EVOS RESTAURANT FRANCHISE AGREEMENT DATED DECEMBER 14, 2005
EXHIBIT
10.1
EVOS
RESTAURANT
FRANCHISE AGREEMENT
DATED
DECEMBER 14,
2005
TABLE
OF
CONTENTS
Page
1. INTRODUCTION
1
1.1. The
EVOS®
System 1
1.2. Acknowledgments
1
1.3. Representations
2
1.4. No
Warranties
2
1.5. Business
Organization
3
2. GRANT
AND
TERM
4
2.1. Grant
of
Franchise
4
2.2. The
Term
4
2.3. Trade
Area
4
2.4. Mass
Gathering
Locations 4
2.5. Rights
We
Reserve
5
3. SITE
SELECTION AND
DEVELOPMENT 5
3.1. Site
Selection
5
3.2. Relocation
of the
Site 6
3.3. Lease
of
Site
6
3.4. Ownership
and
Financing 10
4. RESTAURANT
DEVELOPMENT, DÉCOR
AND OPERATING
ASSETS 10
4.1. Restaurant
Development 10
4.2. Décor 12
4.3. Operating
Assets and Restaurant
Materials 12
4.4. Changes
to Approved
Suppliers 12
4.5. Preferred
Vendor
Programs 13
4.6. Music
and Other Audio and Visual
Entertainment. 13
4.7. Restaurant
Opening 14
4.8. Market
Introduction
Program 14
5. FEES 15
5.1. Initial
Franchise
Fee 15
5.2. Royalty 15
5.3. Electronic
Funds
Transfer 15
5.4. Definition
of “Gross
Sales.” 15
5.5. Interest
on Late
Payments 15
5.6. Late
Payment
Penalties 16
5.7. Application
of
Payments 16
5.8. Payment
Offsets 16
6. TRAINING
AND
ASSISTANCE 16
6.1. Initial
Training 16
6.2. Periodic
Training 17
6.3. General
Guidance 17
7. MARKS 18
7.1. Ownership
and Goodwill of
Marks and
Copyrights 18
7.2. Creation
or Commissioning of
Copyrights 18
7.3. Limitations
on Your Use of Marks and
Copyrights 19
7.4. Notification
of Infringements and
Claims 19
7.5. Discontinuance
of Use of
Marks 19
7.6. Indemnification 19
8. CONFIDENTIAL
INFORMATION 20
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8.1. Types
of Confidential
Information 20
8.2. Disclosure
and Limitations on
Use 20
8.3. Confidentiality
Obligations 21
8.4. Exceptions
to
Confidentiality 21
9. EXCLUSIVE
RELATIONSHIP
21
9.1. Competitive
Activities
21
9.2. Competitive
Business
22
9.3. Employee
Retention
22
10. OPERATION
AND SYSTEM
STANDARDS 23
10.1. Operations
Manual
23
10.2. Compliance
with System
Standards 23
10.3. Modification
of System
Standards 25
10.4. Interior
and Exterior
Upkeep 25
10.5. Hours
of
Operation
25
10.6. Accounting,
Computers and
Records 25
10.7. Trade
Accounts and
Taxes 26
10.8. Proprietary
Materials
26
10.9. Approved
Products
26
10.10. Management
26
10.11. Personnel
26
10.12. Other
Services
27
11. ADVERTISING
AND
PROMOTION 27
11.1. Establishment
of System
Fund 27
11.2. Use
of the
Funds
28
11.3. Accounting
for the
Fund
28
11.4. System
Fund
Limitations
28
11.5. Local
Advertising and
Promotion 29
11.6. Co-op
Participation and
Contributions 29
11.7. Websites
29
11.8. Promotion
of the Franchise
System 30
12.
RECORDS, REPORTS
AND FINANCIAL
STATEMENTS 30
12.1. Accounting
System
30
12.2. Reports
30
12.3. Access
to
Information
31
13. INSPECTIONS
AND
AUDITS
31
13.1. Our
Right to Inspect the
Restaurant 31
13.2. Our
Right to
Audit
32
14.
TRANSFER
32
14.1. By
Us
32
14.2. By
You
32
14.3. Conditions
for Approval of
Transfer 33
14.4. Transfer
to a Business
Entity 34
14.5. Transfer
Upon Death or
Disability 34
14.6. Operation
Upon Death or
Disability 35
14.7. Effect
of Consent to
Transfer 35
14.8. Our
Right of First
Refusal 35
15. SUCCESSOR
TERMS
36
15.1. Acquisition
36
15.2. Grant
37
15.3. Agreements/Releases
37
15.4. Training
and Refresher
Programs 38
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15.6. Subsequent
Successor
Franchises 38
16. TERMINATION
OF
AGREEMENT
38
16.1. Termination
of
Service
38
16.2. On
Notice
38
16.3. After
Notice
40
17. RIGHTS
AND OBLIGATIONS UPON
TERMINATION 41
17.1. Payment
of Amounts Owed To
Us 41
17.2. Marks
41
17.3. Confidential
Information
42
17.4. Competitive
Restrictions
42
17.5. Our
Right to
Purchase 42
17.6. Continuing
Obligations
44
17.7. Buyout
Option
44
18.
RELATIONSHIP
OF
THE
PARTIES/INDEMNIFICATION 45
18.1. Independent
Contractors
45
18.2. No
Liability for Acts of Other
Party 45
18.3. Taxes
46
18.4. Indemnification
46
19. ENFORCEMENT
46
19.1. Severability;
Substitution of Valid
Provisions 46
19.2. Waivers
46
19.3. Limitation
of
Liability
47
19.4. Approval
and
Consents
47
19.5. Waiver
of Punitive
Damages
47
19.6. Limitations
of
Claims
47
19.7. Governing
Law
47
19.8. Jurisdiction
48
19.9. Waiver
of Jury
Trial
48
19.10. Cumulative
Remedies
48
19.11. Costs
and Attorneys
Fees
48
19.12. Binding
Effect
48
19.13. Entire
Agreement
48
19.14. No
Liability to Others; No Other
Beneficiaries
48
19.15. Construction
48
19.16. Certain
Definitions
49
19.17. Timing
is of the
Essence
49
20. DISPUTE
RESOLUTION
49
20.1. Mediation
49
20.2. Agreement
to
Arbitrate
49
20.3. Place
and
Procedure
50
20.4. Awards
and
Decisions
50
20.5. Specific
Performance
50
20.6. Third
Parties
50
20.7. Survival
50
21. NOTICES
AND
PAYMENTS
51
EXHIBITS
EXHIBIT
A GLOSSARY
EXHIBIT
B TRAINING
PROGRAM WAIVER AND RELEASE
EXHIBIT
C OTHER
SERVICES
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EVOS®
RESTAURANT
THIS
FRANCHISE AGREEMENT (this “Agreement”) is effective as
of December 14th, 2005 (the
“Agreement Date”). The parties to this Agreement are
EVOS USA, INC., a Florida corporation, with its principal
business address at 600 Xxxxx Xxxxxx Xxx., Xxxxx, Xx. 00000 (referred to in
this
Agreement as “we,” “us” or
“our”), and HEALTHY FAST
FOOD, INC., whose
principal business address is 1000 Xxxxxxxx Xxxxxxx - Xxxxx X, Xxxxxxxxx,
XX 00000 (referred to in this Agreement as “you,”
“your” or “Franchise Owner”).
1. INTRODUCTION. Various
terms are defined in context throughout this Agreement, and a glossary is
attached as Exhibit “A” for convenience.
1.1. The
EVOS® System. We
and
our affiliates have expended considerable time and effort in developing the
EVOS® concept which specializes in serving healthier fast food in a fast-casual
environment (each an “EVOS® Restaurant” or
“Restaurant”). EVOS® Restaurants operate under
the
Marks and Copyrights and under distinctive business formats, employee selection
and training programs, methods, procedures, designs, layouts, signs, equipment,
menus, use of certain soy-based products, recipes, trade dress, standards and
specifications, all of which we may improve, further develop, change or replace
or otherwise modify from time to time (the
“System”). We commission, use, promote and license
in the operation of an EVOS® Restaurant certain trademarks, service marks and
other commercial symbols, including the trade and service xxxx
“EVOS®” and other associated logos, copyrighted works, designs,
Art, trade dress, trademarks, service marks, commercial symbols, and e-names,
which will gain or have gained and continue to gain public acceptance and
goodwill, and may create, commission, use and license additional trademarks,
service marks, e-names, copyrighted works, Art and commercial symbols in
conjunction with the operation of EVOS® Restaurants (collectively, the
“Marks”). We grant to persons who meet our
qualifications and are willing to undertake the investment and effort, a
Franchise to own and operate an EVOS® Restaurant offering the products and
services we authorize and approve and utilizing the Marks and the
System. You have applied for a Franchise to own and operate an EVOS®
Restaurant.
1.2. Acknowledgments. You
acknowledge and agree that:
(a) you
have read this
Agreement and our Franchise Offering Circular;
(b) you
understand and
accept the terms, conditions and covenants contained in this Agreement as being
reasonably necessary to maintain our high standards of quality and service
and
the uniformity of those standards at each EVOS® Restaurant and to protect and
preserve the goodwill of the Marks;
(c) you
have conducted
an independent investigation of the business venture contemplated by this
Agreement and recognize that, like any other business, the nature of the
business conducted by an EVOS® Restaurant may evolve and change over
time;
(d) an
investment in an
EVOS® Restaurant involves business risks;
(e) your
business
abilities and efforts are vital to the success of the venture and the success
or
failure of your Restaurant is predominately based on your skills in operating
and managing it;
1
(f) any
information you
acquire from other EVOS® Restaurant franchise owners relating to their sales,
profits or cash flows does not constitute information obtained from us, nor
do
we make any representation as to the accuracy of any such
information;
(g) in
all of their
dealings with you, our officers, directors, employees and agents act only in
a
representative, and not in an individual, capacity. All business
dealings between you and such persons as a result of this Agreement are solely
between you and us; and
(h) we
have advised you
to have this Agreement reviewed and explained to you by an
attorney.
1.3. Representations. As
an
inducement to our entry into this Agreement, you represent and warrant to us
that:
(a) all
statements you
have made and all materials you have submitted to us in connection with your
purchase of the franchise are accurate and complete and that you have made
no
misrepresentations or material omissions in obtaining the
franchise;
(b) you
will at all
times faithfully, honestly and diligently perform your obligations, continuously
exert your best efforts to promote and enhance the Restaurant and not engage
in
any other business or activity that conflicts with your obligations to operate
the Restaurant in compliance with this Agreement;
(c) you
will comply
with and/or assist us to the fullest extent possible in our efforts to comply
with Executive Order 13224 issued by the President of the United States, the
USA
PATRIOT Act, and all other present and future federal, state and local laws,
ordinances, regulations, policies, lists and any other requirements of any
governmental authority addressing or in any way relating to terrorist acts
and
acts of war (the “Anti-Terrorism
Laws”); and
(d) neither
you nor any
of your owners, employees, or agents, property or interests are subject to
being
“blocked” under any of the Anti-Terrorism Laws and that neither you nor they are
otherwise in violation of any of the Anti-Terrorism Laws.
Our
approval of
your request to purchase a franchise is made in reliance on all of your
representations and warranties. Any violation of these
representations or warranties, or any Anti-Terrorism Laws by you or your owners,
or your or your owners’ agents or employees, or any “blocking” of your or their
assets under the Anti-Terrorism Laws, will constitute grounds for immediate
termination of this Agreement and any other agreements you have entered into
with us or any of our affiliates.
1.4. No
Warranties. We
expressly disclaim the making of, and you acknowledge that you have not received
or relied upon, any warranty or guaranty, express or implied, as to the
revenues, sales, profits or success of the business venture contemplated by
this
Agreement or the extent to which we will continue to develop and expand the
network of EVOS® Restaurants. You acknowledge and understand the
following:
(a) any
statement
regarding the potential or probable revenues, sales or profits of the business
venture, or of any services, benefits or commitments we are to make available
to
you, are made solely in the Franchise Offering Circular delivered to you prior
to signing this Agreement;
2
(b) any
statement
regarding the potential or probable revenues, sales or profits of the business
venture or statistical information regarding any existing EVOS® Restaurant owned
by us or our affiliates or that is not contained in our Franchise Offering
Circular is unauthorized, unwarranted and unreliable and should be reported
to
us immediately; and
(c) you
have not
received or relied on any representations about us or our franchising program
or
policies made by us, or our officers, directors, employees or agents, that
are
contrary to the statements made in our Franchise Offering Circular or to the
terms of this Agreement. If there are any exceptions to any of the
foregoing, you must: (i) immediately notify our President or such other officer
as we may designate in written notice to you; and (ii) note such exceptions
by
attaching a statement of exceptions to this Agreement prior to signing
it.
1.5. Business
Organization. If
you are at any time a business organization (“Business Entity”)
(like a corporation, limited liability company or partnership) you agree and
represent that:
(a) you
have the
authority to execute, deliver and perform your obligations under this Agreement
and are duly organized or formed and validly existing in good standing under
the
laws of the state of your incorporation or formation;
(b) your
organizational
or governing documents will recite that the issuance and transfer of any
ownership interests in you are restricted by the terms of this Agreement, and
all certificates and other documents representing ownership interests in you
will bear a legend referring to the restrictions of this Agreement;
(c) the
Principal
Owners Statement will completely and accurately describe all of your owners
and
their interests in you. A copy of our current form of Principal
Owners Statement is attached to the Uniform Franchise Offering
Circular;
(d) you
and your owners
agree to revise the Principal Owners Statement as may be necessary to reflect
any ownership changes and to furnish such other information about your
organization or formation as we may request (no ownership changes may be made
without our approval);
(e) each
of your owners
during the Term will sign and deliver to us our standard form of Principal
Owner’s Guaranty undertaking to be bound jointly and severally by all provisions
of this Agreement and any other agreements between you and us. A copy
of our current form of Principal Owners Guaranty is attached to the Uniform
Franchise Offering Circular; and
(f) at
our request, you
will furnish true and correct copies of all documents and contracts governing
the rights, obligations and powers of your owners and agents (like articles
of
incorporation or organization and partnership, operating or shareholder
agreements).
3
2.
GRANT AND TERM
2.1. Grant
of Franchise. You
have applied for a franchise to own and operate an EVOS® Restaurant only at a
location we have approved (the “Site”). Subject to
the terms of and upon the conditions contained in this Agreement, we grant
you a
franchise (the “Franchise”) to: (a) operate an EVOS®
Restaurant at the Site, and at no other location; (b) use
the Marks and
Copyrights in connection with operating the Restaurant; and (c) use the
System in its operation.
2.2. The
Term. The
term of the Franchise and this Agreement (the “Term”) begins on
the Agreement Date and expires 10 years from the date your Restaurant opens
for
business (the “Opening Date”). This Agreement may be
terminated before it expires.
2.3. Trade
Area. We
grant you the right to an exclusive territory referred to as the Trade
Area. The “Trade Area” of your EVOS® Restaurant
consists of the Site and the geographic area surrounding it indicated, or to
be
indicated on Exhibit C. We may vary the size of Trade Areas to be
granted to EVOSÒ Restaurants
in our
sole judgment, based on the circumstance and our judgment. Other than
MGL Sites, we will not approve a Site within the Trade Area of any other EVOS®
Restaurant, whether it is franchised or owned by us. Other than MGL
Sites, as long as you are in compliance with this Agreement, we will not grant
a
franchise for, nor ourselves operate, an EVOS® Restaurant within your Trade
Area. Any MGL Site granted to others will not be deemed to be within
your Trade Area.
2.4. Mass
Gathering Locations. “Mass
Gathering Locations” are places where large numbers of individuals
congregate for various reasons, often due to transit, such as airports, cruise
ship terminals, train stations, subway stations and the like, or for shopping
purposes such as indoor and outdoor malls, outlet centers, town centers, and
the
like, or for purposes of entertainment like stadiums, amphitheaters, amusement
parks, theme parks, boardwalks, private and governmental parks, historic sites,
and the like. If we determine that we want to develop and operate or
grant the rights to an affiliate or other third party to develop and operate,
an
EVOS® Restaurant, or other kiosk or other limited services facility
(collectively, a “MGLSite”) at a Mass
Gathering Location within your Trade Area, we will first notify you of such
intent and provide you a right of first refusal to enter into a Franchise
Agreement with us for such MGL Site. In order to exercise your option
to obtain a Franchise to operate the MGL Site you must, within 30 days of the
date we notify you of our intent to establish such MGL Site, comply with all
of
the following:
(a) enter
into our then
current form of EVOS® Franchise Agreement for the MGL, which may contain terms
and conditions different from the form of Franchise Agreement that we offer
to
EVOS® Restaurants that are not designated as MGL Sites;
(b) pay
to us our then
current Franchise Fee for the MGL Site;
(c) qualify
under our
then current Standards and Specifications for MGL Site franchise owners as
meeting our qualifications to operate MGL Sites, which qualifications may differ
from those of EVOS® Restaurant franchise owners who operate non-MGL Site EVOS®
Restaurants; and
(d) be
in full
compliance with this Agreement and all other agreements between you and us,
and
our affiliates.
4
We
may offer you
the opportunity to, instead of executing our then current form of Franchise
Agreement for such MGL Site, operate such MGL Site under this
Agreement. If we do so, you must enter into an addendum to this
Agreement indicating such, and thereafter your operation of the MGL Site will
be
deemed the same as, and will be treated the same as, the operation of your
Restaurant.
2.5. Rights
We Reserve. We
(and our affiliates) retain the right in our sole discretion to ourselves or
grant others the right:
(a) to
solicit
prospective Franchise owners and grant other persons Franchises, or other rights
to operate EVOS® Restaurants: through national or regional advertising,
trade shows or conventions, or using or through the Internet, Intranet or other
forms of e-commerce or through similar means;
(b) to
own and operate
EVOS® Restaurants ourselves or through affiliates anywhere, except your Trade
Area;
(c) sell,
solicit,
recruit and provide services for EVOS® Restaurants or any franchised business
not defined as an EVOS® Restaurant in this Agreement;
(d) to
sell, and
provide the services authorized for sale by, EVOS® Restaurants under the Marks
or other trade names, trademarks, service marks and commercial symbols
through similar or dissimilar channels (like telephone, mail order, kiosk,
co-branded sites, at “Mass Gathering Locations,” grocery stores, and sites
located within other retail businesses, stadiums, Intranet, Internet, websites,
wireless, email or other forms of e-commerce) for distribution within and
outside of your Trade Area and pursuant to such terms and conditions as we
consider appropriate; and
(e) to
solicit
prospective franchise owners for, and own and operate, businesses and
restaurants of any other kind or nature, anywhere.
