EXHIBIT 10.28
AREA DEVELOPMENT AGREEMENT
THIS AREA DEVELOPMENT AGREEMENT ("Agreement") is entered into as of the
7th day of January, 2005 by and between BACK YARD BURGERS, INC. ("Franchisor"),
and Xxxxxxx X. Xxxxxxxx ("Developer[s]").
RECITALS
A. The Franchisor is the owner of the trade name and service xxxx
"BACK YARD BURGERS," certain valuable trade practices, and all
of the recipes, formulae, operating procedures, exclusive
systems, methods, techniques, designs, trademarks, service
marks, copyrights, manuals, training materials, and all other
items now or hereafter owned, used or provided by the
Franchisor (collectively "Trade Practices") in connection with
the retail sale of BACK YARD BURGERS franchises.
B. BACK YARD BURGERS, INC. ("Franchisor") operates and franchises
a number of drive-through and dine-in hamburger restaurants
under the trade name "BACK YARD BURGERS" which are operated in
accordance with the uniform standards of operation, including
without limitation, design of building, layout of equipment,
interior and exterior decoration, signs, operating methods,
menus, advertising, sales techniques, personnel management and
bookkeeping and accounting systems ("BACK YARD BURGERS
System").
C. Developer desires to obtain from the Franchisor a grant of the
exclusive right to develop and operate a number of BACK YARD
BURGERS Restaurants.
The grant pertains to Xxxxxxxxxx County and Xxxxxx
County, Texas. The parties hereto desire to provide for such
grant upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter contained herein, Franchisor and Developer agree as follows:
1. GRANT OF DEVELOPMENT RIGHTS
A. The Franchisor hereby grants to Developer during the
term of this agreement the exclusive right to open
and operate BACK YARD BURGERS Restaurants
("Restaurant[s]") or ("Unit[s]") under the
development schedule set forth in attached Addendum
1, incorporated herein by reference ("Development
Schedule, Division of Territory and Map"). Developer
shall be required and hereby agrees to open
additional BYB units under the following conditions;
unless otherwise agreed upon:
(1) A minimum of one (1) unit per each 70,000
population increase in the territory as
reported by the U.S. Census Bureau;
(2) Provided that, the increases occur after the
Developer has met and
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finished the terms and time of the
Development Schedule and, such unit
increases are established within the time
limitations of the Franchise Agreement and
any renewal periods.
B. The right of the developer to develop each Restaurant
is contingent upon Developer not being in default
under this Agreement, and in substantial compliance
with the terms and conditions of the Franchise
Agreements to which Developer is a party. Developer
must have opened and be operating all Restaurants
required by the Development Schedule.
C. This Agreement is not a Franchise Agreement, and does
not grant to Developer any right to use Back Yard
Burgers Trade Practices, nor the Back Yard Burgers
System. Developer shall have no right under this
Agreement to license others to use the Trade
Practices or Back Yard Burgers System.
2. DEVELOPMENT FEE
In consideration of the rights granted herein to Developer, Developer
shall pay the franchisor upon the execution hereof a Development fee of Five
Thousand Dollars ($5,000.00) per unit allocated to Developer under the
Development Schedule. The Development fees shall be fully earned by the
Franchisor upon execution hereof and is not refundable; provided, however that,
upon execution of the Franchise Agreement for each unit, the Franchisor shall
credit Developer $5,000.00 towards the franchise fee for that unit.
3. TERM
The term of this Agreement shall be for a period of ten (10) years
commencing on the date hereof unless extended, or sooner terminated by the
Franchisor as provided for in this Agreement. Developer shall have such option
to renew and extend the term of each individual franchise agreement as is
provided for thereunder.
4. TERRITORY
Exclusive Territory. During the term of this Agreement and any
extension hereof, the Franchisor shall not own, operate or grant a franchise for
any other Back Yard Burgers Restaurant within the following described territory:
Xxxxxxxxxx County and Xxxxxx County, Texas
except in or in conjunction with any military installation, zoo, or amusement
park. A map showing the Territory is attached hereto and incorporated herein as
Addendum 1, Page 12 If Developer fails to meet a requirement of the Development
Schedule, the Franchisor may develop a Restaurant or grant a franchise for a
Restaurant within the Territory, but not within the protected territory of any
of Developer's Restaurants, or restaurant sites approved by the Franchisor as
such territory is described in the respective franchise Agreement unless such
failure is due to fire, flood, earthquake or other similar causes beyond the
Developer's control.
