasonable satisfaction. If the General Manager, Kitchen
Manager or an Assistant Manager fails to successfully complete
Franchisor's operations training course, Franchisor may require
designation of a new General Manager, Kitchen Manager or Assistant
Manager, as the case may be, and Franchisee shall designate a new General
Manager, Kitchen Manager or Assistant Manager, who shall be required to
successfully complete such training course.
6.3 The General Manager, the Kitchen Manager and each Assistant
Manager shall, from time to time as reasonably required by Franchisor,
attend and successfully complete to Franchisor's reasonable satisfaction a
Franchisor-provided refresher course in restaurant operations.
6.4 Franchisee shall be responsible for the Restaurant's
compliance with the operating standards, methods, techniques and material
taught at Franchisor's operations training course, and shall cause the
employees of the Restaurant to be trained in such standards, methods and
techniques as are relevant to the performance of their respective duties.
6.5 Attendance of the General Manager, the Kitchen Manager and
each Assistant Manager at any of Franchisor's training courses shall be
tuition-free. Franchisee shall pay all other costs and expenses relating
to the attendance of Franchisee's personnel at any of Franchisor's
training courses, including, without limitation, the cost of travel,
lodging, meals, and other related and incidental expenses.
7. RESTAURANT MAINTENANCE
7.1 Franchisee shall, at Franchisee's sole cost and expense,
maintain the Restaurant in conformity with the standards, specifications
and requirements of the System, as the same may be designated by
Franchisor from time to time. Franchisee specifically agrees to repair or
replace, at Franchisee's cost and expense, equipment, signs, interior and
exterior decor items, fixtures, furnishings, supplies, and other products
and materials required for the operation of the Restaurant as necessary or
desirable, and to obtain, at Franchisee's cost and expense, any new or
additional equipment, signs, interior and exterior decor items, fixtures,
furnishings, supplies, and other products and materials which may be
reasonably required by Franchisor for new products or procedures. Except
as may be expressly provided in the Manuals, no alterations or
improvements, or changes of any kind in design, equipment, signs, interior
or exterior decor items, fixtures or furnishings shall be made in or about
the Restaurant or Restaurant premises without the prior written approval
of Franchisor in each instance.
7.2 In order to assure the continued success of the Restaurant,
Franchisee shall, at any time from time to time after ________________,
_________, (i.e., six [6] years after the date of this Agreement) as
reasonably required by Franchisor (taking into consideration the cost and
then-remaining term of this Agreement), modernize the Restaurant premises,
equipment, signs, interior and exterior decor items, fixtures,
furnishings, supplies, and other products and materials required for the
operation of the Restaurant, to Franchisor's then-current standards and
specifications, provided that at the time Franchisor requires Franchisee
to so modernize the Restaurant premises at least twenty-five percent (25%)
of Franchisor-owned and operated Restaurants meet such standards and
specifications. Franchisee's obligations under this Subsection are in
addition to, and shall not relieve Franchisee from, any of its other
obligations under this Agreement, including those contained in the
Manuals.
7.3 If Franchisee is or becomes a lessee of the Restaurant
premises, Franchisee shall have included in the lease provisions expressly
permitting both Franchisee and Franchisor to take all actions and make all
alterations referred to under Subsections 7.1 and 7.2 hereof, requiring
the lessor thereunder to give Franchisor reasonable notice of any
contemplated termination, and providing that Franchisee has the
unrestricted right to assign the lease to Franchisor without the lessor
having any right to impose conditions on such assignment or to obtain any
payment in connection therewith. Franchisee shall not, without the prior
written consent of Franchisor, execute any lease or other agreement which
imposes, or purports to impose, any limitations on the ability of
Franchisee and/or of Franchisor to operate additional restaurants at any
particular location beyond the geographic limitation set forth in Section
1.4 hereof, or any lease the term of which is shorter than the term of
this Agreement.
8. ADVERTISING
8.1 Franchisor shall develop and administer advertising, public
relations and sales promotion programs designed to promote and enhance the
collective success of all restaurant units in the System. It is expressly
understood, acknowledged and agreed that in all phases of such advertising
and promotion, including, without limitation, type, quantity, timing,
placement and choice of media and medium, market areas, advertising
agencies and public relations firms, Franchisor's decisions shall be final
and binding. Franchisee shall have the right to participate actively in
all such advertising, public relations and sales promotion programs, but
only in full and complete accordance with such terms and conditions as may
be established by Franchisor for each such program.
8.2 Franchisee shall pay Franchisor, in the manner described in
Section 9 hereof, a minimum dollar amount equal to one and one-half
percent (1.5%) of Franchisee's gross sales, as defined in Subsection 9.3
hereof. Such funds shall become the sole and absolute property of
Franchisor, to be allocated to a separate "advertising account"
established by Franchisor. Franchisor shall use such funds for market
studies, advertising and marketing studies or services, production of
commercials, advertising copy and layouts, traffic costs, agency fees,
marketing personnel, or any other costs associated with the development,
marketing and testing of advertising, and for the purchase of advertising
time, space or materials in national, regional or other advertising media,
in a manner determined by Franchisor in its sole discretion. Within
six (6) months following the end of Franchisor's fiscal year, Franchisor
shall provide all franchisees with an accounting of all amounts received
from them and expended by Franchisor for the matters set forth above. In
addition, Franchisee shall expend a minimum dollar amount equal to one and
one-half percent (1.5%) of Franchisee's gross sales, for local promotional
activities, subject to the provisions of Subsections 8.4 and 8.5 hereof.
Franchisor shall have the right at all times to review Franchisee's books
and records, and to require Franchisee to produce evidence of its gross
sales and local promotional activities, to ensure Franchisee's compliance
with this Section. Any amount determined by said audit to be due
Franchisor as part of the advertising fee will be paid to Franchisor by
Franchisee within ten (10) days thereafter. At any time after execution
of this Agreement, Franchisor may in its sole discretion increase, to a
maximum of four percent (4%) of gross sales, the percentage of gross sales
which Franchisee shall be required to pay to Franchisor for allocation to
a separate advertising account pursuant to this Subsection 8.2.
Franchisor shall use the funds paid pursuant to that increased percentage
requirement solely for the purchase of advertising time, space or
materials in national, regional or other advertising media, in a manner
determined by Franchisor in its sole discretion, provided that in each
calendar year (or other twelve [12] month period established by
Franchisor) in which Franchisor makes expenditures for advertising from
such an advertising account, so long as Franchisee is in compliance with
its obligations hereunder, Franchisor's expenditures for advertising in
the Territory encompassed by the Development Agreement (including
expenditures for national or regional advertising in media which reach
that Territory) shall be on a basis which is roughly proportional to
Franchisee's contribution to that advertising account during that calendar
year or other twelve (12) month period. Franchisor also may increase the
percentage of gross sales which Franchisee shall be required to spend for
local promotional activities, provided however, that in no event shall
Franchisee be required to make payments pursuant to this Subsection 8.2 in
a dollar amount in excess of five percent (5%) of gross sales.
8.3 Franchisee shall submit to Franchisor, for Franchisor's
approval, an advertising campaign plan relating to the promotion of the
opening of the Restaurant which is sufficient to meet the needs of the
market. The Manuals contain a Press Release kit to assist Franchisee in
this regard. Franchisee shall conduct the approved advertising campaign
and make all expenditures for advertising to promote the opening of the
Restaurant no later than sixty (60) days after the Restaurant opens for
business. Franchisor will reimburse fifty percent (50%) of Franchisee's
out-of-pocket opening advertising expenditures up to a maximum of two
thousand five hundred dollars ($2,500), if Franchisee meets the following
criteria:
(a) Franchisee's opening advertising expenditures are made
within sixty (60) days after the opening of the Restaurant;
(b) Franchisee submits to Franchisor within one hundred
twenty (120) days after the opening of the Restaurant documentation
for the opening advertising expenditures, such as paid invoices from
suppliers of goods or services evidencing expenditure on the opening
advertising promotion; and
(c) Franchisee's opening advertising expenditures are made
pursuant to the approved advertising campaign plan and in accordance
with the Grand Opening Reimbursement Program Policy Guidelines set
forth in the Manuals.
8.4 Nothing in the foregoing Subsections shall be deemed to
prohibit Franchisee from making additional expenditures for local
promotional activities. All of the Franchisee's local promotional
activities shall utilize approved advertising media. "Approved
advertising media" are limited to the following:
(a) Newspapers, magazines and other such periodicals;
(b) Radio and television;
(c) Outdoor advertising by signs displayed on billboards or
buildings; and
(d) Handbills, flyers, door-hangers and direct mail.
In the event Franchisee wants to use a form of advertising medium not set
forth above, Franchisee shall submit a description of such medium and
advertising to Franchisor. Franchisor shall notify Franchisee whether it
approves the use of such medium within thirty (30) days of Franchisee's
request. Failure by Franchisor to so notify Franchisee within that period
shall be deemed to constitute Franchisor's approval of such request.
Guidelines for local promotional activities are contained in the Manuals.
8.5 All advertising copy and other materials employed by
Franchisee in local promotional activities shall be in strict accordance
and conformity with the standards, formats and specimens contained in the
Manuals and shall receive the prior approval of Franchisor. In the event
Franchisee wishes to deviate from the materials contained in the Manuals,
Franchisee shall submit, in each instance, the proposed advertising copy
and materials to Franchisor for approval in advance of publication.
Franchisor shall notify Franchisee in writing, within fifteen (15) days of
such submission, whether Franchisor disapproves such advertising copy and
materials. Failure by Franchisor to so notify Franchisee within that
period shall be deemed to constitute Franchisor's approval of such
advertising copy and materials. In no event shall Franchisee's
advertising contain any statement or material which may be considered
(a) in bad taste or offensive to the public or to any group of persons,
(b) defamatory of any person or an attack on any competitor, (c) to
infringe upon the use, without permission, of any other persons' trade
name, trademark, service mark or identification, or (d) inconsistent with
the public image of Franchisor or of the System.
9. FEES
9.1 As partial consideration for the rights granted hereunder,
Franchisee shall pay Franchisor:
(a) an initial franchise fee of _____________________
dollars ($__________), to be paid in the manner prescribed in
Subsection 4.l of the Development Agreement as payment for the grant
of the franchise;
(b) a monthly royalty fee as determined by Franchisor, not to
exceed five percent (5%) of each calendar month's gross sales, as
provided in Subsection 4.3 of the Development Agreement, as payment
for Franchisee's continuing right to operate the Restaurant as part of
the System (see Exhibit 1); and
(c) a monthly advertising fee equal to such percentage of each
calendar month's gross sales as Franchisor may require pursuant to
Subsection 8.2 hereof.
Notwithstanding anything contained herein to the contrary, if the
royalty fee set forth in Subsection 9.1(b) is equal to five percent (5%)
of monthly gross sales, then in such an event, the advertising fee
described in Subsection 9.1(c) shall not exceed four percent (4%) of
monthly gross sales.
9.2 The fees referred to in Subsections 9.l(b) and (c) (the
"Fees") shall be paid by check mailed and postmarked on or before the
twelfth day of the next full month immediately following the month to
which the Fees relate. Any Fees, including the initial franchise fee,
which are not paid when due shall bear interest from and after the due
dates thereof at the rate of eighteen percent (18%) per annum or the
highest rate permitted by applicable law, whichever is less.
9.3 (a) Except as provided in Subsection 9.3(b) hereof, the
term "gross sales," as used in this Agreement, shall mean all receipts
(cash, cash equivalents or credit) or revenues from sales from all
business conducted upon or from the Restaurant premises, whether evidenced
by check, cash, credit, charge account, exchange or otherwise, including,
but not limited to, amounts received from the sale of goods, wares and
merchandise (including sales of food, beverages and tangible property of
every kind and nature, promotional or otherwise), from all services
performed from or at the Restaurant premises, and from all orders taken or
received at the Restaurant premises, regardless of where such orders are
filled. Gross sales shall not be reduced by any deductions for cash
shortages incurred in connection with the transaction of business with
customers, credit card company charges or theft which is reimbursed by
insurance or is not reported to the appropriate police authorities. Each
charge or sale upon installment or credit shall be treated as a sale for
the full price in the month during which such charge or sale shall be
first made, irrespective of the time when Franchisee shall receive payment
(whether full or partial) therefor.
(b) Gross sales shall not include: (i) the sale of merchandise
for which cash has been refunded or, except as provided in the second
sentence of Subsection 9.3(a), not received, or allowances made for
merchandise, if the sales of any such returned or exchanged merchandise
shall have been previously included in gross sales, (ii) the amount of any
sales tax imposed by any federal, state, municipal or other governmental
authority directly on sales and intended to be collected from customers,
provided that the amount thereof is added to the selling price and
actually paid by the Franchisee to such governmental authority, (iii) the
sale of merchandise for which a gift certificate is redeemed, provided
that the initial sale of said gift certificate shall have been previously
included in gross sales, (iv) the sale of waste products of the
Restaurant, (v) the sale of meals to employees, (vi) telephone, game and
vending machine revenues, (vii) the sale of non-food items or beverages at
a discount in connection with a promotional campaign, (viii) one-time sale
of furniture, fixtures or equipment, and (ix) theft which is not covered
by insurance and is reported to the appropriate police authorities. In
addition, Franchisor may, from time to time, in writing, permit or allow
certain other items to be excluded from gross sales. Any such permission
or allowance may be revoked or withdrawn at Franchisor's discretion.
10. RECORD KEEPING
10.1 Franchisor shall provide Franchisee with a choice of two (2) or
more approved point of sales systems, and Franchisee shall employ one (1)
of such approved systems, without modification, in connection with the
business of the Restaurant. Franchisee shall use such bookkeeping and
record keeping forms as shall be prescribed in the Manuals.
10.2 Franchisee shall complete and submit to Franchisor, on a
regular, continuous basis, each of the following reports, in the form
specified in the Manuals:
(a) monthly Restaurant reports, on or before the twelfth day of
each calendar month following the month to which the report relates;
(b) annual Restaurant reports, on or before the fifteenth day
of April of each year; and
(c) weekly gross sales reports, on or before the Tuesday
following the calendar week to which the report relates.
10.3 The annual Restaurant reports referred to above shall include a
balance sheet dated as of the end of Franchisee's fiscal year or calendar
year and a profit and loss statement for such year, together with such
additional financial information as Franchisor may reasonably request.
Such balance sheet and profit and loss statement shall be prepared in
accordance with generally accepted accounting principles, certified as
correct and complete by Franchisee's chief executive officer, president,
chief financial officer or controller and reported on and reviewed by an
independent state-licensed certified public accountant. If Franchisee
fails to provide Franchisor with such balance sheet and profit and loss
statement, Franchisor shall have the right to have an independent audit
made of Franchisee's books and records, and Franchisee shall promptly
reimburse Franchisor for the cost thereof.
10.4 Each of the reports referred to in this Section 10 shall be
completed by Franchisee or its accountant in the respective specimen
forms, and in accordance with the instructions, contained in the Manuals.
Subsection 10.3 notwithstanding, time is of the essence with respect to
the completion and submission of each such report.
11. FRANCHISEE ORGANIZATION, AUTHORITY,
FINANCIAL CONDITION AND SHAREHOLDERS
11.1 Franchisee and each Principal Shareholder represent and warrant
that: (a) Franchisee is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of its incorporation;
(b) Franchisee is duly qualified and is authorized to do business and is
in good standing as a foreign corporation in each jurisdiction in which
its business activities or the nature of the properties owned by it
requires such qualification; (c) the execution and delivery of this
Agreement and the transaction contemplated hereby are within Franchisee's
corporate power; (d) the execution and delivery of this Agreement has been
duly authorized by the Franchisee; (e) the articles of incorporation and
by-laws of Franchisee delivered to Franchisor are true, complete and
correct, and there have been no changes therein since the date thereof;
(f) the certified copies of the minutes electing the officers of
Franchisee and authorizing the execution and delivery of this Agreement
are true, correct and complete, and there have been no changes therein
since the date(s) thereof; (g) the specimen stock certificate delivered to
Franchisor is a true specimen of Franchisee's stock certificate; (h) the
balance sheet of Franchisee as of ____________________, ________ ("Balance
Sheet") and the balance sheets of its Principal Shareholders as of
____________________, ________, heretofore delivered to Franchisor, are
true, complete and correct, and fairly present the financial positions of
Franchisee and each Principal Shareholder, respectively, as of the dates
thereof; (i) the Balance Sheet and each such balance sheet have been
prepared in accordance with generally accepted accounting principles; and
(j) there have been no materially adverse changes in the condition, assets
or liabilities of Franchisee or Principal Shareholders since the date or
dates thereof.