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3.
|
SITE
SELECTION AND
DEVELOPMENT.
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3.1. Site
Selection. Within
180 days after signing this Agreement, you (with or without our assistance)
must
locate a Site that we (in our sole judgment) have approved and signed a lease
that we have indicated is acceptable to us. If you and we have agreed
on a Site and Trade Area as of the date you sign this Agreement, it will be
designated on Exhibit C at this time. Otherwise, they will
be designated on Exhibit C upon our approval of the Site and Trade
Area. The Site must meet our criteria for the location of a
Restaurant (which may or may not include demographic characteristics, traffic
patterns, parking, character of neighborhood, competition from and proximity
to
other businesses and other EVOS® Restaurants, the nature of other businesses in
proximity to the Site and other commercial characteristics and the size,
appearance and other physical characteristics of the proposed Site, and any
other factors or characteristics we consider appropriate). Our
criteria, and our evaluation of them, may vary periodically and from location
to
location. If you and we are unable to agree on a location for the Site, or
you
have not obtained a fully signed lease agreement for the Site, within 180 days
of the Agreement Date, we may terminate this Agreement. We will
approve or disapprove a Site you propose for a Restaurant within 30 days after
we receive from you a complete Site report and any other materials we
request. As part of our approval process, you must conduct and
provide to us a site selection analysis performed by us or our
designee. The fee for one such site selection analysis is included
with your Franchise Fee. For the
5
second
and each subsequent site selection analysis, if requested by you or if deemed
necessary and required by us, you must pay to us or our designee our then
current site selection fee. If you have not heard from us within such
30-day period, the Site is deemed disapproved. No Site or Trade Area
will be deemed approved by us until we provide to you Exhibit C with that
Site
and Trade Area designated in it and Exhibit C is signed by both you and
us. You acknowledge and agree that:
(a) our
recommendation
or approval of the Site, and any information regarding the Site communicated
to
you, do not constitute a representation or warranty of any kind, express or
implied, as to the suitability of the Site for an EVOS® Restaurant or for any
other purpose;
(b) our
recommendation
or approval of the Site indicates only that we believe that the Site falls
within the acceptable criteria for Sites and premises that we have established
as of the time of our recommendation or approval of the Site;
(c) application
of
criteria that have appeared effective with respect to other sites and premises
may not accurately reflect the potential for all Sites and premises, and, after
our approval of a Site, demographic and/or other factors included in or excluded
from our criteria could change to alter the potential of a Site and premises;
and
(d) the
uncertainty and
instability of such criteria are beyond our control, and we will not be
responsible for the failure of a Site and premises we have recommended or
approved to meet expectations as to potential revenue or operational
criteria.
3.2. Relocation
of the Site. You
may not operate the Restaurant from any location other than the Site without
our
prior written consent. If we consent to the Restaurant’s relocation,
we have the right to charge you for the expenses we incur in connection with
the
relocation and to require you to conduct a site selection analysis. Our or
our
designee’s current fee for such site selection analysis will be included among
our expenses incurred in your relocation. If the lease expires or
terminates without expiration or termination being your fault, if the Site
is
destroyed, condemned or otherwise rendered unusable as an EVOS® Restaurant in
accordance with this Agreement, or if in our sole judgment, there is a change
in
character of the location of the Site sufficiently detrimental to its business
potential to warrant your Restaurant’s relocation, we will permit you to
relocate the Restaurant to another location within the Trade Area provided
that
you comply with all of our System Standards for a Site relocation and such
relocation Site meets our then current Site criteria for relocation
Sites. Any relocation of the Site will be at your sole
expense. If you seek to obtain our approval of the replacement Site
and lease in accordance with our then current Site approval process, you must
reopen the Restaurant at the replacement Site as soon as practicable, but in
no
event more than 90 days after the closing of the original Site. You
are not permitted to relocate the Restaurant except pursuant to this
section. In addition for each day that the EVOS® Restaurant is closed
pending relocation pursuant to this section, you must pay to us an amount equal
to: (1) the aggregate of all Royalties paid by you during the 12
month period immediately preceding the Restaurant’s closure divided by 365, if
the Restaurant has been operating continuously throughout such 12 month period;
or (2) the aggregate of all Royalties paid by you during the 12 month period
that the EVOS® Restaurant was operating continuously, if less than 12 months,
divided by the number of days in such period. You must make such
payments to us during such period on a weekly basis.
6
3.3. Lease
of
Site.
(a) Lease
of Site: You
must deliver copies of the proposed lease agreement and related documents to
us
prior to signing them. You must not sign any lease agreement or
related documents unless we have previously approved them. The
insurance policy required by our System Standards must be in force and effect
when the lease is signed. Additionally, before entering into such a
lease, you and the lessor must sign our then-current form of Collateral
Assignment and Assumption of Lease (the “Lease
Assignment”). You must give the lessor our forms of the
Lease Assignment when you begin discussions with the prospective
lessor. If you want to lease the Site from any of your affiliates (or
affiliates of your principal owners), we may also require them to sign such
agreements to ensure compliance with the provisions of this
Agreement.
(b) Lease
Approval: You
must obtain our approval of the lease of the Site (the “Lease”)
before you sign it, or any renewal of it. You must deliver a copy of
the signed lease to us within 5 days after its execution along with the Lease
Assignment. You must not sign any lease or renewal of a lease unless
you have also obtained the Lease Assignment signed by the lessor. Our
review and approval of the Lease is solely to ensure that the Lease contains
terms that we accept or require for our benefit and the franchise System; it
is
not a substitute for careful review and analysis by you and your
advisors. Our approval of the Lease does not constitute warranty or
any assurance that the Lease contains terms and conditions for your
benefit. You agree and acknowledge that you are solely responsible
for negotiating the Lease and ensuring that its terms and conditions meet your
interests and objectives.
(c) Mandatory
Lease Terms: We
may
require that the lease or any renewal contain certain provisions
that:
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(i)
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expressly
permits the lessor of the Site to provide us with all revenue and
other
information it may have related to the operation of your EVOS® Restaurant
as we may request;
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(ii)
|
requires
the
lessor to contemporaneously provide us with copies of any written
notice
of default under the lease sent to you and which grants to us, at
our
option, the right (but not the obligation) to cure any default under
the
lease (should you fail to do so) within 15 days after the expiration
of
the period in which you may cure the
default;
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(iii)
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in
the event
of your default of the lease or the Franchise Agreement, and upon
written
notice from us (the “Assignment Notice”)
the lease will, at our option, be assigned to us, we will become
the
lessee, we will be liable for all obligations under the lease accruing
once we take possession, and the landlord will recognize us as the
lessee
as of the date of the Assignment
Notice.
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(iv)
|
authorizes
your right to display the Marks in accordance with the specifications
required by the Manuals, subject only to the provisions of applicable
law;
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(v)
|
requires
that
any lender or other person will not disturb your possession of the
Site so
long as the lease term continues and you are not in default (along
with
such documents as are necessary to ensure that such lenders and other
persons are bound);
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(vi)
|
expressly
states that any default under the lease which is not cured within
any
applicable cure period also constitutes grounds for termination of
this
Agreement;
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7
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(vii)
|
a
lease term
which is at least equal to the Term, either through an initial term
of
that length or rights, at your option, to renew the lease for the
Term;
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|
(viii)
|
the
lease
cannot be modified or canceled with our prior written approval;
and
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|
(ix)
|
we
will be
permitted unrestricted access to the Site to inspect the Art and
remove
any of the Art at any time.
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(d) Copies
of Reports: You
must also send us copies of any sales or other reports sent to any
landlord.
(e) Indemnification: You
agree to indemnify and hold us and our affiliates, stockholders, directors,
officers and representatives harmless from and against any and all losses,
liabilities, claims, proceedings, demands, damages, judgments, injuries,
attorneys’ fees, costs and expenses, that they incur resulting from any claim
brought against any of them or any action which any of them are named as a
party
or which any of them may suffer, sustain or incur by reason of, or arising
out
of, your breach of any of the terms of the Lease, including the failure to
pay
rent or any other terms and conditions of the Lease.
(f) Security
Interest: You
grant to us a security interest in and to all of the furniture, fixtures,
inventory and supplies located in the Restaurant, the franchise and all of
your rights, title and interest in and to the Lease, as collateral for the
payment of any obligation, liability or other amount you or your affiliates
owe
to us under this Agreement. If you breach or default under the Lease,
or if we pay the Lessor any money as a result of your breach of the Lease,
then
you will be in breach of this Agreement, or if you are otherwise in breach
of
this Agreement, then we will be entitled to possession of the Site and to all
of
your rights, title and interest in the Lease, without limitation on any other
remedies available to us under this Agreement, at law or in equity, or under
any
other agreements between you and us. This Agreement constitutes a
lien on your interest in the Lease until satisfaction in full of all amounts
you
owe us. In addition, our rights to assume all obligations under the
Lease are totally optional on our part, to be exercised in our sole
discretion. You agree to sign any and all Uniform Commercial Code
financing statements and all other documents and instruments we deem necessary
to perfect or document the interests and assignments granted in this
Agreement.
(g) No
Subordination: You
will not permit the Lease to become subordinate to any lien without first
obtaining our written consent, other than the lien created by this Agreement,
the Lessor’s lien under the Lease, liens securing bank financing for your
operations on the Site and the agreements and other instruments referenced
in
this Agreement. You will not terminate, modify or amend any of the
provisions or terms of the Lease without our prior written
consent. Any attempt at termination, modification or amendment of any
of the terms without such written consent is null and void.
8
(h) Exercise
of Remedies: In
any
case of your default under the terms of the Lease or under this Agreement,
we
are entitled to exercise any one or more of the following remedies in our sole
discretion:
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(i)
|
to
take
possession of the Site, or any part thereof, personally, or by our
agents
or attorneys;
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|
(ii)
|
to,
in our
discretion, without notice and with or without process of law, enter
upon
and take and maintain possession of all or any part of the Site,
together
with all furniture, fixtures, inventory, books, records, papers and
accounts of the Franchise Owner;
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(iii)
|
to
exclude
you, your agents or employees from the
Site;
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(iv)
|
as
attorney-in-fact for you, or in our own name, and under the powers
herein
granted, to hold, operate, manage and control the Restaurant and
conduct
the business, if any, thereof, either personally or by its agents,
with full power to use such measures, legally rectifiable, as in
its
discretion may be deemed proper or necessary to cure such default,
including actions of forcible entry or detainer and actions in distress
of
rent, granting full power and authority to us to exercise each and
every
of the rights, privileges and powers herein granted at any and all
times
hereafter;
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(v)
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to
cancel or
terminate any unauthorized agreements or subleases entered into by
you,
for any cause or ground which would entitle us to cancel the
same;
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(vi)
|
to
disaffirm
any unauthorized agreement, sublease or subordinated lien, to make
all
necessary or proper repairs, decorating, renewals, replacements,
alterations, additions, betterments and improvements to the Site
or the
Site that may seem judicious, in our sole
judgment;
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(vii)
|
at
our
option, with or without prior notice to you, enter the Site and remove
the
Art and any other signage bearing our Marks, copyrighted materials
or
trade dress, at your expense;
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(viii)
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to
insure and
reinsure the same for all risks incidental to our possession, operation
and management thereof; and/or
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(ix)
|
notwithstanding
any provision of this Agreement, to declare all of your rights, but
not
obligations under the Agreement, to be immediately terminated as
of the
date of your default under the
lease.
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9
(i) Power
of Attorney: You
irrevocably appoint us as your true and lawful attorney-in-fact in your name
and
xxxxx and authorize us, upon any default under the Lease or under this
Agreement, with or without taking possession of the Site, to rent or lease
the
Site to any person, firm or corporation upon such terms and conditions as,
in
our discretion, we may determine, and with the same rights and powers and
immunities, exoneration of liability and rights of recourse and indemnity
as we would have upon taking possession of the Site pursuant to the provisions
set forth in the Lease. The power of attorney conferred upon us
pursuant to this Agreement is a power coupled with an interest and cannot be
revoked, modified or altered without the written consent of the
Franchisor.
(j) No
Warranty: You
acknowledge that our approval of the Site and the Lease does not constitute
a
guarantee or warranty, express or implied, of the successful operation or
profitability of an EVOS® Restaurant operated at the Site. Such
approval indicates only that we believe that the Site and the terms of the
Lease
fall within the acceptable criteria we have established as of the time of our
approval. You further acknowledge that we have advised you to have an
attorney review and evaluate the Lease.
3.4. Ownership
and Financing. Instead
of leasing a Site, you may propose to purchase and own any or all of a Site
directly, or through affiliates. The insurance required by this
Agreement and our System Standards must be in force and effect when you begin
construction of your Restaurant. If at any time prior to acquisition,
or subsequently, you or your affiliates propose to obtain any financing with
respect to the Site or for your Restaurant or for any Operating Assets in which
any of such items are pledged as collateral securing your performance, the
form
of any purchase contract with the seller of a Site and any related documents,
and the form of any loan agreement with or mortgage in favor of any lender
and
any related documents, must be approved by us before you sign
them. Our consent to them may be conditioned upon the inclusion of
various terms and conditions, including the following:
(a) a
provision which
requires any lender or mortgagee concurrently to provide us with a copy of
any
written notice of deficiency or default under the terms of the loan or mortgage
sent to you or your affiliates or the purchaser;
(b) a
provision
granting us, at our option, the right (but not the obligation) to cure any
deficiency or default under the loan or mortgage (should you fail to do so)
within 15 days after the expiration of a period in which you may cure such
default or deficiency; and
(c) a
provision which
expressly states that any default under the loan or mortgage, if not cured
within the applicable time period, constitutes grounds for termination of this
Agreement and any default under this Agreement, if not cured.
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4.
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RESTAURANT
DEVELOPMENT, DÉCOR AND OPERATING
ASSETS.
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4.1. Restaurant
Development. You
are responsible for developing the Restaurant. We will, to the extent
we deem necessary or appropriate, furnish you with mandatory and suggested
specifications and layouts for an EVOS® Restaurant, including requirements for
dimensions, design, color scheme, image, interior layout, décor, and Operating
Assets which include fixtures, equipment, signs, and
furnishings. Following our approval of the Site and its Lease, unless
your Restaurant is an existing operating EVOS® Restaurant at the Site being
purchased by you from another franchise owner, we will furnish to you one or
more sets of design plans for
10
EVOS®
Restaurants developed by us or our affiliates
(“Designs”). These sample designs are merely to
provide guidance on the design and layout of other EVOS®
Restaurants. We make no representation or warranty concerning the
suitability of the sample Designs for your Site. Unless your EVOS®
Restaurant is an operating EVOS® Restaurant at the Site being purchased by you
from another franchise owner, we will also furnish to you our System Standards
with respect to trade dress and other matters of development of the Site
which,
you agree are an integral part of the System and you agree that you will
design
and construct the EVOS® Restaurant in accordance with them. You are
obligated at your expense to have an architect prepare preliminary layout
for
the EVOS® Restaurant and all required construction plans, space plans, and
specifications to suit the shape and dimensions of the Site
(“Construction Plans”) and to ensure that such Construction
Plans and specifications comply with applicable ordinances, building codes
and
permit requirements and with lease requirements and restrictions, and the
mandatory specifications and layout provided by us. You must make
changes to the Construction Plans that we specify from time to time during
the
development of the Restaurant and must not begin construction, remodeling
or
other development of the Restaurant until we have approved the Construction
Plans. You must make no changes to the approved Construction Plans
unless such changes are presented to and approved by us in
writing. Despite our providing the sample Designs (and Construction
Plans, if any), any changes and approval that we might provide for them,
and
your purchase of the Restaurant and its assets from an affiliate of ours
or our
franchise owner, where we have approved such transfer (if applicable), as
between you and us, and our affiliates or other franchise owners, you are
solely
responsible for complying with all laws, ordinances, rules and regulations
relating directly or indirectly to the construction and development of the
EVOS®
Restaurant, including the Americans With Disabilities Act and any other laws,
rules or regulations regarding public accommodations for persons with
disabilities. You are solely responsible, as between us (and our
affiliates or other franchise owners) and you, for any and all claims,
liabilities, costs and images relating to non-compliance or alleged
non-compliance with any such laws, rules, ordinances or regulations, and
you
must remedy, at your expense, any such non-compliance or alleged
non-compliance. You agree to, at our option, assign to us, or require
your architect to assign to us, the plans, drawings or Designs, used by you
in
connection with the Restaurant, or at our option, obtain the architect’s
agreement to license to us such plans, drawings or Designs for use in connection
with the EVOS® Restaurants. You will not hire, engage or use any
construction firm, contractor or architect that we
disapprove.
Without
limiting your foregoing obligations,
you agree, at your own expense, to do the following with respect to developing
the Restaurant at the Site:
(a) secure
and provide
us proof of your securing all financing required to develop and operate the
Restaurant;
(b) obtain
all
building, utility, sign, health, sanitation, business and other permits and
licenses required to construct and operate the Restaurant;
(c) construct
all
required improvements to the Site and decorate the Restaurant in compliance
with
Construction Plans and specifications we have approved (the
“Construction”);
(d) you
must give us
notice of commencement of the Construction within 10 days of the date it began,
with progress reports including digital photographs of the construction
supporting the findings at least every 2 weeks; thereafter. We will,
at your expense, require that additional digital photographs be provided to
us;
11
(e) the
Construction
must be completed within the earlier of 180 days of our approval of the Site
(unless we agree otherwise) or 9 months of the Agreement Date;
(f) sign
a lease or
otherwise obtain the right to occupy the Site within 180 days of the Agreement
date;
(g) purchase
or lease
and install all Operating Assets required for the Restaurant;
(h) purchase
an opening
inventory of authorized and approved products, materials and supplies;
and
(i) purchase
from us
(or our designees) the paintings, pictures, photographs, murals, drawings,
sculptures and other forms of art we designate, for display at your Site and
install it at the Restaurant in accordance with our specifications at your
expense.
