1
EXHIBIT 10.7
ALL AMERICAN FOOD GROUP, INC.
DBA
GOLDBERG'S NEW YORK BAGELS
AREA DEVELOPMENT AGREEMENT
ELEVEN CONGERS INC.
- -------------------
AREA DEVELOPER
January 19, 1996
- --------------------
DATE OF AGREEMENT
SEE SECTION II - PARAGRAPH C.
- -----------------------------
TERRITORY
2
ALL AMERICAN FOOD GROUP, INC.
AREA DEVELOPMENT AGREEMENT
TABLE OF CONTENTS
PREAMBLES
I. ACKNOWLEDGMENTS AND REPRESENTATIONS
II. GRANT OF AREA DEVELOPMENT
A. Term of Area Development Agreement
B. Rights reserved by the Company
C. The Territory
III. OBLIGATIONS OF THE AREA DEVELOPER
A. Development of the Territory
B. Assistance to Local Franchisee
C. Initial Training of Franchisees
D. Ongoing Responsibilities
IV. TRAINING AND OPERATING ASSISTANCE
A. Training
B. Operating assistance
V. STORE IMAGE AND OPERATING STANDARDS
A. Condition and appearance of Store
B. Uniform image
C. Food and beverage products, supplies, and materials
D. Specifications, standards and procedures
VI. THE MARKS
A. Ownership and goodwill of Marks
B Notification of infringements and claims
C. Discontinuance of use of Marks
D. Indemnification of Area Developer
VII. CONFIDENTIAL INFORMATION
VIII. NON-COMPETITION
IX. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION
i
3
X. INITIAL AREA DEVELOPMENT FEE
XI. COMPENSATION TO AREA DEVELOPER
XII. ASSIGNMENT
A. By the Company
B. Area Developer may not assign without approval of the Company
C. Guarantee of Shareholders
D. Effect of consent to assignment
XIII. RENEWAL OF AREA DEVELOPMENT AGREEMENT
A. Area Developer's right to renew
B Notice of renewal and non-renewal
XIV. TERMINATION OF THE AREA DEVELOPMENT AGREEMENT
A. By the Area Developer
B. By the Company
XV. RIGHTS OF THE COMPANY AND OBLIGATIONS OF AREA DEVELOPER
UPON TERMINATION OR EXPIRATION OF THE AREA DEVELOPMENT
AGREEMENT.
A. The Marks
B. Confidential information
C. Covenant not to compete
D. Continuing Obligations
E. The Company's right to Appoint a New Area Developer
F. Ongoing compensation to Area Developer
XVI. ENFORCEMENT
A. Severability and substitution of valid provisions
B. Waiver of obligations
C. Force majeure
D. Specific performance/injunctive relief.
E. Rights of parties are cumulative
F. Costs and attorneys' fees
G. Governing law/consent to jurisdiction
H. Binding effect
I. Construction
J. Notices and payments
ii
4
ALL AMERICAN FOOD GROUP, INC.
AREA DEVELOPMENT AGREEMENT
This agreement is made and entered into this 19th day of January 1996,
by and between:
All American Food Group Inc.,
a New Jersey corporation,
with its principal place of
business at 9 Law Drive,
Fairfield, New Jersey 07006
(the "Company"), and
ELEVEN CONGERS, INC.
whose principal address is: 257 South Middletown Road
Nanuet, NY 10954
("the Area Developer").
PREAMBLES
The Company franchises certain food shops, known as Goldberg's Bagels
units ("Goldberg's"), and Sammy's New York Bagels, ("Sammy's"), (collectively
the "Retail Concepts"), which sell and serve a variety of freshly baked bagels,
served plain or with various toppings, sandwiches also served on bagels, soups,
salads, and other luncheon items, and a variety of soft drinks and other
beverages. The Stores operate with and under uniform formats, designs,
systems, methods, specifications, standards and procedures, all of which may be
improved, further developed or otherwise modified from time to time by the
Company. Such units are operated under or associated with certain trademarks,
service marks, logos, and other commercial symbols which the Company may modify
from time to time, (collectively the "Marks"), and are operated pursuant to the
Company's proprietary and confidential information and trade secrets.
In addition to granting Franchise Agreements to own and operate units
offering the products and services approved by the Company and utilizing the
Company's formats, designs, methods, systems, standards, operating procedures,
and the Marks, to persons who meet the Company's qualifications and who are
willing to undertake the investment and effort to establish and develop bagel
stores, the Company also grants to certain individuals or other entities which
meet higher financial and other criteria, the right to operate as exclusive
Area Developers of the Company's bagel concepts for specified territories,
subject to the terms and conditions outlined herein.
I. ACKNOWLEDGMENTS AND REPRESENTATIONS
1
5
Area Developer acknowledges that he has read this Agreement and the
Company's Uniform Franchise Offering Circular and that he understands and
accepts the terms, conditions and covenants contained in this Agreement as
being reasonably necessary to maintain the Company's high standards of quality
and service, and the uniformity of those standards in order to protect and
preserve the goodwill of the Marks. Area Developer acknowledges that he has
conducted an independent investigation of the business contemplated by this
Agreement and recognizes that, like any other business, the nature of the
business conducted by the Company may evolve and change over time, that an
investment in an Area Development Agreement involves business risks, and that
the success of the venture is largely dependent upon the business abilities and
efforts of Area Developer.
The Company expressly disclaims the making of, and Area Developer
acknowledges that he has not received or relied upon any warranty or guaranty,
express or implied, as to the revenues, profits, or success of the business
venture contemplated by this Agreement. Area Developer acknowledges that he
has not received or relied on any representations of the Company, or its
officers, directors, employees or agents, relating to the business venture
contemplated by this Agreement that are inconsistent with the statements made
in the Company's Uniform Franchise Offering Circular or to the terms herein.
Area Developer further represents to the Company, that Area Developer has made
no misrepresentations in obtaining the Area Development rights granted under
this Agreement.