11.2 Franchisee and each Principal Shareholder covenant that during
the term of this Agreement: (a) Franchisee shall do or cause to be done
all things necessary to preserve and keep in full force its corporate
existence and shall be in good standing as a foreign corporation in each
jurisdiction in which its business activities or the nature of the
properties owned by it requires such qualification; (b) Franchisee shall
have the corporate authority to carry out the terms of this Agreement; and
(c) Franchisee shall print, in a conspicuous fashion on all certificates
representing shares of its stock when issued, a legend referring to this
Agreement and the restrictions on and obligations of Franchisee and
Principal Shareholders hereunder, including the restrictions on transfer
of Franchisee's shares.
11.3 In addition to the financial information which Franchisee is
required to provide to Franchisor under Subsections 10.2 and 11.1 hereof,
Franchisee and Principal Shareholders shall provide Franchisor with such
other financial information as Franchisor may reasonably request from time
to time, including, on an annual basis, copies of the then-most current
financial statements of Franchisee and each Principal Shareholder, dated
as of the end of the last preceding fiscal year of the Franchisee or
Principal Shareholder, said statements to be delivered to Franchisor no
later than April 15 of each year.
11.4 Franchisee and each Principal Shareholder represent, warrant and
covenant that all Interests (as defined in Subsection 12.4 hereto) in
Franchisee are owned as set forth on Appendix A hereto, that no Interest
has been pledged or hypothecated (except in accordance with Section 12 of
this Agreement), and that no change will be made in the ownership of any
such Interest other than as permitted by this Agreement, or otherwise
consented to in writing by Franchisor. Franchisee and Principal
Shareholders agree to furnish Franchisor with such evidence as Franchisor
may request, from time to time, for the purpose of assuring Franchisor
that the Interests of Franchisee and Principal Shareholders remain as
represented herein.
11.5 Each Principal Shareholder, jointly and severally, hereby
personally and unconditionally guarantees each of Franchisee's financial
obligations to Franchisor (including, but not limited to, all obligations
relating to the payment of fees by Franchisee to Franchisor). Each
Principal Shareholder agrees that Franchisor may resort to such Principal
Shareholder (or any of them) for payment of any such financial obligation,
whether or not Franchisor shall have proceeded against Franchisee, any
other Principal Shareholder or any other obligor primarily or secondarily
obligated to Franchisor with respect to such financial obligation. Each
Principal Shareholder hereby expressly waives presentment, demand, notice
of dishonor, protest, and all other notices whatsoever with respect to
Franchisor's enforcement of this guaranty. In addition, each Principal
Shareholder agrees that if the performance or observance by Franchisee of
any term or provision hereof is waived or the time of performance thereof
extended by Franchisor, or payment of any such financial obligation is
accelerated in accordance with any agreement between Franchisor and any
party liable in respect thereto or extended or renewed, in whole or in
part, all as Franchisor may determine, whether or not notice to or consent
by any Principal Shareholder or any other party liable in respect to such
financial obligations is given or obtained, such actions shall not affect
or alter the guaranty of each Principal Shareholder described in this
Subsection.
12. TRANSFER
12.1 There shall be no Transfer of any Interest of Franchisee, or of
a Principal Shareholder in Franchisee, in whole or in part (whether
voluntarily or by operation of law), directly, indirectly or contingently,
except in accordance with the provisions of this Section 12. "Transfer"
and "Interest" are defined in Subsections 12.2, 12.3 and 12.4. Any
proposed Transfer also shall be subject to the provisions of the
Development Agreement.
12.2 Except as provided in Subsection 12.3, "Transfer" shall mean any
assignment, sale, pledge, hypothecation, gift or any other event which
would change ownership of or change or create a new Interest, including,
but not limited to:
(a) any change in the ownership of or rights in or to any
shares of stock or other equity interest in Franchisee which would
result from the act of any shareholder of Franchisee ("Shareholder"),
such as a sale, exchange, pledge or hypothecation of shares, or any
interest in or rights to any of Franchisee's profits, revenues or
assets, or any such change which would result by operation of law; and
(b) any change in the percentage interest owned by any
Shareholder in the shares of stock of Franchisee, or interests in its
profits, revenues or assets which would result from any act of
Franchisee such as a sale, pledge or hypothecation of any Restaurant
assets (other than a pledge of assets to secure bona fide loans made
or credit extended in connection with acquisition of the assets
pledged, provided that immediately before and after such transaction
the net worth of Franchisee shall not be less than the amount which is
reflected on the Balance Sheet referred to in Subsection 11.1 of this
Agreement); any sale or issuance of any shares of Franchisee's stock;
the retirement or redemption of any shares of Franchisee's stock; or
any sale or grant to any person of any right to participate in or
otherwise to share or become entitled to any part of Franchisee's
profits, revenues, assets or equity.
12.3 "Transfer" shall not include (a) a change in the ownership of or
rights to any shares or other equity interest in Franchisee pursuant to a
public offering of Franchisee's securities registered under the Securities
Act of 1933, or (b) a change in the ownership of or rights to any
securities or other equity interest in Franchisee pursuant to a private
offering of Franchisee's securities exempted from registration under such
Act, provided that Franchisee provides Franchisor with a copy of its S-1
prospectus and/or offering memorandum ten (10) days prior to its filing
with the Securities and Exchange Commission or circulation to third
parties so that Franchisor may comment and, if necessary, correct any
information concerning Franchisor and/or the System, and further provided
that after giving effect to such public or private offering, the Principal
Shareholders, or any of them, "control" Franchisee. For purposes of this
Section 12, "control" means either (1) holding fifty-one percent (51%) or
more of the outstanding voting securities of Franchisee, or (2) having the
contractual power presently to designate a majority of the directors of
Franchisee.
12.4 "Interest" shall mean: when referring to interests or rights in
Franchisee, any shares of Franchisee's stock and any other equitable or
legal right in or to any of Franchisee's stock, revenues, profits or
assets; when referring to rights or assets of Franchisee, Franchisee's
rights under and interest in this Agreement, the Restaurant and its
revenues, profits and assets.
12.5 (a) The Interest of a Principal Shareholder may be transferred
to such Principal Shareholder's spouse or children or to a person
designated in such Principal Shareholder's will or trust (individually and
collectively referred to as a "Successor"), upon such Principal
Shareholder's death or permanent incapacity, without Franchisor's
approval, provided that such Successor shall agree to be bound by the
restrictions contained in this Section 12, and the other agreements and
covenants of the Principal Shareholders contained in this Agreement.
(b) The Interest of a Principal Shareholder may not be
transferred to another Principal Shareholder without Franchisor's
approval, which approval shall not be unreasonably withheld.
(c) The Interest of a Successor may only be transferred in
accordance with Subsection 12.5(b) or 12.6, regardless of whether such
Transfer is for consideration or by gift or will or other device.
12.6 (a) Franchisee understands and acknowledges that the rights and
duties set forth in this Agreement are personal to Franchisee and that
Franchisor has entered into this Agreement in reliance on the business
skill and financial capability of Franchisee, and the business skill,
financial capability and personal character of each Principal Shareholder.
Except as otherwise provided in this Section 12, the Principal
Shareholders shall at all times retain control of Franchisee. Except as
otherwise provided in this Section 12, no Transfer of any part of
Franchisee's Interest in this Agreement or in the Restaurant, and no
Transfer of any Interest of any Principal Shareholder, shall be completed
except in accordance with this Subsection 12.6. In the event of such a
proposed Transfer of any part of Franchisee's Interest in this Agreement
or in the Restaurant, or of any Interest of any Principal Shareholder, the
party or parties desiring to effect such Transfer shall give Franchisor
notice in writing of the proposed Transfer, which notice shall set forth
the name and address of the proposed transferee, its financial condition,
including a copy of its financial statement dated not more than
ninety (90) days prior to the date of said notice, and all the terms and
conditions of the proposed Transfer. Upon receiving such notice,
Franchisor may (i) approve the Transfer, or (ii) withhold its consent to
the Transfer. Franchisor shall, within forty-five (45) days of receiving
such notice and all of the information required therein, advise the party
or parties desiring to effect the Transfer whether it (1) approves the
Transfer, or (2) withholds its consent to the Transfer, giving the reasons
for such disapproval. Failure of Franchisor to so advise said party or
parties within that forty-five (45) day period shall be deemed to be an
approval of the proposed Transfer. Appendix B sets forth the criteria for
obtaining Franchisor's consent to a proposed Transfer.
(b) In the event that Franchisor approves the Transfer, and the
Transfer is not completed within ninety (90) days of the later of
(i) expiration of the forty-five (45) day notice period, or (ii) delivery
of notice of Franchisor's approval of the proposed Transfer, Franchisor's
approval of the proposed Transfer shall automatically be revoked. The
ninety (90) day limitation described in the preceding sentence shall not
apply if at the end of said ninety (90) day period the only issue which
prevents completion of the Transfer is the need to effect transfers of the
applicable liquor licenses. In the event of such a delay, the Transfer
shall take place within seven (7) business days after those liquor
licenses have been transferred. Any subsequent proposal to complete the
proposed Transfer shall be subject to Franchisor's right of approval as
provided herein. The party which desires to effect the proposed Transfer
shall immediately notify Franchisor in writing of any change in the terms
of a Transfer. Any material change in the terms of a Transfer prior to
closing shall cause it to be deemed a new Transfer, revoking any approval
previously given by Franchisor and conferring upon Franchisor a new right
to approve such Transfer, which shall be deemed to commence on the day on
which Franchisor receives written notice of such changes in terms.
12.7 In connection with any request for Franchisor's approval of a
proposed Transfer pursuant to this Section 12, the parties to the proposed
Transfer shall pay Franchisor a fee to defray the actual cost of review
and the administrative and professional expenses related to the proposed
Transfer and the preparation and execution of documents and agreements, up
to a maximum of two thousand five hundred dollars ($2,500).
13. CONFIDENTIALITY; RESTRICTIONS
13.1 Franchisee and its Principal Shareholders acknowledge that over
the term of this Agreement they are to receive proprietary information
which Franchisor has developed over time at great expense, including, but
not limited to, information regarding the System, methods of site
selection, marketing and public relations methods, product analysis and
selection, and service methods and skills relating to the development and
operation of Restaurants. They further acknowledge that this information,
which includes, but is not necessarily limited to, that contained in the
Manuals, is not generally known in the industry and is beyond their own
present skills and experience, and that to develop it themselves would be
expensive, time consuming and difficult. Franchisee and its Principal
Shareholders further acknowledge that the Franchisor's information
provides a competitive advantage and will be valuable to them in the
development of their business, and that gaining access to it is therefore
a primary reason why they are entering into this Agreement. Accordingly,
Franchisee and its Principal Shareholders agree that Franchisor's
information, as described above, which may or may not be "trade secrets"
under prevailing judicial interpretations, is private and valuable, and
constitutes trade secrets belonging to Franchisor. Accordingly, in
consideration of Franchisor's confidential disclosure to them of these
trade secrets, Franchisee and Principal Shareholders agree as follows
(subject to the provisions of the Development Agreement and any other
franchise agreement between Franchisor and Franchisee):
(a) During the term of this Agreement, neither Franchisee nor
any Principal Shareholder, for so long as such Principal Shareholder
owns an Interest in Franchisee, may, without the prior written consent
of Franchisor, directly or indirectly engage in, or acquire any
financial or beneficial interest (including any interest in
corporations, partnerships, trusts, unincorporated associations or
joint ventures) in, advise, help, guarantee loans or make loans to,
any restaurant business whose menu or method of operation is similar
to that employed by restaurant units within the System which is either
(i) located in the Territory, as defined in the Development Agreement,
(ii) located in the Area of Dominant Influence (as defined and
established from time to time by Arbitron Ratings Company) of any
Restaurant developed pursuant to the Development Agreement,
(iii) located within a five (5) mile radius of any restaurant unit
within the System, or (iv) determined by Franchisor, exercising
reasonable good faith judgment, to be a direct competitor of the
System.
(b) Neither Franchisee, for two (2) years following the
termination of this Agreement, nor any Principal Shareholder, for
two (2) years following the termination of all of his or her Interest
in Franchisee or the termination of this Agreement, whichever occurs
first, may directly or indirectly engage in, or acquire any financial
or beneficial interest (including any interest in corporations,
partnerships, trusts, unincorporated associations or joint ventures)
in, advise, help, guarantee loans or make loans to, any restaurant
business whose menu or method of operation is similar to that employed
by restaurant units within the System which is located either (i) in
the Territory, as defined in the Development Agreement, (ii) in the
Area of Dominant Influence (as defined and established from time to
time by Arbitron Ratings Company) of any restaurant developed pursuant
to the Development Agreement, (iii) within a five (5) mile radius of
any restaurant unit within the System, or (iv) within any area for
which an active, currently binding development agreement has been
granted by Franchisor to another franchisee as of the date of the
termination.
(c) Neither Franchisee nor any Shareholder shall at any time
(i) appropriate or use the trade secrets incorporated in the System,
or any portion thereof, in any restaurant business which is not within
the System, (ii) disclose or reveal any portion of the System to any
person, other than to Franchisee's Restaurant employees as an incident
of their training, (iii) acquire any right to use any name, mark or
other intellectual property right which is or may be granted by this
Agreement, except in connection with the operation of the Restaurant,
or (iv) communicate, divulge or use for the benefit of any other
person or entity any confidential information, knowledge or know-how
concerning the methods of development or operation of a restaurant
utilizing the System, which may be communicated by Franchisor in
connection with the franchise granted hereunder.
13.2 Franchisee and Principal Shareholders agree that the provisions
of this Section 13 are and have been a primary inducement to Franchisor to
enter into this Agreement, and that in the event of breach thereof
Franchisor would be irreparably injured and would be without adequate
remedy at law. Therefore, in the event of a breach, or a threatened or
attempted breach, of any of such provisions Franchisor shall be entitled,
in addition to any other remedies which it may have hereunder or at law or
in equity (including the right to terminate this Agreement), to a
preliminary and/or permanent injunction and a decree for specific
performance of the terms hereof without the necessity of showing actual or
threatened damage, and without being required to furnish a bond or other
security.
13.3 The restrictions contained in Subsection 13.1(a) and (b) above
shall not apply to ownership of less than two percent (2%) of the shares
of a company whose shares are listed and traded on a national securities
exchange if such shares are owned for investment only, and are not owned
by an officer, director, employee, or consultant of such publicly traded
company.
13.4 If any court or other tribunal having jurisdiction to determine
the validity or enforceability of this Section 13 determines that it would
be invalid or unenforceable as written, then the provisions hereof shall
be deemed to be modified or limited to such extent or in such manner as
necessary for such provisions to be valid and enforceable to the greatest
extent possible.
13.5 Franchisee shall require the General Manager, the Kitchen
Manager and each of its Restaurant managers to execute a confidentiality
agreement in the form attached hereto as Appendix C. Franchisee shall be
responsible for compliance of its employees with the agreements identified
in this Subsection.
14. INSPECTIONS
14.1 Franchisor shall have the right at any time, and from time to
time, to have its representatives enter the Restaurant premises without
notice for the purpose of inspecting the condition thereof and the
operation of the Restaurant in order to determine whether Franchisee is in
compliance with the standards, specifications, requirements and
instructions contained in this Agreement and in the Manuals, and for any
other reasonable purpose connected with the operation of the Restaurant.
14.2 Without limiting the generality of Subsection 14.1, a
representative of Franchisor shall be present in the Restaurant to consult
with Franchisee or its General Manager once each calendar quarter and, at
least semi-annually, a representative shall conduct an inspection/
consultation at the Restaurant (which may be conducted with or without
notice). During such inspection, Franchisor's representative will inspect
the condition of the Restaurant and observe procedures and operations at
the Restaurant. Also during the inspection/consultation, Franchisor's
representative will meet with the General Manager and such other
Restaurant employees as Franchisor's representative may designate, for the
purpose of evaluating the condition and operation of the Restaurant and
seeking to maintain or achieve compliance with the standards,
specifications, requirements and instructions contained in this Agreement
and in the Manuals.
14.3 Without limiting the generality of Subsection 14.1, Franchisor's
representatives shall have the right at all times during normal business
hours to confer with Restaurant employees and customers, and to inspect
Franchisee's books, records and tax returns, or such portions thereof as
pertain to the operation of the Restaurant. All such books, records and
tax returns shall be kept and maintained at the principal executive
offices of Franchisee or such other place as may be agreed upon by the
parties in writing. If any inspection reveals that the gross sales
reported in any report or statement are less than the actual gross sales
ascertained by such inspection, then the Franchisee shall immediately pay
Franchisor the additional amount of fees owing by reason of the
understatement of gross sales previously reported, together with interest
as provided in Subsection 9.2. In the event that any report or statement
understates gross sales by more than three percent (3%) of the actual
gross sales ascertained by Franchisor's inspection, Franchisee shall, in
addition to making the payment provided for in the immediately preceding
sentence, pay and reimburse Franchisor for any and all expenses incurred
in connection with its inspection, including, but not limited to,
reasonable accounting and legal fees. Such payments shall be without
prejudice to any other rights or remedies which Franchisor may have under
this Agreement or otherwise. If any inspection reveals that the gross
sales reported in any report or statement are greater than the actual
gross sales ascertained by such inspection, and that Franchisee thereby
has made an overpayment of fees, the amount of the overpayment (without
interest) shall be offset against future fees owing by Franchisee to
Franchisor.
