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EXHIBIT 10.33
XXXXX'X ROADHOUSE, INC.
AREA DEVELOPMENT AGREEMENT
This Agreement is made this 17th day of March, 1997, by and among XXXXX'X
ROADHOUSE, INC., a Tennessee corporation ("Franchisor"), CMAC INCORPORATED, a
Tennessee corporation ("Developer"), and XXXXXXX X. XxXXXXXXX, XX. ("Principal
Shareholder").
WITNESSETH:
RECITALS
A. Franchisor is engaged in the business of owning, operating, and
granting franchises with respect to certain restaurants serving meat products
and other dishes, which restaurants do business under the trade name "Xxxxx'x
Roadhouse."
B. In connection with its business, Franchisor has developed certain
recipes and seasonings for meats with distinctive flavor and unique quality and
consumer recognition, and is the owner of good and valuable trademarks, trade
names, service marks, certification marks, insignia, signs, designs, emblems,
color and patterns, and other distinctive features that identify the Xxxxx'x
Roadhouse outlets (such items, together with all of Franchisor's other trade
secrets and tangible and intangible property rights relating to the
development, ownership, and operation of a Xxxxx'x Roadhouse outlet, are
hereinafter referred to as the "Xxxxx'x Roadhouse System"); and
C. Developer desires to obtain the exclusive right to develop Xxxxx'x
Roadhouse outlets franchised by Franchisor within the geographic areas
specified in Appendix A attached hereto and made a part hereof (collectively,
the "Territory"), for the period specified in subsection 1.1, and Franchisor is
willing to grant the same to Developer, on and subject to the terms, conditions
and provisions which are set forth in this Agreement.
NOW, THEREFORE, in consideration of Franchisor granting to Developer the
exclusive right to develop Xxxxx'x Roadhouse outlets franchised by Franchisor
which employ the Xxxxx'x Roadhouse System ("Restaurants") in the Territory for
such period, and in consideration of the mutual obligations which are provided
for herein, it is hereby agreed as follows:
1. GRANT OF DEVELOPMENT RIGHTS.
1.1 Franchisor grants Developer the exclusive right to develop between
eight (8) and fifteen (15) Restaurants in the Territory for a period commencing
on the date hereof and ending on March 31, 2002, unless sooner terminated as
hereinafter provided.
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1.2 During the term of this Agreement as extended pursuant to Section 3,
Franchisor shall not (a) license any other person to operate a Xxxxx'x
Roadhouse Restaurant in the Territory, or (b) operate any Franchisor-owned
Xxxxx'x Roadhouse Restaurant in the Territory.
1.3 After this Agreement expires or is terminated, Franchisor shall have
the complete and unrestricted right to (a) license other persons to operate
Restaurants in the Territory, and (b) operate Franchisor-owned Restaurants in
the Territory, subject only to the provisions of any franchise agreement then
in effect between Franchisor and Developer; provided, however, that no such
Xxxxx'x Roadhouse Restaurants operated by Franchisor or any third-party
licensee shall be located within a five (5) mile radius of any existing
Restaurant owned and operated by Developer.
2. DEVELOPMENT SCHEDULE.
2.1 On or before March 31, 2002, Developer agrees to develop and open for
business, and have in operation, a total of up to fifteen (15) Restaurants
franchised by Franchisor in the Territory in compliance with the following:
(a) at least one (1) Restaurant within the Territory, to be located
in the "Greenville, South Carolina ADI" (as defined and described in
subsection 2.2) and to be open for operation and doing business during
calendar year 1997.
(b) one (1) to two (2) additional Restaurants within the Territory,
each to be open for operation and doing business during calendar year
1998. Such Restaurant(s) may be located in any ADI.
(c) two (2) to four (4) additional Restaurants within the Territory,
each to be open for operation and doing business during calendar year
1999, and at least one of such Restaurants to be located in an ADI listed
in subsection 2.2 other than the Greenville, South Carolina ADI.
(d) two (2) to four (4) additional Restaurants within the Territory,
each to be open for operation and doing business during calendar year
2000, and at least one of such Restaurants to be located in an ADI, if
any, listed in subsection 2.2 in which Developer did not develop a
Restaurant which was open for operation and doing business in calendar
years 1997, 1998, or 1999.
(e) two (2) to four (4) additional Restaurants within the Territory,
each to be open for operation and doing business during calendar year
2001, and one of such Restaurants to be located in an ADI, if any, listed
in subsection 2.2 in which Developer did not develop a Restaurant which
was open for operation and doing business in calendar years 1997, 1998,
1999 or 2000.
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Developer's obligations to develop, open and operate Restaurants as set
forth in this subsection 2.1 are sometimes hereinafter referred to collectively
as the "Development Schedule." Each of the periods specified in clauses (a)
through (e) of this subsection 2.1 is sometimes hereinafter referred to as an
"Initial Development Period." During the period beginning March 1, 1997, and
ending March 31, 2002, Developer shall not be permitted to develop or open for
business or operate more than fifteen (15) Restaurants in the Territory without
the prior written consent of Franchisor, which consent may not be unreasonably
withheld.
2.2 In addition, on or before March 31, 2002, Developer shall develop,
open for business and have in operation the following number of Restaurants in
the following Areas of Dominant Influence ("ADIs") within the Territory: (a)
Greenville, South Carolina, one (1) Restaurant; (b) Charleston, South Carolina,
one (1) Restaurant; (c) Charlotte, North Carolina, one (1) Restaurant; and (d)
Raleigh-Durham, North Carolina, one (1) Restaurant.
2.3 The provisions set forth in subsection 2.1 above shall not relieve
Developer of its obligation to develop, open for business and have in
operation, by March 31, 2002, (a) a total of not less than eight (8)
Restaurants in the Territory, and (b) the number of Restaurants in the ADIs as
specified in subsection 2.2. Except as set forth in subsection 2.1, strict
compliance with the Development Schedule is of the essence of this Agreement.
If Developer opens more Restaurants within the Territory during any calendar
year than the maximum number of Restaurants required by the Development
Schedule in such calendar year, the additional Restaurant(s) shall be credited
in the following calendar year of the Development Schedule. If Developer fails
to meet the Development Schedule with respect to any of the Initial Development
Periods as set forth in subsection 2.1 hereof, this Agreement shall terminate
ninety (90) days after the end of the Initial Development Period in question,
unless by the end of such ninety (90) day period Developer has fulfilled the
development obligation required under subsection 2.1 relating to such
Development Period. If Developer fails to develop, open and operate
Restaurants as set forth in subsection 2.2 hereof, this Agreement shall
terminate on March 31, 2002, unless by March 31, 2002, Developer has fulfilled
the development obligation required under subsection 2.2.
3. SUBSEQUENT DEVELOPMENT SCHEDULE.
3.1 Unless this Agreement is terminated pursuant to the provisions of
subsection 2.3 or 3.3, or Section 9, during each calendar year during the
period commencing March 31, 2002, and expiring on March 31, 2007, Developer
shall develop, open for business and have in operation in the Territory, the
number of additional Restaurants determined in accordance with the formula set
forth in subsection 3.2(b), or the number of Restaurants otherwise agreed to by
the parties in accordance with a written development schedule prepared in
accordance with subsection 3.2(c).
3.2 (a) Each consecutive twelve (12) month period beginning on March 31,
2002, and ending on March 31, 2007, is hereinafter referred to as a "Subsequent
Development Period."
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(b) Developer hereby agrees to develop, open for business and have in
operation in the Territory during each of the Subsequent Development Periods,
that number of Restaurants equal to twenty-five (25%) of the total number of
Restaurants developed by Developer during all Initial Development Periods and
all prior Subsequent Development Periods. For example, assuming the Developer
has developed, opened and was operating 14 Restaurants at the end of the last
Initial Development Period, in the first Subsequent Development Period,
Developer shall be required to develop and open for business a total of three
(3) Restaurants (14 x 0.25 = 3.5). In the second Subsequent Development
Period, Developer shall be required to develop and open for business a total of
five (5) Restaurants (14 + 6 = 20 x 0.25 = 5.0). (For the purpose of this
subsection 3.2(b), fractions are rounded down to the nearest whole number.)