Area Developer has applied for the right to develop the Retail
Concepts of the Company for the territory specified herein, and such
application has been approved by the Company in reliance upon all the
representations made in such application.
II. GRANT OF AREA DEVELOPMENT RIGHTS
A. Term of Area Development Agreement
Subject to the provisions contained herein, while this Agreement is in
effect, the Company grants to Area Developer, the right to serve as the
Company's exclusive developer within the Territory described in Paragraph C of
this Section, ("the Territory"), to develop said Territory through the
ownership and operation of Franchised Units owned by the Area Developer and
through the development of stores owned and operated by sub franchisee of Area
Developer, for a term of ten (10) years, commencing on the date of this
Agreement. Termination or expiration of this Agreement shall constitute a
termination or expiration of the Area Development rights granted herein.
B. Rights reserved by the Company
The Company (on behalf of itself and its affiliates) retains the
right, in its sole discretion and without granting any rights to Area
Development: (a) to itself operate, or to grant other persons the right to
operate retail store at such locations and on such terms and conditions as the
Company deems appropriate, subject, however, to the provisions of Paragraph C
of Section II hereof; and, (b) to sell the products and services authorized for
sale at retail stores using the
2
6
Marks or other trademarks and service marks, through other channels of
distribution pursuant to such terms and conditions as the Company deems
appropriate.
C. The Territory
For the purposes of this Agreement, the Territory shall consists of
the following:
In the State of New York, the counties of Nassau, Suffolk and
Westchester.
III. OBLIGATIONS OF THE AREA DEVELOPER
The Area Developer shall perform the following functions, in all cases in
accordance with the procedures established by the Company relating to such
functions.
A. Development of the Territory
The Area Developer shall develop the Territory in accordance with the
Area Development schedule included as Appendix A and attached to this
Agreement. Failure of Area Developer to maintain the Development schedule
shall constitute a default under this Agreement, and permit the Company to
cancel this Agreement as provided herein.
In developing the Territory the Area Developer shall assist the
Company in locating and selecting qualified store franchisees for the operation
of retail bagel stores within the Territory. Area Developer shall be
responsible for advertising for such franchisees, (using only material approved
for said purpose by the Company), for purchasing from the Company material used
in the sales presentation, and for all expenses incurred in assisting the
Company in this function. Area Developer expressly acknowledges, however, that
he is not acting in the capacity of Franchiser, and that the Company shall
retain the sole and exclusive right to appoint Franchisees within the
territory.
B. Assistance to Local Franchises
After appointment of a local franchisee by the Company, Area Developer
shall be responsible for assisting the franchisee in the following areas, in
all cases in accordance with procedures and materials provided to Area
Developer by the Company.
a) Selection of a suitable site for the location of
franchisee's store;
b) Negotiation of a lease for franchisee's site;
c) Preparation of store layout, design work, and
equipment order;
d) Selection of contractors for the construction of
franchisee's store;
e) Supervision of construction of franchise's store;
3
7
f) Supervision preopening activities;
C. Initial Training
Approximately 4 weeks before the opening of each franchisee's store,
Area Developer shall be responsible for the training of each Franchisee and
Franchisee's store manager, in accordance with the training syllabus and
material furnished to Area Developer by the Company. Said training shall be
furnished to Franchisees in accordance with the Company's store Franchise
Agreement, and shall be conducted at Area Developer's own store, which Area
Developer shall maintain at all times in a manner consistent with the
requirements of this section.
D. Ongoing Responsibilities
For all the stores operated within the territory, whether owned by
Area Developer or an affiliate thereof, or by a sub franchisee of Area
Developer, Area Developer shall have the following responsibilities, in all
cases to be carried out in fulfillment of Franchiser's obligations under the
Franchise Agreement, and in accordance with the procedures for such activity
promulgated by the Company for each function.
a) Monitor compliance with all operating procedures and
policies;
b) Distribute all promotional and merchandising programs
developed by the Company and forwarded to Area Developer for such
distribution;
c) When requested by the Company, assist in the
monitoring of all royalty and other payments due the Company pursuant
to the Franchise Agreement;
d) Perform any ongoing training functions required by
the Franchise Agreement;
e) Generally serve as the Company's representative in
the Territory;
IV. TRAINING AND OPERATING ASSISTANCE
A. Training
Prior to the opening of each Store opened in the Territory after the
initial store, the Area developer shall provide to the owner or manager of such
store, an initial training program in the operation of a retail bagel store, as
required by the Franchise Agreement, and as developed by the Company. The Area
Developer shall be solely responsible for the costs and expenses incurred in
connection with the conduct of such initial training programs, except for those
expenses which the Franchise Agreement designates as the responsibility of the
Franchisee.
4
8
Subsequent to the opening of each Store, the Area Developer will
provide such additional supplemental and refresher training programs as
required by the Franchise Agreement, and Area Developer shall be solely
responsible for all expenses incurred in connection with the conduct of such
supplemental or refresher training programs.
B. Operating assistance
The Area Developer shall monitor the performance of all stores in the
territory with respect to compliance with the operating procedures and policies
promulgated by the Company, and shall furnish to all stores within the
Territory such guidance and assistance in connection with the operation of the
Store as is from time to time deemed appropriate by the Company. Operating
assistance may consist of advice and guidance with respect to:
(1) the standards, methods, and operating procedures
utilized by the Retail Concept;
(2) the preparation of food, beverages, and other
products and services authorized for sale in the Retail Concept;
(3) the selection, purchase, and preparation of food and
beverage products, and the purchase of other approved products,
fixtures, equipment, signs, materials, and supplies; and
(4) the formulation and implementation of advertising and
promotional programs.
Such guidance shall be furnished in such manner as the Company
develops and modifies for the use of Area Developers in carrying out their
responsibilities under this Agreement.
V. STORE IMAGE AND OPERATING STANDARDS
A. Condition and appearance of Store
Area Developer agrees that all stores in the Territory will maintain
the condition and appearance of the Store consistent with the image of the
Retail Concept as an attractive, clean, and efficiently operated unit, offering
high quality products, efficient and courteous service, and pleasant ambiance.