14.4 Franchisee shall maintain an accurate stock register. In the
event that the beneficial ownership of Franchisee's stock differs in any
respect from record ownership, Franchisee also shall maintain a list of
the names, addresses and interests of all beneficial owners of its stock.
Franchisee shall produce its stock register, and any list of beneficial
owners certified by the corporation's secretary to be correct, at its
principal executive offices upon ten (10) days prior written request by
Franchisor. Franchisor's representatives shall have the right to examine
the stock register and any list of beneficial owners, and to reproduce all
or any part thereof. Further, upon ten (10) days written notice,
Franchisor may request a copy of the list of stockholders and owners of
beneficial interests to be forwarded to it at Franchisor's principal
office.
15. RELATIONSHIP OF PARTIES AND INDEMNIFICATION
15.1 Franchisee is not, and shall not represent or hold itself out
as, an agent, legal representative, joint venturer, partner, employee or
servant of Franchisor for any purpose whatsoever and, where permitted by
law to do so, shall file a business certificate to such effect with the
proper recording authorities. Franchisee is an independent contractor and
is not authorized to make any contract, agreement, warranty or
representation on behalf of Franchisor, or to create any obligation,
express or implied, on behalf of Franchisor. Franchisee agrees that
Franchisor does not have any fiduciary obligation to Franchisee.
Franchisee shall not use the name Applebee's Neighborhood Grill & Bar
(other than in connection with the operation of the Restaurant), or
Applebee's International, Inc., or any similar words as part of or in
association with any trade name of any business entity which is, directly
or indirectly, associated with Franchisee.
15.2 Franchisee shall indemnify and hold harmless Franchisor and its
officers, directors, employees, agents, affiliates, successors and assigns
from and against (a) any and all claims based upon, arising out of, or in
any way related to the operation or condition of any part of the
Restaurant or Restaurant premises, the conduct of business thereat, the
ownership or possession of real or personal property, and any negligent
act, misfeasance or nonfeasance by Franchisee or any of its agents,
contractors, servants, employees or licensees (including, without
limitation, the performance by Franchisee of any act required by, or
performed pursuant to, any provision of this Agreement), and (b) any and
all fees (including reasonable attorneys' fees), costs and other expenses
incurred by or on behalf of Franchisor in the investigation of or defense
against any and all such claims.
15.3 In addition to, and not in limitation of, any subsection hereof,
Franchisee specifically covenants, represents and warrants that Franchisee
is in compliance in all material respects with all federal, state,
municipal and local laws governing the generation, use or disposal of
hazardous waste or hazardous materials, and any and all other laws
designed to protect the environment and that:
(a) There have been no past, and there are no current or
anticipated, releases or substantial threats of a release of a
hazardous substance, pollutant or contaminant from or onto the
Restaurant or real property upon which the Restaurant is located and
referred to in this Agreement ("Premises") which is or may be subject
to regulation under the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. 9601, et seq.) or other
laws designed to protect the environment;
(b) The Premises have not previously been used, are not now
being used and are not contemplated to be used for the treatment,
collection, storage or disposal of any refuse or objectionable waste
so as to require a permit or approval from the Environmental
Protection Agency pursuant to the Hazardous and Solid Waste Amendments
of 1984 (96 Stat. 3221) or any other federal, state, county or
municipal agency charged with the responsibility of protecting the
environment;
(c) The Premises have not previously been used, are not now
being used, and are not contemplated to be used, for the generation,
transportation, treatment, storage or disposal of any hazardous waste;
(d) No portion of the Premises are located on or over a
"sanitary landfill" or an "open dump" within the meaning of the
Resource Conservation and Recovery Act (42 U.S.C. 6941 et seq.), as
amended by the Hazardous and Solid Waste Amendments of 1984 (96 Stat.
3221);
(e) No asbestos fibers or materials or polychlorinated
biphenyls (PCB's) are on or in the Premises;
(f) There have not been, nor are there presently pending, any
federal or state enforcement actions against the Premises, nor is the
Franchisee or its Landlord, if any, subject to any outstanding
administrative orders which require ongoing compliance efforts in
connection with compliance with laws designed to protect the
environment;
(g) The Franchisee has not entered into any consent decrees or
administrative consent orders with any agency charged with the
responsibility of protecting the environment;
(h) There have not been any notices of violation sent to the
Franchisee under the Citizens Suit Provisions of any statute;
(i) The Franchisee has not received any request for
information, notice or demand letters for administrative inquiries
from any governmental entity with regard to its environmental
practices;
(j) The Franchisee has maintained all required records under
each and every applicable environmental statute and is in full
compliance with all environmental permits issued to it by any
governmental or regulatory agency;
(k) The Franchisee maintains all insurance policies as may be
required by any applicable law governing the environment;
(l) The Franchisee has no reason to believe that any operation
of equipment on or at the Premises may be the cause of a future spill
or release of a pollutant;
(m) The Franchisee has not in the past, nor is it presently,
generating, transporting or disposing of a hazardous substance as
defined by Section 9601(12) of CERCLA; and
(n) The Franchisor shall have the right, at Franchisee's
expense, to require an environmental audit of the Premises from a
company or companies satisfactory to Franchisor.
16. INSURANCE
16.1 Franchisee shall procure before the commencement of Restaurant
operations, and shall maintain in full force and effect during the entire
term of this Agreement, at its sole cost and expense, an insurance policy
or policies protecting Franchisee and Franchisor and their respective
officers, directors and employees against any and all claims, loss,
liability or expense whatsoever, arising out of or in connection with the
condition, operation, use or occupancy of the Restaurant or Restaurant
Premises. Franchisee shall procure workers' compensation coverage for
each of its employees no later than the first date of such employee's
employment. Franchisee shall also insure the Restaurant building and
other improvements, equipment, signs, interior and exterior decor items,
furnishings and fixtures, and any additions thereto, in accordance with
standard fire and extended coverage insurance policies then in effect for
similar businesses. Franchisor shall be named as an additional insured in
all such policies, workers' compensation excepted, and the certificate or
certificates of insurance shall state that the policy or policies shall
not be subject to cancellation or alteration without at least thirty (30)
days prior written notice to Franchisor. Such policy or policies shall be
written by a responsible insurance company or companies satisfactory to
Franchisor, and shall be in such form and contain such limits of liability
as shall be satisfactory to Franchisor from time to time. In any event,
such policy or policies shall include at least the following:
KIND OF INSURANCE MINIMUM LIMITS OF LIABILITY
Workers' Compensation Statutory
General Public Liability, $1,000,000 each person,
including Product Liability, $1,000,000 each occurrence
Injury and Liquor Liability
Fire and Extended Coverage Full replacement value
Umbrella Liability Insurance $2,000,000
Franchisee shall, upon request, exhibit certificates of such insurance to
Franchisor. The insurance afforded by the policy or policies respecting
public liability shall not be limited in any way by reason of any
insurance which may be maintained by Franchisor.
16.2 Within sixty (60) days after the execution of this Agreement,
but in no event later than the day before the Restaurant opens for
business, Franchisee shall submit to Franchisor for approval certificates
of insurance showing compliance with the requirements of Subsection 16.1.
Notwithstanding the foregoing, Franchisee shall submit to Franchisor for
approval certificates of insurance showing compliance with the worker's
compensation requirements set forth in Subsection 16.1 prior to the
training of any Franchisee employee at a Restaurant operated by
Franchisor. Maintenance of such insurance and the performance by
Franchisee of its obligations under this Section 16 shall not relieve
Franchisee of liability under the indemnity provisions of this Agreement,
and shall not limit such liability.
16.3 Should Franchisee, for any reason, fail to procure or maintain
the insurance coverage required by this Section, then Franchisor shall
have the right and authority to immediately procure such insurance
coverage and to charge the cost thereof to Franchisee, which amounts shall
be paid immediately upon notice and shall be subject to charges for late
payments in the manner set forth in Subsection 9.2.
16.4 No later than thirty (30) days following Franchisee's receipt of
same, Franchisee shall submit to Franchisor a copy of any written report
relating to the condition of the Restaurant premises, or any aspect
thereof, prepared by an insurer or prospective insurer or by a
representative of a federal, state or local government agency, provided
that if any such report contains comments or information which could
materially and detrimentally affect the Restaurant, such report shall be
submitted to Franchisor within three (3) days following Franchisee's
receipt thereof.
17. DEBTS AND TAXES
Franchisee shall pay or cause to be paid promptly when due all
obligations incurred, directly or indirectly, in connection with the
Restaurant and its operation, including, without limitation, (a) all taxes
and assessments that may be assessed against the Restaurant land, building
and other improvements, equipment, fixtures, signs, furnishings, and other
property; (b) all liens and encumbrances of every kind and character
created or placed upon or against any of said property, and; (c) all
accounts and other indebtedness of every kind and character incurred by or
on behalf of Franchisee in the conduct of the Restaurant business.
Notwithstanding the foregoing, Franchisee will not be in default of this
Agreement as a result of a non-payment or non-performance of the foregoing
so long as it disputes said debt or lien and is, in the sole opinion of
Franchisor, validly and in good faith pursuing a resolution of said claim
or lien and has reserved sufficient sums to pay the debt/claim as is
agreed to by Franchisor.
18. TRADE NAMES, SERVICE MARKS AND TRADEMARKS
18.1 Franchisee acknowledges the sole and exclusive right of
Franchisor (except for rights granted under existing and future franchise
agreements) to use Franchisor's trade names, service marks and trademarks
in connection with the products and services to which they are or may be
applied by Franchisor, and represents, warrants and agrees that Franchisee
shall not, either during the term of this Agreement, or after the
expiration or other termination hereof, directly or indirectly, contest or
aid in contesting the validity, ownership or use thereof by Franchisor, or
take any action whatsoever in derogation of the rights claimed herein by
Franchisor.
18.2 The right granted to Franchisee under this Agreement to use
Franchisor's trade names, service marks and trademarks is nonexclusive,
and Franchisor, in its sole discretion, subject only to the limitations
contained in Subsection 1.4 of this Agreement, has the right to grant
other rights in, to and under those names and marks in addition to those
rights already granted, and to develop and grant rights in other names and
marks on any such terms and conditions as Franchisor deems appropriate.
The rights granted under this Agreement do not include any right or
authority of any kind whatsoever to pre-package or sell pre-packaged food
products under any of Franchisor's names or marks.
18.3 Franchisee understands and acknowledges and agrees that
Franchisor has the unrestricted right, subject only to the limitations
contained in Subsection 1.4 of this Agreement, to engage, directly and
indirectly, through its employees, representatives, licenses, assigns,
agents, and others, at wholesale, retail, and otherwise, in (a) the
production, distribution and sale of products under the names and marks
licensed hereunder or other names or marks, and (b) the use, in connection
with such production, distribution and sale, of any and all trademarks,
trade names, service marks, logos, insignia, slogans, emblems, symbols,
designs and other identifying characteristics as may be developed or used,
from time to time, by Franchisor.
18.4 Nothing contained in this Agreement shall be construed to vest
in Franchisee any right, title or interest in or to any of Franchisor's
names or marks, the goodwill now or hereafter associated therewith, or any
right in the design of any restaurant building or premises, or the decor
or trade-dress of the Restaurant, other than the rights and license
expressly granted herein for the term hereof. Any and all goodwill
associated with or identified by any of Franchisor's names or marks shall
inure directly and exclusively to the benefit of Franchisor, including,
without limitation, any goodwill resulting from operation and promotion of
the Restaurant, provided that this Subsection shall not be construed to
entitle Franchisor to receive any portion of the consideration paid to
Franchisee and/or any Principal Shareholder as a result of a Transfer of
an Interest pursuant to Section 12 hereof.
18.5 Franchisee shall adopt and use Franchisor's names and marks only
in a manner expressly approved by Franchisor, and shall not use any of
Franchisor's names or marks in connection with any statement or material
which may, in the judgment of Franchisor, be in bad taste or inconsistent
with Franchisor's public image, or tend to bring disparagement, ridicule
or scorn upon Franchisor, any of Franchisor's names or marks, or the
goodwill associated therewith. Franchisee shall not adopt, use or
register as its corporate name (by filling a certificate or articles of
incorporation or otherwise) any trade or business name, style or design
which includes, or is similar to, any of Franchisor's trademarks, service
marks, trade names, logos, insignia, slogans, emblems, symbols, designs or
other identifying characteristics.
18.6 Franchisor shall have the right, at any time and from time to
time, upon notice to Franchisee, to make additions to, deletions from and
changes in any of Franchisor's names or marks, or all of them, all of
which additions, deletions and changes shall be made in good faith, on a
reasonable basis and with a view toward the overall best interests of the
System. Franchisor will use its best efforts to protect and preserve the
integrity and validity of Franchisor's names and marks, including the
taking of actions deemed by Franchisor to be appropriate in the event of
any apparent infringement of any of Franchisor's names or marks.
18.7 (a) Franchisor shall hold Franchisee harmless from any
liability or expense (but excluding consequential damages) resulting from
infringement of a third party's service mark, trade name or trademark by
Franchisor's service mark, Applebee's Neighborhood Grill & Bar, or by any
other service mark, trademark or trade name of Franchisor which Franchisor
shall designate as part of the System. This hold-harmless indemnity shall
not apply to any unauthorized use by Franchisee of any such service mark,
trade name or trademark.
(b) Franchisee agrees to notify Franchisor promptly in writing
of any suit or claim for infringement which is within the scope of the
hold-harmless indemnity set forth in this Subsection 18.7. Subject to the
terms and conditions of this Subsection 18.7, Franchisor shall have the
sole right to defend or settle any such suit or claim of infringement at
Franchisor's expense. Franchisee, at Franchisee's expense, shall have the
right to be represented by counsel. Franchisor shall, however, retain
control of any negotiations with respect to such claim or of any
litigation involving such suit. Franchisee agrees to cooperate with
Franchisor and to assist Franchisor whenever reasonably requested by
Franchisor, at Franchisor's expense, in the defense of any such
infringement suit or claim. Franchisee shall not enter into any
settlement of any such claim or suit or conduct any settlement
negotiations relative thereto without the prior approval of Franchisor in
writing and, if Franchisee does so, the hold-harmless indemnity set forth
in this Subsection 18.7 shall be deemed to have been waived and released
in all respects.
18.8 Franchisor represents that it is the sole owner of the service
mark Applebee's Neighborhood Grill & Bar. In the event that Franchisee is
precluded from operating the Restaurant because Franchisor determines that
a third person has acquired rights under the law of any state in such
mark, which so precludes Franchisee, Franchisor agrees (a) to repay to
Franchisee the initial franchise fee paid by Franchisee with respect to
the Restaurant, and (b) to assist Franchisee, at Franchisee's request, in
locating an alternative site for the Restaurant.
19. EXPIRATION AND TERMINATION;
OPTION TO PURCHASE RESTAURANT; ATTORNEYS' FEES
19.1 Franchisor shall have the right to terminate this Agreement
immediately upon written notice to Franchisee stating the reason for such
termination:
(a) in the event of any breach or default of any of the
provisions of Subsection 9.1, Sections 12 or 13, Subsection 14.1 or
Section 23;
(b) if a petition in bankruptcy, an arrangement for the benefit
of creditors, or a petition for reorganization is filed by Franchisee,
or is filed against Franchisee and not dismissed within ninety (90)
days from the filing thereof, or if Franchisee shall make any
assignment for the benefit of creditors, or if a receiver or trustee
is appointed for Franchisee and is not dismissed within ninety (90)
days of such appointment;
(c) if Franchisee ceases to operate the Restaurant without the
prior written consent of Franchisor or loses its right to possession
of the Restaurant premises; provided however, this provision will not
apply if Franchisee ceases to operate the Restaurant or loses its
right to possession of the Restaurant premises by reason of Force
Majeure and Franchisee complies with the requirements of Section 24 of
this Agreement;
(d) if Franchisor discovers that Franchisee has made any
material misrepresentation or omitted any material fact in the
information which was furnished to Franchisor in connection with this
Agreement;
(e) if any part of this Agreement relating to the payment of
fees to Franchisor, or the preservation of any of Franchisor's trade
names, service marks, trademarks, trade secrets or secret formulae
licensed or disclosed hereunder is, for any reason, declared invalid
or unenforceable; or
(f) if Franchisee or any Principal Shareholder is convicted of
or pleads nolo contendere to a felony or any crime involving moral
turpitude.
