DEVELOPMENT AGREEMENT
This is a Development Agreement (`Agreement'') made in Fort Lauderdale,
Florida, by and between ARBY'S, INC., a Delaware corporation with its principal
office at 1000 Corporate Drive, Fort Laud., Florida 33334 (`Arby's), and Sybra,
Inc., a Michigan corporation with its principal office located at 8300 Dunwoody
Place, Suite 3000, Atlanta, Georgia, 30350 (`Developer'').
WHEREAS, Arby's owns a number of trademarks and service marks, including
the trademark `ARBY'S,'' and is a franchisor of Arby's Restaurants, which serve
roast beef sandwiches and other food items; and
WHEREAS, Developer desires the exclusive rights to develop Arby's
Restaurants within the geographic area specified in this Development Agreement
for the limited term of this Agreement; and
WHEREAS, Arby's is willing to grant such rights in accordance with the
terms and conditions of this Agreement.
NOW, THEREFORE, it is mutually agreed as follows:
1 . GRANT. Arby's hereby grants to Developer during the term of this
Development Agreement and subject to the conditions hereof the exclusive right
to develop Arby's Restaurants in the limited geographical area identified and
set forth in Exhibit A hereto, exclusive of any Unit Trading Area or Protected
Area located therein as defined in any License or Franchise Agreements currently
issued to other parties; this geographical area shall be referred to as the
`Territory.'' The operation of the restaurants developed pursuant to this
Agreement will be governed by individual License Agreements issued by Arby's in
accordance with Section 11 below. So long as Developer is in compliance with
the terms and conditions of this Agreement, Arby's will not license others to
operate, nor will it itself operate, any new or additional Arby's Restaurants in
the Territory during the term of this Agreement
2. TERM. Unless earlier terminated pursuant to Section 13, this
Development Agreement shall expire five (5) years from the date of execution of
this Agreement by Arby's or upon the execution by Arby's of the License
Agreement for the last of the restaurants specified in Exhibit B (the
`Development Schedule''), whichever first occurs.
3. DEVELOPMENT FEE. Upon execution of this Development Agreement,
Developer shall pay to Arby's a fee of $250,000 (the `Development Fee''). This
fee represents $140,000 payable upon execution of this Development Agreement and
$110,000 credit applied from the Consolidation of Development Agreement letter
dated August 20, 1992. This Development Fee shall be fully earned by Arby's in
consideration of its execution of this Agreement and shall be non-refundable.
However, Arby's shall credit $10,000 of the Development Fee toward payment of
the License Fee for each of the first twenty five (25) License Agreements issued
to Developer pursuant to this Development Agreement provided that the applicable
restaurants are constructed and opened in accordance with the Development
Schedule.
4. DEVELOPMENT SCHEDULE. Developer shall open and continuously operate
properly licensed Arby's Restaurants in accordance with the Development Schedule
set forth in Exhibit B. In the event that Developer opens and continuously
operates a greater number of Arby's Restaurants than required during any interim
period of the Development Schedule, the requirements of the succeeding period(s)
shall be deemed satisfied to the extent of such excess number of restaurants, up
to the total number of restaurants specified in the Development Schedule.
5. LOCATION OF RESTAURANTS. Developer is responsible for locating
proposed sites within the Territory for each of the restaurants contemplated in
the Development Schedule; during the term of this Agreement, Developer shall use
its best efforts to locate suitable sites. Arby's may in its discretion offer
counseling and advice in site selection. In no event, however, shall Arby's be
obligated to loan money, guarantee leases, provide financing or otherwise become
directly involved and/or obligated to Developer or to any third party in respect
of such site selection or development; these activities and undertakings shall
be the exclusive responsibility of Developer, financially and otherwise.
6. SITE ACCEPTANCE. Upon selection by Developer of a proposed site for a
restaurant, Developer promptly shall submit to Arby's such specific site data
and demographic and other information concerning the site as may be reasonably
required by Arby's, utilizing such forms as may be required by Arby's. Arby's
shall either accept or reject such site in accordance with Arby's then-current
site selection policies and procedures. To be effective, any acceptance must be
in writing. Developer understands and acknowledges that Arby's may reject any
proposed site, in which event Developer will not proceed at the rejected site,
but will seek to locate an acceptable site. The acquisition in any manner of
any proposed site prior to acceptance by Arby's shall be at the sole risk and
responsibility of Developer and shall not obligate Arby's in any way to accept
same.