In connection therewith, for all Stores within the Territory, Area Developer
shall monitor and report on the cleanliness and sanitation of all Store
premises, disposal of stale, spoiled, or unmerchantable food products,
replacement of worn out or obsolete fixtures, equipment, furniture, signs, and
utensils; repair of the interior and exterior of all Stores, and periodic
painting of all Store premises in accordance with the decor prescribed by the
Company.
If at any time in the Area Developer's judgment, the general state or
repair, appearance, or cleanliness of the premises of any Store in the
Territory, or its fixtures, equipment, furniture,
5
9
signs, or utensils does not meet the Company's standards, the Area Developer
shall so notify the Company, using such forms as the Company has provided for
such reporting.
B. Uniform image
The presentation of a uniform image to the public is an essential
element of a successful Franchise system. Area Developer therefore agrees to
monitor the placement or display at all Store premises of all signs, emblems,
lettering, logos, and display and advertising materials, to insure that such
have been approved in writing by the Company, and to insure that the products
offered for sale at the Stores are only such types of food and beverage
products and services as have been approved by the Company in its capacity as
Franchiser.
C. Food and beverage products, supplies, and materials
The reputation and goodwill of the Retail Concepts is based upon, and
can be maintained only by the sale of distinctive, high quality products and
services. Area Developer therefore agrees to monitor the Stores in the
Territory to insure that they use only those ingredients in the preparation of
food and beverage products, prepare and offer for sale only those food and
beverage products, use only those plates, cups, utensils, uniforms, menus,
forms, packaging materials, labels, and other supplies, and use or offer for
sale only those other products and services which conform to the Company's
specifications and quality standards and are purchased from suppliers approved
by the Company pursuant to a list of approved products and approved suppliers
provided to Area Developer by the Company.
D. Specifications, standards, and procedures
Area Developer acknowledges and agrees that each and every detail of
the appearance and operation of the Stores is important to the Company and the
Retail Concept. The Area Developer shall assist the Company in maintaining
high standards of quality and service at all units, and, accordingly, agrees
that all Stores in the Territory shall comply with all mandatory
specifications, standards, and operating procedures (whether contained in the
Operating Manual or any other written communication to Area Development)
relating to the appearance or operation of a Retail unit, including, without
limitation:
(1) type, quality, taste, appearance, weight and
dimensions, ingredients, uniformity, manner of preparation and sale of
all food, beverages, and other products sold by the Store, and all
other products used in the packaging and sale thereof;
(2) the safety, maintenance, cleanliness, sanitation,
function, and appearance of all Store premises and their fixtures,
equipment, furniture, decor, and signs;
(3) qualifications, dress, general appearance, and
demeanor of Store employees;
(4) use of the Marks;
6
10
(5) use, display and illumination of signs, posters,
displays, menus, menu boards, standard formats, and similar items;
(6) identification of each Franchisee as the independent
owner of each Store;
(7) advertising and promotional material.
Mandatory specifications, standards, and operating procedures
prescribed from time to time by the Company in the Operating Manual, or
otherwise communicated to Franchisees in writing, shall constitute provisions
of each Franchise Agreement, and monitoring the compliance therewith shall
become part of the responsibility of the Area Developer.
VI. THE MARKS
A. Ownership and goodwill of Marks
Area Developer acknowledges that the Company owns the Marks and all
rights therein. Area Developer further acknowledges that Area Developer's
right to use the Marks is derived solely from this Agreement and is limited to
the conduct of his business pursuant to and in compliance with this Agreement
and all applicable specifications, standards, and operating procedures
prescribed by the Company from time to time during the term of the Area
Development Agreement. Any unauthorized use of the Marks by Area Developer
shall constitute a breach of this Agreement and an infringement of the rights
of the Company in and to the Marks.
Area Developer agrees that all usage of the Marks by Area Developer
and any goodwill established thereby shall inure to the exclusive benefit of
the Company, and Area Developer acknowledges that this Agreement does not
confer any goodwill or other interests in the Marks upon Area Developer.
All provisions of this Agreement applicable to the Marks shall apply
to any additional trademarks, service marks, logos, and commercial symbols
hereafter authorized for use by and licensed to Area Developer by the Company.
During the term of this Agreement and after termination or expiration
hereof, Area Development agrees not to dispute or contest, for any reason
whatsoever, directly or indirectly, the validity, ownership, or enforceability
of any of the Marks; or to counsel, procure, or assist anyone else to do the
same; nor directly or indirectly attempt to dilute the value of the good will
attaching to the Marks; nor counsel, procure, or assist anyone else to do the
same.
B. Notification of infringements and claims
Area Developer shall immediately notify the Company in writing of any
apparent infringement of, or challenge to, any mark, or claim by any person of
any rights in any Mark or
7
11
any similar trade name, trademark, or service mark of which Area Developer
becomes aware. Area Developer shall not communicate with any person other than
the Company and its counsel in connection with any such infringement,
challenge, or claim. The Company shall have sole discretion to take such
actions as it deems appropriate and the right to exclusively control any
litigation, U.S. Patent and Trademark Office proceeding, or other
administrative or judicial proceeding arising out of any such infringement,
challenge, or claim relating to any Mark. Area Developer agrees to execute any
and all instruments and documents, render such assistance, and do such acts and
things as may, in the opinion of the Company's counsel, be necessary or
advisable to protect and maintain the interests of the Company in any such
litigation, U.S. Patent and Trademark Office proceeding, or other
administrative proceeding, and to otherwise protect and maintain the interests
of the Company in the Marks.
C. Discontinuance of use of Marks
If it becomes advisable at any time, in the Company's sole discretion,
for the Company, the Area Developer, or both, to modify or discontinue use of
any Mark, or use one or more additional or substitute trademarks or service
marks, the Company will so direct Area Developer, and Area Developer agrees, at
its own expense, to comply with such direction within a reasonable time after
receipt of such direction.