4.2. Décor. You
agree that all décor of your Restaurant must be previously approved by us and
must comply with our standards as described in the Manuals or other
communications, which may be periodically revised. We own all
copyrights in and to all forms of art or other visual media displayed in the
Restaurant including murals, paintings, pictures, drawings, sculptures, and
photographs that we direct you to display (including any artwork commissioned
for the Restaurant) (the “Art”), as well as all intellectual
property rights in and to the Art. You will not, without our prior written
permission, allow any of the Art to become a fixture to the Restaurant and
you
will not display or use the Art in any Competitive Business or restaurant of
any
kind. Your failure to maintain the Restaurant’s décor in compliance
with our System and the standards described in the Manuals or otherwise
constitutes a material breach of this Agreement.
4.3. Operating
Assets and Restaurant Materials. You
must acquire all supplies, materials, food and beverage products and magazines,
reading materials and the like for use in connection with your EVOS® Restaurant
(collectively, the “Restaurant Materials”) and all fixtures,
furnishings, equipment signs, Art and cash registers, telecopiers and computer
hardware and software (the “Operating Assets”) from us (or our
affiliates) or suppliers we have previously approved. We will only
approve suppliers whose Restaurant Materials and Operating Assets meet the
quality standards that we establish from time to time. You will only
place or display at the Site (interior and exterior) such signs, emblems,
lettering, logos and display materials that we periodically
approve.
4.4. Changes
to Approved Suppliers. If
you
want to propose a new supplier of Restaurant Materials or Operating Assets,
you
must submit to us sufficient written information about the proposed new supplier
to enable us to approve or reject either the supplier or the particular
items. If we have not responded within 30 days of our receipt of the
information, then the application will be deemed rejected by us. We
may consider in providing such approval not just the quality standards of the
products or services, but their delivery capabilities, financing terms and
ability to service our franchise System as a whole. We may terminate
or withhold approval of any Restaurant Materials or Operating Assets, or any
supplier of such items, that does not meet our quality standards by giving
you
written notice. If we do so, you must immediately stop purchasing
from such supplier or using such Restaurant Materials or Operating Assets in
your EVOS® Restaurant until we notify you that such supplier or such Restaurant
Materials or Operating Assets meet our quality standards. At our
request, you must submit to us sufficient information about a proposed supplier
and
12
samples
of the proposed Restaurant Materials or Operating Assets for our examination
so
that we can determine whether they meet our quality standards. We
also must have the right to require our representatives to be permitted to
inspect the proposed supplier’s facilities at your expense. We may
charge a fee for evaluating alternative suppliers of $250 per day for
personnel time plus laboratory fees, professional fees and travel and living
expenses as well as any other fees we pay to third parties in furtherance
of the
evaluation.
4.5. Preferred
Vendor Programs. In
addition to our approval of approved suppliers, we may develop certain programs
and terms under which we, our affiliates, certain franchise owners or others
receive certain negotiated benefits or terms from approved suppliers
(“Preferred Vendor Programs”). You must follow all
of our policies and procedures for participation in or termination of Preferred
Vendor Programs (“Program Rules”). We can refuse or
terminate your participation in Preferred Vendor Programs without terminating
your Franchise Agreement. And, our Program Rules may include all
requirements that you agreed to, and you must agree to, only place or display
at
the Restaurant (interior and exterior) such signs, emblems, lettering, logos
and
display materials that we periodically approve in connection with Preferred
Vendor Programs. We may, in connection with our Preferred Vendor
Programs, designate one or more approved suppliers as an exclusive or the
exclusive supplier or suppliers of types, models or brands of Restaurant
Materials or Operating Assets or other business services that we approve for
EVOS® Restaurants as meeting our specifications and standards in such preferred
vendors or other preferred vendors may be required by us to pay to us, the
System Fund or through our affiliates, in a manner we designate, monies or
provide other benefits as condition of our designation of them as preferred
vendors or permission for them to serve as an approved supplier or preferred
vendor (collectively “Preferred Vendors”). We may
require, and certain approved suppliers we designate as Preferred Vendors may
require, that you agree to enter into certain agreements with them (subject
to
our approval) in connection with our designation of them as Preferred Vendors
or
approved suppliers or your participation in the Preferred Vendor Program
(“Preferred Vendor Agreements”). We may require that
we be a party to such Preferred Vendor Agreements with Preferred
Vendors. You acknowledge and agree that: (a) monies or
other remuneration that we receive in connection with Preferred Vendor Programs
or other benefits we receive from Preferred Vendors or approved suppliers is
fair and appropriate compensation to us in connection with our active efforts
to
evaluate them as Preferred Vendors or approved suppliers, our ongoing efforts
to
monitor and evaluate whether they continue to meet our requirements for
participation as Preferred Vendors or approved suppliers and our administration
of Preferred Vendor Programs; and (b) such monies or remuneration are fully
earned by us; and (c) we are not your agents nor does the development or
implementation of such Preferred Vendor Programs create any fiduciary, vicarious
or agency relationship between you and us. We and our affiliates may retain
all
revenue and other remuneration we receive from approved suppliers or Preferred
Vendors without restriction (unless the supplier or vendor requires
otherwise). We, in our sole judgment, may concentrate purchases with
one or more approved suppliers or Preferred Vendors to obtain lower prices,
advertising support and/or services for the benefit of us, our affiliates and
EVOS® Restaurants, or for any other reason that we deem appropriate, and
establish supply facilities or servicing capabilities owned by us or our
affiliates which we may designate as an approved supplier or Preferred
Vendor. In such instances, we may limit the number of suppliers,
approved suppliers or Preferred Vendors with whom you may deal, designate
sources that you must use, and refuse any request by you for another approved
supplier or Preferred Vendor of any applicable product or service.
4.6. Music
and Other Audio and Visual Entertainment. You
acknowledge and agree that the provision of music and audio and visual
entertainment to patrons of EVOS® Restaurants is an integral part of the
System. Accordingly, you agree to play only the type(s) of music and
display only the types of visual
13
entertainment,
at
the decibel levels and in the manners that we may periodically prescribe
or
approve. You must acquire and install any audio or visual equipment
that we designate or require for use by EVOS® Restaurants and you must subscribe
to music and video services as we may periodically specify, whether as an
approved supplier or Preferred Vendor, to enable you to broadcast videos,
music,
live performance and other content as specified by us from time to
time. You must, to the extent and at the times and manners we
designate, permit live performances of music and other entertainment at your
Restaurant and must obtain our prior written consent prior
to your doing so, in accordance with our System Standards. You must
install such types of reading and other visual material display equipment
and
furniture we designate, and must provide to your customers such fee-for use
and
free use reading and other visual materials we designate or approve (like
magazines, newspapers, books, etc.).
4.7. Restaurant
Opening. You
agree not to open the Restaurant for business until:
(a) we
approve the
Restaurant as developed in accordance with our specifications and
standards;
(b) pre-opening
training has been completed to our satisfaction and you provide us with evidence
you and your management personnel have completed training at authorized
facilities;
(c) the
initial
franchise fee and all other amounts then due to us, your landlord, governmental
authorities and our suppliers have been paid;
(d) you
have obtained
all required building, utility, sign, health, sanitation, business permits,
certificates and licenses required to operate the Restaurant;
(e) we
have been
furnished with copies of all insurance policies required by this Agreement,
or
such other evidence of insurance coverage and payment of premiums as we request
or accept; and
(f) we
have received
signed counterparts of all required documents pertaining to your acquisition
of
the Site (including any required agreements between you and us).
(g) we
have provided
you with written authorization to open the Restaurant for business.
You
agree to open
the Restaurant for business within 9 months following the Agreement Date (unless
we agree otherwise).
4.8. Market
Introduction Program. We
may
require you to conduct a market introduction advertising and promotional program
for the Restaurant prior to and after its opening and to expend not less than
$5,000 for such purpose, exclusive of the cost of food, that we specify for
use
in the market introduction program. The market introduction may be
conducted over an approximate 6-month period which will be determined by
us. Such advertising and promotion will utilize the marketing and
public relations programs and media and advertising materials we have developed
or approved, and is separate from your other marketing and advertising
requirements.
14
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5.
|
FEES.
|
5.1. Initial
Franchise Fee. You
will pay us an initial franchise fee (the “Franchise Fee”) in
the amount of $35,000 on the Agreement Date. The Franchise Fee
is nonrefundable and fully earned by us when paid.
5.2. Royalty. You
agree to pay us a royalty (“Royalty”) in the amount of 5.5% of
your Restaurant’s Gross Sales during each Accounting Period. On the
3rd day (the
“Report Day”) of each Accounting Period, you must report the
amount of your Gross Sales for the preceding Accounting
Period. “Accounting Period” is that period we
designate in the Manual (currently a 7-day accounting period for Royalty and
Marketing calculations that runs from Monday through Sunday and a 4, 4, 5-week
accounting period for financial statement purposes). You must pay us the Royalty
so that we receive it on or before the 3rd business
day
following the end of each Accounting Period (the “Payment Day”)
(currently Wednesday) for the immediately preceding Accounting
Period.
5.3. Electronic
Funds Transfer. We
may
require you to pay any amounts due us, including the Royalties, to us by
electronic funds transfer on the due date. You must comply with the
procedures we specify in our Manuals and perform such acts and sign and deliver
such documents as may be necessary to accomplish payment by this
method. On the Report Day designated in the Manual (currently
Wednesday), you must report to us by telephone or electronic means or on written
form, as we direct, the Restaurant’s true and correct Gross Sales for the
immediately preceding week. We may require you to give us
authorization, in a form that we designate, to initiate debit entries or credit
correction entries to the Restaurant’s bank operating account (the
“Account”) for payments of Royalties and other amounts due
under this Agreement, including any applicable interest charges. If
so, you must make the funds available in the Account for withdrawal by
electronic transfer no later than the Payment Day. The amount
actually transferred from the Account to pay Royalties will be based on the
Restaurant’s Gross Sales reported to us on the Report Day. If you
have not reported the Restaurant’s Gross Sales to us for any reporting period,
we may transfer from the Account an amount calculated in accordance with our
reasonable estimate of the Restaurant’s Gross Sales during any such reporting
period. If we determine at any time that you have under-reported
Gross Sales or underpaid Royalties or other amounts due to us, we will be
authorized to immediately initiate a transfer from the Account in the
appropriate amount in accordance with the foregoing procedures, including
applicable interest and late charges. Any overpayment will be
credited to the Account through a credit, effective as of the first Report
Day
after you and we determine that such credit is due.
5.4. Definition
of “Gross Sales.” As
used
in this Agreement, the term “Gross Sales” means the total
actual gross charges for all products (food and non-food) and services sold
to
customers of the Restaurant for cash or credit, whether these sales are made
at
or from the Restaurant premises, or any other location. Gross Sales
also includes any remuneration or monies you receive from the sale, lease,
barter or creation of any products or services bearing our Marks or which are
directly or indirectly related to the Restaurant, regardless from where such
activities take place (i.e., internet sales, etc.). However, any
amounts that you collect and transmit to state or local authorities as sales,
use or other similar taxes are excluded from the definition of Gross
Sales.
5.5. Interest
on Late Payments. All
amounts which you owe us, including but not limited to Royalties, Accounting
System Fees, System Contributions and Co-op Contributions, will bear interest
after their due date at the annual rate of eighteen 18% or the highest contract
rate of interest permitted by law, whichever is
15
less. You
acknowledge that we do not agree to accept any payments after they are due
nor commit to extend credit to, or otherwise finance your operation of, the
Restaurant. Your failure to pay all amounts when due constitutes
grounds for termination of this Agreement.
5.6. Late
Payment Penalties. All
Royalties, System Contributions, amounts due for purchases by you from us,
and
any interest accrued thereon, and any other amounts which you owe us, or our
affiliates, are subject to a late payment fee of $250 for payment or
report received by us 5 days after its due date. The late payment fee
is due immediately on any delinquent payments and for dishonored
checks. The provision in this Agreement concerning late payment fees
does not mean that we accept or condone late payments, nor does it indicate
that
we are willing to extend credit to, or otherwise finance, the operation of
your
Restaurant. In the event that you are delinquent in providing payment
or reports during any 2 or more Accounting Periods, we may require you to pay
all amounts due us by electronic transfer or cashier’s check.
5.7. Application
of Payments. Notwithstanding
any designation you might make, we, in our sole judgment, may apply any of
your
payments to any of your past due indebtedness to us. You
acknowledge and agree that we have the right to set off any amounts you or
your
owners owe us against any amounts we might owe you or your owners.
5.8. Payment
Offsets. We
may
setoff from any amounts that we may owe you any amount that you owe to us,
or
our affiliates, for any reason whatsoever, including without limitation,
Royalties, System Contributions, late payment penalties and late payment
interest, amounts owed to us or our affiliates for purchases or services or
for
any other reason. Thus, payments that we make to you may be reduced,
in our discretion, by amounts that you owe to us or our affiliates from time
to
time. In particular, we may retain (or direct to our affiliates) any
amounts that we have received for your account as a credit and payment against
any amounts that you may owe to us, or our affiliates, at any
time. We may do so without notice to you at any
time. However, you do not have the right to offset payments owed to
us for amounts purportedly due to you from us.
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6.
|
TRAINING
AND ASSISTANCE.
|
6.1. Initial
Training. Before
the Restaurant opens, we will furnish initial training on the operation of
an
EVOS® Restaurant to you and 1 other person (or, if you are a Business Entity, up
to 2 of your owners—or 1 owner and 1 manager) (“Initial
Training”). If space is available at such Initial Training
session, we will furnish Initial Training for up to 3 additional people at
no
additional charge. The Initial Training lasts for 4 to 6 weeks and
will be furnished at our designated training facility and/or at an operating
EVOS® Restaurant, as we specify. You, or your owners, are required to
complete the Initial Training to our satisfaction. We, in our sole
judgment, may change, modify, amend or designate the content and process of
Initial Training. Successful completion of the Initial Training
program by you, or your owners, is a condition to the opening of the EVOS®
Restaurant to the public. You also are required to participate in all
other activities required to operate the Restaurant. Although we will
furnish Initial Training to you, or your owners, at no additional fee or other
charge, you will be responsible for all travel and living expenses which such
persons incur in connection with Initial Training and any other training we
require or recommend. You agree to replace an employee if we
determine that he or she is not qualified to serve at the
Restaurant. If we determine that you, or your owners, are unable to
complete Initial Training to our satisfaction, we have the right to terminate
this Agreement. If this Agreement is terminated for any reason, you
will sign a general release, in form satisfactory to us, of any and all claims
against us and our shareholders, officers, directors, employees and
agents. If you fail to satisfactorily complete the Initial Training,
we will terminate the Agreement. As part of your
16
Initial
Training, we will provide your Restaurant an “opening team” consisting of such
numbers and types of personnel we designate, for such time period as we may
designate, to assist you with the operational, administrative, customer service
and advertising aspects of operating your Restaurant. We require you,
at your expense, to provide on-site meals and beverages to the opening team
while it provides assistance to you. You must fully cooperate with
the efforts of the opening team. However, if you are a transferee of
an existing EVOS® Restaurant, we are not obligated to provide you an opening
team or any on-site assistance.
6.2. Periodic
Training. We
may
require you, or your owners, to attend periodic supplemental, additional or
refresher training courses or training conferences at such times and locations
that we designate, and we may charge fees for such courses (collectively,
“Additional Training”). Currently, we require you or
your designee (i.e., your manager or 1 other person) to attend up to 4 days
of
Additional Training offered on a regional basis, and/or one annual training
conference of up to 3 days. You agree to give us reasonable
assistance in training other EVOS® Restaurant franchise owners. We
will reimburse you for your reasonable out-of-pocket expenses in providing
such
assistance. All persons attending Additional Training are required to sign
our
standard Liability Waiver and Release, a copy of which is attached as Exhibit
“B.” All persons attending Initial Training, Additional Training or
any other training we provide are required to sign our standard Liability Waiver
and Release, a copy of which is attached as Exhibit “B.” During any
training we provide, neither you nor your personnel will be our
employees. Therefore, neither you nor your trainees will be covered
by our workmens compensation insurance.
6.3. General
Guidance. We
will advise you from time to time regarding the operation of the Restaurant
based on reports you submit to us or inspections we make. In
addition, we will furnish guidance to you with respect to:
(a) standards,
specifications and operating procedures and methods utilized by EVOS®
Restaurants;
(b) purchasing
required
fixtures, furnishings, equipment, signs, products, materials and
supplies;
(c) recipes,
food
preparation methods, and menu items;
(d) use
of suppliers,
approved products, volume buying;
(e) advertising
and
marketing programs;
(f) employee
training;
and
(g) administrative,
bookkeeping and accounting procedures.
Such
guidance will,
in our sole judgment, be furnished in our Manual, bulletins or other written
materials and/or during telephone consultations, e-mails, web-based or other
electronic means and/or consultations at our office or the
Restaurant.
At
your request, we will furnish additional
guidance and assistance and, in such a case, may charge the per diem fees and
charges we establish from time to time. If you request or we require
additional or special training for your employees, all of the expenses that
we
incur in connection with such training, including per diem charges and travel
and living expenses for our personnel, will be your responsibility.
17
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7.
|
MARKS.
|
7.1. Ownership
and Goodwill of Marks and Copyrights. As
between you and us, we own all rights, title and interest in and to all
information capable of being rendered into tangible form (i.e., copyrights)
created in connection with or used in connection with the System or your
Restaurant (collectively, the “Copyrights”). The
Copyrights include, for example, the Art, written materials, electronic data,
Software, Manuals, menus, brochures, music, live performances, photography,
the
content and compilation of websites, graphics, and the like. Your
right to use the Marks and the Copyrights is derived solely from this Agreement
and limited to your operation of the Restaurant at the Site pursuant to and
in
compliance with this Agreement and all System Standards we prescribe from time
to time during the Term. Your unauthorized use of the Marks and the
Copyrights will be a breach of this Agreement and an infringement of our rights
in and to the Marks and the Copyrights. You acknowledge and agree
that your usage of the Marks and the Copyrights and any goodwill established
by
such use will be exclusively for our benefit and that this Agreement does not
confer any goodwill or other interests in the Marks or the Copyrights upon
you
(other than the right to operate the Restaurant in compliance with this
Agreement). All provisions of this Agreement applicable to the Marks
and the Copyrights apply to any additional proprietary trade and service marks,
Copyrights and commercial symbols we authorize you to use. If you
commission any Copyrights for your Site or for any use in connection with the
operation of your Restaurant, you will be responsible for requiring the artist
and any other person who may claim copyrights, moral rights, privacy rights,
publicity rights or any other intellectual property rights in or to that
Copyrights (including any aspect of the content or composition of it), to assign
to us all rights, title and interest in and to
the Copyrights. To the extent such assignment is not
possible or obtainable, you must require that such persons failing to grant
to
us such assignment grant to us an unconditional, royalty free, world-wide,
multi-site, multi user, irrevocable, freely assignable license to use, license,
modify, reproduce, make commercial use of, and make derivative works from or
of,
the Copyrights and all attributes of and to it. You acknowledge and agree that
title to all of the Copyrights is and will at all times remain with and be
held
solely by us, and you neither have nor will make any claim with respect the
ownership of the Copyrights. You will not (i) make any express
or implied representations to any person that you own the Copyrights or have
rights in or to it that are superior to our rights in and to it, (ii) grant
or purport to grant any security interest or lien in or on any of the Copyrights
to any other person, or (iii) permit or suffer to exist any lien on any of
the Copyrights in favor of any other person. You must discharge at your expense
any lien asserted against the Copyrights (other than liens imposed thereon
by
our acts or omissions) and to take such steps as may be necessary, from time
to
time, to preserve all of our rights in the Copyrights against third
parties.