7. DISCLAIMER. In executing this Development Agreement, accepting a
proposed site, giving approvals or advice or providing services or assistance in
connection with this Development Agreement, Arby's does not guarantee the
suitability of an accepted site or the success of any Arby's restaurant
established at such site. Arby's expressly disclaims any warranties, express or
implied, with respect to the suitability of any site or the success of any
restaurant. Developer understands and acknowledges that the suitability of a
site and the success of any restaurant depend on many factors outside the
control of either Arby's or Developer (such as interest rates, unemployment
rates, demographic trends and the general economic climate), but principally
depend on Developer's efforts in the operation of the restaurant.
8. LOCATION REQUIREMENTS. As a condition for accepting a proposed site,
Arby's may require Developer to negotiate a lease or sales contract that
includes certain terms regarding duration or other specified matters. Developer
understands and acknowledges that a site acceptance may be conditioned on such
matters and that if Developer does not wish to, or cannot, satisfy the pertinent
conditions within a reasonable time, the site will be deemed rejected.
9. CONSTRUCTION. Upon receiving acceptance for a proposed site,
Developer shall proceed promptly to secure control of the accepted site and to
obtain necessary zoning and building approvals and permits. Arby's will provide
generic plans for the Arby's-approved building, including specifications for
fixtures, furnishings, signs and equipment. Developer must hire an architect
and general contractor to adapt these generic plans to the accepted site and
must submit proposed final working plans to Arby's for approval within the time
limits set by Arby's. Developer shall not proceed with construction or
remodeling until Developer has received Arby's written approval of the final
working plans. Developer shall ensure that the building is constructed or
remodeled in accordance with the final working plans and specifications
designated and approved by Arby's. Developer will allow Arby's to make periodic
inspections and will provide such periodic progress reports as may be requested
by Arby's.
10. TRAINING. Unless Developer already is operating at least one Arby's
restaurant, Developer, a partner of Developer if Developer is a partnership, or
the majority shareholder of Developer if Developer is a corporation, must
complete Arby's New Owner's Training Program prior to issuance of the License
Agreement for the first restaurant set forth in the Development Schedule. In
addition, if Developer is not operating any Arby's restaurants prior to issuance
of the License Agreement for the first restaurant set forth in the Development
Schedule, two representatives of Developer must attend and be certified at
Arby's Restaurant Management Training Program prior to issuance of the License
Agreement for the first restaurant under the Development Schedule, another
representative of Developer must attend and be certified prior to issuance of
the License Agreement for the second restaurant under the Development Schedule,
and Arby's in its sole discretion and prior to issuance of any further License
Agreements for additional restaurants may require additional representatives of
Developer to attend and be certified at the Restaurant Management Training
Program or complete another comparable program approved in advance by Arby's.
If Developer is an individual who intends to participate in the daily operation
of the restaurant, or if Developer includes a partner or shareholder who intends
to participate in the daily operation of the restaurant, that person must attend
and be certified at the Restaurant Management Training Program as one of
Developer's first two representatives. If Developer already is operating one,
but only one, Arby's restaurant prior to issuance of the License Agreement for
the first restaurant under the Development Schedule, one additional
representative of Developer must attend and be certified at the Restaurant
Management Training Program prior to issuance of the License Agreement for the
first restaurant under the Development Schedule, and Arby's in its sole
discretion and prior to issuance of any further License Agreements for
additional restaurants may require additional representatives of Developer to
attend and be certified at the Restaurant Management Training Program or
complete another comparable program approved in advance by Arby's. If Developer
already is operating two or more Arby's restaurants prior to issuance of the
License Agreement for the first restaurant under the Development Schedule,
Arby's in its sole discretion and prior to issuance of any License Agreement
under the Development Schedule, may require an additional representative to
attend and be certified at the Restaurant Management Training Program or
complete another comparable training program approved in advance by Arby's.
Arby's will pay tuition for training at the New Owner's Training Program and the
Restaurant Management Training Program; all other expenses shall be the sole
responsibility of Developer.
11. LICENSE AGREEMENT. No Arby's Restaurant may be opened or operated by
Developer under any circumstances until the required License Fee has been paid
and the License Agreement for such location has been executed by Arby's. The
License Fee shall be thirty-seven thousand and five hundred dollars ($37,500)
for Developer's first License Agreement, and twenty-five thousand dollars
($25,000) for each subsequent License Agreement. The License Fee for each
License Agreement must be paid at least thirty (30) days prior to scheduled
execution of the Agreement. All License Agreements issued pursuant to this
Development Agreement will contain generally the same terms and conditions as
are being offered to other licensees similarly situated at time of issuance,
including without limitation those terms and conditions pertaining to royalties
and other fees and duration of the Agreement; as a condition of Arby's
execution of such License Agreement, Arby's may require Optionee or its
principles to execute a personal guarantee, letter of credit or corporate
guarantee to secure payment of royalties and other fees required to be paid
under the License Agreement. Developer shall comply with Arby's then-current
franchising policies and procedures for issuance of the License Agreements.
