MANAGEMENT AGREEMENT
This Management Agreement (this "Agreement") is made and entered into as of
August __, 1997, by and between Xxx. Xxxxxx' Original Cookies, Inc. (the
"Manager") and Pretzel Time, Inc., a Delaware corporation ("PTI"); "Party" in
the singular or "Parties" in the plural.
R E C I T A L S
WHEREAS, the Manager is engaged in the business of owning, operating
and franchising retail fast food stores, and possesses certain valuable
management and operational skills, experience and resources, and general
administrative skills and resources, including in the financial, accounting,
tax, franchising and legal compliance disciplines; and
WHEREAS, Xxx. Xxxxxx' Holding Company ("MFHC"), the parent company of
the Manager, pursuant to that certain Stock Acquisition Agreement of even date
by and between MFHC and PTI (the "Acquisition Agreement") and the Related
Transaction Documents (as defined in the Acquisition Agreement), has acquired,
or concurrently with the execution of this Agreement will acquire, majority
ownership of the capital stock of PTI; and
WHEREAS, the Parties desire to provide for the management of PTI by the
officers and employees of Manager; and
WHEREAS, the Manager is prepared to provide management services to PTI as
more fully described herein; and
WHEREAS, the directors and shareholders of the Parties have approved
and consented to the Parties entering into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:
1. Agreement to Perform Services.
1.1 Engagement of Manager. PTI hereby engages the Manager to
perform the Services (as defined in Section 3 of this Agreement), and
the Manager agrees to perform such Services in accordance with the
terms and conditions of this Agreement.
1.2 Performance of Manager.
(a) Manager covenants with PTI to use its reasonable
best efforts and diligent skill and judgment in the
performance of its duties and obligations hereunder. Manager
shall perform its duties and obligations under this Agreement
in accordance with the provisions of this Agreement, and shall
do so in an efficient, expeditious and economical manner.
(b) In providing the Services, Manager shall have a
duty to act, and to cause its agents to act, in a reasonably
prudent manner, but neither Manager nor any director, officer,
employee, member or agent of Manager shall be liable to PTI
for any error in judgment or mistake of law or for any loss
incurred by PTI in connection with the matters to which this
Agreement relates, except that the Manager shall be
responsible for a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of Manager.
1.3 Manager's Personnel. Manager shall cause the services of
its employees and officers to be made available as needed or requested
by PTI and its Board of Directors. In performing its obligations
hereunder, Manager and Manager's employees shall be independent
contractors and not employees of PTI. Manager shall comply with all
applicable laws, rules and regulations relating to the duties and
obligations of Manager under this Agreement, including those pertaining
to labor, employment and franchising.
2. Budget. For each partial or full fiscal year of PTI, the Manager
shall prepare an operating budget and a capital budget (collectively the
"Budgets" and individually the "Operating Budget" and the "Capital Budget"
respectively). The Operating Budget shall set forth PTI's projected revenues and
estimated costs for the conduct of its business (including costs payable to the
Manager under this Agreement). The Capital Budget shall identify proposed
capital expenditures by type and amount and shall set forth the source and
estimated cost to acquire the funds. The Parties and the shareholders and
directors of PTI shall have prepared and approved Budgets for the partial fiscal
year ending on December 29, 1997 and for the fiscal year ending December 29,
1998, prior to execution of this Agreement, copies of which are attached hereto
as Exhibit "A" and by reference made a part hereof. Each Budget shall be
substantially in the same form and detail as Exhibit "A". Budgets for subsequent
fiscal years shall not require the approval of PTI's shareholders, but shall
require the approval of PTI's Board of Directors (including the approval of one
"Xxxxxxxxx Director" and one "Fields Director," as those terms are defined in
the Bylaws of PTI). If one Xxxxxxxxx Director and one Fields Director do not
agree to any proposed Budget, the Budget for the prior fiscal year shall be
applied to the next fiscal year.
3. Compensation of Manager. For the Services to be provided hereunder,
PTI shall pay to the Manager:
3.1 The amount of the "Management Costs" set forth in the Budget,
representing the estimated costs and expenses to be incurred by
Manager during the fiscal period covered by the Budget in performing
Manager's obligations under this Agreement, including, without
limitation, payment of all compensation to Manager's employees,
payroll burdens, taxes, withholding taxes, as well as accounting,
financial, legal and other overhead expenses of Manager attributable
to the performance of Manager's obligations under this Agreement;
3.2 The "Management Fee" set forth in the Budget, payable in equal monthly
installments;
3.3 The amount necessary to reimburse Manager for all out-of-pocket costs
incurred or paid to third parties for services provided to PTI
including, but not limited to, the outside services of attorneys,
auditors, trustees, financial institutions and consultants; and
3.4 The payments to Manager described in Sections 3.1, 3.2 and 3.3 shall
be in addition to any dividends or distributions paid or payable to
Manager as a shareholder of PTI, and any area developer or
subfranchising fees paid or payable by PTI to MFHC, Manager or any of
MFHC's and Manager's affiliated companies other than PTI.