(c) At any time during any Subsequent Development Period, Developer may
prepare and submit to Franchisor in writing an alternate development schedule
(the "Alternate Schedule") which, if approved by Franchisor in writing, will
modify Developer's obligations with regard to the development and opening for
business of Restaurants in the Territory as set forth in subsection 3.2(b)
above. The Alternate Schedule submitted by Developer may reduce or increase
the number of Restaurants to be developed and opened for business by Developer
during any one or more Subsequent Development Periods. Within thirty (30) days
of receipt of Developer's Alternate Schedule, Franchisor shall notify Developer
in writing whether Franchisor elects to approve or disapprove the terms of the
Alternate Schedule. In the event Franchisor does not approve Developer's
Alternate Schedule for any Subsequent Development Period, Developer's
obligation to develop additional Restaurants during each such Subsequent
Development Period, in accordance with the formula set forth in subsection
3.2(b), shall remain in effect.
3.3 If during any Subsequent Development Period Developer does not
develop, open for business and have in operation all Restaurants that are
specified in the development schedule described in subsection 3.2(b) or any
applicable Alternate Schedule that has been approved by Franchisor as provided
in subsection 3.2(c), and the number of Restaurants not developed and open for
business as specified is not more than two (2) (such number of Restaurants
herein referred to as the "Shortfall"), Developer shall not be deemed to be in
default of its development schedule for such Subsequent Development Period, so
long as in the next succeeding Subsequent Development Period, Developer
develops, opens for business and has in operation the number of Restaurants
equal to (a) the number which Developer is required to develop, open for
business and have in operation during that Subsequent Development Period, plus
(b) the Shortfall from the previous Subsequent Development Period. The
additional Restaurant(s) which Developer is required to develop and open for
business during that next succeeding Subsequent Development Period shall be
part of Developer's development schedule as established under subsection 3.2
for that Subsequent Development Period. Except as set forth in the preceding
sentences of this subsection 3.3, strict compliance with the development
schedules established for the Subsequent Development Periods in accordance with
subsection 3.2 hereof is of the essence of this Agreement. If Developer fails
to fulfill its development obligation as set forth in subsection 3.2 (as
modified by this subsection 3.3) with respect to any Subsequent Development
Period, this Agreement shall automatically terminate ninety (90) days after the
end of the
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Subsequent Development Period in question, unless by the end of such ninety
(90) day period Developer has fulfilled the development obligation relating to
such Subsequent Development Period.
3A. LIMITATION
3A.1. Notwithstanding anything provided for herein to the contrary,
Developer's failure to develop, open and operate Restaurants as required in
Sections 2 and 3 hereof shall not subject Developer to liability for damages or
injunctive relief requiring performance of such obligations; provided, however,
in the event Developer fails to perform any of such obligations, (i) the
automatic termination provisions of subsections 2.3 and 3.3 hereof and the
optional termination provisions of subsections 9.3 and 9.5 hereof shall apply
and (ii) Franchisor may exercise its rights to exercise the Acquisition Option
pursuant to Section 8 hereof as provided in subsection 9.5 hereof.
4. SITE APPROVALS; PLANS AND SPECIFICATIONS.
4.1 Developer assumes all cost, liability, expense and responsibility for
locating, obtaining and developing sites for Restaurants, and for constructing
and equipping Restaurants at such sites. The development of a Restaurant at
any site and any related contract of sale or lease agreement entered into by
Developer must be approved by Franchisor in accordance with its then-existing
site approval procedure, including submission by Developer of a franchise
application in the form then being required by Franchisor. Notwithstanding the
foregoing, Developer may enter into any contract not inconsistent herewith
relating to the development or operation of a Restaurant subject to
Franchisor's approval. Franchisor shall notify Developer whether it approves a
proposed site and the related contract of sale or lease agreement within
forty-five (45) days of receiving Developer's request for approval. Failure of
Franchisor to so notify Developer within such forty-five (45) day period shall
be deemed to be an approval of such site and the related contract of sale or
lease agreement. Developer acknowledges that Franchisor's approval of a
prospective site for a Restaurant does not constitute a representation, promise
or guarantee by franchisor that a Restaurant operated at that site will be
profitable or otherwise successful. Developer shall not make any binding
commitment to a prospective vendor or lessor of real estate with respect to a
site for a Restaurant unless Franchisor has approved that site in accordance
with Franchisor's then-existing site approval procedure.
4.2 For each Restaurant which Developer develops pursuant to this
Agreement, Franchisor will make available to Developer Franchisor's
specifications for a typical Restaurant. Developer will obtain architectural
and engineering services independently and at its own expense. Developer shall
submit to Franchisor all architectural and/or engineering plans (the "Plans")
which Developer obtains for the development of each Restaurant site, and
Franchisor shall have the right to review and approve the Plans and to prohibit
the implementation of any aspect of the Plans which Franchisor, in its sole and
absolute discretion, believes is not consistent with the best interests of the
Xxxxx'x Roadhouse System. In the event that Franchisor objects to any aspect
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the Plans or desires to prohibit the implementation of any such aspect of the
Plans, Franchisor shall so notify Developer within thirty (30) days of receiving
the Plans for review. Failure of Franchisor to so notify Developer within such
thirty (30) day period shall be deemed to be an approval of the Plans. In the
event Franchisor does object to any aspect of the Plans, Franchisor shall
provide Developer with a reasonably detailed list of changes necessary to make
the Plans acceptable to Franchisor. Franchisor shall, upon a resubmission of
the Plans, with such changes as Developer has prepared, notify Developer within
fifteen (15) days of receiving the revised Plans whether they are acceptable.
Failure to so notify Developer within such fifteen (15) day period shall be
deemed to be an approval of the revised Plans.
4.3 If Developer acquires a leasehold interest in a site, that leasehold
interest shall be for a term which is at least as long as the term of the form
of Franchise Agreement (including renewal or extension options exercisable at
the option of the Developer) which is attached hereto as Appendix B and made a
part hereof (the "Franchise Agreement") (i.e. at least twenty (20) years), and
the lease shall provide that at any time during the term of the lease Developer
may assign all of its interest under the lease to Franchisor without the lessor
having any right to impose conditions on such assignment or to obtain any
payment in connection therewith. Prior to entering into any such lease,
Developer shall furnish Franchisor with a copy thereof and shall not execute
said lease unless and until Franchisor notifies Developer that the lease
complies with the provisions of this Agreement and of the applicable Franchise
Agreement and is otherwise acceptable to Franchisor. Franchisor shall notify
Developer whether the lease meets the requirements of the preceding sentence
within forty-five (45) days of receiving Developer's request for approval.
Failure of Franchisor to so notify Developer within such forty-five (45) day
period shall be deemed to constitute an approval of such lease.
5. FEES AND FRANCHISE AGREEMENTS.
Developer shall notify Franchisor in writing promptly after closing on the
acquisition of a leasehold or fee interest in a Restaurant site. Provided
Franchisor has granted site, operational, financial and legal approval in
accordance with the terms of subsections 4.1 and 10.2 hereof, then Franchisor
shall deliver to Developer a Franchise Agreement substantially in the form
which is attached hereto as Appendix B; provided however that the Franchise
Agreement which Franchisor delivers to Developer shall require Developer to
make advertising expenditures at the rates then established by Franchisor with
respect to new Restaurants, except that in no event shall such rates exceed
three percent (3%) of a Restaurant's gross sales (as defined in Part III(A) of
the form Franchise Agreement which is attached hereto as Appendix B).