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5. FRANCHISE AGREEMENTS
Developer may only develop a Restaurant hereunder by executing a
Franchise Agreement with Franchisor ("Franchise Agreement") for such Restaurant,
to be located at site approved by Franchisor as provided therein. The Franchise
Agreement for each Restaurant developed under the Development Schedule shall be
the form of the Franchise Agreement then being offered by Franchisor which will
be substantially in the form provided as Exhibit D to the Uniform Franchise
Offering Circular. Such Franchise Agreement shall not be effective unless
executed by Franchisor; Franchisor need not execute a Franchise Agreement if
Developer is then in default under any provision hereof.
6. INITIAL FRANCHISE FEE
For each Restaurant to be developed pursuant to the terms hereof,
Developer shall pay to Franchisor at the earlier of a.) submitting the building
plan to state or local regulatory authorities for approval, b.) the signing of
the property lease, c.) closing on the property, d.) or the signing of the
Franchise Agreement, a Franchise fee of Twenty-Five Thousand Dollars
($25,000.00) for the first franchise, and Twenty-Two Thousand Dollars
($22,000.00) for subsequent franchises developed under this Agreement. This fee
shall be fully earned upon execution of the Franchise Agreement, and will be
non-refundable. Franchisor shall credit Developer $5,000.00 towards the
Franchise fee for each unit developed, per paragraph 2 of this Agreement.
7. RESTAURANT OPERATION
Each Restaurant to be developed by Developer must be opened and
operated in accordance with and pursuant to the respective Franchise Agreement.
Developer's rights with respect to each Restaurant will be governed by the
Franchise Agreement for each restaurant.
8. TERMINATION
A. Termination at end of term. This Agreement shall terminate as
to all parties at the end of the term hereof if not renewed
pursuant to the provisions of Paragraph 3.
B. Termination For Good Cause. This Agreement shall not be
terminated except for good cause. The occurrence of any of the
following events shall constitute good and sufficient cause
for Franchisor, at its absolute option and without prejudice
to any other rights or remedies provided for hereunder or by
law or equity, to terminate this Agreement:
1. Immediately and without an opportunity to cure as follows:
(a) If Developer shall be adjudicated bankrupt,
or if any proceeding by or against Developer
or his corporation is instituted under any
section of the Bankruptcy Act, or if a
receiver (permanent or temporary) of
Developer's property or any part thereof is
appointed by a court of competent authority;
if Developer or his corporation
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makes a general assignment for the benefit
of creditors, or if a final judgment remains
unsatisfied of record for thirty (30) days
or longer (unless a supersede as bond is
filed) or if execution is levied against
Developer's business or property, or suit to
foreclose any lien or mortgage against the
restaurant or equipment is instituted
against Developer and not dismissed or
stayed within thirty (30) days.
(b) The Franchisor and Developer agree in
writing to terminate the Agreement;
(c) The Developer makes any material
misrepresentations relating to the
acquisition of the Development Agreement or
the Developer engages in conduct which
reflects materially and unfavorably upon the
operation and reputation of the franchise
business or system;
(d) The Developer on three or more occasions
within a one year period fails to comply
with one or more requirements of this
Agreement, or any Franchise Agreement,
whether or not corrected after notice;
(e) The Developer is convicted of a felony or
any other criminal misconduct which is
relevant to the operation of the business;
(f) Developer's voluntary abandonment of any of
the Restaurants except for reasons beyond
Developer's control.
2. Unless otherwise provided herein, after an
opportunity to cure as follows:
(a) The Developer fails to pay any fees or other
amounts due to the Franchisor within ten
(10) days after receiving written notice
that such fees are overdue;
(b) If the Developer fails, for a period of
fifteen (15) days after notification of
noncompliance, to comply with any federal,
state or local law or regulation applicable
to the operation of the business; and
(c) If Developer violates any other term or
condition of this Agreement or any Franchise
Agreement and Developer fails to cure such
violation within thirty (30) days after
written notice from Franchisor to cure same.
C. Monetary Obligations. In the event of termination of this
Agreement in its entirety, Franchisor may retain all fees paid
pursuant to this Agreement. In addition, all obligations of
Franchisor to Developer and all rights of Developer under this
Agreement shall then terminate; however, any obligations of
Developer
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to take, or abstain from taking, any action upon termination
pursuant to this Agreement shall not be affected by such
termination, including the payment to Franchisor of all sums
earned and due from Developer at the time of termination. No
franchise fees or sums defined in this agreement which are
unearned at the time of termination shall be payable beyond
the termination date.