4. Scope of Services. In compliance with all applicable federal, state
and local laws, rules and regulations, Manager shall perform all services
required for the management, conduct and administration of all of the business,
operations and affairs of PTI (the "Services"), including without limitation the
following:
4.1 the present and future licensing of PTI franchises,
subfranchises and development rights;
4.2 the preparation, execution and administration of all
contracts, agreements and disclosure documents pertaining to PTI's
business, operations and affairs, including those described in Section
3.1;
4.3 the development of domestic and international markets for
PTI franchises and subfranchises, the opening of new PTI-franchised
stores and the development of new products and inventory related
thereto;
4.4 the marketing and advertising activities of PTI;
4.5 the collection and processing of all royalties and fees
payable to PTI in connection with the rights, licenses and operations
described in Section 3.1;
4.6 the provision of notices to, and correspondence with, the
franchisees, subfranchises, area developers, vendors, suppliers,
officers, directors, employees and agents of PTI;
4.7 the financial, tax and accounting services, including
reporting services related thereto required by PTI, Manager or third
parties;
4.8 the maintenance of all corporate records;
4.9 causing PTI to pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real and
personal, owed by or relating to PTI (including federal and state
income taxes), except such as PTI and Manager may in good faith contest
or as to which a bona fide dispute may arise;
4.10 giving notice in writing to each member of the Board of
Directors of PTI of: (a) any litigation pending or threatened against
PTI; (b) the occurrence of any breach or default in the payment or
performance of any obligation owing by PTI to any person or entity; (c)
any uninsured or partially uninsured loss through fire, theft,
liability damage having a material affect on the conduct of PTI's
business; or (d) any termination or cancellation of any insurance
policy which PTI maintains;
4.11 submitting to each member of the board of directors of
PTI a copy of all financial statements (whether internally or
externally prepared) of PTI and of Manager; provided that statements
will be prepared and provided no less often than quarterly;
4.12 causing PTI to maintain and keep in force insurance of
the types and in amounts customarily carried in lines of business
similar to PTI's, including but not limited to fire, extended coverage,
public liability, damage and workers' compensation, carried in
companies and in amounts satisfactory to Manager; and
4.13 such other services as are reasonably requested by PTI or
its board of directors.
5. Franchising; Franchising to Manager. Anything herein to the contrary
notwithstanding, the Manager shall have full authority to grant area developer
rights and franchises to others for the ownership and operation, or
subfranchising, of PTI stores, and to manage and administer fully hereunder all
matters, agreements, contracts and business of PTI related thereto. Further, the
Manager shall have the authority to grant area developer rights and franchises
to itself and any of its affiliated companies for the ownership and operation,
or subfranchising to others, of PTI stores, and to manage and administer fully
hereunder all matters, agreements, contracts and business of PTI related
thereto, subject to (A) any restrictions or limitations thereof set forth in any
agreements between PTI and its existing franchisees or area developers; (B) the
provisions of the Acquisition Agreement and any Related Transaction Documents as
that term is defined in the Acquisition Agreement; and (C) the direction of the
Franchising Committee of the Board of Directors of PTI acting by authority of
its Articles of Incorporation and Bylaws. The Franchise Committee shall consist
of one Fields Director and one Xxxxxxxxx Director. If the Franchise Committee is
unable to act or decide any such matters, then such matter(s) shall be referred
to the Board of Directors for action by the Board of Directors.
6. Term; Termination.
6.1 Term of Agreement. The term of this Agreement shall
commence as of the date of execution of this Agreement and shall
continue until terminated pursuant to Section 5.2 below.
6.2 Termination. This Agreement may be terminated by the Parties only
(a) by the express written agreement of the Parties, or
(b) upon the termination of the Shareholder's Agreement (as described on
Exhibit A to the Acquisition Agreement).
6.3 Rights Upon Termination. Upon termination of this
Agreement, Manager shall provide to PTI all of the documentation,
materials, and records (in whatever form the foregoing may exist) it
possesses relating to PTI, and shall otherwise act in good faith to
allow for the continued, uninterrupted operation of PTI.
7. Dispute Resolution.
7.1 Initial Dispute Resolution. If a dispute arises out of or
relates to this Agreement or its breach, the Parties shall endeavor to
settle the dispute first through direct discussions. If the dispute
cannot be settled through direct discussions, and if both Parties
agree, the Parties shall endeavor to settle the dispute by mediation
with a third-party mediator before recourse to arbitration. The
location of the mediation shall be Salt Lake City, Utah.
7.2 Arbitration. Any controversy or claim arising out of or
relating to this Agreement or its breach not resolved by mediation,
except for claims which have been waived by the making or acceptance of
final payment, shall be decided by binding arbitration in accordance
with the applicable rules of the American Arbitration Association then
in effect unless the Parties mutually agree otherwise. Any such
arbitration shall be held in Salt Lake City, Utah. Judgment on the
award or decision rendered in arbitration may be entered in any court
having jurisdiction thereof.
7.3 Work Continuance and Payment. Unless otherwise agreed by
the Parties in writing, the Manager shall continue to provide the
services covered hereby during any arbitration proceedings.
8. Indemnification. PTI shall indemnify and hold the Manager (including
its officers and employees) harmless from and against any and all losses,
liabilities, claims, damages, costs, and expenses (including reasonable
attorneys' fees and other expenses of litigation) to which the Manager (or its
officers and employees) may become subject arising out of the services provided
under this Agreement, provided that such agreement by PTI shall not protect
Manager (or its officers and employees) against any liability of which Manager
or (its officers and employees) would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence.
9. General Provisions.
9.1 Assignment. The obligations of Manager under this
Agreement are personal to Manager, and PTI is entering into this
Agreement in reliance upon Manager's expertise and knowledge in
performing Manager's obligations hereunder. For the foregoing reasons,
Manager shall not voluntarily or involuntarily, directly or indirectly,
sell, assign, hypothecate, pledge or otherwise transfer or dispose of
all or any portion of its interest in this Agreement to any third party
without the prior written consent of PTI; provided however, Manager may
assign this Agreement to any of its affiliated companies having the
expertise and resources necessary to perform the Manger's duties
hereunder.
9.2 Amendment. This Agreement may be amended from time to time
only by a writing executed by PTI and Manager, and consented to by
PTI's directors.
9.3 Notices. All notices, requests, demands, and other
communications hereunder by which either party is to be legally bound
shall be in writing and shall be given (I) by Federal Express (or other
established express delivery service which maintains delivery records),
(ii) by hand delivery, (iii) or by facsimile transmission, to the
Parties at their last known addresses. Notices shall be deemed
effective upon dispatch.
9.4 Costs and Attorneys' Fees. In the event either party
commences an arbitral or legal proceeding to enforce any of the terms
of this Agreement, the prevailing party in such action shall have the
right to recover reasonable attorneys' fees and costs from the other
party, to be fixed by the arbitral panel in the same action.
9.5 Entire Agreement. This Agreement constitutes the entire
agreement between the Parties with respect to the subject matter
hereof, and supersedes all prior agreements and negotiations between
the Parties with respect thereto.
9.6 Governing Law. This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of Utah.
9.7 No Waiver. No failure or delay of a party in the exercise
of any right given to such party hereunder or by law shall constitute a
waiver thereof, nor shall any single or partial exercise of any such
right preclude the other or further exercise thereof or any other
right. The waiver by a party of any breach of any provision shall not
be deemed to be a waiver of any subsequent breach thereof, or of any
breach of any other provision hereof.
9.8 Additional Documents. Each party shall, whenever and as
often as reasonably requested by the other party, execute or cause to
be executed all such instruments or agreements as may be reasonably
necessary in order to carry out the purpose of this Agreement, and each
party shall do all other acts reasonably necessary or requested by the
other party to carry out the intent and purpose of this Agreement.
9.9 Ownership of Documents. All documents related to PTI shall
be and remain the sole and exclusive property of PTI, and Manager shall
acquire no rights in or to such documents.
9.10 No Third Party Beneficiary. Nothing set forth in this
Agreement is intended to create in or confer upon any person, firm or
entity not a party to this Agreement any rights under this Agreement.
9.11 Miscellaneous. The terms, covenants, conditions, and
benefits contained herein shall be binding upon and inure to the
benefit of the successors, transferees and permitted assigns of the
Parties. Time is expressly made of the essence of each and every
provision of this Agreement. This Agreement shall be interpreted and
construed only by the contents hereof, and there shall be no
presumption or standard of construction in favor of or against either
party. The individuals executing this Agreement represent and warrant
that they have the power and authority to do so, and to bind the
entities for whom they are executing this Agreement. If any term or
provision of this Agreement or the application of it to any person or
circumstance shall to any extent be held by a court to be invalid or
unenforceable, the remainder of this Agreement or the application of
such term or provision to persons or circumstances other than those to
which it is invalid or unenforceable shall not be affected thereby, and
each term and provision of this Agreement shall be valid and shall be
enforced to the extent permitted by law.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
PRETZEL TIME, INC. XXX. XXXXXX' ORIGINAL COOKIES, INC.
By:/s/Xxxxxxx X. Xxxx
Xxxxxxx X. Xxxx, Vice president
By:/s/Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx, President Its:
EXHIBIT A
[Attach Budgets and make sure references are coordinated with Sections 3.1C3.4.]