7.2. Creation
or Commissioning of Copyrights.
You agree to,
prior to commissioning, utilizing, purchasing or licensing any Copyright,
require all persons who claim intellectual property, privacy, publicity or
moral
rights in or to the Copyrights (other than us) sign such assignments or licenses
as we may designate from time to time. Between you and us, you agree
that we will be deemed to own all aspects of the physical embodiment of the
Copyrights. We may also hire artists to commission the Copyrights and
you will be required to pay to us our then current fees for commissioning
shipment or installation of the Copyrights, which will be due, at our option,
prior to commencement of the work by the artist, or prior to shipment, upon
delivery or otherwise in accordance with applicable policies and procedures
we
may establish from time to time. Your payment to us of fees for commissioning
the Copyrights will not be deemed your purchase of the Copyrights and only
constitutes payment to us to help, in whole or in part, offset our cost to
commission the Copyrights.
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7.3. Limitations
on Your Use of Marks and Copyrights. You
agree to use the Marks and Copyrights we designate and in the manner we
designate as the sole identification of the Restaurant, except that you agree
to
identify yourself as the independent owner in the manner we
prescribe. You may not use modifying words, terms, designs or symbols
(other than logos we license to you), or in any modified form, nor may you
use
any Xxxx or Copyright in connection with the performance or sale of any
unauthorized services or products or in any other manner we have not expressly
authorized in writing. No Xxxx or Copyright may be used in any
advertising concerning the transfer, sale or other disposition of the Restaurant
or an ownership interest in you. You agree to display the Marks and
Copyrights prominently in the manner we prescribe at the Restaurant, on supplies
or materials we designate and in connection with forms and advertising and
marketing materials. You agree to give such notices of trade and
service xxxx registrations as we specify and to obtain any fictitious or
assumed name registrations required under applicable law.
7.4. Notification
of Infringements and Claims. You
agree to notify us immediately of any apparent infringement or challenge to
your
use of any Xxxx or Copyright, or of any claim by any person of any rights in
or
to any Xxxx or Copyright, and you agree not to communicate with any person
other
than us, our attorneys and your attorneys in connection with any such
infringement, challenge or claim. We have sole discretion
to take such action as we deem appropriate and the right to control exclusively
any litigation, U.S. Patent and Trademark Office or U.S. Copyright Office
proceeding or any other administrative proceeding arising out of any such
infringement, challenge or claim or otherwise relating to any Xxxx or
Copyright. You agree to sign any and all instruments and documents,
render such assistance and do such acts and things as, in the opinion of our
attorneys, may be necessary or advisable to protect and maintain our interests
in any litigation or Patent and Trademark Office, U.S. Copyright Office or
other
proceeding or otherwise to protect and maintain our interests in the Marks
and
Copyrights.
7.5. Discontinuance
of Use of Marks. If
it
becomes advisable at any time in our sole judgment for us and/or you to modify
or discontinue the use of any Xxxx or Copyright and/or use one or more
additional or substitute trade or service marks, including the complete
replacement of any Xxxx or Copyright and usage of other marks or copyrights
(due
to merger, acquisition or otherwise), you agree to comply with our
directions within a reasonable time after receiving notice. We will
not reimburse you for any loss of revenue attributable to any modified or
discontinued Xxxx or Copyright or for any expenditures you make to change Marks
or Copyrights or to promote or use a modified or substitute trademark or service
xxxx.
7.6. Indemnification. We
will indemnify you against and reimburse you for all damages for which you
are
held liable to third parties in any proceeding arising out of your authorized
use of any of our Marks or Copyrights, pursuant to and in compliance with this
Agreement, resulting from claims by third parties that your use of any of the
Marks or Copyrights infringes their trademark rights, and for all costs you
reasonably incur in the defense of any such claim in which you are named as
a
party, so long as you have timely notified us of the claim and have otherwise
complied with the terms of this Agreement. We will not indemnify you
against the consequences of your use of the Marks or Copyrights except in
accordance with the requirements of this Agreement. You must provide
written notice to us of any such claim within 10 days of your receipt of such
notice and you must tender the defense of the claim to us. We will
have the right to defend any such claim and if we do so, we will have no
obligation to indemnify or reimburse you for any fees or disbursements of any
attorney retained by you. If we elect to defend the claim, we will
have the right to manage the defense of the claim including the right to
compromise, settle or otherwise resolve the claim, and to determine whether
to
appeal a final determination of the claim.
19
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8.
|
CONFIDENTIAL
INFORMATION.
|
8.1. Types
of
Confidential Information. We
possess (and will continue to develop and acquire) certain confidential
information (the “Confidential Information”) relating to the
development and operation of EVOS® Restaurants, which includes (without
limitation):
(a) the
System and the
know-how related to its use;
(b) plans,
specifications, size and physical characteristics of EVOS®
Restaurants;
(c) Site
selection
criteria and Site development methods;
(d) methods
in
obtaining licensing and meeting regulatory requirements;
(e) sources
and design
of equipment, furniture, forms, materials and supplies;
(f) marketing,
advertising and promotional programs for EVOS® Restaurants;
(g) staffing
and
delivery methods and techniques for personal services;
(h) the
selection,
testing and training of personnel for EVOS® Restaurants;
(i) the
recruitment,
qualification and investigation methods to secure employment for employment
candidates;
(j) any
computer
software we make available or recommend for EVOS® Restaurants;
(k) methods,
techniques, formats, specifications, procedures, information and systems related
to and knowledge of and experience in the development, operation and franchising
of EVOS® Restaurants;
(l) knowledge
of
specifications for and suppliers of certain products, materials, supplies,
furniture, furnishings and equipment;
(m) recipes,
formulas,
preparation methods and serving techniques;
(n) knowledge
of
operating results and financial performance of EVOS® Restaurants other than
those operated by you (or your affiliates); and
(o) e-commerce
related
data (e.g., customer data, click-stream data, cookies, user data, hits and
the
like).
(p) patents
and
copyrights secured by us or our affiliates.
8.2. Disclosure
and Limitations on Use. We
will disclose much of the Confidential Information to you and personnel of
the Restaurant by furnishing the Manuals to you and by providing training,
guidance and assistance to you. In addition, in the course of the
operation of your Restaurant, you or your personnel may
20
develop
ideas, copyrightable works, concepts, methods, techniques or improvements
(“Improvements”) relating to your Restaurant, which you agree
to disclose to us. We will be deemed to own the Improvements and may
use them and authorize you and others to use them in the operation of EVOS®
Restaurants. Improvements will then also constitute Confidential
Information.
8.3. Confidentiality
Obligations. You
agree that your relationship with us does not vest in you any interest in
the Confidential Information other than the right to use it in the development
and operation of your Restaurant, and that the use or duplication of the
Confidential Information in any other business would constitute an unfair
method of competition. You acknowledge and agree that the
Confidential Information is proprietary, includes trade secrets belonging to
us
and is disclosed to you or authorized for your use solely on the condition
that you agree, and you therefore do agree, that you:
(a) will
not use the
Confidential Information in any other business or capacity;
(b) will
maintain the
absolute confidentiality of the Confidential Information during and after
the Term;
(c) will
not make
unauthorized copies of any portion of the Confidential Information
disclosed via electronic medium, in written form or in other tangible form,
including, for example, the Manuals; and
(d) will
adopt and
implement all reasonable procedures we may prescribe from time to time to
prevent unauthorized use or disclosure of the Confidential Information,
including, restrictions on disclosure to your employees and the use of
nondisclosure and noncompetition agreements we may prescribe for employees
or
others who have access to the Confidential Information.
8.4. Exceptions
to Confidentiality. The
restrictions on your disclosure and use of the Confidential Information will
not
apply to the following:
(a) disclosure
or use
of information, processes, or techniques which are generally known and used
in
the Restaurant business (as long as the availability is not because of a
disclosure by you), provided that you have first given us written notice of
your
intended disclosure and/or use; and
(b) disclosure
of the
Confidential Information in judicial or administrative proceedings when and
only
to the extent you are legally compelled to disclose it, provided that you
have first given us the opportunity to obtain an appropriate protective order
or
other assurance satisfactory to us that the information required to be
disclosed will be treated confidentially.
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9.
|
EXCLUSIVE
RELATIONSHIP.
|
9.1. Competitive
Activities. During
the term, you and your owners must devote your full attention to the development
and operation of your EVOSÒ
Restaurant. Therefore, during the term, neither you nor any of your
owners may have a direct or indirect ownership interest (disclosed or
beneficial) of 5% or greater in any other business in which you have an active
role as an officer, director, employee manager, partner or member, and that
you
will comply with our System Standards for devotion of your full attention and
efforts to, and your active participation in your EVOSÒ
Restaurant. Without our prior written permission, neither you nor any
of
21
your
owners may serve as an officer, director, employee, manager, member, independent
contractor, partner, or consultant, for or maintain operational role
in any other business venture. You also acknowledge and agree that we
would be unable to protect Confidential Information against unauthorized
use or
disclosure or to encourage a free exchange of ideas and information among
EVOS®
Restaurants if franchised owners of EVOS® Restaurants were permitted to hold
interests in or perform services for a Competitive Business (defined
below). You also acknowledge that we have granted the Franchise to
you in consideration of and reliance upon your agreement to deal exclusively
with us. You agree that, during the Term, neither you nor any of your
owners (nor any of your or your owners’ spouses or children)
will:
(a) have
any direct or
indirect interest as a disclosed or beneficial owner in a Competitive Business
operating at the Site or within 50 miles of the Site;
(b) have
any direct or
indirect controlling interest as a disclosed or beneficial owner in a
Competitive Business, wherever located;
(c) have
any direct or
indirect interest as a disclosed or beneficial owner in a Competitive Business
operating within 50 miles of any EVOS® Restaurant other than the
Restaurant;
(d) perform
services as
a director, officer, manager, employee, consultant, representative, agent or
otherwise for a Competitive Business, wherever located; or
(e) recruit
or hire any
person who is our employee or the employee of any EVOS® Restaurant without
obtaining the prior written permission of that person’s employer.
9.2. Competitive
Business. The
term “Competitive Business” as used in this Agreement means any
business or facility owning, operating or managing, or granting franchises
or
licenses to others to do so, any restaurant or food service facility (other
than
an EVOS® Restaurant operated under a franchise agreement with us) that offers
casual dining, catering, delivery service, kiosk-type or take-out of smoothies,
shakes, healthier fare or organic or natural type sandwiches, wraps, burgers,
salads, vegetable burgers, turkey burgers, soy burgers and other soy-based
foods, lower fat French fries, lower carb foods, specialty ketchup, or any
type
of deli or fast foods and beverages which are then offered
by EVOS® Restaurants.
9.3. Employee
Retention. You
acknowledge and agree that: (a) we and our affiliates have expended
and will expend substantial time and expense in training our and their
employees; and (b) we and our affiliates (as applicable), will suffer
substantial injury, with respect to which it is extremely difficult and
impracticable to calculate actual damages, if you or your affiliates breach
this
Agreement with respect to solicitation of our or our affiliates’ or franchise
owners’ employees. Accordingly, in an effort to liquidate in advance
the sum that would represent the damages caused by such solicitation, you agree
that you will pay to the affected employer an amount equal to the Annualized
Compensation paid by us or such affiliate or franchise owner to any employee
of
ours, our affiliate or our franchise owners who leaves such employment directly
or indirectly as a result of your breach of this
Agreement. “Annualized Compensation” means the
aggregate compensation (including wages/salary, bonus and other employer’s cost
of all taxes and benefits) payable to such employee: (i) an amount equal to
the
aggregate compensation for such employee for such 12 months; or during the
12
month period immediately preceding the date of such employee’s departure from
the previous employment; or (ii) if not,
22
then
12
times the aggregate monthly compensation of such employee. You
acknowledge and agree that this amount, which will be due and payable within
30
days of your receipt of our invoice, is a fair and reasonable amount to be
recovered as liquidated damages and will not constitute a penalty or
forfeiture. The amount will be paid to the former
employer.
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10.
|
OPERATION
AND SYSTEM STANDARDS.
|
10.1. Operations
Manual. We
will loan you, during the Term, one copy of our manuals (the
“Manuals”), consisting of such materials (including, as
applicable, audiotapes, videotapes, magnetic media, computer software and
written materials) that we generally furnish to franchise owners from time
to
time for use in operating an EVOS® Restaurant. We, at our option, may
furnish the Manuals via the Computer System or other electronic (like via
e-mail, fax, CD, DVD, website or intranet access) or hard copy
form. The Manuals contain mandatory and suggested specifications,
standards, operating procedures and rules (“System Standards”)
that we prescribe from time to time for the operation of an EVOS® Restaurant and
information relating to your other obligations under this Agreement and related
agreements. You agree to follow the standards, specifications and
operating procedures we establish periodically for the EVOS® System that are
described in the Manuals. You also must comply with all updates and
amendments to the EVOS® System as described in newsletters or notices we
distribute, including via computer systems. You must maintain the
Manuals as confidential and maintain the information in the Manuals as secret
and confidential. The Manuals may be modified, updated and revised
from time to time to reflect changes in System Standards. You agree
to keep your copy of the Manuals current and in a secure location at the
Restaurant. In the event of a dispute relating to its contents, the
master copy of the Manuals we maintain at our principal office will be
controlling. You may not at any time copy, duplicate, record or
otherwise reproduce any part of the Manuals. If your copy of the
Manuals is lost, destroyed or significantly damaged, you agree to obtain a
replacement copy at our then applicable charge.
10.2. Compliance
with System Standards. You
acknowledge and agree that your advertising, operation and maintenance of
the Restaurant in accordance with System Standards are essential to preserve
our
goodwill including the goodwill of the System, Marks, Copyrights and all EVOS®
Restaurants. Therefore, at all times during the Term, you agree to
operate and maintain the Restaurant in accordance with each and every System
Standard, as we periodically modify and supplement them during the
Term. System Standards may regulate any one or more of the following
with respect to the Restaurant:
(a) design,
layout,
décor, appearance and lighting; periodic maintenance, cleaning and sanitation;
periodic remodeling; replacement of obsolete or worn-out leasehold improvements,
fixtures, furnishings, media, equipment and signs; periodic painting; and use
of
interior and exterior signs, emblems, lettering and logos, and
illumination;
(b) types,
models and
brands of required fixtures, furnishings, equipment, signs, software, materials
and supplies;
(c) required
or
authorized products and product categories including for all Other Services
and
all food and beverage items, audio or visual media, recipes and portions devoted
to each supplier of products;
23
(d) designated
or
approved suppliers (which may include us) of fixtures, furnishings, audio or
visual media, Copyrights, equipment, signs, software, products, ingredients,
materials and supplies including for all food and beverage items;
(e) terms
and
conditions of the sale and delivery of, and terms and methods of payment for,
products, materials, supplies and services, including direct labor, that you
obtain from us, unaffiliated suppliers or others;
(f) sales,
marketing,
advertising and promotional programs and materials and media used in such
programs;
(g) use
and display of
the Marks or Copyrights;
(h) staffing
levels for
the Restaurant and matters relating to managing the Restaurant; communication
to
us of the identities of the Restaurant’s personnel; and qualifications,
training, dress and appearance of employees;
(i) days
and hours of
operation of the Restaurant;
(j) participation
in
market research and testing and product and service development
programs;
(k) acceptance
of
credit cards, gift certificates, loyalty or gift card programs; coupons, other
payment systems and check verification services;
(l) bookkeeping,
accounting, data processing and record keeping systems, including software,
and
forms; methods, formats, content and frequency of reports to us of sales,
revenue, financial performance and condition; and furnishing tax returns and
other operating and financial information to us;
(m) types,
amounts,
terms and conditions of insurance coverage required to be carried for the
Restaurant and standards for underwriters of policies providing required
insurance coverage; our protection and rights under such policies as an
additional named insured; required or impermissible insurance contract
provisions; assignment of policy rights to us; periodic verification of
insurance coverage that must be furnished to us; our right to obtain insurance
coverage for the Restaurant at your expense if you fail to obtain required
coverage; our right to defend claims; and similar matters relating to insured
and uninsured claims;
(n) the
maximum prices
you may charge and advertise for certain menu items;
(o) complying
with
applicable laws; obtaining required licenses and permits; adhering to good
business practices; observing high standards of honesty, integrity, fair
dealing and ethical business conduct in all dealings with customers,
suppliers and us; and notifying us if any action, suit or proceeding is
commenced against you or the Restaurant;
(p) your
purchase, use
and display of audio or visual media, display devices or furniture for your
Restaurant’s customers, and the manner of your sale or lending such media to
them; and
24
(q) regulation
of such
other aspects of the operation and maintenance of the Restaurant that we
determine from time to time to be useful to preserve or enhance the efficient
operation, image or goodwill of the Marks and EVOS® Restaurants.
You
agree that
System Standards prescribed from time to time in the Manual, or otherwise
communicated to you in writing or other tangible form, constitute provisions
of
this Agreement as if fully set forth. All references to this
Agreement include all System Standards as periodically modified.
10.3. Modification
of System Standards. We
may
periodically modify System Standards, which may accommodate regional or
local variations as we determine, and any such modifications may obligate you
to
invest additional capital in the Restaurant (“Capital
Modifications”) and/or incur higher operating costs; provided, however,
that such Capital Modifications will not alter your fundamental status and
rights under this Agreement. You are obligated to comply with all
modifications to System Standards within the time period we
specify. Capital Modifications are in addition to the costs you will
incur to repair, replace or refurbish your equipment and fixtures from time
to
time. Capital Modifications do no include any expenditures you must,
or choose to make solely in order to comply with applicable laws, or
governmental rules or regulations (e.g. ADA compliance).
