Franchise Matters. (a) The Franchisor is the only Person that has operated the Franchise System or sold Franchises of the Business. All such Franchises were sold and/or operated only in the United States of America. Solely for purposes of this Section 3.25, the term “Business” shall not be deemed to include the operation of the Buddy’s Home Furnishings stores by the Seller and its Subsidiaries. (b) Section 3.25(b) of the Disclosure Schedule sets forth a complete and accurate list of the Franchisees of the Franchise System, indicating the address of each franchised Sears Outlet store operated by the Franchisee and the scheduled expiration date of the Franchise Agreement evidencing such franchised Sears Outlet store. Except as set forth in the Franchise Agreements, the Franchisor is not limited in its right to grant Franchises or develop (or grant rights to any other Person to develop) any business that competes with any Franchise of the Business. (c) Each Franchise Agreement is similar in all material respects to the form of Franchise Agreement contained in the FDD that was issued to the applicable Franchisee, except for deviations from such form that are contained in such Franchise Agreement or an addendum to such Franchise Agreement, a copy of which has been made available to Purchaser. There are no oral modifications of any Franchise Agreement or oral agreements between any Franchisee and Franchisor relating to matters pertaining to material obligations of such Franchisee thereunder. (d) Since January 31, 2016, the Franchisor has been at all times in compliance in all material respects with all applicable Franchise Laws in connection with the offer or sale of Franchises of the Business, relationships with Franchisees, the operation of the Franchise System and the termination, non-renewal and transfers of Franchises of the Business and, to the Seller’s Knowledge, no current or former Franchisee or any Governmental Authority has alleged that Franchisor has failed to comply in all material respects with any applicable Franchise Laws during its operation of the Franchise System. No financial performance representations (as defined in the FTC Rule) or any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent or other franchise seller (as defined in the FTC Rule) of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor has used to offer or sell Franchises at any time since January 31, 2016 were prepared and delivered to prospective Franchisees in compliance in all material respects with Franchise Laws. (e) Each Franchisee who left the Franchise System since December 1, 2015 has executed agreements with the Franchisor which released the Franchisor and its Subsidiaries and affiliates from any and all Liabilities and claims that such Franchisee had, has or may have against the Franchisor and its Affiliates which relate in any way to the Franchisee’s Franchise Agreement. (f) Since January 31, 2016, all rebates, allowances, discounts or other payments or remunerations received by the Franchisor or the Seller from vendors, suppliers or other third parties, on account of any Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, have been received, administered, disclosed and spent in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs delivered to such Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each case, in all material respects. Except as set forth in the Franchise Agreements, there are no material restrictions on the Franchisor’s use of any such rebates, allowances, discounts or other payments or remuneration for any purpose. (g) Since January 31, 2016, no Person has alleged, to the Seller’s Knowledge, the Franchisor to be, and the Franchisor has not received any written complaint, allegation or notice of inquiry or investigation from any Franchisee, employee of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers with, or subject to joint employment liability with, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee or any of a Franchisee’s employees have been or are employees of the Franchisor, the Seller or any of its Subsidiaries or improperly classified as independent contractors in accordance with applicable Law.
Appears in 2 contracts
Samples: Equity and Asset Purchase Agreement (Liberty Tax, Inc.), Equity and Asset Purchase Agreement (Sears Hometown & Outlet Stores, Inc.)
Franchise Matters. (a) The Franchisor is the only Person that has operated the Franchise System or sold Franchises Section 4.19(a)(1) of the Business. All such Franchises were sold and/or operated only Company Disclosure Schedule sets forth a list of all (i) development agreements in which the United States Company or any of America. Solely for purposes its Subsidiaries has granted rights to develop or operate “Del Taco” restaurants, or license others to develop or operate “Del Taco” restaurants, within specific geographic areas or at specific locations, and (ii) franchise agreements to which the Company or any of this Section 3.25its Subsidiaries is a party or by which the Company or any of its Subsidiaries or its or their properties is bound and that grant or purport to grant to any Person the right to develop or operate “Del Taco” restaurants, or license others to develop or operate “Del Taco” restaurants, within specific geographic areas or at specific locations (each, a “Company Franchise”), in each case that are in effect (collectively, the term “BusinessCompany Franchise Agreements”). For the avoidance of doubt, the terms Company Franchise Agreements and Company Franchise include any area development agreements, area license or franchise agreements, master franchise agreements, area representative agreements and similar agreements with Persons that cover the development, franchising, or licensing of franchises of “Del Taco” shall not be deemed restaurants. The Company has made available to include the operation Parent a true, correct and complete copy of the Buddy’s Home Furnishings stores by the Seller each such Company Franchise Agreement and its Subsidiariesany amendments, addenda or agreements related thereto.
(b) Except as set forth in Section 3.25(b4.19(b) of the Company Disclosure Schedule, the Company Franchise Agreements do not contain provisions that: (i) grant the Company Franchisee right to develop additional Company Franchises without the payment of additional initial franchise fees, other than in connection with incentive programs generally being offered by the Company or its Affiliates to new and/or existing franchisee at the time of the sale of such franchise; (ii) restrict the Company or any of its Affiliates from receiving and/or retaining payments, rebates or allowances from suppliers in connection with Company Franchisee’s purchases from suppliers; and (iii) grant any rights of first offer, right of first refusal, or other options providing exclusive or protected rights relating to the development or operation of Company Franchises in areas that are in addition to the geographic areas designated as the unit territory or development area granted under such executed Company Franchise Agreement, excluding any rights of first offer, right of first refusal, or other options that have expired by their own terms. Company has made available to Parent a true and complete list of any Company Franchisees with Company Franchise Agreements that provide for payment of royalty fees at rates different than those specified in the Company’s standard form of Company Franchise Agreement in effect at the time such Company Franchise Agreement was executed.
(c) Section 4.19(c) of the Company Disclosure Schedule sets forth a complete and accurate list of the top ten (10) Company Franchisees based upon the total royalties paid by each such Company Franchisee to the Company or any of its Subsidiaries during the 2020 fiscal year. Regarding such top ten (10) Company Franchisees and any other Company Franchisees with five (5) or more Company Franchises (“Specified Franchisees”), to the Knowledge of the Company, as of the date of this Agreement: (i) no such Specified Franchisee is currently involved as a debtor in any bankruptcy proceedings; and (ii) the Company has not received written notice of any Specified Franchisee’s intention or plans to close, cease to operate, leave or abandon, or sell its Company Franchises, or terminate or not renew its Company Franchise Agreements.
(d) Each of the Company Franchise Agreements is valid and binding on the Company or the Subsidiary of the Company party thereto and, to the Knowledge of the Company, each other party thereto, and is in full force and effect, and complies in all material respects with all Applicable Laws and any applicable Orders from any Governmental Authority having jurisdiction with respect to the offer and sale of franchises by the Company, subject in each case to the Bankruptcy and Equity Exception. Neither the Company nor any of its Subsidiaries has received any written notice of any material default or event that with or without notice or lapse of time, or both, would constitute a material default by the Company and its Subsidiaries under any Company Franchise Agreement, and there is no Proceeding, pending against (or to the Knowledge of the Company, threatened in writing against or naming as a party thereto), the Company, any of its Subsidiaries by any Company Franchisees alleging material defaults of any Company Franchise Agreement or violations of the Franchise System, indicating the address of each franchised Sears Outlet store operated by the Franchisee and the scheduled expiration date of the Franchise Agreement evidencing such franchised Sears Outlet storeLaws. Except as set forth in the Franchise Agreements, the Franchisor is not limited in its right to grant Franchises or develop (or grant rights to any other Person to developSection 4.19(d) any business that competes with any Franchise of the BusinessCompany Disclosure Schedule, neither the Company nor any Subsidiary of the Company has (i) provided any Company Franchisee with a notice of breach of any Company Franchise Agreement which has not been cured in accordance with the applicable Company Franchise Agreement or otherwise resolved (whether by termination of the applicable Company Franchise Agreement, settlement or otherwise) or (ii) provided waivers of any material default by Company Franchisees under any Company Franchise Agreement.
(ce) Each Section 4.19(e) of the Company Disclosure Schedule sets forth: (i) a list of all Company FDDs that the Company or any of its Subsidiaries have used to offer or sell Company Franchises within the United States at any time since January 1, 2019 (the “Franchise Agreement is similar Schedule Period”); (ii) the jurisdictions in all material respects to which the form Company has currently effective registrations and exemptions under Franchise Laws or has had an effective registration or exemption during the Franchise Schedule Period, and (iii) the effective date and expiration date of Franchise Agreement contained in the FDD that was issued to the applicable Franchisee, except for deviations from each such form that are contained in such Franchise Agreement current and past registration or an addendum to such Franchise Agreement, a copy of which exemption. The Company has been made available to Purchaser. There are no oral modifications Parent and Merger Sub true and complete copies of: (A) each such Company FDD; (B) copies of the listed franchise registrations, notices of exemption, and any orders, decrees issued to, from, or by any state authority under any Franchise Agreement or oral agreements between any Franchisee Laws during the Franchise Schedule Period; and Franchisor relating to matters pertaining to material obligations (C) financial performance representations, if any, used outside of such Franchisee thereunder.
(d) Since January 31, 2016, the Franchisor has been at all times in compliance in all material respects with all applicable Company FDDs during the Franchise Laws Schedule Period in connection with the offer or sale of Franchises of the Business, relationships with Franchisees, the operation of the Franchise System and the termination, non-renewal and transfers of Franchises of the Business and, to the Seller’s Knowledge, no current or former Franchisee or any Governmental Authority has alleged that Franchisor has failed to comply in all material respects with any applicable Franchise Laws during its operation of the Franchise System. No financial performance representations (as defined in the FTC Rule) or any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent or other franchise seller (as defined in the FTC Rule) of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor has used to offer or sell Franchises at any time since January 31, 2016 were prepared and delivered to prospective Franchisees in compliance in all material respects with Franchise Laws.
(e) Each Franchisee who left the Franchise System since December 1, 2015 has executed agreements with the Franchisor which released the Franchisor and its Subsidiaries and affiliates from any and all Liabilities and claims that such Franchisee had, has or may have against the Franchisor and its Affiliates which relate in any way to the Franchisee’s Franchise AgreementCompany Franchises.
(f) Since January 31, 2016the beginning of the Franchise Schedule Period, all rebates, allowances, discounts or other payments or remunerations received offers and sales of Company Franchises by the Franchisor Company or the Seller from vendors, suppliers or other third parties, on account any of any Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, its Subsidiary have been received, administered, disclosed and spent made in accordance material compliance with all applicable Franchise Laws in effect at the operation manuals utilized by time of such offer or sale. Since the beginning of the Franchise SystemSchedule Period, all Company FDDs that the Company or any of its Subsidiaries have used to offer and sell Franchises have contained the information required by Franchise Laws, the FDDs Laws and have otherwise been prepared and delivered to such Franchisees, the prospective Company Franchisees in compliance with applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each case, Laws in all material respects. Except as set forth in Since the beginning of the Franchise AgreementsSchedule Period, there are no none of the Company or any of its Subsidiaries have, in any Company FDD or in any registration, application or filing with any Governmental Authority made any untrue statement of a material restrictions on fact or omitted to state a material fact required to be stated therein or necessary in order to make the Franchisor’s use statements made therein, in light of any such rebatesthe circumstances under which they were made, allowances, discounts or other payments or remuneration for any purposenot misleading.
(g) Since January 31, 2016, no Neither the Company nor any of its Subsidiaries has (directly or indirectly): (i) offered or sold a Company Franchise in or for any country other than the United States; (ii) sold or granted another Person has alleged, the right to offer or sell Company Franchises in or for any country other than the Seller’s Knowledge, United States; or (iii) filed or registered with any Governmental Authority outside of the Franchisor United States to be, and offer or sell Company Franchises.
(h) Neither the Franchisor has not received Company nor any written complaint, allegation or notice of inquiry or investigation from any Franchisee, employee of a Franchisee, third party or Governmental Authority, alleging that the Franchisor its Subsidiaries is or may be joint employers with, or subject to joint employment liability withany Order that would prohibit or restrict the offer or sale of Company Franchises in any jurisdiction within the United States, any Franchisee. The Franchisor nor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee or any of a Franchisee’s employees have been or are employees of the Franchisor, the Seller Company or any of its Subsidiaries received any written notice from any Governmental Authority indicating that such stop orders or improperly classified as independent contractors other proceedings are or may be threatened.
(i) To the Knowledge of the Company, all funds administered by or paid to the Company or any of its Subsidiaries by or on behalf of one or more Company Franchises at any time since the beginning of the Franchise Schedule Period, including funds that Company Franchises contributed for advertising and promotion and rebates and other payments made by suppliers and other third parties on account of Company Franchises’ purchases from those suppliers and third parties or for purposes of doing business with those Company Franchisees, have been administered and spent in accordance in all material respects with the applicable LawCompany Franchise Agreements, Applicable Laws, any other applicable Contracts to which the Company or any of its Subsidiaries is a party, and as described in the Company FDDs.
(j) The Company has made available to the Parent and Merger Sub true and complete copies of, or electronic access to, a material sample of all advertising and promotional materials used by the Company or its Subsidiaries during the Franchise Schedule Period to market Franchises. The Company has not published or disseminated any franchise advertising in violation of Franchise Laws.
(k) Except as set forth on Section 4.19(k) of the Company Disclosure Schedule, the Company and its Subsidiaries have not contracted with or used any independent sales representatives, brokers, consultants, franchise referral networks, or other third parties in connection with the offer or sale of Company Franchises. The Company has to the extent applicable, filed all broker and sales agent registrations on a timely basis as required by Franchise Laws during periods in which Company Franchises were offered or sold by such third parties on behalf of the Company in the applicable jurisdiction.
(l) Except as set forth on Section 4.19(l) of the Company Disclosure Schedule, the Company has not organized, sponsored, or given formal recognition to any franchisee advisory council, independent franchisee association, or other organization purporting to represent the interests of Company Franchisees, and no independent association or franchisee organization exists which holds itself out as a representative of the Company Franchisees.
(m) Except as set forth on Section 4.19(m) of the Company Disclosure Schedule, in connection with all terminations, non-renewals, or requested and/or completed transfers of Company Franchise Agreements since the beginning of the Franchise Schedule Period, the Company and any of its Subsidiaries has complied with all applicable Relationship Laws and the requirements of the applicable Company Franchise Agreements.
Appears in 2 contracts
Samples: Merger Agreement (Del Taco Restaurants, Inc.), Merger Agreement (Jack in the Box Inc /New/)
Franchise Matters. (a) The Franchisor is the only Person that has operated the Franchise System or sold Franchises Schedule 3.23(a) of the Business. All such Franchises were sold and/or operated only in Disclosure Schedules sets forth a true, correct and complete list of all Franchisees as of the United States of America. Solely for purposes date of this Section 3.25Agreement. Each such Franchisee is subject to an agreement, substantially in one of the forms provided to Purchaser on or prior to the date of this Agreement, entered into by the Company or any of its Subsidiaries, on the one hand, and the Franchisee, on the other hand, pursuant to which, among other things, the term Company or its Subsidiary grants a Franchise to such Franchisee (a “Business” shall not be deemed to include the operation of the Buddy’s Home Furnishings stores by the Seller and its SubsidiariesCompany Franchise Agreement”).
(b) Section 3.25(bSchedule 3.23(b)(i) of the Disclosure Schedule Schedules sets forth a true and complete and accurate list of the Franchisees following information for all Company Franchise Agreements to which the Company or any of its Subsidiaries is a party: (i) the name, address and telephone number of the Franchise System, indicating Franchisee; (ii) the address of each franchised Sears Outlet store operated by the Franchisee and the scheduled expiration effective date of the Company Franchise Agreement; and (iii) the total royalties accrued by the Franchisee, and payable to the Company or its Subsidiaries, during the fiscal year 2016 and for the nine months ended September 30, 2017. Schedule 3.23(b)(ii) of the Disclosure Schedules also sets forth a true and complete, separate list that describes the protected or exclusive territories granted to Franchisees under Company Franchise Agreements. There are no currently effective Company Franchise Agreements other than such listed Company Franchise Agreements. The Company has provided to Purchaser, on or prior to the date of this Agreement, samples of the forms of Company Franchise Agreements to which the Company or any of its Subsidiaries, on the one hand, and Franchisees, on the other hand, are parties. Each Franchisee is a party to a Company Franchise Agreement evidencing such franchised Sears Outlet storethat is substantially in the form of one of the forms of Company Franchise Agreements previously provided to Purchaser. No Company Franchise Agreements are missing. Except as set forth in the Franchise Agreements, the Franchisor is not limited in its right to grant Franchises or develop (or grant rights to any other Person to developSchedule 3.23(b)(iii) any business that competes with any Franchise of the BusinessDisclosure Schedules, no Company Franchise Agreement with an existing Franchisee has expired.
(c) Each Except as set forth in Schedule 3.23(c) of the Disclosure Schedules, the Company Franchise Agreement is similar in Agreements comply with all material respects to the form of Franchise Agreement contained in the FDD that was issued to the applicable FranchiseeLaws, except for deviations from such form any non-compliance that are contained in such Franchise Agreement or an addendum to such Franchise has not had, during the four years before the date of this Agreement, a copy of which has been made available and would not reasonably be expected to Purchaser. There are no oral modifications of have, individually or in the aggregate, an adverse effect in any Franchise Agreement or oral agreements between any Franchisee and Franchisor relating to matters pertaining to material obligations of such Franchisee thereunderrespect.
(d) Since January 31The Company or its Subsidiary, 2016as applicable, the Franchisor has been has, at all times relevant times, had the power and authority and legal right to enter into and carry out the terms of each Company Franchise Agreement, whether currently effective or previously terminated or expired. Except as set forth in compliance in all material respects with all applicable Franchise Laws in connection with the offer or sale of Franchises Schedule 3.23(d)(i) of the BusinessDisclosure Schedules, relationships with Franchisees, the operation each of the Company Franchise System Agreements is valid and binding on the termination, non-renewal and transfers of Franchises Company or the Subsidiary of the Business Company party thereto and, to the SellerCompany’s Knowledgeknowledge, each other party thereto (subject to the other party’s bankruptcy, insolvency, receivership, or similar proceeding under any Law), and is in full force and effect. There is no current or former Franchisee material default under any Company Franchise Agreement by the Company or any Governmental Authority of its Subsidiaries or, to the Company’s knowledge, except as set forth in Schedule 3.23(d)(ii) of the Disclosure Schedules, by any other party thereto, and no event has alleged occurred that Franchisor with the lapse of time or the giving of notice or both would constitute a material default thereunder by the Company or any of its Subsidiaries or, to the Company’s knowledge, except as set forth in Schedule 3.23(d)(ii) of the Disclosure Schedules, by any other party thereto. The execution, delivery and performance by the Company of this Agreement do not, and the consummation of the Merger and the other transactions contemplated in this Agreement and compliance with the provisions of this Agreement will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in any right of rescission or set-off under, any provision of any Company Franchise Agreement.
(e) Schedule 3.23(e) of the Disclosure Schedules identifies each existing Franchisee that (i) is to the Company’s knowledge currently in material violation of or default under any Company Franchise Agreement, whether or not the Company or its Subsidiary, as applicable, has failed notified such Franchisee about such violation or default, or (ii) has received within the twelve (12) month period prior to comply the date of this Agreement a written notice from the Company or its Subsidiary, as applicable, that such Franchisee is in all material respects violation or material default under its Company Franchise Agreement. Neither the Company nor its Subsidiary has knowingly waived in writing during the three years before the date of this Agreement any material violation or material default by a Franchisee under a Company Franchise Agreement that would adversely affect the rights of the Company or its Subsidiary, as applicable, under such Company Franchise Agreement in any material way after the Closing Date.
(f) There are no material contracts, other than the Company Franchise Agreements, that are in effect with any applicable formal franchisee association or group of Franchisees regarding any Franchise Laws during its operation Agreement or franchise operational matter.
(g) There are no Franchisees that, to the Company’s knowledge, are currently the subject of a bankruptcy or similar proceeding.
(h) Except as set forth in Schedule 3.23(h) of the Franchise System. No financial performance representations (as defined in Disclosure Schedules, with respect to Franchises offered and sold during the FTC Rule) four years before the date of this Agreement, neither the Company nor its Subsidiary has authorized or used independent sales representatives, contractors, brokers or consultants or any other representations concerning actual independent Persons (i.e., excluding officers, directors, or projected revenues, earnings, income employees of the Company or profits have been made its Subsidiary) to promote or sell Franchises on its behalf and with whom Company or its Subsidiary has agreed to rebate or share amounts receivable under any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent or other franchise seller Company Franchise Agreement.
(as defined in the FTC Rulei) Schedule 3.23(i) of the Franchisor, Disclosure Schedules sets forth a true and complete list of all currently effective Company FDDs and all other than as disclosed in the franchise disclosure document for the Franchise System. All Company FDDs that the Franchisor has Company or any of its Subsidiaries have used to offer or sell Franchises at any time since January December 31, 2016 2012. The Company has provided to Purchaser true and complete copies of each such Company FDD. During the four years before the date of this Agreement, the Company and its Subsidiaries have not, to their knowledge, in any such Company FDD or in any registration, application or filing with any Governmental Authority under any Franchise Law, made any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were prepared and delivered to prospective Franchisees in compliance in all material respects with Franchise Lawsmade, not misleading.
(ej) Each Franchisee who left Neither the Franchise System since December 1, 2015 has executed agreements with the Franchisor which released the Franchisor and Company nor any of its Subsidiaries and affiliates from is subject to any and all Liabilities and claims Governmental Order that such Franchisee had, has would prohibit or may have against restrict the Franchisor and its Affiliates which relate offer or sale of Franchises in any way to the Franchisee’s Franchise Agreementjurisdiction.
(fk) Since January 31All advertising, 2016marketing, all rebates, allowances, discounts or other payments or remunerations received and promotion funds administered by the Franchisor Company or any of its Subsidiaries at any time during the Seller from vendors, suppliers or other third parties, on account four years before the date of any Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, this Agreement with contributions made by Franchisees have been received, administered, disclosed administered and spent in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs delivered to such Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each case, franchise agreements in all material respects. Except as set forth in the Franchise Agreements, there .
(l) There are no material restrictions on the Franchisor’s use of any such rebatesfranchise-related arbitrations, allowanceslitigation, discounts class proceedings, material complaints, disputes or other payments or remuneration for any purpose.
(g) Since January 31, 2016, no Person has allegedproceedings which are pending or, to the SellerCompany’s Knowledgeknowledge, the Franchisor to be, and the Franchisor has not received any written complaint, allegation or notice of inquiry or investigation threatened in writing (i) from any Franchisee, employee of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers with, or subject to joint employment liability with, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee or association purporting to represent a group of Franchisees, or (ii) from any of a other Franchisee’s employees have been or are employees of the Franchisor, the Seller or any of its Subsidiaries or improperly classified as independent contractors in accordance with applicable Law.
Appears in 2 contracts
Samples: Merger Agreement, Merger Agreement (CNL Strategic Capital, LLC)
Franchise Matters. (a) The Franchisor is Except as set forth in Section 4.12(a) of the only Person that has operated Disclosure Schedules, the Franchise System has not been operated, nor have Franchise Agreements been offered in writing or sold Franchises executed for operations, outside of the Business. All such Franchises were sold and/or operated only in the United States as of AmericaJanuary 1, 2020. Solely for purposes of this Section 3.25Other than the Franchise System, the term “Business” shall Franchisor has not be deemed to include the operation of the Buddy’s Home Furnishings stores by the Seller and its Subsidiariesowned or operated any other franchise system.