D. Indemnification of Area Developer
The Company agrees to indemnify Area Developer against, and to
reimburse Area Developer for all damages for which he is held liable in any
proceeding arising out of Area Developer's authorized use of any Mark pursuant
to and in compliance with this Agreement, and for all costs reasonably incurred
by Area Developer in the defense of any such claim brought against him or in
any such proceeding in which he is named as a party, provided that Area
Developer has timely notified the Company of such claim or proceedings, and has
otherwise complied with this Agreement.
VII. CONFIDENTIAL INFORMATION
The Company possesses certain confidential and proprietary
information, consisting of the following categories of information, methods,
techniques, procedures, and knowledge acquired by or developed by, for, or on
behalf of the Company (the "Confidential Information"):
(1) ingredients, recipes, and methods of preparation of
certain food and beverage products sold at and through the Retail
Concepts;
(2) methods, techniques, formats, specifications,
procedures, information, systems, and knowledge of and experience in,
the operation and franchising of retail bagel stores;
(3) sources of food and beverage products, and supplies
for the preparation and serving of food and beverage products;
8
12
(4) programs and concepts for the marketing of bagels and
the franchising of bagel stores;
(5) designs, concepts, architectural and other plans, and
other information relating to the appearance and image of the Retail
Concepts;
(6) training programs and techniques for, and knowledge
relating to, the selection of managers and employees of the Retail
Concepts; and
(7) knowledge and information relating to the planning,
development, and testing of new food, beverages, or other items for
possible sale at the Retail Concepts;
During the term of this Agreement, the Company will disclose the
Confidential Information to Area Developer in providing Area Developer with the
guidance and assistance required to discharge his responsibilities under this
Agreement.
Area Developer acknowledges and agrees that no interest in the
Confidential Information has or will be acquired by Area Developer, other than
the right to utilize it in discharging the responsibilities of this Agreement,
while this Agreement is in effect,, and that the use or duplication of the
Confidential Information in any other business would constitute an unfair
method of competition. Area Developer acknowledges and agrees that the
Confidential Information is proprietary and involves trade secrets of the
Company, and is disclosed to Area Developer solely on the condition that Area
Developer agrees, and Area Developer does hereby agree:
(1) not to use the confidential information in any other
business or capacity;
(2) to maintain the absolute confidentiality of the
Confidential Information during and after the term of the Area
Development;
(3) not to make unauthorized copies of any portion of the
Confidential Information disclosed in written form; and
(4) to adopt and implement all reasonable procedures
prescribed from time to time by the Company to prevent unauthorized
use or disclosure of the Confidential Information, including, without
limitation, restrictions on disclosure thereof to employees of the
Store, and the use of non-disclosure and noncompetition clause in
employment agreements with employees who have access to the
Confidential Information.
VIII. NON-COMPETITION
Area Developer acknowledges and agrees that the Company would be
unable to protect its trade secrets against unauthorized use, and would be
unable to encourage a free exchange of ideas and information among Franchisees
of the Retail Concepts if Area Developers were
9
13
permitted to hold interests in any competitive businesses. Therefore, during
the term of the Area Development Agreement, neither Area Developer, any
shareholder or partner (if Area Developer is a corporation or partnership), nor
any member of his or their households, shall have any interest as an owner,
investor, partner, director, officer, employee, consultant, representative, or
agent, or in any other capacity, in any other restaurant or carry-out business
serving or selling bagels or other baked goods, sandwiches, or any other
restaurant or business selling products or providing services substantially
similar to the products and services sold by or through the Retail Concepts,
except for other stores operating under Franchise Agreements with the Company,
and the ownership of securities listed on a stock exchange or traded on the
over-the -counter market that represent five percent (5%) or less of that class
of securities.
IX. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION
It is understood and agreed by the parties hereto that this Agreement
does not create a fiduciary relationship between them, that the Company and
Area Developer shall be independent contractors and that nothing in this
Agreement is intended to make either party a general or special agent, legal
representative, subsidiary, joint venturer, partner, employee, or servant of
the other for any purpose.
The Company has not authorized or empowered Area Developer to use the
Marks except as provided by this Agreement, and Area Developer shall not employ
any Mark in signing any contract, lease, mortgage, check, purchase agreement,
negotiable instrument, or other legal obligation without the prior written
consent of the Company, or employ any Mark in a manner that is likely to result
in liability to the Company for any indebtedness or obligation of Area
Developer.
Except as expressly authorized by this Agreement, neither the Company
nor Area Developer shall make any express or implied agreements, guaranties or
representations, or incur any debt, in the name of or on behalf of the other,
or represent that their relationship is other than Franchiser and Area
Developer. Neither the Company nor Area Developer shall be obligated by, or
have any liability under, any agreements or representations made by the other
that are not expressly authorized hereunder, nor shall the Company be obligated
for any damages to any person or property directly or indirectly arising out of
the development of the Territory pursuant to this Agreement, whether or not
caused by Area Developer's negligent or willful action or failure to act.
Area Developer agrees to indemnify and hold harmless the Company and
its affiliates, stockholders, directors, officers, employees, agents and
assignees, from and against any claims, suits, actions, losses, liability,
taxes, or damages (actual or consequential), and all reasonable costs and
expenses in connection with the defense of any claim brought against any of
them or any action in which any of them is named as a party, (including,
without limitation, reasonable accountants', attorneys' and expert witness
fees, cost of investigation, and proof of facts, court costs, other litigation
expenses, and travel and living expenses) which any of them may suffer,
sustain, or incur by reason of, arising from, or in connection with, Area
Developer's activities in connection with this Agreement.
10
14
The indemnities and assumption of liabilities and obligations herein
shall continue in full force and effect subsequent to and notwithstanding the
expiration or termination of this Agreement.