10.4. Interior
and Exterior Upkeep. You
must at all times maintain the Restaurant’s interior and exterior and the
surrounding area in the highest degree of cleanliness, orderliness and
sanitation and comply with the requirements regarding the upkeep of the
Restaurant established in the Manuals and by federal, state and local
laws.
10.5. Hours
of
Operation. You
must operate the Restaurant during the hours and on the days prescribed by
us in
the Manuals or otherwise approved in advance in writing by us.
10.6. Accounting,
Computers and Records. You
must provide your own internet service provider, with access via IDSL or other
medium we designate. You must use in developing and operating the
Restaurant the MIS System, including computer equipment and operating and
accounting software (the “Computer System”) that we
periodically specify. We may require you to obtain specified computer
hardware or software and may modify specifications for any components of the
Computer System from time to time. Our modifications and
specifications for components of the Computer System may require you to incur
costs to purchase, lease or license new or modified computer hardware or
software to obtain service and support for the Computer System during the
term. You agree to incur such costs in connection with obtaining the
computer hardware and software comprising the Computer System (or additions
or
modifications) as long as the Computer System we specify for use is
the same Computer System that we, or our affiliates, then currently use in
EVOS®
Restaurants that we, or they, own and operate. Within 30 days after
you receive notice from us, you must obtain the components of the
Computer System that we designate and require. The Computer System
must be capable of connecting your computers with our computer system so that
we
can daily review the results of your Restaurant’s operations. We also
have the right to require you to purchase, lease or license modifications of
and
enhancements made to any proprietary software that we license to you and other
maintenance and support services that we, or our affiliates, furnish to you
related to the Computer System or your access to and use of the EVOS® intranet
system. You must: (a) supply us with any and all codes, passwords,
and information necessary to have access to your Computer System and not change
any of them without first notifying us; and (b) not load or utilize any software
on the Computer System that we have not specified or approved for
use. You agree to comply with the terms of any terms of use, privacy
policies, or user rules we may designate in our sole discretion relating to
the
Computer System and any website we designate.
25
10.7. Trade
Accounts and Taxes. You
must: (a) maintain your trade accounts in a current status and seek to resolve
any disputes with trade suppliers promptly; and (b) timely pay all taxes
incurred in connection with your Restaurant’s operations. Your
failure to do so is a material breach of this Agreement. If you fail
to maintain your trade accounts in a current status, timely pay such taxes
or
any other amounts owing to any third parties or perform any non-monetary
obligations to third parties, we may, but are not required to, pay any and
all
such amounts and perform such obligations on your behalf. If we elect
to do so, then you must reimburse us for such amounts. You agree to
repay us immediately upon receipt of our invoice. We may also set-off
the amount of any such reimbursement obligations against all amounts which
we
may owe you.
10.8. Proprietary
Materials. You
must purchase from us, or approved manufacturers, or suppliers, all articles
used in operating the Restaurant and bearing any of the Marks or utilizing
any
of our proprietary recipes of food service preparation methods. These
items may include certain feeds, ingredients, condiments, paper goods, employee
clothing (such as shirts, hats and aprons) and menus (collectively, the
“Proprietary Materials”), at then prevailing prices, plus
freight, taxes and delivery costs.
10.9. Approved
Products. You
must not sell any food or beverage products or other items at the Restaurant
that we have not previously approved for sale. You must only use and
display menus that have been prescribed or approved (except for prices) in
advance by us. You must sell all the food and beverage products that
are included on the prescribed or approved menus, and no others. We
may negotiate group or volume purchasing arrangements with approved suppliers
and you must participate in the arrangements. We will be entitled to
all rebates, bonuses and promotional benefits associated with those
programs. You must strictly follow all of our recipes for all menu
items as such recipes are specified from time to time in the Manuals or
otherwise. You must not, without our prior written consent, sell,
dispense, give away or otherwise provide food or beverage products or other
items except by means of retail sales or complimentary meals to employees or
customers at the Restaurant, or a program of charitable giving. You
must immediately implement changes to the products, food, service or other
items
requested by us, including menu changes. You must maintain an
inventory of food and beverage products sufficient to meet the daily demands
of
the Restaurant for all items specified in the menus. Any and all
recipes or menu changes submitted by you for inclusion on the menus will become
our property and you agree to sign all documents necessary to convey all rights
and title, including all rights in such recipes to us.
10.10. Management. Unless
we agree otherwise, you, or one of your owners, must assume responsibility
for
the Restaurant’s day-to-day management and operation and supervise the
Restaurant’s personnel. The Restaurant must at all times be under
your, or your owner’s, direct supervision and control, but recognizing that you
will employ agents (trained management personnel) on-site who will act at your
direction. Unless we approve otherwise, one of your original
principal owners must have and retain at least 51% ownership of the
Restaurant.
10.11. Personnel. You
must hire, train and supervise Restaurant personnel in accordance with the
specifications set forth in the Manuals. All personnel must meet
every requirement imposed by applicable federal, state and local law and those
required by us as a condition to their employment. All persons you
employ that have access to any of the Confidential Information must sign a
Confidentiality and Noncompetition Agreement in a form satisfactory to
us. You are responsible to have such
26
Confidentiality
and
Noncompetition Agreement signed and sent to us before you are granted any
access
to Confidential Information. You are liable to us for any
unauthorized disclosure of such information by any of your Owners, directors,
employees, representatives or agents.
10.12. Other
Services. We
may, at our option, permit you to or require you to offer new or additional
products or services through your Business, like catering, Delivery Service,
Drive-Thru Service and any other products and services we may designate from
time to time (collectively, the “Other
Services”). For example, if we designate a “Delivery
Area,” we may permit or require you to provide catering, delivery or
other similar services from your Restaurant or at locations other than your
Restaurant (e.g., fairs, concerts, or other public or private events)
(collectively, “Delivery Service”) and if so, you must you
comply with all the terms and conditions of this Agreement and all of our System
Standards applicable to your provision of Delivery Service. You must
provide us at least 90 days written notice prior to your election to provide
Delivery Service and you must not establish another outlet or property (other
than the Site) for use in connection with your provision of Delivery
Service. The Delivery Area in which you will be permitted to provide
Delivery Service, if any, may be designated on Exhibit C to this
Agreement. We will not be deemed to have granted any Delivery Area to
you unless we designate it on Exhibit C and both you and we initial such
designation. Also, for example, we may also require you to
offer drive-thru or curbside type service (collectively, “Drive-Thru
Service”) as part of your Other Services. If we require you
to offer Drive Thru Service, we will provide you a period of time we designate,
but not less than 30 days, to, at your expense and in accordance with our System
Standards for Drive-Thru Service, reconfigure your EVOS Restaurant to add one
or
more drive through lanes, and one or more service windows. If we
determine that your Site cannot support Drive-Thru Service or any Other Services
we deem mandatory, we may require you to relocate your Site in accordance with
our System Standards. If you provide any Other Services, you must
provide that (1) you ensure that your customers receive at all times high
quality service, and food and beverage products prepared and maintained in
accordance with our System Standards; and (2) you will not provide any Other
Services to any location outside of the areas we designate for your providing
such Other Services. You must maintain the condition appearance of
and perform maintenance with respect to all vehicles, serve where and equipment
used in connection with your providing Other Services in accordance with our
System Standards. Your providing Other Services will be governed by
this Agreement, unless otherwise agreed to in writing between us and you, and
you must ensure that all Other Services and all off-Site, on-Site, catering,
delivery drivers or any other personnel engaged in any aspect of Other Services
strictly adhere to and comply with all applicable laws, rules and regulations
(e.g., those relating to providing catering and delivery
services). You must maintain adequate motor vehicle liability and
other insurance of the types and in the amounts that we may designate from
time
to time for such Other Services. If you fail to comply with any of
your obligations in connection with providing Other Services, then, in addition
to any other rights or any remedies that we may have (including the right to
terminate this Agreement), we may temporarily suspend or permanently terminate
your rights to provide any particular or all Other Services or restrict the
geographic area in which you may provide any or all Other Services.
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11.
|
ADVERTISING
AND PROMOTION.
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11.1. Establishment
of System Fund. We
may
establish a System Fund (the “System Fund”) for such
advertising, marketing and public relations programs and materials on a
System-wide basis that we deem necessary or appropriate in our sole
judgment. You agree to, upon notice from us, contribute to the System
Fund such amounts that we prescribe from time to time (the “System
Contributions”), not to exceed 2% of your Gross Sales per Accounting
Period (except as described
27
below),
payable in the same manner as the Royalty. We reserve the right to
defer or reduce System Contributions of an EVOS® Restaurant franchise owner and,
upon 30 days’ prior written notice to you, to reduce or suspend System
Contributions to and operations of the System Fund for one or more periods
of
any length and to terminate (and, if terminated, to reinstate) the System
Fund. If the System Fund is terminated, all unspent monies, less any
outstanding accounts payable and other obligations, on the date of termination
will be distributed to our franchise owners in proportion to their respective
System Contributions to the System Fund during the preceding 12 Accounting
Periods. Our affiliates will contribute to the System Fund on the
same basis as franchise owners for any EVOS® Restaurants they own and
operate.
11.2. Use
of
the Funds. We
will direct all programs financed by the System Fund, with sole discretion
over
all fit activities, including without limitation, the creative concepts,
materials and endorsements, and the geographic, market and media placement
and
allocation. You agree that the System Fund may be used to pay the
costs of, without limitations, preparing and producing video, audio and written
advertising materials; administering regional and multi-regional advertising
programs, including, without limitation, purchasing direct mail and other media
advertising and employing advertising, promotion and marketing agencies;
marketing and advertising training programs and materials; and supporting public
relations, market research and other advertising, promotion and marketing
activities. The System Fund periodically will furnish you with
samples of advertising, marketing and promotional formats and materials at
no
cost. Multiple copies of such materials will be furnished to you at
our direct cost of producing them, plus any related shipping, handling and
storage charges.
11.3. Accounting
for the Fund. The
System Fund will be accounted for separately from our other funds and will
not
be used to defray any of our general operating expenses, except for such
reasonable salaries, administrative costs, travel expenses and overhead,
including rent and utilities, as we may incur in activities related to the
development and administration of the System Fund and its programs, including,
without limitation, conducting market research, recipe, product and menu
development, preparing advertising, promotion and marketing materials and
collecting and accounting for contributions to the System Fund. All interest
earned on monies contributed to the System Fund will be used to pay advertising
costs before other assets of the System Fund are expended. We may
spend, on behalf of the System Fund, in any fiscal year an amount greater or
less than the aggregate contribution of all EVOS® Restaurants to the System Fund
in that year. The System Fund may borrow from us or others to cover
deficits or invest any surplus for future use. If we lend money to
the System Fund, we may charge interest at an annual rate 1% greater than the
rates we pay our lenders. We will prepare an annual statement of
monies collected and costs incurred by the System Fund and furnish the statement
to you upon written request. We have the right to cause the System
Fund to be incorporated or operated through a separate entity at such time
as we
deem appropriate, and such successor entity will have all of the rights and
duties specified in this Agreement.
11.4. System
Fund Limitations. You
acknowledge that the System Fund is intended to maximize recognition of the
Marks and patronage of EVOS® Restaurants. Although we will endeavor
to utilize the System Fund to, among its activities, develop advertising and
marketing materials and programs and to place advertising that will benefit
all
EVOS® Restaurants, we undertake no obligation to ensure that expenditures by the
System Fund in or affecting any geographic area are proportionate or equivalent
to the contributions to the System Fund by EVOS® Restaurants operating in that
geographic area or that any EVOS® Restaurant will benefit directly or in
proportion to its contribution to the System Fund from the development of
advertising and marketing materials or the placement of
advertising. Except as
28
expressly
provided
in this section, we assume no direct or indirect liability or obligation
to you
with respect to maintaining, directing, administering or collecting amounts
due
to the System Fund.
11.5. Local
Advertising and Promotion. You
agree that any advertising, promotion and marketing you conduct will be
completely clear and factual and not misleading and conform to the highest
standards of ethical marketing and the promotion policies which we prescribe
from time to time. Samples of all advertising, promotional and
marketing materials which we have not prepared or previously approved must
be
submitted to us for approval before you use them. If you do not
receive written approval within 15 days after our receipt of such
materials, we will be deemed to have disapproved the
materials. You may not use any advertising or promotional
materials that we have not approved. You must spend a minimum of 2%
of your Gross Sales on approved forms of local advertising and promotion,
measured over continuing 6 Financial Statement Periods.
11.6. Co-op
Participation and Contributions. If
a
group of EVOS® Restaurant Franchise Owners is established in a geographic area
in which your Restaurant is located to do joint advertising, marketing and
promotion (the “Co-op”), you must join and actively participate
in it. You also must contribute to the Co-op such amounts as are
determined from time to time by us, not greater than 2% of your Gross
Sales. Your contribution to the fund will not exceed 2% of Gross
Sales unless such higher sum is determined in accordance with the rules,
regulations and procedures of the Co-op. Your local advertising
requirement will be reduced by the amount that you contribute to any
Co-op. We will set the amount of those contributions. The
Co-op will adopt its own rules, regulations and procedures, which you must
follow. However, the rules, regulations and procedures of the Co-op
must be approved by us. All advertising utilized by the Co-op must
not be used unless and until we have reviewed and approved it. The
Co-op will, at its expense, use our mandated accounting system and any MIS
System we designate. We also have the right to participate in any
meetings of the Co-op and its members. Your failure to timely
contribute the amounts required by the Co-op constitutes a material breach
of
the provisions of this Agreement and we may offset against any amounts we
otherwise owe to you the amount of your Co-op contributions and pay such
contributions for you.
11.7. Websites. We
have the right to control or designate the manner of your use of all URLs,
domain names, website addresses, metatags, links, key words, e-mail addresses
and any other means of electronic identification or origin
(“e-names”). We also have the right to designate,
approve, control or limit all aspects of your use of the Internet, Intranet,
World Wide Web, wireless technology, digital cable, use of e-names, e-mail,
home
pages, bulletin boards, chatrooms, linking, framing, on-line purchasing
cooperatives, marketplaces, barter exchanges, and related technologies, methods,
techniques, registrations, networking, and any electronic communication,
commerce, computations, or any means of interactive electronic documents
contained in a network of computers or similar devices linked by communications
software or hardware (collectively,
“e-commerce”). You must follow all of our policies
and procedures for the use and regulation of e-commerce. We may
require that you provide graphical, photographic, written or other forms of
artistic or literary content to us for use in e-commerce activities associated
with the Marks or the System which we may designate. We may restrict
your use of e-commerce to a centralized website, portal or network or other
form
of e-commerce that we designate or operate. We may require that you
provide information to us via e-commerce. You agree to be bound by
any terms of use, privacy policy and copyright notice and takedown policies
and
the like that we establish from time to time. We may require you to,
at your expense, coordinate your e-commerce activities with us, other EVOS®
Restaurants, suppliers and affiliates. We may require you to utilize
the computers we designate and participate in any internet or intranet networks
29
(collectively,
the
“MIS System”) we establish and obtain the services of and pay
the then current fees for ISP and ASP, data polling services and the
like. You recognize and agree that we own all rights, title and
interest in and to any and all websites and any e-names we commission or
utilize, or require or permit you to utilize, in connection with the System
which bear our Marks or any derivative of our Marks. You also recognize and
agree that we own all rights, title and interest in and to any and all data
or
other information collected via e-commerce related to the System or the Marks,
including any customer data, click-stream data, cookies, user data, hits
and the
like. Such data or other information also constitutes our
Confidential Information.
11.8. Promotion
of the Franchise System. You
agree to place and display at the Site and on any vehicles your Business
operates, any and all materials promoting the Franchise System that we from
time
to time provide to you or designate. You will place and display all
such materials in the manner in which we designate. We may require
you, at your expense, to obtain vanity phone numbers and e-names we
designate.
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12.
|
RECORDS,
REPORTS AND FINANCIAL
STATEMENTS.
|
12.1. Accounting
System.
You must obtain
your accounting services and any required hardware or software related to
them. You must at all times maintain the records reasonably specified
in the Manuals, including, without limitation, sales, inventory and expense
information. You must report gross sales and other business information to
us
using the format, reporting system and accounting system (the
“AccountingSystem”) that we require from time
to time, including your use of a uniform chart of accounts we
specify. We may require that: the Accounting System reside
on our computer system and we will provide you access to the Accounting System
through the Internet; the Accounting Systems reside at a location designated
by
us, and you must establish access to the Accounting System via the Internet
at
your cost. You must deliver to us the financial and operating reports
in the form, manner, content and time we specify from time to time, including
via access to the Accounting System. You will update all information
in the Accounting System at least weekly, including but not limited to revenues,
expenditures and other pertinent data. We may periodically change the
Accounting System and the suppliers of accounting services. You will
make available for our review and inspection during normal business hours all
original books and records that we want to ascertain and verify financial
statements or reports. You will maintain all of your books and
records in accordance with generally accepted accounting
principles. You will maintain and preserve such records during the
entire Term and for 10 years following expiration or termination of this
Agreement. Such records include deposit reports and receipts, cash
receipts journal, general ledgers, cash disbursement journals, weekly payroll
registers, monthly bank statements, supplier invoices (paid and unpaid),
accounts payable journals, balance sheets, profit and loss statements, inventory
records, records of wholesale accounts and such other records as we may
require. We may use the information obtained as we deem appropriate,
except that information you designate as confidential will not be disclosed
to
third parties in a manner that identifies you as the subject or source except:
(i) with your permission, (ii) as may be required by law,
(iii) in connection with audits or collections under this Agreement; or
shared within the EVOS® Restaurant System (you understand that we disseminate
operational and financial data throughout the System and to
prospects). We may require you to use approved computer hardware and
software in order to maintain the Accounting System and other communication
processes.
12.2. Reports. You
agree to furnish to us on such forms that we prescribe from time to
time:
30
(a) on
the Report Day,
a report on your Restaurant’s Gross Sales during the preceding Accounting
Period;
(b) within
20 days
after the end of each Accounting Period, a profit and loss statement for the
Restaurant for the immediately preceding Accounting Period and year-to-date
and
a balance sheet as of the end of such Accounting Period;
(c) within
60 days
after the end of the Restaurant’s fiscal year, annual profit and loss and source
and use of funds statements and a balance sheet for the Restaurant as of the
end
of such fiscal year; and
(d) on
the Report Days
we specify, a uniform chart of accounts.