(b) Section 3.25(b4.12(b) of the Disclosure Schedule Schedules sets forth a complete and accurate list of all Franchise Agreements that are currently in effect between the Franchisees Franchisor and any Franchisee. Franchisor has made available to Seller accurate and complete copies of all Franchise Agreements. Franchisor has not entered into any material addenda, amendments, waivers, extensions, renewals, side letters, or other modifications of any Franchise Agreement, except in a document separate from the standard form or version of the franchise agreement provided in the FDD used in connection with the sale of such Franchise System, indicating the address of each franchised Sears Outlet store operated by the Franchisee and the scheduled expiration date of the Franchise Agreement evidencing such franchised Sears Outlet storeAgreement. Except as set forth in Section 4.12(b) of the Franchise AgreementsDisclosure Schedules, Franchisor has not guaranteed the Franchisor is not limited in its right to grant Franchises obligations of any Franchisee, Franchisee owner or develop (or grant rights their respective Affiliates with respect to any other Person to develop) any business that competes with any Franchise obligations, liabilities, or indebtedness of the Franchised Business, including regarding any lease.
(c) Each Franchisor has been, and continues to be, in material compliance with all Franchise Agreements, and, except as set forth in Section 4.13(c) of the Disclosure Schedules, has not received any formal notice, demand or claim from a Franchisee that Franchisor is in material default under a Franchise Agreement. Except as set forth in Section 4.12(c) of the Disclosure Schedules, Franchisor is not in, or to Buyer’s Knowledge, no Franchisee or other party to any Franchise Agreement is similar in all material respects to in, or has received written notice of any, violation of, threatened violation of, or default under (including any condition that with the form passage of Franchise Agreement contained in time or the FDD that was issued to the applicable Franchisee, except for deviations from giving of notice would cause such form that are contained in such Franchise Agreement a violation or an addendum to such default under) any Franchise Agreement, a copy of which has been made available to Purchaser. There are no oral modifications of any Franchise Agreement or oral agreements between any Franchisee and Franchisor relating to matters pertaining to material obligations of such Franchisee thereunder.
(d) Since January 31, 2016, the Franchisor has been at all times in compliance in all material respects with all applicable Franchise Laws in connection with consistently enforced the offer or sale of Franchises of the Business, relationships with Franchisees, the operation terms of the Franchise System Agreements and the terminationFranchise Systems standards and requirements, non-renewal and transfers of Franchises except for such failure to enforce that would not, individually or in the aggregate, have a Buyer Material Adverse Effect. Except as set forth on Section 4.12(d) of the Business andDisclosure Schedules, Franchisor has not amended or modified the economic terms of any Franchise Agreement, or granted any Franchisee the right to terminate the applicable Franchise Agreement earlier than as otherwise permitted in the standard form of franchise agreement that was included in the FDD provided to the Franchisee, to the Sellerextent that such amendment, modification or grant of termination rights would individually or in the aggregate have a Buyer Material Adverse Effect.
(e) Except as set forth on Section 4.12(e) of the Disclosure Schedules, each of the Franchise Agreements set forth on Section 4.12(b) of the Disclosure Schedules is in full force and effect and is the legal, valid and binding obligation of (i) Franchisor thereto and (ii) to Buyer’s Knowledge, no current or former each Franchisee or any Governmental Authority has alleged that Franchisor has failed to comply thereto, and enforceable in all material respects accordance with any applicable Franchise Laws during its operation of the Franchise System. No financial performance representations (as defined in the FTC Rule) or any other representations concerning actual or projected revenuesterms, earnings, income or profits have been made and not subject to any Franchisee claim of, or right to, termination or rescission by any prospective Franchisee Franchisee, or to Buyer’s Knowledge, any third party thereto, except as such enforceability may be limited by the Franchisor or any franchise broker, agent or other franchise seller Enforceability Exceptions.
(as defined in the FTC Rulef) Section 4.12(f) of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All Disclosure Schedules sets forth a list of all forms of FDDs that the Franchisor has used to offer or sell Franchises at any time since January 311, 2016 were prepared 2018. Franchisor has made available to Seller accurate and delivered complete copies of each such form of FDD. Since January 1, 2018, (i) all FDDs that Franchisor has used to prospective Franchisees offer or sell franchises at any time since January 1, 2018 have contained all information required by the FTC Rule and other Franchise Laws in all material respects, (ii) no such FDD contains any statement which is false or misleading with respect to any material fact, or omits to state any material fact required to be stated therein or necessary in order to make the statements made therein not false or misleading in light of the circumstances under which they are made, (iii) Franchisor has been in compliance with all Franchise Laws in all material respects and have not offered or sold any Franchise in material violation of any Franchise Law, and (iv) Franchisor has complied in all material respects with Franchise Laws.
(e) Each Franchisee who left all the Franchise System since December 1proper cause for default, 2015 has executed agreements with the Franchisor which released the Franchisor default notice, time to cure, and its Subsidiaries and affiliates from any and all Liabilities and claims that such Franchisee had, has or may have against the Franchisor and its Affiliates which relate in any way to the Franchisee’s Franchise Agreement.
(f) Since January 31, 2016, all rebates, allowances, discounts or other payments or remunerations received by the Franchisor or the Seller from vendors, suppliers or other third parties, on account actual termination requirements of any Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, have been received, administered, disclosed Franchise Agreement and spent in accordance with the operation manuals utilized as required by the any Franchise System, all Franchise Laws, the FDDs delivered to such Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each case, in all material respects. Except as set forth in the Franchise Agreements, there are no material restrictions on the Franchisor’s use of any such rebates, allowances, discounts or other payments or remuneration for any purposeLaw.
(g) Since January 31, 2016, no Person has alleged, to Neither the Seller’s Knowledge, execution of this Agreement nor the Franchisor to be, and consummation of the Franchisor has not received any written complaint, allegation transactions contemplated hereby: (i) will require the consent or notice of inquiry or investigation from any Franchisee, employee of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers with, or subject to joint employment liability with, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that approval by any Franchisee or Franchise council or association, Governmental Authority or other Third Party, or (ii) will result in a violation of or a default under, or give rise to a right of termination, modification, cancellation, rescission or acceleration of any obligation or loss of a Franchisee’s employees have been or are employees of the Franchisormaterial benefits under, the Seller or any of its Subsidiaries or improperly classified as independent contractors in accordance with applicable LawFranchise Agreement.
Appears in 2 contracts
Samples: Stock Purchase Agreement (BurgerFi International, Inc.), Stock Purchase Agreement (BurgerFi International, Inc.)
Franchise Matters. (a) The Franchisor is the only Person that has operated the Franchise System or sold Franchises Except as set forth in Section 2.20(a)(i) of the BusinessCompany Disclosure Schedule, there are no Persons authorized or privileged to use the Intellectual Property Rights under any contract. All such Franchises were sold and/or operated only in Schedule 2.20(a)(i) of the United States Company Disclosure Schedule sets forth the name, address and phone number of America. Solely for purposes of this Section 3.25each franchisee who is operating a Rally’s restaurant or Checkers restaurant and each developer who is authorized to open and operate a Rally’s restaurant or Checkers restaurant, the term “Business” shall not be deemed to include date that the operation franchise or area development agreement was signed, the expiration date of the Buddyfranchise or area development agreement, and payments due under the franchise or area development agreement. Except as set forth in Section 2.20(a)(ii) of the Company Disclosure Schedule, the royalty fee percentage specified in each extant franchise agreement remains in effect, is being paid when due and has not been reduced, modified, waived or otherwise affected by any franchise agreement “side letter”, modification, amendment, waiver or suspension, in whole or in part, and, to Company’s Home Furnishings stores by Knowledge, there are no franchisees who are not in compliance with their franchise agreements. Except as set forth in Section 2.20(a)(iii) of the Seller and its SubsidiariesCompany Disclosure Schedule, there are no area developers who are not in compliance with their development obligations under their area development agreements.
(b) Section 3.25(b2.20(b) of the Company Disclosure Schedule sets forth a complete lists each state or other jurisdiction in which the Company is currently registered, or with which the Company filed an application for registration or an exemption from registration, to sell franchises, and accurate list of the Franchisees of the Franchise System, indicating the address effective date of each franchised Sears Outlet store operated by the Franchisee and the scheduled expiration date of the Franchise Agreement evidencing such franchised Sears Outlet storeregistration. Except as set forth in Section 2.20(b) of the Franchise AgreementsCompany Disclosure Schedule, all franchise registrations remain in full force and effect and are not the subject of any existing or threatened government or other action intended, in whole or in part, to result in the termination, revocation, modification, suspension, conditioning or dissolution of any such franchise registration and/or any other circumstance which would reasonably be expected to impair the Company’s ability routinely to renew or amend any such franchise registration and/or enter into franchise agreements in any jurisdiction. Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the Franchisor Company is not limited currently in its right compliance with all domestic and international laws relating to grant Franchises or develop (or grant rights the offer and sale of franchises in all states and countries where the Company is conducting franchise activities and has, without limitation, prepared all disclosure documents and secured all registrations to any other Person to develop) any business that competes with any Franchise of the Businesseffectuate such franchise activities.
(c) Each The Company’s current Uniform Franchise Agreement is similar Offering Circulars (“UFOCs”) do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in all material respects order to make the form of Franchise Agreement contained statements therein, in the FDD that was issued to the applicable Franchisee, except for deviations from such form that are contained in such Franchise Agreement or an addendum to such Franchise Agreement, a copy of which has been made available to Purchaser. There are no oral modifications of any Franchise Agreement or oral agreements between any Franchisee and Franchisor relating to matters pertaining to material obligations of such Franchisee thereunder.
(d) Since January 31, 2016, the Franchisor has been at all times in compliance in all material respects with all applicable Franchise Laws in connection with the offer or sale of Franchises light of the Businesscircumstances under which they were made, relationships with Franchisees, the operation of the Franchise System and the termination, non-renewal and transfers of Franchises of the Business and, to the Seller’s Knowledge, no current or former Franchisee or any Governmental Authority has alleged that Franchisor has failed to comply in all material respects with any applicable Franchise Laws during its operation of the Franchise System. No financial performance representations (as defined in the FTC Rule) or any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent or other franchise seller (as defined in the FTC Rule) of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor has used to offer or sell Franchises at any time since January 31, 2016 were prepared and delivered to prospective Franchisees in compliance in all material respects with Franchise Laws.
(e) Each Franchisee who left the Franchise System since December 1, 2015 has executed agreements with the Franchisor which released the Franchisor and its Subsidiaries and affiliates from any and all Liabilities and claims that such Franchisee had, has or may have against the Franchisor and its Affiliates which relate in any way to the Franchisee’s Franchise Agreement.
(f) Since January 31, 2016, all rebates, allowances, discounts or other payments or remunerations received by the Franchisor or the Seller from vendors, suppliers or other third parties, on account of any Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, have been received, administered, disclosed and spent in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs delivered to such Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each case, in all material respectsnot misleading. Except as set forth in Section 2.20(c) of the Franchise AgreementsCompany Disclosure Schedule, there are no material restrictions on each current franchisee signed a UFOC Item 23 “receipt” at least 10 Business Days prior to executing his/her/its franchise agreement or area development agreement with the Franchisor’s use of any such rebates, allowances, discounts or other payments or remuneration for any purposeCompany.
(gd) Since January 31Except as set forth in the UFOCs or in Section 2.20(d) of the Company Disclosure Schedule, 2016(i) there is no franchise or franchise-related Action, (ii) to Company’s Knowledge there has not been any franchisee complaint, threats to initiate an Action, threats to file complaints with any Governmental Authority and/or threats to otherwise complain of the Company in any respect, (iii) there exists no Person has allegedformal or, to the SellerCompany’s Knowledge, informal complaint, inquiry, investigation, or judicial or administrative action or proceeding, communicated or commenced (as the Franchisor case may be) by any Governmental Authority to beor against the Company regarding its offer and sale of franchises, the administration of its franchise network, advancing or referring to any complaint received from any franchisee, inquiring of or contesting any element of the Company’s franchise program or franchise relationships, and/or otherwise related to the Company’s compliance with any franchise Law, and the Franchisor has not received (iv) to Company’s Knowledge, there exists no material Action or other claims asserted by any written complaint, allegation or notice of inquiry or investigation from any Franchisee, employee of a Franchisee, third party or Governmental Authority, alleging that against any of the Franchisor Company’s franchisees in which the company is or may be joint employers withbecome a party thereto, including under a negligence or subject “vicarious liability” theory.
(e) Except as set forth in Section 2.20(e) of the Company Disclosure Schedule, to joint employment liability with, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to the SellerCompany’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee none of the Company’s franchisees or area developers are currently involved in a workout or other financial restructuring or any of insolvency, bankruptcy or similar proceeding; or contemplating or scheduled to undertake a Franchisee’s employees have been workout or are employees of the Franchisor, the Seller other financial restructuring or any of its Subsidiaries insolvency, bankruptcy or improperly classified as independent contractors in accordance with applicable Lawsimilar proceeding.
Appears in 1 contract
Samples: Merger Agreement (Checkers Drive in Restaurants Inc /De)
Franchise Matters. (a) The Franchisor is the only Person that has operated the Franchise System or sold Franchises of the Business. All such Franchises were sold and/or operated only in the United States of America. Solely for purposes of this Section 3.25, the term “Business” shall not be deemed to include the operation of the Buddy’s Home Furnishings stores by the Seller and its Subsidiaries.
(b) Section 3.25(b3.20(a) of the Company Disclosure Schedule Letter sets forth a true and complete and accurate list of all franchise agreements, area development agreements, master franchise agreements, sub-franchise agreements, and similar agreements in effect with Franchisees, in each case to which the Franchisees Company or any of the Company Subsidiaries is a party (collectively, the "Franchise SystemAgreements"). Except as set forth on Section 3.20(b) of the Company Disclosure Letter, indicating since October 14, 2008, neither the address Company nor any Company Subsidiary has waived any material right or benefit of any such Person, or any material obligation of any Franchisee, under any Franchise Agreement, including, without limitation, any buy-out option, and no waiver of any such rights is currently in effect. Except as set forth on Section 3.20(b) of the Company Disclosure Letter, there are no other Contracts in effect between any of the Company or any Company Subsidiary and any Franchisee (in its capacity as such) other than the Franchise Agreements and exhibits related thereto. Section 3.20(c) of the Company Disclosure Letter sets forth a true and complete list of all FDDs that the Company or any of the Company Subsidiaries have used to offer or sell Franchises. The Company has made available to Parent true and complete copies of such FDDs. Except as set forth on Section 3.20(c) of the Company Disclosure Letter, such FDDs were in material compliance with all Laws and Orders applicable to the sale of franchises at the time they were circulated to prospective Franchisees and throughout the period preceding execution and delivery of a Franchise Agreement with such Franchisee. Such FDDs have been amended or supplemented from time to time as required by Law, and such amendments and supplements were timely and properly transmitted to prospective Franchisees in all material respects as required by Law. Except as set forth on Section 3.20(d) of the Company Disclosure Letter, (i) the offer and sale of each franchised Sears Outlet store operated Franchise complied in all material respects, at the time such offer and sale was made, with all applicable Laws, including the laws, rules or regulations of the Federal Trade Commission and any state, foreign country or other jurisdiction regulating the offer and/or sale of franchises, business opportunities, or seller assisted marketing plans, including, without limitation, all franchise disclosure and registration laws (collectively, "Franchise Laws"), (ii) there have been no material misrepresentations or material omissions of information provided to current Franchisees in connection with the offer and sale of any Franchise and (iii) all advertising for Franchises conducted by the Franchisee and the scheduled expiration date Company or any of the Company Subsidiaries was done in material compliance with applicable Laws. Since October 14, 2008, neither the Company nor the Company Subsidiaries have received any written notice from any Governmental Entity with respect to any violation or alleged violation of any Franchise Agreement evidencing such franchised Sears Outlet storeLaws. To the Knowledge of the Company, none of the Company, the Company Subsidiaries nor any of their respective officers, directors, employees, agents or representatives have made any representations or agreed to any Contracts with any Franchisee or prospective Franchisee that were materially inconsistent with the FDDs used by the Company or any Company Subsidiary. Neither the Company nor any of the Company Subsidiaries is subject to any Order with respect to the offer or sale of Franchises in any jurisdiction. Except as set forth in the Franchise Agreements, the Franchisor is not limited in its right to grant Franchises or develop (or grant rights to any other Person to developSection 3.20(f) any business that competes with any Franchise of the Business.
(c) Each Franchise Agreement is similar Company Disclosure Letter, since October 14, 2008, neither the Company nor any Company Subsidiary has waived, altered or modified any material provision regarding the calculation and payment of royalty fees in all material respects to the form of Franchise Agreement contained in the FDD that was issued to the applicable Franchisee, except for deviations from such form that are contained in such Franchise Agreement or an addendum to such any Franchise Agreement, a copy and no waiver regarding the calculation and payment of which has been made available royalty fees is currently in effect. No material right of rescission, right of refund, set-off, counterclaim or defense is pending or since October 14, 2008 threatened against the Company or any Company Subsidiary with respect to Purchaser. There are no oral modifications of any Franchise Agreement Agreement. Section 3.20(g) of the Company Disclosure Letter contains a summary of all pending and, to the Knowledge of the Company, since October 14, 2008, threatened Franchise-related Actions, (i) from any Franchisee, (ii) from any association purporting to represent a group of Franchisees, or oral agreements between (ii) from any Franchisee and Franchisor relating to matters pertaining to material obligations of such Franchisee thereunder.
(d) Governmental Entity, including, but not limited to, any government injunctive or restrictive Actions. Since January 31October 14, 20162008, the Franchisor has been at all times in compliance Company and the Company Subsidiaries have complied in all material respects with all applicable Franchise Laws in connection with governing the offer franchise relationship between the Company or sale of Franchises any of the Business, relationships with Company Subsidiaries and its current and former Franchisees, the operation of the Franchise System . The Company and the termination, non-renewal and transfers of Franchises of the Business and, to the Seller’s Knowledge, no current or former Franchisee or any Governmental Authority has alleged that Franchisor has failed to comply in all material respects with any applicable Franchise Laws during its operation of the Franchise System. No financial performance representations (as defined in the FTC Rule) or any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent or other franchise seller (as defined in the FTC Rule) of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor has used to offer or sell Franchises at any time since January 31, 2016 were prepared and delivered to prospective Franchisees in compliance in all material respects with Franchise Laws.
(e) Each Franchisee who left the Franchise System since December 1, 2015 has executed agreements with the Franchisor which released the Franchisor and its Company Subsidiaries and affiliates from any and all Liabilities and claims that such Franchisee had, has or may have against the Franchisor and its Affiliates which relate in any way to the Franchisee’s Franchise Agreement.
(f) Since January 31, 2016, all rebates, allowances, discounts or other payments or remunerations received by the Franchisor or the Seller from vendors, suppliers or other third parties, on account of any Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, have been received, administered, disclosed and spent in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs delivered to such Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each caseare, in all material respects. Except , in compliance with all Franchise Agreements to which they are a party as set forth in well as all obligations and duties owing with respect to all advertising and marketing funds and other funds and cooperatives under which the Company and the Company Subsidiaries administer or collect monies on behalf of Franchisees, and, since October 14, 2008, neither the Company nor any of the Company Subsidiaries has received any written notice of noncompliance from any Franchisee with respect to any such Franchise Agreements, there are no material restrictions on the Franchisor’s use Agreement or a breach of any obligations or duties with respect to such rebatesfunds, allowances, discounts or other payments or remuneration for any purpose.
(g) Since January 31, 2016, no Person has allegedand, to the Seller’s KnowledgeKnowledge of the Company, the Franchisor to be, there exists no legal or factual basis for any such claims. The Company and the Franchisor has not received any written complaintCompany Subsidiaries have, allegation or notice of inquiry or investigation from any Franchiseein all material respects, employee of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers with, or subject to joint employment liability with, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor fully accounted for and not an employee under applicable Law, and to the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee or any of a Franchisee’s employees have been or are employees of the Franchisor, the Seller or any of its Subsidiaries or improperly classified as independent contractors administered in accordance with applicable LawLaw and all applicable agreements all advertising funds and other marketing monies contributed by Franchisees.
Appears in 1 contract
Franchise Matters. (a) Section 4.18(a)(i) of the Disclosure Schedules contains true, correct and complete lists of all currently effective Franchise Agreements by name of Franchisor, name of Franchisee, date of agreement, expiration date, location of store(s), and for those Franchise Agreements that provide for multi-unit development rights includes a general description of the development area assigned to each such area developer. The Franchisor is the only Person that has operated the Franchise System or sold Franchises FDDs contain, as applicable for each Franchisor FDD, lists that, collectively, identify each of the Business. All former Franchisees with Franchise Agreements that expired (and were not renewed) or were terminated during the four-year period immediately prior to the date of this Agreement (such Franchises were sold and/or operated only in the United States of America. Solely time period, for purposes of this Section 3.254.18, the term “BusinessFranchisor Schedule Period” shall not be deemed and such former Franchisees, the “Former Franchisees”). Except with respect to include the operation of the Buddy’s Home Furnishings stores by the Seller and its Subsidiaries.
(b) Former Franchisees or as set forth on Section 3.25(b4.18(a)(ii) of the Disclosure Schedule sets forth a complete and accurate list Schedules, the Franchisor has not refused to consent to the renewal of the Franchisees of the Franchise System, indicating the address of each franchised Sears Outlet store operated by the Franchisee and the scheduled expiration date of the or otherwise terminated any Franchise Agreement evidencing such franchised Sears Outlet storeduring the Franchisor Schedule Period. Except as set forth in Section 4.18(a)(iii) of the Franchise AgreementsDisclosure Schedules, the Franchisor is not limited restaurants that are the subject of current Franchise Agreements are currently open to the public and operating in its right to grant Franchises or develop (or grant rights to any other Person to develop) any business that competes with any Franchise the ordinary course of business. To the Knowledge of the BusinessCompany, no Franchisee is currently the subject of a bankruptcy or similar proceeding.
(b) The Company has made available to the Buyer true and complete copies of each Franchise Agreement listed on Section 4.18(a)(i) of the Disclosure Schedules, including all formal and informal amendments and addenda thereto.
(c) Each With respect to each Franchise Agreement is similar in all material respects to listed on Section 4.18(a)(i) of the form of Franchise Agreement contained in the FDD that was issued to the applicable Franchisee, except for deviations from such form that are contained in Disclosure Schedules:
(i) such Franchise Agreement (A) is a valid and binding Contract of Franchisor and is in full force and effect, (B) is enforceable against Franchisor and each other party thereto except as enforcement may be limited by applicable Laws (including Franchise Sales Laws and bankruptcy, insolvency, reorganization, moratorium or an addendum to such Franchise Agreementsimilar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at Law)), a copy of which has been made available to Purchaser. There are no oral modifications of any Franchise Agreement or oral agreements between any Franchisee and Franchisor relating to matters pertaining to material obligations of such Franchisee thereunder.