X. INITIAL AREA DEVELOPMENT FEE
Area Developer shall pay to the Company a non-recurring initial Area
Development fee of $250,000 (Two hundred fifty thousand dollars). The initial
Area Development fee shall be payable and fully earned by the Company upon
execution of this Agreement and shall be non-refundable.
The Company agrees to accept a Note in payment for the initial fee
provided that such Note shall have the following characteristics:
It shall be secured by Area Developer placing in escrow with
the Company or its designee, a minimum of 60,000 shares of the common stock of
the Company, previously purchased by Area Developer.
The Note shall repaid by the Company withholding from Area
Developer 75% of the compensation otherwise due Area Developer under this
Agreement, until the note is paid in full.
Beginning with the quarter ending September 30, 1996, a
minimum payment against the outstanding principals of $20,000 is due and
payable at the end of each calendar quarter.
Until paid in full, the unpaid balance of the Note shall earn
interest at the rate of 6% annually, computed and added to the total on a
quarterly basis.
Upon payment of the above fee and execution of this Agreement, Area
Developer shall become the Company's sole and exclusive representative in the
Territory, responsible for the carrying out the duties outlined herein, and
eligible to receive the compensation outlined below.
XI. COMPENSATION TO AREA DEVELOPER
During the term of this Agreement, and provided Area Developer is in
compliance with this Agreement and all other Franchise, Development, and other
Agreements with the Company, then, as full compensation for providing the
services described in this Agreement, Area Developer shall receive as
compensation, the following percentage of the fees received by the Company in
the Territory:
Franchise Fees 50%
Royalties 50%
11
15
Area Developer shall not be entitled to, and expressly disclaims any
rights to, any additional fees or compensation from the Company, or any
affiliate of the Company, whether from fees received by the Company for its
Promotional Fund, for the sale of any equipment or other product, or from any
other source whatever.
The Company shall remit Area Developer's portion of the above fees to
Area Developer within 30 days of receipt of such fees by the Company, and, in
the event the Note described in Section X above is outstanding, the Company
shall first deduct from compensation earned under this Section, any repayment
required under such Note.
XII. ASSIGNMENT
A. By the Company
This Agreement is fully assignable by the Company and shall inure to
the benefit of any Assignee or other legal successor to the interest of the
Company.
B. Area Developer may not assign without approval of the Company
Area Developer understands and acknowledges that the rights and duties
created by this Agreement are personal to Area Developer, and that the Company
has granted the Area Development rights contained in this Agreement, in
reliance upon the individual or collective character, skill, aptitude,
attitude, business ability, and financial capacity of Area Developer (or its
shareholders or partners, if Area Developer is a corporation or partnership).
Therefore, the Area Developer, nor any interest therein, nor any part or all of
the ownership of the Area Development rights contained herein, may be
voluntarily, involuntarily, directly or indirectly, assigned, sold, subdivided,
sub Franchised, or otherwise transferred by Area Developer or its owners,
without the prior written approval of the Company. Any such assignment or
transfer without such approval shall constitute a breach hereof and shall
convey no rights to or interests in the Area Development Agreement, or the Area
Development rights contained in this Agreement.
C. Guarantee of shareholders
Any person who becomes a shareholder of Area Developer during the term
of the Area Development Agreement shall execute an agreement in a form
furnished or approved by the Company undertaking to be personally bound jointly
and severally by all provisions of the Agreements relating to confidential
information and non competition. Area Developer shall furnish to the Company
at any time upon request a certified copy of the articles of incorporation and
a list, verified as being true and correct and in such form as the Company may
require, of all shareholders of record reflecting their respective interests in
the Area Developer Agreement, and the Development rights therein.
D. Effect of consent to assignment
12
16
The Company's consent to an assignment by Area Developer (or its
owners) of any interest subject to the restrictions of this Section XIII shall
not constitute a waiver of any claims it may have against Area Developer (or
any of its owners), nor shall it be deemed a waiver of the Company's right to
demand exact compliance with any of the terms or conditions of the Area
Development Agreement by the Assignee.
XIII. RENEWAL OF AREA DEVELOPMENT
A. Area Developers right to renew
Area Developer shall have the right to renew this Agreement for two
successive five (5) year terms, if upon expiration of the initial or first
renewal term of the Area Development Agreement, Area Developer is;
(1) in compliance with all aspects of the Area
Development Agreement, specifically including the Development Schedule
contained herein;
(2) in compliance with all Store franchise Agreements and
other Agreements between the Company and the Area Developer and its
affiliates;
(3) able to demonstrate to the satisfaction of the
Company that it has the ability to continue to discharge its
responsibilities under the Area Development Agreement;
If the foregoing provisions have been met, then Area Development
shall, upon the terms and conditions herein contained, have the right to renew
the Area Development for two (2) successive five (5) year terms, without the
payment of any renewal fee.
B. Notice of renewal and non-renewal
If Area Developer desires to renew the Area Development Agreement then
Area Developer shall give the Company written notice of his exercise of his
option to renew at least one hundred eighty (180) days, but not more than one
(1) year, prior to the expiration of the term of the Agreements. The Company
agrees to give Area Developer written notice of its determination whether or
not Area Developer has the right to renew the Area Development Agreement by the
later of one hundred eighty (180) days prior to the expiration of the term of
this Agreement, or thirty (30) days after the Company's receipt of such written
notice of exercise of such option to renew. A notice of non-renewal by the
Company shall state the reasons for the Company's refusal to renew.
XIV. TERMINATION OF THE AREA DEVELOPMENT AGREEMENT
A. By the Area Development
13
17
Area Developer may cancel this Agreement at any time by providing
written notice to the Company 60 days prior to such cancellation. Upon
expiration of such notice period, this Agreement shall of no further force and
effect, and Area developer shall no longer be responsible to discharge the
responsibilities hereunder, and shall receive no further compensation from the
Company;
Area Developer acknowledges, however, that those provisions of this
Agreement that by their nature survive the cancellation of this Agreement,
including without limitation the non competition and confidentially provisions
hereof, shall continue in full force and effect after such cancellation.