9. ASSIGNMENT BY DEVELOPER
A. Restriction on Transfer. This Agreement is personal to
Developer and shall not be assigned, either voluntarily or by
operation of law, except as provided herein, without the prior
written consent of Franchisor, which consent shall not be
unreasonably withheld. No partial assignment of this Agreement
shall be allowed. No assignment may be made to a corporation
or control transferred to anyone through the sale of corporate
shares either voluntarily or by operation of law, except as
provided herein, except Developer retains at least fifty-one
percent (51%) ownership of said corporation, without the prior
written consent of Franchisor, which consent shall not be
unreasonably withheld.
B. Corporation as Proposed Assignee. If the proposed assignee is
a corporation, Franchisor shall have the right in its' sole
discretion, as a condition to granting its consent, to require
responsible officers and principal shareholders of the
corporation to guarantee the performance of the corporation
hereunder.
C. Other Agreements. If Franchisor consents to the assignment of
this Agreement, it shall also consent to the assignment of any
and all other agreements between Franchisor, its affiliates
and Developer in connection with the Restaurants. Developer,
in the event of assignment of this Agreement, shall also
assign all leases and other agreements in connection with the
Restaurants to the same assignee.
D. Execution of Then-Current Agreements. In any approved sale or
assignment of this Agreement, the assignee shall complete and
sign all appropriate forms and agreements required by
Franchisor, including assignments of each Franchise Agreement
then in effect. The term to be conveyed to any purchaser or
assignee shall be the balance of the term of this Agreement as
to each Restaurant unless otherwise agreed upon by Franchisor.
The assignee and/or assignee's managerial employees will be
required to fulfill all of the Franchisor's training
requirements before operating any of the Restaurants.
E. Void Assignments. Any purported assignment of this Agreement
without the written consent of Franchisor shall be void and
any such attempt to assign or transfer this Agreement shall be
a breach hereof.
F. Franchisor's Right of First Refusal Regarding the Development
Agreement. Prior to the sale or assignment by Developer of
this Agreement in a transaction requiring Franchisor's
consent, Franchisor shall have the option, exercisable within
thirty (30) days after receipt
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of notice from Developer of the proposed sale or assignment,
to purchase Developer's rights under this Agreement for the
price and on the terms and conditions of the proposed sale.
Such notice shall specify the name and address of the proposed
purchaser, and shall set forth the price, terms, conditions,
and date and place of closing of the proposed sale. Should
Franchisor not exercise this right and should the contemplated
sale not be completed, or should the terms and conditions
thereof be altered in any way, this right of first refusal
shall be reinstated and any subsequent proposed sale, or the
altered terms and conditions of the current transaction, must
again be offered to Franchisor in accordance with this
Section.
G. Release of Franchisor. Upon consent of Franchisor to any
assignment, Developer shall bring all accounts with Franchisor
current and shall execute a general release of all claims
against Franchisor.
10. DEATH OR DISABILITY OF DEVELOPER
In the event of the death or disability of the Developer, Franchisor
shall consent to the transfer of the interest to Developer's spouse, heirs, or
relative, by blood or by marriage, whether such a transfer is made by Will or by
operation of law if, at the sole discretion and judgment of Franchisor, such
person or persons obtaining said interest shall be capable of conducting said
business in a manner satisfactory to Franchisor. In the event Franchisor does
not consent to such transfer, Franchisee's rights hereunder shall, at
Franchisor's option, terminate. This paragraph shall only apply to the extent
Developer owns the rights hereunder personally and has not assigned such rights
to a corporation, limited liability company, partnership, or any other entity.
11. IN-TERM COMPETITION
During the term of this Agreement neither Developer nor his employees,
without Franchisor's written approval, shall own, maintain, operate, engage in,
or have any interest in any business which sells goods or services of a like
competitive nature, more specifically, hamburger or chicken sandwich
restaurants, and which is located within ten (10) miles of the protected
territory of any company-owned or franchised Restaurant. This subsection shall
not apply to ownership by Franchisee as a passive investor of less than five
percent (5%) interest in a publicly-held corporation listed on a national stock
exchange or traded on the over-the-counter market.