(dC) Since January 31, 2016, the Franchisor has been at all times in compliance complies in all material respects with all applicable Laws, except where any failure to be in compliance, individually or in the aggregate, would not have a Material Adverse Effect;
(ii) (A) such Franchise Agreement sets forth all contractual obligations owed by the Franchisor to each Franchisee that is a party to that Franchise Agreement and (B) there are no existing material defaults by the Franchisor, and no event has occurred which, with notice or lapse of time, or both, would constitute a material default by the Franchisor, under any such Franchise Agreement that would permit a Franchisee to terminate a Franchise Agreement;
(iii) except as described in Section 4.18(c)(iii) of the Disclosure Schedules, no party to such Franchise Agreement has delivered a written demand or request for material amendment or early termination, cancellation, rescission or other cessation thereof, or written notice of its intention to cease operating its franchised business or not renew its franchise;
(iv) such Franchise Agreement does not include provisions that would prevent or otherwise impair the Franchisor’s ability to undergo a change in ownership or control or require the Franchisor to notify any Franchisee or any other Person party to such Contract (other than Franchisee) of such a change in ownership or control;
(v) such Franchise Agreement does not obligate the Franchisor to buy back or otherwise acquire the stock, assets, or contractual rights of the Franchisee or any other Person, subject to applicable state Franchise Sales Laws that may impose requirements for the repurchase of certain types of franchise assets in the event that a franchise is terminated or not renewed under certain circumstances;
(vi) such Franchise Agreement does not impose on the Franchisor an obligation to guarantee the lease obligations, third party financing obligations, or other material obligations to third parties of the Franchisee or any other Person;
(vii) except by operation of Law, no such Franchise Agreement expressly grants any Franchisee any right of rescission or set-off;
(viii) such Franchise Agreement, if it relates to the design, development, construction, build-out, management and/or actual operation of a restaurant, imposes on the Franchisee an obligation to comply with all applicable Laws; and
(ix) such Franchise Agreement and/or the operating manual in effect for such Franchise Agreement imposes on the Franchisee an obligation to maintain commercially reasonable insurance that names the Franchisor or, if applicable, its Affiliates, as an additional insured.
(d) Section 4.18(d) of the Disclosure Schedules identifies: (i) each current Franchisee to which Franchisor has issued any outstanding notice of default (financial or otherwise) under a Franchise Agreement, which default has not been cured as of the date hereof; (ii) each current Franchisee that, to the Knowledge of the Company, is in material default under a Franchise Agreement, including for failure to pay any franchise fee, development fee, or royalty obligations or for failure to open restaurants by the required development deadlines, as may have been modified by any extensions agreed to by the Franchisor; and (iii) each current Franchisee and Former Franchisee for which the Company has received, during the Franchisor Schedule Period, written notice from any Governmental Authority that the Franchisee is or was in violation of any Laws material to the operation of its franchise. Except as set forth on Section 4.18(d) of the Disclosure Schedules, to the Knowledge of the Company, no current Franchisee or Former Franchisee has materially violated any applicable Laws in connection with the operation of its franchise in the past four years. As of the date of this Agreement, to the Knowledge of the Company, there is no Former Franchisee that is not in material compliance with its respective covenants against competition and any other material obligations that survive the termination or other cessation of its respective Franchise Agreement.
(e) Except for Franchisees who have received loans from the Franchisor pursuant to the Franchisor’s “development incentive program” pursuant to the applicable Franchise Agreement, (all such Franchisees having been listed in Section 4.18(e) of the Disclosure Schedules) and for Franchisees listed in Section 4.18(e) of the Disclosure Schedules as being party to a lease with the Franchisor, Franchisor (i) is not a guarantor or otherwise party to an agreement pursuant to which it agreed to become directly or contingently liable (as a co-xxxxxx or otherwise) for the obligations of a Franchisee, (ii) is not leasing or subleasing any real or personal property to any Franchisee, and (iii) has no currently outstanding offer regarding, or is currently a party to, any financing arrangement with any Person in which the Franchisor or any of its Affiliates (A) provide financing to the Franchisee, (B) guarantees a note, lease or other obligation of a Franchisee, (C) receives a benefit from a lender in exchange for financing a franchise purchase, or (D) has a written arrangement for a lender to offer financing to a Franchisee.
(f) The Company has made available to the Buyer true and complete copies of the FDD issued by Franchisor on March 15, 2017 (the “Current FDD”), and all other FDDs, offering circulars and similar disclosure documents that were issued, disseminated or otherwise used by Franchisor in connection with the offer and sale of a franchise or an investment in a franchise to any Person in 2014, 2015, 2016 and 2017 (together with the Current FDD, the “Franchisor FDDs”). All Franchisor FDDs (A) were prepared, maintained and have been and will be delivered to prospective Franchisees in material compliance with all Franchise Sales Laws and all statements therein were true, accurate and complete in all material respects consistent with Franchise Sales Laws, and (B) Franchisor (i) has obtained executed receipts of the Franchisor FDDs from all existing Franchisees and (ii) with respect to prospective Franchisees that have received a copy of the Current FDD, Franchisor will obtain executed FDD receipts before completing such franchise sale, except for transactions under clauses (i) or (ii) above that are subject to an applicable exemption from the franchise disclosure obligations under the Franchise Sales Laws. Since the date of issuance of the Current FDD and other than the transactions contemplated by this Agreement, there has been no material change in the business, financial condition or affairs of the Franchisor, its franchise program or its franchise system that would require an amendment to the Current FDD or any filing with any Governmental Authority. Section 4.18(f)(i) of the Disclosure Schedules sets forth a complete list of all Franchisor FDDs, and identifies by jurisdiction and effective date all currently effective registrations under the Franchise Sales Laws and exemptions from franchise or business opportunity registrations that require a filing with a state government, and notifications of intent to offer franchises for sale, relating to the offer and sale of franchises by Franchisor. Section 4.18(f)(ii) of the Disclosure Schedules sets forth a true and correct list of all jurisdictions in and outside of the United States in which the Franchisor has been registered or authorized to offer and sell franchises under the Franchise Sales Laws during 2014, 2015, 2016 and 2017, identifying for each such jurisdiction the dates upon which such registration and authorization was effective and when it expired, as applicable. During the Franchisor Schedule Period, the Franchisor did not use franchise brokers in connection with the offer or sale of Franchises a franchise or an investment in a franchise to any Person. Franchisor has not offered, sold or granted a franchise or an investment in a franchise outside of the Business, relationships with FranchiseesUnited States and Canada during the Franchisor Schedule Period.
(g) Except as described in Section 4.18(g) of the Disclosure Schedules, the operation Franchisor is, and during the Franchisor Schedule Period was, in material compliance with all Franchise Sales Laws applicable to the offer and sale of franchises, and Franchisor has not offered or sold any franchise in violation of any Franchise Sales Law during the Franchisor Schedule Period, except where any failure to be in compliance therewith, individually or in the aggregate, would not have a Material Adverse Effect. Except as described in Section 4.18(g) of the Franchise System Disclosure Schedules, Franchisor is not currently, and was not during the terminationFranchisor Schedule Period, non-renewal and transfers of Franchises of the Business andsubject to any notice, to the Seller’s KnowledgeAction, no current case, stop order or former Franchisee other order, judgement, injunction, ruling, or proceeding by any Governmental Authority has alleged against the Franchisor that Franchisor has failed to comply in all material respects with alleges or found any applicable Franchise Laws during its operation of the Franchise System. No financial performance representations (as defined in the FTC Rule) or any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee failure by the Franchisor to comply with any Franchise Sales Law or that prohibits or restricts (or seeks to prohibit or restrict) the Franchisor’s offer or sale of franchises in any franchise broker, agent or other franchise seller (as defined in jurisdiction. To the FTC Rule) Knowledge of the FranchisorCompany, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor has used there is no investigation or review pending or threatened by any Governmental Authority with respect to offer or sell Franchises at any time since January 31, 2016 were prepared and delivered to prospective Franchisees in compliance in all material respects with Franchise Laws.
(e) Each Franchisee who left the Franchise System since December 1, 2015 has executed agreements with the Franchisor which released the Franchisor and its Subsidiaries and affiliates from any and all Liabilities and claims that such Franchisee had, has or may have against the Franchisor and its Affiliates which relate in any way to the Franchisee’s Franchise Agreement.
(f) Since January 31, 2016, all rebates, allowances, discounts or other payments or remunerations received by the Franchisor or the Seller from vendors, suppliers or other third parties, on account of its compliance with any Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, have been received, administered, disclosed and spent in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs delivered to such Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each case, in all material respectsSales Law. Except as expressly set forth in the Franchise Agreements, there are no material restrictions on the Franchisor’s use of any such rebates, allowances, discounts or other payments or remuneration for any purpose.
(g) Since January 31, 2016, no Person has alleged, to the Seller’s Knowledge, contractual limitations prohibiting the Franchisor to be, and the Franchisor has not received any written complaint, allegation or notice of inquiry or investigation from any Franchisee, employee of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers with, or subject to joint employment liability with, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee or any of a Franchisee’s employees have been or are employees of the Franchisor, the Seller or any of its Subsidiaries Affiliates from developing and/or operating any stores, or improperly classified selling franchises or licensing others to do so in any geographic area or location.
(h) Except as independent contractors described in Section 4.18(h) of the Disclosure Schedules, there is no Action pending or, to the Knowledge of the Company, threatened, against the Franchisor related to any current Franchisee or Former Franchisee.
(i) To the Knowledge of the Company, each Franchisee has materially complied with its financial reporting and financial record keeping obligations under the terms of its Franchise Agreement.
(j) The Franchisor has accounted for and administered in accordance with applicable LawLaws and all applicable agreements all advertising funds and other marketing moneys contributed by Franchisees or other cooperatives which the Franchisor administers or collects monies on behalf of Franchisees, if any. During the Franchisor Schedule Period, no Franchisee has asserted to the Franchisor a written claim or demand for damages with respect to the expenditure or management of any such advertising funds, marketing monies or collectives by the Franchisor.
(k) Section 4.18(k) of the Disclosure Schedules accurately identifies all: (i) organizational and operational documents between the Franchisor and any franchisee advisory boards or councils, and (ii) advertising, marketing or cooperative funds or accounts to which Franchisees contribute (if any), and the financial statements for said funds or account that were made available for distribution to the Franchisees during the Franchisor Schedule Period. Except as set forth on Section 4.18(k) of the Disclosure Schedules, no other advertising funding arrangements exist between the Franchisor and any Franchisees.
(l) Section 4.18(l) of the Disclosure Schedules accurately identifies all franchisee associations that have Franchisees as members and are associated with the Qdoba Business (each, a “Franchisee Association”). Except as described in Section 4.18(l) of the Disclosure Schedules, no Franchisee Association has brought or threatened in writing (or to the Knowledge of the Company, orally) to bring any legal claims against the Franchisor or any of its Affiliates, and no Franchisee Association has provided notice to Franchisor or any of its Affiliates of an objection to the transactions contemplated by this Agreement.
(m) There are no area or regional representatives, development agents, regional directors or other persons or entities that currently provide support services to Franchisees on behalf the Franchisor, other than employees thereof; provided, however, that the Franchisor has employed the services of the third parties identified in Section 4.18(m) of the Disclosure Schedules in connection with auditing Franchisees and their operations during the Franchisor Schedule Period.
(n) Except as described in Section 4.18(n) of the Disclosure Schedules, or as disclosed in an applicable Franchisor FDD, neither the Franchisor nor any of its Affiliates is a party to any Contract pursuant to which the Franchisor or an Affiliate receives rebates or compensation as a result of transactions between Franchisees and suppliers selling products or services to Franchisees. The Contracts pursuant to which the Company or its Affiliates receive a rebate or compensation are (i) not prohibited by any Franchise Agreement, (ii) disclosed in the relevant Franchisor FDD to the extent required by the Franchise Sales Laws, if applicable, and (iii) disclosed to the extent necessary under applicable Law with respect to any Franchisee based outside of the United States, except where any failure to be in compliance would not be a Material Adverse Effect.
Appears in 1 contract
Samples: Stock Purchase Agreement (Jack in the Box Inc /New/)
Franchise Matters. (a) Section 3.14(a) of the Disclosure Schedules contains a true and correct list of all currently effective Franchise Agreements and area development agreements (“Area Developer Agreements”), including any amendments thereto, to which EFV or Elevation is a party, listing the name of the franchisee, licensee or area developer (“Franchisee”), date of agreement or amendment and location of restaurant(s) or development area. Neither EBIP nor EB Creative is a party to any Franchise Agreement or Area Developer Agreement. No other Contracts exist between EFV, the Company or either Subsidiary and any third party granting any such third party the right, or any option or right of first refusal, to conduct business under the name “Elevation Burger”. The Franchisor name “Elevation Burger” is the only Person that has operated tradename or Mxxx owned or used by EFV, the Franchise System Company or sold Franchises either Subsidiary. The consummation of the Businesstransactions contemplated hereby will not require the consent of any Franchisee. All such Franchises were sold and/or operated only Except as set forth in Section 3.14(a) of the United States of America. Solely for purposes of this Section 3.25Disclosure Schedules, to Sellers’ Knowledge, the term “Business” shall not be deemed restaurants that are the subject of Franchise Agreements with Franchisees are presently open to include the operation public and operating. Sellers have made available to Buyer a correct and complete copy of each Franchise Agreement and each Area Developer Agreement (as amended to date) listed in Section 3.14(a) of the Buddy’s Home Furnishings stores by the Seller and its SubsidiariesDisclosure Schedules.
(b) With respect to each Franchise Agreement and Area Development Agreement identified in Section 3.25(b3.14(a) of the Disclosure Schedules:
(i) Except as set forth in Section 3.14(b)(i) of the Disclosure Schedules, such Franchise Agreement and Area Development Agreement is the legal, valid, and binding obligation of the applicable Franchisee or area developer, enforceable in accordance with its terms;
(ii) Except as set forth in Section 3.14(b)(ii) of the Disclosure Schedules, neither Elevation nor, to Sellers’ Knowledge, any counter-party is in Franchise Breach of such Franchise Agreement or Area Development Agreement, and, to Sellers’ Knowledge, no event has occurred that with notice or lapse of time would constitute a Franchise Breach under such Franchise Agreement or Area Development Agreement, except for such Franchise Breaches by the counter-party thereto which could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect or materially and adversely impact the economic or business benefits to Buyer of such Franchise Agreement or Area Development Agreement;
(iii) no party to such Franchise Agreement or Area Development Agreement has delivered a formal written demand for early termination pursuant to the terms thereof or any written notice claiming a breach or violation by EFV or Elevation of, or a default by EFV or Elevation under, such Franchise Agreement or Area Development Agreement;
(iv) Except as set forth in Section 3.14(b)(iv) of the Disclosure Schedules, neither EFV nor Elevation has granted a waiver or consent with respect to a provision of such Franchise Agreement or Area Development Agreement regarding a counter-party’s obligation to make payments of royalty fees, contributions to any marketing development fund, or expenditures for advertising purposes;
(v) EFV or Elevation has in its possession an original or executed copy of each Franchise Agreement and Area Development Agreement, and any amendments thereto, all of which have been made available to Buyer;
(vi) Except as set forth in Section 3.14(b)(vi) of the Disclosure Schedules, each Franchisee is current in its financial obligations to EFV or the Company, as applicable, including for payments due for franchise, development, or license fees, royalties, advertising contributions, and product purchases; and
(vii) Except as set forth in Section 3.14(b)(vii) of the Disclosure Schedules, each Franchisee is current in its development obligations with respect to each restaurant to be developed by such Franchisee in such Franchisee’s development area.
(c) Since the Balance Sheet Date, neither EFV nor Elevation has received any formal written notice, claim or demand pursuant to the terms of a Franchise Agreement or Area Developer Agreement from any Franchisee of any Franchise Breach by EFV or Elevation of any material term or provision of such Franchise Agreement.
(d) Schedule 3.14(d) of the Disclosure Schedules sets forth each state or other jurisdiction in which EFV or Elevation is currently registered to sell franchises or with which EFV or Elevation has filed an application for registration to sell its franchises that is currently pending, or has filed (where such filing is required) an application for exemption from registration, to sell franchises, and the effective date and expiration date of each such registration and exemption.
(e) To Sellers’ Knowledge, other than matters for which EFV or Elevation has obtained releases, EFV and Elevation have in all material respects made all disclosures in each Franchise Offering Circular required by all applicable federal and state laws and regulations which govern the sale of franchises, and to the Knowledge of Sellers, none of EFV, Elevation, EBIP, EB Creative or any Franchise Sales Person has offered for sale, accepted an offer, or sold a Franchise except in compliance with all applicable federal and state Laws and regulations which govern the sale of franchises.
(f) Except as disclosed in any Franchise Offering Circular, during the period commencing on the Interim Balance Sheet Date and continuing through the date of this Agreement, none of EFV, the Company or any Subsidiary has received written notice of any violation by EFV, the Company or such Subsidiary of any franchise Law from any federal or state regulatory agency, and, to Sellers’ Knowledge, no allegations of violations by EFV, the Company or such Subsidiary of any state franchise registration, disclosure, relationship or termination Law have been made by any federal or state regulatory agency.
(g) Section 3.14(g) of the Disclosure Schedules sets forth a complete and accurate list of all independent sales representatives, area developers, agents, employees, contractors, brokers or consultants authorized by EFV or Elevation to offer or sell franchises during the period commencing on the Interim Balance Sheet Date and continuing through the date of this Agreement (collectively, “Franchise Sales Persons”), including a list of all written or oral agreements or arrangements (and with respect to oral agreements a description thereof) with such Franchise Sales Persons under which EFV or Elevation has authorized any Franchise Sales Persons to offer or sell Franchises on EFV’s or Elevation’s behalf or agreed to rebate or share amounts receivable under any Franchise Agreement. Sellers have delivered to Buyer true, complete and correct copies of all such agreements.
(h) Except as set forth on Section 3.14(h) of the Disclosure Schedules, no Franchisee has a protected territory, exclusive territory, covenant not to compete, right of first refusal, option or other arrangement (collectively, the “Territorial Rights”) with EFV, the Company or either Subsidiary pursuant to which (A) EFV, the Company or either Subsidiary is restricted in any way in its right to own or operate, or license others to own or operate, any business or line of business; or (B) the Franchisee is granted rights for the acquisition of additional franchises or expansion of the Franchisee’s territory. No Franchisee’s Territorial Rights conflict with the Territorial Rights of any other Franchisee. To the extent EFV or Elevation has granted any such Territorial Rights (whether disclosed or required to be disclosed herein), EFV or Elevation, as applicable, has complied with such Territorial Rights and, in the course of offering or selling franchises, neither EFV nor Elevation has violated the Territorial Rights of any Franchisee.
(i) Section 3.14(i) of the Disclosure Schedules sets forth a complete and accurate list of the name, last known address and telephone number of all Franchisees of whose franchise agreements were terminated, cancelled, not renewed, reacquired by EFV or Elevation or who have otherwise ceased to do business during the Franchise System, indicating the address of each franchised Sears Outlet store operated by the Franchisee and the scheduled expiration date of the Franchise Agreement evidencing such franchised Sears Outlet store. Except as set forth in the Franchise Agreements, the Franchisor is not limited in its right to grant Franchises or develop (or grant rights to any other Person to develop) any business that competes with any Franchise of the Business.
(c) Each Franchise Agreement is similar in all material respects to the form of Franchise Agreement contained in the FDD that was issued to the applicable Franchisee, except for deviations from such form that are contained in such Franchise Agreement or an addendum to such Franchise Agreement, a copy of which has been made available to Purchaser. There are no oral modifications of any Franchise Agreement or oral agreements between any Franchisee and Franchisor relating to matters pertaining to material obligations of such Franchisee thereunder.
(d) Since period commencing on January 31, 2016, the Franchisor has been at all times in compliance in all material respects with all applicable Franchise Laws in connection with the offer or sale of Franchises of the Business, relationships with Franchisees, the operation of the Franchise System and the termination, non-renewal and transfers of Franchises of the Business and, to the Seller’s Knowledge, no current or former Franchisee or any Governmental Authority has alleged that Franchisor has failed to comply in all material respects with any applicable Franchise Laws during its operation of the Franchise System. No financial performance representations (as defined in the FTC Rule) or any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent or other franchise seller (as defined in the FTC Rule) of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor has used to offer or sell Franchises at any time since January 31, 2016 were prepared and delivered to prospective Franchisees in compliance in all material respects with Franchise Laws.
(e) Each Franchisee who left the Franchise System since December 1, 2015 has executed agreements with and continuing through the Franchisor which released the Franchisor and its Subsidiaries and affiliates from any and all Liabilities and claims that such Franchisee had, has or may have against the Franchisor and its Affiliates which relate in any way to the Franchisee’s Franchise date of this Agreement.
(f) Since January 31, 2016, all rebates, allowances, discounts or other payments or remunerations received by the Franchisor or the Seller from vendors, suppliers or other third parties, on account of any Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, have been received, administered, disclosed and spent in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs delivered to such Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each case, in all material respects. Except as set forth in the Franchise Agreements, there are no material restrictions on the Franchisor’s use of any such rebates, allowances, discounts or other payments or remuneration for any purpose.
(g) Since January 31, 2016, no Person has alleged, to the Seller’s Knowledge, the Franchisor to be, and the Franchisor has not received any written complaint, allegation or notice of inquiry or investigation from any Franchisee, employee of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers with, or subject to joint employment liability with, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee or any of a Franchisee’s employees have been or are employees of the Franchisor, the Seller or any of its Subsidiaries or improperly classified as independent contractors in accordance with applicable Law.
Appears in 1 contract
Samples: Membership Interest Purchase Agreement (Fat Brands, Inc)
Franchise Matters. (a) The Franchisor is the only Person that has operated Other than the Franchise System Systems, no Acquired Company has owned or sold Franchises of the Business. All such Franchises were sold and/or operated only in the United States of America. Solely for purposes of this Section 3.25, the term “Business” shall not be deemed to include the operation of the Buddy’s Home Furnishings stores by the Seller and its Subsidiariesany franchise system.
(b) Set forth on Section 3.25(b4.27(b)(i) of the Disclosure Schedule sets forth Letter is a complete and accurate list of all Franchise Agreements, including (i) the Franchisees franchise number, name and location of the Franchisee; (ii) the ownership of the Franchisee if the Franchisee is an entity; (iii) the effective date of the Franchise System, indicating Agreement; (iv) the address of each franchised Sears Outlet store operated by the Franchisee and the scheduled expiration date of the current term of the Franchise Agreement; and (v) the number of renewal terms remaining under the Franchise Agreement. Except as set on Section 4.27(b)(ii) of the Disclosure Letter, the terms and conditions of all of the Franchise Agreements are the same in all material respects. The Acquired Companies have made available to the Buyer Parties a correct and complete copy of each form of Franchise Agreement evidencing used thereby since April 10, 2015. No Franchisee or other Person has any right of first refusal, option or other right or arrangement to sign any Franchise Agreement or acquire any Franchise.
(c) To the Knowledge of Sellers, each Franchisee is currently in material compliance with, and is not currently in material default under, the requirements of the Franchise Agreement. No Acquired Company has delivered written notice to a Franchisee pursuant to such franchised Sears Outlet storeFranchisee’s Franchise Agreement that it is in violation of, or in breach or default under, such Franchise Agreement that remains uncured or outstanding. Each Franchise Agreement is a valid and binding agreement of the applicable Acquired Company, is in full force and effect in accordance with its terms (except to the extent such Franchise Agreement expires after the date hereof in accordance with its terms), and is enforceable against the applicable Acquired Company and each Franchisee who is a party thereto; except as the same may be limited by: (A) bankruptcy, insolvency, reorganization, moratorium or similar Laws relating to creditor rights generally; (B) state Law, including the enforcement of non-competition agreements; and (C) general principles of equity). Except as set forth on Section 4.27(c) of the Disclosure Letter, no Acquired Company has received written notice from a Franchisee pursuant to such Franchisee’s Franchise Agreement that remains outstanding or uncured and that (i) such Acquired Company is in material violation of, or breach or default under, such Franchise Agreement, or (ii) that the Franchisee is terminating the Franchise Agreement. To the Knowledge of Sellers, no facts or circumstances exist that would reasonably be expected to constitute a material breach or a material event of default under any Franchise Agreement, but for the passage of time.