12.3. Access
to Information. You
agree to verify and sign each report and financial statement in the manner
we
prescribe. We have the right to disclose data derived from such
reports. We also have the right to require you to have reviewed or
audited financial statements prepared on an annual basis if you have been late
in making payments or sending us reports or we determine that you have
understated Gross Sales by over 2% twice or more during any 18-month
period. You will provide us copies of any reviewed or audited
financial statements (if any) promptly after you receive
them. Moreover, we have the right as often as we deem appropriate
(including on a daily basis) to access all computer registers and other computer
systems that you are required to maintain in connection with the operation
of
the Restaurant and to retrieve all information relating to the Restaurant’s
operations. At our request, you will promptly send us true and
correct copies of all federal and state income, sales, excise and other tax
returns.
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13.
|
INSPECTIONS
AND AUDITS.
|
13.1. Our
Right to Inspect the Restaurant. To
determine whether you and the Restaurant are complying with this Agreement
and
all System Standards, we and our designated agents have the right at any time
during your regular business hours, and without prior notice to you,
to:
(a) inspect
the
Restaurant;
(b) observe,
photograph
and videotape the operations of the Restaurant for such consecutive or
intermittent periods as we deem necessary;
(c) remove
samples of
any products, materials or supplies for testing and analysis;
(d) interview
personnel
and customers of the Restaurant; and
(e) inspect
and copy
any books, records, tax returns and documents relating to your operation of
the
Restaurant.
You
agree to
cooperate with us fully in connection with any such inspections, observations,
photographing, videotaping, product removal and interviews. You agree
to present to your customers such evaluation forms that we periodically
prescribe and to participate and/or request your customers to participate in
any
surveys performed by us or on our behalf. You must immediately
correct or repair any unsatisfactory conditions we specify.
31
13.2. Our
Right to Audit. We
have the right at any time during your business hours, and without prior notice
to you, to inspect and audit, or cause to be inspected and audited, your (if
you
are a Business Entity) and the Restaurant’s business, bookkeeping and accounting
records, sales and income tax records and returns and other
records. You agree to cooperate fully with our representatives
and independent accountants we hire to conduct any such inspection or
audit. You must immediately pay us any shortfall in the amounts you
owe us (regardless of the degree), including late fees and
interest. You agree to reimburse us for the cost of such inspection
or audit, including, without limitation, the charges of attorneys and
independent accountants and the travel expenses, room and board and compensation
of our employees if:
(a) our
inspection or
audit is made necessary by your failure to furnish reports, supporting records
or other information we require, or to furnish such items on a timely basis;
and/or
(b) our
audit or
inspection reveals that you understated Gross Sales by
over 2%.
The
foregoing
remedies are in addition to our other remedies and rights under this Agreement
and applicable law.
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14.
|
TRANSFER.
|
14.1. By
Us. This
Agreement is fully transferable by us and will inure to the benefit of any
transferee or other legal successor to our interests.
14.2. By
You. You
understand and acknowledge that the rights and duties created by this Agreement
are personal to you (or, if you are a Business Entity, to your owners) and
that
we have granted the Franchise to you in reliance upon our perceptions of your
(or your owners’) individual or collective character, skill, aptitude,
attitude, business ability and financial capacity. Accordingly,
neither this Agreement (nor any interest in it) nor any ownership or other
interest in you or the Restaurant may be transferred without our prior written
approval. Any transfer without such approval constitutes a breach of
this Agreement and is void and of no effect. As used in this
Agreement, the term “transfer” includes your (or your owners’)
voluntary, involuntary, direct or indirect assignment, sale, gift or other
disposition of any interest in: (a) this Agreement; (b) you; or (c) the
Restaurant.
An
assignment, sale, gift or other disposition
includes the following events:
|
(i)
|
transfer
of
ownership of 10% or more of any capital stock or a partnership interest
or
any other interest that affects control over the Business
Entity;
|
|
(ii)
|
merger
or
consolidation or issuance of additional securities or interests
representing an ownership interest in
you;
|
|
(iii)
|
any
issuance
or sale of your stock or any security convertible to your
stock;
|
32
|
(iv)
|
transfer
of
an interest in you, this Agreement or the Restaurant in a divorce,
insolvency or corporate or partnership dissolution proceeding or
otherwise by operation of law;
|
|
(v)
|
transfer
of
an interest in you, this Agreement or the Restaurant, in the event
of your
death or the death of one of your owners, by will, declaration of
or
transfer in trust or under the laws of intestate succession;
or
|
|
(vi)
|
pledge
of
this Agreement (to someone other than us) or of an ownership interest
in
you as security, foreclosure upon the Restaurant or your transfer,
surrender or loss of possession, control or management of the
Restaurant.
|
14.3. Conditions
for Approval of Transfer. If
you
(and your owners) are in full compliance with this Agreement, then subject
to
the other provisions of this section , we will approve a transfer that
meets all the applicable requirements of this section. The proposed
transferee and its direct and indirect owners must be individuals of good
character and otherwise meet our then applicable standards for EVOS® Restaurant
franchise owners. A transfer of ownership, possession or control of
the Restaurant may be made only in conjunction with a transfer of this
Agreement. If the transfer is of this Agreement or a controlling
interest in you, or is one of a series of transfers which in the aggregate
constitute the transfer of this Agreement or a controlling interest in you,
all
of the following conditions must be met prior to or concurrently with the
effective date of the transfer:
(a) the
transferee has
sufficient business experience, character, aptitude and financial resources
to
operate the Restaurant;
(b) you
have paid all
Royalties, System Fund contributions, Co-op fund contributions, amounts owed
for
purchases from us and all other amounts owed to us or to third-party creditors
and have submitted all required reports and statements;
(c) the
transferee (or
its owners) have agreed to complete our standard training program, at their
expense;
(d) the
transferee has
agreed to be bound by all of the terms and conditions of this
Agreement;
(e) the
transferee has
entered into our then-current form of Franchise Agreement;
(f) the
transferee
agrees to upgrade the Restaurant to conform to our then-current standards and
specifications;
(g) you
or the
transferee pay us a transfer fee equal to $7,000 to defray expenses we incur
in
connection with the transfer, including the costs of training the transferee
(or
its owners) and other personnel. If the proposed transfer is among
your owners, the transfer fee will be equal to $1,500 (However, in addition
to
such fees you will remain responsible for any lodging and meal expenses
associated with our on-site training of your personnel, if any);
33
(h) you
(and your
transferring owners) have signed a general release, in form satisfactory to
us,
of any and all claims against us and our shareholders, officers, directors,
employees and agents;
(i) we
have approved
the material terms and conditions of such transfer and determined that the
price
and terms of payment will not adversely affect the transferee’s operation of the
Restaurant;
(j) if
you or your
owners finance any part of the sale price of the transferred interest, you
and/or your owners have agreed that all of the transferee’s obligations pursuant
to any promissory notes, agreements or security interests that you or your
owners have reserved in the Restaurant are subordinate to the transferee’s
obligation to pay Royalties, System Fund contributions, Co-op fund contributions
and other amounts due to us and otherwise to comply with this
Agreement;
(k) you
and your
transferring owners (and your and your owners’ spouses and children) have signed
a non-competition covenant in favor of us and the transferee agreeing to be
bound, commencing on the effective date of the transfer, by the restrictions
contained in this Agreement; and
(l) you
and your
transferring owners have agreed that you and they will not directly or
indirectly at any time or in any manner (except with respect to other EVOS®
Restaurants you own and operate) identify yourself or themselves or any business
as a current or former EVOS® Restaurant, or as one of our licensees or franchise
owners, use any Xxxx, any colorable imitation of a Xxxx, or other indicia of
an
EVOS® Restaurant in any manner or for any purpose or utilize for any purpose any
trade name, trade or service xxxx or other commercial symbol that suggests
or
indicates a connection or association with us.
We
are not
obligated to provide transferees on-site pre-opening or grand opening
assistance.
14.4. Transfer
to a Business Entity. If
you
are in full compliance with this Agreement, you may transfer this Agreement
to a
Business Entity that conducts no business other than the Restaurant
and, if applicable, other EVOS® Restaurants so long as you own, control and have
the right to vote 51% or more of its issued and outstanding ownership
interests (like stock or partnership interests) and you guarantee its
performance under this Agreement. All other owners are subject to our
approval. The organizational or governing documents of the Business
Entity must recite that the issuance and transfer of any ownership interests
in
the Business Entity are restricted by the terms of this Agreement, are subject
to our approval, and all certificates or other documents representing ownership
interests in the Business Entity must bear a legend referring to the
restrictions of this Agreement. As a condition of our approval
of the issuance or transfer of ownership interests to any person other than
you,
we may require (in addition to the other requirements we have the right to
impose) that the proposed owner sign an agreement, in a form provided or
approved by us, agreeing to be bound jointly and severally by, to comply with,
and to guarantee the performance of, all of the your obligations under this
Agreement.
14.5. Transfer
Upon Death or Disability. Upon
your death or disability or, if you are a Business Entity, the death or
disability of the owner of a controlling interest in you, we may require you
(or
such owner’s executor, administrator, conservator, guardian or other personal
representative) to transfer your interest in this Agreement (or such owner’s
interest in you) to a third party. Such disposition (including,
without limitation, transfer by bequest or inheritance) must be completed within
34
the
time
we designate, not less than 1 month but not more than 6 months from the
date of death or disability. Such disposition will be subject to all
of the terms and conditions applicable to transfers contained in this
section. A failure to transfer your interest in this Agreement or the
ownership interest in you within this period of time constitutes a breach
of
this Agreement. For purposes of this Agreement, the term
“disability” means a mental or physical disability, impairment
or condition that is reasonably expected to prevent or actually does prevent
you
or an owner of a controlling interest in you from managing and operating
the
Restaurant.
14.6. Operation
Upon Death or Disability. If,
upon your death or disability or the death or disability of the owner of a
controlling interest in you, the Restaurant is not being managed by a trained
manager, your or such owner’s executor, administrator, conservator, guardian or
other personal representative must within a reasonable time, not to exceed
15
days from the date of death or disability, appoint a manager to operate the
Restaurant. Such manager will be required to complete training at
your expense. Pending the appointment of a manager as provided above
or if, in our judgment, the Restaurant is not being managed properly any time
after your death or disability or after the death or disability of the owner
of
a controlling interest in you, we have the right, but not the obligation, to
appoint a manager for the Restaurant. All funds from the operation of
the Restaurant during the management by our appointed manager will be kept
in a
separate account, and all expenses of the Restaurant, including compensation,
other costs and travel and living expenses of our manager, will be charged
to
this account. We also have the right to charge a reasonable
management fee (in addition to the Royalty, System Fund contributions and Co-op
fund contributions payable under this Agreement) during the period that our
appointed manager manages the Restaurant. Operation of the Restaurant
during any such period will be on your behalf, provided that we only have a
duty
to utilize our best efforts and will not be liable to you or your owners for
any
debts, losses or obligations incurred by the Restaurant or to any of your
creditors for any products, materials, supplies or services the Restaurant
purchases during any period it is managed by our appointed manager.
14.7. Effect
of Consent to Transfer. Our
consent to a transfer of this Agreement and the Restaurant or any interest
in
you does not constitute a representation as to the fairness of the terms of
any
contract between you and the transferee, a guarantee of the prospects of success
of the Restaurant or transferee or a waiver of any claims we may have against
you (or your owners) or of our right to demand the transferee’s exact compliance
with any of the terms or conditions of this Agreement.
14.8. Our
Right of First Refusal. If
you
(or any of your owners) at any time determine to sell, assign or transfer for
consideration an interest in this Agreement and the Restaurant or an ownership
interest in you, you (or such owner) agree to obtain a bona fide, executed
written offer and xxxxxxx money deposit (in the amount of 5% or more of the
offering price) from a responsible and fully disclosed offeror (including lists
of the owners of record and all beneficial owners of any corporate or limited
liability company offeror and all general and limited partners of any
partnership offeror and, in the case of a publicly-held corporation or limited
partnership, copies of the most current annual and quarterly reports and
Form 10K) and within 5 days of receipt submit to us a true and complete
copy of such offer, which includes details of the payment terms of the proposed
sale and the sources and terms of any financing for the proposed purchase
price. To be a valid, bona fide offer, the proposed purchase price
must be denominated in a dollar amount. The offer must apply only to
an interest in you or in this Agreement and the Restaurant and may not include
an offer to purchase any of your (or your owners’) other property or
rights. However, if the offeror proposes to buy any other property or
rights from you (or your owners) under a separate, contemporaneous offer, such
separate, contemporaneous offer must be disclosed to us, and the price and
terms
of purchase offered to you (or your owners) for the interest in you or in this
Agreement and the Restaurant must reflect the bona fide price offered and not
reflect any value for any other property or rights.
35
We
have the right, exercisable by written
notice delivered to you or your selling owner(s) within 30 days from the
date of the delivery to us of both an exact copy of such offer and all other
information we request, to purchase such interest for the price and on the
terms
and conditions contained in such offer, provided that:
(a) we
may substitute
cash for any form of payment proposed in such offer (with a discounted amount
if
an interest rate will be charged on any deferred payments);
(b) our
credit will be
deemed equal to the credit of any proposed purchaser;
(c) we
will have not
less than 30 days after giving notice of our election to purchase to prepare
for
closing; and
(d) we
are entitled to
receive, and you and your owners agree to make, all customary representations
and warranties given by the seller of the assets of a business or the capital
stock of an incorporated business, as applicable, including, without limitation,
representations and warranties as to:
(e) ownership
and
condition of and title to stock or other forms of ownership interest and/or
assets;
(f) liens
and
encumbrances relating to the stock or other ownership interest and/or assets;
and
(g) validity
of
contracts and the liabilities, contingent or otherwise, of the corporation
whose
stock is being purchased.
If
we exercise our
right of first refusal, you and your selling owner(s) agree that, for a period
of 2 years commencing on the date of the closing, you and they will be
bound by the non-competition covenant contained within this
Agreement. You and your selling owner(s) further agree that you and
they will, during this same time period, abide by the restrictions of this
Agreement.
If
we do not exercise our right of first
refusal, you or your owners may complete the sale to such purchaser pursuant
to
and on the exact terms of such offer, subject to our approval of the transfer,
provided that, if the sale to such purchaser is not completed within
120 days after delivery of such offer to us, or if there is a material
change in the terms of the sale (which you agree promptly to communicate to
us),
we will have an additional right of first refusal during the 30 day period
following either the expiration of such 120 day period or notice to us of
the material change(s) in the terms of the sale, either on the terms originally
offered or the modified terms, at our option.
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15.
|
SUCCESSOR
TERMS.
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15.1. Acquisition. Upon
expiration of this Agreement, subject to the conditions of this section, you
will have the right to acquire a successor franchise to operate an EVOS®
Restaurant for 2 additional 5-year periods on the terms and conditions of the
franchise agreement we are then using in granting franchises for EVOS®
Restaurants, if you (and each of your owners) have substantially complied with
this Agreement during its Term, and either:
36
(a) you
maintain
possession of and agree to remodel and/or expand the Restaurant, add or replace
improvements, equipment and signs and otherwise modify the Restaurant as we
require to bring it into compliance with specifications and standards then
applicable for EVOS® Restaurants; or
(b) if
you are unable
to maintain possession of the Site, or if in our judgment the Restaurant should
be relocated, you secure substitute premises we approve, develop such premises
in compliance with specifications and standards then applicable for EVOS®
Restaurants and continue to operate the Restaurant at the Site until operations
are transferred to the substitute premises.
15.2. Grant. You
must give us written notice of your election to acquire a successor franchise
during the last year of the Term, but no later than 180 days before
expiration. We will respond (“Response Notice”),
within 90 days after we receive your notice, of our decision,
either:
(a) to
grant you a
successor franchise;
(b) to
grant you a
successor franchise on the condition that deficiencies of the Restaurant, or
in
your operation of the Restaurant, are corrected; or
(c) not
to grant you a
successor franchise based on our determination that you and your owners have
not
substantially complied with this Agreement during its Term.
If
applicable, our
Response Notice will:
(a) describe
the remodeling and/or expansion of the Restaurant and other improvements or
modifications required to bring the Restaurant into compliance with then
applicable specifications and standards for EVOS® Restaurants; and
(b) state
the actions you must take to correct operating deficiencies and the time period
in which such deficiencies must be corrected.
If
we elect not to
grant a successor franchise, the Response Notice will describe the reasons
for
our decision. Your right to acquire a successor franchise is subject
to your continued compliance with all of the terms and conditions of this
Agreement through the date of its expiration, in addition to your compliance
with the obligations described in the Response Notice.
In
our discretion, we may extend the Term for
such period of time as we deem necessary in order to provide you with either
reasonable time to correct deficiencies or 90 days notice of our refusal to
grant a successor franchise.
15.3. Agreements/Releases. If
you
satisfy all of the other conditions to the grant of a successor franchise,
you
and your owners agree to sign the form of franchise agreement and any ancillary
agreements we are then customarily using in connection with the grant of
successor franchises for EVOS® Restaurants. You and your owners
further agree to sign general releases, in form satisfactory to us, of any
and
all claims against us and our shareholders, officers, directors, employees,
agents, successors and assigns. Failure by you or your owners to sign
such agreements and releases and deliver them to us for acceptance and signature
within 60 days after their delivery to you will be deemed an election not to
acquire a successor franchise.
37
15.4. Training
and Refresher Programs. Our
grant of a successor franchise is also conditioned on the satisfactory
completion by you (or a your owners) of any new training and refresher
programs as we may reasonably require.
15.5. Fees
and
Expenses. Our
grant of a successor franchise is contingent on your payment to us of a
successor franchise fee in the amount of $7,000. We must receive the
fee from you at the time of your election, but not later than 180 days prior
to
the expiration date of this Agreement. In addition, we have the right
to charge you for services we render to you and expenses we incur in
conjunction with the grant of the successor franchise. Payment
of those charges is due upon your receipt of our invoice.
15.6. Subsequent
Successor Franchises. The
fees and other conditions for any later granting of subsequent successor
franchises will be governed by the successor franchise agreement (as
described above); except that the first 5-year successor franchise will also
be
for 5 years.