If Franchisee defaults in the performance or observance of any of its
other obligations hereunder, and such default continues for a period of
sixty (60) days after written notice to Franchisee specifying such
default, Franchisor shall have the right to terminate this Agreement upon
thirty (30) days written notice to Franchisee. If Franchisee defaults in
the performance or observance of the same obligation two (2) or more times
within a twelve (12) month period, Franchisor shall have the right to
terminate this Agreement immediately upon commission of the second act of
default, upon thirty (30) days written notice to Franchisee stating the
reason for such termination, without allowance for any curative period.
The foregoing provisions of this Subsection 19.1 are subject to the
provisions of any local statutes or regulations which limit the grounds
upon which Franchisor may terminate this Agreement, or which require that
Franchisor give Franchisee additional prior written notice of termination
and opportunity to cure any default.
In the event of termination by reason of Franchisee's failure after a
good faith effort to obtain the necessary state or local liquor licenses
(as required in Section 23), Franchisor shall refund to Franchisee,
without interest, the franchise fee payment referred to in
Subsection 9.1(a), less any expenses incurred and damages sustained by
Franchisor in connection with its performance hereunder prior to the date
of such termination. Franchisor shall also repay the initial franchise
fee in the circumstances described in Subsection 18.8 hereof. In the
event of termination for any other reason, Franchisor shall have no
obligation to refund any amount previously paid by Franchisee, and
Franchisee shall be obligated to promptly pay all sums which are then due
Franchisor.
19.2 Upon the termination of this Agreement by Franchisor, Franchisee
may not remove any property from the Restaurant premises for thirty (30)
days after the termination. Upon the expiration or earlier termination of
this Agreement for any reason:
(a) Franchisee shall immediately discontinue its use of the
System and its use of Franchisor's trade names, service marks,
trademarks, logos, insignia, slogans, emblems, symbols, designs and
other identifying characteristics;
(b) if the Restaurant premises are owned by Franchisee or
leased from a third party, Franchisee shall, upon demand by
Franchisor, remove (at Franchisee's expense) Franchisor's trade names,
service marks, trademarks, logos, insignia, slogans, sign facia,
emblems, symbols, designs and other identifying characteristics from
all premises, and paint all premises and other improvements maintained
pursuant to this Agreement a design and color which is basically
different from Franchisor's authorized design and color. If
Franchisee shall fail to make or cause to be made any such removal or
repainting within thirty (30) days after written notice, then
Franchisor shall have the right to enter upon the Restaurant premises,
without being deemed guilty of trespass or any tort (or Franchisee
shall cause Franchisor to be permitted on the premises as necessary),
and make or cause to be made such removal, alterations and repainting
at the reasonable expense of Franchisee, which expense Franchisee
shall pay to Franchisor immediately upon demand; and
(c) Franchisee shall not thereafter use any trademark, trade
name, service mark, logo, insignia, slogan, emblem, symbol, design or
other identifying characteristic that is in any way associated with
Franchisor or similar to those associated with Franchisor, or use any
food or proprietary menu item, recipe or method of food preparation or
operate or do business under any name or in any manner that might tend
to give the public the impression that Franchisee is or was a licensee
or franchisee of, or otherwise associated with, Franchisor.
19.3 In the event that any part to this Agreement initiates any legal
proceeding to construe or enforce any of the terms, conditions and/or
provisions of this Agreement, including, but not limited to, its
termination provisions and its provisions requiring Franchisee to make
certain payments to Franchisor incident to the operation of the
Restaurant, or to obtain damages or other relief to which any such party
may be entitled by virtue of this Agreement, the prevailing party or
parties shall be paid its reasonable attorneys' fees and expenses by the
other party or parties. If Franchisee fails to comply with a written
notice of termination sent by Franchisor and a court later upholds such
termination of this Agreement, Franchisee's operation of the Restaurant,
from and after the date of termination stated in such notice, shall
constitute willful trademark infringement and unfair competition by
Franchisee, and Franchisee shall be liable to Franchisor for damages
resulting from such infringement in addition to any fees paid or payable
hereunder, including, without limitation, any profits which Franchisee
derived from such post-termination operation of the Restaurant.
19.4 (a) With respect to Restaurant premises owned by Franchisee, in
the event of termination of this Agreement, Franchisor shall have, for
thirty (30) days after the termination is effective, an option,
exercisable upon written notice to Franchisee within such thirty (30) day
period, to elect to purchase the Restaurant premises from Franchisee for
the fair market value of the land and buildings, furnishings and equipment
located therein.
(b) In addition to the option described above, Franchisor shall
have an option, exercisable upon written notice to Franchisee, to elect to
purchase the Restaurant premises from Franchisee upon expiration of this
Agreement for the fair market value of the land and buildings,
furnishings, and equipment located therein subject to Franchisee's option
to operate the Restaurant for an additional term under Subsection 1.3
hereof. If Franchisee does not notify Franchisor, pursuant to
Subsection 1.3 hereof, of a desire to operate the Restaurant for an
additional term, then Franchisor shall provide the written notice
described in the preceding sentence within thirty (30) days after the
latest date by which Franchisee is required by Subsection 1.3 to advise
Franchisor of such a desire; if Franchisee does notify Franchisor of a
desire to operate the Restaurant for an additional term and Franchisor
determines that Franchisee is not eligible to do so, Franchisor shall
provide the written notice described in the preceding sentence within
thirty (30) days of its written notice to Franchisee that Franchisee is
not eligible to operate the Restaurant for such additional term. With
respect to the option to purchase upon expiration of this Agreement, this
option shall not apply if prior to thirty (30) days before said
expiration, Franchisee enters into an agreement to sell such Restaurant
premises to a third party upon the expiration of the Franchise Agreement,
provided that Franchisee's agreement with the purchaser includes a
covenant by the purchaser, which is expressly enforceable by Franchisor as
a third-party beneficiary thereof, pursuant to which the purchaser agrees
that, for a period of twelve (12) months after the expiration of this
Agreement, the purchaser shall not use such premises for the operation of
a restaurant business whose menu or method of operation is similar to that
employed by restaurant units within the System.
(c) If Franchisee receives approval to operate the Restaurant
premises for an additional term in accordance with Subsection 1.3 hereof,
Franchisee will be required to execute the then-existing form of franchise
agreement, which shall contain an option to obtain assignment of
Franchisee's lease with a third party and/or to purchase certain property,
exercisable by Franchisor upon termination thereof, and an option to
purchase the Restaurant premises, exercisable by Franchisor upon
expiration of the additional term (subject to any then-existing rights to
renew of Franchisee). Such options shall be substantially similar to the
provisions described in this Subsection 19.4.
(d) If the parties cannot agree on the purchase price or other
terms of purchase within thirty (30) days following Franchisor's exercise
of its option pursuant to Subsection 19.4(a) and (b), the price or
disputed terms of purchase shall be determined by three (3) appraisers,
with each party selecting one (1) appraiser and the two (2) appraisers, so
chosen, selecting the third appraiser. In the event of such an appraisal,
each party shall bear its own legal and other costs and shall split the
appraisal fees. The appraisers' determination of the price and other
disputed terms of purchase shall be final and binding.
(e) If Franchisor elects to exercise its option to purchase
upon termination of this Agreement, the purchase price shall be paid
within thirty (30) days of the determination of the purchase price and
other terms of purchase. If Franchisor elects to exercise its option to
purchase upon expiration of this Agreement, the purchase price shall be
paid within thirty (30) days of the later of (a) the determination of the
purchase price and other terms of purchase, or (b) expiration of this
Agreement. If the Franchisor does not elect to exercise its option to
purchase the Restaurant premises, the Franchisee may sell such premises to
a third party, provided that Franchisee's agreement with the purchaser
includes a covenant by the purchaser, which is expressly enforceable by
Franchisor as a third-party beneficiary thereof, pursuant to which the
purchaser agrees that it shall not use such premises for the operation of
a restaurant business whose menu or method of operation is similar to that
employed by restaurant units within the System for a period of twelve (12)
months after the termination or expiration of this Agreement.
(f) If the Restaurant premises are leased by Franchisee from a
third party, such lease must allow Franchisee to assign the lease to
Franchisor. Upon termination of this Agreement for any reason, Franchisor
has the right, exercisable upon written notice to Franchisee within
thirty (30) days after termination is effective, to require Franchisee to
assign all Franchisee's rights and obligations under the lease to
Franchisor and to immediately surrender possession of the premises,
including all fixtures and leasehold improvements, to Franchisor. The
lessor may not impose any assignment fee or other similar charge on
Franchisor in connection with such assignment. If Franchisor exercises
that right, it has an additional right, to be exercised within thirty (30)
days after taking possession of the premises, to purchase all of
Franchisee's equipment, signs, decor items, furnishings, supplies and
other products and materials at their then-fair market value. If the
parties cannot agree on the price, the price will be determined in the
manner set forth in connection with Franchisee-owned Restaurant premises.
If Franchisor elects not to purchase the items mentioned above, Franchisee
shall, at Franchisee's own expense and under Franchisor's supervision
remove those items from the premises within ten (10) days after such final
election, or ten (10) days after expiration of the option period,
whichever is earlier. If Franchisee fails to remove all such property
from the premises within such period, Franchisor shall be entitled to do
so, or to authorize a third party to do so, all at Franchisee's expense.
19.5 In addition to the provisions contained in Subsection 19.4
hereof:
(a) With respect to Restaurant premises owned by Franchisee, in
the event of termination of this Agreement and Franchisor's exercise
of its option to purchase the Restaurant premises pursuant to
Subsection 19.4(a) hereof, Franchisee shall have, for ten (10) days
after its receipt of written notice of Franchisor's election to
purchase, an option, exercisable upon written notice to Franchisor, to
lease said premises to Franchisor, pursuant to a lease which provides
for rental at a rate not in excess of six percent (6%) of gross sales
and triple net terms. Said lease shall provide for a lease term of at
least ten (10) years with two (2) five (5)-year options to renew, and
for primary annual rent of not in excess of the number derived from
multiplying six percent (6%) times the gross sales reported by
Franchisee to Franchisor for which Franchisee has paid a royalty fee
for the next preceding calendar year times eighty percent (80%).
(b) In addition to the option described above, Franchisee shall
have an option, exercisable upon written notice to Franchisor, to
elect to lease the Restaurant premises to Franchisor upon expiration
of this Agreement and Franchisor's exercise of its option to purchase
the Restaurant premises pursuant to Subsection 19.4(b) hereof,
pursuant to the same terms set forth in Subsection 19.5(a) above,
subject to Franchisee's option to operate the Restaurant for an
additional term under Subsection 1.3 hereof. If (i) Franchisee does
not notify Franchisor, pursuant to Subsection 1.3 hereof, of a desire
to operate the Restaurant for an additional term, or (ii) Franchisee
does notify Franchisor of a desire to operate the Restaurant for an
additional term and Franchisor determines that Franchisee is not
eligible to do so, and Franchisor exercises its option to purchase the
Restaurant premises, then Franchisee shall provide the written notice
described in the preceding sentence within ten (10) days after its
receipt of written notice of Franchisor's election to purchase. With
respect to the option to lease upon expiration of this Agreement, this
option shall not apply if prior to thirty (30) days before said
expiration, Franchisee enters into an agreement to sell such
Restaurant premises to a third party upon the expiration of the
Franchise Agreement, provided that Franchisee's agreement with the
purchaser includes a covenant by the purchaser, which is expressly
enforceable by Franchisor as a third-party beneficiary thereof,
pursuant to which the purchaser agrees, at Franchisor's option, either
to lease said premises to Franchisor upon the terms set forth in
Subsection 19.5(a), or that for a period of twelve (12) months after
the expiration of this Agreement, the purchaser shall not use such
premises for the operation of a restaurant business whose menu or
method of operation is similar to that employed by restaurant units
within the System.
(c) If Franchisee receives approval to operate the Restaurant
premises for an additional term in accordance with Subsection 1.3
hereof, Franchisee will be required to execute the then-existing form
of franchise agreement which shall contain an option to obtain
assignment of Franchisee's lease with a third party and/or to lease
certain property, exercisable by Franchisor upon termination thereof,
and an option to lease the Restaurant premises, exercisable by
Franchisor upon expiration of the additional term (subject to any
then-existing rights to renew of Franchisee). Such options shall be
substantially similar to the provisions described in this Subsection
19.5.
20. NO WAIVER OF DEFAULT
20.1 The waiver by any party to this Agreement of any breach or
default, or series of breaches or defaults, of any term, covenant or
condition herein, or of any same or similar term, covenant or condition
contained in any other agreement between Franchisor and any franchisee,
shall not be deemed a waiver of any subsequent or continuing breach or
default of the same or any other term, covenant or condition contained in
this Agreement, or in any other agreement between Franchisor and any
franchisee.
20.2 All rights and remedies of the parties hereto shall be
cumulative and not alternative, in addition to and not exclusive of any
other rights or remedies which are provided for herein or which may be
available at law or in equity in case of any breach, failure or default or
threatened breach, failure or default of any term, provision or condition
of this Agreement. The rights and remedies of the parties hereto shall be
continuing and shall not be exhausted by any one (1) or more uses thereof,
and may be exercised at any time or from time to time as often as may be
expedient; and any option or election to enforce any such right or remedy
may be exercised or taken at any time and from time to time. The
expiration or earlier termination of this Agreement shall not discharge or
release Franchisee or any Principal Shareholder from any liability or
obligation then accrued, or any liability or obligation continuing beyond,
or arising out of, the expiration or earlier termination of the Agreement.
21. CONSTRUCTION, SEVERABILITY,
GOVERNING LAW AND JURISDICTION
21.1 If any part of this Agreement shall for any reason be declared
invalid, unenforceable or impaired in any way, the validity of the
remaining portions shall remain in full force and effect as if the
Agreement had been executed with such invalid portion eliminated, and it
is hereby declared the intention of the parties that they would have
executed the remaining portion of this Agreement without including therein
any such portions which might be declared invalid; provided however, that
in the event any part hereof relating to the payment of fees to
Franchisor, or the preservation of any of Franchisor's trade names,
service marks, trademarks, trade secrets or secret formulae licensed or
disclosed hereunder is for any reason declared invalid or unenforceable,
then Franchisor shall have the right to terminate this Agreement upon
written notice to Franchisee. If any clause or provision herein would be
deemed invalid or unenforceable as written, it shall be deemed modified or
limited to such extent or in such manner as may be necessary to render the
clause or provision valid and enforceable to the greatest extent possible
in light of the interest of the parties expressed in that clause or
provision, subject to the provisions of the preceding sentence.
21.2 FRANCHISEE AND PRINCIPAL SHAREHOLDERS ACKNOWLEDGE THAT
FRANCHISOR MAY GRANT NUMEROUS FRANCHISES THROUGHOUT THE UNITED STATES ON
TERMS AND CONDITIONS SIMILAR TO THOSE SET FORTH IN THIS AGREEMENT, AND
THAT IT IS OF MUTUAL BENEFIT TO FRANCHISEE AND PRINCIPAL SHAREHOLDERS AND
TO FRANCHISOR THAT THESE TERMS AND CONDITIONS BE UNIFORMLY INTERPRETED.
THEREFORE, THE PARTIES AGREE THAT TO THE EXTENT THAT THE LAW OF THE STATE
OF MISSOURI DOES NOT CONFLICT WITH LOCAL FRANCHISE STATUTES, RULES AND
REGULATIONS, MISSOURI LAW SHALL APPLY TO THE CONSTRUCTION OF THIS
AGREEMENT AND SHALL GOVERN ALL QUESTIONS WHICH ARISE WITH REFERENCE
HERETO; PROVIDED HOWEVER, THAT PROVISIONS OF MISSOURI LAW REGARDING
CONFLICTS OF LAW SHALL NOT APPLY HERETO.
21.3 THE PARTIES AGREE THAT ANY CLAIM, CONTROVERSY OR DISPUTE ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE PERFORMANCE THEREOF WHICH
CANNOT BE AMICABLY SETTLED, EXCEPT AS OTHERWISE PROVIDED HEREIN, MAY, AT
THE OPTION OF THE CLAIMANT, BE RESOLVED BY A PROCEEDING IN A COURT IN
JACKSON COUNTY, MISSOURI, AND FRANCHISEE AND PRINCIPAL SHAREHOLDERS EACH
IRREVOCABLY ACCEPT THE JURISDICTION OF THE COURTS OF THE STATE OF MISSOURI
AND THE FEDERAL COURTS LOCATED IN JACKSON COUNTY, MISSOURI FOR SUCH
CLAIMS, CONTROVERSIES OR DISPUTES.
The parties agree that service of process in any proceeding arising
out of or relating to this Agreement or the performance thereof may be
made as to Franchisee and any Principal Shareholder by serving a person of
suitable age and discretion (such as the person in charge of the office)
at the address of Franchisee specified in this Agreement and as to
Franchisor by serving the president or a vice-president of Franchisor at
the address of Franchisor or by serving Franchisor's registered agent.