(d) Except as set forth on Section 4.27(d) of the Disclosure Letter, no Franchisee has been granted protected or exclusive territory rights, a designated area, or an option, right of first refusal or other arrangement regarding additional territory rights, except as set forth in the Franchise Agreements, the Franchisor is not limited in its right to grant Franchises . No Franchisee’s protected or develop (exclusive territory rights or grant rights to any other Person to develop) any business that competes with any Franchise of the Business.
(c) Each designated area under such Franchisee’s Franchise Agreement is similar in all material respects to the form of Franchise Agreement contained in the FDD that was issued to the applicable are currently being materially violated by another Franchisee, except for deviations from ’s protected or exclusive territory rights or designated area under such form that are contained in such Franchise Agreement or an addendum to such Franchisee’s Franchise Agreement, a copy of which has been made available to Purchaser. There are no oral modifications of any Franchise Agreement or oral agreements between any Franchisee and Franchisor relating to matters pertaining to material obligations of such Franchisee thereunder.
(d) Since January 31, 2016, the Franchisor has been at all times in compliance in all material respects with all applicable Franchise Laws in connection with the offer or sale of Franchises of the Business, relationships with Franchisees, the operation of the Franchise System and the termination, non-renewal and transfers of Franchises of the Business and, to the Seller’s Knowledge, no current or former Franchisee or any Governmental Authority has alleged that Franchisor has failed to comply in all material respects with any applicable Franchise Laws during its operation of the Franchise System. No financial performance representations (as defined in the FTC Rule) or any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent or other franchise seller (as defined in the FTC Rule) of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor has used to offer or sell Franchises at any time since January 31, 2016 were prepared and delivered to prospective Franchisees in compliance in all material respects with Franchise Laws.
(e) Each With respect to all of the terminations, non-renewals, and transfers of Franchises completed since the Lookback Date, the applicable Acquired Company has complied in all respects with requirements for the proper cause for default and termination, notice, time to cure, and actual termination and non-renewal requirements of all applicable Franchise Agreements and Laws, including Laws regulating the relationship between franchisors and franchisees. To the Knowledge of Sellers, there have been no Franchisee who left the Franchise System since December 1, 2015 has executed agreements transfers that were not in compliance with the Franchisor which released requirements of the Franchisor and its Subsidiaries and affiliates from any and all Liabilities and claims that such Franchisee had, has or may have against the Franchisor and its Affiliates which relate in any way to the Franchisee’s Franchise Agreement.
(f) Since January 31the Lookback Date, 2016, all rebates, allowances, discounts or other payments or remunerations received by the Franchisor or the Seller from vendors, suppliers or other third parties, on account (i) no Acquired Company has waived enforcement of any Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, have been received, administered, disclosed and spent in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs delivered to such Franchisees, the applicable non-compete restriction under any Franchise Agreement, and (ii) except as set forth on Section 4.27(f) of the Disclosure Letter, no current or former Franchisee and no principal of any current or former Franchisee is currently in violation of any non-compete covenant under any Franchise Agreement to which the current or former Franchisee is or was a party or any ancillary written agreement with an Acquired Company to which the principal of the current or former Franchisee is or was a party.
(g) The Acquired Companies have made available to Buyer correct and complete copies of each form of FDD (including variants of such FDDs if the variance made in response to a comment or request from a state franchise examiner) used since the Lookback Date to offer or sell the Franchise Businesses. The FDDs issued on or after April 10, 2015, have contained all information required by the FTC Rule and other applicable Contracts associated Franchise Laws. The FDDs issued on or after April 10, 2015 have otherwise been prepared and delivered to prospective Franchisees under a Franchise Agreement in compliance with the Franchise SystemLaws. No FDD issued on or after April 10, 2015 contains any statement which is false or misleading with respect to any material fact, or omits to state any material fact required to be stated therein or necessary in order to make the statements made therein not false or misleading in any respect in light of the circumstances under which they are made.
(h) The FDDs issued on or after April 10, 2015 identify all: (i) current Franchise-related or Franchisee-related arbitrations, litigation, class proceedings, and formally filed actions, suits or proceedings against any Acquired Company by a Franchisee or Governmental Entity that are required to be disclosed in the applicable FDD by any Franchise Law; and (ii) pending and concluded actions, orders and decrees that are required to be disclosed in the applicable FDD by any Franchise Law.
(i) Set forth on Section 4.27(i) of the Disclosure Letter are the names and organizational documents, if applicable, of all advertising and promotion funds or cooperatives currently administered by or paid to the applicable Acquired Company on behalf of any Franchisees. There are no loans currently owed to or owing from any such funds or cooperatives by the Acquired Companies or their Affiliates. To the Knowledge of Sellers, there are no claims from a Franchisee or any other Person that any of the expenditures from any such funds or cooperatives have been improperly administered or used.
(j) Set forth on Section 4.27(j) of the Disclosure Letter is a list (organized by Acquired Company) of the jurisdictions in which each caseAcquired Company, as applicable, (1) (A) is currently registered or authorized to offer and sell Franchises, or (B) sells Franchises but is exempt from such registration, under a Franchise Law or a business opportunity law (including seller-assisted marketing plan acts), and (2) is subject to a currently effective financial assurances condition to registration.
(k) Since the Lookback Date: (i) the Acquired Companies are and have been in compliance with all material respects. Franchise Laws and business opportunity laws (including seller-assisted marketing plan laws); (ii) the Acquired Companies have not received any written notice, report, inquiry, or information, or to the Knowledge of Sellers any oral notice, report, inquiry, or information, from any Governmental Entity regarding a Acquired Company’s actual or alleged violation of any applicable Franchise Laws or business opportunity laws or any complaints made to the Governmental Entity; (iii) the Acquired Companies have not entered into an assurance of discontinuance, settlement agreement, consent order or similar agreement with any Governmental Entity; and (iv) the Acquired Companies have not sent, delivered, entered into or been requested to send a notice of violation, rescission offer, cancellation offer, disgorgement notice or similar communication to any Franchisee.
(l) Except as set forth in on Section 4.27(l) of the Franchise AgreementsDisclosure Letter, there neither the Acquired Companies nor any of their respective Affiliates are no material restrictions on a party to any Contract whereby the Franchisor’s use of applicable Acquired Company or any such Affiliate receives rebates, allowances, discounts or other payments or remuneration for of any purposekind from suppliers or other third parties selling or leasing products or services, directly or indirectly, to Franchisees. Neither the Acquired Companies nor any of their respective Affiliates has made any commitment, promise or pledge (oral or written) to share any rebates with Franchisees. The amount of all such rebates have been disclosed in Item 8 of the Acquired Companies’ FDDs.
(gm) Since January 31Except as set forth on Section 4.27(m) of the Disclosure Letter, 2016each Franchisee under a Franchise Agreement has provided evidence to the applicable Acquired Company that it has complied in all material respects with the insurance requirements of the Franchise Agreement and the applicable Acquired Company and any Affiliates that the Acquired Company designated have been named as additional insureds on each Franchisee’s insurance policy as required by the Franchise Agreement.
(n) Set forth on Section 4.27(n) of the Disclosure Letter is a list of any franchise association or similar organization formed or currently sponsored by any Acquired Company. To the Knowledge of Sellers, no Person has allegedany franchise council or advisory group (whether independently formed or sponsored by an Acquired Company) presently in place or in the preliminary stages of formation is advisory in nature.
(o) Set forth on Section 4.27(o) of the Disclosure Letter is a list of all independent franchisee associations or similar organizations currently relating to either of the Franchise Systems. Except as set forth on Section 4.27(o) of the Disclosure Letter, to the Seller’s KnowledgeKnowledge of Sellers, the Franchisor to be, there is no such independent franchisee association or similar organization that is being formed and the Franchisor has not received any written complaint, allegation no solicitation of Franchisees is currently in process or notice of inquiry or investigation from any Franchisee, employee of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers with, or subject to joint employment liability with, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee or any of a Franchisee’s employees have been or are employees of in the Franchisor, the Seller or any of its Subsidiaries or improperly classified as independent contractors in accordance with applicable Lawpast.
Appears in 1 contract
Samples: Securities Purchase Agreement (J&j Snack Foods Corp)
Franchise Matters. (a) The Franchisor is Except as set forth on Schedule 4.23(a), Seller does not have, and has not had, any Subsidiary or Affiliate offering or selling Franchises domestically or internationally. Seller and international master Franchisees duly appointed under Franchise Agreements are the only Person Persons that Seller has operated authorized to offer or sell Franchises for the Franchise System or sold Franchises of the Business. All such Franchises were sold and/or operated only in the United States of America. Solely for purposes of this Section 3.25, the term “Business” shall not be deemed to include the operation of the Buddy’s Home Furnishings stores by the Seller and its SubsidiariesMxxx.
(b) Section 3.25(bSchedule 4.23(b) of the Disclosure Schedule sets forth a listing of, and Seller has provided Buyer with a true and complete copy of, Seller's currently effective Seller UFOCs, together with true and accurate list complete copies of all Seller UFOCs used by Seller since April 1, 2002 in connection with the Franchisees offer and sale of the Franchise System, indicating the address of each franchised Sears Outlet store operated by the Franchisee and the scheduled expiration date of the Franchise Agreement evidencing such franchised Sears Outlet store. Except as set forth in the Franchise Agreements, the Franchisor is not limited in its right to grant Franchises or develop (or grant rights to any other Person to develop) any business that competes with any Franchise of the BusinessFranchises.
(c) Each Schedule 4.16 contains a true and complete list of all Franchise Agreements to which Seller is a party, and there are no other currently effective Franchise Agreements relating to the Mxxx. Except as noted as Schedule 4.16 and except for negotiated Franchise Agreements for international Franchises, each Franchise Agreement entered is substantially similar in all material respects to the form of Franchise Agreement contained in attached as an exhibit to the FDD Seller UFOC that was issued to the applicable Franchisee, except for deviations from such form that are contained in Franchisee contemporaneously with the sale of such Franchise Agreement or an addendum to such Franchise Agreement, a copy of which by Seller. Seller has been made available to Purchaser. There are no oral modifications Buyer true, complete and correct copies of any all Franchise Agreement Agreements listed or oral agreements between any Franchisee required to be listed on Schedule 4.16, including all amendments and Franchisor relating to matters pertaining to material obligations of such Franchisee thereunderaddenda thereto.
(d) Since January 31Seller has, 2016at all relevant times, the Franchisor has been at all times in compliance corporate power and authority and legal right to enter into and carry out the terms of each Franchise Agreement. All of the Franchise Agreements are valid, binding and enforceable in all material respects against the Franchisee thereunder in accordance with all applicable Franchise Laws in connection with their terms, subject to any such Franchisee's bankruptcy, insolvency, receivership or similar proceeding under state or federal law and subject to any equitable doctrines and Legal Requirements which may affect the offer or sale of Franchises of the Business, relationships with Franchisees, the operation enforceability of the Franchise System and the termination, non-renewal and transfers of Franchises of the Business and, to the Seller’s Knowledge, no current or former Franchisee or any Governmental Authority has alleged that Franchisor has failed to comply in all material respects with any applicable Franchise Laws during its operation of the Franchise System. No financial performance representations (as defined in the FTC Rule) or any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent or other franchise seller (as defined in the FTC Rule) of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor has used to offer or sell Franchises at any time since January 31, 2016 were prepared and delivered to prospective Franchisees in compliance in all material respects with Franchise LawsAgreements against Franchisees.
(e) Each Schedule 4.23(e) identifies each existing Franchisee who left that (i) is, to Seller's Knowledge, currently in material default under any Franchise Agreement, whether or not Seller has notified the Franchise System since December 1, 2015 Franchisee about the default; (ii) has executed agreements with received within the Franchisor which released twelve (12) month period prior to the Franchisor and its Subsidiaries and affiliates date of this Agreement notice from any and all Liabilities and claims Seller that such Franchisee hadhas incurred a default under such Franchise Agreement; or (iii) has on three or more occasions within the twelve (12) month period prior to the date of this Agreement received written notices of events of default under a Franchise Agreement. Except as described in Schedule 4.23(e), no notices of default issued by Seller with respect to any Franchise Agreement remain outstanding because the defaults identified in such notices have not been cured, and Seller has or may have against the Franchisor and its Affiliates not waived any default by a Franchisee which relate could be adverse in any way material respect to the Franchisee’s Franchise AgreementSeller.
(f) Since January 31Except as set forth on Schedule 4.23(f), 2016or except as set forth in Seller’s standard forms of domestic and international Franchise Agreement as in use from time to time, all rebatesor except as may be granted by operation of law, allowancesSeller has not granted any Franchisee any Territorial Rights pursuant to which (i) Seller is restricted in any way in its right to own or operate, discounts or other payments license others to own or remunerations received by operate, any business or line of business; or (ii) the Franchisor Franchisee is granted rights for the acquisition of additional franchises or expansion of the Seller from vendorsFranchisee's territory. Except as described in Schedule 4.23(f), suppliers or other third parties, on account no Franchisee's Territorial Rights conflict with the Territorial Rights of any other Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, have been received, administered, disclosed and spent in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs delivered to such Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each case, in all material respects. Except as set forth on Schedule 4.23(f), to the extent Seller granted any such Territorial Rights (whether or not disclosed or required to be disclosed herein), Seller has complied with such Territorial Rights and in the Franchise Agreementscourse of offering or selling franchises, there are no material restrictions on Seller has not violated the Franchisor’s use Territorial Rights of any such rebates, allowances, discounts or other payments or remuneration for any purposeFranchisee.
(g) Since January 31April 1, 20162002, no Person and except as set forth on Schedule 4.23(g), Seller has: (i) prepared and maintained in all material respects each of the Seller UFOCs in accordance with all Legal Requirements; (ii) filed and obtained registration of the offer and sale of the Franchises in all jurisdictions requiring such registration prior to any offers or sales of Franchises in such states and has allegedfiled all material changes, amendments, renewals thereto on a timely basis as required by Legal Requirements in such jurisdictions; (iii) filed all notice filings (including the filing of the Seller UFOC, as applicable) in all jurisdictions in which a notice filing is required to be filed prior to the offer and sale of franchises in such jurisdictions; (iv) filed all notices of exemption in all jurisdictions in which a notice filing is required in order to obtain an exemption from regulation as a "business opportunity" or to otherwise be subject to regulation under Legal Requirements in such jurisdictions absent such notice filing; and (v) sold no franchises during periods after the need for amendment arose (based on advice of Seller’s Knowledgelegal counsel) and before the prospective Franchisee had been in receipt of an amended Seller UFOC for the required period for redisclosure in the jurisdiction. The Seller UFOCs were prepared in all material respects in compliance with the UFOC Guidelines and/or other Legal Requirements and there were no material misrepresentations or misstatements of fact or omissions to state material information in any Seller UFOC necessary to make the statements made therein not misleading under the circumstances at the txxx Xxxxxx was using such Seller UFOC. Except as set forth on Schedule 4.23(g), Seller has never withdrawn its application or registration to offer and sell franchises from any jurisdiction.
(h) Except as disclosed in Schedule 4.23(h), the Franchisor to beoffer, sale, and administration of each Franchise Agreement complied in all material respects at the Franchisor time such offer and sale was made and at all times since such Franchise Agreement became effective with all Legal Requirements.
(i) Except as listed or described in Schedule 4.23(i), Seller’s rights to receive payments from the Franchisee under each Franchise Agreement to which Seller is a party have not been subordinated by Seller and no provision regarding the calculation and payment of royalty fees in any Franchise Agreement has been waived, altered or modified in any material respect adverse to Seller.
(j) No Franchisee Organization exists among the Franchisees of Seller, except for the five-member Franchise Advisory Council that Seller appoints to advise Seller with respect to advertising matters.
(k) Except as set forth on Schedule 4.23(k), Seller has not received offered or sold Franchises in any written complaint, allegation or notice jurisdiction where the sale of inquiry or investigation from any Franchisee, employee such Franchise violated any Legal Requirements of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers with, or subject to joint employment liability with, any Franchiseesuch jurisdiction. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to the To Seller’s Knowledge, no Franchisee paid any consideration or signed any Franchise Agreement before the expiration of all applicable waiting periods. Except as set forth on Schedule 4.23(k), Seller has not offered rescission as would be required under any Legal Requirements arising from a possible violation of any Legal Requirements, and no Franchisee has asserted or exercised any statutory right of rescission arising from a violation of the Legal Requirements. Except as set forth on Schedule 4.23(k) and with the exception of routine comment letters from regulators, Seller has never received a stop order, revocation or withdrawal of approval or a license or exemption to offer and sell Franchises in any jurisdiction. Seller has never received an official notice, complaint, subpoena, request for information, or any form of formal or informal inquiry from any Governmental Authority regarding the offer or sale of Franchises. Seller has not participated in any remedial program directed towards its franchise selling practices administered by the National Franchise Council, the International Franchise Association, the Federal Trade Commission, any state or provincial authority, or any other public or private organization.
(l) Seller's Books and Records include all written allegation communications and written memorialization of all material oral communications with franchise regulatory authorities regarding the Franchises that Seller has been made received or submitted since January 311, 2016 that 2002, including without limitation all applications for initial registration, renewal applications, amendments, comment letters, approvals, licenses, consents, exemption filings, withdrawals, and undertakings regarding future changes in Seller's offering materials.
(m) Seller has delivered or made available to Buyer correct and complete copies of (i) all registrations, material advertising or promotional materials used by Seller subsequent to April 1, 2002, and (ii) the Seller UFOCs or agreements used by Seller or filed with any Franchisee foreign or domestic administrative or regulatory agency or otherwise used by Seller in connection with the offer, sale and operation of Franchises in any of a Franchiseejurisdiction (domestic or international) since April 1, 2002. To Seller’s employees have been or are employees Knowledge, Seller has not published any franchise recruitment advertising in violation of the FranchisorLegal Requirements of any jurisdiction. Seller has effected timely filing of franchise recruitment advertising with the applicable governmental authority before publication and obtained any approvals or clearances, or received no comments requiring changes to the Seller or any of its Subsidiaries or improperly classified as independent contractors advertising materials that were not incorporated in accordance with applicable Lawthe final copy.
Appears in 1 contract
Franchise Matters. (a) The Franchisor is Other than the only Person that has franchise systems operated under the Franchise System Bakers Square Brand and the Village Inn Brand, no Company owns or sold Franchises of the Business. All such Franchises were sold and/or operated only in the United States of America. Solely for purposes of this Section 3.25, the term “Business” shall not be deemed to include the operation of the Buddy’s Home Furnishings stores by the Seller and its Subsidiariesoperates any franchise system.
(b) Section 3.25(bSchedule 4.13(a)(v) of the Disclosure Schedule sets forth a complete and accurate list of all Franchise Agreements to which any Company is a party. The Companies have made available to Purchaser accurate and complete copies of each Franchise Agreement (including all amendments and waivers thereto as are currently in effect). The list of Franchise Agreements includes: (i) the Franchisees name of the counterparty to the Franchise System, indicating Agreement the (“Franchisee”); (ii) the business address of each franchised Sears Outlet store Franchised Location authorized thereunder to be operated by such Franchisee; (iii) the Franchisee effective and expiration dates; (iv) the scheduled expiration date number of remaining renewals; and (v) a description of any material waivers, alterations, amendments or other modifications thereto agreed by any Company that are not reflected in the Franchise Agreement evidencing such franchised Sears Outlet store. Agreements.
(c) Except as set forth in Schedule 4.27(c), since the Franchise AgreementsReorganization Plan Confirmation Date, no Company or, to the Franchisor is not limited in its right to grant Franchises or develop (or grant rights to Knowledge of the Companies, any other Person to developparty thereto, is in, or, has received written notice of any, presently effective (i) violation of, (ii) written asserted violation of, or (iii) default under (including any condition that with the passage of time or the giving of notice would cause such a violation or default under) any business that competes with any Franchise Agreement. Subject to the Enforceability Exceptions, each Franchise Agreement: (i) is a valid and binding agreement of the Business.
Company party thereto, is in full force and effect (c) Each except to the extent such Franchise Agreement is similar terminated or expires after the date hereof in all material respects accordance with its terms), and is enforceable in accordance with its terms against the Company party thereto; and (ii) to the form Knowledge of Franchise Agreement contained the Companies, is valid, binding and enforceable in the FDD that was issued accordance with its terms against each Franchisee and not subject to the applicable Franchisee, except for deviations from such form that are contained any right to termination (other than as may be provided in such Franchise Agreement Agreement) or an addendum to such Franchise Agreement, a copy of which has been made available to Purchaser. There are no oral modifications of rescission by any Franchise Agreement or oral agreements between any Franchisee and Franchisor relating to matters pertaining to material obligations of such Franchisee thereunderFranchisee.
(d) Since January 31Other than as may exist in the Franchise Agreements, 2016, the Franchisor no Franchisee or other Person has been at granted by the Companies any right of first refusal, option or other right or arrangement to sign any Franchise Agreement or acquire any rights granted by a Franchise Agreement.
(e) All funds or cooperatives administered by or paid to the Companies on behalf of any Franchisees since the Reorganization Plan Confirmation Date, including funds that Franchisees contributed for advertising and promotion: (i) have been administered and used in material compliance with all times applicable Laws, descriptions in compliance the Franchise Disclosure Documents and Uniform Franchise Offering Circulars (together, “FDDs”), and all Franchise Agreements, and (ii) each Company has in all material respects properly accounted for all payments made by each Franchisee with all applicable Franchise Laws in connection with respect to any such fund or cooperative. There are no loans owed to or owing from any such funds or cooperatives. To the offer or sale of Franchises Knowledge of the BusinessCompanies, relationships with Franchisees, the operation there are no written claims made against any of the Franchise System and Companies after the termination, non-renewal and transfers of Franchises Reorganization Plan Confirmation Date that any of the Business andexpenditures from any such funds or cooperatives have been improperly collected, accounted for, maintained, used or applied. Schedule 4.27(e) contains a listing of all advertising funds or cooperatives administered by or paid to the Seller’s Knowledge, no current or former Franchisee or Companies on behalf of any Governmental Authority has alleged that Franchisor has failed to comply in Franchisees since the Reorganization Plan Confirmation Date.
(f) Schedule 4.27(f) sets forth a list of all material respects with any applicable Franchise Laws during its operation forms of the Franchise System. No financial performance representations (as defined in the FTC Rule) or any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent or other franchise seller (as defined in the FTC Rule) of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor Company has used to offer or sell Franchises franchises at any time since January 31, 2016 were and the time period of effectiveness of each such FDD. The Companies have made available to Purchaser accurate and complete copies of each such form of FDD. All FDDs that the Company has used to offer or sell franchises at any time since the Reorganization Plan Confirmation Date have contained all information required by Law and the North American Securities Administrators Association guidelines and commentaries then published (“Franchise Laws”) and have otherwise been prepared and delivered to prospective Franchisees in compliance with Franchise Laws, and no such FDD contains any statement which is false or misleading with respect to any material fact, or omits to state any material fact required to be stated therein or necessary in order to make the statements made therein not false or misleading in light of the circumstances under which they are made. The Company has made available to Purchaser correct and complete copies of all material respects correspondence since the Reorganization Plan Confirmation Date with state and federal authorities concerning compliance with Franchise Laws.