Developer shall execute the Franchise Agreement and return same to Franchisor
with payment of the initial franchise fee within ten (10) days following
receipt by Developer; and Franchisor will execute and return the same to
Developer, so long as none of the events of default described in subsections
9.2 and 9.3 shall have occurred.
6. DEVELOPER ORGANIZATION, AUTHORITY, FINANCIAL CONDITION AND
SHAREHOLDERS.
6.1 Developer and Principal Shareholder represent and warrant that: (a)
Developer is a corporation duly incorporated, validly existing and in good
standing under the laws of the state of its incorporation; (b) Developer is
duly qualified and is authorized to do business and is in good standing as a
foreign corporation in each jurisdiction in which its business activities
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or the nature of the properties owned by it requires such qualification; (c) the
execution and delivery of this Agreement and the transactions contemplated
hereby are within Developer's corporate power; (d) the execution and delivery of
this Agreement have been duly authorized by the Developer; (e) the charter and
by-laws of Developer delivered to Franchisor are correct and complete and there
have been no changes therein since the date thereof; (f) the specimen stock
certificate delivered to Franchisor is a true specimen of Developer's stock
certificate; (g) the balance sheet of Principal Shareholder, heretofore
delivered to Franchisor, is complete and correct and fairly presents the
financial position of Principal Shareholder as of the date thereof; and (h)
there have been no materially adverse changes in the condition, assets or
liabilities of Principal Shareholder since the date thereof.
6.2 Developer and Principal Shareholder covenant that during the term of
this Agreement: (a) Developer shall do or cause to be done all things
necessary to preserve and keep in full force its corporate existence and shall
be in good standing as a foreign corporation in each jurisdiction in which its
business activities or the nature of the properties owned by it requires such
qualification; (b) Developer shall have the corporate authority to carry out
the terms of this Agreement; and (c) Developer shall print, in a conspicuous
fashion on all certificates representing shares of its stock when issued, a
legend referring to this Agreement and the restrictions on and obligations of
Developer and Principal Shareholder hereunder, including the restrictions on
transfer of Developer's shares.
6.3 In addition to its obligations pursuant to subsection 6.2 hereof,
Developer and Principal Shareholder shall provide Franchisor with such
financial information as Franchisor may reasonably request from time to time.
6.4 Developer and Principal Shareholder represent, warrant and covenant
that all Interests (as defined in subsection 7.3 hereto) in Developer are owned
as set forth on Appendix C hereto, that no Interest has been pledged or
hypothecated (except in accordance with Section 7 of this Agreement), and that
no change will be made in the ownership of any such Interest other than as
permitted by this Agreement, or otherwise consented to in writing by
Franchisor. Developer and Principal Shareholder agree to furnish Franchisor
with such evidence as Franchisor may reasonably request, from time to time, for
the purpose of assuring Franchisor that the Interests of Developer and
Principal Shareholder remain as represented herein.
6.5 Principal Shareholder hereby personally and unconditionally guarantees
each of Developer's financial obligations to Franchisor as set forth in Part
III, Section A of the form of Franchise Agreement which is attached hereto as
Appendix B and made a part hereof. Principal Shareholder agrees that Franchisor
may resort to such Principal Shareholder for payment of any such financial
obligations, whether or not Franchisor shall have proceeded against Developer,
any other Principal Shareholder or any other obligor primarily or secondarily
obligated to Franchisor with respect to such financial obligation. Principal
Shareholder hereby expressly waives presentment, demand, notice of dishonor,
protest and all other notices whatsoever with respect to Franchisor's
enforcement of this guaranty.
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7. TRANSFER.
7.1 There shall be no "Transfer" (as defined in subsection 7.2 below) of
any "Interest" (as defined in subsection 7.3 below) of Developer or of
Principal Shareholder in Developer in whole or in part (whether voluntarily or
by operation of law) directly, indirectly or contingently, except in accordance
with the provisions of this Section 7.
7.2 (a) Except as provided hereinbelow, "Transfer" shall mean any
assignment, sale, pledge, hypothecation, gift or other transfer of any Interest
or any other event which would change ownership of any Interest in violation of
the provisions of this Section 7 or change or create a new Interest in
violation of the provisions of this Section 7, including but not limited to:
(i) any change in the ownership of or rights in or to any shares of
stock or other equity interest in Developer which would result from the
act of any shareholder of Developer ("Shareholder"), such as a sale,
exchange, pledge or hypothecation of shares, or any interest in or rights
to any of Developer's profits, revenues or assets, or any such change
which would result by operation of law; and
(ii) any change in the percentage interest owned by any Shareholder
in the shares of stock of Developer, or interests in its profits,
revenues or assets which would result from any act of Developer such as a
sale, pledge or hypothecation of any Restaurant assets (other than as
provided for in subsection 7.2(b) below); any sale or issuance of any
shares of Developer's stock; or any sale or grant to any person of any
right to participate in or otherwise to share or become entitled to any
part of Developer's profits, revenues, assets or equity.
(b) Notwithstanding anything provided herein to the contrary, "Transfer"
shall not mean:
(i) any change in the ownership of or rights in or to any shares of
stock or other equity interest in Developer, constituting less than a
majority of the outstanding shares of stock of any class of Developer,
resulting from the divorce of Principal Shareholder; and
(ii) any grant to Developer's employees of options to purchase
Developer's stock which in the aggregate does not exceed twenty-five
percent (25%) of Developer's issued and outstanding stock; and
(iii) any grant to Developer's employees of a right to participate
in any profit-sharing, bonus or retirement plans offered by Developer
which are based on Developer's profits; and
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(iv) any pledge by Developer of Developer's stock to a financial
institution for the purpose of obtaining or restructuring any financing
necessary for Developer to develop, open and operate its franchised
Xxxxx'x Roadhouse Restaurants; and
(v) any pledge by Principal or any other shareholder of Developer of
Developer's assets to secure bona fide loans or credit necessary for
Developer to develop, open and operate its franchised Xxxxx'x Roadhouse
Restaurants; and
(vi) any grant or authorization by Developer of any mortgage or
security interest and any lien or security interest arising by operation
of law, including but not limited to any materialmen's or landlord's
lien, with respect to any "Interest" (as defined in subsection 7.3
below); and
(vii) any grant or authorization by Developer to a lessor of a
percentage of Developer's sales for a particular Restaurant pursuant to a
lease arrangement relating to such Restaurant.
7.3 "Interest" shall mean, in reference to interests or rights in
Developer, any shares of Developer's stock and any other equitable or legal
right in or to any of Developer's stock, revenues, profits or assets; and in
reference to rights or assets of Developer, "Interest" shall mean any of
Developer's rights under and interest in this Agreement, any Restaurant and its
revenues, profits and assets.
7.4 (a) The Interest of the Principal Shareholder may be transferred to
such Principal Shareholder's spouse or children or to a person designated in
such Principal Shareholder's will or trust (individually and collectively
referred to as "Successor"), without Franchisor's approval, provided that such
Successor shall agree to be bound by the restrictions contained in this Section
7, the purchase option described in Section 8 and all other covenants of
Principal Shareholder contained in this Agreement.
(b) The Interest of a Successor may only be transferred in accordance with
subsection 7.7, regardless of whether such Transfer is for consideration or by
gift or will or other device.
7.5 If at any time the Principal Shareholder desires to dispose of all or
substantially all of the Interest of the Principal Shareholder in Developer, or
the Principal Shareholder (or Developer) desires to dispose of all or
substantially all of Developer's Interest in this Agreement or in the assets
which Developer has acquired pursuant to this Agreement, the principal
Shareholder or Developer, as the case may be, shall notify Franchisor of that
desire, in writing, thirty (30) days before announcing that fact publicly or
engaging the services of a broker or sales agent.
