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EXHIBIT 10(a)
THE GOLDEN CORRAL FRANCHISING SYSTEMS, INC.
AREA DEVELOPMENT AGREEMENT
XXXXXX'X RESTAURANTS, INC.
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EXHIBIT 10(a)
THE GOLDEN CORRAL FRANCHISING SYSTEMS, INC.
AREA DEVELOPMENT AGREEMENT
This Area Development Agreement is entered into this 30th day of December,
l997 by and between Golden Corral Franchising Systems, Inc., a Delaware
corporation (hereinafter referred to as "Franchisor"), and Xxxxxx'x Restaurants,
Inc., an Ohio corporation (hereinafter referred to as "Area Developer").
WITNESSETH:
WHEREAS, Golden Corral Corporation, a North Carolina corporation, as the
result of the expenditure of time, skill, effort, and money, has developed and
owns a unique system (hereinafter "System") for opening and operating family
steakhouse restaurants;
WHEREAS, the distinguishing characteristics of the System include, without
limitation, the establishment, development, and operation of a family restaurant
which features steak, seafood, chicken, salad bars, food buffet, in-store
display bakery and other food and beverage items for lunch, dinner, weekend
breakfast and snacks; emphasis on prompt, courteous service in a clean,
wholesome, family-oriented atmosphere; distinctive exterior and interior design
and trade dress; standards and specifications for materials, equipment,
furnishings, fixtures, supplies, signage and food and beverage items (including
special quality and quantity standards); operating procedures for sanitation and
maintenance; special procedures for food and beverage preparation and service;
training and assistance; and methods and techniques for inventory and cost
controls, record keeping and reporting, purchasing, customer service, sales
promotion, and advertising; all of which may be changed, improved, and further
developed by Franchisor from time to time;
WHEREAS, the System is identified by means of certain trade names, service
marks, trademarks, logos, emblems, and indicia of origin, including but not
limited to the xxxx "GOLDEN CORRAL" and such other trade names, service marks,
and trademarks as are now or hereafter designated by Franchisor (in the
Confidential Operations Manuals or otherwise in writing) for use in connection
with the System (hereinafter referred to as "Proprietary Marks");
WHEREAS, Franchisor continues to develop, use, and control the use of the
Proprietary Marks in order to identify for the public the source of products and
services marketed thereunder and under the System, and to represent the System's
high standards of quality, appearance, and service;
WHEREAS, Golden Corral Corporation has granted Franchisor the
non-exclusive right to franchise others to operate restaurants using the System,
including the Proprietary Marks; and
WHEREAS, Area Developer wishes to obtain certain development rights to
operate Golden Corral restaurants under the System, to be identified with the
Proprietary Marks in the territory described in this Development Agreement, and
to be trained by Franchisor to establish and operate Golden Corral restaurants;
NOW, THEREFORE, the parties, in consideration of the under takings and
commitments of each party to the other party set forth herein, hereby mutually
agree as follows:
X. XXXXX
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A. Franchisor hereby grants the right to Area Developer, and Area
Developer accepts the obligation, pursuant to the terms and conditions of this
Development Agreement, to establish and operate five (5) restaurants using a
GC-11S building design, ten (10) restaurants using a GC-llM building design, and
eight (8) restaurants using a Metro Market building design for a total of
twenty-three(23)restaurants(hereinafter "restaurants" or "franchised
businesses") and to use the Proprietary Marks and the System solely in
connection therewith. Area Developer shall establish and operate such
restaurants at specific locations to be designated in separate Golden Corral
Franchise Agreements (hereinafter "Franchise Agreements") executed as provided
in Section III.A hereof, and pursuant to the development schedule set forth in
Exhibit A, attached hereto. Each restaurant developed hereunder shall be located
in the area described in Exhibit A, attached hereto (hereinafter the
"Development Area") which Development Area may be further defined by sub-markets
established by mutually approved segmentation map(s).
B. Each restaurant shall be established and operated pursuant to a
separate Franchise Agreement to be entered into between Area Developer and
Franchisor in accordance with Section III.A. hereof.
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EXHIBIT 10(a)
C. Except as otherwise provided in this Agreement, Franchisor shall not
establish and operate, nor license anyone other than Area Developer to establish
and operate, any restaurant under the Proprietary Marks and the System in the
Development Area during the term of this Agreement; provided, however, that
Franchisor retains the right, among other rights, both within and outside of the
Development Area, and without offering Developer any rights therein, (i) to
establish and operate, and to license others to establish and operate,
restaurant businesses utilizing the Proprietary Marks and/or the System at or
from educational institutions (including, without limitation, colleges and
universities); hospitals; airports; food courts; manufacturing, industrial or
research facilities; office buildings; convention centers; supermarkets;
gasoline stations; department stores; contract food services; theaters;
convenience stores; vending machines; fixed/mobile modular units; any casino or
other gambling facility; hotels; kiosks; any sports facility, public
transportation facility, or public entertainment facility; or any facility which
is owned by, or operated by or under contract with, any military or other
government entity; and/or (ii) to sell or distribute, at retail or wholesale,
directly or indirectly, or license others to sell or distribute, any products
under any proprietary marks, including the Proprietary Marks. In the event that
Area Developer is granted the right to develop Metro Market restaurants, the
Development Area to be developed for such Metro Market restaurants shall be
deemed not to include those smaller towns and unincorporated municipal areas and
rural areas which, because of population density, demographic factors, and other
characteristics, would not satisfy the development criteria as created by
Franchisor from time to time for a Metro Market design restaurant. Also excluded
from the Development Area is any location within three (3) miles of an existing
Golden Corral restaurant. Franchisor retains the right to establish and operate,
and to license others to establish and operate at such existing restaurant
facility or any other restaurant location within such three (3) mile excluded
territory, except to the extent, if any, where a Franchise Agreement's Protected
Territory grants exclusive rights for a prescribed distance from an existing
franchise restaurant that would specifically limit such rights. Upon the
execution of a Franchise Agreement for an approved site in a specific submarket
identified by a segmentation map or otherwise within the Development Area, any
rights Area Developer may have to exclusivity for future additional development
in that submarket shall cease and the territorial protection for that submarket,
if any, shall be determined by the applicable Franchise Agreement for the
approved location.
D. This Agreement is not a franchise agreement, and does not grant to
Area Developer any right to use in any manner Franchisor's Proprietary Marks or
System.
E. Area Developer shall have no right under this Agreement to license
others to use in any manner the Proprietary Marks or System.
II. DEVELOPMENT FEE
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A. In consideration of the development rights granted herein, Area
Developer shall pay to Franchisor upon execution of this Agreement a development
fee of Two hundred thirty thousand Dollars ($230,000) which is the sum of Ten
Thousand Dollars ($10,000) multiplied by twenty-three (23) restaurant locations
to be developed hereunder, receipt of which is hereby acknowledged by
Franchisor, and which shall be deemed fully earned and non-refundable upon
execution of this Agreement in consideration of administrative and other
expenses incurred by Franchisor and for the development opportunities lost or
deferred as a result of the rights granted Area Developer herein.
B. If Area Developer is in full compliance with the development schedule
described in Section I.A hereof and set forth in Exhibit A, attached hereto, Ten
Thousand Dollars ($10,000) of the development fee for each restaurant shall be
credited toward the initial franchise fee payable under each Franchise Agreement
executed pursuant to the development schedule.
III. DEVELOPMENT OBLIGATIONS
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A. Area Developer shall execute a Franchise Agreement for each restaurant
at a site approved by Franchisor in the Development Area as hereinafter
provided. The Franchise Agreement for each restaurant developed hereunder shall
be the then current form of Franchise Agreement and the amendment thereto, if
any, being offered generally by Franchisor for such restaurant design at the
time each such Franchise Agreement is executed; provided, however, that if such
restaurant utilizes a GC-11S design or GC-11M design, such Franchise Agreement
shall be amended by the respective form of Addendum for GC-11S Restaurants or
Addendum for GC-11M Restaurants being offered generally by Franchisor at such
time, the current forms of which are attached as Exhibits B-1 and B-2 hereto.
The current form of Franchise Agreement being offered by Franchisor as of the
date hereof is the Franchise Agreement attached hereto as Exhibit C. The
Franchise Agreement and amendment, if applicable, for each restaurant shall be
executed by Area Developer and submitted to Franchisor within the later of
fifteen (15) days of: (1) receipt of Franchisor's notice of Phase I site
approval, as provided in Section III.B hereof, or (2) receipt of the applicable
Franchise Agreement.
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EXHIBIT 10(a)
B. Prior to Area Developer's acquisition by lease or purchase of any site
for a restaurant, Area Developer shall submit to Franchisor, in the form
specified by Franchisor, a completed Site Evaluation Questionnaire, the
description of the proposed site and such information or materials as Franchisor
may reasonably require, together with a letter of intent or other evidence
satisfactory to Franchisor which confirms Area Developer's favorable prospects
for obtaining the site. Franchisor shall have sixty (60) days after receipt of
such Site Evaluation Questionnaire, the description of the proposed site and
other information and materials to approve or disapprove, in its sole
discretion, each proposed site for a restaurant. Area Developer must submit to
the Franchisor the aforementioned Site Evaluation Questionnaire and other
required information regarding the first site to be developed pursuant to this
Agreement within ninety (90) days after the execution of this Agreement.
Notwithstanding anything contained in this Agreement to the contrary, Area
Developer must acquire by lease or purchase a location approved by Franchisor at
the earlier of 180 days after the execution of this Agreement or six months
before the scheduled opening date of the first restaurant as set forth in the
attached Exhibit A.
C. If Area Developer will occupy the premises at which a restaurant is
operated under a lease, Area Developer shall, prior to the execution thereof,
submit such lease to Franchisor, for its written approval. Franchisor's approval
of the lease may be conditioned upon the inclusion in the lease of such
provisions as Franchisor may reasonably require, including, without limitation:
1. A provision which restricts the use of the premises during the term
of the Franchise Agreement solely to the operation of the business franchised
under the Franchise Agreement.
2. A provision which prohibits Area Developer from subleasing or
assigning all or any part of its occupancy rights or extending the term of or
renewing the lease, without Franchisor's prior written consent.
3. A provision that the landlord consents to Area Developer's use of
such Proprietary Marks and signage as Franchisor may prescribe for the
franchised business;
4. A provision giving Franchisor the right to enter the premises
without assuming the lease to make modifications necessary to protect the
Proprietary Marks and the System or cure any default under the Franchise
Agreement;
5. A provision that the initial term of the lease, or the initial term
together with any renewal terms (for which the rent shall be set forth in the
lease), shall be for not less than fifteen (l5) years;
6. A provision which requires the landlord concurrently to provide
Franchisor with a copy of any written notice of breach or default under the
lease sent to Area Developer; and which grants to Franchisor, in its sole
discretion, the right (but not the obligation) to cure any breach or default
under the lease, should Area Developer fail to do so, within fifteen (l5) days
after the expiration of the period in which Area Developer may cure the breach
or default; and
7. A provision that provides that upon Area Developer's default under
the lease or under the Franchise Agreement, Franchisor shall without the
landlord's further consent have a continuing right of entry into the premises,
the right to operate a Golden Corral restaurant therein, the right but not the
obligation to assume Area Developer's interests under the existing terms,
conditions and covenants of the lease, and should Franchisor assume Area
Developer's position under the lease, the right to assign the lease or sublet
the premises to a third party which will operate on the premises a Golden Corral
restaurant.
D. Recognizing that time is of the essence, Area Developer agrees to
satisfy the development schedule for the restaurant design described therein
("development schedule") set forth in Exhibit A, attached hereto. Failure by
Area Developer to adhere to the development schedule shall constitute a default
under this Agreement as provided in Section VI.B. hereof.
IV. TERM
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Unless sooner terminated in accordance with the terms of this Agreement,
the term of this Agreement and all present and future rights granted hereunder
to develop restaurants in the Development Area shall expire on the earlier of
the date when Area Developer has open and in operation all of the restaurants
required by the development schedule set forth in Exhibit A hereto, or December
31, 2004, notwithstanding the fact that all of the restaurants to be developed
pursuant to this Agreement are not opened and in operation.
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EXHIBIT 10(a)
V. DUTIES OF THE PARTIES
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A. For each restaurant developed hereunder Franchisor shall furnish to
Area Developer the following:
1. Such site selection guidelines and consultation as Franchisor may
deem advisable; and
2. Such on-site evaluation as Franchisor may deem advisable as part of
its evaluation of Area Developer's request for site approval; provided, however,
that Franchisor shall not provide on-site evaluation for any proposed site prior
to Franchisor's receipt of a complete response to Franchisor's Site Evaluation
Questionnaire, a description of the proposed site and a letter of intent or
other evidence satisfactory to the Franchisor which confirm Area Developer's
favorable prospects for obtaining the proposed site, pursuant to Section III.B
hereof. If on-site evaluation is deemed necessary and appropriate by Franchisor,
Franchisor shall conduct up to two (2) on-site evaluations for each restaurant
at Franchisor's cost; for each additional on-site evaluation (if any) Area
Developer shall reimburse Franchisor for Franchisor's reasonable expenses,
including, without limitation, the costs of travel, lodging, and food.
B. Area Developer accepts the following obligations:
1. An Area Developer which is a corporation shall comply, except as
otherwise approved in writing by Franchisor, with the following requirements
throughout the term of this Agreement:
a. Area Developer shall furnish Franchisor with its Articles of
Incorporation, Bylaws, other governing documents, any other documents Franchisor
may reasonably request, and any amendments thereto.
b. Area Developer shall confine its activities, and its governing
documents, if any, shall at all times provide that its activities are confined,
exclusively to the management and operation of the business contemplated
hereunder, including the establishment and operation of the restaurants to be
developed hereunder.
c. Area Developer shall maintain stop transfer instructions against
the transfer on its records of any voting securities; and shall issue no
certificates for voting securities upon the face of which the following printed
legend does not legibly and conspicuously appear:
The transfer of this stock is subject to the terms and conditions of a
Development Agreement with GOLDEN CORRAL FRANCHISING SYSTEMS, INC.
dated ________. Reference is made to the provisions of the said
Development Agreement and to the Articles and Bylaws of this
Corporation.
d. Area Developer shall maintain a current list of all owners of
record and all beneficial owners of any class of voting stock of Area Developer
and shall furnish the list to Franchisor upon request. Such lists shall also
include the percentage of ownership of each such owner.
2. If Area Developer is a corporation, each proposed holder of an
interest in Area Developer shall submit a franchise application to Franchisor,
shall be approved by Franchisor, and shall, upon Franchisor's request, execute a
guarantee of Area Developer's obligations under this Agreement in a form
prescribed by Franchisor; provided, however, that the requirements of this
Section V.B. shall not apply to a holder of any corporation registered under the
Securities and Exchange Act of 1934.
3. An Area Developer which is a partnership shall comply, except as
otherwise approved in writing by Franchisor, with the following requirements
throughout the term of this Agreement:
a. Area Developer shall furnish Franchisor with its partnership
agreement as well as such other documents as Franchisor may reasonably request,
and any amendments thereto.
b. Area Developer shall prepare and furnish to Franchisor, upon
request, a list of all general and limited partners in Area Developer.
4. Area Developer shall at all times preserve in confidence any and
all materials and information furnished or disclosed to Area Developer by
Franchisor and shall disclose such information or materials only to such of Area
Developer's employees or agents who must have access to it in connection with
their employment. Area Developer shall not at any time, without Franchisor's
prior written consent, copy, duplicate, record, or otherwise reproduce such
materials or information, in whole or in part, nor otherwise make the same
available to any unauthorized person.
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EXHIBIT 10(a)
5. Area Developer shall comply with all requirements of federal,
state, and local laws, rules, and regulations.
6. Except as otherwise specifically stated in this Agreement as to be
performed by Franchisor, it is the Area Developer's responsibility to undertake
all actions necessary to develop and open each and every restaurant at Area
Developer's sole cost and expense, which responsibility includes but is not
limited to: (a) identify potential sites to be developed; (b) to negotiate for
the acquisition of such sites by lease or purchase; (c) to obtain necessary and
appropriate governmental approvals; (d) to select a general contractor and
obtain construction bids; (e) to adapt the generic building plans and
specifications as provided by Franchisor to each selected site and have such
plans sealed by Area Developer's architect/engineer; (f) obtain financing as
needed for acquisition and construction of the building(s) and the purchase of
all furniture, fixtures and equipment; and (g) to construct each restaurant to
be developed pursuant to this Agreement.
VI. DEFAULT
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A. Area Developer shall be deemed in default under this Agreement, and
all rights granted herein shall automatically terminate, without notice to Area
Developer, if Area Developer shall become insolvent or makes a general
assignment for the benefit of creditors; if a petition in bankruptcy is filed by
Area Developer or such a petition is filed against and not opposed by Area
Developer; or if Area Developer is adjudicated a bankrupt, or insolvent; if a
xxxx in equity or other proceeding for the appointment of a receiver of Area
Developer or other custodian for Area Developer's business or assets is filed
and consented to by Area Developer; if a receiver or other custodian (permanent
or temporary) of Area Developer's business or assets or any part thereof is
appointed by any court of competent jurisdiction; if proceedings for a
composition with creditors under any state or federal law should be instituted
by or against Area Developer; if a final judgment remains unsatisfied or of
record for thirty (30) days or longer (unless supersedeas bond is filed); or if
execution is levied against Area Developer's business or assets, or if suit to
foreclose any lien or mortgage against the premises or equipment is instituted
against Area Developer and not dismissed within thirty (30) days; or if the real
or personal property of any of Area Developer's restaurants shall be sold after
levy thereupon by any sheriff, xxxxxxxx or constable.
B. If Area Developer fails to comply with the development schedule set
forth in Exhibit A attached hereto, such action shall constitute a default under
this Agreement, upon which Franchisor, in its discretion, may (1) terminate the
credit granted in Section II.B. hereof or (2) terminate this Agreement and all
rights granted hereunder without affording Area Developer any opportunity to
cure the default, effective immediately upon receipt by Area Developer of
written notice. If Area Developer fails to comply with the terms and conditions
of any franchise agreement or development agreement between Area Developer and
Franchisor, or makes or attempts to make a transfer or assignment in violation
of Section VII.B. hereof, such action shall constitute a default under this
Agreement. Upon such default, Franchisor, in its discretion, may terminate this
Agreement and all rights granted hereunder without affording Area Developer any
opportunity to cure the default, effective immediately upon receipt by Area
Developer of written notice.
C. Upon termination of the Agreement, Area Developer shall have no right
to establish or operate any Golden Corral restaurants for which a Franchise
Agreement has not been executed by Franchisor at the time of termination.
Franchisor shall be entitled to establish, and to license others to establish,
Golden Corral restaurants in the Development Area except as may be otherwise
provided under any Franchise Agreement which has been executed between
Franchisor and Area Developer.
D. No default under this Development Agreement shall constitute a default
under any Franchise Agreement between the parties hereto. Default under this
Development Agreement shall constitute default under any other Development
Agreement between the parties hereto.
E. No right or remedy herein conferred upon or reserved to Franchisor is
exclusive of any other right or remedy provided or permitted by law or equity.
VII. TRANSFERS
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A. TRANSFER BY FRANCHISOR:
Franchisor shall have the right to transfer or assign all or any part of
its rights or obligations herein to any person or legal entity.
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EXHIBIT 10(a)
B. TRANSFER BY DEVELOPER:
1. Area Developer understands and acknowledges that the rights and
duties set forth in this Agreement are personal to Area Developer, and are
granted in reliance on Area Developer's business skill, financial capacity, and
personal character. Accordingly, neither Area Developer nor any immediate or
remote successor to any part of Area Developer's interest in this Agreement nor
any individual, partnership, corporation, or other legal entity, which directly
or indirectly controls Area Developer shall sell, assign, transfer, convey or
give away, any direct or indirect interest in Area Developer or in the
development rights granted by this Agreement without the prior written consent
of Franchisor. No partial assignments of this Agreement and/or the Development
Area can be made by Area Developer. Any purported assignment or transfer, by
operation of law or otherwise, not having the written consent of Franchisor
shall be null and void and shall constitute a material breach of this Agreement,
for which Franchisor may then terminate without opportunity to cure pursuant to
Section VI.B. of this Agreement. The transfer restrictions described in this
Section VII.B. shall apply to any sale, assignment, transfer, conveyance, or
donation of any ownership interest in Area Developer (except for an Area
Developer which is a corporation registered under the Securities and Exchange
Act of 1934) by any holder of such interest to any party.