B. By the Company
The Company shall have the right to terminate this Agreement effective
upon delivery of notice of termination to Area Developer if Area Developer or
any of its shareholders or partners, if Area Developer is a corporation or
partnership,
(1) fails to open the initial Store for business as
provided in Paragraph B or D of Section 3 of this Agreement;
(2) has failed, as of any anniversary date of this
Agreement, to maintain the Development Schedule in this Agreement;
(3) has made any material misrepresentation or omission
in its application for the Area Development Agreement;
(4) is convicted of or pleads no contest to a felony or
any crime or offense that may adversely affect the reputation of the
Retail Concepts or the goodwill associated with the Marks;
(5) fails to provide to any of the Stores in the
Territory, any of the services provided for in this Agreement;
(6) makes an unauthorized assignment or transfer of this
Agreement, or any ownership interest in the Area Development rights;
(7) makes any unauthorized use of the Marks or
unauthorized use or disclosure of Operating Manual or any other
Confidential Information;
(8) fails or refuses to comply with any mandatory
specification, standard or operating procedure prescribed by the
Company relating to the cleanliness or sanitation of the Stores;
(9) fails to discharge his responsibilities under this or
any other Development or Franchise Agreement with the Company; or
14
18
(10) is or becomes insolvent, or in the event a voluntary
or involuntary petition for bankruptcy, with Area Developer as debtor,
is filed under the United States Bankruptcy code or any similar law,
or if Area Developer makes an assignment for the benefit of
creditors,;
XV. RIGHTS OF THE COMPANY AND OBLIGATIONS OF AREA DEVELOPER UPON
TERMINATION OR EXPIRATION OF THE AREA DEVELOPMENT AGREEMENT
A. The Marks
Area Developer agrees that after the termination or expiration
(without renewal) of the Area Development Agreement:
(1) Area Developer (and all owners thereof) shall not
directly or indirectly at any time or in any manner identify himself
or any business as a current or former Area Developer of the Company,
or use the Marks, any colorable imitation thereof or other indicia of
the Retail Concepts in any manner or for any purpose, or utilize for
any purpose material that suggests or indicates a connection or
association with the Company, other than the operation of a Retail
Store operating under a Franchise Agreement with the Company.
(2) Area Developer will promptly take such action as may
be required to cancel all fictitious or assumed names, or equivalent
registrations relating to the use of the Marks;
B. Confidential information
Area Developer agrees that upon termination or expiration without
renewal of the Area Development Agreement, he will immediately cease to use the
Confidential Information relating to Franchising, or the operation of a
Franchise System, in any business or otherwise, and return to the Company all
copies of the Operating Manual and other material which have been loaned to him
by the Company, except as may still be required by Area Developer in the
operation of a Retail Store operating under a valid Franchise Agreement with
the Company.
C. Covenant not to compete
Area Developer (and its shareholders, directors, and officers, if Area
Developer is a corporation, or its partners, if Area Developer is a
partnership) agrees that for a period of two (2) years following the
termination or expiration (without renewal) of this Agreement, Area Developer
(and if Area Development is a corporation or a partnership, its shareholders,
directors, officers, partners, and members of their immediate families) will
not have any interest, directly or indirectly, as an owner, partner, director,
officer, employee, consultant, representative or agent, or in any other
capacity, in any business engaged in the franchising, licensing, or other
expansion of any retail concept substantially similar to the business of the
Company, other than
15
19
the ownership of securities traded on a stock exchange or on the
over-the-counter market that represent five percent (5%) or less of that class
of securities.
D. Continuing obligations
All obligations of the Company and Area Developer which expressly or
by their nature survive the expiration or termination of this Agreement,
including, without limitation, the provisions of Section 8 and Paragraph D of
Section 17, shall continue in full force and effect subsequent to and
notwithstanding its expiration or termination, until they are satisfied or by
their nature expire.
E. The Company's Right to Appoint a New Area Developer
Upon the termination or expiration of this Agreement, Area Developer
expressly acknowledges the right of the Company to appoint a new Area Developer
in the Territory, under such terms and conditions as the Company deems
appropriate.
F. On Going Compensation to Area Developer
Subsequent to the termination or expiration of this Agreement, Area
Developer's right to compensation from the fees and royalties generated within
the Territory shall cease, except that, in the event that the Company elects to
terminate the Agreement pursuant to paragraph B. (2) of Section XV of this
Agreement, and the Area Developer is otherwise capable of continuing to
discharge his responsibilities under this Agreement with respect to stores
already established in the Territory,, then Area Developer shall continue to
provide such services, and shall continue to be compensated for such. In such
events, those provisions of this Agreement which by their nature are necessary
for the implementation of this paragraph shall survive the termination of this
Agreement.
The provisions of this paragraph in no way limit the Company's right
to appoint a new Area Developer in the Territory, provided, however, that, in
the event the provisions of this paragraph are in effect, any such new Area
Developer shall have no responsibility for stores operating at the time of
termination of Area Developer.
XVI. ENFORCEMENT
A. Severability and substitution of valid provisions
Except as expressly provided to the contrary herein, each section,
paragraph, term, and provision of this Agreement, and any portion thereof,
shall be considered severable, and if, for any reason, any such portion of this
Agreement is held to be invalid, contrary to, or in conflict with any
applicable present or future law or regulation by any court, agency, or
governmental authority of competent jurisdiction, that ruling shall not impair
the operation of, or have any other effect upon, this Agreement, unless the
Company has been a party to such proceeding, and until such ruling has been
affirmed in an unappealable ruling of a reviewing court or body, or the
16
20
time for any such appeal has expired (or upon Area Developer's receipt of
written notice of non-enforcement of such provision from the Company), from and
after which time such other portions of this Agreement as may remain otherwise
intelligible shall continue to be given full force and effect and bind the
parties hereto, and any portion held to be invalid shall be deemed not to be a
part of this Agreement.