7.6 (a) If at any time the Principal Shareholder or Developer, as the
case may be, obtains from a third party or third parties a bona fide offer (the
"Offer") in writing for the
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purchase of all or substantially all of the Interest of the Principal
Shareholder in Developer or of all or substantially all of Developer's Interest
in this Agreement or in the assets which Developer has acquired pursuant to this
Agreement, the Principal Shareholder or Developer shall not accept such Offer
without first giving notice (the "Selling Notice") to Franchisor stating that
the Principal Shareholder or Developer, as the case may be, has received the
Offer, identifying the prospective purchaser by name and address, specifying the
proposed purchase price and attaching a true and complete copy of the Offer.
(b) Franchisor shall have the option (the "Option"), exercisable within a
period of forty-five (45) days after receipt of the Selling Notice (the "Option
Period"), to purchase such Interest(s) at the price and on the same terms and
conditions set forth in the Offer except that Franchisor shall not be obligated
to pay any finder's or broker's fee, and if the Offer provides for payment of
consideration other than cash, or if the Offer involves certain intangible
benefits, Franchisor may elect to purchase such Interest(s) by offering a
reasonable cash substitute for the non-cash part of the Offer.
(c) The Option shall be exercisable by Franchisor delivering to the
Principal Shareholder or Developer, as the case may be, within the Option
Period, a notice (i) stating that the Option is being exercised and (ii)
specifying the time, date and place at which the closing of such purchase and
sale will take place, which date shall be not later than one hundred twenty
(120) days from the date Franchisor exercises its Option. Notwithstanding the
foregoing, if Franchisor exercises the Option, its obligation to close the
purchase shall be subject to its ability to obtain all necessary approvals,
including but not limited to, any necessary approvals of its shareholders and
any governmental or regulatory authority. If any such approvals are not
obtained, Franchisor may terminate its obligation to purchase the Interest(s)
by giving Developer written notice, and in such event, Franchisor shall be
released of all obligations to purchase such Interest(s).
(d) If the Option is not exercised, the Principal Shareholder or
Developer, as the case may be, may sell the Interests in or of Developer to the
third party which made the Offer, on conditions no more favorable to the third
party offerer than those set forth in the Offer, provided that Franchisor
approves the proposed transferee and provided further that such sale takes
place within one hundred twenty (120) days after the expiration of the Option
Period.
(e) If the Option is not exercised, the Principal Shareholder or
Developer, as the case may be, shall immediately notify Franchisor in writing
of any change in the terms of an Offer. Any material change in the terms of an
Offer shall cause it to be deemed a new Offer, conferring upon Franchisor a new
Option pursuant to this subsection 7.6; the Option Period with respect to the
new Option shall be deemed to commence on the day on which Franchisor receives
written notice of a material change in the terms of the original Offer.
7.7 (a) Developer understands and acknowledges that the rights and duties
set forth in this Agreement are personal to Developer and that Franchisor has
entered into this Agreement in reliance on the business skill and financial
capacity of Developer, and the business skill,
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financial capability and personal character of Principal Shareholder. Except as
otherwise provided in this Section 7, the Principal Shareholder shall at all
times retain control of Developer. Except as otherwise provided in this Section
7, no Transfer of any part of Developer's Interest in this Agreement, and no
Transfer of any interest of Principal Shareholder shall be completed except in
accordance with this subsection 7.7. In the event of such a proposed Transfer
of any part of Developer's interest in this Agreement, or of any Interest of
Principal Shareholder, the party or parties desiring to effect such Transfer
shall give Franchisor notice in writing of the proposed Transfer, which notice
shall set forth the name and address of the proposed transferee and all the
terms and conditions of the proposed Transfer. Upon receiving such notice,
Franchisor may (i) approve the Transfer, or (ii) withhold its consent to the
Transfer. Franchisor shall, within thirty (30) days of receiving such notice,
advise the party or parties desiring to effect the Transfer whether it (1)
approves the Transfer, or (2) withholds its consent to the Transfer, giving the
reasons for such disapproval. Franchisor shall not unreasonably withhold its
consent to a Transfer; provided, however, that Franchisor shall not be deemed to
have unreasonably withheld consent if Franchisor determines, in its reasonable
discretion, that the proposed transferee (i) does not have a net worth at least
that of Developer, or does not have a sound financial condition satisfactory to
Franchisor, in its reasonable discretion or (ii) does not have adequate
experience in the operation and marketing of food service establishments
reasonably similar to the Restaurants within the Xxxxx'x Roadhouse System. Upon
request by Franchisor, Developer shall provide to Franchisor any and all
information pertaining to the Transfer and/or the proposed transferee as
Franchisor may reasonably request, and the thirty (30) day time period
referenced above shall be extended until the date that is thirty (30) days from
the date Franchisor receives the requested information from Developer.
(b) In the event that Franchisor approves the Transfer, and the Transfer
is not completed within ninety (90) days of the later of (i) expiration of the
thirty (30) day notice period, or (ii) delivery of notice of Franchisor's
approval of the proposed Transfer, Franchisor's approval of the proposed
Transfer shall automatically be revoked. The ninety (90) day limitation
described in the preceding sentence shall not apply if at the end of said
ninety (90) day period the only issue which prevents completion of the Transfer
is the need to effect transfers of the applicable liquor licenses. Any
subsequent proposal to complete the proposed Transfer shall be subject to
Franchisor's right of approval as provided herein. The party which desires to
effect the proposed Transfer shall immediately notify Franchisor in writing of
any change in the terms of a Transfer. Any material change in the terms of a
Transfer prior to closing shall cause it to be deemed a new Transfer, revoking
any approval previously given by Franchisor and conferring upon Franchisor a
new right to approve such transfer, which shall be deemed to commence on the
day on which Franchisor receives written notice of such changes in terms.
7.8 In connection with any request for Franchisor's approval of a proposed
Transfer pursuant to this Section 7, the parties to the proposed Transfer shall
pay Franchisor a fee to defray the actual cost of review and the administrative
and professional expenses related to the proposed Transfer and the preparation
and execution of documents and agreements, up to a maximum of Ten Thousand
Dollars ($10,000).
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8. ACQUISITION OPTION.
8.1 Developer hereby grants to Franchisor the right to acquire, by merger
of Developer with and into Franchisor (the "Acquisition Option"), all of the
outstanding capital stock of Developer, for the consideration and on the terms
set forth below in subsection 8.2 at any time during the term of this Agreement
upon the occurrence of any of the following events:
(a) The expiration of five (5) years from the date of the later to
occur of the following: (i) the execution of this Agreement or (ii) the
execution by Developer and Franchisor of a Franchise Agreement for
Developer's first Restaurant (the "First Franchise Agreement").
Franchisor may exercise the Acquisition Option during a period of five
(5) years after it becomes effective under this subsection 8.1(a); or
(b) The death or disability of Principal Shareholder during the
time period set forth in subsection 8.1(a) above, disability being
defined as the inability to perform his duties as an officer and/or
director of Developer for six (6) consecutive months. Franchisor may
exercise the Acquisition Option during a period of nine (9) months after
it becomes effective under this subsection 8.1(b); or
(c) Developer's default, with such default continuing without cure
for a period of thirty (30) days after written notice to Developer
specifying such default or if Developer is notified of more than two
events of default in one year with respect to any of its obligations
under either (i) this Agreement or (ii) any of the individual Franchise
Agreements executed and in effect between Franchisor and Developer.