12. EMPLOYMENT OF FRANCHISOR'S EMPLOYEES
Developer agrees that without the express written approval of
Franchisor, he shall not employ, nor seek to employ, any full or part-time
employee of Franchisor and will not, directly or indirectly, induce any such
person to leave his or her employment as aforesaid. This prohibition, shall
likewise apply to all such employees whose employment has been terminated, for
any reason, with Franchisor for a period of less than four (4) months prior to
being hired by Developer.
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13. FRANCHISOR RESTAURANTS
Developer acknowledges, approves, and consents to Franchisor having the
absolute right to own and operate or sell as many Restaurants as Franchisor, in
its sole discretion, may decide. Developer agrees not to raise any objections to
such Restaurants, nor to interfere in any way with their operation or management
by Franchisor, provided such Restaurants are not located within Developer's
Territory, except such Restaurants as Franchisor may develop pursuant to
Paragraphs 4 and 9 of this Agreement.
14. FRANCHISOR'S AND DEVELOPER'S RIGHT OF FIRST REFUSAL REGARDING RESTAURANTS
If Franchisor or Developer desires to sell, assign or transfer its
rights in any Restaurant located within the Territory, it shall first notify the
other in writing of its intent to sell, assign, or transfer said rights upon the
same terms and conditions to the other, who shall then have thirty (30) days
after receipt within which to review and accept or reject the written offer;
provided, however, that if additional information is requested, it shall have
ten (10) days from receipt of the additional information to make its decision.
If the offer has not been accepted within thirty (30) days of receipt of the
offer or ten (10) days from receipt of additional information, whichever is
longer, the sale to the prospective purchaser, assignee or transferee may be
concluded.
15. INSURANCE, CONDEMNATION
A. Liability, Fire, Business Interruption, and Worker's
Compensation Insurance. During the term hereof, in the event
Developer obtains a Restaurant site by purchase or executed
lease prior to execution of a Franchise Agreement covering
such site, Developer shall obtain and maintain for such site
insurance coverage in accordance with Franchisor's current
insurance requirements for Franchisees. The coverage shall
also comply with the requirements of Developer's lease, if
any, for such site. Developer shall carry also such Workers'
Compensation insurance as may be required by applicable law.
Upon execution of a Franchise agreement covering the site,
Developer shall maintain insurance covering the site, in
accordance with the applicable provisions of such Franchise
Agreement.
B. Conditions of Coverage. Franchisor shall be named as an
additional insured, to the extent of its interest, on all of
such policies and shall be provided with certificates of
insurance evidencing such coverage. All public liability and
property damage policies shall contain a provision that
Franchisor, although named as an insured, shall nevertheless
be entitled to recover under such policies on any loss
occasioned to it, its affiliates, agents and employees by
reason of the negligence of Developer, its principals,
contractors, agents or employees. All policies shall provide
Franchisor with at least thirty (30) days notice of
cancellation or termination of coverage. Franchisor reserves
the right to specify reasonable changes in the types and
amounts of insurance coverage required by this Section. Should
Developer fail or refuse to procure the required insurance
coverage from an insurance carrier acceptable to Franchisor or
to maintain it as required hereby, Franchisor may procure such
coverage for Developer, in which event Developer agrees to pay
the required premiums or to reimburse Franchisor upon
Franchisor's demand. Failure to maintain the required
insurance or to promptly reimburse Franchisor for any premiums
paid on behalf of Developer by Franchisor shall constitute a
default hereunder.
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16. RELATIONSHIP OF THE PARTIES
Developer is and shall be an independent contractor. No employee of
Developer shall be deemed to be an employee of Franchisor. Nothing herein
contained shall be construed to create a partnership, joint venture or agency
between Developer and Franchisor.
Neither party hereto shall be liable for the debts or obligations of
the other unless expressly assumed in writing.
17. NOTICE
All notices under this Agreement shall be in writing and shall be
delivered by personal service, or by certified or registered mail, postage
prepaid, return receipt requested, to the parties.
18. HEIRS AND SUCCESSORS
This Agreement shall be binding upon and inure to the benefit of the
parties, their heirs, successors, and assigns.
19. WAIVER
Failure by either party to enforce any rights under this Agreement
shall not be construed as a waiver of such rights. Any waiver, including waiver
of default, in any one instance shall not constitute a continuing waiver or a
waiver in any other instance. Any acceptance of money or other performance by
Franchisor from Developer shall not constitute a waiver of any default except as
to the payment of the particular payment or performance so received.