To the extent that any provision hereof is deemed unenforceable by
virtue of its scope in terms of area, length of time, or nature of prohibited
activity, but can be made enforceable by limitations upon such scope, then Area
Developer and the Company agree that such provisions shall be enforced to the
full extent permissible under the laws and public policies of the jurisdiction
in which enforcement is sought. If any applicable and binding law, or rule of
any jurisdiction requires a greater prior notice of the termination of or
non-renewal of this Agreement than is required hereunder, or the taking of some
other action not required hereunder, or if under any applicable and binding law
or rule of any jurisdiction, any provision of this Agreement or any
specification, standard, or operating procedure prescribed by the Company is
invalid or unenforceable, the prior notice or other action required by such law
or rule shall be substituted for the comparable provisions hereof, and the
Company shall have the right, in its sole discretion, to modify such invalid or
unenforceable provision, specification, standard, or operating procedure to the
extent required to be valid and enforceable. Area Developer agrees to be bound
by any promise or covenant imposing the maximum duty permitted by law which is
subsumed within the terms of any provision hereof, as though it were separately
articulated in and made a part of this Agreement, that may result from striking
from any of the provisions hereof, or any specification, standard, or operating
procedure prescribed by the Company, any portion or portions of which a court
may hold to be unenforceable in a final decision to which the Company is a
party, or from reducing the scope of any promise or covenant to the extent
required to comply with such a court order. Such modifications to this
Agreement shall be effective only in such jurisdiction, unless the Company
elects to give them greater applicability, and this Agreement shall be enforced
as originally made and entered into in all other jurisdictions.
B. Waiver of obligations
The Company and Area Developer may each by written instrument
unilaterally waive or reduce any obligation of or restriction upon the other
under this Agreement, effective upon delivery of written notice thereof to the
other or such other effective date stated in the notice of waiver. Whenever
this Agreement requires the Company's prior approval or consent, Area Developer
shall make a timely written request therefore, and such approval shall be
obtained in writing.
The Company makes no warranties or guaranties upon which Area
Developer may rely, and assumes no liability or obligation to Area Developer,
by granting any waiver, approval or consent to Area Developer, or by reason of
any neglect, delay, or denial of any request therefor. Any waiver granted by
the Company shall be without prejudice to any other rights the Company may
have, will be subject to continuing review by the Company, and may be revoked,
in the Company's sole discretion, at any time and for any reason, effective
upon delivery to Area Developer ten (10) days' prior written notice.
17
21
The Company and Area Developer shall not be deemed to have waived or
impaired any right, power, or option reserved by this Agreement (including,
without limitation, the right to demand exact compliance with every term,
condition, and covenant herein, or to declare any breach thereof to be a
default and to terminate the Area Developer prior to the expiration of its
term), by virtue of any custom or practice of the parties at variance with the
terms hereof; any failure, refusal, or neglect of the Company or Area Developer
to exercise any right under this Agreement, or to insist upon the other's exact
compliance with its obligation hereunder, including, without limitation, any
mandatory specification, standard, or operating procedure; any waiver,
forbearance, delay, failure, or omission by the Company to exercise any right,
power or option, whether of the same, similar of different nature, with respect
to other Area Developer Agreements.
C. Force majeure
Neither the Company nor Area Developer shall be liable for loss or
damage or deemed to be in breach of this Agreement if its failure to perform
its obligations hereunder results from transportation shortages, inadequate
supply of labor, materials, or energy; compliance with any law, ruling, order,
regulation, requirement, or instruction of any federal, state, or municipal
government, or any department or agency thereof (other than a judgment for the
payment of money); acts of God, acts or omissions of the other party; fires,
strikes, embargoes, war, or riot; or any other similar event or cause. Any
delay resulting from any of said causes shall extend performance accordingly or
excuse performance, in whole or in part, as may be reasonable.
D. Specific performance/injunctive relief
Nothing herein contained shall bar the Company's or the Area
Developer's right to obtain specific performance of the provisions of this
Agreement and to obtain injunctive relief against threatened conduct that will
cause it irreparable loss or damage under customary rules of equity. Area
Developer agrees that the Company may have such injunctive relief, without
bond, but upon due notice, in addition to such further and other relief as may
be available at equity or law, and the sole remedy of Area Developer, in the
event of any improper or wrongful entry of such injunction, shall be the
dissolution of such injunction upon hearing duly had, all claims for damages by
reason of the wrongful issuance of any such injunction being expressly waived
hereby.
E. Rights of parties are cumulative
The rights of the Company and Area Developer hereunder are cumulative,
and no exercise or enforcement by the Company or Area Developer of any right or
remedy hereunder shall preclude the exercise or enforcement by the Company or
Area Developer of any other right or remedy hereunder, which the Company or
Area Developer is entitled by law or equity to enforce.
F. Costs and attorneys' fees
18
22
If a claim for amounts owed by Area Developer to the Company or its
affiliates is asserted in any legal proceeding before a court of competent
jurisdiction, or if the Company or Area Developer is required to enforce this
Agreement in a judicial proceeding, the party prevailing in such proceeding
shall be entitled to reimbursement of its costs and expenses, including
reasonable accounting and legal fees, incurred in connection with such
proceeding.
G. Governing law/consent to jurisdiction
Except to the extent governed by the United States Trademark Act of
1946, as amended (Lanham Act, 15 U.S.C. Sections 1051 et seq.), or any other
applicable federal law, this Agreement shall be governed by the laws of the
State of New Jersey. This Agreement is made at Fairfield, New Jersey. Area
Developer agrees that the Company may institute any action against Area
Developer arising out of or relating to this Agreement in any state or federal
court of general jurisdiction in the State of New Jersey, and Area Developer
irrevocably submits to the jurisdiction of such court and waives any objection
he may have to either the jurisdiction or venue of such court.
H. Binding effect
This Agreement is binding upon the parties hereto and their respective
executors, administrators, heirs, assigns, and successors in interest, and
shall not be modified except by written agreement signed by both Area Developer
and the Company.