Franchisor may exercise the Acquisition Option at any time during a
period of twelve (12) months after the occurrence of such an event of
default;
8.2 (a) The consideration (the "Consideration") for all of the
outstanding capital stock of Developer shall be equal to the product of (a)
fifty percent (50%) of the average trailing price/earnings ratio of Franchisor's
Common Stock, par value, $.01 per share (the "Common Stock"), as published in
The Wall Street Journal for the thirty (30) trading day period immediately prior
to the date of notice of exercise of the Acquisition Option, multiplied by (b)
the net income of Developer calculated for the most recently completed twelve
(12) month period immediately prior to the date of notice of exercise of the
Acquisition Option ("Developer's Trailing Net Income") with respect to which
Franchisor shall have received audited financial statements, if available. If
audited financial statements for such period are not then available, Franchisor
and Developer will share equally in the cost of obtaining audited financial
statements for such period. For the purposes of this subsection 8.2, Developer's
Trailing Net Income shall be computed in accordance with generally accepted
accounting principles and adjusted, if necessary, to correspond in accounting
policy with Franchisor's financial statements and: (a) to substitute for
Developer's actual supervisory, general and administrative expense an amount
equal to three percent (3%) of Developer's monthly gross sales, (b) to limit
Developer's advertising expense to three percent (3%)
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of Developer's monthly gross sales (which shall include up to one percent (1%)
as contributed by Franchisee pursuant to Part II, Section G(2) of the form of
Franchise Agreement which is attached hereto as Appendix B and made a part
hereof) and (c) to provide for federal income taxes at the then-current tax
rate applicable to Franchisor. Developer's net income statement shall reflect
Developer's royalty fee of three percent (3%) of Developer's monthly gross
sales as a separate line item.
(b) For purposes of subsection 8.2(a), the Consideration shall be
adjusted, if necessary, to include compensation to Developer for its reasonable
and documentable pre-opening costs expended for Restaurants under development
but not yet open through and including the date of the Exercise Notice (as
defined in subsection 8.7 below)
(c) For purposes of subsection 8.2(a), each Shareholder shall be entitled
to elect the percentage of the Consideration to be paid by certified or
official bank check, in next day funds, or in such other form and manner as may
be mutually satisfactory up to an aggregate for all Shareholders of 25% of the
Consideration, except as provided in subsection 8.6(b).
8.3 In no event shall the Consideration be either (i) less than the
product of ten (10) times Developer's Trailing Net Income or (ii) more than the
product of fifteen (15) times Developer's Trailing Net Income. The
Consideration shall be adjusted, if necessary, to the extent necessary so that
the amount is within the range specified herein.
8.4 Upon the closing of the Acquisition Option and for a period of twelve
(12) months thereafter, Franchisor shall pay ten percent (10%) of the
Consideration into escrow (the "Escrowed Consideration"). In the event that
any of the Escrowed Consideration is in the form of Franchisor's Common Stock,
then Franchisor shall establish an escrow account in the name of Franchisor and
Developer for such Common Stock and Developer shall be entitled to all rights
and privileges arising from such Common Stock during the duration of the escrow
of the portion of the Escrowed Consideration comprised of Franchisor Common
Stock. In the event that any of the Escrowed Consideration is in the form of
cash pursuant to Developer's election in subsection 8.6 hereof, then Franchisor
shall establish an escrow account in the name of Franchisor and Developer for
such cash amount bearing interest at a commercially reasonable annual rate,
which interest shall be the property of Developer. Franchisor shall pay
Developer the entire Escrowed Consideration if Developer is in compliance with
all of the terms and provisions of the Merger Agreement, all representations
and warranties contained therein were true and correct when made and all
covenants therein had been performed. The Merger Agreement shall be
substantially in the form attached hereto as Appendix D and executed in
connection with the exercise of the Acquisition Option, it being understood
that the covenants, representations and warranties contained therein may
require modifications at the time the Acquisition Option is exercised to
reflect any changes in facts, circumstances or controlling law, which
modifications shall be reasonably agreed upon by Developer and Franchisor.
8.5 Franchisor shall make payment of the full Consideration to Developer's
shareholders by delivering to such shareholders and the escrow agent the checks
and certificates
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representing shares of Franchisor's Common Stock in exchange for certificates
for shares of Developer's Common Stock. The value of Franchisor's Common Stock
shall be determined as follows: the price per share of Franchisor's Common Stock
to be delivered upon exercise of the Acquisition Option shall equal the average
of the closing prices of Franchisor's Common Stock as published in The Wall
Street Journal for the most recent thirty (30) trading day period immediately
prior to the date of notice of exercise of the Acquisition Option.
8.6 (a) It is intended by the parties hereto that the merger transaction
shall qualify for federal income tax purposes as a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended.
(b) Notwithstanding the foregoing, in the event that the merger
transaction shall not qualify for federal income tax purposes as a
reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended, (i) Developer shall have the right to receive up to fifty
percent (50%) of the Consideration in cash by providing written notice to
Franchisor of such election; provided, however, that Franchisor may, upon
receipt of Developer's notice of such election, rescind its own exercise of the
Acquisition Option, with the effect of reserving its Acquisition Option right
for a later date and (ii) Franchisor shall have the right, in lieu of acquiring
all of the outstanding capital stock of Developer, to acquire for the
Consideration all of Developer's assets and assume all its liabilities,
including all corporate and administrative assets and liabilities, necessary
for or directly related to the operation of its franchised Xxxxx'x Roadhouse
Restaurants, but excluding any operating assets and related liabilities
relating to the operation of any business other than its franchised Xxxxx'x
Roadhouse Restaurants, subject to all the terms and conditions of this section
8. In the event Franchisor chooses to acquire assets rather than stock, the
Merger Agreement attached as Appendix D shall be modified by the parties hereto
to the extent necessary to conform to the provisions of this subsection 8.6.
8.7 Franchisor may exercise the Acquisition Option by delivering written
notice to Developer of such election (the "Exercise Notice"). The Exercise
Notice shall specify the closing date, which shall take place on a date and at
the time designated by Franchisor in the Exercise Notice, which date shall not
be earlier than sixty (60) days and not later than one hundred twenty (120) days
after the date on which the Exercise Notice is delivered; provided, however,
that Franchisor may require that the closing occur later than one hundred twenty
(120) days after the date on which the Exercise Notice is delivered if an
extension is necessary for Developer to complete the audit required by
Subsection 8.2 or for Franchisor to obtain necessary approvals of its
shareholders or of governmental or regulatory authorities; and provided,
further, that in the event Developer requests cash in excess of 10% of the
Consideration as part of the Consideration, Franchisor may require that the
closing occur not later than two hundred ten (210) days after the date on which
the Exercise Notice is delivered for the purpose of arranging financing of the
cash portion of the Consideration. Upon delivery of the Exercise Notice,
Developer's obligations pursuant to Sections 2 and 3 hereof shall immediately
cease, Developer shall immediately cease all development activities in
undeveloped markets, and Franchisor and Developer shall execute a definitive
Merger Agreement, substantially in the form attached hereto
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as Appendix D, with such changes, if any, as may be reasonably acceptable to
Franchisor and Developer. Notwithstanding the foregoing, if Franchisor exercises
the Acquisition Option, its obligation to execute the Merger Agreement and close
the Acquisition Option shall be subject to its ability to obtain all necessary
approvals, including but not limited to, the approvals of its shareholders and
any governmental or regulatory authority. If any such approvals are not
obtained within one hundred eighty (180) days after the date on which the
Exercise Notice is delivered, either Franchisor or Developer may rescind the
exercise of the Acquisition Option at such time by giving the other party
written notice within ten (10) days after expiration of such one hundred eighty
(180) day period, and in such event, both parties shall be released of all
obligations pursuant to the Acquisition Option as previously exercised and
Developer's obligations pursuant to Sections 2 and 3 shall thereupon be
reinstated with an additional period equal to the amount of days during which
such obligations were suspended (not to exceed one hundred eighty (180) days)
added to each of the Development Schedule and the Subsequent Development
Schedule.
8.8 Upon closing of the Acquisition Option, all stock certificates held by
shareholders of Developer shall be delivered to Franchisor in exchange for
payment of the Consideration. Each of Franchisor and Developer hereby
acknowledge the following:
(a) The issuance of Franchisor Common Stock will not be registered
under the Securities Act of 1933, as amended (the "Securities Act"), in
reliance upon exemptions from registration contained in the Securities
Act, and Franchisor's reliance upon such exemptions is based in part upon
Developer's representations, warranties and agreements contained in this
Agreement.