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16.
|
TERMINATION
OF AGREEMENT.
|
16.1. Termination
of Service. If
we
are entitled to terminate this Agreement in accordance with any of its
provisions, we will have the option to terminate or suspend any one or more
of
any of the services we provide or rights we offer, instead of terminating this
Agreement, including:
(a) your
right to
participate in any convention offered by us from time to time;
(b) your
right to
provide Delivery Services, provide or participate in any call center, order
fulfillment services we develop or provide, or your right to provide live music
or other entertainment at your Restaurant;
(c) your
right to
participate in any services that we provide in connection with any website
or
marketing services, the System Fund or the like; and any exclusivity for the
trade area granted to you under this Agreement; or
(d) your
right to
participate in Preferred Vendor Programs.
If
we terminate or
suspend any of your rights under this Agreement in accordance with this section,
we will provide you five days prior written notice of such suspension or
termination. If any such rights, options or arrangements are
terminated or suspended in accordance with this section, such termination or
suspension will be without prejudice to and will not be a waiver or release
of
any of our rights to terminate this Agreement in accordance with its terms,
or
to terminate any other rights, options or arrangements under this Agreement
or
any other agreement between you and us at any time thereafter, for the same
default or as a result of any additional defaults of the terms of this Agreement
or other agreements between you and us.
16.2. On
Notice. We
have the right to terminate this Agreement, effective upon delivery of written
notice of termination to you, if:
38
(a) you
(or any of your
owners) have made any material misrepresentation or omission in connection
with
your purchase of the Franchise;
(b) you
fail to begin
operating the Restaurant within 9 months of the Agreement Date;
(c) you
or your owners
fail to successfully complete initial or any other training to our
satisfaction;
(d) you
abandon the
Restaurant or fail to actively operate the Restaurant for 1 or more consecutive
business days, unless the Restaurant has been closed for a purpose we have
approved or because of casualty or government order;
(e) you
surrender or
transfer control of the operation of the Restaurant without our prior written
consent;
(f) you
(or any of your
owners) are or have been convicted by a trial court of, or plead or have pleaded
no contest, or guilty, to, a felony or other serious crime or
offense;
(g) you
(or any of your
owners) engage in any dishonest or unethical conduct which may adversely affect
the reputation of the Restaurant or another EVOS® Restaurants or the goodwill
associated with the Marks;
(h) you
understate
Gross Sales by 3% or more, or our audits or investigations show that you
understated Gross Sales by 2% or more 2 or more times during any 18-month
period;
(i) you
(or any of your
owners) make an unauthorized assignment of this Agreement or of an ownership
interest in you, the Restaurant or the Art;
(j) in
the event of
your death or disability or the death or disability of the owner of a
controlling interest in you, this Agreement or such owner’s interest in you is
not assigned as required under this Agreement;
(k) you
lose the right
to possession of the Site;
(l) you
(or any of your
owners) make any unauthorized use or disclosure of any Confidential Information
or use, duplicate or disclose any portion of the Manual in violation of this
Agreement;
(m) you
violate any
health, safety or sanitation law, ordinance or regulation and do not cure the
violation within 24 hours to both our satisfaction and that of the governmental
authority;
(n) you
fail to make
payments of any amounts due to us and do not correct such failure within 30
days
after written notice of such failure is delivered to you;
(o) you
fail to pay
when due any federal or state income, service, sales or other taxes due on
the
operations of the Restaurant, unless you are in good faith contesting your
liability for such taxes;
39
(p) you
(or any of your
owners) fail to comply with any other provision of this Agreement or any System
Standard and do not correct such failure within 30 days after written notice
of
such failure to comply is delivered to you;
(q) you
(or any of your
owners) fail on 3 or more separate occasions within any period of 12 consecutive
Accounting Periods or on 5 occasions during the Term to submit when due reports
or other data, information or supporting records, to pay when due any amounts
due to us or otherwise to comply with this Agreement, whether or not such
failures to comply were corrected after written notice of such failure was
delivered to you; or
(r) you
make an
assignment for the benefit of creditors or admit in writing your insolvency
or
inability to pay your debts generally as they become due; you consent to the
appointment of a receiver, trustee or liquidator of all or the substantial
part
of your property; the Restaurant is attached, seized, subjected to a writ or
distress warrant or levied upon, unless such attachment, seizure, writ, warrant
or levy is vacated within 30 days; or any order appointing a receiver, trustee
or liquidator of you or the Restaurant is not vacated within 30 days following
the entry of such order.
16.3. After
Notice.
We may also
terminate this Agreement after we notify you of our intention to do so because
of the occurrence of any of the following events and your failure to cure it
within 30 days of our notice:
(a) you
or a trained
manager is not present at the Restaurant during all open hours;
(b) failure
to keep the
Restaurant open during the required hours;
(c) purchasing
or
leasing any product or service from an
unapproved supplier;
(d) failure
to
participate in a Co-op;
(e) failure
to pay
taxes and assessments;
(f) failure
to obtain
and maintain required permits
(g) if
you are a
Business Entity, failure to maintain active status in your state of
organization;
(h) failure
to promptly
pay any amounts due us or your suppliers;
(i) failure
to timely
make required reports;
(j) failure
to maintain
sufficient liquid funds to pay amounts to us via electronic
transfer;
(k) you
violate any
other provision of this Agreement;
(l) failure
to maintain
any standards or procedures contained in the Operations Manual;
40
(m) continued
violation
of any law, ordinance, rule or regulation of a governmental agency;
(n) failure
to obtain
any approvals or consents required by this Agreement;
(o) you
violate the
Lease;
(p) the
Lease
terminates or expires;
(q) you
do not pay
approved suppliers or vendors; or
(r) you
lose the right
to possession of the Restaurant.
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17.
|
RIGHTS
AND OBLIGATIONS UPON
TERMINATION.
|
17.1. Payment
of Amounts Owed To Us. You
agree to pay us within 15 days after the effective date of termination or
expiration of this Agreement, or on such later date that the amounts due to
us
are determined, such Royalties, System Fund contributions, amounts owed for
purchases from us, interest due on any of the foregoing and all other amounts
owed to us which are then unpaid.
17.2. Marks. Upon
the termination or expiration of this Agreement:
(a) you
may not
directly or indirectly at any time or in any manner (except with respect to
other EVOS® Restaurants you own and operate) identify yourself or any business
as a current or former EVOS® Restaurant, or as one of our licensees or franchise
owners, use any Xxxx, any colorable imitation of a Xxxx or other indicia of
an
EVOS® Restaurant in any manner or for any purpose or utilize for any purpose any
trade name, trade or service xxxx or other commercial symbol that indicates
or
suggests a connection or association with us;
(b) you
agree to take
such action as may be required to cancel all fictitious or assumed name or
equivalent registrations relating to your use of any Xxxx;
(c) if
we do not have
or do not exercise an option to purchase the Restaurant, you agree to deliver
to
us within 30 days after, as applicable, the effective date of expiration of
this
Agreement or the Notification Date all signs, sign-faces, sign-cabinets,
marketing materials, forms and other materials containing any Xxxx or otherwise
identifying or relating to an EVOS® Restaurant and allow us, without liability
to you or third parties, to remove all such items from the
Restaurant;
(d) if
we do not have
or do not exercise an option to purchase the Restaurant, you agree that, after,
as applicable, the effective date of expiration of this Agreement or the
Notification Date, you will promptly and at your own expense make such
alterations we specify to distinguish the Restaurant clearly from its former
appearance and from other EVOS® Restaurants so as to prevent confusion by the
public;
(e) if
we do not have
or do not exercise an option to purchase the Restaurant, you agree that, after,
as applicable, the effective date of expiration of this Agreement or the
Notification Date, you will notify the telephone company and all telephone
directory publishers of the termination or expiration
41
(f) you
agree to
furnish us, within 30 days after, as applicable, the effective date of
expiration of this Agreement or the Notification Date, with evidence
satisfactory to us of your compliance with the foregoing
obligations.
17.3. Confidential
Information. You
agree that, upon termination or expiration of this Agreement, you will
immediately cease to use any of our Confidential Information in any business
or
otherwise and return to us all copies of the Manual and any other confidential
materials that we have loaned to you.
17.4. Competitive
Restrictions. Upon
our termination of this Agreement in accordance with its terms and conditions,
or expiration of this Agreement (if we offer, but you elect not to acquire,
a
successor franchise),
(a) you
and your owners
agree that, for a period of 2 years commencing on the effective date of
termination or expiration or the date on which a person restricted by this
section begins to comply with this section, whichever is later, neither you
nor
any of your owners will have any direct or indirect interest (e.g., through
a
spouse or child) as a disclosed or beneficial owner, investor, partner,
director, officer, employee, consultant, representative or agent or in any
other
capacity in any Competitive Business operating:
|
(i)
|
at
the
Site;
|
|
(ii)
|
within
50
miles of the Site; or
|
|
(iii)
|
within
50
miles of any other EVOS® Restaurant in operation or under construction on
the later of the effective date of the termination or expiration
or the
date on which a person restricted by this section complies with this
section.
|
If
any person restricted by this section
refuses voluntarily to comply with the foregoing obligations, the 2-year period
will commence with the entry of an order of an arbitrator, or court if
necessary, enforcing this provision. You and your owners expressly
acknowledge that you possess skills and abilities of a general nature and have
other opportunities for exploiting such skills. Consequently,
enforcement of the covenants made in this section will not deprive you of your
personal goodwill or ability to earn a living.
17.5. Our
Right to Purchase.
(a) ExerciseofOption. We
have the option, exercisable by giving written notice to you within 60 days
from
the date of such termination or Triggering Event, to purchase the Restaurant
from you, including the leasehold rights to the Site. Upon
either: (i) our termination of this Agreement in accordance with
its terms and conditions or your termination of this Agreement without cause;
or
(ii) the occurrence of a “Triggering
Event.” (The date on which we notify you whether or not we
are exercising our option is referred to in this Agreement as the
“Notification Date”). We have the unrestricted right to
assign this option to purchase the Restaurant. We will be
entitled to all customary warranties and representations in connection with
our asset purchase,
42
(b) LeaseholdRights. You
agree at our election:
|
(i)
|
to
assign
your leasehold interest in the Site to us;
or
|
|
(ii)
|
to
enter into
a sublease for the remainder of the lease term on the same terms
(including renewal options) as the prime
lease.
|
(c) Purchase
Price. The “purchase price” for the Restaurant will be its
fair market value, determined in a manner consistent with reasonable
depreciation of the Restaurant’s equipment, signs, inventory, materials and
supplies, provided that the Restaurant will be valued as an independent business
and its value will not include any value for:
|
(i)
|
the
Franchise
or any rights granted by this
Agreement;
|
|
(ii)
|
the
Marks;
or
|
|
(iii)
|
participation
in the network of EVOS®
Restaurants.
|
When
determining
the purchase price, the Restaurant’s fair market value will include the goodwill
you developed in the market of the Restaurant that exists independent of the
goodwill of the Marks and the System. The length of the remaining
term of the lease for the Site will also be considered in determining the
Restaurant’s fair market value. We may exclude from the assets
purchased cash or its equivalent and any equipment, signs, inventory, materials
and supplies that are not reasonably necessary (in function or quality) to
the
Restaurant’s operation or that we have not approved as meeting standards for
EVOS® Restaurant, and the purchase price will reflect such
exclusions.
(d) Appraisal. If
we and you are unable to agree on the Restaurant’s fair market value, its fair
market value will be determined by 3 independent appraisers who
collectively will conduct 1 appraisal. We will appoint one appraiser,
you will appoint one appraiser and the two party-appointed appraisers will
appoint the third appraiser. You and we agree to select our
respective appraisers within 15 days after we notify you that we are exercising
our option to purchase the Restaurant, and the two appraisers so chosen are
obligated to appoint the third appraiser within 15 days after the date on which
the last of the two party-appointed appraisers was appointed. You and
we will bear the cost of our own appraisers and share equally the fees and
expenses of the third appraiser chosen by the two party-appointed
appraisers. The appraisers are obligated to complete their appraisal
within 30 days after the third appraiser’s appointment.
The
purchase price will be paid in 2
installments. The first installment consisting of $30,000 (the “First
Installment”) will be paid within 15 days of our notifying you of our
election to purchase your Business. The second installment of the
purchase price (the “Second Installment”) will equal the total
purchase price agreed to among the parties or determined by the appraisal
process described in this section less the First Installment. The Second
Installment will be paid at a time of our choosing, not later than 90 days
after
determination of the purchase price. We have the right to set
off against the purchase price, and thereby
43
reduce
the purchase
price by, any and all amounts you or your owners owe to us or any amounts of
rent you owe the landlord of the Site, or supplies or your creditors that we
pay
on your behalf in order to obtain lawful possession of the Site, any of your
assets or to cover amounts you owe suppliers we do business with. You
agree not to take any actions detrimental to the operations of your Restaurant
prior to closing. At the closing, which will occur at our option, on
or within 15 days of our payment of the First Installment, you agree to deliver
instruments transferring to us:
|
(i)
|
good
and
merchantable title to the assets purchased, free and clear of all
liens
and encumbrances (other than liens and security interests acceptable
to us), with all sales and other transfer taxes paid by you;
and
|
|
(ii)
|
all
licenses
and permits of the Restaurant which may be assigned or transferred;
and
|
|
(iii)
|
the
leasehold
interest and improvements in the
Site.
|
If
you cannot
deliver clear title to all of the purchased assets, or if there are other
unresolved issues, the closing of the sale will be accomplished through an
escrow. You and your owners further agree to execute general
releases, in form satisfactory to us, of any and all claims against us and
our
shareholders, officers, directors, employees, agents, successors and
assigns.
17.6. Continuing
Obligations. All
of
our and your (and your owners’ and affiliates’) obligations which expressly or
by their nature survive the expiration or termination of this Agreement will
continue in full force and effect subsequent to and notwithstanding its
expiration or termination and until they are satisfied in full or by their
nature expire. Examples include indemnification, payment,
de-identification and dispute resolution provisions.
17.7. Buyout
Option.
(a) Triggering
Event: We, or our designee, may purchase all of the rights
and interests you have under this Agreement, at our option, if we experience
a
Triggering Event. A “Triggering Event” means the
sale of all or substantially all of our assets to an unaffiliated third party,
the sale or exchange of more than 50% of our total issued and outstanding equity
securities to an unaffiliated third party, a merger or consolidation of us
with
or into an unaffiliated third party in which neither we nor our affiliates
obtain or maintain a controlling voting interest, or the effectiveness of a
registration statement for the initial public offering of our equity
securities.
(b) Purchase
Price Form: If we exercise our option pursuant to a
Triggering Event other than an initial public offering, the purchase price
will
be paid to you in the same form or type of consideration, and upon the same
terms, as we or our shareholders receive in the Triggering Event
transaction. If the Triggering Event is an initial public offering,
at our option the purchase price will be paid to you either in cash or stock
valued at the initial public offering price.
(c) Purchase
Price Amount: The purchase price will be
determined in accordance with the appraisal procedures of Section
17.5.
44
(d) Procedural
Aspects: We must notify you of our intention to
exercise our purchase option not later than 60 days following our entering
into
the definitive purchase and sale agreement or the underwriting agreement
relating to the Triggering Event. Unless the Triggering Event is not
completed or closed, in which case our notice and election to exercise our
purchase option will not be effective, the closing for such acquisition will
take place at the completion or closing of the Triggering Event or, at our
option, within 180 days thereafter. You will have all of your rights
and benefits, and all of your obligations, under this Agreement until we (or
our
designee) have consummated the acquisition pursuant to our purchase
option. The acquisition will be in the form of an assignment and
relinquishment of your rights under this Agreement and we will not be obligated
to assume any of your obligations or liabilities whatsoever other than those
we,
at our option, expressly agree, in writing, to assume. If we do so,
we will notify you at least 3 days prior to closing of such obligations we
wish
to assume. Moreover, your rights must be transferred to us free and
clear of all liens, pledges, security interests and encumbrances. We
will be entitled to all customary representations and warranties in that regard,
in such form and content as we reasonably require. You will cooperate
with us in preparing for the sale of such rights, any transition in ownership,
and to accurately calculate the purchase price. You will not,
however, be required to transfer any assets other than your contract rights
in
this Agreement, unless we elect, as provided in subsection (f) immediately
following this subsection, to acquire as part of the transaction any or all
of
the franchises owned or controlled by you or your affiliates.
(e) Option
to
Include Franchises: If we exercise our option pursuant to a Triggering
Event to acquire your rights under this Agreement, we may also at the time
we
notify you of our election also elect to include as part of the acquisition
any
or all franchise(s) owned or controlled by you or your affiliates, including
all
of your or their rights and obligations under any related Franchise Agreement
and property lease and including all assets used in connection with the
operation of the EVOS® Restaurant covered by this Agreement.
|
18.
|
RELATIONSHIP
OF THE
PARTIES/INDEMNIFICATION.
|
18.1. Independent
Contractors. You
and we understand and agree that this Agreement does not create a fiduciary
relationship between you and us, that we and you are and will be independent
contractors and that nothing in this Agreement is intended to make either you
or
us a general or special agent, joint venturer, partner or employee of the other
for any purpose. You agree to conspicuously identify yourself in all dealings
with customers, suppliers, public officials, Restaurant personnel and others
as
the owner of the Restaurant under a franchise we have granted and to place
such
notices of independent ownership on such forms, business cards, stationery
and
advertising and other materials as we may require from time to
time.
18.2. No
Liability for Acts of Other Party. You
agree not to employ any of the Marks in signing any contract or applying for
any
license or permit, or in a manner that may result in our liability for any
of
your indebtedness or obligations, and that you will not use the Marks in any
way
we have not expressly authorized. Neither we nor you will make any
express or implied agreements, warranties, guarantees or representations or
incur any debt in the name or on behalf of the other, represent that our
respective relationship is other than franchisor and franchisee or be obligated
by or have any liability under any agreements or representations made by the
other that are not expressly authorized in writing. We will not be
obligated for any damages to any person or property directly or indirectly
arising out of the Restaurant’s operation or the business you conduct pursuant
to this Agreement.
45
18.3. Taxes. We
will have no liability for any sales, use, alcohol surcharge, service,
occupation, excise, gross receipts, income, payroll, property or other taxes,
whether levied upon you or the Restaurant, in connection with the business
you
conduct (except any taxes we are required by law to collect from you with
respect to purchases from us). Payment of all such taxes are your
responsibility.