(eg) Each Franchisee who left the Franchise System since December 1No Company has granted any Person any protected or exclusive territory rights, 2015 has executed agreements with the Franchisor which released the Franchisor and its Subsidiaries and affiliates from any and all Liabilities and claims that such Franchisee hada designated area, has or may have against the Franchisor and its Affiliates which relate in any way to the Franchisee’s Franchise Agreement.
(f) Since January 31an option, 2016, all rebates, allowances, discounts right of first refusal or other payments or remunerations received by the Franchisor or the Seller from vendorsarrangement regarding additional territory rights, suppliers or other third parties, on account of any Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, have been received, administered, disclosed and spent in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs delivered to such Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each case, in all material respects. Except except as set forth in the Franchise Agreements.
(h) Except as set forth on Schedule 4.27(h), there are no material restrictions on is not in effect after the Franchisor’s use of Reorganization Plan Confirmation Date any such Contract with a Company or any Affiliate whereby it receives rebates, allowances, discounts or other payments or remuneration for of any purpose.
kind (gcollectively, “Rebates”) Since January 31from suppliers or other third parties selling products or services, 2016, no Person has allegeddirectly or indirectly, to Franchisees. Except as set forth on Schedule 4.27(h): (i) no Company or any Affiliate thereof has made any commitment, promise or pledge (oral or written) that remains effective after the Seller’s KnowledgeReorganization Plan Confirmation Date to share with Franchisees any Rebates; and (ii) since the Reorganization Plan Confirmation Date, the Franchisor to be, and the Franchisor Company has not received any revenue or other consideration as a result of Franchisees’ required purchases or leases of products or services.
(i) Except to the extent set forth in any Franchise Agreement, no Company has waived enforcement of any non-compete restriction under any Franchise Agreement, and, to the Knowledge of the Companies, no current Franchisee is currently in violation of any non-compete covenant under any Franchise Agreement.
(j) Since the Reorganization Plan Confirmation Date, the Companies have consistently enforced the terms of the Franchise Agreements against all Franchisees in all material respects, including, to the Knowledge of the Companies, enforcement of any material violations of the operating standards set forth in the operations manuals of the Companies.
(k) Since the Reorganization Plan Confirmation Date: (i) no Company has issued policies that violate applicable Laws (including any Franchise Laws) relating to, or otherwise exercised control over, any Franchisee’s relationship with its employees, including hiring, firing, disciplining, compensation, benefits, supervision, and scheduling; (ii) none of the Companies has received, any formal or informal written complaint, allegation or notice of inquiry or investigation from any a Franchisee, any employee of a Franchisee, third party Franchisee or Governmental Authority, alleging that the Franchisor any Company is or may be be, joint employers with, with or subject to joint employment liability with, any Franchisee. The Franchisor has properly classified each .
(l) Schedule 4.27(l) sets for the calculation of all unpaid and prepaid Royalties as of the date of this Agreement, together with any aging of unpaid Royalties and any agreements with any Franchisee as an independent contractor and not an employee under applicable Law, and with respect to the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee or any payment of Royalties on a Franchisee’s employees have been or are employees of the Franchisor, the Seller or any of its Subsidiaries or improperly classified as independent contractors in accordance with applicable Lawdeferred basis.
Appears in 1 contract
Samples: Membership Interest Purchase Agreement (BBQ Holdings, Inc.)
Franchise Matters. (a) The Franchisor is the only Person that has operated the Franchise System or sold Franchises Except as set forth in Schedule 4.21(a) of the Business. All such Franchises were sold and/or operated only in Company Disclosure Letter, no Group Company has received any written notice, nor, to the United States of America. Solely for purposes of this Section 3.25, the term “Business” shall not be deemed to include the operation Knowledge of the Buddy’s Home Furnishings stores by Company, has any reason to believe, based upon oral or written communications from its current Franchisees, that any Franchisee intends to terminate, its Franchise Agreement or to otherwise terminate or materially reduce its relationship with the Seller and its SubsidiariesGroup Companies other than, in each case, with respect to any scheduled expiration or termination date expressly set forth in such Franchise Agreement.
(b) Section 3.25(b) of The Franchise System is the Disclosure Schedule sets forth a complete and accurate list of only franchise system that the Franchisees of Group Companies have operated. No Group Company has offered or sold or otherwise granted rights to any Person conferring upon that Person area development, multi-unit development, area representative, master franchise, sub-franchise or other multi-unit or multilevel rights with respect to the “F45 Training” brand. The Franchise System, indicating the address of each franchised Sears Outlet store System has been operated by the Franchisee and the scheduled expiration date of the Franchise Agreement evidencing such franchised Sears Outlet store. Except as set forth in the Franchise Agreements, the Franchisor is not limited in its right to grant Franchises or develop (or grant rights to any other Person to develop) any business that competes with any Franchise of the BusinessGroup Companies at all times since inception.
(c) Each Franchise Agreement is similar in all material respects to the form of Franchise Agreement contained in the FDD Franchise Disclosure Document (if applicable) for that particular jurisdiction that was issued to the applicable Franchisee, except for deviations from such form any negotiated changes that are contained in such Franchise Agreement or an addendum the parties to such Franchise Agreement, a copy of which has been made available to Purchaseragreements may have agreed to. There are no oral modifications of any Franchise Agreement or oral agreements between any Franchisee and Franchisor any Group Company relating to matters pertaining to material obligations of such Franchisee thereunder.
(d) Except as set forth in Schedule 4.21(d) of the Company Disclosure Letter, none of the Franchise Agreements contains any grant of exclusive rights to a territory designated therein, or other exclusive right, which in either case conflicts with any grant of exclusive rights to a territory or other exclusive right granted under any other Franchise Agreement.
(e) Since January 311, 20162017, the Franchisor each Group Company has been at all times in compliance in all material respects with all applicable Franchise Laws in connection with the offer solicitation, offer, grant or sale of Franchises of the BusinessFranchises, relationships with Franchisees, the operation of the Franchise System and the termination, non-renewal and transfers transfer of Franchises of the Business and, to the Seller’s KnowledgeKnowledge of the Company, no current or former Franchisee or any Governmental Authority Entity has alleged that Franchisor any Group Company has failed to comply in all material respects with any applicable Franchise Laws during its operation of the Franchise System. No financial performance representations .
(as defined in the FTC Rulef) or All Franchise Disclosure Documents that any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent or other franchise seller (as defined in the FTC Rule) of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor Group Company has used to offer or sell Franchises at any time since January 311, 2016 2017 or that are currently in effect were prepared and delivered to prospective Franchisees in compliance in all material respects with Franchise Laws at the time they were furnished to prospective Franchisees and throughout the period preceding the execution and delivery of a Franchise Agreement. The information in the Franchise Disclosure Documents at the time they were used by a Group Company in connection with the solicitation, offer, grant or sale of Franchises was true and complete in all material respects and did not contain any untrue or misleading statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and included all information required by all applicable Franchise Laws. The Franchise Disclosure Documents have been amended or supplemented from time to time as required by applicable Franchise Law and such amendments and supplements were timely and properly furnished to each applicable Governmental Entity and Franchisees or prospective Franchisees as required by applicable Franchise Law.
(eg) A true and correct copy of all Franchise Disclosure Documents used by any Group Company since January 1, 2017 has been delivered to Parent. Since the date of the most recent Franchise Disclosure Documents used by any Group Company, other than the transactions contemplated by this Agreement, there has been no material change in the business, financial condition, or affairs of the Group Companies, the Franchise System, or, to the Knowledge of the Company, the Franchisees that would, taken as a whole, require an amendment or supplement to such Franchise Disclosure Documents prior to the date hereof.
(h) Each Franchisee who left the Franchise System since December January 1, 2015 2017 has executed agreements with the Franchisor a Group Company which released the Franchisor Company and its Subsidiaries and affiliates Affiliates from any and all Liabilities liabilities (whether direct or indirect, absolute, accrued, contingent or otherwise) and claims that such Franchisee had, has or may have against the Franchisor Company and its Affiliates which relate in any way to the Franchisee’s Franchise Agreement.
(fi) Since January 311, 20162017, all rebates, allowances, discounts or other payments or remunerations received by the Franchisor or the Seller any Group Company from vendors, suppliers or other third parties, on account of any Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, have been received, administered, disclosed and spent in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs Franchise Disclosure Documents delivered to such Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each case, in all material respects. Except as set forth in the Franchise Agreements, there are no material restrictions on the Franchisorany Group Company’s use of any such rebates, allowances, discounts or other payments or remuneration for any purpose.
(gj) Since January 31Prior to the Closing Date, 2016the Group Companies have at all times collected, no Person maintained, administered, managed, directed, spent and utilized all advertising and marketing funds (including any advertising cooperative funds) contributed by or received from Franchisees in compliance with the Franchise Agreements and applicable Franchise Law. No Franchisee has allegeddelivered to the Company a written claim of any Group Company’s breach of any Franchise Agreements with respect to such advertising or marketing funds and, to the Seller’s KnowledgeKnowledge of the Company, no facts exist that would reasonably be expected to form the Franchisor basis for any such a claim of breach of any Franchise Agreement.
(k) No Group Company is (i) a guarantor or party to be, and the Franchisor has not received an agreement pursuant to which any written complaint, allegation Group Company is directly or notice contingently liable (as a co-xxxxxx or otherwise) for any obligation of inquiry or investigation from any Franchisee, employee (ii) a lessor or sublessor of a any real or personal property to any Franchisee, third or (iii) a party or Governmental Authority, alleging that the Franchisor is or may be joint employers with, or subject to joint employment liability with, any financing arrangement with any Franchisee. The Franchisor .
(l) No Group Company has properly classified each engaged or hired an agent, broker, third party, Franchisee as an independent contractor and not an employee under applicable Lawor licensee to provide material services, and assistance or support to the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee or any of a Franchisee’s employees have been to identify, offer or are employees sell to potential Franchisees other than in connection with negotiations with vendors on behalf of the FranchisorCompany or its Subsidiaries.
(m) To the Knowledge of the Company, no franchise association or other organization is acting as a representative of any group of two or more Franchisees. Any franchise council or advisory group presently in place (whether independently formed or sponsored by the Seller Company or its Subsidiaries) is purely advisory in nature. No Group Company has granted any enforceable right of its Subsidiaries first refusal, option or improperly classified as independent contractors in accordance with applicable Lawother right or arrangement to sign any Franchise Agreement or acquire any Franchise Agreement.
Appears in 1 contract
Franchise Matters. Seller represents and warrants the following:
(a) The Franchisor Attached as Franchise Agreement Schedule 3.22
(a) is a true correct and complete list of the only Person existing franchise agreements, master agreements, and development agreements to which Seller is a party in connection with Franchising Activities (collectively, the "Franchise Agreements") and of the only existing leases, licenses and other agreements or contracts to which Seller is a party in connection with Franchising Activities (together with the Franchise Agreements, collectively, the "Franchise Related Contracts"). True, correct and complete copies of the Franchise Related Contracts have been made available to Buyer. Franchise Agreement Schedule 3.22(a) includes with respect to each of the Franchised Businesses (defined below): (i) the date and or agreement number or other identifier of the Franchise Agreement governing the Franchised Business; (ii) the name of the Franchisee, the Address of the Franchised Business; the term commencement and termination date of each Franchise Agreement; (iii) the names of each of each individual or entity that has operated guaranteed the Franchisee's obligations under the Franchise System Agreements, and (iv) whether addenda or sold Franchises of riders to the Business. All such Franchises were sold and/or operated only in the United States of America. Solely for purposes of this Section 3.25, the term “Business” shall not be deemed to include the operation of the Buddy’s Home Furnishings stores by the Seller and its SubsidiariesFranchise Agreements exist.
(b) Section 3.25(b) Except for negotiated changes, the forms of Franchise Agreements previously delivered to Buyer constitute all of the Disclosure Schedule sets forth a complete and accurate list of the Franchisees of the Franchise System, indicating the address of each franchised Sears Outlet store operated by the Franchisee and the scheduled expiration date of the Franchise Agreement evidencing such franchised Sears Outlet store. Except as set forth in the Franchise Agreements, the Franchisor is not limited in its right to grant Franchises or develop (or grant rights to any other Person to develop) any business that competes with any Franchise of the Business.
(c) Each Franchise Agreement is similar in all material respects to the form forms of Franchise Agreement contained in the FDD that was issued to the applicable Franchisee, except for deviations from such form that are contained in such Franchise Agreement or an addendum to such Franchise Agreement, a copy of which has been made available to Purchaser. There are no oral modifications of any Franchise Agreement or oral agreements between any Franchisee and Franchisor relating to matters pertaining to material obligations of such Franchisee thereunder.
(d) Since January 31, 2016, the Franchisor has been at all times in compliance in all material respects with all applicable Franchise Laws Agreements used by Seller in connection with the offer or sale of Franchises of or otherwise in connection with the Business, relationships with Franchisees, the operation of the Franchise System and the termination, non-renewal and transfers of Franchises of the Business and, to the Seller’s Knowledge, no current or former Franchisee or any Governmental Authority has alleged that Franchisor has failed to comply in all material respects with any applicable Franchise Laws during its operation of the Franchise System. No financial performance representations (as defined in the FTC Rule) or any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent or other franchise seller (as defined in the FTC Rule) of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor has used to offer or sell Franchises at any time since January 31, 2016 were prepared and delivered to prospective Franchisees in compliance in all material respects with Franchise LawsFranchised Activities.
(c) Seller has not offered or sold any franchise or business opportunity system other than: (a) the Computer Renaissance(R) System; (b) the "Play It Again Sports(R)" franchise system; (c) the "Once Upon A Child(R)" franchise system; (d) the "Music Go Round(R)" franchise system; (e) Each Franchisee who left the Franchise System since December 1, 2015 has executed agreements with the Franchisor which released the Franchisor and its Subsidiaries and affiliates from any and all Liabilities and claims that such Franchisee had, has or may have against the Franchisor and its Affiliates which relate in any way to the Franchisee’s Franchise Agreement.
(fDisc-Go-Round(R) Since January 31, 2016, all rebates, allowances, discounts or other payments or remunerations received by the Franchisor or the Seller from vendors, suppliers or other third parties, on account of any Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, have been received, administered, disclosed and spent in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs delivered to such Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each case, in all material respects. Except as set forth in the Franchise Agreements, there are no material restrictions on the Franchisor’s use of any such rebates, allowances, discounts or other payments or remuneration for any purpose.
(g) Since January 31, 2016, no Person has alleged, to the Seller’s Knowledge, the Franchisor to be, and the Franchisor has not received any written complaint, allegation or notice of inquiry or investigation from any Franchisee, employee of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers with, or subject to joint employment liability with, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee or any of a Franchisee’s employees have been or are employees of the Franchisor, the Seller or any of its Subsidiaries or improperly classified as independent contractors in accordance with applicable Law.franchise system;
Appears in 1 contract
Samples: Asset Purchase Agreement (Grow Biz International Inc)
Franchise Matters. (a) The Franchisor is the only Person that has operated the Franchise System or sold Franchises Section 1.38 of the BusinessDisclosure Schedule accurately identifies all Franchise Agreements to which the Company is a party that are currently in effect. All such Franchises were sold and/or operated only in the United States of America. Solely for purposes of this Section 3.25, the term “Business” shall not be deemed to include the operation The consummation of the Buddy’s Home Furnishings stores transactions contemplated by this Agreement will not require the Seller and its Subsidiariesconsent of any Franchisee.
(b) With respect to each Franchise Agreement:
(i) neither the Company nor any Franchisee, since January 1, 2002, has delivered a written demand for early termination of any Franchise Agreement;
(ii) the Company has not granted a waiver or consent with respect to a provision of any Franchise Agreement regarding a Franchisee’s obligation to make any monetary payments required by a Franchise Agreement and, since January 1, 2002, the Company has not entered into any written forbearance agreements, settlement agreements, general releases, cancellation agreements, termination agreements with respect to the obligations of a Franchisee under any Franchise Agreement or any purchase agreement for the reacquisition of any restaurants operated by a Franchisee.
(iii) the Company has in its possession an original executed copy or an exact photocopy of each Franchise Agreement. A true, complete and accurate copy of each Franchise Agreements has been delivered to the Buyer. Since January 1, 2002, no Franchise Agreement has been transferred or sold by a Franchisee.
(c) Section 3.25(b4.26(c) of the Disclosure Schedule sets forth a complete and accurate list each state or other jurisdiction in which Company: (i) since January 1, 2002, has filed, or caused to be filed, applications for registration of the Franchisees sale of the Franchise System, indicating the address franchises and/or applications or notices of each franchised Sears Outlet store operated by the Franchisee exemption from such registration and the scheduled date of registration or the grant of exemption; and (ii) is currently registered to sell franchises, together with the effective date and expiration date of any such registration or exemption.
(d) To Seller’s Knowledge, since January 1, 2002, the Franchise Agreement evidencing such franchised Sears Outlet store. Company has made all disclosures in its franchise offering circulars required by all applicable federal and state laws and regulations which govern the sale of franchises, and neither Company nor any of its employees or agents have offered for sale, accepted an offer, or sold a franchise except in compliance in all material respects with all applicable federal and state laws and regulations which govern the sale of franchises.
(e) Except as set forth in the Franchise Agreements, the Franchisor is no Franchisee has a protected territory, exclusive territory, covenant not limited in its to compete, right to grant Franchises of first refusal, option or develop (or grant rights to any other Person to develop) any business that competes arrangement with any Franchise of the Business.
(c) Each Franchise Agreement is similar in all material respects respect to the form of Franchise Agreement contained in the FDD that was issued to the applicable Franchisee, except for deviations from such form that are contained in such Franchise Agreement or an addendum to such Franchise Agreement, a copy of which has been made available to Purchaser. There are no oral modifications of any Franchise Agreement or oral agreements between any Franchisee and Franchisor relating to matters pertaining to material obligations of such Franchisee thereunder.
(d) Since January 31, 2016, the Franchisor has been at all times in compliance in all material respects with all applicable Franchise Laws in connection with the offer or sale of Franchises of the Business, relationships with Franchisees, the operation of the Franchise System and the termination, non-renewal and transfers of Franchises of the Business and, to the Seller’s Knowledge, no current or former Franchisee or any Governmental Authority has alleged that Franchisor has failed to comply in all material respects with any applicable Franchise Laws during its operation of the Franchise System. No financial performance representations (as defined in the FTC Rule) or any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent or other franchise seller (as defined in the FTC Rule) of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor has used to offer or sell Franchises at any time since January 31, 2016 were prepared and delivered to prospective Franchisees in compliance in all material respects with Franchise Laws.
(e) Each Franchisee who left the Franchise System since December 1, 2015 has executed agreements with the Franchisor which released the Franchisor and its Subsidiaries and affiliates from any and all Liabilities and claims that such Franchisee had, has or may have against the Franchisor and its Affiliates which relate in any way to the Franchisee’s Franchise Agreement.
(f) Since January 31, 2016, all rebates, allowances, discounts or other payments or remunerations received by the Franchisor or the Seller from vendors, suppliers or other third parties, on account of any Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, have been received, administered, disclosed and spent in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs delivered to such Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each case, in all material respects. Except as set forth in the Franchise Agreements, there are no material restrictions on the Franchisor’s use of any such rebates, allowances, discounts or other payments or remuneration for any purpose.
(g) Since January 31, 2016, no Person has alleged, to the Seller’s Knowledge, the Franchisor to be, and the Franchisor has not received any written complaint, allegation or notice of inquiry or investigation from any Franchisee, employee of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers with, or subject to joint employment liability with, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee or any of a Franchisee’s employees have been or are employees of the Franchisor, the Seller or any of its Subsidiaries or improperly classified as independent contractors in accordance with applicable Law.or
Appears in 1 contract
Franchise Matters. (a) The Franchisor is the only Person that has operated the Franchise System offered or sold Franchises a Franchise and has made available to Purchaser accurate and complete copies of the Businesseach Franchise Agreement and any amendments, addenda or agreements related thereto currently in effect. All such Franchises were sold and/or operated only in the United States of America. Solely for purposes of this Section 3.25, the term “Business” shall not be deemed to include the operation of the Buddy’s Home Furnishings stores by the Seller and its Subsidiaries.
(bSchedule 5.23(a) Section 3.25(b) of the Disclosure Schedule sets forth a complete and accurate list of all currently effective Franchise Agreements, including the Franchisees name and business address of all currently existing Franchisees. Each of the Franchise SystemAgreements is in full force and effect, indicating the address and is a legal, valid and binding obligation of each franchised Sears Outlet store operated by the Franchisee Franchisor and the scheduled expiration date of the other parties thereto and is enforceable in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other Laws affecting the enforcement of creditors’ rights generally and general equitable principles and Laws related to the availability of specific performance, injunctive relief or other equitable remedies. No Franchisee is operating under a Franchise Agreement evidencing such franchised Sears Outlet storethat is oral or expired.
(b) Schedule 5.23(b) lists any Franchisee who is financially in arrears over thirty (30) days under payment obligations to the Company, Franchisor or a Subsidiary, or otherwise is, to Company’s knowledge, in material non-payment default under the applicable Franchise Agreement as of the date hereof, including any development schedule under a multi-unit agreement or area development agreement. Except as set forth To the Company’s knowledge, no Franchisee is in the Franchise Agreementsviolation, the Franchisor is not limited in its right to grant Franchises breach or develop (or grant rights to default of any other Person to develop) any business that competes with material provision of any Franchise Agreement. Franchisor has not received written or, to the Company’s knowledge, oral notice that a Franchisee intends or threatens to cease to do business within twelve (12) months of Closing. Since the BusinessOriginal Acquisition Date, Franchisor has not delivered written notice to a Franchisee pursuant to such Franchisee’s Franchise Agreement that Franchisee is in material violation of, or material breach or material default under, such Franchise Agreement.
(c) Each Franchise Agreement Neither the Company nor any of its Subsidiaries (including Franchisor) is similar in all material respects to the form of Franchise Agreement contained in the FDD that was issued to the applicable Franchisee, except for deviations from such form that are contained in such Franchise Agreement or an addendum to such default under any Franchise Agreement. Since the Original Acquisition Date, no event has occurred that with the lapse of time or the giving of notice or both would constitute a copy material breach or material default on the part of which has been made available to Purchaserthe Company or any of its Subsidiaries (including Franchisor) under any Franchise Agreement. There are is no oral modifications material basis for any claim or demand by any Franchisee for rescission of any Franchise Agreement and no Franchisee is entitled to any material set-off or material reduction in any payment required under any Franchise Agreement. No Franchisee has given written or oral agreements between notice to the Company or any Franchisee and Franchisor relating of its Subsidiaries, including Franchisor, of an intention to matters pertaining exercise any termination rights with respect to material obligations of such Franchisee thereunderor refuse to renew any existing Franchise Agreement.
(d) Since January 31(i) there are no oral or verbal agreements modifying in any material respects any of the existing Franchise Agreements, 2016including any waivers of any material right of Franchisor, the Franchisor has been at Company or any of its Subsidiaries or any material obligation of any Franchisee; (ii) neither Franchisor, the Company nor any of its Subsidiaries have entered into or are bound by any agreements, promises or undertakings with Franchisees to reduce current or future fees or royalty payments due under an existing Franchise Agreement or any Franchise Agreement to be signed after the date hereof, (iii) no Franchise Agreement or other Contract imposes on Franchisor, the Company or any of its Subsidiaries any obligation to guarantee the lease obligations, third-party financing obligations or other liability of any Franchisee to any third party and (iv) the existing Franchise Agreements are in substantially the same form as the forms attached to the most recent FDD provided to the applicable Franchisee prior to signing the Franchise Agreement, with no material negotiated terms that are materially adverse to the Company or any of its Subsidiaries.