22. INTERFERENCE WITH EMPLOYMENT RELATIONS
During the term of this Agreement, neither Franchisor nor Franchisee
shall employ or seek to employ in a managerial position (i.e., in a
position at a pay grade at or above that of Assistant Restaurant Manager
or Kitchen Manager), directly or indirectly, any person who is at the time
or was at any time during the prior six (6) months employed by the other
party or any of its subsidiaries or affiliates, or by any franchisee in
the System. This section shall not be violated if, at the time Franchisor
or Franchisee employs or seeks to employ such person, such former employer
has given its written consent. Notwithstanding any other provision of
this Agreement, the parties hereto acknowledge that if this Section is
violated, such former employer shall be entitled to liquidated damages
equal to three (3) times the annual salary of the employee involved, plus
reimbursement of all costs and attorneys' fees incurred. In addition to
the rights granted to the parties hereto, the parties acknowledge and
agree that any franchisee from which an employee was hired by either party
to this Agreement in violation of the terms of this Section shall be
deemed to be a third-party beneficiary of this provision and may sue and
recover against the offending party the liquidated damages herein set
forth; provided however, the failure by Franchisee to enforce this Section
shall not be deemed to be a violation of this Section.
23. LIQUOR LICENSE
The grant of the rights which are the subject of this Agreement is
expressly conditioned upon the ability of the Franchisee to obtain and
maintain any and all required state and/or local licenses permitting the
sale of liquor by the drink on the Restaurant premises, and Franchisee
agrees to use its best efforts to obtain such licenses. In the event
Franchisee fails, after a good faith effort, to obtain any and all such
required liquor licenses prior to the date on which the Restaurant is
otherwise ready to open for business, then, at the option of the
Franchisor, this Agreement may be terminated forthwith by Franchisor upon
written notice to Franchisee, in which event, Franchisor shall refund to
Franchisee, without interest, the initial franchise fee payment referred
to in Subsection 9.1, less any expenses incurred and damages sustained by
Franchisor in connection with its performance hereunder prior to the date
of such termination. After obtaining the necessary state or local liquor
licenses, Franchisee shall thereafter comply with all applicable laws and
regulations relating to the sale of liquor on the Restaurant premises.
If, during any twelve (12) month period during the term of this Agreement,
Franchisee is prohibited for any reason from selling liquor on the
Restaurant premises for more than thirty (30) days because of a violation
or violations of state or local liquor laws, then at the option of
Franchisor this Agreement may be terminated forthwith by Franchisor upon
written notice to Franchisee.
24. FORCE MAJEURE
24.1 As used in this Agreement, the term "Force Majeure" shall mean
any act of God, strike, lock-out or other industrial disturbance, war
(declared or undeclared), riot, epidemic, fire or other catastrophe, act
of any government and any other similar cause not within the control of
the party affected thereby.
24.2 If the performance of any obligation by any party under this
Agreement is prevented, hindered or delayed by reason of Force Majeure,
which cannot be overcome by use of normal commercial measures, the parties
shall be relieved of their respective obligations to the extent the
parties are respectively necessarily prevented, hindered or delayed in
such performance during the period of such Force Majeure. The party whose
performance is affected by an event of Force Majeure shall give prompt
notice of such Force Majeure event to the other party by telephone or
telegram (in each case to be confirmed in writing), setting forth the
nature thereof and an estimate as to its duration, and shall be liable for
failure to give such timely notice only to the extent of damage actually
caused.
24.3 Notwithstanding the provisions of this Section 24, if, as a
result of an event of Force Majeure (including condemnation proceedings),
the Franchisee ceases to operate the Restaurant or loses the right to
possession of the Restaurant premises, Franchisee shall apply within
thirty (30) days after the event of Force Majeure for Franchisor's
approval to relocate and/or reconstruct the Restaurant. If relocation is
necessary, Franchisor agrees to use its reasonable efforts to assist
Franchisee in locating an alternative site in the same general area where
Franchisee can operate a Restaurant within the System for the balance of
the term of the Franchise Agreement. If Franchisor so assists Franchisee,
Franchisee shall reimburse Franchisor for its reasonable out-of-pocket
expenses incurred as a result thereof. (This provision shall not be
construed to prevent Franchisee from receiving the full amount of any
condemnation award of damages relating to the closing of the Restaurant;
provided however, that if Franchisor or an affiliate is the lessor of the
Restaurant premises, Franchisee specifically waives and releases any claim
it may have for the value of any building, fixtures and other improvements
on the premises, whether or not installed or paid for by the Franchisee,
and Franchisee agrees to subordinate any claim it may have to Franchisor's
claim for such improvements.) Selection of an alternative location will
be subject to the site approval procedures set forth in Section 5 of the
Development Agreement. Once Franchisee has obtained Franchisor's approval
to relocate and/or reconstruct the Restaurant, Franchisee must diligently
pursue relocation and/or reconstruction until the Restaurant is reopened
for business.
25. MISCELLANEOUS
25.1 All notices and other communications required or permitted to be
given hereunder shall be deemed given when delivered in person or mailed
by registered or certified mail addressed to the recipient at the address
set forth below, unless that party shall have given written notice of
change of address to the sending party, in which event the new address so
specified shall be used.
FRANCHISOR: Applebee's International, Inc.
4551 W. 107th Street, Suite 100
Overland Park, Kansas 66207
Attention: President
FRANCHISEE:
PRINCIPAL SHAREHOLDERS:
25.2 All terms used in this Agreement, regardless of the number and
gender in which they are used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context or sense of this Agreement may require,
the same as if such words had been written in this Agreement themselves.
The headings inserted in this Agreement are for reference purposes only
and shall not affect the construction of this Agreement or limit the
generality of any of its provisions. The term "business day" means any
day other than Saturday, Sunday, or the following national holidays: New
Year's Day, Martin Luther King Day, Washington's Birthday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and
Christmas.
25.3 Franchisee shall, at its own cost and expense, promptly comply
with all laws, ordinances, orders, rules, regulations and requirements of
all federal, state and municipal governments and appropriate departments,
commissions, boards and offices thereof. Without limiting the generality
of the foregoing, Franchisee shall abide by all applicable rules and
regulations of any public health department.
25.4 In the event that Franchisor has leased the Restaurant premises
to Franchisee pursuant to a written lease agreement (the "Lease"), the
Lease is hereby incorporated in this Agreement by reference, and any
failure on the part of Franchisee (Lessee therein) to perform, fulfill or
observe any of the covenants, conditions or agreements contained in the
Lease shall constitute a material breach of this Agreement. It is
expressly understood, acknowledged and agreed by Franchisee that any
termination of the Lease shall result in automatic and immediate
termination of this Agreement without additional notice to Franchisee.
25.5 This Agreement and the documents referred to herein constitute
the entire agreement between the parties, superseding and canceling any
and all prior and contemporaneous agreements, understandings,
representations, inducements and statements, oral or written, of the
parties in connection with the subject matter hereof. FRANCHISEE
EXPRESSLY ACKNOWLEDGES THAT IT HAS ENTERED INTO THIS FRANCHISE AGREEMENT
AS A RESULT OF ITS OWN INDEPENDENT INVESTIGATION AND AFTER CONSULTATION
WITH ITS OWN ATTORNEY, AND NOT AS A RESULT OF ANY REPRESENTATIONS OF
FRANCHISOR, ITS AGENTS, OFFICERS OR EMPLOYEES, EXCEPT AS CONTAINED HEREIN
AND IN FRANCHISOR'S FRANCHISE OFFERING CIRCULAR, HERETOFORE MADE AVAILABLE
TO FRANCHISEE.
25.6 Except as expressly authorized herein, no amendment or
modification of this Agreement shall be binding unless executed in writing
both by Franchisor and by Franchisee and Principal Shareholders.
26. ACKNOWLEDGMENTS
Franchisee and Principal Shareholders acknowledge that:
(a) Franchisee has received a copy of this Agreement and has
had an opportunity to consult with its attorney with respect thereto
at least five (5) business days prior to execution of this Agreement;
(b) No representation has been made by Franchisor as to the
future profitability of the Restaurant;
(c) Prior to the execution of this Agreement, Franchisee has
had ample opportunity to contact Franchisor's existing franchisees, if
any, and to investigate all statements made by Franchisor relating to
the System;
(d) This Agreement establishes the right to construct and
operate a Restaurant only at the location specified in Subsection 1.1
hereof; and
(e) Franchisor is the sole owner of the service marks
identified in this Agreement, and of the goodwill associated
therewith, and Franchisee acquires no right, title or interest in
those names and marks other than the right to use them only in the
manner and to the extent prescribed and approved by Franchisor.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of
the date first above written.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Name:
Title: Title:
FRANCHISEE:
ATTEST:
By:
Name: Name:
Title: Title:
PRINCIPAL SHAREHOLDER(S):
Witness Name:
Witness Name:
Witness Name:
Witness Name:
EXHIBIT 1 TO FRANCHISE AGREEMENT
ROYALTY FEE
The monthly royalty fee to be paid by Franchisee shall be four
percent (4%) of each calendar month's gross sales; provided however, on
and after January 1, 2000, Franchisor may, in its sole discretion,
increase the monthly royalty fee to five percent (5%) of each calendar
month's gross sales.
APPENDIX A TO FRANCHISE AGREEMENT
STATEMENT OF OWNERSHIP INTERESTS
Percent of Issued
and Outstanding
Shareholder Shares of Franchisee
APPENDIX B TO FRANCHISE AGREEMENT
REVIEW AND CONSENT WITH RESPECT TO TRANSFERS
In determining whether to grant or to withhold consent to a proposed
Transfer, Franchisor shall consider all of the facts and circumstances
which it views as relevant in the particular instance, including, but not
limited to, any of the following: (i) work experience and aptitude of
Proposed New Owner and/or proposed new management (a proposed transferee
of a Principal Shareholder's Interest and/or a proposed transferee of this
Agreement is referred to as "Proposed New Owner"); (ii) financial
background and condition of Proposed New Owner, and actual and pro forma
financial condition of Franchisee; (iii) character and reputation of
Proposed New Owner; (iv) conflicting interests of Proposed New Owner;
(v) the terms and conditions of Proposed New Owner's rights, if the
proposed Transfer is a pledge or hypothecation; (vi) the adequacy of
Franchisee's operation of any Restaurant and compliance with the System
and this Agreement; and (vii) such other criteria and conditions as
Franchisor shall then consider relevant in the case of an application for
a new franchise to operate a restaurant unit within the System by an
applicant that is not then currently doing so. Franchisor's consent also
may be conditioned upon execution by Proposed New Owner of an agreement
whereby Proposed New Owner assumes full, unconditional, joint and several
liability for, and agrees to perform from the date of such Transfer, all
obligations, covenants and agreements contained herein to the same extent
as if it had been an original party to this Agreement and may also require
Franchisee and Principal Shareholders, including the proposed
Transferor(s), to execute a general release which releases Franchisor from
any claims they may have had or then have against Franchisor. In the
event Proposed New Owner is a partnership (including, but not limited to,
a limited partnership), Proposed New Owner will also be required to
execute an addendum to the Agreement which amends the references to
Franchisee and its Principal Shareholders to include the partnership
approved by Franchisor and Proposed New Owner's general partner(s) and the
principal shareholders of the general partner(s), if the general
partner(s) is a corporation. This addendum will contain a provision
including in the definition of "Transfer" the withdrawal, removal or
voluntary/involuntary dissolution (if applicable) of the general
partner(s) or the substitution or addition of a new general partner.
Franchisee or Principal Shareholders, as the case may be, shall provide
Franchisor with such information as it may require in connection with a
request for approval of a proposed Transfer.
APPENDIX C TO FRANCHISE AGREEMENT
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made this ________ day of ________________,
19_______, by and between _______________________________________, a
_____________ corporation ("Developer"), and __________________________,
an individual employed by Developer ("Employee").
WITNESSETH:
WHEREAS, APPLEBEE'S INTERNATIONAL, INC. ("Applebee's") is the owner
of all rights in and to a unique system for the development and operation
of restaurants (the "System"), which includes proprietary rights in
valuable trade names, service marks and trademarks, including the service
mark Applebee's Neighborhood Grill & Bar and variations of such mark,
designs and color schemes for restaurant premises, signs, equipment,
procedures and formulae for preparing food and beverage products,
specifications for certain food and beverage products, inventory methods,
operating methods, financial control concepts, a training facility and
teaching techniques;
WHEREAS, Developer is the owner of the exclusive right to develop
restaurants franchised by Applebee's which utilize the System
("Restaurants") for the period and in the territory described in the
Development Agreement between Applebee's and Developer (the "Development
Agreement"); and
WHEREAS, Developer acknowledges that Applebee's information as
described above was developed over time at great expense, is not generally
known in the industry and is beyond Developer's own present skills and
experience, and that to develop it itself would be expensive,
time-consuming and difficult, that it provides a competitive advantage and
will be valuable to Developer in the development of its business, and that
gaining access to it was therefore a primary reason why Developer entered
into the Development Agreement; and
WHEREAS, in consideration of Applebee's confidential disclosure to
Developer of these trade secrets, Developer has agreed to be obligated by
the terms of Development Agreement to execute, with each employee of
Developer who will have supervisory authority over the development or
operation of more than one Restaurant in the Territory described in the
Development Agreement, a written agreement protecting Applebee's trade
secrets and confidential information entrusted to Employee;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, the parties agree as follows:
(1) The parties acknowledge and agree that Employee is or will be
employed in a supervisory or managerial capacity and in such capacity will
have access to information and materials which constitute trade secrets
and confidential and proprietary information. The parties further
acknowledge and agree that any actual or potential direct or indirect
competitor of Applebee's, or of any of its franchisees, shall not have
access to such trade secrets and confidential information.
(2) The parties acknowledge and agree that the System includes
trade secrets and confidential information which Applebee's has revealed
to Developer in confidence, and that protection of said trade secrets and
confidential information and protection of Applebee's against unfair
competition from others who enjoy or who have had access to said trade
secrets and confidential information are essential for the maintenance of
goodwill and special value of the System.
(3) Employee agrees that he or she shall not at any time
(i) appropriate or use the trade secrets incorporated in the System, or
any portion thereof, for use in any business which is not within the
System; (ii) disclose or reveal any portion of the System to any person,
other than to Developer's employees as an incident of their training;
(iii) acquire any right to use, or to license or franchise the use of any
name, mark or other intellectual property right which is or may be granted
by any franchise agreement between Applebee's and Developer; or
(iv) communicate, divulge or use for the benefit of any other person or
entity any confidential information, knowledge or know-how concerning the
methods of development or operation of a Restaurant which may be
communicated to Employee or of which Employee may be apprised by virtue of
Employee's employment by Developer. Employee shall divulge such
confidential information only to such of Developer's other employees as
must have access to that information in order to operate a Restaurant or
to develop a prospective site for a Restaurant. Any and information,
knowledge and know-how, including, without limitation, drawings,
materials, equipment, specifications, techniques and other data, which
Applebee's designates as confidential, shall be deemed confidential for
purposes of this Agreement.
(4) Employee further acknowledges and agrees that the Franchise
Operations Manual and any other materials or manuals provided or made
available to Developer by Applebee's (collectively, the "Manuals"),
described in Section 5 of the applicable franchise agreement between
Applebee's and Developer, are loaned by Applebee's to Developer for
limited purposes only, remain the property of Applebee's, and may not be
reproduced, in whole or in part, without the written consent of
Applebee's.
(5) Employee agrees to surrender to Developer or to Applebee's each
and every copy of the Manuals and any other information or material in his
or her possession or control upon request, upon termination of employment
or upon completion of the use for which said Manuals or other information
or material may have been furnished to Employee.
(6) The parties agree that in the event of a breach of this
Agreement, Applebee's would be irreparably injured and would be without an
adequate remedy at law. Therefore, in the event of a breach or a
threatened or attempted breach of any of the provisions hereof, Applebee's
shall be entitled to enforce the provisions of this Agreement as a third-
party beneficiary hereof and shall be entitled, in addition to any other
remedies which it may have hereunder at law or in equity (including the
right to terminate the Development Agreement), to a temporary and/or
permanent injunction and a decree for specific performance of the terms
hereof without the necessity of showing actual or threatened damage, and
without being required to furnish a bond or other security.
(7) If any court or other tribunal having jurisdiction to determine
the validity or enforceability of this Agreement determines that it would
be invalid or unenforceable as written, the provisions hereof shall be
deemed to be modified or limited to such extent or in such manner
necessary for such provisions to be valid and enforceable to the greatest
extent possible.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
as of the date first above written.