2. Franchisor shall not unreasonably withhold its consent to any such
transfer; provided, however, that if a transfer, alone or together with other
previous, simultaneous, or proposed transfers, would have the effect of
transferring a controlling interest in Area Developer or in the development
rights granted herein, Franchisor may, in its sole discretion, require as a
condition of its approval that:
a. All of Area Developer's accrued monetary obligations to
Franchisor and all other outstanding obligations related to the terms and
conditions under this Agreement shall have been satisfied;
b. Area Developer is not in default of any provision of this
Agreement, any amendment hereof or successor hereto, or any other agreement
between Area Developer and Franchisor, or its subsidiaries and affiliates;
c. The transferor shall have executed a general release under seal,
in a form satisfactory to Franchisor, of any and all claims against Franchisor
and its officers, directors, shareholders, and employees, in their corporate and
individual capacities, including, without limitation, claims arising under
federal, state, and local laws, rules, and ordinances;
d. The transferee (and, if the transferee is other than an
individual, such owners of a beneficial interest in the transferee as Franchisor
may request) shall enter into a written assignment, under seal and in a form
satisfactory to Franchisor, assuming and agreeing to discharge all of Area
Developer's obligations under this Agreement;
e. The transferee (and, if the transferee is other than an
individual, such owners of a beneficial interest in the transferee as Franchisor
may request) shall demonstrate to Franchisor's satisfaction that transferee
meets Franchisor's educational, managerial, and business standards; possesses a
good moral character, business reputation, and credit rating; has the minimum
net worth and liquidity which meets Franchisor's then current requirements to
become an area developer of the number and type of restaurants described in this
Agreement; has the aptitude and ability to conduct the business franchised
herein (as may be evidenced by prior related business experience equivalent to
not less than three (3) years experience in the operation of the number and type
of restaurants to be developed under this Agreement, the franchise application,
or otherwise); and has adequate financial resources and capital to comply with
the development schedule;
f. At Franchisor's option, the transferee (and, if the transferee
is other than an individual, such owners of a legal or beneficial interest in
the transferee as Franchisor may request) shall execute (and/or, upon
Franchisor's request, shall cause all interested parties to execute), for a term
ending on the expiration date of this Agreement, Franchisor's standard form of
Development Agreement, which agreement shall supersede this Agreement in all
respects and the terms of which agreement may differ from the terms of this
Agreement;
g. Area Developer shall remain primarily liable for all obligations
of the Area Developer's business, and all covenants to be kept or performed by
Area Developer, and shall execute any and all instruments reasonably requested
by Franchisor to evidence such liability;
h. Each restaurant has already opened and been approved for
operation by Franchisor in compliance with all the conditions listed herein;
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EXHIBIT 10(a)
i. Except in the case of a transfer to a corporation formed for the
convenience of ownership, a transfer fee in an amount equal to five percent (5%)
of the development fee shall be paid by Developer to Franchisor under this
Agreement, or such greater amount as is necessary to reimburse Franchisor for
its reasonable costs and expenses associated with reviewing the application to
transfer, including, without limitation, legal and accounting fees.
j. Area Developer agrees that if, in the opinion of Franchisor, the
price to be paid for any transfer appears to be excessive or is likely to result
in there being an unsatisfactory return on investment, or there being an
insufficient cash flow to meet obligations, Franchisor may, without liability to
Area Developer, review such opinions with any such prospective
transferee/purchaser.
k. The transferee must at the time of the proposed transfer have an
Operating Partner that has been approved by Franchisor and meets Franchisor's
requirements for such position, which may include significant prior multi-unit
restaurant operating experience, successful completion of Franchisor's training
program for managers and ownership by such Operating Partner of a significant
equity interest in the transferee.
3. Franchisor shall not unreasonably withhold its consent to a
proposed public offering of securities interests in Area Developer; provided,
however, that Franchisor may, in its sole discretion, require as a condition of
its approval that Franchisor or a company controlling Franchisor has previously
made a public offering of Franchisor's or such company's securities. (For the
purposes of this Section VII, a "public offering" shall mean any offering
requiring registration under any state or federal securities laws, and any
offering exempt from registration but requiring disclosure under any federal law
or regulation.)
4. Area Developer shall grant no security interest in the franchised
business or in any of its assets unless the secured party agrees that in the
event of any default by Area Developer under any documents related to the
security interest, Franchisor shall have the right and option to purchase the
rights of the secured party upon payment of all sums then due to such secured
party, except such amounts which may have become due as a result of any
acceleration of the payment dates based upon the Area Developer's default.
5. Area Developer acknowledges and agrees that each condition which
must be met by the transferee franchisee is necessary to assure such
transferee's full performance of the obligations hereunder.
C. OFFERINGS BY DEVELOPER:
Securities or partnership interests in Area Developer may be sold, by
private offering or otherwise, only with the prior written consent of
Franchisor, as required in Sections VII.B.2. and VII.B.3. hereof. All materials
required for such offering by federal or state law shall be submitted to
Franchisor for review prior to their being filed with any government agency; and
any materials to be used in any exempt offering shall be submitted to Franchisor
for review prior to their use. No Area Developer offering shall imply (by use of
the Proprietary Marks or otherwise) that Franchisor is participating as an
underwriter, issuer, or offeror of Area Developer's or Franchisor's securities;
and Franchisor's review of any offering shall be limited solely to the subject
of the relationship between Area Developer and Franchisor. Area Developer and
the other participants in the offering must fully indemnify Franchisor in
connection with the offering. For each proposed offering, Area Developer shall
pay to Franchisor a non-refundable fee of Five Thousand Dollars ($5,000) if only
GC-11S or GC-11M design restaurants are to be developed pursuant to this
Development Agreement, and Ten Thousand Dollars ($10,000) if Metro Market design
restaurants are to be developed, or such greater amount as is necessary to
reimburse Franchisor for its reasonable costs and expenses associated with
reviewing the proposed offering. Area Developer shall give Franchisor written
notice at least thirty (30) days prior to the date of commencement of any
offering or other transaction covered by this Section VII.C.
D. RIGHT OF FIRST REFUSAL:
1. If any party holding any interest in Area Developer or in this
Agreement (the transfer of which interest would have the effect of transferring
a controlling interest in the franchised business), or if Area Developer,
desires to accept any bona fide offer from a third party to purchase such
interest or the premises of the franchised business, the seller shall notify
Franchisor in writing of the terms of such offer, and shall provide such
information and documentation relating to the offer as Franchisor may require;
and Franchisor shall have the right and option, exercisable within thirty (30)
days after receipt of such written notification, to send written notice to the
seller that Franchisor intends to purchase the seller's interest on the same
terms and conditions offered by the third party. In the event that Franchisor
elects to purchase the seller's interest, closing on such purchase must occur
within sixty (60) days from the date of notice to the seller of the election to
purchase by Franchisor or such later date as may have been provided in the
offer. Any material change in the terms of any
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EXHIBIT 10(a)
offer prior to closing shall constitute a new offer subject to the same rights
of first refusal by Franchisor as in the case of an initial offer. Failure of
Franchisor to exercise the option afforded by this Section VII.D shall not
constitute a waiver of any other provision of this Agreement, including all of
the requirements of this Section VII.D, with respect to a proposed transfer.
2. In the event the consideration, terms, and/or conditions offered by
a third party are such that Franchisor may not reasonably be required to furnish
the same consideration, terms, and/or conditions, then Franchisor may purchase
the interest in the franchised business proposed to be sold for the reasonable
equivalent in cash. If the parties cannot agree within a reasonable time on the
reasonable equivalent in cash of the consideration, terms, and/or conditions
offered by the third party, an independent appraiser shall be designated by
Franchisor, and his determination shall be binding.
E. TRANSFER UPON DEATH OR MENTAL INCOMPETENCY:
Upon the death or mental incompetency of any person with a controlling
interest in this Agreement or in Area Developer, the transfer of which requires
the consent of Franchisor as provided in Section VII.B hereof, the executor,
administrator, personal representative, guardian, or conservator of such person
shall transfer such interest within six (6) months after such death or mental
incompetency to a third party approved by Franchisor. Such transfers, including,
without limitation, transfers by devise or inheritance, shall be subject to the
same conditions as any inter vivos transfer. However, in the case of transfer by
devise or inheritance, if the heirs or beneficiaries of any such person are
unable to meet the conditions of this Section VII, the personal representative
of the deceased person shall have a reasonable time to dispose of the deceased's
interest in the franchise, which disposition shall be subject to all the terms
and conditions for transfers contained in this Agreement. If the interest is not
disposed of within a reasonable time, Franchisor may terminate this Agreement.
Nothing contained in this Section VII.E. shall be deemed to relieve Area
Developer of the requirement to satisfy the development schedule described in
Section I.A. hereof and Exhibit A, attached hereto.
F. NON-WAIVER OF CLAIMS:
Franchisor's consent to a transfer of any interest in this Agreement or
in Area Developer shall not constitute a waiver of any claims Franchisor may
have against the transferring party, nor shall it be deemed a waiver of
Franchisor's right to demand exact compliance with any of the terms of this
Agreement by the transferee.
VIII. COVENANTS
---------
A. Area Developer covenants that during the term of this Agreement,
except as otherwise approved in writing by Franchisor, Area Developer, (or, if
Area Developer is a corporation or a limited liability company or partnership or
other entity, a principal of Area Developer approved by Franchisor as the
Operating Partner of Area Developer) shall devote full time, energy, and best
efforts to the management and operation of the business contemplated hereunder,
including the establishment and operation of the restaurants to be developed
hereunder. The current Operating Partner approved by Franchisor is Xxxx Xxxx or
if the Operating Partner has not been identified and obtained, Area Developer
shall obtain an Operating Partner pursuant to the terms of the Operating Partner
Addendum attached hereto and make a part hereof.
B. Area Developer specifically acknowledges that, pursuant to this
Agreement, Area Developer will receive valuable confidential information,
including, without limitation, information regarding the site selection and
marketing methods and techniques of Franchisor and the System, and that Area
Developer has the exclusive right and obligation under this Agreement to
identify sites and develop the Development Area for the benefit of the System.
Area Developer covenants that during the term of this Agreement, except as
otherwise approved in writing by Franchisor, Area Developer shall not, either
directly or indirectly, for itself, or through, on behalf of, or in conjunction
with any person, persons, or legal entity:
1. Divert or attempt to divert any business or customer of any Golden
Corral restaurant to any competitor, by direct or indirect inducement or
otherwise, or do or perform, directly or indirectly, any other act injurious or
prejudicial to the goodwill associated with Franchisor's Proprietary Marks and
the System;
2. Employ or seek to employ any person who is or within the prior six
(6) months had been employed by Franchisor, any affiliate of Franchisor, or by
any other franchisee of Franchisor, or otherwise directly or indirectly to
induce such person to leave his or her employment for the purpose of becoming an
employee of Area Developer;
3. Own, invest in, maintain, engage in, be employed by, be a
consultant to, or have any interest in any restaurant business which is located
within the Development Area unless otherwise consented to in writing by
Franchisor.
27
10
EXHIBIT 10(a)
C. Area Developer covenants that, except as otherwise approved in writing
by Franchisor, Area Developer shall not, for a continuous uninterrupted period
commencing upon the expiration or termination of this Agreement, regardless of
the cause for termination, and continuing for two (2) years thereafter, either
directly or indirectly, for itself, or through, on behalf of, or in conjunction
with any person, persons, partnership, or corporation, own, invest in, maintain,
operate, engage in, be employed by, be a consultant to, or have any interest in
any restaurant business offering for sale steak, buffet, salad bar, bakery and
other items which had been offered by the franchised business which is located
within the Development Area.
D. Sections VIII.B.3 and VIII.C shall not apply to ownership by Area
Developer of less than a five percent (5%) beneficial interest in the
outstanding equity securities of any corporation which is registered under the
Securities and Exchange Act of 1934.
E. The parties agree that each of the foregoing covenants shall be
construed as independent of any other covenant or provision of this Agreement.
If all or any portion of a covenant in this Section VIII. is held unreasonable
or unenforceable by a court or agency having valid jurisdiction in an unappealed
final decision to which Franchisor is a party, Area Developer expressly agrees
to be bound by any lesser covenant subsumed within the terms of such covenant
that imposes the maximum duty permitted by law, as if the resulting covenant
were separately stated in and made a part of this Section VIII.E.
F. Area Developer understands and acknowledges that Franchisor shall have
the right, in its sole discretion, to reduce the scope of any covenant set forth
in Sections VIII.A and VIII.B in this Agreement or any portion thereof, without
Area Developer's consent, effective immediately upon receipt by Area Developer
of written notice thereof, and Area Developer agrees to comply forthwith with
any covenant as so modified, which shall be fully enforceable notwithstanding
the provisions of Section XIII hereof.
G. Area Developer expressly acknowledges that the existence of any claims
which Area Developer may have against Franchisor, whether or not arising from
this Agreement, shall not constitute a defense to the enforcement by Franchisor
of the covenants in this Section VIII.
H. Area Developer acknowledges that Area Developer's violation of the
terms of this Section VIII would result in irreparable injury to Franchisor for
which no adequate remedy at law may be available; and Area Developer accordingly
consents to the issuance of, and agrees to pay all court costs and reasonable
attorneys' fees incurred by Franchisor in obtaining, an injunction prohibiting
any conduct by Area Developer in violation of the terms of this Section VIII.
I. At the request of Franchisor, Area Developer shall provide Franchisor
with executed covenants similar in substance to those set forth in this Section
VIII (including covenants applicable upon the termination of a person's
relationship with Area Developer) from the following persons: (l) all managers
of Area Developer and any other person employed by Area Developer who have
received training from Franchisor; (2) all officers, directors, and holders of a
direct or indirect beneficial ownership interest of five percent (5%) or more in
Area Developer; and (3) the general partners and any limited partners (including
any corporation, and the officers, directors, and holders of a beneficial
interest of five percent (5%) or more of the securities of any corporation which
controls, directly or indirectly, any general or limited partner), if Area
Developer is a partnership. With respect to each person who becomes associated
with Area Developer in one of the capacities enumerated above subsequent to
execution of this Agreement, Area Developer shall require and obtain such
covenants and promptly provide Franchisor with executed copies of such covenant.
In no event shall any person enumerated be granted access to any confidential
aspect of the System or the franchised business prior to execution of such a
covenant. All covenants required by this Section VIII.I shall be in forms
satisfactory to Franchisor, including, without limitation, specific
identification of Franchisor as a third party beneficiary of such covenants with
the independent right to enforce them. Failure by Area Developer to obtain
execution of a covenant required by this Section VIII.I shall constitute a
material breach of this Agreement.
IX. NOTICES
-------
Any and all notices required or permitted under this Agreement shall be
in writing and shall be personally delivered by any means which will provide
evidence of the date received to the respective parties at the following
addresses unless and until a different address has been designated by written
notice to the other party:
28
11
EXHIBIT 10(a)
Notices to FRANCHISOR: Vice President of Franchising
Golden Corral Franchising
Systems, Inc.
X.X. Xxx 00000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Notices to DEVELOPER: Xxxxxx'x Restaurants, Inc.
c/o Xxxxxx X. Xxxxxx,
Vice-President-Finance
0000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Any notice shall be deemed to have been given at the date and time it is
received, or is refused, or delivery is made impossible by the intended
recipient.
X. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
------------------------------------------
A. It is understood and agreed by the parties hereto that this Agreement
does not create a fiduciary relationship between them; that Area Developer shall
be an independent contractor; and, that nothing in this Agreement is intended to
constitute either party an agent, legal representative, subsidiary, joint
venturer, partner, employee, or servant of the other for any purpose whatsoever.
B. During the term of this Agreement, Area Developer shall hold himself
out to the public to be an independent contractor operating pursuant to this
Agreement. Area Developer agrees to take such affirmative action as shall be
necessary to do so, including, without limitation, exhibiting a notice of that
fact in a conspicuous place in the franchised premises, the content of which
Franchisor reserves the right to specify.
C. Area Developer understands and agrees that nothing in this Agreement
authorizes Area Developer to make any contract, agreement, warranty, or
representation on Franchisor's behalf, or to incur any debt or other obligation
in Franchisor's name; and, that Franchisor shall in no event assume liability
for, or be deemed liable as a result of, any such action, or by reason of any
act or omission of Area Developer in Area Developer's operations hereunder, or
any claim or judgment arising therefrom against Franchisor. Area Developer shall
indemnify and hold Franchisor harmless against any and all such claims directly
or indirectly from, as a result of, or in connection with Area Developer's
operations hereunder, as well as the costs, including attorneys' fees, of
defending against them.
XI. APPROVALS AND WAIVERS
---------------------
A. Whenever this Development Agreement requires the prior approval or
consent of Franchisor, Area Developer shall make a timely written request to
Franchisor therefor; and, except as otherwise provided herein, any approval or
consent granted shall be in writing.
B. Franchisor makes no warranties or guarantees upon which Area Developer
may rely, and assumes no liability or obligation to Area Developer, by providing
any waiver, approval, advice, consent, or suggestion to Area Developer in
connection with this Agreement, or by reason of any neglect, delay, or denial of
any request therefor.
C. No failure of Franchisor to exercise any power reserved to it by this
Agreement, or to insist upon strict compliance by Area Developer with any
obligation or condition hereunder, and no custom or practice of the parties at
variance with the terms hereof, shall constitute a waiver of Franchisor's right
to demand exact compliance with any of the terms herein. Waiver by Franchisor of
any particular default by Area Developer shall not affect or impair Franchisor's
rights with respect to any subsequent default of the same, similar or different
nature, nor shall any delay, forbearance or omission of Franchisor to exercise
any power or right arising out of any breach or default by Area Developer of any
of the terms, provisions or covenants hereof, affect or impair Franchisor's
right to exercise the same, nor shall such constitute a waiver by Franchisor of
any right hereunder, or the right to declare any subsequent breach or default
and to terminate this Agreement prior to the expiration of its term. Subsequent
acceptance by Franchisor of any payments due to it hereunder shall not be deemed
to be a waiver by Franchisor of any preceding breach by Area Developer of any
terms, covenants or conditions of this Agreement.
29
12
EXHIBIT 10(a)
XII. SEVERABILITY AND CONSTRUCTION
-----------------------------
A. Except as expressly provided to the contrary herein, each section,
part, term, and/or provision of this Agreement shall be considered severable;
and if, for any reason, any section, part, term, and/or provision herein is
determined to be invalid and contrary to, or in conflict with, any existing or
future law or regulation by a court or agency having valid jurisdiction, such
shall not impair the operation of, or have any other effect upon, such other
portions, sections, parts, terms, and/or provisions of this Agreement as may
remain otherwise intelligible, and the latter shall continue to be given full
force and effect and bind the parties hereto; and said invalid sections, parts,
terms, and/or provisions shall be deemed not to be a part of this Agreement.
B. Anything to the contrary herein notwithstanding, nothing in this
Agreement is intended, nor shall be deemed, to confer upon any person or legal
entity other than Franchisor or Area Developer and such of their respective
successors and assigns as may be contemplated by Section VII hereof, any rights
or remedies under or by reason of this Agreement.
C. Area Developer expressly agrees to be bound by any promise or
covenants imposing the maximum duty permitted by law which is subsumed within
the terms of any provision hereof, as though it were separately articulated in
and made a part of this Agreement, that may result from striking from any of the
provisions hereof any portion or portions which a court may hold to be
unreasonable and unenforceable in a final decision to which Franchisor is a
party, or from reducing the scope of any promise or covenant to the extent
required to comply with such a court order.
D. All captions in this Agreement are intended solely for the convenience
of the parties, and none shall be deemed to affect the meaning or construction
of any provision hereof.
XIII. ENTIRE AGREEMENT
----------------
This Agreement, the documents referred to herein, and the Attachments
hereto, if any, constitute the entire, full, and complete agreement between
Franchisor and Area Developer concerning the subject matter hereof and supersede
any and all prior agreements. No amendment, change, or variance from this
Agreement shall be binding on either party unless executed in writing.
XIV. APPLICABLE LAW
--------------
A. This Agreement takes effect upon its acceptance and execution by
Franchisor, and shall be interpreted and construed under the laws of North
Carolina, which laws shall prevail in the event of any conflict of law;
provided, however, that if any of the covenants in Section VIII. of this
Agreement would not be enforceable under the laws of North Carolina, then such
covenants shall be interpreted and construed under the laws of the state in
which the principal office of Area Developer is located.
B. The parties agree that any action brought by either party against the
other in any court, whether federal or state, shall be brought within the state
of North Carolina in the judicial district in which Franchisor has its principal
place of business and do hereby waive all questions of personal jurisdiction or
venue for the purpose of carrying out this provision.
C. No right or remedy conferred upon or reserved to Franchisor or Area
Developer by this Agreement is intended to be, nor shall be deemed, exclusive of
any other right or remedy herein or by law or equity provided or permitted, but
each shall be cumulative of every other right or remedy.
D. Nothing herein contained shall bar Franchisor's right to obtain
injunctive relief against threatened conduct that will cause it loss or damages,
under the usual equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions; nor shall the reference to such
relief in certain Sections of this Agreement be deemed to imply the
unavailability of such relief to enforce rights provided for in other sections.
XV. ACKNOWLEDGMENTS
---------------
A. Area Developer acknowledges that it has conducted an independent
investigation of the business franchised hereunder, and recognizes that the
business venture contemplated by this Agreement involves business risks and that
its success will be largely dependent upon the ability of Area Developer as an
independent businessman. Franchisor expressly disclaims the making of, and Area
Developer acknowledges that Area Developer has not received, any warranty or
30
13
EXHIBIT 10(a)
guarantee, express or implied, as to the potential volume, profits, or success
of the business venture contemplated by this Agreement.
B. Area Developer acknowledges that Area Developer has received a copy of
the complete Golden Corral restaurant Development Agreement, the attachments
thereto, if any, and agreements relating thereto, if any, at least five (5)
business days prior to the date on which this Agreement was executed. Area
Developer further acknowledges that it has received a disclosure document which
is required by the Trade Regulation Rule of the Federal Trade Commission
entitled "Disclosure Requirements and Prohibitions Concerning Franchising and
Business Opportunity Ventures," and which contains a copy of this Development
Agreement, at least ten (10) business days prior to the date on which this
Agreement was executed.
C. Area Developer acknowledges that it has read and understood this
Agreement, the attachments hereto, if any, and agreements relating thereto, if
any; and, that Franchisor has accorded Area Developer ample time and opportunity
to consult with advisors of its own choosing about the potential benefits and
risks of entering into this Agreement.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
31
14
EXHIBIT 10(a)
IN WITNESS WHEREOF, the parties hereto have fully executed, sealed, and
delivered this Agreement on the day and year first above written.
GOLDEN CORRAL FRANCHISING
SYSTEMS, INC.
(Corporate Seal)
By: /s/ Xxxxx X. Xxxx
----------------------------------------
Its Vice President
Xxxxx X. Xxxx
Attested
By: /s/ Xxxxxx X. Xxxxxxxxx, Xx.
----------------------------------------
Its Assistant Secretary
WITNESS: AREA DEVELOPER
/s/ W. Xxxx Xxxx By: /s/ Xxxxxx X. Xxxxxx
---------------------------- ----------------------------------------
Its Secretary Xxxxxx X. Xxxxxx, Vice President-Finance
(Corporate Seal)
32
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EXHIBIT 10(a)
THE GOLDEN CORRAL FRANCHISING SYSTEMS, INC.
AREA DEVELOPMENT AGREEMENT
EXHIBIT A
1. Each restaurant developed under this Development Agreement shall be
located in the following area:
See attached Exhibit "AA" which is incorporated by reference herein
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2. Recognizing that time is of the essence, Area Developer agrees to
satisfy the development schedule set forth below:
Cumulative Total Number
of Restaurants Which
Area Developer Shall Have
By (Date) Open and in Operation
----------- -------------------------
12/31, 1998 two (2)
12/31, 1999 five (5)
12/31, 2000 eight (8)
12/31, 2001 eleven (11)
12/31, 2002 fifteen (15)
12/31, 2003 nineteen (19)
12/31, 2004 twenty-three (23)
/s/ DHW LIT initials
----------------
33
16
EXHIBIT 10(a)
Exhibit "AA"
The Development Area in which eight (8) Metro Market restaurants, ten (10)
GC-11M restaurants and five (5) GC-11S restaurants are to be located is as
follows:
A. One (1) Metro Market restaurant within one defined submarket of Cincinnati,
Ohio which submarket is more specifically described on the attached
segmentation map Exhibit A-1 as submarket numbered 1.
B. One (1) Metro Market restaurant within one defined submarket of Florence,
Kentucky which submarket is more specifically described on the attached
segmentation map Exhibit A-2 as submarket numbered 2.
C. One (1) Metro Market restaurant within one defined submarket of
Xxxxxxx/Kenwood/Amberley/Madeira, Ohio which submarket is more specifically
described on the attached segmentation map Exhibit A-1 as submarket numbered
3.
D. One (1) Metro Market restaurant within one defined submarket of Cincinnati,
Ohio which submarket is more specifically described on the attached
segmentation map Exhibit A-1 as submarket numbered 4.
E. One (1) Metro Market restaurant within one defined submarket of
Springdale/Sharonville, Ohio which submarket is more specifically described
on the attached segmentation map Exhibit A-1 as submarket numbered 5.
F. One (1) Metro Market restaurant within one defined submarket of Cheviot, Ohio
which submarket is more specifically described on the attached segmentation
map Exhibit A-1 as submarket numbered 6.
G. One (1) Metro Market restaurant within one defined submarket of Louisville,
Kentucky which submarket is more specifically described on the attached
segmentation map Exhibit A-3 as submarket numbered 1.
H. One (1) Metro Market restaurant within one defined submarket of Louisville,
Kentucky which submarket is more specifically described on the attached
segmentation map Exhibit A-3 as submarket numbered 3.
I. One (1) GC-11M restaurant within one defined submarket of Covington, Kentucky
which submarket is more specifically described on the attached segmentation
map Exhibit A-2 as submarket numbered 11.
J. One (1) GC-11M restaurant within one defined submarket of Hamilton, Ohio
which submarket is more specifically described on the attached segmentation
map Exhibit A-4 as submarket numbered 7.
K. One (1) GC-11M restaurant within one defined submarket of
Miamisburg/Centerville/Bellbrook/W. Carrollton, Ohio which submarket is more
specifically described on the attached segmentation map Exhibit A-5 as
submarket numbered 1.
L. One (1) GC-11M restaurant within one defined submarket of
Fairborn/Beavercreek, Ohio which submarket is more specifically described on
the attached segmentation map Exhibit A-5 as submarket numbered 2.
M. One (1) GC-11M restaurant within one defined submarket of Englewood/Trotwood,
Ohio which submarket is more specifically described on the attached
segmentation map Exhibit A-5 as submarket numbered 3.
N. One (1) GC-11M restaurant within one defined submarket of Louisville,
Kentucky which submarket is more specifically described on the attached
segmentation map Exhibit A-3 as submarket numbered 4.
O. *One (1) GC-11M restaurant within one defined submarket of Louisville,
Kentucky which submarket is more specifically described on the attached
segmentation map Exhibit A-3 as submarket numbered 5.
P. One (1) GC-11M restaurant within one defined submarket of
Clarksville/Jeffersonville, Indiana which submarket is more specifically
described on the attached segmentation map Exhibit A-3 as submarket numbered
2.
Q. One (1) GC-11M restaurant within the city limits of Richmond, Indiana.
Initials DHW LIT
-------
34
17
EXHIBIT 10(a)
R. One (1) GC-11M restaurant within the city limits of Springfield, Ohio.
S. One (1) GC-11S restaurant within one defined submarket of Fairfield, Ohio
which submarket is more specifically described on the attached segmentation
map Exhibit A-4 as submarket numbered 8.
T. One (1) GC-11S restaurant within one defined submarket of Middletown, Ohio
which submarket is more specifically described on the attached segmentation
map Exhibit A-6 as submarket numbered 9.
U. One (1) GC-11S restaurant within one defined submarket of Mason, Ohio which
submarket is more specifically described on the attached segmentation map
Exhibit A-4 as submarket numbered 10.
V. One (1) GC-11S restaurant within one defined submarket of Newport, Kentucky
which submarket is more specifically described on the attached segmentation
map Exhibit A-2 as submarket numbered 12.
W. One (1) GC-11S restaurant within the city limits of Sidney, Ohio.
*This GC-11M restaurant must be the last developed pursuant to this Area
Development Agreement.
Initials DHW LIT
-------
Exhibit "AA" Page 2
35
18
EXHIBIT 10(a)
THE GOLDEN CORRAL FRANCHISING SYSTEMS, INC.
DEVELOPMENT AGREEMENT
EXHIBIT B-1
ADDENDUM FOR GC-11S RESTAURANTS
-------------------------------
The form of Addendum For GC-11S Restaurants currently offered by
Franchisor is attached.
36
19
EXHIBIT 10(a)
THE GOLDEN CORRAL FRANCHISING SYSTEMS, INC.
DEVELOPMENT AGREEMENT
EXHIBIT B-2
ADDENDUM FOR GC-11M RESTAURANTS
-------------------------------
The form of Addendum For GC-11M Restaurants currently offered by
Franchisor is attached.
37
20
EXHIBIT 10(a)
THE GOLDEN CORRAL FRANCHISING SYSTEMS, INC.
DEVELOPMENT AGREEMENT
EXHIBIT C
FRANCHISE AGREEMENT
-------------------
The form of Franchise Agreement currently offered by Franchisor is
attached.
38
21
EXHIBIT 10(a)
GOLDEN CORRAL
FRANCHISE AGREEMENT
THIS AGREEMENT, is made and entered into this the ____ day of __________,
19__, between Golden Corral Franchising Systems, Inc., a Delaware corporation,
with its principal offices located in Raleigh, North Carolina (hereinafter
"Franchisor"), and _____________________________________________________________
(hereinafter "Franchisee").
WITNESSETH:
WHEREAS, Golden Corral Corporation, a North Carolina corporation, as the
result of the expenditure of time, skill, effort, and money, has developed and
owns a unique system (hereinafter "System") for opening and operating family
steakhouse restaurants;
WHEREAS, the distinguishing characteristics of the System include,
without limitation, the establishment, development, and operation of a family
restaurant which features steak, seafood, chicken, salad bars, food buffet,
in-store display bakery, and other food and beverage items for lunch, dinner,
weekend breakfast and snacks; emphasis on prompt, courteous service in a clean,
wholesome, family-oriented atmosphere; distinctive exterior and interior design
and trade dress; standards and specifications for materials, equipment,
furnishings, fixtures, supplies, signage and food and beverage items (including
special quality and quantity standards); operating procedures for sanitation and
maintenance; special procedures for food and beverage preparation and service;
training and assistance; and methods and techniques for inventory and cost
controls, record keeping and reporting, purchasing, customer service, sales
promotion, and advertising; all of which may be changed, improved, and further
developed by Franchisor from time to time;
WHEREAS, the System is identified by means of certain trade names,
service marks, trademarks, logos, emblems, and indicia of origin, including but
not limited to the xxxx "GOLDEN CORRAL" and such other trade names, service
marks, and trademarks as are now or hereafter designated by Franchisor (in the
Confidential Operations Manuals or otherwise in writing) for use in connection
with the System (hereinafter referred to as "Proprietary Marks");
WHEREAS, Franchisor continues to develop, use, and control the use of the
Proprietary Marks in order to identify for the public the source of products and
services marketed thereunder and under the System, and to represent the System's
high standards of quality, appearance, and service;
WHEREAS, Golden Corral Corporation has granted Franchisor the
non-exclusive right to franchise others to operate restaurants using the System,
including the Proprietary Marks;
WHEREAS, Franchisee desires to enter into the business of operating a
metro market "Golden Corral" restaurant under the Proprietary Marks and the
System (hereinafter referred to as "restaurant" or "franchised business") and
wishes to obtain a franchise from Franchisor for that purpose, as well as to
receive the training and other assistance provided by Franchisor in connection
therewith; and
WHEREAS, Franchisee understands and acknowledges the importance of
Franchisor's high standards of quality, cleanliness, appearance, and service,
and the necessity of opening and operating the business franchised hereunder in
conformity with Franchisor's standards and specifications;
NOW, THEREFORE, the parties, in consideration of the undertakings and
commitments of each party to the other party set forth herein, hereby agree as
follows:
X. XXXXX
-----
A. Franchisor hereby grants to Franchisee, upon the terms and conditions
herein contained, the right and franchise, and Franchisee undertakes the
obligation, to operate a restaurant and to use solely in connection therewith
the Proprietary Marks and System, as they may be changed, improved, and further
developed from time to time, only at the Approved Location (hereinafter the
"Approved Location") described in Section I.B. hereof.
39
22
EXHIBIT 10(a)
B. The Approved Location under this Agreement is:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
1. If, at the time of execution of this Agreement, a location for the
franchised business has not been obtained by Franchisee and approved by
Franchisor, Franchisee shall obtain a location, subject to Franchisor's
approval as provided in Attachment A to this Agreement (which Attachment
A shall constitute an integral part of this Agreement), and that location
shall constitute the Approved Location.
2. Franchisee shall not relocate the franchised business without the
prior written approval of Franchisor. In the event that Franchisor
approves any such relocation, Franchisee shall execute (and/or upon
Franchisor's request, shall cause all interested parties to execute), the
standard form franchise agreement then being offered to new System
franchisees and other ancillary agreements as Franchisor may require for
the relocated franchised business and pay the then current initial
franchise fee for such relocated restaurant, which agreements shall
supersede this Agreement in all respects and the terms of which
agreements may differ from the terms of this Agreement, including,
without limitation, a higher percentage royalty rate and advertising
contribution. Franchisee shall receive a prorata credit for the
unamortized amount of the initial franchise fee paid pursuant to this
Agreement which will be credited toward the initial franchise fee payable
under any such relocated restaurant's franchise agreement. For example,
if the term of this Agreement is fifteen (15) years, the original initial
franchise fee was $40,000 and the relocated restaurant opens ten (10)
years after the commencement of the term of this Agreement, then
Franchisee will receive a prorata credit of $13,333 toward the relocated
restaurant's initial franchise fee.
C. During the term of this Agreement, Franchisor shall not establish and
operate, nor license another to establish and operate, a restaurant under the
Proprietary Marks and the System within a radius of ( ) miles distance from
the Approved Location (hereinafter "the Protected Territory"); provided,
however, that Franchisor retains the right, among other rights, both within and
outside of the Protected Territory, and without offering Franchisee any rights
therein, (i) to establish and operate, and to license others to establish and
operate, restaurant businesses utilizing the Proprietary Marks and/or the
System at or from educational institutions (including, without limitation,
colleges and universities); hospitals; airports; food courts; manufacturing,
industrial or research facilities; office buildings; convention centers;
supermarkets; gasoline stations; department stores; contract food services;
theaters; convenience stores; vending machines; fixed/mobile modular units;
any casino or other gambling facility; hotels; kiosks; any sports facility,
public transportation facility, or public entertainment facility; or any
facility which is owned by, or operated by or under contract with, any
military or other government entity; and/or (ii) to sell or distribute, at
retail or wholesale, directly or indirectly, or license others to sell or
distribute, any products under any proprietary marks, including the Proprietary
Marks. Except as described in this Section I.C., Franchisee acknowledges that
this franchise is non-exclusive, is granted subject to the terms and conditions
of Section VII.C hereof, and that Franchisor retains the right outside of the
Protected Territory to establish and operate, and to franchise others to
establish and operate, restaurant businesses utilizing the Proprietary Marks
and/or the System at or from any location.
II. TERM AND RENEWAL
----------------
A. Except as otherwise provided in this Agreement, the term of this
franchise shall be for fifteen (l5) years from the date the restaurant is first
opened for business. In the event the restaurant is first opened for business on
other than the first day of the month, then the term shall be calculated for
fifteen (15) years from the first day of the month following the restaurant's
opening and the expiration date shall be the last day of the 180th month
thereafter. Franchisee, upon Franchisor's request, shall execute an agreement,
in a form acceptable to Franchisor, specifying the commencement and expiration
dates of this Agreement. Franchisee shall execute such agreement specifying the
term and deliver it to Franchisor within fifteen (15) days of its receipt.
B. Franchisee may, at its option, renew this franchise for two (2)
additional consecutive terms of five (5) years each, provided that at the end of
the applicable term:
1. Franchisee has given Franchisor written notice of such election to
renew not less than six (6) months nor more than twelve (12) months prior to the
end of the term;
2. Franchisee has made, or has provided for, such renovation and
modernization of the restaurant premises (hereinafter the "premises") as
Franchisor may reasonably require, including, without limitation, maintenance,
renovation of signs, equipment, furnishings, fixtures, and decor to reflect the
then-current standards, image, and competitive conditions of the System;
40
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EXHIBIT 10(a)
3. Franchisee is not in default of any provision of this Agreement,
any amendment hereof or successor hereto, or any other agreement between
Franchisee and Franchisor, or its subsidiaries and affiliates, if any, and has
substantially complied with all the terms and conditions of such agreements
during the terms thereof;
4. Franchisee has satisfied all monetary obligations owed by
Franchisee to Franchisor and its subsidiaries and affiliates, if any, and has
timely met these obligations throughout the term of this Agreement;
5. Franchisee shall present satisfactory evidence that Franchisee has
the right to remain in possession of the premises for the renewal term or has
obtained Franchisor's prior written approval for relocation of the restaurant to
a new Approved Location;
6. Franchisee shall execute Franchisor's then-current form of renewal
Franchise Agreement, which agreement shall supersede this Agreement in all
respects, and the terms of which may differ from the terms of this Agreement,
including, without limitation, a higher percentage royalty fee and advertising
contribution; provided, however, that Franchisee shall pay, in lieu of the
then-current initial franchise fee, a renewal fee not to exceed in amount the
mathematical product of (a) the then-current initial franchise fee being charged
by Franchisor for a single franchised business under the System for the
restaurant design franchised hereunder (or, if no such design is then offered,
such fee for the restaurant design closest in interior square footage to the
restaurant) divided by the total number of years in the initial term under the
then-current Franchise Agreement (b) multiplied by five (5);
7. Franchisee shall execute a general release, in a form prescribed by
Franchisor, of any and all claims against Franchisor and its subsidiaries and
affiliates, and their respective officers, directors, agents, and employees; and
8. Franchisee shall comply with Franchisor's then-current
qualification and training requirements.
III. DUTIES OF FRANCHISOR
--------------------
A. Franchisor shall make available, at no charge to Franchisee, generic
plans and specifications designed for use in Raleigh, North Carolina for the
construction of the restaurant, including the restaurant's exterior and interior
design and layout, fixtures, furnishings, and signs. Franchisee shall adapt, at
Franchisee's expense, the generic plans and specifications to the restaurant's
location, as provided in Section V. hereof.
B. Franchisor shall provide Franchisee with specifications for equipment,
supplies, and inventory necessary to establish and operate the franchised
business.
C. Franchisor shall provide a managerial training program to Franchisee's
restaurant manager (hereinafter "general manager"), to Franchisee's associate
manager-kitchen (hereinafter "associate manager-kitchen"), and to Franchisee's
associate manager-service (hereinafter, "associate manager-service")
(collectively, "managers") and shall make available such other training
programs, from time to time, as it deems appropriate. All training provided by
Franchisor shall be subject to the terms set forth in Sections VI.A. and VI.B of
this Agreement, and shall be at such times and places as may be designated by
Franchisor.
D. Upon Franchisee's request, and subject (as to timing) to the
availability of personnel, Franchisor shall provide Franchisee, at Franchisor's
expense, an aggregate of fifteen (15) to forty-five (45) man-days of on-site
management assistance in connection with the opening of the restaurant.
E. In addition to the assistance described in Section III.D. hereof,
immediately prior to and upon opening of the restaurant, Franchisor shall
provide, at the restaurant, such of Franchisor's personnel for such length of
time as Franchisor, in its sole discretion, deems necessary to train and prepare
Franchisee's non-managerial employees for opening and operating the restaurant.
Franchisee acknowledges and agrees that Franchisee shall bear all the costs and
expenses of Franchisor's personnel incurred as a result of providing such
training, including, without limitation, such personnels' transportation costs
for travel to and from the restaurant, and food, lodging, and wages for such
employees during the period such training assistance is being provided.
F. Franchisor shall provide to Franchisee periodic and continuing
advisory assistance to Franchisee in the operation and promotion of the
franchised business, and advice and written materials concerning new
developments in Franchisor's restaurant equipment, food products, packaging, and
preparation.
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24
EXHIBIT 10(a)
G. Franchisor shall make available, from time to time, at Franchisee's
expense, such approved advertising and promotional plans and materials for local
advertising and promotion as Franchisor deems advisable.
H. Franchisor shall provide Franchisee, on loan, one (l) set of the
Confidential Operations Manuals (hereinafter referred to as "the Manuals"), as
more fully described in, and subject to the terms of, Section IX. hereof.
I. Franchisor shall provide Franchisee, in the Manuals or otherwise in
writing, initial sets of accounting forms for use in the franchised business.
J. All of the obligations of Franchisor under this Agreement are to
Franchisee, and no other party is entitled to rely on, enforce, or obtain relief
for breach of such obligation, either directly or by subrogation.
K. Franchisor shall not, by virtue of any approvals, advice, forms or
services provided to Franchisee, assume responsibility or liability to
Franchisee or any third parties to which Franchisor would not otherwise be
subject.
IV. FEES
----
A. In consideration of the franchise granted herein, Franchisee shall pay
to Franchisor the following fees:
1. An initial franchise fee of Forty Thousand Dollars ($40,000):
a. Ten Thousand Dollars ($10,000) of which Franchisor acknowledges
receipt upon execution of this Agreement; and
b. Fifteen Thousand Dollars ($15,000) of which Franchisee shall pay
upon being notified by Franchisor of site approval for the restaurant, except
when this Agreement is granted pursuant to an Area Development Agreement, then
and in such event Fifteen Thousand Dollars ($15,000) shall also be paid upon
execution of this Agreement; and,
c. Fifteen Thousand Dollars ($15,000) of which Franchisee shall pay
at least fourteen (14) days prior to opening the restaurant.
The initial franchise fee (and each portion thereof) described in this Section
IV.A.1. shall be deemed fully earned and non-refundable in consideration for,
among other things, the administrative and other expenses incurred by Franchisor
in furnishing assistance and services to Franchisee and for Franchisor's lost or
deferred opportunity to franchise others; and
2. A continuing weekly or monthly royalty fee during the term of this
Agreement in an amount equal to four percent (4%) of the gross sales of the
restaurant, as defined in Section IV.D. hereof.
B. Franchisee shall also expend or contribute monthly or weekly, on
advertising, two percent (2%) of its gross sales or such greater amount, up to a
maximum of six percent (6%), in the manner to be determined by Franchisor, as
described in Section XI.A. hereof.
C. Except as otherwise provided in Section IV.C.1 hereof, Franchisee
shall make all payments to Franchisor or to a National Fund or Regional Fund (as
defined in Section XI. hereof) required by Sections IV.A.2. and IV.B. hereof by
the tenth (lOth) day of each month on the gross sales during the preceding
month.
1. Franchisor shall have the right to require in the Manuals or
otherwise in writing that Franchisee make such payments to Franchisor or to a
bank account specified by Franchisor on a weekly basis by electronic fund
transfer, pre-authorized auto-draft arrangement, or such other means as
Franchisor may specify from time-to-time in writing. Such weekly payments shall
be paid by Thursday for the week ending on the preceding Sunday, or as otherwise
designated by Franchisor in writing. Franchisee shall report its gross sales for
such week to Franchisor by telephone within two (2) days after the end of such
week. Franchisee agrees to maintain sufficient funds in its bank account
designated for such payments to cover all amounts payable. Franchisee shall
furnish Franchisor, Franchisor's bank, any other recipients of payment with such
information and authorizations as may be necessary to permit such persons to
make withdrawals by electronic fund transfer or auto-draft arrangement.
Franchisee shall bear all expenses, if any, associated with such authorizations
and payments.
2. All monthly or weekly payments made pursuant to this Section IV.C.
shall be submitted to Franchisor together with any reports or statements
required under Section X.B. hereof. Any payment or report not actually
42
25
EXHIBIT 10(a)
received by Franchisor or any other recipient on or before the date due shall be
overdue. If any payment is overdue, Franchisee shall pay to Franchisor,
immediately upon demand, in addition to the overdue amount a late fee of
Seventy-Five Dollars ($75.00) and interest on the overdue amount from the date
it was due until payment is received at one and one-half percent (1 1/2%) per
month, or the maximum rate permitted by law, whichever is less. Entitlement to
such late fee and interest shall be in addition to any other remedies Franchisor
may have.
3. Franchisor shall have the right to retain any and all amounts
otherwise due or payable by Franchisor and/or any affiliate of Franchisor to
Franchisee and apply such amounts to any sum due Franchisor or any affiliate of
Franchisor under this or any other agreement.
D. "Gross sales," as used in this Agreement, shall include all receipts
from the sale of food, beverages, and merchandise or services in or from the
franchised business and all other income of every kind and nature related to the
franchised business (including off-premises catering and employee meals at
discounted sales prices) whether for cash or credit, and regardless of
collection in the case of credit; provided, however, that "gross sales" shall
not include refunds or any sales taxes or other taxes collected by Franchisee
for transmittal to the appropriate taxing authority.
V. FRANCHISEE'S ACQUISITION OF AND CONSTRUCTION OF PREMISES
--------------------------------------------------------
Franchisee understands and acknowledges that every detail of the
franchised business is important to Franchisee, Franchisor, and other
franchisees in order to develop and maintain high operating standards, to
increase the demand for the products and services sold by all franchisees, and
to protect Franchisor's reputation and goodwill.
A. No later than one hundred eighty (180) days after execution of this
Agreement, Franchisee shall obtain a site by lease or purchase for the
restaurant, the terms of which Franchisor reserves the right to approve. Time is
of the essence in Franchisee's obtaining a site for the restaurant.
B. If Franchisee will occupy the premises from which the franchised
business is conducted under a lease, Franchisee shall, prior to the execution
thereof, submit such lease to Franchisor for its written approval. Franchisor's
approval of a lease (if any) for the site shall be conditioned upon the
inclusion in the lease of such provisions as Franchisor may reasonably require,
including, without limitation:
1. A provision which restricts the use of the premises during the term
of the Franchise Agreement solely to the operation of the business franchised
hereunder;
2. A provision which prohibits Franchisee from subleasing or assigning
all or any part of its occupancy rights or extending the term of or renewing the
lease, without Franchisor's prior written consent;
3. A provision that the landlord consents to Franchisee's use of such
Proprietary Marks and signage as Franchisor may prescribe for the franchised
business;
4. A provision giving Franchisor the right to enter the premises
without assuming the lease to make modifications necessary to protect the
Proprietary Marks and the System or cure any default under this Agreement;
5. A provision that the initial term of the lease, or the initial term
together with any renewal terms (for which the rent shall be set forth in the
lease), shall be for not less than fifteen (l5) years;
6. A provision which requires the landlord concurrently to provide
Franchisor with a copy of any written notice or breach of default under the
lease sent to Franchisee; and which grants to Franchisor, in its sole
discretion, the right (but not the obligation) to cure any breach or default
under the lease, should Franchisee fail to do so, within fifteen (l5) days after
the expiration of the period in which Franchisee may cure the breach or default;
and
7. A provision that provides that upon Franchisee's default under the
lease or under the Franchise Agreement, Franchisor shall without the landlord's
further consent have a continuing right of entry into the premises, the right to
operate a Golden Corral restaurant therein, the right but not the obligation to
assume Franchisee's interests under the existing terms, conditions and covenants
of the lease, and should Franchisor assume Franchisee's position under the
lease, the right to assign the lease or sublet the premises to a third party
which will operate on the premises a Golden Corral restaurant.
C. Before commencing any construction or renovation of the restaurant,
Franchisee, at its expense, shall comply, to Franchisor's satisfaction, with all
of the following requirements:
43
26
EXHIBIT 10(a)
1. Franchisee shall employ a licensed architect to prepare and seal
the site-adapted plans and specifications for construction of the restaurant,
referred to in Section V.D., and Franchisee shall submit to Franchisor a
statement identifying the architect;
2. Franchisee shall submit to Franchisor, for Franchisor's approval,
the site-adapted plans and specifications adapting Franchisor's then-current
generic plans and specifications to Franchisee's location and to local, state,
and federal laws, regulations, and ordinances. When approved by Franchisor, such
site-adapted plans and specifications shall thereafter not be changed or
modified without the prior written consent of Franchisor;
3. Franchisor shall provide Franchisee written notice of approval or
disapproval of the site-adapted plans and specifications within sixty (60) days
after receipt of such plans and specifications from Franchisee;
4. Franchisee shall employ a qualified general contractor to supervise
construction of the restaurant and completion of all improvements, and
Franchisee shall submit to Franchisor a statement identifying the general
contractor;
5. Franchisee shall submit to Franchisor a list identifying the
vendor(s) which are to supply furniture, fixtures and equipment to the
restaurant; and
6. Franchisee shall, using only Franchisee's legal name, use its best
efforts to obtain all permits and certifications required for lawful
construction and operation of the restaurant, including, without limitation,
zoning, access, sign, and fire requirements, and shall certify in writing to
Franchisor that all such permits and certifications have been obtained.
D. Franchisee shall commence construction or renovation of the restaurant
within thirty (30) days after execution of the approved lease for the premises
or purchase of the site for the restaurant or, if Franchisee's right to occupy
the premises begins after the date of execution of the lease, within thirty (30)
days after obtaining possession of the premises. Franchisee shall provide
written notice to Franchisor of the date construction of the restaurant
commenced within five (5) days after commencement and shall at that time submit
in writing a construction schedule and a proposed opening date, which shall be
no more than one hundred fifty (150) days from the date of submission of the
construction schedule. Franchisee shall maintain continuous construction of the
restaurant premises and shall complete construction, including all exterior and
interior carpentry, electrical, painting, and finishing work, and installation
of all fixtures, equipment, and signs, in accordance with the approved
site-adapted plans and specifications, at Franchisee's expense, within one
hundred twenty (120) days after commencement of construction (exclusive of time
lost by reason of strikes, lockouts, fire, delays caused by local regulatory
authorities, and other casualties and acts of God). Franchisee further agrees
that Franchisor and its agents shall have the right to inspect the construction
at all reasonable times. Franchisee shall notify Franchisor in writing of the
scheduled opening date of the restaurant at least thirty (30) days prior to such
date. After completion of construction, Franchisee shall obtain all permits
necessary to commence operation of the restaurant and, after obtaining
Franchisor's approval in writing for opening, shall open the restaurant within
ten (l0) days from the date construction is completed. Franchisee cannot open
the restaurant for business until Franchisor's written approval to open has been
obtained. If the Franchisor's approval to open is subject to certain changes
being made, the failure to timely make such changes shall cause Franchisee to be
in default. Franchisee and Franchisor agree that time is of the essence in the
construction and opening of the restaurant.
E Except as otherwise specifically stated in this Agreement as to be
performed by Franchisor, it is the Franchisee's responsibility to undertake all
actions necessary to acquire and open the restaurant at Franchisee's sole cost
and expense, which responsibility includes but is not limited to: (a) identify
any potential site to be developed; (b) to negotiate for the acquisition of such
site by lease or purchase; (c) to obtain necessary and appropriate governmental
approvals; (d) to select a general contractor and obtain construction bids; (e)
to adapt the generic building plans and specifications as provided by Franchisor
to the Approved Location and have such plans sealed by Franchisee's
architect/engineer; (f) obtain financing as needed for acquisition and
construction of the building and the purchase of all furniture, fixtures and
equipment for the Approved Location; and, (g) to construct the restaurant upon
the Approved Location.
VI. OPERATIONAL DUTIES OF FRANCHISEE
--------------------------------
A. Prior to the opening of the restaurant, the managers shall attend and
complete, to Franchisor's satisfaction, the training program for managers
offered by Franchisor. Franchisor shall take into consideration the background
and experience of the person attending the training programs and whether such
person has previously received training in the Franchisor's System. The training
program for managers shall be provided at Franchisor's training center and/or in
a company-owned restaurant of Golden Corral Corporation or at such other
locations as Franchisor may designate. Franchisor
44
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EXHIBIT 10(a)
shall provide instructors and training materials for such initial training
program for each of Franchisee's initial managers for no additional fee for such
training.
1. Any persons subsequently employed by Franchisee in the position of
general manager, associate manager-kitchen, or associate manager-service shall
also attend and complete, to Franchisor's satisfaction, Franchisor's training
program for managers and Franchisee shall be responsible for a reasonable
training fee. No person may at any time during the term of this Agreement serve
as general manager, associate manager-kitchen, or associate manager-service of
the restaurant without first having been certified as completing Franchisor's
training program for such managers in its entirety to Franchisor's satisfaction.
2. Prior to the opening of the restaurant such additional employees of
Franchisee in positions identified by Franchisor in the Manuals or otherwise in
writing shall attend and complete, to Franchisor's satisfaction, a training
program in a company-owned restaurant of Golden Corral Corporation or at such
other locations as Franchisor may designate.
Franchisee or its employees shall be responsible for any and all expenses
incurred by them in connection with any training programs described in this
Section VI.A., including without limitation, the costs of transportation,
lodging, meals, and wages.
B. The general manager, associate manager-kitchen, and the associate
manager-service shall also attend such refresher courses, additional training
programs and seminars as Franchisor may designate from time to time. For all
such programs and seminars, Franchisor shall provide instructors and training
materials; Franchisee and Franchisee's employees shall be responsible for a
reasonable training fee and for any and all other expenses incurred by them in
connection with such programs and seminars, including, without limitation, the
costs of transportation, lodging, meals, and any wages.
C. During the term of this Agreement, Franchisee shall use the restaurant
premises solely for the operation of the business franchised hereunder; keep the
business open and in normal operation for such minimum hours and days as
Franchisor may from time to time specify in the Manuals or otherwise in writing;
and refrain from using or permitting the use of the premises for any other
purpose or activity at any time without first obtaining the written consent of
Franchisor. Franchisee shall not locate or permit to be located on or about the
restaurant premises any signs, telephone booths, newspaper racks, video games,
pinball machines, jukeboxes, cigarette vending machines, or any other types of
amusement or vending machines, except as prescribed in the Manuals or otherwise
approved by Franchisor in writing.
D. Franchisee agrees to maintain a competent, conscientious, trained
staff, including such minimum number of employees as may be prescribed by
Franchisor and at least one full-time general manager, one associate
manager-kitchen, and one associate manager-service (one manager who must be
certified shall be present in the restaurant at all times during the
restaurant's operation); to take such steps as are necessary to ensure that all
employees of the restaurant keep a neat and clean personal appearance; to
preserve good customer relations; to comply with such requirements relating to
dress codes and uniforms as Franchisor may prescribe; and to comply with all
applicable federal, state, and local laws, rules, and regulations with respect
to such employees.
E. Franchisee shall maintain the restaurant in the highest degree of
sanitation, repair, and condition as Franchisor may reasonably require in the
Manuals or in writing from time to time, and in connection therewith shall make
such additions, alterations, repairs and replacements thereto (but no others
without Franchisor's prior written consent) as may be required for that purpose,
including, without limitation, such periodic repainting or repairs and
replacement of impaired equipment, furniture, fixtures, decor, and obsolete
signs. At Franchisor's request (but not more often than once every five (5)
years), and within a reasonable time after such request, Franchisee shall
refurbish the restaurant premises at Franchisee's expense, to conform to the
decor, building design, trade dress, and presentation of the Proprietary Marks
consistent with Franchisor's then-current image, including, without limitation,
such structural changes, remodeling, redecoration, and modifications to existing
improvements as may be necessary.
F. Franchisee shall meet and maintain the highest health standards and
ratings applicable to the operation of the restaurant. Franchisee shall furnish
to Franchisor, within five (5) days after receipt thereof, a copy of any
violation or citation which indicates Franchisee's failure to maintain local
health or safety standards in the operation of the restaurant.
G. Franchisee shall operate the restaurant in strict conformity with such
methods, standards, specifications, systems and procedures as Franchisor may
from time to time prescribe in the Manuals or otherwise in writing to insure
that the highest degree of quality and service is maintained. Franchisee agrees:
45
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EXHIBIT 10(a)
1. To maintain in sufficient supply, and use at all times, only such
products, materials, ingredients, supplies, and paper goods as conform to
Franchisor's standards and specifications; and to refrain from deviating
therefrom by using non-conforming items without Franchisor's prior written
consent;
2. To sell or offer for sale only such products, food, beverages, and
other menu items as meet Franchisor's standards of quality and quantity, as have
been expressly approved for sale in writing by Franchisor, and as have been
prepared in accordance with Franchisor's methods, techniques and specifications;
to sell or offer for sale all approved items; to refrain from any deviation from
Franchisor's standards and specifications for serving or selling the same
without Franchisor's prior written consent; to discontinue selling and offering
for sale any such items as Franchisor may, in its discretion, disapprove in
writing at any time. Franchisor reserves the right to vary menu items among
franchisees from time to time to conform to regional variations in cooking and
taste. With respect to the offer and sale of all menu items, products, and
services, Franchisee shall have sole discretion as to the prices to be charged
to customers; and
3. To purchase and install, at Franchisee's expense, all fixtures,
furnishings, signs, and equipment as Franchisor may reasonably direct from time
to time in the Manuals or otherwise in writing; and to refrain from installing
or permitting to be installed on or about the restaurant premises, without
Franchisor's prior written consent, any fixtures, furnishings, signs, equipment,
or other improvements not previously approved as meeting Franchisor's standards
and specifications.
H. Franchisee shall purchase all fixtures, furnishings, equipment, signs,
supplies, food and beverage items and other products and materials required for
the operation of the restaurant, solely from sources who demonstrate, to the
continuing reasonable satisfaction of Franchisor, the ability to meet
Franchisor's then-current standards and specifications for such items; who
possess adequate quality controls and capacity to supply Franchisee's needs
promptly and reliably; and who have been approved in writing by Franchisor and
not thereafter disapproved. Sources requiring Franchisor's approval include each
and every supplier, distributor, manufacturer, wholesaler and broker of such
products and materials described in this Section VI.H. If Franchisee desires to
purchase any items from an unapproved source, Franchisee shall submit to
Franchisor a written request for such approval, or shall request the source
itself to do so. Franchisor shall have the right to require that its
representatives be permitted to inspect the source's facilities, and that
samples from the source be delivered, at Franchisor's option, either to
Franchisor or to an independent, certified laboratory designated by Franchisor
for testing. A charge not to exceed the reasonable cost of the inspection and
the actual cost of the test shall be paid by Franchisee or the source.
Franchisor reserves the right, at its option, to reinspect the facilities and
products of any such approved source, and to revoke its approval upon the
source's failure to continue to meet any of Franchisor's criteria.
I. Franchisee shall grant Franchisor, its agents and its representatives,
the right to enter upon the restaurant premises at any reasonable time for the
purpose of conducting inspections; cooperate with Franchisor's representatives
in such inspections by rendering such assistance as they may reasonably request;
and, upon notice from Franchisor or its agents or representatives, and without
limiting Franchisor's other rights under this Agreement, require such steps to
be taken as may be necessary to correct immediately the deficiencies detected
during any such inspection, including, without limitation, immediately desisting
from the further use of any equipment, advertising materials, products,
ingredients, supplies, or other items that do not conform to Franchisor's
then-current specifications, standards, or requirements.
J. Franchisee shall obtain at Franchisee's expense, from a vendor
approved by Franchisor, periodic "customer feed back/mystery shopper" reports
and supply Franchisor, at Franchisee's expense, with copies of such completed
customer feed back/mystery shopper reports, at the times, and in the form and
manner as shall be prescribed by Franchisor in the Manuals or otherwise in
writing.
K. Franchisee shall require all advertising and promotional materials,
signs, decorations, paper goods (including disposable food containers, napkins,
and all forms used in the franchised business), and other items which may be
designated by Franchisor to bear the Proprietary Marks in the form, color,
location, and manner prescribed by Franchisor.
L. If Franchisee, or an affiliate of Franchisee if Franchisee is a
corporation, partnership, limited liability company or other entity other than a
sole proprietorship, is also the Franchisee and operator of other Golden Corral
restaurants, the Franchisee shall at all times have actively employed in the
supervision of the franchise business an Operating Partner who shall be approved
by Franchisor and meets Franchisor's requirements for such position, which may
include significant prior multi-unit restaurant operating experience, successful
completion of Franchisor's training program for managers, and ownership by such
Operating Partner of a significant equity interest in the entity established to
hold each of such related franchised business(es).
M. Franchisee shall comply with all other requirements set forth in this
Agreement.
46
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EXHIBIT 10(a)
VII. PROPRIETARY MARKS
-----------------
A. Franchisor represents with respect to the Proprietary Marks that:
l. Franchisor has the right to use, and license others to use the
Proprietary Marks.
2. Franchisor has taken and will take all steps reasonably necessary
to preserve and protect its right and interest in the ownership and validity in,
and of, and to the Proprietary Marks; and
3. Franchisor will use and permit Franchisee and other franchisees to
use the Proprietary Marks only in accordance with the System and the standards
and specifications attendant thereto which underlie the goodwill associated with
and symbolized by the Proprietary Marks.
B. With respect to Franchisee's licensed use of the Proprietary Marks
pursuant to this Agreement, Franchisee agrees that:
l. Franchisee shall use only the Proprietary Marks designated by
Franchisor, and shall use them only in the manner authorized and permitted by
Franchisor;
2. Franchisee shall use the Proprietary Marks only for the operation
of the business franchised hereunder and only at the location authorized
hereunder, or in advertising for the business conducted at or from that
location;
3. During the term of this Agreement and any renewal hereof,
Franchisee shall identify itself as the owner of the franchised business in
conjunction with any use of the Proprietary Marks, including, but not limited
to, on invoices, order forms, receipts, and contracts, as well as at such
conspicuous locations on the premises of the franchised business as Franchisor
shall designate in writing and in a form approved by Franchisor;
4. Franchisee's right to use the Proprietary Marks is limited to such
uses as are authorized under this Agreement, and any unauthorized use thereof
shall constitute an infringement of Franchisor's rights;
5. Unless otherwise authorized or required by Franchisor, Franchisee
shall operate and advertise the franchised business only under such Proprietary
Marks as may be authorized by Franchisor, without prefix or suffix, and only in
the manner prescribed by Franchisor;
6. Franchisee shall not use the Proprietary Marks to incur any
obligation or indebtedness on behalf of Franchisor;
7. Franchisee shall not use the Proprietary Marks as part of its
corporate or other legal name;
8. Franchisee shall comply with Franchisor's instructions in filing
and maintaining the requisite trade name or fictitious name registrations, and
shall execute any documents deemed necessary by Franchisor or its counsel to
obtain protection for the Proprietary Marks or to maintain their continued
validity and enforceability; and
9. With respect to actual or potential litigation concerning the
Proprietary Marks:
(a) Franchisee shall promptly notify Franchisor of any unauthorized
use of the Proprietary Marks or marks confusingly similar thereto as well as any
challenge to the Proprietary Marks. Franchisee acknowledges that Franchisor has
the sole right to direct and control any administrative proceeding or litigation
involving the ownership or validity of the Proprietary Marks, including any
settlement thereof. Franchisor has the right, but not the obligation, to take
action against uses by others that may constitute infringement of the
Proprietary Marks.
(b) Provided Franchisee has used the Proprietary Marks in
accordance with this Agreement, Franchisor will defend Franchisee at
Franchisor's expense against any third party claim, suit, or demand involving
the ownership or validity of the Proprietary Marks arising out of Franchisee's
use thereof. In the event that Franchisee has not used the Proprietary Marks in
accordance with this Agreement, Franchisor shall defend Franchisee, at
Franchisee's expense, against such third party claims, suits, or demands.
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EXHIBIT 10(a)
(c) In the event Franchisor undertakes the defense or prosecution
of any litigation relating to the Proprietary Marks, Franchisee agrees to
execute any and all documents and to do such acts and things as may, in the
opinion of Franchisor, be necessary to carry out such defense or prosecution,
including but not limited to becoming a nominal party to any legal action.
Except to the extent that such litigation is the result of Franchisee's use of
the Proprietary Marks in a manner inconsistent with the terms of this Agreement,
Franchisor agrees to reimburse Franchisee for its out of pocket costs in doing
such acts and things, except that Franchisee shall bear the salary costs of its
employees, and Franchisor shall bear the costs of any judgment or settlement.
C. Franchisee expressly understands and acknowledges that:
l. As between the parties hereto, Franchisor is the owner of all
right, title and interest in and to the Proprietary Marks and the goodwill
associated with and symbolized by them;
2. The Proprietary Marks are valid and serve to identify the System
and those who are franchised under the System;
3. Franchisee shall not directly or indirectly contest the validity or
the ownership of the Proprietary Marks;
4. Franchisee's use of the Proprietary Marks pursuant to this
Agreement does not give Franchisee any ownership interest or other interest in
or to the Proprietary Marks, except the non-exclusive license granted herein;
5. Any and all goodwill arising from Franchisee's use of the
Proprietary Marks in its franchised operation under the System shall inure
solely and exclusively to Franchisor's benefit; and, upon expiration or
termination of this Agreement and the license herein granted, no monetary amount
shall be assigned as attributable to any goodwill associated with Franchisee's
use of the System or the Proprietary Marks;
6. The right and license of the Proprietary Marks granted hereunder to
Franchisee is non-exclusive except as provided in Section I.C. of this
Agreement, and Franchisor thus has and retains the right, among others:
(a) To grant other licenses for the Proprietary Marks;
(b) To use the Proprietary Marks itself in connection with selling
products and services;
(c) To develop, establish and franchise other systems or other
products for the same or similar Proprietary Marks, or any other Proprietary
Marks, and to grant licenses or franchises thereto without providing any rights
therein to Franchisee; and
7. Franchisor reserves the right to substitute different Proprietary
Marks for use in identifying the System and the businesses operating thereunder
if Franchisor's currently owned Proprietary Marks no longer can be used, or if
Franchisor, in its sole discretion, determines that substitution of different
Proprietary Marks will be beneficial to the System.
VIII. CONFIDENTIAL INFORMATION
------------------------
A. Franchisee shall not, during the term of this Agreement or thereafter,
communicate, divulge, or use for the benefit of any other person, persons,
partnership, association, or corporation any confidential information,
knowledge, or know-how concerning the methods of operation of the business
franchised hereunder which may be communicated to Franchisee, or of which
Franchisee may be apprised, by virtue of Franchisee's operation under the terms
of this Agreement. Franchisee shall divulge such confidential information only
to such of its employees as must have access to it in order to operate the
franchised business. Any and all information, knowledge, know-how, and
techniques including without limitation, drawings, materials, equipment,
recipes, prepared mixtures or blends of spices or other food products,
specifications, techniques, and other data which Franchisor designates as
confidential and any information, knowledge, or know-how which may be derived by
analysis thereof, shall be deemed confidential for purposes of this Agreement,
except information which Franchisee can demonstrate came to its attention prior
to disclosure thereof by Franchisor; or which, at or after the time of
disclosure by Franchisor to Franchisee, had become or becomes a part of the
public domain, through publication or communication by others.
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EXHIBIT 10(a)
B. Franchisee acknowledges that any failure to comply with the
requirements of Section VIII.A. will cause Franchisor irreparable injury, and
Franchisee agrees to pay all court costs and reasonable attorneys' fees incurred
by Franchisor in obtaining specific performance of, or an injunction against
violation of, the requirements of Section VIII.A.
C. Franchisee shall require Franchisee's board of directors, officers,
general partners, and restaurant management employees, at the time of their
employment, to execute confidentiality agreements, in a form approved by
Franchisor, requiring that all information deemed confidential hereunder that
may be acquired by, or imparted to, such persons in connection with their
employment be held in strict confidence and used solely in their employment for
the benefit of Franchisee and Franchisor at all times during their employment,
and thereafter. Such covenants shall include specific identification of
Franchisor as a third-party beneficiary of such covenants with the independent
right to enforce them.
IX. CONFIDENTIAL OPERATIONS MANUALS
-------------------------------
A. In order to protect the reputation and goodwill of Franchisor and to
maintain uniform standards of operation under the Proprietary Marks, Franchisee
shall conduct its business in accordance with the Manuals, one (l) set of which
Franchisee acknowledges having received on loan from Franchisor for the term of
this Agreement and any renewals thereof. In the event of loss by Franchisee of
its set of the Manuals, or any portion thereof, Franchisee shall reimburse
Franchisor for the actual cost of replacement of the Manual(s).
B. Franchisee shall at all times treat the Manuals, any other manuals
created for, or approved for use in, the operation of the franchised business
and the information contained therein, as confidential, and shall use all
reasonable efforts to maintain such information as secret and confidential.
Franchisee shall not at any time copy, duplicate, record, or otherwise reproduce
the foregoing materials, in whole or in part, nor otherwise make the same
available to any unauthorized person.
C. The Manuals shall at all times remain the sole property of Franchisor
and shall at all times be kept in a secure place on the restaurant premises.
D. Franchisor may from time to time revise the contents of the Manuals,
and Franchisee expressly agrees to comply with each new or changed standard or
procedure.
E. Franchisee shall at all times insure that its copy of the Manuals is
kept current and up-to-date, and in the event of any dispute as to the contents
of the Manuals, the terms of the master copy of the Manuals maintained by
Franchisor at Franchisor's home office shall be controlling.
X. ACCOUNTING AND RECORDS
----------------------
A. During the term of this Agreement, Franchisee shall maintain and
preserve, for at least seven (7) years from the date of their preparation, full,
complete and accurate books, records, and accounts in accordance with generally
accepted accounting principles and in the form and manner prescribed by
Franchisor from time-to-time in the Manuals or otherwise in writing. Franchisee
shall record all sales at or from the restaurant using cash registers or other
point-of-sale equipment and computer software meeting Franchisor's standards and
specifications and approved by Franchisor. Franchisee shall maintain and
preserve all cash register tapes and/or computer records for at least two (2)
years.
B. Franchisee shall submit to Franchisor, no later than the tenth (l0th)
of each month during the term of this Agreement, after the opening of the
restaurant, an unaudited profit and loss statement, in the form prescribed by
Franchisor, accurately reflecting all gross sales during the preceding month and
such other data or information as Franchisor may require. Each profit and loss
statement shall be signed by Franchisee attesting that it is true and correct to
the best of Franchisee's knowledge.
C. Franchisee shall, at Franchisee's expense, submit to Franchisor an
audited profit and loss statement and audited balance sheet prepared in
accordance with generally accepted accounting principles, within one hundred
twenty (120) days after the end of each fiscal year during the term hereof,
showing the results of operations of the franchised business during said fiscal
year.
D. Franchisee shall submit to Franchisor, within thirty (30) days of the
filing of Franchisee's annual federal income tax return, a copy of Franchisee's
federal income tax return and copies of monthly sales tax returns pertaining to
the franchised business for the preceding fiscal year.
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EXHIBIT 10(a)
E. Franchisee shall submit to Franchisor, for review or auditing, such
other forms, reports, books, tax returns, records, bank statements, federal and
state unemployment compensation reports and workmen's compensation reports,
withholding tax reports, purchasing records, cash register tapes, computer
records, and such other information and data as Franchisor may reasonably
designate, in the form and at the times and places reasonably required by
Franchisor, upon request and as specified from time to time in the Manuals or
otherwise in writing.
F. Franchisee shall, and does hereby, consent to the release of records,
accounts, and such other information held by banks, credit reporting agencies,
and suppliers of Franchisee as may be reasonably requested by Franchisor.
Franchisee shall execute such documents as Franchisor deems necessary to obtain
such information.
G. Franchisor or its designated agents shall have the right at all
reasonable times to examine, at its expense, the books, records, and tax returns
of Franchisee. Franchisor shall also have the right, at any time, to have an
independent audit made of the books of Franchisee. If an inspection should
reveal that such payments have been understated in any report to Franchisor,
then Franchisee shall pay Franchisor, immediately upon demand and in addition to
the amount understated, a late fee of $75.00 and interest on the understated
amount, from the date the understated amount was due until paid, at one and
one-half percent (l l/2%) per month or the maximum rate permitted by law,
whichever is less. If an inspection discloses an understatement in any report of
three percent (3%) or more of the amount due to Franchisor, Franchisee shall, in
addition, reimburse Franchisor for any and all costs and expenses connected with
the inspection (including, without limitation, travel, lodging, wage expenses
and reasonable accounting and attorneys' fees). The foregoing remedies shall be
in addition to any other remedies Franchisor may have.
H. Franchisee shall, at its expense, submit to Franchisor, in conjunction
with, and as a part of, the financial statements required under Section X.C.
hereof, a complete and accurate accounting and a detailed description of all
expenditures by Franchisee for local advertising during the preceding fiscal
year.
XI. ADVERTISING
-----------
Recognizing the value of advertising and the importance of consistency of
advertising and promotion to the furtherance of the goodwill and public image of
the System, the parties agree that Franchisor shall conduct, determine,
maintain, and administer all national and/or regional advertising funds
("Funds") which may hereafter be established pursuant to Section XI.B. hereof,
and shall have sole discretion over the concepts, materials, media, type,
nature, scope, frequency, place, form, copy, layout, and content of all
national, regional, and local advertising, and accordingly agree as follows:
A. Franchisee shall expend or contribute monthly or weekly, on
advertising, as required in Sections IV.B. and IV.C. hereof, not less than two
percent (2%) of its gross sales or more than six percent (6%) of its gross
sales, which percentage Franchisor may direct from time to time in the Manuals.
Franchisor may pursuant to the terms and conditions of Section XI.B. hereof,
establish national and/or regional advertising funds for advertising for the
System. Franchisee shall allocate such weekly or monthly expenditures and
contributions among local advertising and a national and/or regional advertising
fund in such a manner as Franchisor shall, in its sole discretion, direct from
time-to-time in the Manuals or otherwise in writing. Franchisee shall be free to
conduct additional advertising at Franchisee's separate expense, in accordance
with Section XI.F. hereof.
B. Franchisee agrees that Franchisor shall have the right, in its
discretion, to establish the Funds for the System as described in Section IV.B.
hereof. In the event the Funds are established, Franchisee agrees to make
contributions to the Funds as required under Section IV.B. hereof, and agrees
that the Funds shall be maintained and administered by Franchisor or its
designee, as follows:
1. Franchisee agrees and acknowledges that the national advertising
fund ("National Fund") is intended to maximize general public recognition and
acceptance of the Proprietary Marks for the benefit of all restaurants within
the System, and that Franchisor and its designees are not obligated in
administering the National Fund to make expenditures for Franchisee which are
equivalent or proportionate to Franchisee's contribution or to ensure that any
particular Franchisee benefits directly or pro rata from the placement of
advertising.
2. The National Fund, all contributions thereto, and any earnings
thereon, shall be used exclusively to meet any and all costs of maintaining,
administering, researching, directing, creating and preparing advertising and/or
promotional activities including, without limitation, the costs of preparing,
creating and conducting advertising campaigns in various media; direct mail and
outdoor xxxx-board advertising; marketing surveys and other public relations
activities; employing advertising agencies to assist therein; product
development; and providing promotional, point of purchase/in-restaurant
materials and other marketing materials for franchisees and company-owned
restaurants in the System.
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EXHIBIT 10(a)
3. Franchisor shall, for each of its company-owned facilities (if
any), make contributions to the National Fund on the same basis as assessments
required of comparable franchisees within the System.
4. Franchisee shall contribute to the National Fund by no later than
the tenth (10th) day of each month for the preceding calendar month, except as
described in Section IV.C. hereof. All sums paid by Franchisee to the National
Fund shall be maintained in an account separate from the other monies of
Franchisor. Such sums shall not be used to defray any of Franchisor's expenses,
except for such reasonable administrative costs and overhead, if any, as
Franchisor may incur in activities reasonably related to the administration or
direction of the National Fund or advertising programs for franchisees and the
System, including the costs of enforcing contributions to the Fund required
under this Agreement and the costs of preparing the statement of operations, as
required under Section XI.B.7. hereof. The National Fund and its earnings shall
not otherwise inure to the benefit of Franchisor. Franchisor shall maintain
separate bookkeeping accounts for the Fund.
5. Franchisee agrees that Franchisor shall have the right, in its
discretion, to designate a designated market area "DMA" or any geographical area
as a region for purposes of establishing a regional advertising fund ("Regional
Fund"). If a Regional Fund for Franchisee's region is established at any time
during the term of this Agreement, Franchisee shall become a member of such
Regional Fund no later than thirty (30) days after the date on which the
Regional Fund commences operation as provided below.
(a) Each Regional Fund shall be organized and governed in a form
and manner, and shall commence operation on a date, approved in advance by
Franchisor in writing.
i. Each Regional Fund shall be organized for the exclusive
purposes of administering regional advertising programs.
ii. Each Regional Fund shall be Franchisor's designee for
maintaining and administering advertising and promotional programs in each
region, and each Regional Fund shall be subject to the same provisions with
respect to the Regional Fund as Franchisor is with respect to the National Fund
as set forth in this Section XI.B. hereof.
iii. Each member franchisee shall submit to the Regional Fund,
except as described in Section IV.C. hereof, no later than the tenth (l0th) day
of each month, for the preceding calendar month, its contribution as provided in
Section XI.A. hereof, together with such other statements or reports as may be
required by Franchisor or by the Regional Fund with Franchisor's prior written
approval.
(b) Franchisor, in its sole discretion, may grant to any franchisee
an exemption for any length of time from the requirement of membership in a
Regional Fund, upon written request of such franchisee stating reasons
supporting such exemption. Franchisor may require as a condition of granting
such exemption that Franchisee expend on local advertising, in a manner approved
in advance by Franchisor, and supported by such proof of expenditures as
Franchisor may require, at least the amount that the franchisee would have
contributed to a Regional Fund. Franchisor's decision concerning such request
for exemption shall be final.
(c) Franchisor shall, for each of its company-owned stores (if any)
located in a region in which a Regional Fund is established, make contributions
to the Regional Fund comparable to those required of franchisees.
6. It is anticipated that all contributions to and earnings of the
National Fund shall be expended for advertising and/or promotional purposes
during the taxable year within which the contributions are made. If, however,
excess amounts remain in the National Fund at the end of such taxable year, all
expenditures in the following taxable year(s) shall be made first out of
accumulated earnings from previous years, next out of earnings in the current
year, and finally from contributions.
7. The National Fund is not and shall not be an asset of Franchisor. A
statement of the operations of the National Fund as shown on the books
maintained by Franchisor shall be reviewed annually by an independent certified
public accountant selected by Franchisor and shall be made available to
Franchisee, upon reasonable notice.
8. Although Franchisor intends the National Fund to be of perpetual
duration, Franchisor maintains the right to terminate the National Fund. Such
National Fund shall not be terminated, however, until all monies in the National
51
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EXHIBIT 10(a)
Fund have been expended for advertising and/or promotional purposes or returned
to contributors on the basis of their respective contributions.
C. In addition to the advertising requirements as described in Section
XI.A. hereof, Franchisee agrees to expend, (1) in a manner prescribed by
Franchisor, prior to opening and for grand opening advertising an additional
amount to be specified by Franchisor for pre-opening and opening advertising,
other promotional activities and grand opening party, which amount shall not
exceed five thousand dollars ($5,000), and (2) within ninety (90) days after
opening, additional advertising and promotional activities to be specified by
the Franchisor for post-opening advertising and promotions; provided however,
that the aggregate amount payable by Franchisee pursuant to this Section XI.C.
shall not exceed fifteen thousand dollars ($15,000).
D. In addition to the advertising requirements described in Sections
XI.A. and XI.C. hereto, Franchisee shall obtain listings and place
advertisements in the white and yellow pages of local telephone directories, in
the form, size and type specified by Franchisor in the Manuals or otherwise in
writing and shall obtain and maintain an adequate supply of brochures,
pamphlets, and special promotional materials of the kind and size, and at
locations in and around the restaurant premises, as Franchisor may reasonably
require from time-to-time in the Manuals or otherwise in writing.
E. Franchisor shall have the right to delegate and re-delegate its
responsibilities and duties under this Agreement to any designee(s) of its
choosing; provided, however, that the right of final approval of all advertising
programs shall be retained at all times by Franchisor.
F. All advertising by Franchisee in any medium shall be conducted in a
dignified manner and shall conform to such standards and requirements as
Franchisor may specify from time to time in writing. Franchisee shall submit to
Franchisor (through the mail, return receipt requested), for its prior approval
(except with respect to prices to be charged), samples of all advertising and
promotional plans and materials, including signs, and all other materials
displaying the Proprietary Marks that Franchisee desires to use and that have
not been prepared or previously approved by Franchisor. If written disapproval
thereof is not received by Franchisee from Franchisor within fifteen (l5) days
from the date of receipt by Franchisor of such plans and materials, Franchisor
shall be deemed to have given the required approval. Franchisee shall display
the Proprietary Marks in the manner prescribed by Franchisor on all signs and
all other advertising and promotional materials used in connection with the
franchised business; and shall obtain and maintain an adequate supply of
brochures, pamphlets and special promotional materials of the kind and size, and
at locations in and around the restaurant premises as the Franchisor may
reasonably require from time to time in the Manuals or otherwise in writing.
XII. INSURANCE
---------
A. Franchisee shall procure, prior to the commencement of any operations
under this Agreement, and maintain in full force and effect during the term of
this Agreement, at Franchisee's expense, an insurance policy or policies
protecting Franchisee and Franchisor, and their officers, directors,
shareholders, partners, and employees, against demand or claim with respect to
any loss, liability, personal injury, death, property damage, or expense
whatsoever, arising or occurring upon or in connection with the franchised
business.
B. Such policy or policies shall be written by an insurance company
satisfactory to Franchisor in accordance with standards and specifications set
forth in the Manuals or otherwise in writing, and shall include, at a minimum,
(except as additional coverages and higher policy limits may reasonably be
specified by Franchisor from time to time in the Manuals or otherwise in
writing) the following:
1. Comprehensive general liability insurance, including broad form
comprehensive general liability endorsement, product liability and independent
contractors coverage and comprehensive automobile liability coverage, for owned,
hired and non-owned vehicles used by the franchised business, for bodily injury,
personal injury, and property damage with limits of not less than One Million
Dollars ($1,000,000) combined single limit ($2,000,000 aggregate for multi-unit
franchisees) and naming Franchisor as an additional insured in each such policy
or policies;
2. Workers' compensation and employer's liability insurance with
limits of not less than $1,000,000 as well as such other insurance as may be
required by statute or rule of the state or locality in which the franchised
business is located and operated;
3. All risk physical damage insurance, to include but not limited to
flood and earthquake coverage which is required if the restaurant is in a flood
or earthquake zone, including replacement cost endorsement with primary and
52
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EXHIBIT 10(a)
excess limits of not less than one hundred percent (100%) of the full
replacement value of the restaurant, its equipment, furniture, signs, and
fixtures;
4. Business interruption insurance, including coverage for payments to
Franchisor for loss of royalties and payments to the advertising Funds as a
result of any interruption in Franchisee's business operations to cover the
monies that would be payable for royalties and advertising pursuant to Sections
IV.A.2. and IV.B. of this Agreement but for any business interruption or closing
of the restaurant; and
5. Commercial umbrella insurance, with limits of not less than five
million dollars ($5,000,000) to cover all primary underlying coverages.
C. In connection with any construction, renovation, refurbishing, or
remodeling of the restaurant, Franchisee will cause the general contractor to
maintain with an insurer acceptable to Franchisor comprehensive general
liability insurance, product liability, auto liability and completed operations
and independent contractors coverage) in at least the amount of One Million
Dollars ($1,000,000) with Franchisor named as an additional insured, builders
risk insurance in an amount adequate to cover the full contract cost, and
workers' compensation and employer's liability insurance, as well as such other
insurance as may be required by law.
D. Franchisee's obligation to obtain and maintain the foregoing policy or
policies in the amounts specified shall not be limited in any way by reason of
any insurance which may be maintained by Franchisor, nor shall Franchisee's
performance of that obligation relieve Franchisee of liability under the
indemnity provisions set forth in Section XIX.C. of this Agreement.
E. Franchisee shall promptly submit evidence of satisfactory insurance
and proof of payment therefor to Franchisor, together with, upon request, copies
of all policies and policy amendments:
1. For builder's risk insurance no later than fifteen (15) days before
the date on which any construction of the restaurant is commenced, and on each
policy renewal date thereafter;
2. Evidence of worker's compensation insurance is required prior to
training in any Golden Corral Corporation restaurant(s) or other facility and on
each policy renewal date thereafter; and
3. For all other types of insurance required hereunder no later than
fifteen (15) days before the scheduled opening date of the restaurant, and on
each policy renewal date thereafter.
The evidence of insurance shall include a statement by the insurer that
the policy or policies will not be cancelled or materially altered without at
least thirty (30) days prior written notice to Franchisor.
F. No requirement for insurance contained herein shall constitute advice
or guarantee by Franchisor that only such policies, in such amounts, are
necessary to protect Franchisee from losses in connection with the franchised
business.
G. Should Franchisee, for any reason, fail to procure or maintain the
insurance required by this Agreement, as revised from time to time by the
Manuals or otherwise in writing, Franchisor shall have the right and authority
(without, however, any obligation to do so), immediately to procure such
insurance and to charge same to Franchisee, which charges, together with a
reasonable fee for Franchisor's expenses in so acquiring the policy or policies,
shall be payable by Franchisee immediately upon notice. The foregoing remedies
shall be in addition to any other remedy Franchisor may have.
XIII. TRANSFER OF INTEREST
--------------------
A. TRANSFER BY FRANCHISOR:
Franchisor shall have the right to transfer or assign all or any part of
its rights or obligations herein to any person or legal entity.
B. TRANSFER BY FRANCHISEE:
1. Franchisee understands and acknowledges that the rights and duties set
forth in this Agreement are personal to Franchisee, and that Franchisor has
granted this franchise in reliance on Franchisee's business skill, financial
capacity, and personal character. Accordingly, neither Franchisee nor any
immediate or remote successor to any part of
53
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EXHIBIT 10(a)
Franchisee's interest in this franchise nor any individual, partnership,
corporation, or other legal entity, which directly or indirectly controls
Franchisee shall sell, assign, transfer, convey or give away, any direct or
indirect interest in Franchisee or in this franchise without the prior written
consent of Franchisor. Any purported assignment or transfer, by operation of law
or otherwise, not having the written consent of Franchisor shall be null and
void and shall constitute a material breach of this Agreement, for which
Franchisor may then terminate without opportunity to cure pursuant to Section
XIV.B. of this Agreement. The transfer restrictions described in this Section
XIII.B. shall apply to any sale, assignment, transfer, conveyance, or donation
of any ownership interest in Franchisee (except for a Franchisee which is a
corporation registered under the Securities and Exchange Act of 1934) by any
holder of such interest to any party.
2. Franchisor shall not unreasonably withhold its consent to a
transfer of any interest in Franchisee or in this franchise; provided, however,
that if a transfer, alone or together with other previous, simultaneous, or
proposed transfers, would have the effect of transferring a controlling interest
in the franchised business, Franchisor may, in its sole discretion, require as a
condition of its approval that:
(a) All of Franchisee's monetary obligations to Franchisor and all
or any of its affiliates under this and any other agreements between Franchisee
and Franchisor or any affiliate have been satisfied, and all other outstanding
obligations related to the franchised business shall have been satisfied;
(b) Franchisee is not in default of any provision of this
Agreement, any amendment hereof or successor hereto, or any other agreement
between Franchisee and Franchisor, or its subsidiaries and affiliates;
(c) The transferor shall have executed a general release under
seal, in a form satisfactory to Franchisor, of any and all claims against
Franchisor and its officers, directors, shareholders, and employees, in their
corporate and individual capacities, including, without limitation, claims
arising under federal, state, and local laws, rules, and ordinances;
(d) The transferee (and, if the transferee is other than an
individual, such owners of a beneficial interest in the transferee as Franchisor
may request) shall enter into a written assignment, under seal and in a form
satisfactory to Franchisor, assuming and agreeing to discharge all of
Franchisee's obligations under this Agreement;
(e) The transferee (and, if the transferee is other than an
individual, such owners of a beneficial interest in the transferee as Franchisor
may request) shall demonstrate to Franchisor's satisfaction that transferee
meets Franchisor's educational, managerial, and business standards; possesses a
good moral character, business reputation, and credit rating; has the aptitude
and ability to conduct the business franchised herein (as may be evidenced by
prior related business experience, the franchise application, or otherwise); and
has adequate financial resources and capital to operate the business;
(f) At Franchisor's option, the transferee shall execute (and/or,
upon Franchisor's request, shall cause all interested parties to execute), for a
term ending on the expiration date of this Agreement and with such renewal term
as may be provided by this Agreement, the standard form franchise agreement then
being offered to new System franchisees and other ancillary agreements as
Franchisor may require for the franchised business, which agreements shall
supersede this Agreement in all respects and the terms of which agreements may
differ from the terms of this Agreement, including, without limitation, a higher
percentage royalty rate and advertising contribution;
(g) The transferee shall, at transferee's expense and upon the
reasonable request of Franchisor, upgrade the restaurant to conform to the
then-current standards and specifications for System restaurants, and shall
complete the upgrading and other requirements within the time specified by
Franchisor;
(h) Franchisee shall remain primarily liable for all obligations of
the franchised business and all covenants to be kept or performed by Franchisee
and Franchisee shall execute any and all instruments reasonably requested by
Franchisor to evidence such liability;
(i) At transferee's expense, transferee or transferee's managers
shall complete any training programs then in effect for franchisees upon such
terms and conditions as Franchisor may reasonably require; and
(j) Except in the case of a transfer to a corporation formed for
the convenience of ownership, a transfer fee shall be paid by Franchisee to
Franchisor in an amount equal to five percent (5%) of the then-current standard
initial franchise fee being charged by Franchisor for a restaurant utilizing the
restaurant design franchised hereunder (or, if such design is not then offered,
such fee for the restaurant design closest in interior square footage to the
restaurant).
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EXHIBIT 10(a)
(k) Franchisee agrees that if, in the opinion of Franchisor, the
price to be paid for the restaurant or franchised business appears to be
excessive or is likely to result in there being an unsatisfactory return on
investment or there being an insufficient cash flow to meet obligations,
Franchisor may, without liability to Franchisee, review such opinions with any
such prospective transferee/purchaser.
(l) The transferee must at the time of the proposed transfer meet
Franchisor's requirements to have an Operating Partner that has been approved by
Franchisor.
3. Franchisor shall not unreasonably withhold its consent to a
proposed public offering of securities interests in Franchisee; provided,
however, that Franchisor may, in its sole discretion, require as a condition of
its approval that Franchisor or a company controlling Franchisor has previously
made a public offering of Franchisor's or such company's securities. (For the
purposes of this Section XIII, a "public offering" shall mean any offering
requiring registration under any state or federal securities laws, and any
offering exempt from registration but requiring disclosure under any federal law
or regulation.)
4. Franchisee shall grant no security interest in the franchised
business or in any of its assets unless the secured party agrees that in the
event of any default by Franchisee under any documents related to the security
interest, Franchisor shall have the right and option to purchase the rights of
the secured party upon payment of all sums then due to such secured party,
except such amounts which may have become due as a result of any acceleration of
the payment dates based upon the Franchisee's default.
5. Franchisee acknowledges and agrees that each condition which must
be met by the transferee franchisee is necessary to assure such transferee's
full performance of the obligations hereunder.
C. TRANSFER TO FRANCHISEE'S CORPORATION:
In the event Franchisee is a corporation formed by Franchisee for the
convenience of ownership, Franchisor's consent to such transfer shall, in
addition to the requirements set forth in Section XIII.B. of this Agreement, be
conditioned upon the following requirements:
1. Franchisee shall be the owner of all the voting stock of the
corporation; and, if Franchisee is more than one individual, each individual
shall have the same proportionate ownership interest in the corporation as he
had in Franchisee prior to the transfer.
2. Corporate resolutions and minutes shall be furnished to Franchisor
prior to the transfer, and the transferee shall comply with all the terms and
conditions set forth in Sections V. and VI. of this Agreement.
D. OFFERINGS BY FRANCHISEE:
Securities or partnership interests in Franchisee may be sold, by private
offering or otherwise, only with the prior written consent of Franchisor, as
required in Sections XIII.B.2. and XIII.B.3. hereof. All materials required for
such offering by federal or state law shall be submitted to Franchisor for
review prior to their being filed with any government agency; and any materials
to be used in any exempt offering shall be submitted to Franchisor for review
prior to their use. No Franchisee offering shall imply (by use of the
Proprietary Marks or otherwise) that Franchisor is participating as an
underwriter, issuer, or offeror of Franchisee's or Franchisor's securities; and
Franchisor's review of any offering shall be limited solely to the subject of
the relationship between Franchisee and Franchisor. Franchisee and the other
participants in the offering must fully indemnify Franchisor in connection with
the offering. For each proposed offering, Franchisee shall pay to Franchisor a
non-refundable fee of Ten Thousand Dollars ($10,000), or such greater amount as
is necessary to reimburse Franchisor for its reasonable costs and expenses
associated with reviewing the proposed offering. Franchisee shall give
Franchisor written notice at least thirty (30) days prior to the date of
commencement of any offering or other transaction covered by this Section
XIII.D.
E. RIGHT OF FIRST REFUSAL:
1. If any party holding any interest in Franchisee or in this
Agreement (the transfer of which interest would have the effect of transferring
a controlling interest in the franchised business), or if Franchisee desires to
accept any bona fide offer from a third party to purchase such interest or the
premises of the franchised business, the seller shall notify Franchisor in
writing of the terms of such offer, and shall provide such information and
documentation relating to the offer
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EXHIBIT 10(a)
as Franchisor may require; and Franchisor shall have the right and option,
exercisable within thirty (30) days after receipt of such written notification,
to send written notice to the seller that Franchisor intends to purchase the
seller's interest on the same terms and conditions offered by the third party.
In the event that Franchisor elects to purchase the seller's interest, closing
on such purchase must occur within sixty (60) days from the date of notice to
the seller of the election to purchase by Franchisor or such later date as may
have been provided in the offer. Any material change in the terms of any offer
prior to closing shall constitute a new offer subject to the same rights of
first refusal by Franchisor as in the case of an initial offer. Failure of
Franchisor to exercise the option afforded by this Section XIII.E. shall not
constitute a waiver of any other provision of this Agreement, including all of
the requirements of this Section XIII.E., with respect to a proposed transfer.
2. In the event the consideration, terms, and/or conditions offered by
a third party are such that Franchisor may not reasonably be required to furnish
the same consideration, terms, and/or conditions, then Franchisor may purchase
the interest in the franchised business proposed to be sold for the reasonable
equivalent in cash. If the parties cannot agree within a reasonable time on the
reasonable equivalent in cash of the consideration, terms, and/or conditions
offered by the third party, an independent appraiser shall be designated by
Franchisor, and his determination shall be binding.
F. TRANSFER UPON DEATH OR MENTAL INCOMPETENCY:
Upon the death or mental incompetency of any person with a controlling
interest in the franchise or in Franchisee, the transfer of which requires the
consent of Franchisor as provided in Section XIII.B. hereof, the executor,
administrator, personal representative, guardian, or conservator of such person
shall transfer such interest within six (6) months after such death or mental
incompetency to a third party approved by Franchisor. Such transfers, including,
without limitation, transfers by devise or inheritance, shall be subject to the
same conditions as any inter vivos transfer. However, in the case of transfer by
devise or inheritance, if the heirs or beneficiaries of any such person are
unable to meet the conditions in this Section XIII., the personal representative
of the deceased person shall have a reasonable time to dispose of the deceased's
interest in the franchise, which disposition shall be subject to all the terms
and conditions for transfers contained in this Agreement. If the interest is not
disposed of within a reasonable time, Franchisor may terminate this Agreement.
G. NON-WAIVER OF CLAIMS:
Franchisor's consent to a transfer of any interest in the franchise
granted herein shall not constitute a waiver of any claims Franchisor may have
against the transferring party, nor shall it be deemed a waiver of Franchisor's
right to demand exact compliance with any of the terms of this Agreement by the
transferee.
XIV. DEFAULT AND TERMINATION
-----------------------
A. Franchisee shall be deemed to be in default under this Agreement, and
all rights granted herein shall automatically terminate without notice to
Franchisee, if Franchisee shall become insolvent or make a general assignment
for the benefit of creditors; if a petition in bankruptcy is filed by Franchisee
or such a petition is filed against and consented to by Franchisee; if
Franchisee is adjudicated a bankrupt or insolvent; if a xxxx in equity or other
proceeding for the appointment of a receiver of Franchisee or other custodian
for Franchisee's business or assets is filed and consented to by Franchisee; if
a receiver or other custodian (permanent or temporary) of Franchisee's assets or
property, or any part thereof, is appointed by any court of competent
jurisdiction; if proceedings for a composition with creditors under any state or
federal law should be instituted by or against Franchisee; if a final judgment
remains unsatisfied or of record for thirty (30) days or longer (unless
supersedeas bond is filed); if execution is levied against Franchisee's business
or property; if suit to foreclose any lien or mortgage against the premises or
equipment is instituted against Franchisee and not dismissed within thirty (30)
days; or if the real or personal property of Franchisee's restaurant shall be
sold after levy thereupon by any sheriff, marshal, or constable.
B. Franchisee shall be deemed to be in default and Franchisor may, at its
option, terminate this Agreement and all rights granted hereunder, without
affording Franchisee any opportunity to cure the default, effective immediately
upon receipt of notice by Franchisee, upon the occurrence of any of the
following events;
l. If Franchisee fails to obtain a site for the franchised business as
required in the Site Selection Addendum (Attachment A hereto), prepare the
premises, and commence the franchised business as required in Section V. hereof,
or if Franchisee loses its lease, sublease, or its right to occupy the premises,
ceases to operate, or otherwise abandons the franchised business or otherwise
forfeits the right to do or transact business in the jurisdiction where the
restaurant is located; provided, however, that if any such loss of possession
results from the governmental exercise of the power of eminent domain, or if,
through no fault of Franchisee, the premises are damaged or destroyed, then
Franchisee shall have thirty (30) days after either such event in which to apply
for Franchisor's approval to relocate or reconstruct the premises, which
approval shall not be unreasonably withheld;
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EXHIBIT 10(a)
2. If Franchisee is convicted, or enters a plea with adjudication of
guilt withheld or suspended, involving a felony, a crime involving moral
turpitude, or any other crime or offense that is reasonably likely, in the sole
opinion of Franchisor, to adversely affect the System, the Proprietary Marks,
the goodwill associated therewith, or Franchisor's interest therein;
3. If Franchisee or any partner or shareholder of Franchisee purports
to transfer any rights or obligations under this Agreement or any interest in
Franchisee to any third party without Franchisor's prior written consent,
contrary to the terms of Section XIII. of this Agreement;
4. If Franchisee fails to comply with the in-term covenants in Section
XVI. hereof or fails to obtain and provide Franchisor with the covenants
required by Section XVI.I. hereof;
5. If Franchisee misuses or makes any unauthorized use of the
Proprietary Marks or otherwise materially impairs the goodwill associated
therewith or Franchisor's rights therein contrary to Section VII. hereof,
intentionally discloses the contents of the Manuals to any unauthorized person,
or violates in any way the trade secrets and confidential information provisions
of Section VIII. hereof;
6. If an approved transfer, as required by Section XIII.F. hereof, is
not effected within a reasonable time following the death or mental incompetency
of a person with a controlling interest in the franchise or in Franchisee;
7. If Franchisee knowingly maintains false books or records, or
submits any false reports to Franchisor;
8. If Franchisee is declared in default by Franchisor under any
provision of any other franchise agreement between the parties, any amendment
thereof or successor thereto, or is in default of any provision of any sublease
agreement, equipment purchase agreement, any promissory note (a) with Franchisor
or an affiliate or (b) to which franchisor or any affiliates is a guarantor, or
any other agreement between Franchisee and Franchisor, or its subsidiaries and
affiliates.
9. If Franchisee, after curing any default under Section XIV.C.,
repeatedly defaults, whether or not such default(s) are cured after notice;
C. Except as provided in Sections XIV.A. and XIV.B. of this Agreement,
Franchisee shall have thirty (30) days after its receipt from Franchisor of a
written Notice of Termination within which to remedy any default hereunder and
provide evidence thereof to Franchisor. If any such default is not cured within
that time, or such longer period as applicable law may require, this Agreement
shall terminate without further notice to Franchisee, effective immediately upon
expiration of the thirty (30) day period or such longer period as applicable law
may require. Franchisee shall be in default hereunder for any failure to comply
substantially with any of the requirements imposed by this Agreement, as it may
from time to time reasonably be supplemented by the Manuals, or to carry out the
terms of this Agreement in good faith. Such defaults shall include, for example,
without limitation, the occurrence of any of the following events:
l. If Franchisee fails, refuses, or neglects promptly to pay when due
any monies owing to Franchisor or its subsidiaries or affiliates, or to the
Funds, or to submit the financial information or other reports required by
Franchisor under this Agreement;
2. If Franchisee fails to maintain any of the standards or procedures
prescribed by Franchisor in this Agreement, the Manuals, or otherwise in writing
or fails to have an operations principal and/or to have an Operating Partner, if
required;
3. If Franchisee fails, refuses, or neglects to obtain Franchisor's
prior written approval or consent, as required by this Agreement;
4. If Franchisee, directly or indirectly, commences or conducts any
business operation, or markets any service or product under any name or
proprietary xxxx which, in Franchisor's opinion, is confusingly similar to the
Proprietary Marks; or
5. If Franchisee, by act or omission, suffers a continued violation,
in connection with the operation of the restaurant, of any law, ordinance, rule
or regulation of a governmental agency, in the absence of a good faith dispute
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EXHIBIT 10(a)
over its application or legality and without promptly resorting to an
appropriate administrative or judicial forum for relief therefrom.
D. Default under this Franchise Agreement shall constitute a default
under any Development Agreement between the parties pursuant to which this
Franchise Agreement was executed.
XV. OBLIGATIONS UPON TERMINATION
----------------------------
Upon termination or expiration of this Agreement:
A. Franchisee shall immediately cease to operate the business franchised
under this Agreement and shall not thereafter, directly or indirectly, represent
to the public or hold itself out as a present or former franchisee of
Franchisor. Franchisee shall immediately return to Franchisor all confidential
materials provided to Franchisee by Franchisor and/or Franchisor's designee(s),
which confidential materials include without limitation, the Manuals and any
translations thereof.
B. Franchisee shall immediately and permanently cease to use, by
advertising or in any other manner whatsoever, any format, confidential methods,
procedures, and techniques associated with the System; the Proprietary Xxxx
"Golden Corral" and all other Proprietary Marks and distinctive forms, slogans,
signs, symbols, trade dress or devices associated with the System. In
particular, without limitation, Franchisee shall cease to use all signs,
equipment, advertising materials, forms, and any other articles which display
the Proprietary Marks; provided, however, that this Section XV.B. shall not
apply to the operation of any other franchise under the System which may be
granted by Franchisor to Franchisee.
C. Franchisee shall take such action as may be necessary to cancel any
assumed name or equivalent registration which contains the name "Golden Corral"
or any other service xxxx or trademark of Franchisor; and Franchisee shall
furnish Franchisor with evidence satisfactory to Franchisor of compliance with
this obligation within thirty (30) days after termination or expiration of this
Agreement.
D. Franchisee shall, at Franchisor's option (which such option may be
exercised within thirty (30) days after termination or expiration), assign to
Franchisor any interest which Franchisee has in any lease or sublease for the
premises of the franchised business.
E. In the event Franchisor does not elect to exercise its option to
purchase the premises pursuant to Section XV.J., or to acquire the lease or
sublease for the premises of the franchised business pursuant to Section XV.D.,
Franchisee shall make such modifications or alterations to the premises operated
hereunder (including, without limitation, the changing of the telephone number)
immediately upon termination or expiration of this Agreement as may be necessary
to prevent the operation of any business thereon by itself or others in
derogation of this Section XV. and shall make such specific additional changes
thereto as Franchisor may reasonably request for that purpose. In the event
Franchisee fails or refuses to comply with the requirements of this Section XV.,
Franchisor shall have the right to enter upon the premises where Franchisee's
franchised business was conducted, without being guilty of trespass or any other
tort, for the purpose of making or causing to be made such changes as may be
required at the expense of Franchisee, which expense Franchisee agrees to pay
upon demand.
F. If Franchisee owns an interest in the premises of the franchised
business and, at any time prior to the termination or expiration of this
Agreement, Franchisee desires to accept any bona fide offer from a third party
to purchase Franchisee's interest in the premises of the franchised business,
then Franchisee shall notify Franchisor in writing of the terms of each such
offer, and shall provide such information and documentation relating to the
offer as Franchisor may require, including information as to the condition of
title to the restaurant premises; and Franchisor shall have the right and
option, exercisable within thirty (30) days after receipt of such written
notification, to send written notice to Franchisee that Franchisor intends to
purchase the seller's interest on the same terms and conditions offered by the
third party. In the event that Franchisor intends to purchase Franchisee's
interest, closing on such purchase must occur within sixty (60) days from the
date of notice to Franchisee of the election to purchase by Franchisor or such
later date as may have been provided in the offer. Any material change in the
terms of any offer prior to closing shall constitute a new offer subject to the
same rights of first refusal by Franchisor as in the case of an initial offer.
Failure of Franchisor to exercise the option afforded by this Section XV.F.
shall not constitute a waiver of any other provision of this Agreement,
including all of the requirements of this Section XV.F., with respect to a
proposed transfer.
In the event the consideration, terms, and/or conditions offered by a
third party are such that Franchisor may not reasonably be required to furnish
the same consideration, terms, and/or conditions, then Franchisor may purchase
the interest in the premises of the franchised business proposed to be sold for
the reasonable equivalent in cash. If the parties
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EXHIBIT 10(a)
cannot agree within a reasonable time on the reasonable equivalent in cash of
the consideration, terms, and/or conditions offered by the third party, an
independent appraiser shall be designated by Franchisor, and his determination
shall be binding.
G. Franchisee agrees, in the event it continues to operate or
subsequently begins to operate any other business, not to use any reproduction,
counterfeit, copy, or colorable imitation of the Proprietary Marks either in
connection with such other business or the promotion thereof, which is likely to
cause confusion, mistake, or deception, or which is likely to dilute
Franchisor's exclusive rights in and to the Proprietary Marks; and further
agrees not to utilize any designation of origin or description or representation
which falsely suggests or represents an association or connection with
Franchisor.
H. Franchisee shall promptly pay all sums owing to Franchisor and its
subsidiaries and affiliates. In the event of termination for any default of
Franchisee, such sums shall include all damages, costs, and expenses, including
reasonable attorneys' fees, incurred by Franchisor as a result of the default,
which obligation shall give rise to and remain, until paid in full, a lien in
favor of Franchisor against any and all of the personal property, furnishings,
equipment, inventory, and fixtures owned by Franchisee and on all premises
operated hereunder at the time of default.
I. Franchisee shall pay to Franchisor all damages, costs, and expenses,
including reasonable attorneys' fees, incurred by Franchisor subsequent to the
termination or expiration of the franchise herein granted in obtaining
injunctive or other relief for the enforcement of any provisions of this Section
XV.
J. Franchisor shall have the option, to be exercised within thirty (30)
days after termination or expiration, to purchase from Franchisee the restaurant
premises, to include but not limited to land, building and site improvements,
and related improvements at then-current fair market value, and also the option
to assume any and/or all leases relating to the restaurant premises, and also to
purchase any or all of furnishings, equipment, signs, fixtures, supplies, or
inventory of Franchisee related to the operation of the franchised business, at
Franchisee's cost or fair market value, whichever is less. If the parties cannot
agree on a fair market value within a reasonable time, an independent appraiser
shall be designated by the parties and his determination shall be binding. If
the parties cannot agree on an appraiser within a reasonable time, an
independent appraiser shall be designated by each party, and the two (2)
independent appraisers so designated shall select a third independent appraiser.
The determination of fair market value of the third appraiser so chosen shall be
binding. If Franchisor elects to exercise any option to purchase herein
provided, it shall have the right to set off all amounts due from Franchisee to
Franchisor or its affiliates, and the cost of the appraisal, if any, against any
payment therefor.
K. Franchisee shall comply with the covenants contained in Sections
XVI.B. and XVI.C. of this Agreement.
XVI. COVENANTS
---------
A. Franchisee covenants that during the term of this Agreement, except as
otherwise approved in writing by Franchisor, Franchisee or, if Franchisee is a
corporation, a limited liability company or partnership or other entity, a
principal of Franchisee approved by Franchisor, shall be designated as the
approved operations principal who shall devote full time, energy, and best
efforts to the management and operation of the business franchised hereunder.
The current approved operations principal is _____________________________.
B. Franchisee specifically acknowledges that, pursuant to this Agreement,
Franchisee will receive valuable specialized training and confidential
information, including, without limitation, information regarding the
operational, sales, promotional, and marketing methods and techniques of
Franchisor and the System. Franchisee covenants that during the term of this
Agreement, except as otherwise approved in writing by Franchisor, Franchisee
shall not, either directly or indirectly, for itself, or through, on behalf of,
or in conjunction with, any person, persons, partnership, or corporation:
1. Divert or attempt to divert any business or customer of the
business franchised hereunder to any competitor, by direct or indirect
inducement or otherwise, or do or perform, directly or indirectly, any other act
injurious or prejudicial to the goodwill associated with the Proprietary Marks
and the System; or
2. Employ or seek to employ any person who is or within the prior six
(6) months had been employed by Franchisor, any affiliate of Franchisor or by
any other franchisee of Franchisor, or otherwise directly or indirectly to
induce such person to leave his or her employment for the purpose of becoming an
employee of Franchisee;
3. Own, invest in, maintain, operate, engage in, be employed by, be a
consultant to, or have any interest in any restaurant business unless previously
consented to in writing by the Franchisor.
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EXHIBIT 10(a)
C. Franchisee further covenants that, except as previously approved in
writing by Franchisor, Franchisee shall not, for a continuous and uninterrupted
period commencing upon the expiration or termination of this Agreement
(regardless of the cause for termination) and continuing for the following
described period(s) thereafter directly or indirectly, for itself, or through,
on behalf of, or in conjunction with any person, persons, partnership, or
corporation, own, invest in, maintain, operate, engage in, be employed by, be a
consultant to, or have any interest in any restaurant business offering for sale
steak, buffet, salad bar, bakery and other items which had been offered by the
franchised business, and/or which is a cafeteria-style or buffet restaurant
concept, which is, or is intended to be, located: (i) for a period of two (2)
years within ten (l0) miles of the Approved Location; and/or (ii) for a period
of two (2) years within ten (10) miles of any Golden Corral restaurant which is
located, or intended to be located, within the same Designated Market Area
("DMA") as the Approved Location if a Golden Corral advertising cooperative has
been formed for such DMA; and/or (iii) for a period of one (1) year within ten
(10) miles of any Golden Corral restaurant within the United States of America.
D. Sections XVI.B.3. and XVI.C. shall not apply to ownership by
Franchisee of less than a five percent (5%) beneficial interest in the
outstanding equity securities of any corporation which is registered under the
Securities and Exchange Act of 1934.
E. The parties agree that each of the foregoing covenants shall be
construed as independent of any other covenant or provision of this Agreement.
If all or any portion of a covenant in this Section XVI. is held unreasonable or
unenforceable by a court or agency having valid jurisdiction in an unappealed
final decision to which Franchisor is a party, Franchisee expressly agrees to be
bound by any lesser covenant subsumed with the terms of such covenant that
imposes the maximum duty permitted by law, as if the resulting covenant were
separately stated in and made a part of this Section XVI.E.
F. Franchisee understands and acknowledges that Franchisor shall have the
right, in its sole discretion, to reduce the scope of any covenant set forth in
Sections XVI.B. and XVI.C. of this Agreement, or any portion thereof, without
Franchisee's consent, effective immediately upon receipt by Franchisee of
written notice thereof, and Franchisee agrees that it shall comply forthwith
with any covenant as so modified, which shall be fully enforceable
notwithstanding the provisions of Section XXII. hereof.
G. Franchisee expressly agrees that the existence of any claims it may
have against Franchisor, whether or not arising from this Agreement, shall not
constitute a defense to the enforcement by Franchisor of the covenants in this
Section XVI.
H. Franchisee acknowledges that Franchisee's violation of the terms of
this Section XVI. would result in irreparable injury to Franchisor for which no
adequate remedy at law may be available; and Franchisee accordingly consents to
the issuance of, and agrees to pay all court costs and reasonable attorneys'
fees incurred by Franchisor in obtaining, an injunction prohibiting any conduct
by Franchisee in violation of the terms of this Section XVI.
I. At the request of Franchisor, Franchisee shall provide Franchisor with
executed covenants similar in substance to those set forth in this Section XVI.
(including covenants applicable upon the termination of a person's relationship
with Franchisee) from any or all of the following persons: (l) Franchisee's
managers; (2) a11 officers, directors, and holders of a direct or indirect
beneficial ownership interest of five percent (5%) or more in Franchisee; and
(3) the general partners and any limited partners (including any corporation,
and the officers, directors, and holders of a beneficial interest of five
percent (5%) or more of the securities of any corporation which controls,
directly or indirectly, any general or limited partner), if Franchisee is a
partnership. With respect to each person who becomes associated with Franchisee
in one of the capacities enumerated above subsequent to execution of this
Agreement, Franchisee shall require and obtain such covenants from them and
promptly provide Franchisor with executed copies of such covenants. In no event
shall any person enumerated be granted access to any confidential aspect of the
system or the franchised business prior to execution of such a covenant. All
covenants required by this Section XVI.I. shall be in forms satisfactory to
Franchisor, including, without limitation, specific identification of Franchisor
as a third-party beneficiary of such covenants with the independent right to
enforce them. Failure by Franchisee to obtain execution of a covenant required
by this Section XVI.I. and provide the same to Franchisor shall constitute a
material breach of this Agreement.
XVII. CORPORATE OR PARTNERSHIP FRANCHISEE
-----------------------------------
A. A Franchisee which is a corporation shall comply with the following
requirements throughout the term of this Agreement:
1. Franchisee shall furnish Franchisor with its Articles of
Incorporation, Bylaws, other governing documents, and such other documents
Franchisor may reasonably request, and any amendments thereto;
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EXHIBIT 10(a)
2. Franchisee shall confine its activities, and its governing
documents shall at all times provide that its activities are confined,
exclusively to operating the business franchised herein;
3. Franchisee shall maintain stop transfer instructions against the
transfer on its records of any voting securities; and shall issue no voting
securities upon the face of which the following printed legend does not legibly
and conspicuously appear:
The transfer of this stock is subject to the terms and conditions of a
Franchise Agreement with GOLDEN CORRAL FRANCHISING SYSTEMS, INC. dated
_______________. Reference is made to the provisions of the said
Franchise Agreement and to the Articles and Bylaws of this
Corporation.
4. Franchisee shall maintain a current list of all owners of record
and all beneficial owners of any class of voting stock of Franchisee and shall
furnish the list to Franchisor upon request. Such lists shall also include the
percentage of ownership of each such owner.
B. If Franchisee is a corporation, each proposed holder of an interest in
Franchisee shall submit a franchise application to Franchisor, shall be approved
by Franchisor, and shall, upon Franchisor's request, execute a guarantee of
Franchisee's obligations under the Franchise Agreement in a form prescribed by
Franchisor; provided, however, that the requirements of this Section XVII.B.
shall not apply to a holder of any corporation registered under the Securities
and Exchange Act of 1934.
C. A Franchisee which is a partnership shall comply with the following
requirements throughout the term of this Agreement:
1. Franchisee shall furnish Franchisor with its partnership agreement
as well as such other documents as Franchisor may reasonably request, and any
amendments thereto; and
2. Franchisee shall prepare and furnish to Franchisor, upon request, a
current list of all general and limited partners in Franchisee with the
percentage of ownership of each partner shown.
XVIII. TAXES, PERMITS, AND INDEBTEDNESS
--------------------------------
A. Franchisee shall promptly pay when due all taxes levied or assessed by
any federal, state or local tax authority, including, without limitation,
unemployment and sales taxes, and all accounts and other indebtedness of every
kind incurred by Franchisee in the conduct of the business franchised under this
Agreement. Franchisee shall pay to Franchisor an amount equal to any sales tax,
gross receipts tax, or similar tax imposed on Franchisor with respect to any
payments to Franchisor required under this Agreement, unless the tax is credited
against income tax otherwise payable by Franchisor.
B. In the event of any bona fide dispute as to liability for taxes
assessed or other indebtedness, Franchisee may contest the validity or the
amount of the tax or indebtedness in accordance with procedures of the taxing
authority or applicable law; however, in no event shall Franchisee permit a tax
sale or seizure by levy of execution or similar writ or warrant, or attachment
by a creditor, to occur against the premises of the franchised business, or any
improvements thereon.
XIX. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
------------------------------------------
A. It is understood and agreed by the parties hereto that this Agreement
does not create a fiduciary relationship between them; that Franchisee shall be
an independent contractor; and, that nothing in this Agreement is intended to
constitute either party an agent, legal representative, subsidiary, joint
venturer, partner, employee, or servant of the other for any purpose whatsoever.
B. During the term of this Agreement and any extensions hereof,
Franchisee shall hold itself out to the public as an independent contractor
operating the business pursuant to a franchise from Franchisor. Franchisee
agrees to take such affirmative action as may be necessary to do so, including,
without limitation, exhibiting a notice of that fact in a conspicuous place in
the franchised premises, the content of which Franchisor reserves the right to
specify.
C. It is understood and agreed that nothing in this Agreement authorizes
Franchisee to make any contract, agreement, warranty, or representation on
Franchisor's behalf, or to incur any debt or other obligation in Franchisor's
name;
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EXHIBIT 10(a)
and, that Franchisor shall in no event assume liability for, or be deemed liable
as a result of, any such action, or by reason of any act or omission of
Franchisee in its conduct of the franchised business or any claim or judgment
arising there from against Franchisor. Franchisee shall indemnify and hold
Franchisor and Franchisor's officers, directors, and employees harmless against
any and all such claims arising directly or indirectly from, as a result of, or
in connection with Franchisee's operation of the franchised business, as well as
the costs, including attorneys' fees, of defending against them.
XX. APPROVALS AND WAIVERS
---------------------
A. Whenever this Agreement requires the prior approval or consent of
Franchisor, Franchisee shall make a timely written request to Franchisor
therefor; and such approval or consent shall be obtained in writing.
B. Franchisor makes no warranties or guarantees upon which Franchisee may
rely, and assumes no liability or obligation to Franchisee, by providing any
waiver, approval, consent, or suggestion to Franchisee in connection with this
Agreement, or by reason of any neglect, delay, or denial of any request thereof.
C. No failure of Franchisor to exercise any power reserved to it by this
Agreement, or to insist upon strict compliance by Franchisee with any obligation
or condition hereunder, and no custom or practice of the parties at variance
with the terms hereof, shall constitute a waiver of Franchisor's right to demand
exact compliance with any of the terms herein. Waiver by Franchisor of any
particular default by Franchisee shall not affect or impair Franchisor's rights
with respect to any subsequent default of the same, similar or different nature,
nor shall any delay, forbearance or omission of Franchisor to exercise any power
or right arising out of any breach or default by Franchisee of any of the terms,
provisions or covenants hereof, affect or impair Franchisor's right to exercise
the same, nor shall such constitute a waiver by Franchisor of any right
hereunder, or the right to declare any subsequent breach or default and to
terminate this franchise prior to the expiration of its term. Subsequent
acceptance by Franchisor of any payments due to it hereunder shall not be deemed
to be a waiver by Franchisor of any preceding breach by Franchisee of any terms,
covenants or conditions of this Agreement.
XXI. NOTICES
-------
Any and all notices required or permitted under this Agreement shall be
in writing and shall be personally delivered by any means which will provide
evidence of the date received to the respective parties at the following
addresses unless and until a different address has been designated by written
notice to the other party:
Notices to Franchisor: Vice President of Franchising
Golden Corral Franchising Systems,
Inc.
X.X. Xxx 00000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Notices to Franchisee: __________________________________
__________________________________
__________________________________
__________________________________
Any notice shall be deemed to have been given at the date and time it is
received, or is refused, or delivery is made impossible by the intended
recipient.
XXII. ENTIRE AGREEMENT
----------------
This Agreement, the documents referred to herein, and the Attachments
hereto, if any, constitute the entire, full, and complete Agreement between
Franchisor and Franchisee concerning the subject matter hereof, and supersede
any and all prior agreements. No amendment, change, or variance from this
Agreement shall be binding on either party unless mutually agreed to by the
parties and executed in writing.
XXIII. SEVERABILITY AND CONSTRUCTION
-----------------------------
A. Except as expressly provided to the contrary herein, each section,
part, term, and/or provision of this Agreement shall be considered severable;
and if, for any reason, any section, part, term, and/or provision herein is
determined to be invalid and contrary to, or in conflict with, any existing or
future law or regulation by a court or agency having valid jurisdiction, such
shall not impair the operation of, or have any other effect upon, such other
portions, sections, parts, terms, and/or provisions of this Agreement as may
remain otherwise intelligible; and, the latter shall continue to be given full
force
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EXHIBIT 10(a)
and effect and bind the parties hereto; and said invalid sections, parts, terms,
and/or provisions shall be deemed not to be a part of this Agreement.
B. Anything to the contrary herein notwithstanding, nothing in this
Agreement is intended, nor shall be deemed, to confer upon any person or legal
entity other than Franchisor or Franchisee and such of their respective
successors and assigns as may be contemplated by Section XIII. hereof, any
rights or remedies under or by reason of this Agreement.
C. Franchisee expressly agrees to be bound by any promise or covenants
imposing the maximum duty permitted by law which is subsumed within the terms of
any provision hereof, as though it were separately articulated in and made a
part of this Agreement, that may result from striking from any of the provisions
hereof any portion or portions which a court may hold to be unreasonable and
unenforceable in a final decision to which Franchisor is a party, or from
reducing the scope of any promise or covenant to the extent required to comply
with such a court order.
D. All captions in this Agreement are intended solely for the convenience
of the parties, and none shall be deemed to affect the meaning or construction
of any provision hereof.
E. All references herein to the masculine, neuter, or singular shall be
construed to include the masculine, feminine, neuter, or plural, where
applicable, and all acknowledgments, promises, covenants, agreements, and
obligations herein made or undertaken by Franchisee shall be deemed jointly and
severally undertaken by all the parties hereto signing on behalf of Franchisee.
F. This Agreement may be executed in several parts, and each copy so
executed shall be deemed an original.
XXIV. APPLICABLE LAW
--------------
A. This Agreement takes effect upon its acceptance and execution by
Franchisor, and shall be interpreted and construed under the laws of North
Carolina, which laws shall prevail in the event of any conflict of law;
provided, however, that if the covenants in Section XVI. of this Agreement would
not be enforceable under the laws of North Carolina and the franchised business
is located outside of North Carolina, then such covenants shall be interpreted
and construed under the laws of the state in which the franchised business is
located.
B. The parties agree that any action brought by either party against the
other in any court, whether federal or state, shall be brought within the state
of North Carolina in the judicial district in which Franchisor has its principal
place of business and do hereby waive all questions of personal jurisdiction or
venue for the purpose of carrying out this provision.
C. No right or remedy conferred upon or reserved to Franchisor or
Franchisee by this Agreement is intended to be, nor shall be deemed exclusive of
any other right or remedy herein or by law or equity provided or permitted, but
each shall be cumulative of every other right or remedy.
D. Nothing herein contained shall bar Franchisor's right to obtain
injunctive relief against threatened conduct that will cause it loss or damages,
under the usual equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions; nor shall the reference to such
relief in certain Sections of this Agreement be deemed to imply the
unavailability of such relief to enforce rights provided for in other sections.
XXV. ACKNOWLEDGMENTS
---------------
A. Franchisee acknowledges that it has conducted an independent
investigation of the business franchised hereunder, and recognizes that the
business venture contemplated by this Agreement involves business risks and that
its success will be largely dependent upon the ability of Franchisee as an
independent businessman. Franchisor expressly disclaims the making of, and
Franchisee acknowledges that it has not received, any warranty or guarantee,
express or implied, as to the potential volume, profits, or success of the
business venture contemplated by this Agreement.
B. Franchisee acknowledges that Franchisee has received an exact copy of
this Agreement, the attachments thereto, if any, and agreements relating
thereto, if any, and agreements relating thereto, if any, at least five (5)
business days prior to the date on which this Agreement was executed. Franchisee
further acknowledges that it has received the disclosure document which is
required by the Trade Regulation Rule of the Federal Trade Commission entitled
"Disclosure Requirements and Prohibitions Concerning Franchising and Business
Opportunity Ventures," and which contains a copy of this Agreement, at least ten
(l0) business days prior to the date on which this Agreement was executed.
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EXHIBIT 10(a)
C. Franchisee acknowledges that it has read and understood this
Agreement, the attachments hereto, if any, and agreements relating hereto, if
any; and that Franchisor has afforded Franchisee ample time and opportunity to
consult with advisors of its own choosing about the potential benefits and risks
of entering into this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed, sealed, and
delivered this Agreement on the day and year first above written.
GOLDEN CORRAL FRANCHISING SYSTEMS, INC.
(Corporate Seal)
By:
-------------------------------------
Its Vice President
Attested
By:
-------------------------------------
Its Secretary
WITNESS: FRANCHISEE
By: (SEAL)
------------------------- -------------------------------------
(Name)
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EXHIBIT 10(a)
ATTACHMENT A
SITE SELECTION ADDENDUM TO GOLDEN CORRAL FRANCHISE
AGREEMENT
GOLDEN CORRAL FRANCHISING SYSTEMS, INC. (hereinafter "Franchisor") and
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(hereinafter "Franchisee"), have this date, , 19 , entered into a certain Golden
Corral Franchise Agreement (hereinafter "Franchise Agreement") and desire to
supplement its terms, as set out below. The parties hereto therefore agree as
follows:
1. No later than one hundred eighty (180) days after the execution of
this Site Selection Addendum and the Franchise Agreement Franchisee shall obtain
premises by lease or purchase, at Franchisee's expense, for the Golden Corral
restaurant franchised under the Franchise Agreement, which premises shall be
approved by Franchisor as hereinafter provided. The premises shall be within the
following territory (hereinafter "Site Selection Territory"):
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
2. Failure by Franchisee to obtain premises for the franchised business
within the time required in Paragraph 1. hereof shall constitute a default under
the Franchise Agreement and this Site Selection Addendum. Time is of the
essence.
3. Prior to obtaining the premises for the franchised business in the
Site Selection Territory, Franchisee shall submit to Franchisor, in the form
specified by Franchisor, a complete response to Franchisor's Site Evaluation
Questionnaire, a description of the proposed site and such information or
materials as Franchisor may reasonably require and a letter of intent or other
evidence satisfactory to Franchisor which confirms Franchisee's favorable
prospects for obtaining the proposed site. Recognizing that time is of the
essence, Franchisee agrees that Franchisee must submit such information and
materials for Franchisee's proposed site to Franchisor for its approval within
ninety (90) days after execution of this Site Selection Addendum. Franchisor
shall have sixty (60) days after receipt of such information and materials from
Franchisee to approve or disapprove, in its sole discretion, the site as a
location for the franchised business.
4. Franchisor shall furnish to Franchisee the following:
a. Such site selection guidelines and consultation as Franchisor may
deem advisable;
b. Such on-site evaluation as Franchisor may deem advisable as part of
its evaluation of Franchisee's request for site approval; provided, however,
that Franchisor shall not provide on-site evaluation for any proposed site prior
to Franchisor's receipt of a complete response to Franchisor's Site Evaluation
Questionnaire, a description of the proposed site and a letter of intent or
other evidence satisfactory to the Franchisor which confirm Franchisee's
favorable prospects for obtaining the proposed site. If on-site evaluation is
deemed necessary and appropriate by Franchisor, Franchisor shall conduct up to
two (2) on-site evaluations at Franchisor's cost; for each additional on-site
evaluation (if any) Franchisee shall reimburse Franchisor for Franchisor's
reasonable expenses, including, without limitation, the costs of travel,
lodging, and food.
5. After the location for the franchised business is approved by
Franchisor and obtained by Franchisee pursuant to Paragraph 3 hereof, the
location shall constitute the Approved Location referred to in Section I. of the
Franchise Agreement.
6. This Site Selection Addendum constitutes an integral part of the
Franchise Agreement between the parties hereto, and the terms of this Site
Selection Addendum shall be controlling with respect to the subject matter
hereof. Except as modified or supplemented by this Site Selection Addendum, the
terms of the Franchise Agreement are hereby ratified and confirmed.
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EXHIBIT 10(a)
IN WITNESS WHEREOF, the parties hereto have duly executed, sealed and
delivered this Addendum on the day and year first above written.
GOLDEN CORRAL FRANCHISING SYSTEMS, INC.
(Corporate Seal)
By:
-------------------------------------
Its Vice President
Attested
By:
-------------------------------------
Its __________ Secretary
WITNESS: FRANCHISEE
By: (SEAL)
------------------------- -------------------------------------
(Name)
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EXHIBIT 10(a)
GOLDEN CORRAL FRANCHISING SYSTEMS, INC.
FRANCHISE AGREEMENT
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EXHIBIT 10(a)
ADDENDUM TO AREA DEVELOPMENT AGREEMENT
--------------------------------------
This is an Addendum to the Area Development Agreement (the "Development
Agreement") dated as of the 30th day of December, 1997 by and between XXXXXX'X
RESTAURANTS, INC. ("Area Developer") and GOLDEN CORRAL FRANCHISING SYSTEMS, INC.
("Franchisor") with respect to certain markets in the Development Area specified
under the Development Agreement defined by the Cincinnati, Dayton, OH and
Louisville, KY Designated Market Area (the "DMA").
By executing this Addendum, Area Developer and Franchisor intend to supplement
the terms and provisions of the Development Agreement and, to the extent that
any term or provision of the Development Agreement is inconsistent with the
terms and provisions of this Addendum, the terms of this Addendum shall control.
1. OPTION TO PURCHASE ADDITIONAL NEW MARKETS
Franchisor and Area Developer acknowledge and agree that certain markets (not
including Non-traditional Markets) exist within the DMA which in the judgement
of Franchisor do not currently meet the minimum criteria for development and
operation of a Golden Corral(R) restaurant. Franchisor and Area Developer agree
that in the event that Franchisor in its sole and absolute judgement determines
in the future that any one or more market areas within the DMA meets the
then-current criteria established by Franchisor for development of a Golden
Corral(R) restaurant (a "New Market"), Area Developer shall have the option to
purchase each such New Market (the "Option"), on the following terms:
TERM OF OPTION:
So long as Area Developer is not in default under the Development Agreement or
any Franchise Agreement, the Option shall continue throughout the term of the
Development Agreement (including any extension thereof) and thereafter so long
as Area Developer acquires each New Market which may become available under the
Option and and develops a Golden Corral(R) restaurant in each market owned by
Area Developer as required by the Development Agreement (including any amendment
or replacement thereto).
DESIGNATION AS NEW MARKET; ELECTION TO EXERCISE OPTION TO PURCHASE:
Following the designation by Franchisor of any New Market, Franchisor shall give
notice to Area Developer in writing that such market has been so designated.
Such notice shall include all New Markets so designated, together with such
information as Franchisor in its discretion deems relevant to each such
designation. If Area Developer elects to exercise the Option granted hereby with
respect to a New Market, Area Developer shall give written notice of such
election to Franchisor within thirty (30) days following receipt by Area
Developer of the notice from Franchisor. Area Developer shall exercise such
Option with respect to all, but not less than all, New Markets included within a
notice from Franchisor.
TERMS OF PURCHASE; EXECUTION OF DOCUMENTS
In the event that Area Developer elects to exercise the Option with respect to
New Markets designated by Franchisor, such New Markets shall be purchased on
Franchisor's then-standard terms for the licensing of markets under an Area
Development Agreement. Franchisor shall prepare and Area Developer shall
execute, within thirty (30) days after receipt, an amendment to the Development
Agreement in which the Term and the opening schedule set forth in the
Development Agreement shall be extended for a period of time determined by
Franchisor based upon the number of New Markets being acquired and after taking
into consideration the number of new restaurants required to be developed each
year under the existing terms of the agreement, or, if the term of the
Development Agreement has expired, Area Developer shall execute a new agreement
providing for the development and operation by Area Developer of a Golden
Corral(R) restaurant in each New Market and with a term sufficient to allow for
such development based upon the previously existing agreement.
Area Developer shall pay to Franchisor the Development Fee otherwise due for
each New Market being acquired, according to Franchisor's then-standard terms,
at the time of execution of the Amendment to the Development Agreement or a new
Area Development Agreement, as the case may be.
2. LIMITED OPTION TO PURCHASE RIGHTS FOR NON-TRADITIONAL SITES:
Franchisor and Area Developer acknowledge and agree that the Development Area
excludes certain non-traditional sites as described in Clause I.C.(i) of the
Development Agreement, and which are likewise excluded from the Protected
Territory defined in the form of Franchise Agreement attached as an exhibit to
the Development Agreement. Franchisor and Area Developer agree that in the event
that Franchisor in its sole and absolute judgement determines that any one or
more non-traditional sites within the DMA meets the then-current criteria
established by Franchisor for development of a restaurant business or similar
offering using the Proprietary Marks and the System (a "Non-traditional Site"),
and, based on the
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EXHIBIT 10(a)
characteristics of such Non-traditional Site (including but not limited to the
nature of the offering which may be made from such site, any contractual
obligations or limitations, bidding requirements, connections with any other
similar site not within the DMA, and other criteria deemed by Franchisor as
bearing on the proposed use of the site) Franchisor determines in its sole
discretion that Area Developer can be expected to meet all of the development
and operating criteria for such site and without affecting the operation of any
similar site not within the DMA, Area Developer shall have the option to
purchase the development right for each such Non-traditional Site (a
"Supplemental Right"), on the following terms:
TERM OF SUPPLEMENTAL RIGHT:
So long as Area Developer is not in default under the Development Agreement or
any Franchise Agreement, the Option shall continue throughout the term of the
Development Agreement (including any extension thereof) and thereafter so long
as Area Developer acquires each New Market which may become available under the
Option and and develops a Golden Corral(R) restaurant in each market owned by
Area Developer as required by the Development Agreement (including any amendment
or replacement thereto).
DESIGNATION AS NON-TRADITIONAL SITE SUBJECT TO SUPPLEMENTAL RIGHT; ELECTION TO
EXERCISE OPTION TO PURCHASE:
Following the designation by Franchisor of any Non-traditional Site as a site
subject to a Supplemental Right, Franchisor shall give notice to Area Developer
in writing that such site has been so designated. Such notice shall include such
information as Franchisor in its discretion deems relevant to each such
designation, and any information in Franchisor's possession regarding the site
which create developmental or operating requirements or restrictions, such as
bidding requirements, operating requirements or restrictions and the like.
Franchisor shall also specify in such notice any fees or payments due from Area
Developer to Franchisor or any affiliate of Franchisor, including but not
limited to any franchise fee or royalty requirement if different in any respect
from the fees or payments specified with respect to any other franchised Golden
Corral(R) restaurant developed under Franchisor's then-standard terms. If Area
Developer elects to exercise the Supplemental Right granted hereby with respect
to a Non-traditional Site, Area Developer shall give written notice of such
election to Franchisor within thirty (30) days following receipt by Area
Developer of the notice from Franchisor. Area Developer shall exercise such
Supplemental Right with respect to all, but not less than all, Non-traditional
Sites included within a common bid, operating agreement or contract required
with a third party, but may otherwise exercise or reject such Supplemental
Rights with respect to sites on a case by case basis.
TERMS OF PURCHASE; EXECUTION OF DOCUMENTS
In the event that Area Developer elects to exercise the Option with respect to a
Non-traditional Site designated by Franchisor and for which Area Developer is
successful in acquiring the right to operate at such site from any third party
required to approve such development, such Non-traditional Sites shall be
purchased on Franchisor's then-standard terms for the sale of markets in similar
locations, or, if Franchisor has not established standard terms for such kinds
of development, on such terms as Franchisor deems reasonable and appropriate
after giving consideration to the training, development and other assistance
likely to be provided by Franchisor. The Term of the Development Agreement shall
be extended for a period of time determined by Franchisor based upon the number
and type of Non-traditional Sites being acquired and after taking into
consideration the number of new restaurants required to be developed each year
under the existing terms of the agreement, or, if the term of the Development
Agreement has expired, Area Developer shall execute a Franchise Agreement for
any single Non-traditional Site or new Area Development Agreement for multiple
sites on such terms as Franchisor deems reasonable and appropriate, which
agreement shall provide for the development and operation by Area Developer of a
Golden Corral(R) restaurant facility in each Non-traditional Site and with a
term sufficient to allow for such development based upon the development
obligations imposed by the third party with whom Area Developer is required to
contract for the operation of such site.
Area Developer shall pay to Franchisor any fees due with respect to each
Non-traditional Site being acquired, according to Franchisor's terms, at the
later of the date Area Developer secures the right from any third party to
develop such site (such as the date Area Developer is notified of its successful
bid or acceptance by the third party of acceptance of Area Developer's contract)
or the time of execution of the Amendment to Development Agreement or new Area
Development Agreement including such Non-traditional Site or, in the case of a
single Non-traditional site, at the time of execution of the Franchise Agreement
for such site, as the case may be.
3. LIMITATION ON RESTRICTIONS WHILE PUBLIC COMPANY:
Franchisor acknowledges that Area Developer is currently organized and operates
as and expects to remain a corporation registered under the Securities and
Exchange Act of 1934 (or any similar subsequent law) regulating the transfer of
publicly traded securities, and has qualified for and has listed for trading of
its equity securities on national and regional stock exchanges (a "Public
Company").
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EXHIBIT 10(a)
Area Developer shall upon request provide to Franchisor (i) a copy of Area
Developer's annual report on Form 10-K each year promptly after its preparation
and (ii) a list each year of any individual or entity required under the federal
securities laws to file Form 5 (or any similar form) with the Securities
Exchange Commission in such year.
Franchisor agrees that so long as Area Developer continues to operate as a
Public Company, Area Developer shall not be required to comply (except as set
forth below) with the following restrictions or requirements in the Development
Agreement or form of Franchise Agreement attached thereto, or any similar
restriction found in any other provision of any form of Franchise or Area
Development Agreement hereafter adopted by Franchisor:
A) Area Developer shall not be required to comply with the provisions of Section
V. B of the Development Agreement or Section XVII of the Franchise Agreement.
B) Except as set forth below, the transfer of stock or other interests in Area
Developer so long as Area Developer is a Public Company shall not be deemed a
transfer subject to the provisions of Section VII.B. of the Development
Agreement or Section XIII.B. of the Franchise Agreement; the consent of
Franchisor shall not be required nor shall any fee be payable to Franchisor
with respect to any offerings of shares or securities otherwise restricted by
Section VII.C. of the Development Agreement or Section XIII.D. of the
Franchise Agreement; and Franchisor shall not have any right of first refusal
as otherwise provided in Sections VII.D. or VII.E. of the Development
Agreement or Sections XIII.E. or XIII.F. of the Franchise Agreement;
Provided, however, that a transfer by operation of law as the result of a
merger, consolidation or reorganization with an entity engaged in the
operation of family steakhouse or buffet restaurants which compete directly
or indirectly with Golden Corral(R)restaurants shall be a prohibited
transfer, and no such merger or consolidation shall be permitted without the
express prior written consent of Franchisor, which Franchisor may refuse to
give in its sole and absolute discretion.
C) So long as Area Developer maintains policies and procedures designed to
maintain the confidential nature of any Proprietary Information furnished to
Area Developer and to prevent its improper use, and otherwise agrees to
notify Franchisor of any prohibited use and assist Franchisor in taking such
action as may be necessary to obtain an injunction prohibiting any prohibited
conduct, Area Developer shall not be required to furnish covenants required
under clause VIII.I.(2) of the Development Agreement or Section VIII.C. of
the Franchise Agreement.
4. CONSENT TO OPERATION OF ALTERNATIVE BUSINESSES:
Area Developer currently operates other restaurant businesses under the
Frisch's(R) restaurant operating format which is distinct from those of
Franchisor and does not use any of the Marks or the System. Franchisor has
agreed in reliance upon the assurances of Area Developer and in consideration of
the continuing covenant and agreement of Area Developer to preserve and protect
the Proprietary Information to give its consent to the specific existing or
additional Frisch's business operations of Area Developer, and may consent to
other types of restaurant operations in the future. Area Developer shall as a
continuing condition to the ongoing consent of Franchisor to the continuing
operation of such alternative restaurant businesses at all times maintain all
confidential and Proprietary Information in the manner called for under Section
VIII.A. of the Franchise Agreement, and shall not take any steps designed to or
as a foreseeable result of which the other business operations of Area Developer
will become substantially similar to those licensed under the Development
Agreement or Franchise Agreement, or cause confusion in the minds of the public
as to the source of any product or service offered in any other business
operated by Area Developer with those offered from Golden Corral(R) restaurants.
This consent shall not serve as a consent to the acquisition of any other
restaurant business, or the merger or consolidation of Area Developer with any
other entity which operates family steakhouse or buffet restaurants (including
cafeteria restaurants) or other restaurants which utilize an operating format
similar to that of Franchisor.
BALANCE OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS
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EXHIBIT 10(a)
IN WITNESS WHEREOF, the parties have caused this Addendum to Area Development
Agreement to be executed by their respective duly authorized officers on the
same day and year as the original execution of the Development Agreement.
GOLDEN CORRAL FRANCHISING SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxx
------------------------------------
Its Vice President
(Corp. Seal)
Attest: /s/ Xxxxxx X. Xxxxxxxxx, Xx.
--------------------------------
Its Assistant Secretary
XXXXXX'X RESTAURANTS, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Its Vice President
(Corp. Seal)
Attest: /s/ W. Xxxx Xxxx
--------------------------------
Its ______ Secretary