(e) True, correct and complete copies of all times in compliance in all material respects with all applicable Franchise Laws forms of FDDs used by Franchisor, the Company or any of its Subsidiaries in connection with the offer or sale of Franchises of since the BusinessOriginal Acquisition Date have been made available to Purchaser. Each FDD was prepared in all material respects in compliance with the FTC Rule and all applicable Franchise Laws. No FDD contains any statement which is false or misleading with respect to any material fact or omits any material fact required to be stated therein. Since the Original Acquisition Date, relationships with Franchiseesneither Franchisor, the operation Company, nor any of the its Subsidiaries has authorized any of their officers, directors, employees or sales representatives (including any Franchise System and the terminationBrokers) to furnish, non-renewal and transfers of Franchises of the Business and, to the SellerCompany’s Knowledgeknowledge, no current none of their officers, directors, employees or former Franchisee sales representatives (including Franchise Brokers) has furnished, any materials or any Governmental Authority has alleged that Franchisor has failed to comply in all material respects with any applicable Franchise Laws during its operation of the Franchise System. No information constituting a financial performance representations representation (as defined in the FTC Rule) ), which is in addition to, or inconsistent with any financial performance representations or any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent or other franchise seller (as defined set forth in the FTC Rule) of the Franchisorapplicable FDD, in each case, other than as disclosed permitted by, and in accordance with, Franchise Laws. Franchisor has retained properly signed FDD receipts required by Franchise Laws evidencing compliance with disclosure waiting periods under applicable Franchise Laws with respect to all Franchises since the Original Acquisition Date.
(f) Schedule 5.23(f) sets forth the jurisdictions in which Franchisor has operated since the Original Acquisition Date, and such list identifies the effective and expiration dates (as applicable) since the Original Acquisition Date for each state franchise disclosure document for registration to offer and sell Franchises and each exemption from such state franchise registration under any relevant Franchise Law. Since the Original Acquisition Date, Franchisor is and has been in material compliance with all applicable Franchise Laws in connection with the offer or sale of Franchises (including being registered or exempt with appropriate Governmental Bodies at the time of such offer and sale in any jurisdiction that requires the registration of franchises) and the ongoing relationships with Franchisees, and the termination, non-renewal and transfers of Franchises. Since the Original Acquisition Date, Franchisor has not received any written notice relating to any alleged violation of any applicable Franchise Laws from any Governmental Body or any Franchisee, or of any investigation with respect thereto. Since the Original Acquisition Date, no current or former Franchisee or any Governmental Body has alleged in writing that Franchisor has failed to materially comply with any applicable Franchise Laws during the offer and sale of a Franchise or the operation of the Franchise System. All FDDs that Since the Original Acquisition Date, Franchisor has used not received any written notice of actual or threatened termination, revocation, suspension, condition or dissolution of any such state franchise registration or indicating that it would be unable to offer renew any such state franchise registration or sell Franchises at enter into Franchise Agreement in any time since January 31such jurisdiction, 2016 were prepared other than comment letters, requests for information and delivered other routine inquiries.
(g) Schedule 5.23(g) lists, with respect to prospective each multi-unit option or development agreement currently in effect as of the date of this Agreement, including as to each (i) an identification of the Franchisee, (ii) the number of scheduled Franchised Restaurants to be opened and operated thereunder (both through the date hereof and cumulatively through the term of each such multi-unit option or development agreement), (iii) the actual number of Franchised Restaurants thereunder opened and operating as of the date hereof and (iv) any written or oral amendments, modifications or waivers applicable thereto. There are no Franchisees in compliance which Franchisor, the Company or any of its Subsidiaries reasonably expect will not timely comply in all material respects with Franchise Laws.
(e) Each Franchisee who left the Franchise System since December 1, 2015 has executed agreements with the Franchisor which released the Franchisor and its Subsidiaries and affiliates from their development obligations under any and all Liabilities and claims that such Franchisee had, has or may have against the Franchisor and its Affiliates which relate in any way to the Franchisee’s Franchise Agreement.
(fh) To the Company’s knowledge, no Franchisee is in the midst of a workout or other financial restructuring or has commenced any insolvency, bankruptcy or similar proceeding, or, to the Company’s knowledge, is contemplating, determined or scheduled to undertake or commence any of the foregoing.
(i) Schedule 5.23(i) sets forth the name of all advertising and promotion funds or cooperatives currently administered by or paid to Franchisor, the Company or its Subsidiaries on behalf of any Franchisees and there are no loans currently owed to or owing from any such funds or cooperatives. All funds administered by or paid to the Company, its Subsidiaries or Franchisor on behalf of one (1) or more Franchisees since the Original Acquisition Date, including funds that Franchisees contributed for marketing, advertising and promotional activities, and rebates and other payments made by suppliers and other third parties on account of Franchisees’ purchases from those suppliers and third parties, have been disclosed, administered and spent in compliance with all material respects of the Franchise Agreements and all applicable Laws.
(j) (i) there are no actions, suits or proceedings or material disputes pending or overtly threatened against the Company or any of its Subsidiaries (including Franchisor), with or by any Franchisee or association purporting to represent a group of Franchisees and (ii) neither Franchisor, the Company nor any of its other Subsidiaries is subject to any stop order, consent decree or material judgment with respect to the offer or sale of Franchises in any jurisdiction.
(k) Any material written or oral Contracts in effect and used by Franchisor to engage or hire any Franchise Brokers have been made available to Purchaser and Franchisor is in material compliance with any such Contracts with the Franchise Brokers. To the Company’s knowledge, since the Original Acquisition Date, no Franchise Broker has provided information to prospective franchisees of a Franchise that materially differs from the information contained in the FDDs then in effect. Schedule 5.23(k) contains a list of each Franchise Broker currently providing services to Franchisor or that is entitled to receive any accrued consideration from Franchisor based on services previously provided by the Franchise Broker to Franchisor.
(l) (i) no franchise association, council, advisory group or other organization is presently acting as a representative of any group of two (2) or more Franchisees, whether independently formed or sponsored by Franchisor and (ii) any such franchise association, council, advisory group or other organization is purely advisory in nature. Franchisor has made available to Purchaser true, correct and complete copies of all material correspondence with any franchisee association since the Original Acquisition Date.
(m) Since January 31the Original Acquisition Date, 2016neither Franchisor, all its Affiliates, the Company nor its Subsidiaries, have received any rebates, allowances, discounts discounts, advertising contributions or other payments or remunerations received by the Franchisor or the Seller remuneration from vendors, suppliers or other third parties, on account of any Franchisee’s direct or indirect Franchisees’ purchases from those vendors, suppliers or third parties, that have not been received, administered, properly disclosed and spent in accordance the FDDs in material compliance with the operation manuals utilized by the Franchise System, all Franchise Laws.
(n) No Franchisee has been granted protected or exclusive territory rights, the FDDs delivered to such Franchiseesa designated area, the applicable Franchise Agreementor an option, and right of first refusal or other applicable Contracts associated with the Franchise Systemarrangement regarding additional territory rights (collectively, in each case“Territorial Rights”), in all material respects. Except except as set forth in the Franchise Agreements or such rights are no longer in effect or available for exercise in the future. No Territorial Rights violate the contractual Territorial Rights of any other current Franchisee. To the extent Franchisor has granted any such Territorial Rights (whether disclosed or required to be disclosed herein), to the Company’s knowledge, such Person has not violated the Territorial Rights of any Franchisee. Other than rights granted to Franchisees under Franchise Agreements, there are no material restrictions on Franchisor does not have any written policies or procedures which in any way restrict or limit Franchisor’s, the FranchisorCompany’s use or any of its Subsidiaries’ right to own or operate, or license others to own or operate, any such rebates, allowances, discounts or other payments or remuneration for business in any purposegeographic location.
(go) Since January 31the Original Acquisition Date, 2016, no Person has alleged, to the Seller’s Knowledgeneither Franchisor, the Franchisor to be, and the Franchisor Company nor any of its Subsidiaries has not received any written complaint, allegation or notice of inquiry inquiry, audit or investigation from any Franchisee, employee or independent contractor of a Franchisee, third party or Governmental AuthorityBody, alleging that Franchisor, the Franchisor is Company or any of its Subsidiaries are or may be be, joint employers with, or co-employers with or subject to joint employment liability with, any the Franchisee, or a single employer of such employees or contractors. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to To the SellerCompany’s Knowledgeknowledge, no written complaint, allegation or notice has been made or received since January 31the Original Acquisition Date, 2016 that any Franchisee or any of a Franchisee’s employees have been or are employees of the Franchisor, the Seller Company or any of its Subsidiaries or improperly classified as independent contractors in accordance with applicable LawLaws. Neither the Company nor any of its Subsidiaries (including Franchisor) exercise direction or control over, reserve the right to exercise direction or control over, or issue any policies relating to, any of Franchisee’s employees, including hiring, firing, disciplining, compensation, benefits, supervision, and scheduling. To the Company’s knowledge, no Franchisee is a party to or bound by any Collective Bargaining Agreement, and no union organizing or certification or decertification activities are underway or threatened with respect to the employees of any of the Franchisees, and no such activities have occurred since the Original Acquisition Date. To the Company’s knowledge, with respect to employees and independent contractors of the Franchisees, the Franchisees are, and since the Original Acquisition Date, have been, in compliance in all material respects with all applicable labor and employment Laws.
(p) Since the Original Acquisition Date, with respect to all terminations, non-renewals and transfers of Franchises, Franchisor’s enforcement of rights under the Franchise Agreements, and otherwise regarding the relationship between Franchisor and any Franchisee, Franchisor has complied in all material respects with all applicable Franchise Laws and the requirements of the applicable Franchise Agreements, including requirements with respect to the proper notice of default, time to cure, and the actual termination of any Franchise Agreement. To the Company’s knowledge, no former Franchisee is currently, or since the Original Acquisition Date has been, in violation of any post-termination obligation (including non-competition covenant) under a Franchise Agreement.
(q) Franchisor’s operations manual and any other material documents and material communications that have been made available to Franchisees related to the standards, specifications and operating procedures for a Franchise, and Franchisor’s enforcement of the standards and other provisions contained therein, do not conflict in any material respect with the Franchise Agreement or any other Laws.
(r) The consummation of the transactions contemplated by this Agreement will not require the consent or approval by a Franchisee nor cause the material violation of or material default under, nor give rise to a right of termination, modification, cancellation, rescission or acceleration of any obligation, or loss of rights or benefits under, any Franchise Agreement.
Appears in 1 contract
Franchise Matters. (a) The Franchisor is the only Person that Except as has operated the Franchise System not had and would not reasonably be expected to have, individually or sold Franchises of the Business. All such Franchises were sold and/or operated only in the United States of America. Solely for purposes of this Section 3.25aggregate, a Material Adverse Effect, (i) subject to the term “Business” shall not be deemed to include the operation of the Buddy’s Home Furnishings stores by the Seller Bankruptcy and its Subsidiaries.
(b) Section 3.25(b) of the Disclosure Schedule sets forth a complete and accurate list of the Franchisees of the Franchise SystemEquity exception, indicating the address of each franchised Sears Outlet store operated by the Franchisee and the scheduled expiration date of the Franchise Agreement evidencing such franchised Sears Outlet store. Except as set forth in the Franchise Agreements, the Franchisor is not limited in its right to grant Franchises or develop (or grant rights to any other Person to develop) any business that competes with any Franchise of the Business.
(c) Each Franchise Agreement is similar in all material respects valid and binding on Seller and/or any of its Subsidiaries to the form extent such Subsidiary is a party thereto, as applicable, and to the Knowledge of Seller, each other party thereto, and is in full force and effect and enforceable in accordance with its terms, (ii) Seller and each of its Subsidiaries, and, to the Knowledge of Seller, any other party thereto, has performed all obligations required to be performed by it under each Franchise Agreement, (iii) neither Seller nor any of its Subsidiaries has received written notice of the existence of any event or condition which constitutes, or, after notice or lapse of time or both, will constitute, a default on the part of Seller or any of its Subsidiaries under any Franchise Agreement contained in the FDD that was issued to the applicable from any other Franchisee, except for deviations from such form that (iv) there are contained in such Franchise Agreement no events or an addendum to conditions which constitute, or, after notice or lapse of time or both, will constitute a default on the part of any counterparty under such Franchise Agreement, a copy (v) to the Knowledge of which Seller, neither Seller nor any Subsidiary has been made available to Purchaser. There are no oral modifications not received any written notice from any Franchisee that such Franchisee is claiming that the franchisor is in breach of any Franchise Agreement, intends to terminate, or not renew, any Franchise Agreement, or is seeking the renegotiation thereof in any material respect or substitute performance thereunder in any material respect, and (vi) the completion of the Transactions contemplated by this Agreement will not cause the expiration, termination or oral agreements between constitute a breach of any Franchisee and Franchisor relating to matters pertaining to Franchise Agreement, or the acceleration of any payment obligation or the alteration of any material obligations terms of such Franchisee thereunder.
(d) Since January 31, 2016, the Franchisor has been at all times in compliance any Franchise Agreement. The Franchise Agreements comply in all material respects with all applicable Laws. No Franchise Laws in connection with Agreement contains a provision that requires the offer consent or sale of Franchises approval of the Business, relationships with Franchisees, Franchisee to the operation of the Franchise System and the termination, non-renewal and transfers of Franchises of the Business Transactions and, to the Knowledge of Seller’s Knowledge, no current neither Seller nor any of its Subsidiaries has made any oral or former written representation, warranty or covenant to any Franchisee that a change of control of Seller or any Governmental Authority has alleged of its Subsidiaries will not occur or that Franchisor has failed such Franchisee’s consent to comply in all material respects with any applicable change of control would be sought or obtained prior to or as part of any such change of control. No Franchise Laws during its operation Agreement is subject to any right of rescission, set-off, counterclaim or defense, and neither the terms of the Franchise System. No financial performance representations Agreement, nor the exercise of any rights thereunder, will render the Franchise Agreement unenforceable, in whole or in part, nor give to the Franchisee any right of rescission, set-off, counterclaim or defense, except in each case as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) As of the date hereof, except for Persons who have signed Commitment Agreements (as defined in the FTC Rule) applicable FDD used by Seller or any of its Subsidiaries) substantially in the form attached to the applicable FDD and existing Franchise Agreements under which the Franchisee has the right to develop multiple franchised businesses (each of which are identified on Section 3.21(b) of the Seller Disclosure Letter), no Franchisee or other representations concerning actual Person has any enforceable right of first refusal, option or projected revenuesother right or arrangement to sign any Franchise Agreement or acquire any franchise from Seller or any of its Subsidiaries.
(c) To the Knowledge of Seller, earningsall funds administered by or paid to Seller or any Subsidiary on behalf of one or more Franchisees at any time since January 1, income or profits 2007, including funds that Franchisees contributed for advertising and promotion and rebates and other payments made by suppliers and other third parties on account of Franchisees’ purchases from those suppliers and third parties, have been made in all material respects administered and spent in accordance with all applicable Laws and the Franchise Agreements.
(d) Either the applicable FDD or Section 3.21(d) of the Seller Disclosure Letter contains a summary of all Franchise-related Actions which are pending or, to the Knowledge of Seller, threatened in writing by any Franchisee or any prospective Franchisee by the Franchisor association purporting to represent a group of Franchisees except where such Actions have not had and would not reasonably be expected to have, individually or any franchise broker, agent or other franchise seller (as defined in the FTC Ruleaggregate, a Material Adverse Effect.
(e) Section 3.21(e) of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All Seller Disclosure Letter sets forth a list of all FDDs that the Franchisor has Seller or any of its Subsidiaries have used to offer or sell Franchises at any time since January 311, 2016 were prepared 2007. Seller has delivered to Purchaser accurate and complete copies of each such FDD. All FDDs that Seller or any of its Subsidiaries have used to offer or sell franchises at any time since January 1, 2007 have complied in all material respects as to form and content with the FTC Rule and other Franchise Laws and have otherwise been delivered to prospective Franchisees in compliance in all material respects with the Franchise Laws.
(e) Each Franchisee who left , and no such FDD contains any statement which is false or misleading with respect to any material fact, or omits to state any material fact required to be stated therein or necessary in order to make the Franchise System since December 1, 2015 has executed agreements with statements made therein not false or misleading in light of the Franchisor circumstances under which released the Franchisor and its Subsidiaries and affiliates from any and all Liabilities and claims that such Franchisee had, has or may have against the Franchisor and its Affiliates which relate in any way to the Franchisee’s Franchise Agreementthey are made.
(f) Since January 31, 2016, all rebates, allowances, discounts or other payments or remunerations received by the Franchisor or Section 3.21(f) of the Seller from vendorsDisclosure Letter sets forth, suppliers or other third partieswith respect to each applicable Subsidiary, on account of any Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, have been received, administered, disclosed and spent in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs delivered to such Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each case, in all material respects. Except as set forth in the Franchise Agreements, there are no material restrictions on the Franchisor’s use of any such rebates, allowances, discounts or other payments or remuneration for any purpose.
(g) Since January 31, 2016, no Person has alleged, to the Seller’s Knowledge, the Franchisor to be, and the Franchisor has not received any written complaint, allegation or notice of inquiry or investigation from any Franchisee, employee of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers with, or subject to joint employment liability with, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee or any of a Franchisee’s employees have been or are employees list of the Franchisor, the jurisdictions in which Seller or any of its Subsidiaries is currently registered or improperly classified authorized to offer and sell Franchises, or is exempt from such registration, under a Franchise Law. There are no stop orders or other material proceedings in effect or, to the Knowledge of Seller, threatened in writing that prohibit or materially impede the ability of Seller and its Subsidiaries to offer or sell Franchises or enter into Franchise Agreements.
(g) Seller and the Subsidiaries are, and since January 1, 2007 have been, in compliance with all Franchise Laws and have not offered or sold any Franchise in violation of any Franchise Law (including by filing on a timely basis all required amendments and renewals of the registrations and exemptions under the Franchise Laws), except for such non-compliance as independent contractors would not either individually or in accordance the aggregate reasonably be expected to have a Material Adverse Effect.
(h) To the Knowledge of Seller, with respect to all terminations, non-renewals, and transfers of Franchises since January 1, 2007, Seller and the applicable LawSubsidiary have complied in all material respects with all applicable franchise termination, unfair practices, and/or relationship Laws, including to those Laws’ requirements with respect to the proper notice of default, time to cure, and the actual termination of any Franchisee.
Appears in 1 contract
Franchise Matters. (a) The Franchisor is the only Person that has operated the Franchise System or sold Franchises Except as set forth in Schedule 3.24 of the Business. All such Disclosure Schedules, no Company Entity has as of the date of this Agreement: (i) sold or granted a Franchise in or for any country other than the United States; (ii) sold or granted another Person the right to offer or sell Franchises were sold and/or operated only in or for any country other than the United States; or (iii) filed or registered with any Governmental Entity outside of the United States of Americato offer or sell Franchises. Solely for purposes of this Section 3.25Other than the Franchisor(s), the term “Business” shall not be deemed no Company Entity has owned or operated any Franchise System, been a party to include the operation of the Buddy’s Home Furnishings stores by the Seller and its Subsidiariesany Franchise Agreement, or granted any Franchises.
(b) Section 3.25(bSchedule 3.24(b) of the Disclosure Schedule Schedules sets forth a true, correct and complete list, in all material respects, of all Franchise Agreements that are currently between either Franchisor and accurate list any Franchisee as of the Franchisees date of this Agreement; segregating the Franchise Agreements by Franchisor and by country where Franchisee is located, and which list includes for each Franchise Agreement (i) the type of Franchise Agreement, whether a franchise agreement, a PBA, license agreement or a multiple unit or territory development agreement, (ii) the name of the Franchisee, (iii) the business address of the franchised or licensed location operated by the Franchisee, and, if applicable, a general description of the development area or territory assigned to each Franchisee (including territory that is considered protected or exclusive and any territory assigned under a Franchise Agreement on a non-protected basis), (iv) the effective date, (v) expiration date, (vi) any “most favored nations” pricing terms (or similar provisions in which pricing, discounts or benefits are based on those provided to another Person), (vii) any enforceable right of first refusal, option or other right or arrangement to sign any Franchise Agreement or acquire any Franchise that is not included in the standard Franchise Agreement included with its applicable FDD, and (viii) any limits on the ability of any Company Entity from engaging in any line of business or that otherwise contains a covenant not to compete applicable to any such Company Entity. Except as set forth on Schedule 3.24(b) of the Disclosure Schedules, all Franchise Agreements are substantially similar to the then-current form of Franchise Agreement offered in the then-current FDD at the time such Franchise Agreements were executed. Except as set forth on Schedule 3.24(b) of the Disclosure Schedule, under Franchisor’s standard practice, in connection with each Franchise Agreement executed by Franchisor, if Franchisor agrees to any material changes or deviations from the terms contained in the then-current standard form of the franchise agreement, license agreement, and development agreement provided in the FDD used in connection with the sale of such Franchise Agreement, such material changes, waivers, extensions, renewals, or other modifications are memorialized in a document separate from Franchise Agreement executed in connection with the sale of such Franchise or in an exhibit or addendum to the Franchise Agreement where such terms are clearly identified as modification(s) to the body of the Franchise SystemAgreement. The Company has made available to Buyer true, indicating the address correct and complete copies of each franchised Sears Outlet store operated by the Franchisee and the scheduled expiration date of the all currently effective Franchise Agreement evidencing such franchised Sears Outlet storeAgreements. Except as set forth in Schedule 3.24(b) of the Disclosure Schedules, none of the Company Entities has guaranteed obligations of any Franchisee, Franchisee owner or Affiliate with respect to any material obligations, liabilities or indebtedness of the Franchise AgreementsBusiness, including regarding any lease. As used in this Section 3.24(b), “currently effective” refers to the Franchisor is not limited in its right to grant Franchises or develop (or grant rights to any other Person to develop) any business Franchise Agreements that competes with any Franchise have been fully executed as of the Businessdate of this Agreement, other than with respect to Franchise Agreements that have either expired in accordance with their terms (and were not renewed or extended) or which have been terminated by the Franchisor.
(c) Each Except for breaches of contract or non-compliance with contracts which would not, individually or in the aggregate, be material to the Company Entities, taken as a whole, each Franchise Agreement is similar a valid and binding agreement of the Franchisor, is in full force and effect, and is enforceable against the Franchisor, and, is valid, binding and enforceable against each Franchisee in accordance with its terms, in all material respects, and not currently subject to any material claim of, or right to, termination or rescission by any Franchisee, or to the Knowledge of the Company, any third party thereto, except, in each case: (i) to the extent such Franchise Agreement terminates or expires after the date of this Agreement in accordance with its terms; or (ii) as limited by the application of bankruptcy, moratorium, and other laws affecting creditors’ rights generally and as limited by the availability of specific performance and the application of equitable principles. Except as set forth on Schedule 3.24(c) of the Disclosure Schedules, each Franchise Agreement complies in all material respects with all applicable Laws and any applicable Orders from any Governmental Entity having jurisdiction with respect to the form offer and sale of Franchise Agreement contained in Franchises by the FDD that was issued to the applicable FranchiseeFranchisor or other Company Entity, except for deviations from such form that are contained breaches of contract or non-compliance with contracts which would not, individually or in such the aggregate, be material to the Company Entities, taken as a whole. The personal guarantees made by an owner of Franchisee to the Company Entity in connection with the respective Franchise Agreement or an addendum to such Franchise Agreement, a copy of which has been made available to Purchaser. There are no oral modifications of any Franchise Agreement or oral agreements between any Franchisee constitute valid and Franchisor relating to matters pertaining to material binding obligations of the applicable guarantor, enforceable against such Franchisee thereunderguarantor in accordance with their respective terms, in all material respects, except as would not, individually or in the aggregate, expected to be material to the Company Entities, taken as a whole.