DEVELOPER EMPLOYEE
By: By:
Name: Name:
Title:
APPENDIX C TO DEVELOPMENT AGREEMENT
STATEMENT OF OWNERSHIP INTERESTS
Percent of Issued
and Outstanding
Shareholder Shares of Developer
The Marcus Corporation 100%
APPENDIX D TO DEVELOPMENT AGREEMENT
REVIEW AND CONSENT WITH RESPECT TO TRANSFERS
In determining whether to grant or to withhold consent to a proposed
Transfer, Franchisor shall consider all of the facts and circumstances
which it views as relevant in the particular instance, including, but not
limited to, any of the following: (i) work experience and aptitude of
Proposed New Owner and/or proposed new management (a proposed transferee
of a Principal Shareholder's Interest and/or a proposed transferee of this
Agreement is referred to as "Proposed New Owner"); (ii) financial
background and condition of Proposed New Owner, and actual and pro forma
financial condition of Developer; (iii) character and reputation of
Proposed New Owner; (iv) conflicting interests of Proposed New Owner;
(v) the terms and conditions of Proposed New Owner's rights, if the
proposed Transfer is a pledge or hypothecation; (vi) the adequacy of
Developer's operation (as Franchisee) of any Restaurant and compliance
with the System and this Agreement; and (vii) such other criteria and
conditions as Franchisor shall then consider relevant in the case of an
application for a new franchise to operate a restaurant unit within the
System by an applicant that is not then currently doing so. Franchisor's
consent also may be conditioned upon execution by Proposed New Owner of an
agreement whereby Proposed New Owner assumes full, unconditional, joint
and several liability for, and agrees to perform from the date of such
Transfer, all obligations, covenants and agreements contained herein to
the same extent as if it had been an original party to this Agreement and
may also require Developer and Principal Shareholders, including the
proposed Transferor(s), to execute a general release which releases
Franchisor from any claims they may have had or then have against
Franchisor. In the event Proposed New Owner is a partnership (including,
but not limited to, a limited partnership), Proposed New Owner will also
be required to execute an addendum to the Agreement which amends the
references to Developer and its Principal Shareholders to include the
partnership approved by Franchisor and Proposed New Owner's general
partner(s) and the principal shareholders of the general partner(s), if
the general partner(s) is a corporation. This addendum will contain a
provision including in the definition of "Transfer" the withdrawal,
removal or voluntary/involuntary dissolution (if applicable) of the
general partner(s) or the substitution or addition of a new general
partner. Developer or Principal Shareholders, as the case may be, shall
provide Franchisor with such information as it may require in connection
with a request for approval of a proposed Transfer.
APPENDIX E TO DEVELOPMENT AGREEMENT
CONFIDENTIALITY AGREEMENT AND
COVENANT NOT TO COMPETE
THIS AGREEMENT is made this ________ day of ________________,
19______, by and between _______________________________________, a
_____________ corporation ("Developer"), and __________________________,
an individual employed by Developer ("Employee").
WITNESSETH:
WHEREAS, APPLEBEE'S INTERNATIONAL, INC. ("Applebee's") is the owner
of all rights in and to a unique system for the development and operation
of restaurants (the "System"), which includes proprietary rights in
valuable trade names, service marks and trademarks, including the service
mark Applebee's Neighborhood Grill & Bar and variations of such mark,
designs and color schemes for restaurant premises, signs, equipment,
procedures and formulae for preparing food and beverage products,
specifications for certain food and beverage products, inventory methods,
operating methods, financial control concepts, a training facility and
teaching techniques;
WHEREAS, Developer is the owner of the exclusive right to develop
restaurants franchised by Applebee's which utilize the System
("Restaurants") for the period and in the territory described in the
Development Agreement between Applebee's and Developer (the "Development
Agreement");
WHEREAS, Developer acknowledges that Applebee's information as
described above was developed over time at great expense, is not generally
known in the industry and is beyond Developer's own present skills and
experience, and that to develop it itself would be expensive,
time-consuming and difficult, that it provides a competitive advantage and
will be valuable to Developer in the development of its business, and that
gaining access to it was therefore a primary reason why Developer entered
into the Development Agreement; and
WHEREAS, in consideration of Applebee's confidential disclosure to
Developer of these trade secrets, Developer has agreed to be obligated by
the terms of Development Agreement to execute, with its Director of
Operations, a written agreement protecting Applebee's trade secrets and
confidential information entrusted to Employee, and protecting against
unfair competition;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, the parties agree as follows:
(1) The parties acknowledge and agree that Employee is or will be
employed in a supervisory or managerial capacity and in such capacity will
have access to information and materials which constitute trade secrets
and confidential and proprietary information. The parties further
acknowledge and agree that any actual or potential direct or indirect
competitor of Applebee's or of any of its franchisees shall not have
access to such trade secrets and confidential information.
(2) The parties acknowledge and agree that the System includes
trade secrets and confidential information which Applebee's has revealed
or will reveal to Developer in confidence, and that protection of said
trade secrets and confidential information and protection of Applebee's
against unfair competition from others who enjoy or who have had access to
said trade secrets and confidential information are essential for the
maintenance of goodwill and special value of the System.
(3) Employee agrees that he or she shall not at any time
(i) appropriate or use the trade secrets incorporated in the System, or
any portion thereof, for use in any business which is not within the
System; (ii) disclose or reveal any portion of the System to any person
other than to Developer's employees as an incident of their training;
(iii) acquire any right to use, or to license or franchise the use of any
name, mark or other intellectual property right which is or may be granted
by any franchise agreement between Applebee's and Developer; or
(iv) communicate, divulge or use for the benefit of any other person or
entity any confidential information, knowledge or know-how concerning the
methods of development or operation of a Restaurant which may be
communicated to Employee or of which Employee may be apprised by virtue of
Employee's employment by Developer. Employee shall divulge such
confidential information only to such of Developer's other employees as
must have access to that information in order to operate a Restaurant or
to develop a prospective site for a Restaurant. Any and all information,
knowledge and know-how, including, without limitation, drawings,
materials, equipment, specifications, techniques and other data, which
Applebee's designates as confidential, shall be deemed confidential for
purposes of this Agreement.
(4) Employee agrees that for the duration of his or her employment
by Developer, and for two (2) years following termination thereof,
Employee may not, without the prior written consent of Applebee's,
directly or indirectly, for himself or through, on behalf of or in
conjunction with any person, partnership or corporation, engage in or
acquire any financial or beneficial interest (including any interest in
corporations, partnerships, trusts, unincorporated associations or joint
ventures) in, advise, help, guarantee loans or make loans to, any
restaurant business whose menu or method of operation is the same as or
similar to that employed by restaurant units within the System which is
located either (a) in the Territory, as defined in the Development
Agreement, or (b) in the Area of Dominant Influence (as defined and
established from time to time by Arbitron Ratings Company) of any
Restaurant developed pursuant to the Development Agreement.
(5) Employee further acknowledges and agrees that the Franchise
Operations Manual and any other materials and manuals provided or made
available to Developer by Applebee's (collectively, the "Manuals"),
described in Section 5 of the form of franchise agreement which is
attached as Appendix B to the Development Agreement are loaned by
Applebee's to Developer for limited purposes only, remain the property of
Applebee's, and may not be reproduced, in whole or in part, without the
written consent of Applebee's.
(6) Employee agrees to surrender to Developer or to Applebee's each
and every copy of the Manuals and any other information or material in his
or her possession or control upon request, upon termination of employment,
or upon completion of the use for which said Manuals or other information
or material may have been furnished to Employee.
(7) The parties agree that in the event of a breach of this
Agreement, Applebee's would be irreparably injured and would be without an
adequate remedy at law. Therefore, in the event of a breach or a
threatened or attempted breach of any of the provisions hereof, Applebee's
shall be entitled to enforce the provisions of this agreement as a third-
party beneficiary hereof and shall be entitled, in addition to any other
remedies which it may have hereunder at law or in equity (including the
right to terminate the Development Agreement), to a temporary and/or
permanent injunction and a decree for specific performance of the terms
hereof without the necessity of showing actual or threatened damage, and
without being required to furnish a bond or other security.
(8) The restrictions in Subsection (4) hereof shall not apply to
ownership of less than two percent (2%) of the shares of a company whose
shares are traded on a national securities exchange if such shares are
owned for investment only, and are not owned by an officer, director,
employee or consultant of such publicly traded company.
(9) If any court or other tribunal having jurisdiction to determine
the validity or enforceability of this Agreement determines that it would
be invalid or unenforceable as written, the provisions hereof shall be
deemed to be modified or limited to such extent or in such manner
necessary for such provisions to be valid and enforceable to the greatest
extent possible.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
as of the date first above written.
DEVELOPER: EMPLOYEE:
By: By:
Name: Name:
Title:
APPENDIX F TO DEVELOPMENT AGREEMENT
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made this ________ day of ________________,
19_______, by and between ________________________________________, a
_____________ corporation ("Developer"), and __________________________,
an individual employed by Developer ("Employee").
WITNESSETH:
WHEREAS, APPLEBEE'S INTERNATIONAL, INC. ("Applebee's") is the owner
of all rights in and to a unique system for the development and operation
of restaurants (the "System"), which includes proprietary rights in
valuable trade names, service marks and trademarks, including the service
mark Applebee's Neighborhood Grill & Bar and variations of such mark,
designs and color schemes for restaurant premises, signs, equipment,
procedures and formulae for preparing food and beverage products,
specifications for certain food and beverage products, inventory methods,
operating methods, financial control concepts, a training facility and
teaching techniques;
WHEREAS, Developer is the owner of the exclusive right to develop
restaurants franchised by Applebee's which utilize the System
("Restaurants") for the period and in the territory described in the
Development Agreement between Applebee's and Developer (the "Development
Agreement"); and
WHEREAS, Developer acknowledges that Applebee's information as
described above was developed over time at great expense, is not generally
known in the industry and is beyond Developer's own present skills and
experience, and that to develop it itself would be expensive,
time-consuming and difficult, that it provides a competitive advantage and
will be valuable to Developer in the development of its business, and that
gaining access to it was therefore a primary reason why Developer entered
into the Development Agreement; and
WHEREAS, in consideration of Applebee's confidential disclosure to
Developer of these trade secrets, Developer has agreed to be obligated by
the terms of Development Agreement to execute, with each employee of
Developer who will have supervisory authority over the development or
operation of more than one Restaurant in the Territory described in the
Development Agreement, a written agreement protecting Applebee's trade
secrets and confidential information entrusted to Employee;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, the parties agree as follows:
(1) The parties acknowledge and agree that Employee is or will be
employed in a supervisory or managerial capacity and in such capacity will
have access to information and materials which constitute trade secrets
and confidential and proprietary information. The parties further
acknowledge and agree that any actual or potential direct or indirect
competitor of Applebee's, or of any of its franchisees, shall not have
access to such trade secrets and confidential information.
(2) The parties acknowledge and agree that the System includes
trade secrets and confidential information which Applebee's has revealed
to Developer in confidence, and that protection of said trade secrets and
confidential information and protection of Applebee's against unfair
competition from others who enjoy or who have had access to said trade
secrets and confidential information are essential for the maintenance of
goodwill and special value of the System.
(3) Employee agrees that he or she shall not at any time
(i) appropriate or use the trade secrets incorporated in the System, or
any portion thereof, for use in any business which is not within the
System; (ii) disclose or reveal any portion of the System to any person
other than to Developer's employees as an incident of their training;
(iii) acquire any right to use, or to license or franchise the use of any
name, mark or other intellectual property right which is or may be granted
by any franchise agreement between Applebee's and Developer; or
(iv) communicate, divulge or use for the benefit of any other person or
entity any confidential information, knowledge or know-how concerning the
methods of development or operation of a Restaurant which may be
communicated to Employee or of which Employee may be apprised by virtue of
Employee's employment by Developer. Employee shall divulge such
confidential information only to such of Developer's other employees as
must have access to that information in order to operate a Restaurant or
to develop a prospective site for a Restaurant. Any and information,
knowledge and know-how, including, without limitation, drawings,
materials, equipment, specifications, techniques and other data, which
Applebee's designates as confidential, shall be deemed confidential for
purposes of this Agreement.
(4) Employee further acknowledges and agrees that the Franchise
Operations Manual and any other materials or manuals provided or made
available to Developer by Applebee's (collectively, the "Manuals"),
described in Section 5 of the applicable franchise agreement between
Applebee's and Developer, are loaned by Applebee's to Developer for
limited purposes only, remain the property of Applebee's, and may not be
reproduced, in whole or in part, without the written consent of
Applebee's.
(5) Employee agrees to surrender to Developer or to Applebee's each
and every copy of the Manuals and any other information or material in his
or her possession or control upon request, upon termination of employment
or upon completion of the use for which said Manuals or other information
or material may have been furnished to Employee.
(6) The parties agree that in the event of a breach of this
Agreement, Applebee's would be irreparably injured and would be without an
adequate remedy at law. Therefore, in the event of a breach or a
threatened or attempted breach of any of the provisions hereof, Applebee's
shall be entitled to enforce the provisions of this Agreement as a third-
party beneficiary hereof and shall be entitled, in addition to any other
remedies which it may have hereunder at law or in equity (including the
right to terminate the Development Agreement), to a temporary and/or
permanent injunction and a decree for specific performance of the terms
hereof without the necessity of showing actual or threatened damage, and
without being required to furnish a bond or other security.
(7) If any court or other tribunal having jurisdiction to determine
the validity or enforceability of this Agreement determines that it would
be invalid or unenforceable as written, the provisions hereof shall be
deemed to be modified or limited to such extent or in such manner
necessary for such provisions to be valid and enforceable to the greatest
extent possible.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
as of the date first above written.
DEVELOPER EMPLOYEE
By: By:
Name: Name:
Title:
APPENDIX G TO DEVELOPMENT AGREEMENT
EXISTING COMPETITIVE RESTAURANTS
Big Boy restaurants
Captain's restaurants
Pancho O'Mally's restaurants
Kentucky Fried Chicken restaurants
Marc's Cafe & Coffee Mill restaurants
Gino's East of Chicago restaurants
FIRST ADDENDUM TO DEVELOPMENT AGREEMENT
THIS FIRST ADDENDUM is made and entered into this ________ day of
________________, 19_____, by and between APPLEBEE'S INTERNATIONAL, INC.,
a Delaware corporation, hereinafter referred to as "Franchisor", MARCUS
RESTAURANTS, INC., a Wisconsin corporation, hereinafter sometimes referred
to as "Developer" or "Franchisee".
WITNESSETH:
WHEREAS, Franchisor franchises nationally the Applebee's Neighborhood
Grill & Bar restaurant system (the "System"), and
WHEREAS, contemporaneous with the execution of this First Addendum to
Development Agreement, Franchisor and Franchisee have entered into an
Applebee's Neighborhood Grill & Bar Development Agreement (the
"Development Agreement") whereby Franchisor will grant to Franchisee the
right to develop Applebee's Neighborhood Grill & Bar Restaurants, as such
term is defined in the Development Agreement, in a market generally
described as a portion of the Chicago, Illinois A.D.I. and more
specifically defined in the Development Agreement (the "Territory"), and
WHEREAS, the parties desire to amend and supplement said Development
Agreement as hereinafter set forth,
NOW THEREFORE, for good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. The parties acknowledge that no rights regarding the Franchisor's
trade names, trademarks and service marks are granted to Developer
pursuant to the Development Agreement; however, if Franchisor authorizes
Developer to use Franchisor's trade names, trademarks or service marks for
an identified purpose, the terms of Section 18.7 of the form of franchise
agreement attached to the Development Agreement as Appendix B (the
"Franchise Agreement") shall apply to Developer's use of the trade names,
trademarks and service marks, provided that the Developer's use of such
names and marks is consistent with the requirements and restrictions of
Section 18 of the Franchise Agreement.
2. Developer agrees to require Axel Wolff and Bruce Olson to execute
the form of Confidentiality Agreement and Covenant Not To Compete attached
as Appendix E to the Development Agreement.
3. The parties agree that if and when Franchisor adopts the new form
of the franchise agreement agreed upon by the Franchisor and the
Applebee's franchise business council for use in the System,
notwithstanding Section 6 of the Development Agreement, Developer will
have the option for thirty (30) days after receipt of the new form of
franchise agreement to adopt all of the provisions of the new form of
franchise agreement for all of its franchises and to substitute the new
form for the Franchise Agreement to be used for all future Restaurants
developed. If Developer wishes to exercise its option, Developer must
notify Franchisor in writing within the thirty (30) day option period.
Developer acknowledges that its option relates only to the adoption of the
new form of franchise agreement in its entirety and that Developer may not
choose to adopt only select provisions of the new form.
4. Subsection 8.8(a) of the Development Agreement shall be
supplemented by the following sentence:
"Franchisor's approval of a Transfer will not be unreasonably
withheld."