I. Construction
The preambles and exhibits hereto are a part of this Agreement. This
Agreement constitutes the entire Agreement of the parties, and there are no
other oral or written understandings or Agreements between the Company and Area
Developer relating to the subject matter of this Agreement.
Except as otherwise expressly provided herein, nothing in this
Agreement is intended, nor shall be deemed to confer any rights or remedies
upon any person or legal entity not a party hereto.
Except where this Agreement expressly obligates the Company not to
unreasonably withhold its approval of any action or request of Area Developer,
the Company has the absolute right to grant or withhold such approval or grant
or refuse such request in its sole and absolute discretion.
The heading of the several sections and paragraphs hereof are for
convenience only and do not define, limit, or construe the contents of such
sections or paragraphs.
The term "Area Developer" as used herein is applicable to one or more
persons, a corporation or a partnership, as the case may be; the singular usage
includes the plural and vice
19
23
versa; and the feminine, masculine, and neuter usages each includes the other
usages. If two or more persons or entities are at any time Area Developers
hereunder, as partners, joint venturers, or otherwise, their obligations and
liabilities to the Company shall be joint and several. References to "Area
Developer," "Owner," "Transferee," or "Assignee" which are applicable to an
individual or individuals shall mean the owner or owners of the equity or
operating control of Area Developer or the transferee or Assignee, if Area
Developer or the Assignee is a corporation or partnership.
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original.
J. Notices and payments
All written notices and reports permitted or required to be delivered
by the provisions of this Agreement or of the Operating Manual, shall be deemed
so delivered at the time delivered by hand, one (1) business day after sending
by telegraph or comparable electronic system or by U.S. Express Mail or
comparable private commercial overnight carrier service, or three (3) business
days after placed in the U.S. mail by Registered or Certified Mail, Return
Receipt Requested, postage prepaid and addressed to the party to which such
notice is directed at its most current principal business address as set forth
in the records of the Company.
All payments and reports required by this Agreement shall be directed
to the Company at the address specified by the Company from time to time, or to
such other persons and places as the Company may direct from time to time. Any
required payment or report not actually received by the Company during regular
business hours on the date due or properly placed in the U.S. mail and
postmarked by postal authorities at least three (3) business days prior
thereto, shall be deemed delinquent.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as follows:
Area Developer: Witness:
- ---------------------------------
ELEVEN CONGERS, INC.
Thomas C. Winn, President
All American Food Group, Inc. Witness:
- ---------------------------------
Andrew Thorburn, President
20
24
APPENDIX A
DEVELOPMENT SCHEDULE
Area Developer acknowledges that the grant of rights contained in the Area
Development Agreement between the parties is expressly contingent on the
obligation of the Area Developer to develop the Territory in accordance with
the minimum development schedule outlined below. As of the anniversary date of
this Agreement, Area Developer agrees that the following minimum number of
retail stores operating under the trade names and in accordance with the
policies and procedure of the Company shall be operating:
At the end of year number of stores
------------------ ----------------
1 3
2 6
3 11
4 16
5 21
For the purposes of this schedule, only stores open and operating as of each
anniversary date shall be counted, and stores shall be included in this
schedule whether opened and operated by the Area Developer, or a sub franchisee
of Area Developer; it is further agreed that stores under the "Goldberg's" and
"Sammy's" name shall count equally, in the maintenance of this development
schedule.
It is expressly understood by the parties that failure of the Area Developer to
maintain the above Development Schedule shall be sufficient grounds for the
cancellation of Area Developer's exclusive rights to the Territory, and that
such failure shall constitute a default under the Area Development Agreement,
entitling the Company to the remedies available under the Agreement for such
default.
- --------------------------------
Area Developer Witness:
- --------------------------------
All Amercian Food Group, Inc. Witness:
21
25
ADDENDUM TO AREA DEVELOPMENT AGREEMENT
BETWEEN ELEVEN CONGERS, INC. (DEVELOPER),
AND ALL AMERICAN FOOD GROUP, INC., (THE "COMPANY")
Whereas the parties have entered into an Area Development Agreement (the
"Agreement"), dated January 19, 1996, under which Developer has purchased the
rights to develop the Company's retail bagel concepts, and
Whereas the parties are now desirous of increasing the territory covered by
that Agreement, and
Whereas there remains outstanding from the initial agreement a Note in the
amount of $175,000, and
Whereas the Company acknowledges receipt of an additional payment of $75,000,
paid simultaneously with the execution of this Addendum, and
Whereas the parties are desirous of amending certain features of that
Agreement,
Now therefore on this 22nd day of April, 1996, for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby enter into this Addendum to the previous Agreement.
1. Except as expressly amended or modified by this Addendum, the terms and
provisions of the Agreement of January 19, 1996 are hereby expressly affirmed.
2. Section II C. is hereby amended to include the following additional
territory:
In the City of New York, the Borough of Queens.
3. Section X is hereby amended as follows:
a) The initial fee is increased to $400,000.
The Note described in Section X is hereby raised to $250,000, due and payable
as described therein.
Failure to make the minimum payment shall result in the cancellation of the
Agreement and this Addendum.
4. The Development schedule for the additional territory shall be calculated
separately from the development schedule in Appendix A of the Agreement.
22
26
As of each anniversary date of this Addendum, in the territory covered by this
Addendum, the Developer agrees that the following minimum number of stores
shall be open and operating under the trade names and in accordance with the
policies and procedures of the Company:
At the end of year number of stores
------------------ ----------------
1 2
2 5
3 8
4 12
5 16
5. For the purpose of establishing the Company's rights to terminate the
Agreement for failure to fulfill the development schedule, the development
schedule for the territory in the Agreement, and the development schedule for
the territory outlined in this Addendum, shall be calculated separately, and
the failure of the developer to reach the development schedule of either
territory shall have no bearing on the developer's rights in the other.
In Witness whereof the parties hereto have executed this Addendum as follows:
- --------------------------------
Area Developer Witness:
- --------------------------------
All American Food Group, Inc. Witness:
23