(d) Since January 31Except as set forth on Schedule 3.24(d) of the Disclosure Schedules to the Knowledge of the Company, 2016(i) each Franchisee is in compliance with its obligations pursuant to its respective Franchise Agreement in all material respects, except for non-compliance which would not, individually or in the aggregate, be material to the Company Entities, taken as a whole, (ii) there are no pending workouts, reinstatements, or other arrangements for the purpose of curing a default notice or terminating any Franchise Agreement and (iii) no Franchisee has given written notice to any Company Entity of its intention to (A) exercise any termination rights with respect to its Franchise Agreement, (B) decline to renew its Franchise Agreement or (C) otherwise cease or materially and adversely change its business relationship with any Company Entity. Neither Franchisor nor any other Company Entity has waived in writing, or to the Knowledge of the Company, has by practice waived, any material right or benefit of the Franchisor or Company Entity, or any material obligation of any Franchisee, under any Franchise Agreement, except as would not expected to be material to the Company Entities, taken as a whole. To the Knowledge of the Company, as of the date hereof, no Franchisee is involved as a debtor in any bankruptcy proceeding. Schedule 3.24(d) of the Disclosure Schedules provides the following: (x) a list of all written notices of non- compliance, default and/or termination that Franchisor has issued since the Lookback Date to Franchisees under currently effective Franchise Agreements in the period since the Lookback Date, and indication, to the extent of the Company’s Knowledge, of whether default has been at cured or otherwise remedied; and (y) a list of all times Franchise Agreements that, since the Lookback Date, were terminated by Franchisor due to Franchisee default or not renewed by Franchisor due to default or non-compliance of Franchisee, and for each such Franchise Agreement, identify any written agreement between Franchisor and Franchisee regarding the termination or non-renewal.
(e) Except as set forth in Schedule 3.24(e) of the Disclosure Schedules, (i) Franchisor has not, since the Lookback Date received written notice, or to the Knowledge of the Company, verbal notice, from any current or former Franchisee claiming that any Franchisor is in breach or default of any Franchise Agreement in any material respect and (ii) to the Knowledge of the Company, no event has occurred that, with notice, lapse of time, or both, would permit the termination of any currently effective Franchise Agreement by any Franchisee.
(f) To the Knowledge of the Company, no Franchisee’s protected or exclusive territory rights or designated area are violated in any material respect by another Franchisee’s Franchise Business, protected area, development area, or exclusive territory rights or designated area.
(g) Each of the Company Entities are, and since the Lookback Date have been, in compliance in all material respects with all applicable Franchise Laws and have not offered or sold any Franchise in connection with the offer or sale violation of Franchises of the Businessany Franchise Law, relationships with Franchisees, the operation of the Franchise System and the termination, except for such non-renewal and transfers of Franchises of compliance that would not, individually or in the Business andaggregate, be material to the Seller’s KnowledgeCompany Entities, no current or former Franchisee or any Governmental Authority has alleged that Franchisor has failed to comply in all material respects with any applicable Franchise Laws during its operation of the Franchise Systemtaken as a whole. No financial performance representations (as defined in the FTC Rule) or any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent or other franchise seller (as defined in the FTC RuleSchedule 3.24(g) of the FranchisorDisclosure Schedules sets forth a true, other than as disclosed in the franchise disclosure document for the Franchise System. All correct and complete list of all forms of FDDs that the Franchisor any Company Entity has used to offer or sell Franchises at any time since January 31the Lookback Date and prior to the date of this Agreement, 2016 were including the time period of effectiveness of each such FDD form. The Company Entities have made available to Buyer accurate and complete copies of each such form of FDD. Since the Lookback Date, all FDDs that either Franchisor has used to offer or sell Franchises have been prepared in accordance with and are compliant with applicable Franchise Laws, including the disclosures do not omit any material fact necessary to make the statements made therein not misleading, except as would not be material to the Company Entities, taken as a whole. Except as would not be material to the Company Entities, taken as a whole, since the Lookback Date, Franchisor has timely delivered to all prospective Franchisees a complete and accurate copy of the Franchisor’s appropriate FDD in accordance with applicable Franchise Laws and has obtained and retained executed FDD receipts evidencing compliance in all material respects with disclosure waiting periods under the applicable Franchise Laws, except for such non-compliance that would not, individually or in the aggregate, be material to the Company Entities, taken as a whole, in connection with all Franchise Agreements executed since the Lookback Date. Since the Lookback Date, to the Knowledge of the Company, neither the Franchisor nor any franchise sellers have made any representations to any prospective Franchisee that are inconsistent with the information contained in the then-current FDD. Since the Lookback Date, no “Financial Performance Representation” (as defined in the FTC Rule) has been made to any prospective Franchisee by Franchisor or any franchise sellers, except for any Financial Performance Representations made in a FDD properly disclosed by Franchisor or made in connection with a franchise sale that is not subject to, or are exempt from, Franchise Law that would otherwise restrict Franchisor from providing a Financial Performance Representation.
(eh) Each Franchisee who left Schedule 3.24(h) of the Franchise System since December 1Disclosure Schedules sets forth a true, 2015 has executed agreements with correct and complete list (segregated by Franchisor) of the jurisdictions in which the Franchisor which released currently is, or since the Franchisor Lookback Date has been at any time, offering or selling Franchises, and its Subsidiaries such list identifies the effective and affiliates expiration dates (as applicable) for each registration (or exemption from any registration) to offer and all Liabilities sell Franchises under a Franchise Law during such period. Except as set forth on Schedule 3.24(h) of the Disclosure Schedules, there are no, and claims since the Lookback Date there have been no, (i) stop orders or other Actions in effect that such Franchisee hadprohibited or impeded Franchisor, has or may have against prohibit or impede Franchisor after the Franchisor and its Affiliates which relate Closing Date, from offering or selling Franchises or entering into Franchise Agreements, or (ii) written notice of any proceeding by any Governmental Entity alleging that the FDDs of the Franchisor, or any Franchise offering or sales activity (whether by a Franchisor, other Company Entity, or any other franchise sellers) violates or violated any Franchise Laws in any way material respect, other than routine comment letters and other routine inquiries. Except as set forth on Schedule 3.24(h) of the Disclosure Schedules, since the Lookback Date, no Governmental Entity has imposed a financial condition or sought financial assurance with respect to the Franchiseeregistration of Franchisor’s Franchise Agreementoffering, which would require Franchisor to defer or escrow initial fees, provide a guaranty, or post a surety bond.
(fi) Since January 31, 2016, all rebates, allowances, discounts or other payments or remunerations received by the Franchisor or the Seller from vendors, suppliers or other third parties, on account of any Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, have been received, administered, disclosed and spent in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs delivered to such Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each case, in all material respects. Except as set forth in the Franchise AgreementsFDDs or on Schedule 3.24(i) of the Disclosure Schedules, there are no material restrictions on since the Franchisor’s use Lookback Date, none of the Company Entities has entered into, and currently is not party to, any arrangements, orally or in writing, whereby such Company Entity receives rebates, commissions, allowances, discounts or other payments or remuneration for of any purposekind (collectively, “Rebates”) from suppliers or other third parties based on the third parties’ sales of products or services, directly or indirectly, to Franchisees. Excluding any terms of the Franchise Agreements or any disclosures contained in, the FDDs used by Franchisor, since the Lookback Date, neither the Franchisor nor any other Company Entity has made any material written commitment, promise or pledge (verbal or written) to share any Rebates with Franchisees. Since the Lookback Date, the Company Entities have not received any revenue or other consideration, directly or indirectly, as a result of Franchisees’ required purchases or leases of products or services, except as set forth in the FDDs or on Schedule 3.24(i) of the Disclosure Schedules.
(gj) Since January 31the Lookback Date, 2016all advertising and marketing funds and cooperatives, if any, that the Company Entities administer and into which monies are paid by a Franchisee have been, in all material respects, accounted for and administered in accordance with the applicable Franchise Agreements and governing documents of the fund or cooperative, if any, and as described in the FDDs.
(k) No Company Entity has organized, sponsored, or given formal recognition to any franchise advisory council, independent franchisee association, or other organization purporting to represent the interests of Franchisees, except as set forth in the applicable FDD or on Schedule 3.24(k) of the Disclosure Schedules. To the Knowledge of the Company, no Person independent association or franchisee organization exists which holds itself out as a representative of the Franchisees, except as set forth in the applicable FDD or on Schedule 3.24(k) of the Disclosure Schedules. Any franchise council or advisory group (whether independently formed or sponsored by the Company Entities) presently in place is advisory in nature and is disclosed on Schedule 3.24(k) of the Disclosure Schedules.
(l) Except as set forth on Schedule 3.24(l) of the Disclosure Schedules, none of the Company Entities has allegedcontracted with or used any independent sales representatives, to the Seller’s Knowledgebrokers, the Franchisor to beconsultants, and the Franchisor has not received any written complaint, allegation or notice of inquiry or investigation from any Franchisee, employee of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers withfranchise referral networks, or subject to joint employment liability with, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, other third parties in connection with the offer or sale of Franchises; and to the Seller’s Knowledgeextent any such were used, no such Company Entity and such independent sales representatives, brokers, consultants, franchise referral networks, or other third parties have filed all broker and sales agent registrations on a timely basis as required by applicable Laws during periods in which Franchises were offered or sold by such third parties on behalf of such Company Entity in the applicable jurisdiction.
(m) Except as set forth on Schedule 3.24(m) of the Disclosure Schedules, since the Lookback Date, none of the Company Entities has either (i) issued a written allegation has been made since January 31, 2016 that any Franchisee or any waiver of a Franchisee’s employees have been material non-compete restriction under any Franchise Agreement, or are employees (ii) engaged in a pattern or practice of conduct that may be deemed waive enforcement of any material non-compete restriction under any Franchise Agreement, except for any such restriction the Franchisorwaiver of which would not be material to the Company Entities, the Seller or any of its Subsidiaries or improperly classified taken as independent contractors in accordance with applicable Lawa whole.
(n) Except as set forth on Schedule
Appears in 1 contract
Samples: Merger Agreement (Compass, Inc.)
Franchise Matters. (a) The Franchisor is the only Person that has operated the Franchise System or sold Franchises of the Business. All such Franchises were sold and/or operated only in the United States of America. Solely for purposes of this Section 3.25, the term “Business” shall not be deemed to include the operation of the Buddy’s Home Furnishings stores by the Seller and its Subsidiaries.
(b) Section 3.25(b) 4.14 of the Disclosure Schedule Schedules sets forth with respect to each Franchisee: (i) the name of the Franchisee, (ii) the address of the Franchisee; and (iii) a complete and accurate list of the Franchisees Franchise Agreements with respect to all Franchisees, and any addenda, promissory notes, renewals, or amendments related thereto. There are no other agreements with Franchisees, oral or written, except for those agreements that appear on Section 4.14 of the Franchise System, indicating the address of each franchised Sears Outlet store operated by the Franchisee and the scheduled expiration date of the Franchise Agreement evidencing such franchised Sears Outlet storeDisclosure Schedules. Except as set forth in Section 4.14 of the Disclosure Schedules, Seller has not received any notice that any of the Franchisees has terminated, or intends to terminate after the Closing, its Franchise AgreementsAgreement or to otherwise terminate or materially reduce its relationship with Seller.
(b) The franchise disclosure documents and related documentation (as amended and supplemented from time to time, collectively, the Franchisor is not limited “FDDs”) for Franchisees and prospective franchisees who were solicited or sold a franchise or license by Seller or any of its Affiliates (each a “Franchise”) complied in its right all material respects with applicable Law at the time they were furnished to grant Franchises prospective Franchisees and throughout the period preceding execution and delivery of a Franchise Agreement. The FDDs have been amended or develop (supplemented from time to time as required by applicable Law and such amendments and supplements were timely and properly furnished to each applicable Governmental Authority and Franchisees or grant rights to any other Person to develop) any business that competes with any Franchise of the Businessprospective franchisees as required by applicable Law.
(c) Each Franchise Agreement is similar in all material respects to the form of Franchise Agreement contained in the FDD that was issued to the applicable Franchisee, except for deviations from such form that are contained in such Franchise Agreement or an addendum to such Franchise Agreement, a A true and correct copy of which has all FDDs used by Seller and its Affiliates for the years 2016, 2015, and 2014, have been made available to PurchaserBuyer. There are Since the date of the most recent FDDs, other than the transactions contemplated by this Agreement, there has been no oral modifications material change in the business, financial condition, or affairs of Seller, the Franchise programs and systems, or the Franchisees that would, taken as a whole, require an amendment or supplement to such FDDs prior to the date hereof. Except as provided for in Section 4.14 of the Disclosure Schedules, neither Seller nor any of its Affiliates (whether by contract or pursuant to any applicable Law) has made (i) any material representations or material agreements with any Franchisee that (y) vary from the Franchise Agreement or oral agreements between any with such Franchisee and Franchisor relating (z) are materially adverse to matters pertaining the Franchisee, or (ii) except as set forth in the FDDs, any written (or, to material obligations of such Seller’s Knowledge, oral) representations to prospective Franchisees with respect to historical and/or prospective Franchisee thereundersales, profits, or earnings.
(d) Since January 31Seller and its Affiliates (and any other Person soliciting, 2016offering, the Franchisor has been at all times granting, promoting or selling Franchises on behalf of Seller or any of its Affiliates) are in compliance in all material respects with all Law applicable Franchise Laws in connection with to the offer or solicitation, offering, granting, promotion and sale of Franchises Franchises. Seller and its Affiliates are complying with all Laws that relate to the regulation of the Businessrelationship between Seller (or its Affiliates) and its (or their) Franchisees. Seller and its Affiliates are being operated in material compliance with all Franchise Agreements. Each Franchise Agreement is valid and binding on Seller in accordance with its terms and is in full force and effect. Neither Seller nor any of its Affiliates, relationships with Franchisees, the operation of the Franchise System and the termination, non-renewal and transfers of Franchises of the Business and, or to the Seller’s Knowledge, no current any other party, is in material default under or former Franchisee in material breach of, nor in receipt of any written claim or allegation of material default or material breach under, any Franchise Agreement currently in effect. No event has occurred which with the passage of time or giving of notice or both would result in a material default, material breach, or material event of non-compliance by Seller or any Governmental Authority has alleged that Franchisor has failed to comply of its Affiliates under any Franchise Agreement currently in all material respects with any applicable Franchise Laws during its operation effect. Except as set forth on Section 4.14 of the Franchise System. No financial performance representations (as defined in the FTC Rule) Disclosure Schedules, neither Seller nor any of its Affiliates has sent or any other representations concerning actual or projected revenues, earnings, income or profits have been made received notice of a material breach to any Franchisee or that remains uncured. There are no material disputes pending or, to Seller’s Knowledge, threatened under any prospective Franchisee by the Franchisor or any franchise brokerFranchise Agreement, agent or other franchise seller (except as defined in the FTC Rule) set forth on Section 4.14 of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor has used to offer or sell Franchises at any time since January 31, 2016 were prepared and delivered to prospective Franchisees in compliance in all material respects with Franchise LawsDisclosure Schedules.
(e) Each Franchisee who left Except as set forth on Section 4.14 of the Disclosure Schedules, none of the Franchise System since December 1Agreements contains any grant of exclusive rights to a territory designated therein, 2015 has executed agreements or other exclusive right, which conflicts with the Franchisor which released the Franchisor and its Subsidiaries and affiliates from any and all Liabilities and claims that such Franchisee had, has grant of exclusive rights to a territory or may have against the Franchisor and its Affiliates which relate in other exclusive right granted under any way to the Franchisee’s other Franchise Agreement.
(f) Since January 31Seller and its Affiliates, 2016, all rebates, allowances, discounts or other payments or remunerations received by prior to the Franchisor or the Seller from vendors, suppliers or other third parties, on account date of any Franchisee’s direct or indirect purchases from those vendors, suppliers or third partiesClosing, have been receivedat all times collected, maintained, administered, disclosed managed, directed, spent and spent utilized all advertising and marketing funds (including any advertising cooperative funds, if any) contributed by or received from Franchisees in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs delivered to such Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated material compliance with the Franchise System, in each case, in all material respectsAgreements and applicable Law. Except as set forth in on Section 4.14 of the Disclosure Schedules, no Franchisee has delivered to Seller a written claim of Seller’s or any of its Affiliates’ material breach of any Franchise Agreements with respect to such advertising or marketing funds and Seller does not have any Knowledge of any threat or notice of such a claim of breach of any Franchise Agreements, there are no material restrictions on the Franchisor’s use of any such rebates, allowances, discounts or other payments or remuneration for any purpose.
(g) Since January 31A true and correct copy of each Franchise Agreement and every amendment, 2016change, no Person has alleged, to the Seller’s Knowledge, the Franchisor to be, and the Franchisor has not received any written complaint, allegation or notice of inquiry or investigation from any Franchisee, employee of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers withaddendum, or subject modification of any kind to joint employment liability with, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to the Seller’s Knowledge, no written allegation such form of Franchise Agreement which has been made since January 31, 2016 that any Franchisee or any of a Franchisee’s employees have been or are employees of the Franchisor, the entered into by Seller or any of its Subsidiaries Affiliates in the five years prior to the date hereof has been made available to Buyer.
(h) Except as set forth on Section 4.14 of the Disclosure Schedules, there are no written claims made by Franchisees and received by Seller or improperly classified any of its Affiliates which remain unresolved, including any claims which assert that any information in any FDDs or similar document was materially untrue, misleading, or incomplete at the time such FDDs or similar document was in use.
(i) Seller and its Affiliates have obtained all authorizations and qualifications from Governmental Authorities that are required in order for Seller and its Affiliates to currently offer, sell and grant Franchises and such authorizations and qualifications remain currently effective and in good standing.
(j) Except as independent contractors set forth on Section 4.14 of the Disclosure Schedules, Seller is not (i) a guarantor or party to an agreement pursuant to which Seller or any of its Affiliates is directly or contingently liable (as a co-sxxxxx or otherwise) for any obligation of any Franchisee, (ii) a lessor or sublessor of any real or personal property to any Franchisee, or (iii) a party to any written financing arrangement with any Franchisee.
(k) Except as set forth on Section 4.14 of the Disclosure Schedules, Seller and its Affiliates have at all times complied in accordance all material respects with, and neither Seller nor any of its Affiliates has received any written notice from, any Governmental Authority with applicable Lawrespect to any violation or alleged violation of, any Law which govern the offer, sale, terms, operation, advertisement, modification, renewal, transfer, or termination of franchises and business opportunities, including the FTC Regulation entitled “Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures” (16 CFR 436.1 et seq.), New Jersey Franchise Practices Act (N.J.
Appears in 1 contract
Franchise Matters. (a) Schedule 3.23(a) contains a true, correct and complete list of the Group Companies’ Franchisees as of the date hereof, including the name and address of the Franchisee. The Franchisor is Company has made available to Parent and Merger Sub accurate and complete copies of each Franchise Agreement, and any amendments, addenda or agreements related thereto, in effect as of the only Person that has operated date hereof. Each of the Franchise System or sold Franchises Agreements is in full force and effect, and is a legal, valid and binding obligation of Franchisor and of the Business. All such Franchises were sold and/or operated only other parties thereto and is enforceable in accordance with its terms, except to the United States extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of America. Solely for purposes creditors’ rights generally and general equitable principles and laws related to the availability of this Section 3.25specific performance, the term “Business” shall not be deemed to include the operation of the Buddy’s Home Furnishings stores by the Seller and its Subsidiariesinjunctive relief or other equitable remedies.
(b) Section 3.25(b) of the Disclosure Schedule sets forth a complete and accurate list of the Franchisees of the Franchise System, indicating the address of each franchised Sears Outlet store operated by the There are no agreements with any Franchisee and the scheduled expiration date of the Franchise Agreement evidencing such franchised Sears Outlet store. Except other than as set forth in the Franchise Agreements, including any promises or undertakings to reduce current or future fees or royalty payments due under any Franchise Agreement. There are no oral or verbal agreements modifying in any material respects any of the Franchisor is not limited in its Franchise Agreements. No Group Company has granted any Franchisee or other third party a protected territory, exclusive territory, right to grant Franchises of first refusal or develop (or grant rights area development rights. No franchise broker provides services to any other Person to develop) any business that competes with any Franchise of the BusinessGroup Companies or is entitled to receive any accrued consideration based on services previously provided to any of the Group Companies.
(c) Each The Franchise Agreement is similar in all material respects to the form of Franchise Agreement contained in the FDD that was issued to the applicable Franchisee, except for deviations from such form that are contained in such Franchise Agreement or an addendum to such Franchise Agreement, a copy of which has been made available to Purchaser. There are no oral modifications of any Franchise Agreement or oral agreements between any Franchisee and Franchisor relating to matters pertaining to material obligations of such Franchisee thereunder.
(d) Since January 31, 2016, the Franchisor has been at all times in compliance in all material respects with all applicable Franchise Laws in connection with the offer or sale of Franchises of the Business, relationships with Franchisees, the operation of the Franchise System and the termination, non-renewal and transfers of Franchises of the Business and, to the Seller’s Knowledge, no current or former Franchisee or any Governmental Authority has alleged that Franchisor has failed to Agreements comply in all material respects with applicable law and do not include provisions that would prevent or otherwise impair the Company’s ability to undergo a change in ownership or control or require any Group Company to notify any Franchisee.
(d) As of the date hereof, none of the Group Companies is in violation or default of any Franchise Agreement in effect, nor has there occurred any event or condition as of the date hereof which would constitute (with or without due notice or lapse of time or both) a default by the Group Companies of any Franchise Agreement or permit a Franchisee to terminate such Franchise Agreement for a default, in each case except as would not reasonably be expected to have a material and adverse effect on the Group Companies. Schedule 3.23(d) lists any Franchisee who is financially in arrears over seventy five (75) days under payment obligations under its Franchise Agreement or otherwise is, to Group Companies’ knowledge, in material non-payment default under the applicable Franchise Laws during its operation Agreement as of the Franchise Systemdate hereof. No financial performance representations (as defined in the FTC Rule) or any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent or other franchise seller (as defined in the FTC Rule) of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor has used not received written or, to offer the Company’s knowledge, oral notice that a Franchisee intends or sell Franchises at any time since January 31, 2016 were prepared and delivered threatens to prospective Franchisees in compliance in all material respects with Franchise Lawscease to do business within twelve (12) months of Closing.
(e) Each Franchisee who left the Franchise System since December 1The Group Companies’ franchise offerings were, 2015 has executed agreements where applicable, properly registered with the Franchisor which released the Franchisor appropriate Governmental Entities or qualified for an exemption from such registration requirements and its Subsidiaries and affiliates from any and all Liabilities actions to obtain and claims that maintain any such Franchisee had, has or may exemptions were timely taken. Schedule 3.23(e) sets forth the jurisdictions in which the Group Companies have against operated and identifies the Franchisor effective and its Affiliates which relate in expiration dates (as applicable) for each state franchise registration to offer and sell Franchises and each exemption from such state franchise registration under any way to the Franchisee’s Franchise Agreementrelevant franchise law.