5. Section 9 of the Development Agreement shall be supplemented with
the following Subsection 9.5:
"9.5 If Franchisor is liquidated pursuant to the Chapter 7
of Title 11 of the U.S. Code and the Development Agreement is
not assumed by Franchisor or its trustee or assigned,
transferred or conveyed to a third party, the Development
Agreement will automatically terminate."
6. Subsections 11.1(a) and (b) of the Development Agreement shall be
deleted in their entirety and the following provisions inserted in lieu
thereof:
"(a) During the term of this Agreement, neither
Developer nor any Principal Shareholder, for so long as such
Principal Shareholder owns an Interest in Developer, may,
without the prior written consent of Franchisor, directly or
indirectly engage in, or acquire any financial or beneficial
interest (including interests in corporations, partnerships,
trusts, unincorporated associations or joint ventures) in,
advise, help, guarantee loans or make loans to, any restaurant
business, except those restaurant businesses listed in
Appendix G to the Development Agreement, whose menu or method of
operation is similar to that employed by restaurant units within
the System which is either (i) located in the Territory,
(ii) located in the Area of Dominant Influence (as defined and
established from time to time by Arbitron Ratings Company) of
any Restaurant developed pursuant to this Agreement,
(iii) located within a five (5) mile radius of any restaurant
unit within the System, or (iv) determined by Franchisor,
exercising reasonable good faith judgment, to be a direct
competitor of the System.
"(b) Neither Developer, for two (2) years following
the termination of this Agreement, nor any Principal
Shareholder, for two (2) years following the termination of all
of his or her Interest in Developer or the termination of this
Agreement, whichever occurs first, may directly or indirectly
engage in, or acquire any financial or beneficial interest
(including any interest in corporations, partnerships, trusts,
unincorporated associations or joint ventures) in, advise, help,
guarantee loans or make loans to, any restaurant business,
except those restaurant businesses listed in Appendix G to the
Development Agreement, whose menu or method of operation is
similar to that employed by restaurant units within the System
which is located either (i) in the Territory, (ii) in the Area
of Dominant Influence (as defined and established from time to
time by Arbitron Ratings Company) of any Restaurant developed
pursuant to this Agreement, (iii) within a five (5) mile radius
of any restaurant unit within the System, or (iv) within any
area for which an active, currently binding development
agreement has been granted by Franchisor to another franchisee
as of the date of termination."
7. The Franchise Agreement which is attached to the Development
Agreement as Appendix B and all future Franchise Agreements to be entered
between the parties hereto pursuant to this Development Agreement shall be
amended as set forth in the following paragraphs 8 through 10 and shall be
interpreted and governed in accordance with this First Addendum. Any
future amendment or modification to such a Franchise Agreement shall not
affect this First Addendum unless such amendment or modification expressly
refers to this First Addendum.
8. Subsection 12.6(a) of the Franchise Agreement shall be
supplemented by the following sentence:
"Franchisor's approval of a Transfer will not be unreasonably
withheld."
9. Subsections 13.1(a) and (b) of the Franchise Agreement shall be
deleted in their entirety and the following provisions inserted in lieu
thereof:
"(a) During the term of this Agreement, neither
Franchisee nor any Principal Shareholder, for so long as such
Principal Shareholder owns an Interest in Franchisee, may,
without the prior written consent of Franchisor, directly or
indirectly engage in, or acquire any financial or beneficial
interest (including interests in corporations, partnerships,
trusts, unincorporated associations or joint ventures) in,
advise, help, guarantee loans or make loans to, any restaurant
business, except those restaurant businesses listed in
Appendix G to the Development Agreement, whose menu or method of
operation is similar to that employed by restaurant units within
the System which is either (i) located in the Territory, as
defined in the Development Agreement (ii) located in the Area of
Dominant Influence (as defined and established from time to time
by Arbitron Ratings Company) of any restaurant developed
pursuant to the Development Agreement, (iii) located within a
five (5) mile radius of any restaurant unit within the System,
or (iv) determined by Franchisor, exercising reasonable good
faith judgment, to be a direct competitor of the System.
"(b) Neither Franchisee, for two (2) years following
the termination of this Agreement, nor any Principal
Shareholder, for two (2) years following the termination of all
of his or her Interest in Franchisee or the termination of this
Agreement, whichever occurs first, may directly or indirectly
engage in, or acquire any financial or beneficial interest
(including any interest in corporations, partnerships, trusts,
unincorporated associations or joint ventures) in, advise, help,
guarantee loans or make loans to, any restaurant business,
except those restaurant businesses listed in Appendix G to the
Development Agreement, whose menu or method of operation is
similar to that employed by restaurant units within the System
which is located either (i) in the Territory, as defined by the
Development Agreement (ii) in the Area of Dominant Influence (as
defined and established from time to time by Arbitron Ratings
Company) of any restaurant developed pursuant to the Development
Agreement, (iii) within a five (5) mile radius of any restaurant
unit within the System, or (iv) within any area for which an
active, currently binding development agreement has been granted
by Franchisor to another franchisee as of the date of
termination."
10. Section 19 of the Franchise Agreement shall be supplemented
with the following Subsection 19.6:
"19.6 If Franchisor is liquidated pursuant to the Chapter 7
of Title 11 of the U.S. Code and the Franchise Agreement is not
assumed by Franchisor or its trustee or assigned, transferred or
conveyed to a third party, the Franchise Agreement will
automatically terminate."
11. This First Addendum shall be considered an integral part of
the Development Agreement and the terms of this First Addendum shall
govern with respect to the subject matter hereof. Except as modified or
supplemented by this First Addendum, the terms of the Development
Agreement are hereby ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed this First
Addendum to Development Agreement the day and year first above written.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Robert T. Steinkamp Name: Abe J. Gustin, Jr.
Title: Secretary Title: President
FRANCHISEE:
ATTEST: MARCUS RESTAURANTS, INC.
By:
Name: Thomas F. Kissinger Name: Stephen Marcus
Title: Secretary Title: President
The Marcus Corporation, the principal shareholder of Developer, hereby
executes this First Addendum to Development Agreement for the sole purpose
of signifying its agreement with the terms contained in Paragraphs 6 and 9
of this First Addendum.
ATTEST: THE MARCUS CORPORATION
By:
Name: Name:
Title: Title:
SECOND ADDENDUM TO DEVELOPMENT AGREEMENT
THIS SECOND ADDENDUM is made and entered into this ________ day of
________________, 19_____, by and between APPLEBEE'S INTERNATIONAL, INC.,
a Delaware corporation, hereinafter referred to as "Franchisor", MARCUS
RESTAURANTS, INC., a Wisconsin corporation, hereinafter referred to as
"Developer".
WITNESSETH:
WHEREAS, Franchisor franchises nationally the Applebee's Neighborhood
Grill & Bar restaurant system (the "System"), and
WHEREAS, contemporaneous with the execution of this Second Addendum
to Development Agreement, Franchisor and Franchisee have entered into an
Applebee's Neighborhood Grill & Bar Development Agreement and a First
Addendum to Development Agreement (collectively, the "Development
Agreement") whereby Franchisor will grant to Franchisee the right to
develop Applebee's Neighborhood Grill & Bar Restaurants, as such term is
defined in the Development Agreement, in a market generally described as a
portion of the Chicago, Illinois A.D.I. and more specifically defined in
the Development Agreement (the "Territory"), and
WHEREAS, an attachment to said Development Agreement is the form
Franchise Agreement which will be entered between the parties with respect
to each of said Restaurants, and
WHEREAS, Article 19 of the Franchise Agreement grants to Franchisor
certain rights and options with respect to the Restaurant to which each of
the franchise agreements will refer, and
WHEREAS, the parties hereto desire to amend and supplement said form
Franchise Agreement now and in the future as hereinafter set forth,
NOW THEREFORE, for good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. This Agreement shall be a part of the Development Agreement and
Appendices entered this date to which it is attached, the same as if the
provisions hereof were an integral part thereof.
2. Irrespective of the provisions of Article 19 of the Franchise
Agreement attached to the Development Agreement as an Appendix or any
other provision of either the Development Agreement or Franchise
Agreement, if:
(i) All or substantially all of the assets of the Marcus
Corporation, the principal shareholder of Developer, including the
assets or stock of Developer, are sold to a third-party purchaser as
a part of one (1) transaction and so long as the third-party
purchaser is not a Direct Competitor (as hereinafter defined) of
Franchisor, as determined by Franchisor in its discretion, and is
approved by Franchisor as a new franchisee in the manner provided in
the Development and Franchise Agreements; or
(ii) All or substantially all of the assets of Developer,
including all of its Applebee's Restaurants (both the property and
the operation thereof), are sold to a third-party purchaser as a part
of one (1) transaction and so long as the third-party purchaser is
not a Direct Competitor of Franchisor, as determined by Franchisor in
its discretion, and is approved by Franchisor as a new franchisee in
the manner provided in the Development and Franchise Agreements; or
(iii) All of Developer's Applebee's Restaurants, including the
property and the operation thereof, are sold to a third-party
purchaser as a part of one (1) transaction and so long as the third-
party purchaser is not a Direct Competitor of Franchisor, as
determined by Franchisor in its discretion, and is approved by
Franchisor as a new franchisee in the manner provided in the
Development and Franchise Agreements;
then, in any one of such events, the rights and options granted Franchisor
in Article 19 of the Franchise Agreement to purchase a Restaurant site or
accept an assignment of the Restaurant lease, is hereby waived by
Franchisor.
For purposed of this Addendum, a "Direct Competitor" of Franchisor
shall mean a person, firm, corporation or other entity which operates a
chain of three (3) or more restaurants that are upscale, with moderately
priced menu items, that serves alcoholic beverages, and that has a menu
and/or method of operation substantially similar to Franchisor's menu and
method of operation and which competitor operates its restaurants within
the continental United States.
Developer shall notify Franchisor of any proposed sale and within
fifteen (15) days after receipt of such notice Franchisor will notify
Developer whether Franchisor has determined the third-party purchaser to
be a Direct Competitor. If Franchisor determines that said third-party
purchaser is not a Direct Competitor and said third-party purchaser is
approved by Franchisor as a new franchisee in the manner and in the time
period provided in the Development and Franchise Agreements, Franchisor
shall have no right to purchase said Restaurant or take an assignment of
such lease as a result of the options granted it in Article 19 of the
Franchise Agreement. Alternatively, if Franchisor determines that the
third-party purchaser is a Direct Competitor as hereinbefore provided, or
does not approve said third-party purchaser as a new franchisee, the
provisions of Article 19 shall apply, unaffected by the terms of this
Second Addendum. In all other respects, except as set forth in the other
Addenda to this Development Agreement, the Development Agreement and form
Franchise Agreement shall remain unaffected by the terms hereof.
3. Franchisor acknowledges that the Marcus Corporation, the
principal shareholder of the Developer, is not a party to the Development
Agreement, nor any Franchise Agreement to be entered pursuant to the terms
of said Development Agreement. Accordingly, any reference to obligations,
responsibilities, guarantees or liabilities of the Marcus Corporation
referred to in the Development Agreement, Franchise Agreement or Addenda
thereto is hereby eliminated.
4. This Second Addendum shall amend each and every Franchise
Agreement entered between the parties pursuant to the Development
Agreement now and in the future without the necessity of referring hereto
in those agreements. This Second Addendum may be amended by the parties
hereto only by a written instrument specifically referring to this Second
Addendum.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Addendum to Development Agreement the day and year first above written.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Robert T. Steinkamp Name: Abe J. Gustin, Jr.
Title: Secretary Title: President
FRANCHISEE:
ATTEST: MARCUS RESTAURANTS, INC.
By:
Name: Thomas F. Kissinger Name: Stephen Marcus
Title: Secretary Title: President
The Marcus Corporation, the principal shareholder of Developer, hereby
executes this Second Addendum to Development Agreement for the sole
purpose of signifying its agreement with the terms contained in
Paragraph 2 of this Second Addendum.
ATTEST: THE MARCUS CORPORATION
By:
Name: Name:
Title: Title:
THIRD ADDENDUM TO DEVELOPMENT AGREEMENT
THIS THIRD ADDENDUM is made and entered into this ________ day of
________________, 19_____, by and between APPLEBEE'S INTERNATIONAL, INC.,
a Delaware corporation, hereinafter referred to as "Franchisor", MARCUS
RESTAURANTS, INC., a Wisconsin corporation, hereinafter referred to as
"Franchisee".
WITNESSETH:
WHEREAS, Franchisor franchises nationally the Applebee's Neighborhood
Grill & Bar restaurant system (the "System"), and
WHEREAS, on or about November 22, 1991, Franchisor and Franchisee
entered into a franchise agreement (the "8680 Franchise Agreement"),
pursuant to the terms of which Franchisee was granted the right to operate
an Applebee's Restaurant located at 601 Martingale Road, Schaumburg,
Illinois, upon the terms and conditions specified in the Franchise
Agreement, and
WHEREAS, on or about September 9, 1992, Franchisor and Franchisee
entered into a franchise agreement (the "8719 Franchise Agreement"),
pursuant to the terms of which Franchisee was granted the right to operate
an Applebee's Restaurant located at 354 West Army Trail Road,
Bloomingdale, Illinois, upon the terms and conditions specified in the
Franchise Agreement, and
WHEREAS, on or about February 16, 1993, Franchisor and Franchisee
entered into a franchise agreement (the "8750 Franchise Agreement"),
pursuant to the terms of which Franchisee was granted the right to operate
an Applebee's Restaurant located at 100 South Waukegan Road, Deerfield,
Illinois, upon the terms and conditions specified in the Franchise
Agreement, and
WHEREAS, on or about March 23, 1993, Franchisor and Franchisee
entered into a franchise agreement (the "8753 Franchise Agreement"),
pursuant to the terms of which Franchisee was granted the right to operate
an Applebee's Restaurant located at Randhurst Shopping Center, 999
Elmhurst Road, Mt. Prospect, Illinois, upon the terms and conditions
specified in the Franchise Agreement, and
WHEREAS, on or about __________________, _______, Franchisor and
Franchisee entered into a franchise agreement (the "Streamwood Franchise
Agreement"), pursuant to the terms of which Franchisee was granted the
right to operate an Applebee's Restaurant located in Streamwood, Illinois,
upon the terms and conditions specified in the Franchise Agreement, and
WHEREAS, on or about __________________, _______, Franchisor and
Franchisee entered into a franchise agreement (the "Hodgkins Franchise
Agreement"), pursuant to the terms of which Franchisee was granted the
right to operate an Applebee's Restaurant located in Hodgkins, Illinois,
upon the terms and conditions specified in the Franchise Agreement, and
WHEREAS, on or about __________________, _______, Franchisor and
Franchisee entered into a franchise agreement (the "Naperville Franchise
Agreement"), pursuant to the terms of which Franchisee was granted the
right to operate an Applebee's Restaurant located in Naperville, Illinois,
upon the terms and conditions specified in the Franchise Agreement, and
WHEREAS, on or about __________________, _______, Franchisor and
Franchisee entered into a franchise agreement (the "Crystal Lake Franchise
Agreement"), pursuant to the terms of which Franchisee was granted the
right to operate an Applebee's Restaurant located in Crystal Lake,
Illinois, upon the terms and conditions specified in the Franchise
Agreement (the 8680 Franchise Agreement, the 8719 Franchise Agreement, the
8750 Franchise Agreement, the 8753 Franchise Agreement, the Streamwood
Franchise Agreement, the Hodgkins Franchise Agreement, the Naperville
Franchise Agreement and the Crystal Lake Franchise Agreement shall be
collectively referred to herein as the "Franchise Agreements"), and
WHEREAS, contemporaneous with the execution of this Third Addendum to
Development Agreement, Franchisor and Franchisee have entered into an
Applebee's Neighborhood Grill & Bar Development Agreement and addenda
thereto (collectively, the "Development Agreement") whereby Franchisor
will grant to Franchisee the right to develop Applebee's Neighborhood
Grill & Bar Restaurants, as such term is defined in the Development
Agreement, in a market generally described as a portion of the Chicago,
Illinois A.D.I. and more specifically defined in the Development Agreement
(the "Territory"), and
WHEREAS, the Restaurants operated pursuant to the terms of the
Franchise Agreements are located in the Territory, and
WHEREAS, the parties desire to amend said Development Agreement as
hereinafter set forth,
NOW THEREFORE, for good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. The Development Agreement to which this Third Addendum is
attached shall be, and the same hereby is, amended and supplemented by
this Third Addendum. Any conflict between this Third Addendum and the
Development Agreement shall be governed and controlled by the terms of
this Third Addendum.
2. Notwithstanding the fact that the Franchise Agreements were
issued prior to the execution of the Development Agreement, the parties
hereto agree that the Franchise Agreements will be deemed to be franchise
agreements issued under the Development Agreement, and accordingly, any
violation of the terms and conditions of the Franchise Agreements shall be
deemed to be, and shall be, a breach of and a default under the
Development Agreement and may result in a termination of such Development
Agreement the same as if said Franchise Agreements were issued pursuant
thereto.