Arby's shall be under no obligation to execute and issue a License Agreement if
Developer is in breach or default of any other License or Franchise Agreement
between Arby's and Developer, or if Developer is not eligible for expansion
pursuant to Arby's then-current criteria for expansion. In addition, Arby's
shall be under no obligation to execute and issue a License Agreement unless
Developer has complied in a timely manner with all terms and conditions of this
Development Agreement and has satisfied all requirements set forth herein
(including construction and training requirements) with respect to the
pertinent accepted site. If and when a License Agreement is executed by
Arby's, it shall govern the relations between the parties with respect to the
pertinent restaurant.
12. NO RIGHT TO OPERATE OR USE TRADEMARKS. Developer acknowledges that
until a License Agreement has been issued for a specified site, Developer shall
not have or be entitled to exercise any of the rights, powers and privileges
granted by the License Agreement, including without limitation the right to use
Arby's trademarks, service marks and trade names; that the execution of this
Development Agreement shall not be deemed to grant any such rights, powers or
privileges to Developer, and that Developer may not under any circumstances
commence operation of any Arby's restaurant prior to execution by Arby's of a
License Agreement for the pertinent location.
13. TERMINATION. This Agreement shall terminate immediately and without
notice to either party upon:
(a) the death of Developer, if Developer is an individual; or
(b) the commencement of any proceedings by or against Developer under
the Bankruptcy Act, under any Chapter thereof or amendment
thereto, or under any other insolvency act, whether federal or
state; the appointment of any trustee or receiver for the business
or property of Developer, or any assignment by Developer for the
benefit of creditors.
Arby's shall have the right at its election to terminate this Agreement
immediately upon notice to Developer, upon the occurrence of any of the
following
(a) failure to comply with the Development Schedule;
(b) the attempted assignment of this Agreement without the prior
written approval of Arby's;
(c) if Developer is a corporation or a partnership, the transfer of
any of the capital stock or partnership interest involving 25% or
more of such corporation or partnership during the term of this
Agreement without the prior written approval of Arby's, which
approval will not be unreasonably withheld, subject to the
transfer provisions under the current form License Agreement;
(d) the discovery by Arby's of any material misrepresentation in any
of the information or documents submitted to Arby's by or on
behalf of Developer,
(e) any violation by Developer of any of the provisions of this
Agreement or
(f) the termination by Arby's of any License or Franchise Agreement or
other agreement between Arby's and Developer or Developer's
failure to cure a default under any other agreement between Arby's
and Developer within the time specified by Arby's.
For purposes of Sections 11 and 13 herein, any License or Franchise
Agreements issued to Developer, any affiliated company of Developer or any
corporation, partnership or joint venture (or their affiliates) in which
Developer or any stockholder, partner or joint venture of Developer, direct or
indirect, has any interest of ownership or participation, regardless of
location, shall be deemed an Agreement between Arby's and Developer.
14. EFFECT OF EXPIRATION OR TERMINATION. Upon expiration or completion of
this Development Agreement, or upon termination for any reason, the rights
granted to Developer pursuant to Section 1 of this Development Agreement shall
be extinguished immediately. Unless the parties have executed a new development
agreement, Arby's thereafter shall have the right to operate or permit others to
operate Arby's Restaurants within the Territory, except as limited by the Unit
Trading Area or Protected Area provisions of any then-effective License or
Franchise Agreements.
15. CONFIDENTIALITY. At all times during the term of this Agreement and
after termination of this Agreement for any reason, Developer (and if a
corporation or partnership, its shareholders, directors, and officers or
partners, as individuals) shall not divulge, disclose or communicate, directly
or indirectly, to any other person or entity any confidential or proprietary
information or knowledge obtained from Arby's.
16. ASSIGNMENT. This Agreement shall inure to the benefit of and be
binding upon Arby's, its successors and assigns. However, neither this
Agreement nor any of Developer's rights hereunder shall be assignable or
transferable by Developer, directly or indirectly, by operation of law or
otherwise. without prior written approval from Arby's.