(f) Since January 31No franchise association, 2016council, all rebates, allowances, discounts advisory group or other payments or remunerations received by the Franchisor or the Seller from vendors, suppliers or other third parties, on account organization is presently acting as a representative of any Franchisee’s direct group of two (2) or indirect purchases from those vendors, suppliers or third parties, have been received, administered, disclosed and spent in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs delivered to such more Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each case, in all material respects. Except as set forth in the Franchise Agreements, there are no material restrictions on the Franchisor’s use of any such rebates, allowances, discounts or other payments or remuneration for any purpose.
(g) Since January 31, 2016, no Person has alleged, to the Seller’s Knowledge, the Franchisor to be, and the Franchisor has not received any written complaint, allegation or notice of inquiry or investigation from any Franchisee, employee of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers with, or subject to joint employment liability with, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee or any of a Franchisee’s employees have been or are employees of the Franchisor, the Seller or any of its Subsidiaries or improperly classified as independent contractors in accordance with applicable Law.
Appears in 1 contract
Samples: Merger Agreement (Fat Brands, Inc)
Franchise Matters. (a) The Franchisor is the only Person that has operated the Franchise System or offered or sold Franchises of “Pokémoto®” franchises. The Franchise System is the Businessonly franchise system that the Companies have owned and operated. All such Franchises were sold and/or operated only Except as provided in the United States of America. Solely for purposes of this Section 3.25Multi-Unit Operator Agreements and Development Agent Agreements, the term Companies have not offered or sold or otherwise granted rights to any Person conferring upon that Person area development, multi-unit development, area representative, master franchise, sub-franchise or other multi-unit or multilevel rights with respect to the “BusinessPokémoto®” shall not be deemed to include brand. Only Franchisor has entered into the operation of the Buddy’s Home Furnishings stores by the Seller and its SubsidiariesFranchise Agreements.
(b) Section 3.25(b) of the Disclosure Schedule Schedules sets forth a true and complete and accurate list of all Franchise Agreements executed by Franchisor. The Transferors have made available to Transferee accurate and complete copies of each Franchise Agreement. The list of Franchise Agreements accurately includes as to each Franchise Agreement (i) the Franchisees names of Franchisees, (ii) the Franchise System, indicating the business address of each franchised Sears Outlet store location operated by Franchisees, (iii) the Franchisee effective and expiration dates, (iv) the scheduled expiration date number of remaining renewals, (v) the royalty rate required to be paid by Franchisees, (vi) the required Brand Development Fund contribution rate or other similar payments to be paid by Franchisees, and (vii) a description of any material waivers, amendments or other modifications of any Franchise Agreement evidencing (including regarding any fees, costs, expenses, defaults or obligations of Franchisees or Franchisor) since the execution of such franchised Sears Outlet store. Except as set forth in the Franchise Agreements, the Franchisor is not limited in its right to grant Franchises or develop (or grant rights to any other Person to develop) any business that competes with any Franchise of the BusinessAgreement.
(c) Each Franchise Agreement is similar in all material respects to Section 3.25(c) of the form Disclosure Schedules sets forth a list of Franchise Agreement contained in the FDD that was issued to business address of each the applicable Franchisee, except for deviations from such form that are contained in such Franchise Agreement or an addendum to such Franchise Agreement, a copy of which has been made available to Purchaser. There are no oral modifications of any Franchise Agreement or oral agreements between any Franchisee Pokémoto® restaurants owned and Franchisor relating to matters pertaining to material obligations of such Franchisee thereunderoperated by the Companies.
(d) Since January 31To the Knowledge of the Transferors and the Companies, 2016no Franchisee is in, or has received written notice of, any material violation or material default of (including any condition that with the passage of time or the giving of notice, or both, would cause such a material violation or material default under) any Franchise Agreement. Franchisor is not in, nor has it received written notice of any, violation of or default by Franchisor under (including any condition that with the passage of time or the giving of notice, or both, would cause such a violation or default under), any Franchise Agreement or that would permit termination or rescission of any such Franchise Agreement. Franchisor has been at not received any written demand by any Franchisee for rescission of any Franchise Agreement. To the Knowledge of the Transferors and the Companies, (i) there is no basis for any claim by any Franchisee for rescission of any Franchise Agreement, and (ii) no Franchisee is entitled to any material set-off or reduction in any payment required under any Franchise Agreement. Each Franchise Agreement is a valid and binding agreement with Franchisor and is in full force and effect.
(e) Neither the execution of this Agreement nor the consummation of the transaction contemplated hereby requires the consent of any party to a Franchise Agreement or will result in the termination, modification or acceleration of any Franchise Agreement.
(f) Section 3.25(f) of the Disclosure Schedules set forth a list of all times forms of Franchise Disclosure Documents that Franchisor have used to offer or sell Franchises. The Companies have made available to Transferee accurate and complete copies of each such form of Franchise Disclosure Documents.
(g) Franchisor is and, for the three (3) years prior to the Closing, has been, in material compliance in all material respects with all applicable Franchise Applicable Laws in connection with the offer or and sale of Franchises of Franchises, the Business, ongoing relationships with current and former Franchisees, the operation of the Franchise System and the termination, non-renewal and transfers of Franchises Franchises, and the operation and administration of the Business and, to Franchise System.
(h) To the Seller’s KnowledgeKnowledge of the Transferors and the Companies, no current or former Franchisee Franchisee, or any Governmental Authority Authority, has alleged that Franchisor has or the Companies have failed to comply in all material respects with any applicable Franchise Laws Applicable Law during its the offer and sale of a Pokémoto® franchise or the operation of the Franchise System. No financial performance representations .
(as defined i) Section 3.25(i) of the Disclosure Schedules contain a summary of all (i) legal proceedings relating to the Franchise System, including those initiated by any Franchisee, Orders, material complaints or disputes, (ii) proceedings or Orders required to be disclosed in Franchise Disclosure Documents under Applicable Law pertaining to franchising, or (iii) other proceedings or complaints that are pending or, to the FTC RuleKnowledge of the Transferors and the Companies, have been threatened against Franchisor (A) from any existing or former Pokémoto® franchisee, or (B) or any other representations concerning actual or projected revenues, earnings, income or profits have been made association purporting to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent represent a group of Franchisees. There are no stop orders or other franchise seller (as defined proceedings in effect or, to the FTC Rule) Knowledge of the Transferors and the Companies, threatened that would prohibit Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor has used ’s ability to offer or sell Franchises at or enter into Franchise Agreements immediately following the date hereof, except for any time since January 31pending renewal filings, 2016 were prepared and delivered any amendment filings and changes to prospective Franchisees in compliance in all the Franchise Disclosure Documents that might be required to describe the transaction contemplated under this Agreement and other material respects with Franchise Lawschanges resulting therefrom.
(ej) Each To the Knowledge of the Transferors and the Companies, all collections and contributions to any advertising or Brand Development Fund to which Franchisees are obliged to contribute (the “Brand Development Fund”) have been undertaken in accordance with the terms and conditions of each Franchise Agreement, and the use and administration of the Brand Development Fund contributions by, on behalf of, or at the direction of, Franchisor have at all times materially complied with all Franchise Agreements, Franchise Disclosure Documents and Franchise Laws. The use of the Brand Development Fund has not and does not violate any Applicable Law in any material respect. There are no loans owed to, or owing from, the advertising program. To the Knowledge of the Transferors and the Companies, there are no allegations that any of the expenditures from the Brand Development Fund have been improperly collected, accounted for, maintained, used or applied.
(k) Except as set forth on Section 3.25(k) of the Disclosure Schedules, Franchisor has not engaged or hired an agent, broker, third party, or licensee to provide material services, assistance or support to any Franchisee who left or to identify, offer or sell potential Pokémoto® franchisees.
(l) No franchise association or other organization is acting as a Representative of any group of two or more Franchisees. Any franchise council or advisory group presently in place (whether independently formed or sponsored by Franchisor or the Companies) is purely advisory in nature.
(m) Except as provided in the Franchise System since December 1Agreements, 2015 Franchisor has executed agreements with the Franchisor which released the Franchisor and its Subsidiaries and affiliates from not granted any and all Liabilities and claims that such Franchisee hadenforceable right of first refusal, has option or may have against the Franchisor and its Affiliates which relate in other right or arrangement to sign any way to the Franchisee’s Franchise Agreement or acquire any Franchise Agreement.
(fn) Since January 31Except as set forth on Section 3.25(n) of the Disclosure Schedules, 2016none of the Companies have received, all or been a party to any Contract under which any of such entities has the right to receive, material rebates, allowances, discounts or other material payments or remunerations received by the Franchisor or the Seller material consideration from vendors, suppliers or other third parties, including the ability to purchase products, goods and services at lower prices than those charged to Franchisees, on account of any Franchisee’s direct or indirect Franchisees’ purchases from those vendors, suppliers or third parties. None of the Companies have made any offer, promise or Contract with respect to any future or contingent rebates or other payments from suppliers or other third parties to or for the benefit of a Franchisee or another Person. There are no Contracts or special arrangements with any Franchisee that are prohibited by the applicable Franchise Agreement or that have not been received, administered, properly disclosed and spent in accordance with Applicable Law.
(o) Neither the operation manuals utilized execution of this Agreement nor the consummation of the transaction contemplated hereby will result in a violation of or a default under, or give rise to a right of termination, modification, cancellation, rescission or acceleration of any obligation or loss of material benefits under, any Franchise Agreement.
(p) Section 3.25(p) of the Disclosure Schedules contains, as of the date set forth in such schedule, a complete and accurate list of all currently effective Multi-Unit Operator Agreements and Development Agent Agreements, including the following information for such Multi-Unit Operator Agreements and Development Agent Agreements (using the defined terms therein): (i) the name, address and telephone number of the Franchisees, (ii) the development area covered by such Multi-Unit Operator Agreements and Development Agent Agreements, (iii) the Franchise System, all Franchise Lawsnumber of Pokémoto® restaurants currently open and operated pursuant to the Multi-Unit Operator Agreements and Development Agent Agreements including the business address of each; (iv) the status as to whether the Franchisees or the development agents (as applicable) are in compliance with the Development Schedule required under the Multi-Unit Operator Agreements and the Development Agent Agreements; (v) the amount of the development fee paid and number of Pokémoto® restaurants remaining to be opened with the associated initial franchise fee required to be paid for those scheduled to be opened; (vi) the stated effective date, the FDDs delivered expiration date and the term of the Multi-Unit Operator Agreements and the Development Agent Agreements; and (vii) whether or not there have been any material waivers, amendments or other material modifications of any Multi-Unit Operator Agreement or the Development Agent Agreements (including changes related to such Franchiseesany fees, costs, expenses, defaults, covenants, term, Development Schedule, territory or development area, termination, renewal or transfer rights, or other material obligations) since their execution. The Companies have made available to Transferee copies of each Multi-Unit Operator Agreement and the applicable Franchise Development Agent Agreement.
(q) Each Company that owns or operates a Pokémoto® restaurant, and other applicable Contracts associated with the Franchise System, in each case, in all material respects. Except as set forth in the Franchise Agreements, there are no material restrictions on the Franchisor’s use of any such rebates, allowances, discounts or other payments or remuneration for any purpose.
(gSection 3.25(c) Since January 31, 2016, no Person has alleged, to the Seller’s Knowledge, the Franchisor to be, and the Franchisor has not received any written complaint, allegation or notice of inquiry or investigation from any Franchisee, employee of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers with, or subject to joint employment liability with, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee or any of a Franchisee’s employees have been or are employees of the FranchisorDisclosure Schedules, the Seller or any of its Subsidiaries or improperly classified as independent contractors has operated such restaurant in accordance material compliance with applicable all Applicable Law.
Appears in 1 contract
Samples: Membership Interest Exchange Agreement (Muscle Maker, Inc.)
Franchise Matters. (a) The Franchisor is the only Person that has operated the Franchise System or sold Franchises of the Business. All such Franchises were sold and/or operated only in the United States of America. Solely for purposes of this Section 3.25Except as would not have a Company Material Adverse Effect, the term “Business” shall not be deemed to include the operation of the Buddy’s Home Furnishings stores by the Seller and its Subsidiaries.
(bi) Section 3.25(b) of the Disclosure Schedule sets forth a complete and accurate list of the Franchisees of the Franchise System, indicating the address of each franchised Sears Outlet store operated by the Franchisee and the scheduled expiration date of the Franchise Agreement evidencing such franchised Sears Outlet store. Except as set forth in the Franchise Agreements, the Franchisor is not limited in its right to grant Franchises or develop (or grant rights to any other Person to develop) any business that competes with any Franchise of the Business.
(c) Each Franchise Agreement is similar complies in all material respects to respects, and the form administration and relationship of Franchise Agreement contained in the FDD that was issued to the applicable Franchisee, except for deviations from such form that are contained in such Franchise Agreement or an addendum to such Franchise Agreement, a copy of which has been made available to Purchaser. There are no oral modifications of any Franchise Agreement or oral agreements between any Franchisee and Franchisor relating to matters pertaining to material obligations of such Franchisee thereunder.
(d) Since January 31, 2016, the Franchisor has been at all times in compliance complies in all material respects with all applicable Laws, (ii) each Franchise Laws in connection with the offer or sale of Franchises of the Business, relationships with Franchisees, the operation Disclosure Document of the Franchise System and that the termination, non-renewal and transfers of Franchises of the Business and, to the Seller’s Knowledge, no current or former Franchisee Company or any Governmental Authority has alleged that Franchisor has failed to comply in all material respects with any applicable Franchise Laws during of its operation of the Franchise System. No financial performance representations (as defined in the FTC Rule) or any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent or other franchise seller (as defined in the FTC Rule) of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor Subsidiaries has used to offer or sell Franchises at any time since January 311, 2016 were 2022 have contained all material information required by Franchise Laws and have otherwise been prepared and delivered to prospective Franchisees in compliance in all material respects with Franchise Laws, (iii) except as specifically set forth in a Franchise Agreement for a Franchised Location, neither the Company nor any of its Subsidiaries has granted any enforceable right of first refusal, option or other similar right or arrangement to a Franchisee or other Person to sign any Franchise Agreement, acquire any Franchise or obtain the right to operate in additional territories, (iv) there are no stop orders or other Actions in effect or, to the Knowledge of the Company, threatened, that would prohibit or impede the Company’s or any of its Subsidiaries’ ability to offer or sell Franchises or enter into Franchise Agreements in any jurisdiction immediately following the Closing (except for any applications for registration in jurisdictions that require registration and where the Company or any of its Subsidiaries is not registered, and amendment filings and changes to any Franchise Disclosure Document of the Franchise System that might be required as a result of the Transactions), and (v) the Company and its Subsidiaries are (and have been at all times since January 1, 2022) in compliance in all material respects with Franchise Laws in connection with the offer or sale of Franchises, the ongoing relationships with Franchisees, and the termination, non-renewal and transfers of Franchises, including by retaining properly-signed Franchise Disclosure Documents of the Franchise System and receipts required by applicable Franchise Laws evidencing compliance in all material respects with disclosure waiting periods under the applicable Franchise Laws.
(eb) Each Franchisee who left Section 3.25(b) of the Company Disclosure Letter sets forth a true and complete list of the currently existing store locations operated by Franchisees pursuant to Franchise Agreements that are part of the Franchise System since December 1(each, 2015 has executed agreements a “Franchised Location”), indicating with respect to each Franchised Location, the Franchisor which released name of the Franchisor Franchisee, the address of the Franchised Location and its Subsidiaries and affiliates from any and all Liabilities and claims that the scheduled expiration date of the Franchise Agreement evidencing such Franchisee had, has or may have against Franchised Location. Each Franchise Agreement is in substantially the Franchisor and its Affiliates which relate in any way same form as the form of Franchise Agreement attached to the Franchisee’s Franchise Disclosure Document of the Franchise System issued at the time such Franchise Agreement was signed. The Company has made available to Parent all Franchise Agreements that are in effect as of the date of this Agreement.
(fc) Since January 31The execution, 2016, all rebates, allowances, discounts or other payments or remunerations received delivery and performance of this Agreement by the Franchisor Company do not and will not result in any breach or the Seller from vendors, suppliers violation of or other third parties, on account constitute a default (or an event that with notice or lapse of any Franchisee’s direct time or indirect purchases from those vendors, suppliers both would constitute a default) or third parties, have been received, administered, disclosed and spent in accordance with the operation manuals utilized by the Franchise System, all Franchise Laws, the FDDs delivered to such Franchisees, the applicable Franchise Agreement, and other applicable Contracts associated with the Franchise System, in each case, in all material respects. Except as set forth result in the Franchise Agreements, there are no material restrictions on the Franchisor’s use of any such rebates, allowances, discounts or other payments or remuneration for any purpose.
(g) Since January 31, 2016, no Person has alleged, to the Seller’s Knowledge, the Franchisor to be, and the Franchisor has not received any written complaint, allegation or notice of inquiry or investigation from any Franchisee, employee loss of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers withbenefit under, or subject give rise to joint employment liability withany right of termination, cancellation, amendment or acceleration of, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and Franchise Agreement or related document to which the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee Company or any of its Subsidiaries is a Franchisee’s employees have been party or are employees of by which the Franchisor, the Seller Company or any of its Subsidiaries or improperly classified as independent contractors in accordance with applicable Lawits or any of their respective properties are bound, except, for any such breach, violation, default, loss, right, termination, cancellation, amendment, acceleration or other occurrence that would not have a Company Material Adverse Effect.
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Franchise Matters. (a1) The Franchisor is Franchise Agreements are in full force and effect and enforceable against the franchisees/licensees thereunder in accordance with their terms, subject only Person that has operated to the Franchise System or sold Franchises applicable bankruptcy laws and judicial limitations on availability of equitable remedies. The consent of the Business. All such Franchises were sold and/or operated only in the United States of America. Solely franchisees/licensees is not required for purposes of this Section 3.25execution, the term “Business” shall not be deemed to include the operation of the Buddy’s Home Furnishings stores by the Seller performance and its Subsidiaries.
(b) Section 3.25(b) of the Disclosure Schedule sets forth a complete and accurate list of the Franchisees effectiveness of the Franchise System, indicating the address of each franchised Sears Outlet store operated by the Franchisee and the scheduled expiration date of Assignments relating to the Franchise Agreement evidencing such franchised Sears Outlet storeAgreements. Except as set forth disclosed on SCHEDULE 8.S.(1), (i) to the knowledge of Seller, all royalties and other sums due and owing have been paid in full as of the date hereof and will be paid in full as of the Effective Date, (ii) Seller has not given or received notice under any Franchise Agreement of any existing default or event of default, (iii) to the knowledge of Seller, there is no event which, with notice or lapse of time, or both, either would constitute a default of Seller, and in respect of which Seller has not taken adequate steps to prevent a default from occurring, or, to the knowledge of Seller, would constitute a default by a franchisee/licensee thereunder, (iv) to the knowledge of Seller, there is no pending or threatened bankruptcy relating to a franchisee/licensee under any of the Franchise Agreements, the Franchisor is not limited in its right to grant Franchises or develop (or grant rights to any other Person to developv) any business that competes with any Franchise of the Business.
(c) Each Franchise Agreement is similar in all material respects neither Seller nor, to the form knowledge of Seller, any franchisee/licensee under the Franchise Agreement contained in Agreements, have commenced any action or given or received any notice for the FDD that was issued to the applicable Franchisee, except for deviations from such form that are contained in such Franchise Agreement or an addendum to such purpose of terminating any Franchise Agreement, a copy of which has been made available to Purchaser. There and (vi) there are no oral modifications of any Franchise Agreement offsets, defenses or oral agreements between any Franchisee and Franchisor relating abatements to matters pertaining to material obligations of such Franchisee thereunder.
(d) Since January 31, 2016, the Franchisor has been at all times in compliance in all material respects with all applicable Franchise Laws in connection with the offer or sale of Franchises payment of the Business, relationships with Franchisees, the operation of the Franchise System and the termination, non-renewal and transfers of Franchises of the Business and, to the Seller’s Knowledge, no current or former Franchisee or any Governmental Authority has alleged that Franchisor has failed to comply in all material respects with any applicable Franchise Laws during its operation of the Franchise System. No financial performance representations (as defined in the FTC Rule) or any other representations concerning actual or projected revenues, earnings, income or profits have been made to any Franchisee or any prospective Franchisee by the Franchisor or any franchise broker, agent royalties or other franchise seller (as defined in the FTC Rule) of the Franchisor, other than as disclosed in the franchise disclosure document for the Franchise System. All FDDs that the Franchisor has used to offer or sell Franchises at sums payable under any time since January 31, 2016 were prepared and delivered to prospective Franchisees in compliance in all material respects with Franchise Laws.
(e) Each Franchisee who left the Franchise System since December 1, 2015 has executed agreements with the Franchisor which released the Franchisor and its Subsidiaries and affiliates from any and all Liabilities and claims that such Franchisee had, has or may have against the Franchisor and its Affiliates which relate in any way to the Franchisee’s Franchise Agreement.
(f2) Since January 31, 2016, all rebates, allowances, discounts or other payments or remunerations received by The Subsidiary Franchise Agreements are in full force and effect and enforceable against the Franchisor or the Seller from vendors, suppliers or other third parties, on account of any Franchisee’s direct or indirect purchases from those vendors, suppliers or third parties, have been received, administered, disclosed and spent franchisees/licensees thereunder in accordance with their terms, subject only to the operation manuals utilized by applicable bankruptcy laws and judicial limitations on availability of equitable remedies. The consent of the franchisee/licensees is not required for execution, performance and effectiveness of the Franchise SystemAssignments relating to the Subsidiary Franchise Agreements. Except as disclosed on SCHEDULE 8.S.(2), (i) to the knowledge of Seller all royalties and other sums due and owing under the Subsidiary Franchise LawsAgreements have been paid in full as of the date hereof and will be paid in full as of the Effective Date, (ii) neither Subsidiary nor Seller has given or received notice under any Subsidiary Franchise Agreement of any existing default or event of default, (iii) to the FDDs delivered to such Franchiseesknowledge of Seller there is no event which, the applicable with notice or lapse of time, or both, either would constitute a default of Subsidiary under any Subsidiary Franchise Agreement, and other applicable Contracts associated with in respect of which Subsidiary has not taken adequate steps to prevent a default from occurring, or, to the knowledge of Seller, would constitute a default by a franchisee/licensee thereunder, (iv) to the knowledge of Seller there is no pending or threatened bankruptcy relating to a franchisee/licensee under any Subsidiary Franchise SystemAgreement, in each case(v) neither Subsidiary nor, in all material respects. Except as set forth in to the knowledge of Seller, any franchisee/licensee under the Subsidiary Franchise Agreements, have commenced any action or given or received any notice for the purpose of terminating any Subsidiary Franchise Agreement, and (vi) there are no material restrictions on offsets, defenses or abatements to the Franchisor’s use payment of any such rebates, allowances, discounts the royalties or other payments or remuneration for sums payable under any purposeSubsidiary Franchise Agreement.
(g3) Since January 31, 2016, no Person has alleged, to the Seller’s Knowledge, the Franchisor to be, and the Franchisor has not received any written complaint, allegation or notice of inquiry or investigation from any Franchisee, employee of a Franchisee, third party or Governmental Authority, alleging that the Franchisor is or may be joint employers with, or subject to joint employment liability with, any Franchisee. The Franchisor has properly classified each Franchisee as an independent contractor and not an employee under applicable Law, and to the Seller’s Knowledge, no written allegation has been made since January 31, 2016 that any Franchisee or any of a Franchisee’s employees have been or are employees of the Franchisor, the Seller or any of its Subsidiaries or improperly classified as independent contractors in accordance with applicable Law.SCHEDULE 8.S.
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