(b) The following legend shall appear on the certificates for the
shares of Franchisor Common Stock issued pursuant to the exercise of the
Acquisition Option. Franchisor and Developer agree that the shares of
Franchisor Common Stock received by Developer will be restricted and may
not be freely sold, Franchisor may refuse to permit transfer or limit the
transfer of the shares and that the shares must be held indefinitely in
the absence of compliance with the terms of the following legend. For a
period of one (1) year subsequent to the closing of the Acquisition
Option, to the extent that Franchisor permits Developer to transfer the
shares and such transfer complies with the terms of the following legend,
in no event (unless expressly waived by Franchisor) may Developer
transfer (except pursuant to an effective registration statement or a
sale under Rule 144) more than ten percent (10%) of the total number of
shares received by Developer pursuant hereto in any twelve (12) month
period:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ISSUED AND SOLD IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND MAY NOT BE SOLD,
OFFERED FOR SALE OR OTHERWISE DISPOSED OF OTHER THAN
(i) PURSUANT TO
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AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OR (ii) AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY REGARDING
COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE
SECURITIES LAWS OF ANY OTHER JURISDICTION. THE
COMPANY SHALL BE ENTITLED TO REQUIRE AN OPINION OF
COUNSEL SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE
WITH THE ABOVE LAWS.
(c) Upon the written request of the shareholders of Developer who
receive shares of Franchisor's Common Stock pursuant to the exercise of
the Acquisition Option (the "Developer Shareholders"), Franchisor shall,
at the Developer Shareholders' cost and expense (including, but not
limited to, the fees and expenses of Franchisor's and Developer
Shareholders' counsel and underwriting discounts, commissions and filing
fees attributable to the Common Stock to be registered), register for
resale pursuant to an effective registration statement such number of the
shares of Franchisor's Common Stock received by the Developer
Shareholders pursuant to the exercise of the Acquisition Option which
such Developer Shareholders are otherwise then unable to sell pursuant to
Rule 144 or another exemption from registration under the Securities Act
of 1933, as amended.
8.9 Upon closing of the Acquisition Option, all employment agreements
among Developer or Principal Shareholder and any employee relating to the
operation of Restaurants shall immediately become null and void unless
otherwise preapproved to continue by Franchisor.
9. TERMINATION.
9.1 This Agreement shall expire on March 31, 2007, unless sooner
terminated pursuant to the terms hereof.
9.2 Franchisor shall have the right to terminate this Agreement
immediately upon written notice to Developer stating the reason for such
termination, and Developer shall no longer have any of the rights created by
this Agreement, in the event of:
(a) development by Developer of a Restaurant without first obtaining
approval from Franchisor of the Restaurant site, the proposed form of
lease for a Restaurant site, and of Developer's Plans in accordance with
Section 4 hereof;
(b) any breach or default of any of the provisions of Section 7
hereof;
(c) the filing by Developer of a petition in bankruptcy, an
arrangement for the benefit of creditors, or a petition for
reorganization; the filing against Developer of a
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petition in bankruptcy, an arrangement for the benefit of creditors, or
petition for reorganization, not dismissed within sixty (60) days of the
filing thereof; the making of an assignment by Developer for the benefit of
creditors; or the appointment of a receiver or trustee for Developer, which
receiver or trustee shall not have been dismissed within sixty (60) days of
such appointment;
(d) the discovery by Franchisor that Developer made a material
misrepresentation or omitted a material fact in the information which was
furnished to Franchisor in connection with this Agreement;
(e) failure by Developer to locate a replacement to the "Director of
Operations" (as defined in subsection 12.2 below) who is approved by
Franchisor in accordance with subsection 12.2 within one hundred twenty
(120) days of the date on which the last Director of Operations who was
approved by Franchisor ceased to be employed by Developer in that
capacity; or
(f) any part of this Agreement relating to the payment of fees to
Franchisor, or the preservation of any of Franchisor's trade names,
service marks, trademarks, trade secrets or secret formulae licensed or
disclosed hereunder or under any Franchise Agreement between Franchisor
and Developer, is for any reason declared invalid or unenforceable and
such declaration materially adversely affects Franchisor.
(g) notwithstanding anything provided herein to the contrary, any
person or group (as such terms are defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) other than Principal
Shareholder becomes the holder of 50% or more of all of the outstanding
shares of Developer's stock.
9.3 If Developer defaults in the performance or observance of any of its
obligations hereunder or under any Franchise Agreement between Developer and
Franchisor, if no other curative period applies pursuant to the provisions of
this Agreement, and if any such default continues for a period of thirty (30)
days after written notice to Developer specifying such default, Franchisor
shall have the right to terminate this Agreement upon written notice to
Developer. If Developer defaults in the performance or observance of any
obligation two or more times within a twelve (12) month period, Franchisor
shall have the right to terminate this Agreement immediately upon commission of
the second act of default, upon written notice to Developer stating the reason
for such termination, without allowance for any curative period.
9.4 This Agreement shall automatically terminate under the conditions and
at the times specified in Sections 2 and 3.
9.5 Notwithstanding anything to the contrary explicitly set forth or
implicitly contained in this Agreement, no termination or expiration of this
Agreement pursuant to any term or provision of this Agreement shall result in
the termination of the Acquisition Option provided in Section 8 of this
Agreement prior to the last date on which it would expire or
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terminate in accordance with the provisions of Section 8; provided, however,
that (i) if the Franchisor terminates the Agreement pursuant to Section 9.2 or
9.3 or if the Agreement terminates pursuant to Section 9.4, the Acquisition
Option shall become immediately exercisable and shall remain for one (1) year
after termination of this Agreement.
10. PREREQUISITES TO OBTAINING FRANCHISES FOR INDIVIDUAL RESTAURANT UNITS.
10.1 Developer understands and agrees that this Agreement does not confer
upon Developer a right to obtain a franchise for any Restaurant but is intended
by the parties to set forth the terms and conditions which, if fully satisfied,
shall entitle Developer to obtain such a franchise.
10.2 In the event that Developer shall have obtained Franchisor's approval
of a particular proposed site for a Restaurant, and if Franchisor, in the
exercise of its sole discretion, has granted Developer operational, financial
and legal approval, then Franchisor will grant Developer a franchise for a
Restaurant at the site in question. As used herein, Franchisor will grant
Developer "operational", "financial" and "legal" approval under the following
circumstances:
"Operational" approval will be granted if Franchisor has
determined, in the exercise of its sole discretion, that Developer
is conducting the operation of each of its Restaurants, and is
capable of conducting the operation of the proposed Restaurant,
including physical aspects thereof, (a) in accordance with the
terms and conditions of this Agreement, (b) in accordance with the
provisions of the respective Franchise Agreements, and (c) in
accordance with the standards, specifications and procedures set
forth and described in the Franchise Operations Manual, as it may
be amended from time to time. Developer understands that changes
in said standards, specifications and procedures may become
necessary from time to time. Developer agrees to accept said
changes, and Developer further agrees that it is within the sole
discretion of Franchisor to make said changes.
"Financial" approval will be granted if (a) Developer is not in
breach of its obligations under this Agreement and has been and is
faithfully performing all terms and conditions under each of its
existing Franchise Agreements with Franchisor, (b) Developer or
its affiliates is not in default of any monetary obligations owed
to Franchisor, and (c) Developer is not in default of any
financial obligation to any of its suppliers unless any such
obligation is being disputed in good faith by the Developer.
Developer acknowledges and agrees that it is vital to Franchisor's
interest that each of its franchisees be financially sound to
avoid failure of a franchised business (which would adversely
affect the reputation and good name of Franchisor and the Xxxxx'x
Roadhouse System).