3. Franchisee hereby covenants and agrees that the Restaurants
operated pursuant to the terms of the Franchise Agreements shall be
operated by the Franchisee in accordance and compliance with the terms of
the Franchise Agreements. Franchisee hereby acknowledges its continuing
obligations under the Franchise Agreements and hereby agrees to be bound
by all provisions of such Franchise Agreements.
4. In all other respects, said Development Agreement shall remain
in full force and effect as originally written.
5. This Third Addendum to Development Agreement and the Development
Agreement contain the entire agreement between the parties, and except as
otherwise provided herein, no other agreements, representations or
commitments made or discussed prior to the date hereof shall survive the
execution of the Development Agreement and this Third Addendum.
IN WITNESS WHEREOF, the parties hereto have executed this Third
Addendum the day and year first above written.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Robert T. Steinkamp Name: Abe J. Gustin, Jr.
Title: Secretary Title: President
FRANCHISEE:
ATTEST: MARCUS RESTAURANTS, INC.
By:
Name: Thomas F. Kissinger Name: Stephen Marcus
Title: Secretary Title: President
FOURTH ADDENDUM TO
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
DEVELOPMENT AGREEMENT
THIS FOURTH ADDENDUM made and entered this _______ day of
_______________, 19_____ by and between APPLEBEE'S INTERNATIONAL, INC., a
Delaware corporation, hereinafter referred to as "FRANCHISOR", and MARCUS
RESTAURANTS, INC., a Wisconsin corporation, hereinafter referred to as
"DEVELOPER".
WHEREAS, Franchisor and Developer have this ________ day of
_________________, 19_____ entered into a development agreement and
addenda thereto (collectively, the "Development Agreement") relating to
the right to develop Applebee's Neighborhood Grill & Bar restaurants
("Restaurants") in certain areas in the states of Illinois and Wisconsin
and will enter into separate franchise agreements which will be in the
form of the franchise agreement ("Franchise Agreement") attached as
Appendix B to the Development Agreement. In exchange for the mutual
obligations of the parties set forth in this Fourth Addendum and for other
good a valuable consideration, the receipt, adequacy and sufficiency of
which is hereby acknowledged, the parties now wish to amend and supplement
the Development Agreement as follows:
1. Attached hereto and incorporated herein by reference are
documents noted as Attachment DA-1-1 which contain certain provisions
required by the state of Illinois. The parties agree that said Attachment
DA-1-1 (Illinois) shall only apply to that portion of the Territory
granted to Developer which is located within the state of Illinois to
which said Attachment refers and shall not otherwise govern the agreement
between the parties except as expressly required and mandated by laws of
the state of Illinois for that portion of the Territory which is located
therein.
2. Attached hereto and incorporated herein by reference are
documents noted as Attachment DA-1-2 which contain certain provisions
required by the state of Wisconsin. The parties agree that said
Attachment DA-1-2 (Wisconsin) shall only apply to that portion of the
Territory granted to Developer which is located within the state of
Wisconsin to which said Attachment refers and shall not otherwise govern
the agreement between the parties except as expressly required and
mandated by laws of the state of Wisconsin for that portion of the
Territory which is located therein.
3. This Fourth Addendum shall amend each and every Franchise
Agreement entered between the parties pursuant to the Development
Agreement now and in the future without the necessity of referring hereto
in those agreements. This Fourth Addendum may be amended by the parties
hereto only by a written instrument specifically referring to this Fourth
Addendum.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
as of the date first above written.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
______________________________ By: ________________________________
Name: Robert T. Steinkamp Name: Abe J. Gustin, Jr.
Title: Secretary Title: President
DEVELOPER:
ATTEST: MARCUS RESTAURANTS, INC.
______________________________ By: ________________________________
Name: Thomas F. Kissinger Name: Stephen Marcus
Title: Secretary Title: President
ADDENDUM TO
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
FRANCHISE AGREEMENT
THIS ADDENDUM made and entered this _______ day of _______________,
19_____ by and between APPLEBEE'S INTERNATIONAL, INC., a Delaware
corporation, hereinafter referred to as "FRANCHISOR", and MARCUS
RESTAURANTS, INC., a Wisconsin corporation, hereinafter referred to as
"DEVELOPER".
WHEREAS, Franchisor and Developer have this ________ day of
_________________, 19_____ entered into a development agreement
("Development Agreement") relating to the right to develop Applebee's
Neighborhood Grill & Bar restaurants ("Restaurants") in certain areas in
the states of Illinois and Wisconsin and will enter into separate
franchise agreements which will be in the form of the franchise agreement
("Franchise Agreement") attached as Appendix B to the Development
Agreement. In exchange for the mutual obligations of the parties set
forth in this Addendum and for other good a valuable consideration, the
receipt, adequacy and sufficiency of which is hereby acknowledged, the
parties now wish to amend and supplement the Franchise Agreement as
follows:
1. Attached hereto and incorporated herein by reference are
documents noted as Attachment FA-1-1 which contain certain provisions
required by the state of Illinois. The parties agree that said Attachment
FA-1-1 (Illinois) shall apply only as to those franchise agreements issued
by Franchisor to Developer regarding Restaurants to be located in the
state of Illinois except as otherwise expressly required or mandated by
the laws of said state.
2. Attached hereto and incorporated herein by reference are
documents noted as Attachment FA-1-2 which contain certain provisions
required by the state of Wisconsin. The parties agree that said
Attachment FA-1-2 (Wisconsin) shall apply only as to those franchise
agreements issued by Franchisor to Developer regarding Restaurants to be
located in the state of Wisconsin except as otherwise expressly required
or mandated by the laws of said state.
3. This Addendum shall be considered an integral part of the
Franchise Agreement and the terms of this Addendum shall govern with
respect to the subject matter hereof. Except as modified or supplemented
by this Addendum, the terms of the Franchise Agreement are hereby ratified
and confirmed.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
as of the date first above written.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
______________________________ By: ________________________________
Name: Robert T. Steinkamp Name: Abe J. Gustin, Jr.
Title: Secretary Title: President
DEVELOPER:
ATTEST: MARCUS RESTAURANTS, INC.
______________________________ By: ________________________________
Name: Thomas F. Kissinger Name: Stephen Marcus
Title: Secretary Title: President
ATTACHMENT DA-1-1
AMENDMENT TO APPLEBEE'S NEIGHBORHOOD GRILL & BAR
DEVELOPMENT AGREEMENT
REQUIRED BY THE STATE OF ILLINOIS
In recognition of the requirement of the Illinois Franchise
Disclosure Act of 1987 (the "Act"), the parties to the attached APPLEBEE'S
NEIGHBORHOOD GRILL & BAR DEVELOPMENT AGREEMENT (the "Development
Agreement") agree as follows:
1. Section 9, "Termination," of the Development Agreement shall be
supplemented by the following subsection, which shall be inserted
following Subsection 9.4 and shall be considered an integral part of the
Development Agreement:
9.5 Notwithstanding anything to the contrary contained in
this Agreement, if any provisions of this Section 9, governing
termination, are inconsistent with Section 19 of the Illinois
Franchise Disclosure Act of 1987, if applicable, the provisions
of the Act shall apply rather than the contrary provisions of
this Section 9. As provided in Subsection 15.1 hereof, however,
each provision of this Agreement shall be considered severable,
and if, for any reason, any provision of this Section 9 is
determined to be invalid and contrary to, or in conflict with,
Section 19 of the Act, such shall not impair the operation of,
or have any other effect upon, such other provisions of this
Section 9 as may remain otherwise enforceable, and the latter
shall continue to be given full force and effect and bind the
parties hereto.
2. Subsection 15.3 of Section 15 of the Development Agreement,
"Construction, Severability, Governing Law and Jurisdiction," shall be
deleted in its entirety and shall be of no force or effect.
IN WITNESS WHEREOF, the parties hereto have fully executed, sealed
and delivered this Amendment to the Development Agreement (Attachment
DA-1) on the day and year first above written in the Development
Agreement.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Robert T. Steinkamp Name: Abe J. Gustin, Jr.
Title: Secretary Title: President
DEVELOPER:
ATTEST: MARCUS RESTAURANTS, INC.
By:
Name: Thomas F. Kissinger Name: Stephen Marcus
Title: Secretary Title: President
ATTACHMENT FA-1-1
AMENDMENT TO APPLEBEE'S NEIGHBORHOOD GRILL & BAR
FRANCHISE AGREEMENT
REQUIRED BY THE STATE OF ILLINOIS
In recognition of the requirements of the Illinois Franchise
Disclosure Act of 1987 (the "Act"), the parties to the attached APPLEBEE'S
NEIGHBORHOOD GRILL & BAR FRANCHISE AGREEMENT (the "Franchise Agreement")
agree as follows:
1. The following language shall be added to Subsection 1.3 of
Section 1 of the Franchise Agreement, "Franchise Grant and Term":
Notwithstanding anything to the contrary contained in this
Agreement, if any of the provisions of this Subsection 1.3,
concerning non-renewal, are inconsistent with Section 20 of the
Illinois Franchise Disclosure Act of 1987, the provisions of the
Act shall apply rather than the contrary provisions of this
Subsection 1.3. As provided under Subsection 21.1 hereof,
however, each provision of this Agreement shall be considered
severable, and if, for any reason, any provision of this
Subsection 1.3 is determined to be invalid and contrary to, or
in conflict with, Section 20 of the Act, such shall not impair
the operation of, or have any other effect upon, such other
provisions of this Subsection 1.3 as may remain otherwise
enforceable, and the latter shall continue to be given full
force and effect and bind the parties hereto.
2. Section 19, "Expiration and Termination; Option to Purchase
Restaurant; Attorneys' Fees," of the Franchise Agreement shall be
supplemented by the following subsection, which shall be inserted
following Subsection 19.4 and shall be considered an integral part of the
Franchise Agreement:
19.5 Notwithstanding anything to the contrary contained in
this Agreement, if any provisions of this Section 19, governing
termination, are inconsistent with Section 19 of the Illinois
Franchise Disclosure Act of 1987, the provisions of the Act
shall apply rather than the contrary provisions of this
Section 19. As provided under Subsection 21.1 hereof, however,
each provision of this Agreement shall be considered severable,
and if, for any reason, any provision of this Section 19 is
determined to be invalid and contrary to, or in conflict with,
Section 19 of the Act, such shall not impair the operation of,
or have any other effect upon such other provisions of this
Section 19 as may remain otherwise enforceable, and the latter
shall continue to be given full force and effect and bind the
parties hereto.
3. Subsection 21.3 of Section 21 of the Franchise Agreement,
"Construction, Severability, Governing Law and Jurisdiction," shall be
deleted in its entirety and shall be of no force or effect.
4. The second sentence of Subsection 25.5 of Section 25 of the
Franchise Agreement, "Miscellaneous," shall be deleted in its entirety and
shall be of no force or effect.
5. Subsections 26(a) and 26(b) of Section 26 of the Franchise
Agreement, "Acknowledgements," shall be deleted in their entirety and
shall be of no force or effect.
IN WITNESS WHEREOF, the parties have duly executed, sealed and
delivered this Amendment to the Franchise Agreement (Attachment FA-1) on
the day and year first above written in the Franchise Agreement.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Name:
Title: Title:
ATTEST: FRANCHISEE:
By:
Name: Name:
Title: Title:
PRINCIPAL SHAREHOLDER(S):
Witness Name:
Witness Name:
Witness Name:
ATTACHMENT DA-1-2
AMENDMENT TO APPLEBEE'S NEIGHBORHOOD GRILL & BAR
DEVELOPMENT AGREEMENT
REQUIRED BY THE STATE OF WISCONSIN
In recognition of the requirements of the Wisconsin Fair Dealership
Law, Wisconsin Statutes, Chapter 135, the parties to the attached
APPLEBEE'S NEIGHBORHOOD GRILL & BAR DEVELOPMENT AGREEMENT (the
"Development Agreement") agree as follows:
1. Section 9 of the Development Agreement, "Termination," shall be
supplemented by the following Subsection 9.5, which shall be considered an
integral part of the Development Agreement:
9.5 To the extent that the above provisions regarding
termination are inconsistent with the requirements of the
Wisconsin Fair Dealership Law, Wisconsin Statutes, Chapter 135
(which, among other things, grants the right, in most
circumstances, to ninety (90) days prior written notice of
termination and sixty (60) days within which to remedy any
claimed deficiencies), if applicable to this Agreement, the
above-mentioned termination provisions shall be superseded by
the Law's requirements and shall have no force or effect.
2. Section 15 of the Development Agreement, "Construction,
Severability, Governing Law and Jurisdiction," shall be supplemented by
the following Subsection 15.4, which shall be considered an integral part
of the Development Agreement:
15.4 TO THE EXTENT THAT ANY PROVISIONS OF THIS AGREEMENT
CONFLICTS WITH THE WISCONSIN FAIR DEALERSHIP LAW, IF APPLICABLE
TO THIS AGREEMENT, SUCH PROVISION SHALL BE SUPERSEDED BY THE
LAW'S REQUIREMENTS.
IN WITNESS WHEREOF, the parties hereto have duly executed, sealed and
delivered this Amendment to the Development Agreement (Attachment DA-1) on
the _______ day of ________________, 19_____.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Robert T. Steinkamp Name: Abe J. Gustin, Jr.
Title: Secretary Title: President
DEVELOPER:
ATTEST: MARCUS RESTAURANTS, INC.
By:
Name: Thomas F. Kissinger Name: Stephen Marcus
Title: Secretary Title: President
ATTACHMENT FA-1-2
AMENDMENT TO APPLEBEE'S NEIGHBORHOOD GRILL & BAR
FRANCHISE AGREEMENT
REQUIRED BY THE STATE OF WISCONSIN
In recognition of the requirements of the Wisconsin Fair Dealership
Law, Wisconsin Statutes, Chapter 135, the parties to the attached
APPLEBEE'S NEIGHBORHOOD GRILL & BAR FRANCHISE AGREEMENT (the "Franchise
Agreement") agree as follows:
1. Section 1 of the Franchise Agreement, "Franchise Grant and
Term," shall be supplemented by the following Subsection 1.7, which shall
be considered an integral part of the Agreement:
1.7 To the extent that the provisions in this Section 1
regarding renewal are inconsistent with the requirements of the
Wisconsin Fair Dealership Law, Wisconsin Statutes, Chapter 135
(which, among other things, grants a Franchisee the right, in
most circumstances, to ninety (90) days prior written notice of
non-renewal and sixty (60) days within which to remedy any
claimed deficiencies), the renewal provisions shall be
superseded by the Law's requirements and shall have no force or
effect.
2. Section 19 of the Franchise Agreement, "Expiration and
Termination; Option to Purchase Restaurant; Attorneys' Fees," shall be
supplemented by the following Subsections 19.4(g) and 19.5, which shall be
considered an integral part of the Franchise Agreement:
(g) To the extent that the provisions herein regarding the
repurchase of inventory are inconsistent with the requirements
of the Wisconsin Fair Dealership Law, Wisconsin Statutes,
Chapter 135.045, those provisions shall be superseded, where
applicable, by the Law's requirements, which state that if
Franchisor, at the option of Franchisee, repurchases inventory
which was sold by Franchisor to Franchisee for resale, fair
wholesale market value must be paid for all merchandise bearing
a name, trade name, label or other mark which identifies
Franchisor. All other provisions related to the purchase of
property described in Section 19 shall be applicable to such
items.
19.5 To the extent that provisions in this Section 19
regarding termination are inconsistent with the requirements of
the Wisconsin Fair Dealership Law, Wisconsin Statutes,
Chapter 135 (which, among other things, grants a Franchisee the
right, in most circumstances, to ninety (90) days prior written
notice of non-renewal and sixty (60) days within which to remedy
any claimed deficiencies), the renewal provisions shall be
superseded by the Law's requirements and shall have no force or
effect.
3. Section 21 of the Franchise Agreement, "Construction,
Severability, Governing Law and Jurisdiction," shall be supplemented by
the following Subsection 21.4, which shall be considered an integral part
of the Franchise Agreement:
21.4 TO THE EXTENT THAT ANY PROVISIONS OF THIS AGREEMENT
CONFLICTS WITH THE WISCONSIN FAIR DEALERSHIP LAW SUCH PROVISION
SHALL BE SUPERSEDED BY THE LAW'S REQUIREMENTS.
IN WITNESS WHEREOF, the parties hereto have duly executed,
sealed and delivered this Amendment to the Franchise Agreement (Attachment
FA-1) on the _______ day of ________________, 19_____.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Name:
Title: Title:
ATTEST: FRANCHISEE:
By:
Name: Name:
Title: Title:
PRINCIPAL SHAREHOLDER(S):
Witness Name:
Witness Name:
Witness Name: