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Exhibit (10) (a)
INTELLECTUAL PROPERTY USE AND
NON-COMPETE AGREEMENT
This Agreement is made and entered into on January 12, 2001 between
Xxxxxxx Restaurant Enterprises LLC ("Xxxxxxx"), a Michigan limited liability
company, and Xxxxxx'x Restaurants, Inc. ("Frisch's), an Ohio corporation.
RECITALS
X. Xxxxxxx Restaurant Group, Inc. ("LRG") has entered into a certain
Asset Purchase Agreement dated October 18, 2000 (the "Xxxxx Purchase Agreement")
with Xxxxx Xxxxxxxx Restaurants, Inc. ("Xxxxx") to purchase (directly or through
affiliates) certain assets of Xxxxx (the "Xxxxx Asset Package"), including all
of Xxxxx' right, title and interest in certain trademarks, copyrights, trade
names and service marks used by Xxxxx as franchisor and by its franchisees of
Big Boy restaurants including but not limited to the trademarks listed on
Schedule I attached (the "Big Boy Rights") and Xxxxx' system of opening and
operating restaurants using the Big Boy Rights (the "Big Boy System");
B. The sale of the Xxxxx Asset Package to LRG (and its affiliates,
including Xxxxxxx) was approved by the United States Bankruptcy Court for the
Eastern District of Michigan, Southern Division (the "Court"). LRG and
affiliates and Xxxxx closed the Xxxxx Purchase Agreement on or about December
28, 2000, to be effective December 21, 2000.
C. Pursuant to that certain Restated and Amended Area Franchise
Agreement between Elias, Frisch's, and other parties dated November 2, 1987, as
amended ("Franchise Agreement"), Frisch's is the exclusive franchisee of the Big
Boy Rights in the states of Kentucky, Indiana and in portions of Ohio and
Tennessee, as more fully described on Exhibit A hereto, ("Frisch's Core
Region"), and is the primary franchisee in Florida, Oklahoma, Texas and portions
of Kansas, as more fully described on Exhibit B hereto (the "Expanded
Territory");
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X. Xxxxxx'x also has certain franchisee rights in North Carolina, South
Carolina, Alabama, Arkansas, Mississippi, Louisiana and Missouri, as more fully
described on Exhibit C hereto which, together with the Expanded Territory, are
hereinafter referred to as the "Reconveyed Territories";
X. Xxxxxx'x, LRE and Xxxxxxx have entered into a certain agreement of
even date herewith for the transfer of ownership of the Big Boy Rights in
Frisch's Core Region to Frisch's and a transfer of ownership of the Big Boy
Rights in the Reconveyed Territories to Xxxxxxx (the "Transfer Agreement") and a
certain agreement of even date herewith for the concurrent use of the Big Boy
Rights (the "Concurrent Use Consent Agreement"), to take effect if and when
Xxxxxxx acquires the Big Boy Rights from Xxxxx. This Agreement, the Transfer
Agreement and the Concurrent Use Consent Agreement are sometimes hereinafter
collectively referred to as the Xxxxxx'x-Xxxxxxx Agreements."
X. Xxxxxx'x and Xxxxxxx recognize that products identified with the Big
Boy Rights have developed a distinctive public image over the years. Frisch's
and Xxxxxxx wish to enter into this Agreement to govern the use of the Big Boy
Rights by Frisch's and Xxxxxxx in their respective areas.
X. Xxxxxx'x has recently opened several "Golden Corral" restaurants.
Frisch's plans to open several more Golden Corral restaurants in the future in
various locations throughout parts of the United States. Although Frisch's has
agreed not to open any competitive family style restaurants in the Reconveyed
Territories for a period of three (3) years from the date hereof (the
"Non-Compete Term"), such agreement does not restrict or otherwise affect
Frisch's rights to open and operate Golden Corral restaurants. Indeed, nothing
in this Agreement shall be deemed to restrict Frisch's from opening and/or
operating Golden Corral restaurants at any time, anywhere.
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AGREEMENT
Therefore, in consideration of the respective promises contained herein
and other good and valuable consideration, Frisch's and Xxxxxxx agree as
follows:
1. USE OF BIG BOY RIGHTS. Frisch's and Xxxxxxx agree that products sold
under the Big Boy trade name and trade marks have a reputation for excellence
and that it is of the utmost importance to both parties that this reputation be
maintained. Frisch's and Xxxxxxx covenant and warrant that they will at all
times: (i) use the Big Boy Rights in a manner which will not materially detract
from the Big Boy reputation; and (ii) in connection with the operation of their
restaurants (including those of subfranchisees): (a) use the Big Boy Rights in a
manner which is substantially consistent with the past uses of the Big Boy
Rights; (b) except as otherwise provided, operate all Big Boy restaurants and
prepare and sell all products sold therein in a manner so as to maintain the
reputation for the distinctive standards, qualities, and attributes of the Big
Boy products and services currently existing; (c) maintain and operate all Big
Boy restaurants in good condition and repair and in a proper and business-like
manner, and use its reasonable efforts to maintain a clean, quiet, and
respectable atmosphere therein; (d) prominently display the "Big Boy" xxxx on
the signs that are located in and upon the land and buildings of each of their
(or their subfranchisee's) Big Boy restaurants where reasonably possible,
provided however, that they shall not be required to display the "Big Boy" xxxx
in a more prominent manner than is consistent with their present practice; and
(e) not permit gambling or other adult themes or activities or adult atmosphere
(such as a "Hooters" type restaurant or staff dress) to take place at any Big
Boy restaurant. Notwithstanding the foregoing, nothing herein shall be deemed
to: (a) require Frisch's or Xxxxxxx to operate in a manner which is dissimilar
to their current Big Boy restaurant operations, or (b) preclude or restrict
Xxxxxxx in the use, promotion and application of the Big Boy Rights (to
restaurant operations or otherwise) that Xxxxxxx determines in its reasonable
business judgement to be in its best interest.
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2. MAINTENANCE OF BIG BOY RIGHTS BY XXXXXXX. Xxxxxxx shall be
responsible for maintaining United States registrations of the existing
trademarks, tradenames, copyrights and service marks that are part of the Big
Boy Rights. Xxxxxxx shall comply with any future laws applicable to such
registrations and the maintenance thereof. Xxxxxxx and Frisch's shall cooperate
with one another in connection with any filings that are required in order to
maintain such registrations and shall execute any documents reasonably necessary
to do so.
3. MAINTENANCE OF BIG BOY RIGHTS BY FRISCH'S. Frisch's shall maintain
Limited Concurrent Use Registrations of the existing trademarks, tradenames,
copyrights and service marks that are part of the Big Boy Rights in Frisch's
Core Region. If Xxxxxxx fails to take any action in a timely manner, which is
necessary for the maintenance of the registrations of the existing trademarks,
tradenames, copyrights, and service marks that are part of the Big Boy Rights,
Frisch's shall have the right to take such action on behalf of Xxxxxxx but at
Frisch's expense.
4. DEFENSE OF BIG BOY RIGHTS BY XXXXXXX. Xxxxxxx shall defend any
challenges to the validity of the Big Boy Rights within the United States (other
than infringement actions) which, if determined adversely, would have a material
adverse effect upon the Big Boy Rights within the Frisch's Core Region and the
operation of Big Boy restaurants in connection therewith within Frisch's Core
Region ("Material Adverse Effect").
5. COSTS OF MAINTAINING AND DEFENDING THE BIG BOY RIGHTS. Xxxxxxx shall
bear 56% of the costs of maintaining and defending the Big Boy Rights as
described in Sections 2 and 4 herein and Frisch's shall bear 44% of such costs.
The foregoing percentages are based upon the number of Big Boy restaurants
currently operated by or through (including franchisees and subfranchisees)
Frisch's (126) and Xxxxxxx (159), respectively. Should the number of Big Boy
restaurants operated by or through Xxxxxxx or Frisch's increase or decrease by
more than five (5) restaurants, the above percentages shall be adjusted
accordingly. For purposes of this section, costs shall include filing fees,
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reasonable fees paid to third parties for preparation of documents for filing,
and reasonable costs and legal fees to defend challenges.
6. THIRD-PARTY INFRINGEMENT. Frisch's and Xxxxxxx shall promptly notify
each other in writing of any infringement of the Big Boy Rights or any act of
unfair competition of which they become aware. Frisch's and Xxxxxxx shall
initiate legal proceedings in their respective names for infringement and/or
acts that occur in their respective territories which could reasonably have a
Material Adverse Effect, shall bear all of the costs of such action and shall be
entitled to retain all damages and other monies recovered as a result of any
such infringement or unfair competition that occurs within their respective
territories, i.e., Frisch's shall bear the cost of prosecuting infringement
actions and shall retain all damages and other monies recovered with respect to
such actions that occur within the Frisch's Core Region; and Xxxxxxx shall bear
the cost of prosecuting infringement actions and shall retain all damages and
monies recovered with respect to acts that occur in all other areas. Frisch's
and Xxxxxxx agree to cooperate with one another in connection with their
respective actions against third-party infringers. If either party fails to
comply with its obligations under this Section after 90 days notice and
opportunity to commence or undertake actions required by this Section, then the
aggrieved party may commence legal action against the third-party infringer in
the territory of the other, at the aggrieved party's sole cost and expense. The
foregoing shall be the sole remedy for a breach of the requirements set forth in
the first three (3) sentences of this Section by either party.
7. NON-COMPETE. Frisch's hereby covenants and agrees not to open,
operate or manage (directly or indirectly) any competitive family style
restaurants in the Reconveyed Territories throughout the Non-Compete Term,
provided however, that nothing herein shall be deemed to restrict Frisch's from
opening, operating or managing Golden Corral restaurants at any time, anywhere.
In consideration for this covenant, at the Closing, Xxxxxxx shall pay Frisch's,
by wire transfer, the sum of Three Hundred Thousand Dollars ($300,000) and shall
deliver to Frisch's its noninterest-bearing promissory note for Five Hundred
Thirty Thousand Dollars ($530,000) payable in four
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equal installments on the first, second, third and fourth anniversary dates of
the Closing (the "Note"). The Note shall bear a default rate of interest of
twelve percent (12%) per annum and all payments shall be accelerated, at
Frisch's option, in the event Xxxxxxx fails to make a payment within 15 business
days of a written notice of a failure to pay. The foregoing Note may, at the
election of any party, be combined with that certain promissory note of even
date in the principal amount of Two Hundred Thousand Dollars ($200,000) to be
executed by LRE in favor of Frisch's pursuant to the Transfer Agreement. In
addition, the combined promissory note shall contain a provision granting
Frisch's an election of remedies whereby, upon default by Xxxxxxx, Frisch's
shall have the option to proceed with collection of the balance due under the
combined promissory note, or demand the return of certain portions of the
Expanded Territories. Notwithstanding Section 10, Arbitration, Xxxxxxx shall be
entitled to enforce its rights under this Section in any court of competent
jurisdiction and shall be entitled to injunctive relief (and money damages) to
enjoin a violation of this Section. Frisch's agrees that all payments pursuant
to the Note shall be subordinate to the loan by Comerica Bank to LRG or its
affiliates in accordance with the terms of the Subordination Agreement by
Xxxxxxx and Frisch's in favor or Comerica Bank.
8. NOTICE OF BREACH. In the event that either party (the "Complaining
Party") determines that the other party (the "Breaching Party") is in breach of
the use restrictions set forth in section 1 above, then the Complaining Party
shall notify the Breaching Party, in writing, of the alleged breach. Such
written notice shall specify the nature of the alleged improper use and shall
provide the alleged Breaching Party with thirty (30) days, or such longer time
as is reasonable, if the breach cannot be reasonably cured within thirty (30)
days, to cure such breach. If the alleged Breaching Party fails to cure such
breach within the period for cure, then the Complaining Party shall be permitted
to proceed with an arbitration of the dispute under the terms and conditions set
forth in Section 8 herein.
9. ASSIGNMENT OF FRANCHISE AGREEMENT. Xxxxxxx hereby assigns and
conveys to Frisch's the Franchise Agreement, as amended, provided however, such
assignment
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shall not diminish, modify, alter, supercede, amend or otherwise affect the
respective rights and obligations of the parties under the Xxxxxx'x-Xxxxxxx
Agreements or otherwise give rise to any rights in Frisch's (in connection with
the Big Boy Rights, Big Boy System, or otherwise) or obligations of Xxxxxxx
which are not specifically set forth in the Xxxxxx'x-Xxxxxxx Agreements. If a
conflict arises between the terms of the Franchise Agreement and the terms of
this Agreement and a Court of competent jurisdiction has not voided or otherwise
obviated this Agreement, then the terms of this Agreement shall control.
10. ARBITRATION. Unless otherwise provided, all disputes arising under,
or relating to the interpretation of, this Agreement, including without
limitation all disputes concerning the use of the Big Boy Rights, shall be
subject to final and binding arbitration in Cincinnati, Ohio, if Xxxxxxx is the
Complaining Party, or in Detroit, Michigan, if Frisch's is the Complaining
Party. The arbitration shall be conducted in accordance with the commercial
rules of the American Arbitration Association ("AAA"). All reasonable costs
incidental to the arbitration process shall be equally shared by Xxxxxxx and
Frisch's; provided, however, that Xxxxxxx and Frisch's shall each bear their own
attorney's fees and costs in connection with the arbitration. Moreover, the
parties agree that arbitration shall not preclude a Court from granting interim
equitable relief while the arbitration is pending. In no event shall the
Complaining Party be entitled to relief which narrows the scope of the rights of
the Breaching Party, under this Agreement, to use the Big Boy Rights.
11. INDEMNIFICATION. Xxxxxxx and Frisch's each hereby agrees to
indemnify, defend and hold the other (and their respective affiliates) harmless,
from and against any and all loss, liability (whether known or unknown, actual
or contingent, legal or equitable, mature or inchoate, howsoever arising),
claim, damage and expense, including, but not limited to, reasonable attorneys'
fees and amounts reasonably expended in settlement of litigation, pending or
threatened, arising out of or relating to any liabilities or obligations
relating to or arising from their (or their respective franchisee's or
subfranchisee's) operation of Big Boy restaurants and/or their use of or
operations in
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connection with the Big Boy Rights, now or in the future. The foregoing
indemnification shall apply solely to liabilities, expenses, damages, or losses
arising from claims asserted by third-parties against either Frisch's or
Xxxxxxx; it shall not provide Frisch's or Xxxxxxx with an independent claim or
cause of action against each other. The parties expressly agree that no
partnership or joint venture is hereby created and that they shall each operate
separate businesses for which the other shall not be liable, directly,
indirectly, vicariously, or otherwise. Neither Xxxxxxx nor Frisch's is required
to take any action or make any claim to any third person as a precondition of
seeking indemnification from the other(s) hereunder. The party seeking
indemnification (the "Claimant") shall promptly give notice to the indemnifying
party or parties of any matter or item which forms a basis for indemnification
hereunder (a "Claim"). The Claimant shall afford the indemnifying party or
parties, or their authorized representatives, the opportunity to defend,
discharge or compromise such Claim and examine the books and records of the
Claimant insofar as they relate to such Claim and to copy or make extracts
therefrom, and will (at the expense of the indemnifying party) provide
reasonable cooperation of itself and its employees and agents with respect to
such Claim. At an indemnifying party's request and expense, the Claimant will
assign any claims or rights which the Claimant may have against any third party
in an action against the third parties, and, at the indemnifying party's
expense, the Claimant will cooperate fully with the indemnifying party in
pursuing any such claim or right. The indemnifying party or parties may, within
ten (10) days after the Claimant has given notice of the Claim, give notice to
the Claimant that the indemnifying party or parties intend to litigate or
otherwise attempt to resolve the claim identified in the Claimant's notice. Upon
such notice from the indemnifying party or parties to the Claimant: (i) the
indemnifying party or parties, or any of them, shall have the right, at their
sole cost and expense and without liability, cost or expense, to Claimant, to
prosecute any such proceeding, defend any such Claim or otherwise attempt to
resolve the Claim (including, but not limited to, settling such claim by paying
all amounts in settlement), and (ii) Claimant shall have the right to
participate at its expense in the defense of any such Claim. The indemnifying
party or parties shall keep the Claimant apprised of all material developments
in connection with any such Claim. Notwithstanding the foregoing, if as a result
of any Claim, a judgment is entered against
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Claimant in a court of competent jurisdiction, or a lien attaches to any
property or asset of Claimant, or any injunction, order or decree is obtained in
any court of competent jurisdiction which materially and adversely affects or
threatens to materially affect the assets, property, business or operations of
Claimant, Claimant may make a demand in writing to the indemnifying party to
satisfy or contest in good faith at such party's cost, the judgment, lien,
injunction, order or decree. If the indemnifying party fails to satisfy or
contest in good faith the judgment, lien, injunction order or decree within ten
(10) days after receipt of said Notice, Claimant will be entitled to discharge,
compromise or settle such Claim in good faith without the consent of the
indemnifying party or parties. In the event Xxxxxxx is entitled to
indemnification hereunder and complies with the obligations set forth above,
Xxxxxxx shall be entitled to offset against amounts owed Frisch's pursuant to
the Note or the promissory note identified in the Transfer Agreement.
12. NOTICES. Any notice to be given hereunder shall be in writing and
shall be sent by certified mail postage prepaid, or by a recognized national
overnight delivery service, to the party to be notified, addressed to such party
at its address appearing herein or such other address as such party, may, by
written notice, have substituted therefore, and the depositing of such a notice
in the mail or with the delivery service, so addressed, shall constitute the
giving thereof.
IF TO FRISCH'S: Xxxxxx'x Restaurants, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attn: Xxxxx X. Xxxxx, President
IF TO XXXXXXX: Xxxxxxx Restaurant Enterprises LLC
0000 Xxxxx
Xxxxxx, XX 00000-0000
Attn: Xxxxxx Xxxxxxx, President
WITH A COPY TO: Xxxxx X. Xxxxxxx, Esq.
Timmis & Xxxxx, LLP
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
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13. EXTENSION/WAIVER. Either party may agree to extend the time for the
performance of any of the obligations or other acts of the other party or waive
compliance with any of the agreements contained herein. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the authorized representative of such
party.
14. ENTIRE AGREEMENT. This Agreement, together with the other
Xxxxxx'x-Xxxxxxx Agreements, set forth the entire integrated understanding and
agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements whether written or verbal. This Agreement may
not be modified, amended or terminated except in writing signed by all of the
parties hereto.
15. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original instrument, but
all such counterparts together shall constitute the same instrument.
16. MICHIGAN LAW GOVERNS. This Agreement is being made in and shall be
governed by and construed and enforced in accordance with the laws of the State
of Michigan without regard to conflict of laws principles. Notwithstanding the
foregoing, the parties hereto agree that both parties have equally participated
in the drafting of this Agreement and that if any term, condition or provision
of this Agreement is deemed or construed to be ambiguous or vague, such
ambiguity or vagueness shall not be construed in favor of or against any party
to this Agreement.
17. SEVERABILITY. Should any terms, provision or clause hereof or of
any other agreement or document which is required by this Agreement, be held to
be invalid, such invalidity shall not affect or render invalid any other
provisions or clauses hereof or thereof the consideration or mutuality of which
can be given effect without such invalid provision, and all of which shall
remain in full force and effect. If any provision of this Agreement is so broad
as to be unenforceable, such provision shall be interpreted to be only so broad
as is enforceable under applicable law.
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18. EXHIBITS. The exhibits referenced in this Agreement and attached
hereto shall be deemed to be a part of this Agreement and are incorporated
herein by this reference.
19. RECITALS. Each of the above-stated Recitals shall be deemed a part
of this Agreement and they are incorporated herein by reference.
20. BINDING EFFECT. This Agreement shall be binding upon the parties,
their successors and assigns.
21. ASSIGNMENT. Each party may assign its interests under this
Agreement provided (i) that any such assignee shall also be the owner of such
party's interests in the Big Boy Rights; and (ii) that the other party to this
Agreement has been given written notice of such assignment.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer on the date first above written.
XXXXXXX RESTAURANT ENTERPRISES LLC
By: /s/Xxxxxx X. Xxxxxxx
-----------------------------------
Title: Chairman
-----------------------------------
XXXXXX'X RESTAURANTS, INC.
By: /s/ Xxxxx X. Xxxxx
-----------------------------------
Title: President
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Schedule 1 (List of trade marks)
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EXHIBIT A
INDIANA
KENTUCKY
OHIO (except for the following counties: Cuyahoga, Lorain, Xxxxxx, Summit,
Portage, Geauga and Lake)
TENNESSEE (except for the following counties: Anderson, Blount, Campbell,
Claiborne, Cocke, Cumberland, Fentress, Grainger, Hamblen, Hancock, Jefferson,
Knox, Louden, Monroe, Morgan, Xxxxx, Xxxxx, Xxxxxx and Union)
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EXHIBIT B
FLORIDA (subject to certain rights granted to Marriott in a certain Agreement
dated February, 1985, between Xxxxxx'x Restaurants, Inc., Kip's Big Boy, Inc.
and Marriott Corporation)
TEXAS (subject to certain rights granted to Marriott in a certain Agreement
dated February, 1985, between Xxxxxx'x Restaurants, Inc., Kip's Big Boy, Inc.
and Marriott Corporation)
OKLAHOMA
KANSAS (Sedgewick and Xxxxxx counties only)
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EXHIBIT C
Frisch's option for additional territory in NORTH CAROLINA, SOUTH CAROLINA,
ALABAMA, ARKANSAS, MISSISSIPPI, LOUISIANA and MISSOURI as set forth in section
21 of a certain Restated and Amended Area Franchise Agreement dated November 2,
1987, by and between Xxxxx Xxxxxxxx Restaurants, Inc., Xxxxxx'x Restaurants,
Inc. and Kip's Big Boy, Inc.