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Developer acknowledges and agrees that it is vital to Franchisor's
interest and to the interests of the Xxxxx'x Roadhouse System that
Developer (in its capacity as franchisee) remain current in satisfying its
financial obligations to its suppliers.
"Legal" approval will be granted if Franchisor has determined, in the
exercise of its sole discretion, that Developer has submitted to
Franchisor, in a timely manner as requested, all information and documents
requested by Franchisor, prior to and as a basis for the issuance of
individual franchises or pursuant to any right granted to Franchisor by
this Agreement or by any Franchise Agreement between Developer and
Franchisor.
10.3 It is understood and agreed that the foregoing criteria apply to the
operational, financial and legal aspects of any Restaurant franchised by
Franchisor in which Developer or Principal Shareholder has any legal or
equitable interest. It is further understood and agreed that Developer and
Principal Shareholder have an ongoing responsibility to operate each Restaurant
in which Developer or Principal Shareholder has any legal or equitable interest
in a manner which satisfies the foregoing requirements for operational,
financial and legal approval.
11. RESTRICTIONS.
11.1 Developer and Principal Shareholder acknowledge that protection of
Franchisor's trade secrets and confidential information, and protection against
unfair competition from others who enjoy or who recently have had access to
Franchisor's trade secrets and confidential information, are essential for the
maintenance of the goodwill and value of the Xxxxx'x Roadhouse System and the
rights of Franchisor's other franchisees. Developer and Principal Shareholder
recognize that they will acquire access to confidential information and other
information relating to the development and operation of Restaurants, which may
or may not be "trade secrets" under prevailing judicial interpretations of that
term but which nevertheless are private and confidential and are not generally
available to persons not in close privity with Franchisor; and which, to
preserve the goodwill and special value of the System for Franchisor and all of
its franchisees, should not be available to any actual or potential direct or
indirect competitor of Franchisor or any of its franchisees. Accordingly,
Developer and Principal Shareholder agree as follows:
(a) During the term of this Agreement, neither Developer nor
Principal Shareholder for so long as such Principal Shareholder owns an
Interest in Developer, may without the prior written consent of Franchisor,
directly or indirectly engage in or acquire any financial or beneficial
interest (including interests in corporations, partnerships, trusts,
unincorporated associations or joint ventures) in, advise, help or make
loans to, any entity engaged in the business of preparing and serving or
preparing for service of steaks, ribs, chicken and seafood dishes in a
distinctive atmosphere reminiscent of an American roadhouse which is
located either (i) in the Territory, (ii) in the Area of Dominant Influence
(as defined and established from time to time by Arbitron Ratings Company)
of any Restaurant developed pursuant to this Agreement, or
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(iii) within a fifty (50) mile radius of any Franchisor owned or
operated unit or any franchisee owned or operated unit within the
Xxxxx'x Roadhouse System.
(b) Neither Developer, for two (2) years following the termination
of this Agreement, nor Principal Shareholder, for two (2) years following
termination of all of his Interest in Developer, may directly or
indirectly engage in or acquire any financial or beneficial interest
(including any interest in corporations, partnerships, trusts,
unincorporated associations or joint ventures) in, advise, help or make
loans to, any entity engaged in the business of preparing and serving or
preparing for service of steaks, ribs, chicken and seafood dishes in a
distinctive atmosphere reminiscent of an American roadhouse which is
located either (i) in the Territory, (ii) in the Area of Dominant
Influence (as defined and established from time to time by Arbitron
Ratings Company) of any Restaurant developed pursuant to this Agreement,
or (iii) within a fifty (50) mile radius of any Franchisor owned or
operated unit or any franchisee owned or operated unit within the Xxxxx'x
Roadhouse System.
11.2 Neither Developer nor any Shareholder shall (a) appropriate, use, or
duplicate the Xxxxx'x Roadhouse System, or any portion thereof, for use in any
other restaurant business which is not within the Xxxxx'x Roadhouse System, (b)
disclose or reveal any portion of the Xxxxx'x Roadhouse System to any other
person other than to Developer's employees as an incident of their training, or
(c) acquire any right to use, or to license or franchise the use of, any name,
xxxx or other intellectual property right which may be granted pursuant to any
agreement between Franchisor and Developer, except in connection with the
operation of a Restaurant.
11.3 Developer and Principal Shareholder agree that the provisions of this
Section 11 are and have been a primary inducement to Franchisor to enter into
this Agreement and that in the event of breach thereof Franchisor would be
irreparably injured and would be without an adequate remedy at law. Therefore,
in the event of a breach of any of such provisions Franchisor shall be
entitled, in addition to any other remedies which it may have hereunder or in
law or in equity (including the right to terminate this Agreement), to a
preliminary and/or permanent injunction and decree for specific performance of
the terms hereof without the necessity of showing actual or threatened damage,
and without being required to furnish a bond or other security.
11.4 If any court or other tribunal having jurisdiction to determine the
validity or enforceability of this Section 11 determines that it would be
invalid or unenforceable as written, then the provisions hereof shall be deemed
to be modified or limited to such extent or in such manner as necessary for
such provisions to be valid and enforceable to the greatest extent possible.
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12. DEVELOPMENT PROCEDURES.
12.1 Franchisor will use its best efforts to furnish Developer with advice
and assistance in developing Restaurants and in selecting sites therefor.
12.2 Developer shall designate an individual who shall be personally
responsible for Developer's development activities during the term of this
Agreement, and who shall devote his or her full-time, best efforts and personal
attention, on a day-to-day basis, to Developer's development activities in the
Territory (the "Director of Operations"). Franchisor acknowledges and accepts
Developer's designation of Principal Shareholder as the first Director of
Operations. Developer shall require that the Director of Operations maintain
his or her principal personal residence in the Territory; provided, that
Principal Shareholder shall be permitted ninety (90) days after the opening of
the first franchised Restaurant hereunder to relocate his principal residence
in the Territory. Developer's designation of any subsequent Director of
Operations shall be subject to the written approval of Franchisor (which
approval shall not be arbitrarily withheld), and shall also be subject to the
time limitations described in subsection 9.2(e) hereof. Franchisor shall
notify Developer in writing within fourteen (14) days of receipt of Developer's
request whether Franchisor disapproves such person. Failure by Franchisor to
so notify Developer within that period shall be deemed to constitute
Franchisor's approval of such person.
12.3 Developer shall require the Director of Operations and each of its
area supervisors to execute a confidentiality agreement and covenant not to
compete in form and substance satisfactory to Franchisor. Developer shall use
its best efforts to obtain from each other employee of Developer, including but
not limited to each Restaurant general manager, who will have supervisory
authority over the development or operation of more than one Restaurant execute
a confidentiality agreement in form and substance satisfactory to Franchisor
and to the extent required by Franchisor of its own employees at similar
levels. Developer shall be responsible for compliance by its employees with
the agreements identified in this subsection.
12.4 (a) Developer shall require its Director of Operations to attend, and
to complete to Franchisor's reasonable satisfaction, an operations training
course provided by Franchisor. If the Director of Operations or any such
supervisory employee fails to complete Franchisor's operations training course
successfully, Franchisor may require designation of a new Director of
Operations or replacement supervisory employee, as the case may be, and
Developer shall designate a new Director of Operations or replacement
supervisory employee who shall be required to complete successfully such
training course.
(b) The Director of Operations shall, from time to time as reasonably
requested by Franchisor, attend and complete to Franchisor's reasonable
satisfaction a Franchisor-provided refresher course in restaurant operations.
12.5 With respect to each Restaurant within the Territory developed by
Developer, Developer's employees must satisfy the training requirements
described in Part I, Section E of Appendix B hereto. After Developer opens its
first Restaurant pursuant to this Agreement,
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Franchisor may, but shall not be obligated to, permit Developer (at Developer's
own expense) to conduct a portion of the required training at one of Developer's
existing Restaurants. In such event Developer
will be required to provide qualified personnel to administer training tests
and to maintain records relating to the training and performance employees.