20. ATTORNEY'S FEE
If any action or proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement, or
to interpret this Agreement or any of the provisions hereof, the successful or
prevailing party shall be entitled to recover reasonable attorneys fees and
other costs incurred in that action or proceeding, whether or not said action or
proceeding goes to final judgment, in addition to any other relief to which it
or they may be entitled.
21. GOVERNING LAW
This Agreement shall be interpreted according to the internal laws of
the State of Tennessee without regard to its conflict of law provisions.
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22. ENTIRE AGREEMENT
This Agreement represents the entire understanding between the parties
and supersedes all other negotiations, agreements, representations and
covenants, oral or written, except any other agreement executed by the
Franchisor, and Developer in connection herewith. This Agreement may not be
modified except by a written instrument signed by all the parties hereto.
Developer acknowledges and agrees that Franchisor has made no promises
or warranties to Developer concerning the profitability or of success of the
franchised business to be developed. Developer acknowledges that it has been
informed by Franchisor that there can be no guaranty of success in such
business. No other agreements, representations, promises, commitments or the
like, of any nature, exist between the parties except as set forth or otherwise
referenced herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
FRANCHISOR:
BACK YARD BURGERS, INC.
A DELAWARE CORPORATION
By: /s/ Xxxxxxxxx X. Xxxxxxx
--------------------------
Title: Chief Executive Officer
------------------------
Witness: /s/ Xxxxxxx X. Xxxx
------------------------
Date: January 7, 2005
-------------------------
DEVELOPER:
Xxxxxxx X. Xxxxxxxx
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------
Witness: /s/ Xxxxxxx X. Xxxx
-----------------------
Date: January 7, 2005
-------------------------
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XXXXXXXX 0
XXXXXXXXXXX XXXXXXXX,
DIVISION OF TERRITORY AND MAP
(A) TERRITORY:
Xxxxxxxxxx County and Xxxxxx County, Texas
Total Units Operating
Date at End of Period
270 days after the termination/expiration of the
Consulting Services Agreement 1 Unit
06/30/07 2 Units
12/31/07 3 Units
12/31/08 5 Units
12/31/09 7 Units
12/31/10 9 Units
12/31/11 10 Units
All locations shall be constructed according to the above schedule and the store
type limitations apply to each of the listed territories.
(B) GOVERNING LAW, JURISDICTION AND VENUE
1. The provisions of the Area Development Agreement
concerning governing law, jurisdiction and venue
shall not constitute a waiver of any right conferred
upon Texas law. Tennessee law governs this agreement.
Jurisdiction and venue shall be in Tennessee.
(C) DIVISION OF TERRITORY
The exclusive territory is delineated on the map (Page 11)
attached hereto and incorporated herein, as set forth in
Section 4 Paragraph A. The territory is defined as
Xxxxxxxxxx County and Xxxxxx County, Texas
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ADDENDUM 2
DEVELOPMENT FEE
Section 2 of this Agreement is herby deleted in its entirety and
replaced by the following:
"2. DEVELOPMENT FEE
Developer will not be required to pay any Development fees to the
Franchisor."
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ADDENDUM 3
INITIAL FRANCHISE FEE
Section 6 of the Agreement is herby deleted in its entirety and
replaced by the following:
"6. INITIAL FRANCHISE FEE
For each Restaurant to be developed pursuant to the terms hereof, Developer
shall pay to Franchisor at the earlier of a.) submitting the building plan to
state or local regulatory authorities for approval, b.) the signing of the
property lease, c.) closing on the property, d.) or the signing of the Franchise
Agreement, a Franchise fee of Five Thousand Dollars ($5,000.00) for the first
franchise, Zero Dollars ($0.00) for the second franchise, and Twenty-Two
Thousand Dollars ($22,000.00) for each of the eight subsequent franchises
developed under this Agreement. This fee shall be fully earned upon execution of
the Franchise Agreement, and will be non-refundable.
00
XXXXXXXX 0
XXXXXXXXX XX XXXXXXXXXX
The Company agrees to amend Section 3 item (h) of the Franchise Agreement for
the second franchise (once executed) to read as follows:
"(h) For a period of two years beginning with the commencement of operations of
the Franchisee's second Restaurant, Franchisor agrees to spend one percent (1%)
of taxable sales to market the Franchisee's second Restaurant."
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