17. NEW DEVELOPMENT AGREEMENT. If Developer wishes to negotiate a new
development agreement with Arby's with respect to further development of Arby's
Restaurants in the Territory, Developer must so advise Arby's in writing sixty
(60) days before the expiration date of this Development Agreement or sixty (60)
days before the anticipated date of execution of the License Agreement for the
final restaurant under the Development Schedule in Exhibit B. Subject to receipt
of such notice and so long as this Development Agreement is in effect and
Developer is not and has not been in default under this Development Agreement or
any License or Franchise Agreement or other agreement with Arby's, Arby's then
will negotiate in good faith with Developer with respect to a new development
agreement during the remainder of the term of this Development Agreement
18. GOVERNING LAW -AND FORUM SELECTION. This Agreement shall be governed,
construed and interpreted in accordance with the laws of the State of Florida.
In the event of any dispute concerning the parties' rights or obligations under
this Agreement, Developer agrees to file any suit against Arby's only in the
federal or state court having jurisdiction where Arby's principal office is then
located.
19. DEVELOPER'S ACKNOWLEDGMENTS Developer understands and acknowledges
that there are significant risks in any business venture and that the primary
factor in Developers success or failure under this agreement will be Developer's
own efforts. In addition, Developer acknowledges that Arby's and its
representatives have made no representations to Developer other than or
inconsistent with the matters set forth in the Franchise Offering Circular
provided to Developer and that Developer has undertaken this venture solely in
reliance upon the matters set forth in the Franchise Offering Circular and
Developer's own independent investigation of the merits of this venture.
20. ENTIRE AGREEMENT. This Development Agreement contains the entire
agreement between the parties and shall not be modified except by a written
document executed by both parties.
WITNESS: DEVELOPER: SYBRA, INC.
/S/ Carolyn Berkowitz /s/ Charles N. Hyslop
Charles N. Hyslop
President
Date: 11/11/96
WITNESS: ARBY'S, INC.
/s/ Charlotte Kozeal /s/ Kenneth N. Fischer
Kenneth N. Fischer
Vice President, Finance
Controller
Date: 11/13/96
EXHIBIT A
TERRITORY
The following Pennsylvania Counties:
ADAMS COUNTY
DAUPHIN COUNTY
Excluding the Unit Trade Areas of the following units:
Unit # 5140 located at 4310 Union Deposit Road, Harrisburg, PA
Unit #5350 located at 244 Strawberry Square, Harrisburg, PA
CUMBERLAND COUNTY
JUNIATA COUNTY
LANCASTER COUNTY
LEBANON COUNTY
MIFFLIN COUNTY
PERRY COUNTY
YORK COUNTY
Excluding the following Unit Trade Area of the following unit:
Unit # 5889 located at 2899 Whiteford Road, York PA
(Harrisburg - Lancaster - Lebanon - York DMA)
Arby's will grant to SYBRA the NON-EXCLUSIVE right to develop
15 new restaurants in the following DMA's subject to Arby's accepting the
proposed sites:
Dallas-Ft Worth DMA
Detroit
Flint-Saginaw-Bay City
Grand Rapids-Kalamazoo-Battle Creek
Lansing
Philadelphia
ACKNOWLEDGED AND APPROVED
/s/ Charles H. Hyslop (Developer)
/s/ Kenneth C. Fischer (Arby's)
EXHIBIT B
DEVELOPMENT SCHEDULE
1. Four (4) licensed, open and operating Arby's Restaurant(s) on or before
December 31, 1997 to be opened in the following Territories:
*Harrisburg DMA Other DMA TOTAL
2 3 5
2. Six (6) additional licensed, open and operating Arby's Restaurant(s) on or
before December 31, 1998 for a cumulative total of ten (10) Restaurants in
the Territory.
*Harrisburg DMA Other DMA TOTAL
2 3 5
3. Five (5) additional licensed, open and operating Arby's Restaurant(s) on or
before December 31,1999 for a cumulative total of fifteen (15) Restaurants
in the Territory.
*Harrisburg DMA Other DMA TOTAL
2 3 5
4. Five (5) additional licensed, open and operating Arby's Restaurant(s) on or
before December 31, 2000 for a cumulative total of twenty (20) Restaurants
in the Territory.
*Harrisburg DMA Other DMA TOTAL
2 3 5
5. Five (5) additional licensed, open and operating Arby's Restaurant(s) on or
before December 31, 2001 for a cumulative total of twenty-five (25)
Restaurants in the Territory.
*Harrisburg DMA Other DMA TOTAL
2 3 5
*Harrisburg-Lancaster-Lebanon-York DMA as defined on Exhibit `A''.
ACKNOWLEDGED AND APPROVED
/s/ Charles H. Hyslop (Developer)