13. NO WAIVER OF DEFAULT.
13.1 The waiver by either party to this Agreement of any breach or
default, or series of breaches or defaults, of any term, covenant or condition
herein or of any same or similar term, covenant or condition contained in any
other agreement between Franchisor and any other person, shall not be deemed a
waiver of any subsequent or continuing breach or default of the same or any
other term, covenant or condition contained in this Agreement, or in any other
agreement between Franchisor and any other person.
13.2 Unless otherwise specified herein, all rights and remedies of
Franchisor shall be cumulative and not alternative, in addition to and not
exclusive of any other rights or remedies which are provided for herein or
which may be available at law or in equity in case of any breach, failure or
default or threatened breach, failure or default of any term, provision or
condition of this Agreement. Franchisor's rights and remedies shall be
continuing and shall not be exhausted by any one or more uses thereof, and may
be exercised at any time or from time to time as often as may be expedient; and
any option or election to enforce any such right or remedy may be exercised or
taken at any time and from time to time. The expiration or earlier termination
of this Agreement shall not discharge or release Developer or Principal
Shareholder from any liability or obligation then accrued, or any liability or
obligation continuing beyond, or arising out of, the expiration or earlier
termination of this Agreement.
14. FORCE MAJEURE.
14.1 As used in this Agreement, the term "Force Majeure" shall mean any
act of god, strike, lock-out or other industrial disturbance, war (declared or
undeclared), riot, epidemic, fire or other catastrophe, act of any government,
material defaults by unaffiliated third parties under agreements with Developer
relating to the development of franchised Restaurants and any other similar
cause not within the control of the party affected thereby.
14.2 If the performance of any obligation by any party under this
Agreement is prevented, hindered or delayed by reason of Force Majeure, which
cannot be overcome by use of normal commercial measures, the parties shall be
relieved of their respective obligations to the extent the parties are
respectively necessarily prevented, hindered or delayed in such performance
during the period of such Force Majeure. The party whose performance is
affected by an event of Force Majeure shall give prompt notice of such Force
Majeure event to the other party by telephone or telegram (in each case to be
confirmed in writing), setting forth the nature thereof and an estimate as to
its duration, and shall be liable for failure to give such timely notice only
to the extent of damage actually caused.
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15. CONSTRUCTION, SEVERABILITY, GOVERNING LAW AND
JURISDICTION.
15.1 If any part of this Agreement shall for any reason be declared
invalid, unenforceable or impaired in any way, the validity of the remaining
portions shall remain in full force and effect as if this Agreement had been
executed with such invalid portion eliminated, and it is hereby declared the
intention of the parties that they would have executed the remaining portion of
this Agreement without including therein any such portions which might be
declared invalid; provided, however, that in the event any part hereof relating
to the payment of fees to Franchisor, or the preservation of any of
Franchisor's trade names, service marks, trademarks, trade secrets or secret
formulae licensed or disclosed hereunder or pursuant to any Franchise Agreement
between Franchisor and Developer is for any reason declared invalid or
unenforceable, then Franchiser shall have the option of terminating this
Agreement upon written notice to Developer. If any clause or provision herein
would be deemed invalid or unenforceable as written, it shall be deemed to be
modified or limited to such extent or in such manner as may be necessary to
render the clause or provision valid and enforceable to the greatest extent
possible in light of the interest of the parties expressed in that clause or
provision.
15.2 Developer and Principal Shareholder acknowledge that Franchisor may
enter into other Development Agreements throughout the United States on terms
and conditions similar to those set forth in this Agreement, and that it is of
mutual benefit to Developer and Principal Shareholder and to Franchisor that
these terms and conditions be uniformly interpreted. Therefore, the parties
agree that to the extent that the laws of the State of Tennessee do not
conflict with local franchise investment statutes, rules and regulations,
Tennessee law shall apply to the construction and enforcement of this Agreement
and shall govern all questions which arise with reference hereto.
15.3 The parties agree that any claim, controversy or dispute arising out
of or relating to this Agreement or the performance thereof which cannot be
amicably settled, except as otherwise provided herein, may, at the option of
the claimant, be resolved by a proceeding in a court in Tennessee, and
Developer and the Principal Shareholder each irrevocably accept the
jurisdiction of the courts of the State of Tennessee and the federal courts
located in such State for such claims, controversies, or disputes.
The parties agree that service of process in any proceeding arising out of
or relating to this Agreement or the performance thereof may be made by serving
a person of suitable age and discretion (such as the person in charge of the
office) as to Franchisor, at the address of Franchisor; and as to Developer and
Principal Shareholder, at the address of Developer specified in this Agreement.
16. MISCELLANEOUS.
16.1 All notices and other communications required or permitted to be
given hereunder shall be deemed given when delivered in person or via
nationally recognized overnight air
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courier service or mailed by registered or certified mail addressed to the
recipient at the address set forth below, unless that party shall have given
written notice of change of address to the sending party, in which event the new
address so specified shall be used.
FRANCHISOR:
Xxxxx'x Roadhouse, Inc.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Chief Executive Officer
cc: Xxxxxx Xxxxxxx Xxxxxx & Xxxxx,
A Professional Limited Liability Company
Nashville City Center
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxxx Xxx 000000
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: X. Xxxxx Xxxx, Esq.
DEVELOPER:
CMAC Incorporated
Xxxxx'x Roadhouse, Inc.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
cc: Xxxxxx X. Xxxxx, Esq.
0000 Xxxxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxxx 00000
PRINCIPAL SHAREHOLDER:
Xxxxxxx X. XxXxxxxxx, Xx.
Xxxxx'x Roadhouse, Inc.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
cc: Xxxxxx X. Xxxxx, Esq.
0000 Xxxxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxxx 00000
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16.2 All terms used in this Agreement, regardless of the number and gender
in which they are used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine feminine or neuter,
as the context or sense of this Agreement may require, the same as if such
words had been written in this Agreement themselves. The headings inserted in
this Agreement are for reference purposes only and shall not affect the
construction of this Agreement or limit the generality of any of its
provisions.
16.3 This Agreement and the documents referred to herein constitute the
entire agreement between the parties, superseding and cancelling any and all
prior and contemporaneous agreements, understandings, representations,
inducements and statements, oral or written, of the parties in connection with
the subject matter hereof.
16.4 Except as expressly authorized herein, no amendment or modification
of this Agreement shall be binding unless executed in writing both by
Franchisor and by Developer and Principal Shareholder.
16.5 In the event that any party to this Agreement initiates any legal
proceeding to construe or enforce any of the terms, conditions and/or
provisions of this Agreement, including but not limited to its termination
provisions, or to obtain damages or other relief to which any party may be
entitled by virtue of this Agreement, the prevailing party or parties shall be
paid its reasonable attorneys' fees and expenses by the other party or parties.
16.6 It is the intention of the parties to this Agreement that this
Agreement shall not violate the Rule Against Perpetuities or any statute, rule
or regulation similar thereto (the "Rule"); and in the event anything in this
Agreement violates the Rule, this Agreement shall be construed, to the extent
permitted by law, in a manner that will not cause the violation of the Rule.
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IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of
the date first above written.
FRANCHISOR:
ATTEST: XXXXX'X ROADHOUSE, INC.
____________________________ By:____________________________________
Name:_______________________ Name:__________________________________
Title:______________________ Title:_________________________________
DEVELOPER:
ATTEST: CMAC INCORPORATED
____________________________ By:____________________________________
Name:_______________________ Name:__________________________________
Title:______________________ Title:_________________________________
WITNESS: PRINCIPAL SHAREHOLDER:
____________________________ _______________________________________
Name:_______________________ Xxxxxxx X. XxXxxxxxx, Xx.
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