18.4. Indemnification. You
agree to indemnify, defend and hold harmless us, our affiliates and our
respective shareholders, directors, officers, employees, agents, successors
and
assignees (the “Indemnified Parties”) against and to reimburse
any one or more of the Indemnified Parties for all claims, obligations and
damages described in this section, any and all taxes described in this Agreement
and any and all claims and liabilities directly or indirectly arising out of
the
Restaurant’s operation (even if our negligence is alleged) or your breach of
this Agreement. For purposes of this indemnification,
“claims” includes all obligations, damages (actual,
consequential or otherwise) and costs reasonably incurred in the defense of
any
claim against any of the Indemnified Parties, including, without limitation,
reasonable accountants’, arbitrators’, attorneys’ and expert witness fees, costs
of investigation and proof of facts, court costs, other expenses of litigation,
arbitration or alternative dispute resolution and travel and living expenses.
We
have the right to defend any such claim against us. This indemnity will continue
in full force and effect subsequent to and notwithstanding the expiration or
termination of this Agreement. Under no circumstances will we or any other
Indemnified Party be required to seek recovery from any insurer or other third
party, or otherwise to mitigate our, their or your losses and expenses, in
order
to maintain and recover fully a claim against you. You agree that a failure
to
pursue such recovery or mitigate a loss will in no way reduce or alter the
amounts we or another Indemnified Party may recover from you. If, for any
reason, you are not permitted by law to indemnify us for a particular claim,
then you and we will each contribute our proportionate amount necessary to
satisfy the claim. The contribution ratio will be based on the proportion of
revenues you and we receive from the operation of your Restaurant; which you
and
we agree is approximately a 95:05 ratio from you to us. (So if a claim is for
$100, you contribute $95 and we contribute $5.)
|
19.
|
ENFORCEMENT.
|
19.1. Severability;
Substitution of Valid Provisions. Except
as otherwise stated in this Agreement, each term of this Agreement, and any
portion of any term, are severable. The remainder of this Agreement
will continue in full force and effect. To the extent that any
provision restricting your competitive activities is deemed unenforceable,
you
and we agree that such provisions will be enforced to the fullest extent
permissible under governing law. This Agreement will be deemed
automatically modified to comply with such governing law if any applicable
law
requires: (a) a greater prior notice of the termination of or
refusal to renew this Agreement; or (b) the taking of some other action not
described in this Agreement; or (c) if any EVOS® System Standard is invalid
or unenforceable. We may modify such invalid or unenforceable
provision to the extent required to be valid and enforceable. In such
event, you will be bound by the modified provisions.
19.2. Waivers. We
will not be deemed to have waived our right to demand exact compliance with
any
of the Terms, even if at any time: (a) we do not exercise a
right or power available to us under this Agreement; or (b) we do
not insist on your strict compliance with the terms of this Agreement; or
(c) if there develops a custom or practice which is at variance with the
terms of this Agreement; or (d) if we accept payments which are otherwise
due to us under this Agreement. Similarly, our waiver of any
particular breach or series of breaches under this Agreement or of any similar
term in any other agreement between you and us or between us and any other
franchise owner, will not affect our rights with respect to any later breach
by
you or anyone else.
46
19.3. Limitation
of Liability. Neither
of the parties will be liable for loss or damage or deemed to be in breach
of this Agreement if failure to perform obligations results
from:
(a) compliance
with any
law, ruling, order, regulation, requirement or instruction of any
federal, state or municipal government or any department or agency
thereof;
(b) acts
of God, war,
terror or similar like;
(c) acts
or omissions
of a similar event or cause.
However,
such
delays or events do not excuse payments of amounts owed at any
time.
19.4. Approval
and Consents. Whenever
this Agreement requires our advance approval, agreement or consent, you
agree to make a timely written request for it. Our approval or
consent will not be valid unless it is in writing. Except where
expressly stated otherwise in this Agreement, we have the absolute right to
refuse any request by you or to withhold our approval of any action or
omission by you. If we provide to you any waiver, approval, consent,
or suggestion, or if we neglect or delay our response or deny any request for
any of those, we will not be deemed to have made any warranties or guarantees
which you may rely on, and will not assume any liability or obligation to
you.
19.5. Waiver
of Punitive Damages.
EXCEPT
FOR YOUR OBLIGATIONS TO INDEMNIFY US AND CLAIMS FOR UNAUTHORIZED USE OF THE
MARKS OR CONFIDENTIAL INFORMATION, YOU AND WE EACH WAIVE TO THE FULL EXTENT
PERMITTED BY LAW ANY RIGHT TO, OR CLAIM FOR, ANY PUNITIVE OR EXEMPLARY DAMAGES
AGAINST THE OTHER. YOU AND WE ALSO AGREE THAT, IN THE EVENT OF A DISPUTE BETWEEN
YOU AND US, THE PARTY MAKING A CLAIM WILL BE LIMITED TO EQUITABLE RELIEF AND
RECOVERY OF ANY ACTUAL DAMAGES IT SUSTAINS.
19.6. Limitations
of Claims.
ANY AND
ALL CLAIMS ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP AMONG YOU AND
US
MUST BE MADE BY WRITTEN NOTICE TO THE OTHER PARTY WITHIN 1 YEAR FROM THE
OCCURRENCE OF THE FACTS GIVING RISE TO SUCH CLAIM (REGARDLESS OF WHEN IT
BECOMES KNOWN); EXCEPT FOR CLAIMS ARISING FROM: (A) UNDER-REPORTING OF
GROSS SALES; (B) UNDER-PAYMENT OF AMOUNTS OWED TO US OR OUR AFFILIATES;
(C) CLAIMS FOR INDEMNIFICATION; AND/OR (D) UNAUTHORIZED USE OF
THE MARKS. HOWEVER, THIS PROVISION DOES NOT LIMIT THE RIGHT TO
TERMINATE THIS AGREEMENT IN ANY WAY.
19.7. Governing
Law. EXCEPT
TO THE EXTENT THIS AGREEMENT OR ANY PARTICULAR DISPUTE IS GOVERNED BY THE
U.S. TRADEMARK ACT OF 0000 (XXXXXX XXX, 00 X.X.X. §0000 AND THE SECTIONS
FOLLOWING IT) OR OTHER FEDERAL LAW, THIS AGREEMENT AND THE FRANCHISE ARE
GOVERNED BY THE LAW OF THE STATE IN WHICH OUR PRINCIPAL BUSINESS OFFICE IS
LOCATED, EXCLUDING ANY LAW REGULATING THE SALE OF FRANCHISES OR GOVERNING THE
RELATIONSHIP BETWEEN A FRANCHISOR AND FRANCHISE OWNER, UNLESS THE
JURISDICTIONAL REQUIREMENTS OF SUCH LAWS ARE MET INDEPENDENTLY WITHOUT REFERENCE
TO THIS SECTION. ALL MATTERS RELATING TO ARBITRATION ARE GOVERNED BY
47
THE
FEDERAL ARBITRATION ACT. References to any law or
regulation also refer to any successor laws or regulations and any implementing
regulations for any statute, as in effect at the relevant
time. References to a governmental agency also refer to any successor
regulatory body that succeeds to the function of such agency.
19.8. Jurisdiction. YOU
AND WE CONSENT AND IRREVOCABLY SUBMIT TO THE JURISDICTION AND VENUE OF ANY
STATE
OR FEDERAL COURT OF COMPETENT JURISDICTION LOCATED IN HILLSBOROUGH
COUNTY, FLORIDA, AND WAIVE ANY OBJECTION TO THE JURISDICTION AND VENUE OF SUCH
COURTS. THE EXCLUSIVE CHOICE OF JURISDICTION DOES NOT PRECLUDE THE
BRINGING OF ANY ACTION BY THE PARTIES OR THE ENFORCEMENT BY THE PARTIES IN
ANY
JUDGMENT OBTAINED IN ANY SUCH JURISDICTION, IN ANY OTHER APPROPRIATE
JURISDICTION OR THE RIGHT OF THE PARTIES TO CONFIRM OR ENFORCE ANY ARBITRATION
AWARD IN ANY APPROPRIATE JURISDICTION.
19.9. Waiver
of Jury Trial. YOU
AND WE EACH IRREVOCABLY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY, BROUGHT BY EITHER YOU OR
US.
19.10. Cumulative
Remedies. The
rights and remedies provided in this Agreement are cumulative and neither you
nor we will be prohibited from exercising any other right or remedy
provided under this Agreement or permitted by law or equity.
19.11. Costs
and Attorneys Fees. If
a
claim for amounts owed by you to us or any of our affiliates is asserted in
any
legal or arbitration proceeding or if either you or we are required to enforce
this Agreement in a judicial or arbitration proceeding, the party prevailing
in
such proceeding will be entitled to reimbursement of its costs and
expenses, including reasonable accounting and attorneys fees.
Attorneys fees will include, without limitation, reasonable legal fees
charged by attorneys, paralegal fees, and costs and disbursements, whether
incurred prior to, or in preparation for, or contemplation of, the filing
of written demand or claim, action, hearing, or proceeding to enforce the
obligations of the parties under this Agreement.
19.12. Binding
Effect. This
Agreement is binding on and will inure to the benefit of our successors and
assigns. Except as otherwise provided in this Agreement, this
Agreement will also be binding on your successors and assigns, and
your heirs, executors and administrators.
19.13. Entire
Agreement. This
Agreement, including the introduction, addenda and exhibits to it,
constitutes the entire agreement between you and us. There are
no other oral or written understandings or agreements between you and us
concerning the subject matter of this Agreement. Except as
expressly provided otherwise in this Agreement, this Agreement may be
modified only by written agreement signed by both you and us.
19.14. No
Liability to Others; No Other Beneficiaries. We
will not, because of this Agreement or by virtue of any approvals, advice
or services provided to you, be liable to any person or legal entity who is
not
a party to this Agreement. Except as specifically described in this
Agreement, no other party has any rights because of this Agreement.
19.15. Construction. The
headings of the sections are for convenience only. If two or more
persons are at any time franchise owners hereunder, whether or not as partners
or joint venturers, their obligations and liabilities to us are joint and
several. This Agreement may be signed in multiple copies, each
of which will be an original. “A or B” means
“A” or “B” or both.
48
19.16. Certain
Definitions. The
term “family member” refers to parents, spouses, offspring
and siblings, and the parents and siblings of spouses. The term
“affiliate” means any Business Entity directly or
indirectly owned or controlled by a person, under common control with a
person or controlled by a person. The terms “franchisee,
franchise owner, you and your” are applicable to one or more persons, a
Business Entity, as the case may be. The singular use of any pronoun
also includes the plural and the masculine and neuter usages
include the other and the feminine. The
term “person” includes individuals or Business
Entities. The term “section” refers to a section or
subsection of this Agreement. The word “control” means the
power to direct or cause the direction of management and
policies. The word “owner” means any person holding
a direct or indirect, legal or beneficial ownership interest or voting rights
in
another person (or a transferee of this Agreement or an interest in you),
including any person who has a direct or indirect interest in you or this
Agreement and any person who has any other legal or equitable interest, or
the
power to vest in himself any legal or equitable interest, in the revenue,
profits, rights or assets.
19.17. Timing
is of the Essence. It
will be a material breach of this Agreement to fail to perform any obligation
within the time required or permitted by this Agreement. In computing
time periods from one date to a later date, the words “from”
and “commencing on” (and the like) mean “from and
including”; and the words “to,”
“until” and “ending on” (and the like)
mean
“to but excluding.” Indications of time of day mean
Jacksonville, Florida time.
|
20.
|
DISPUTE
RESOLUTION.
|
20.1. Mediation. During
the Term, certain disputes may arise between you and us that may be resolvable
through mediation. To facilitate such resolution, you and we agree
that each party must, before commencing any arbitration proceeding, submit
the
dispute for non-binding arbitration at a mutually agreeable location (if you
and
we cannot agree on a location, the mediation will be conducted at our
headquarters) to 1 mediator, appointed under the American Arbitration
Association’s Commercial Mediation Rules. The mediator will conduct a
mediation in accordance with such rules. You and we agree that any
statements made by either you or us in any such mediation proceeding will not
be
admissible in any subsequent arbitration or other legal
proceeding. Each party will bear its own costs and expenses of
conducting the mediation and share equally the costs of any third parties who
are required to participate. Nevertheless, both you and we have the
right in a proper case to obtain temporary restraining orders and temporary
or
preliminary injunctive relief from a court of competent
jurisdiction. However, the parties must immediately and
contemporaneously submit the dispute for non-binding mediation. If
any dispute between the parties cannot be resolved through mediation within
60
days following the appointment of a mediator, the parties must submit the
dispute to arbitration subject to the following terms and
conditions.
20.2. Agreement
to Arbitrate. Except
for claims (as defined below) related to or based on the marks (which at our
sole option may be submitted to any court of competent jurisdiction) and
except as otherwise expressly provided by section 20.4 of this
Agreement, any litigation, claim, dispute, suit, action, controversy,
proceeding or otherwise (“Dispute”) between or involving you
and us (and/or involving you and/or any claim against or involving any of our
or
our affiliates’ shareholders, directors, partners, officers, employees, agents,
attorneys, accountants, affiliates, guarantors or otherwise), which are not
resolved within 45 days of notice from either you or we to the other, will
be
submitted to arbitration to the office of the American Arbitration Association
closest to our then existing principal business address. The
arbitration will be conducted by the American Arbitration Association pursuant
to its commercial arbitration rules. All matters relating to
arbitration will be governed by the
49
20.3. Place
and Procedure. The
arbitration proceedings will be conducted at our headquarters in Tampa,
Florida. Any dispute and any arbitration will be conducted and
resolved on an individual basis only and not a class-wide, multiple plaintiff
or
similar basis. Any such arbitration proceeding will not be
consolidated with any other arbitration proceeding involving any other person,
except for disputes involving affiliates of the parties to such
arbitration. The parties agree that, in connection with any such
arbitration proceeding, each must submit or file any claim which would
constitute a compulsory counterclaim (as defined by rule 13 of the federal
rules of civil procedure) within the same proceeding as the dispute to which
it
relates. Any such dispute which is not submitted or filed in such
proceeding will be barred.
20.4. Awards
and Decisions. The
proceedings will be heard by 1 arbitrator. The arbitrator will have
the right to award any relief which he deems proper in the circumstances,
including, for example, money damages (with interest on unpaid amounts from
their due date(s)), specific performance, temporary and/or permanent injunctive
relief, and reimbursement of attorneys’ fees and related costs to the prevailing
party. The arbitrator will not have the authority to award exemplary
or punitive damages except as otherwise permitted by this Agreement, nor the
right to declare any xxxx generic or otherwise invalid. You and we
agree to be bound by the provisions of any limitations or the time on which
claims must be brought under applicable law or under this Agreement, whichever
expires earlier. The award and decision of the arbitrator will be
conclusive and binding and judgment on the award may be entered in any court
of
competent jurisdiction. The parties acknowledge and agree that any
arbitration award may be enforced against either or both of them in a court
of
competent jurisdiction and each waives any right to contest the validity or
enforceability of such award. Without limiting the foregoing,
the parties will be entitled in any such arbitration proceeding to the
entry of an order by a court of competent jurisdiction pursuant to an opinion
of
the arbitrator for specific performance of any of the requirements of this
Agreement. Judgment upon an arbitration award may be entered in any
court having jurisdiction and will be binding, final and
non-appealable.
20.5. Specific
Performance. Nothing
in this Agreement will prevent either you or we from obtaining temporary
restraining orders and temporary or preliminary injunctive relief in a court
of
competent jurisdiction. However, you and we must contemporaneously
submit the dispute for arbitration on the merits.
20.6. Third
Parties. The
arbitration provisions of this Agreement are intended to benefit and bind
certain third party non-signatories, and all of yours and our principal owners
and affiliates.
20.7. Survival. This
provision continues in full force and effect subsequent to and notwithstanding
the expiration or termination of this Agreement for any reason.
50
|
21.
|
NOTICES
AND PAYMENTS.
|
All
notices and
reports permitted or required under this Agreement or by the Manuals must be
in
writing and will be deemed delivered:
(a) at
the time
delivered by hand;
(b) 1
business day
after transmission by facsimile, telecopy, e-mail, or other electronic
system;
(c) 2
business days
after being placed in the hands of a commercial airborne courier service for
next business day delivery; or
(d) 3
business days
after placement in the United States mail by registered or certified mail,
return receipt requested, postage prepaid.
Delivery
by
facsimile, e-mailed and electronic means constitutes a writing. All
such notices must be addressed to the parties as follows:
If
to
Us: EVOS
USA, INC.
000
Xxxxx Xxxxxx Xxxxxx
Xxxxx,
Xxxxxxx 00000
Attention: Xxxxxxx
Xxxxxxx
If
to
You: HEALTHY
FAST FOOD, INC.
0000
Xxxxxxxx Xxxxxxx - Xxxxx X
Xxxxxxxxx,
XX 00000
Attention: Xx.
Xxxxx
Xxxxxxxxxx
Either
you or we may change the address for
delivery of all notices and reports and any such notice will be effective within
10 business days of any change in address. Any required payment or
report not actually received by us during regular business hours on the date
due
(or postmarked by postal authorities at least 2 days prior to such date, or
in
which the receipt from the commercial courier service is not dated prior to
2
days prior to such date) will be deemed delinquent.
Intending
to be bound, you and we sign and
deliver this Agreement in 2 counterparts on the Agreement Date.
| "US" | "YOU" | |||
| EVOS USA, INC. | HEALTHY FAST FOOD, INC. | |||
|
By:
|
By:
/s/ Xxxxxxx
X. Xxxxxx
|
|||
|
Name:
|
Name:
Xxxxxxx X. Xxxxxx
|
|||
|
Title:
|
Title:
President
|
|||
| Date: | Date: 12/14/05 |
51
EXHIBIT
“A”
TO
THE
EVOS
USA,
INC.
FRANCHISE
AGREEMENT
DATED
DECEMBER 14th,
2005
WITH
HEALTHY
FAST FOOD, INC.
(Name
of
Franchise Owner)
GLOSSARY
This
Glossary is
intended as a general guideline to assist you in reading the Franchise
Agreement. You must review the Franchise Agreement to get an exact
definition of a term.
|
Term
|
Definition
|
|
Account
Section
5.3
|
The
Restaurant’s bank operating account from which you may be required to
authorize us to initiate debit entries or credit correction entries
to for
payments of Royalties and other amounts due under this Agreement,
including any applicable interest charges.
|
|
Accounting
Period
Section
5.2
|
That
period
we designate in the Manual (currently a 7-day accounting period for
Royalty and Marketing Calculations that runs from Monday through
Sunday
and a 4, 4, 5-week accounting period for financial statement
purposes).
|
|
Accounting
System
Section
12.1
|
The
format,
reporting system and accounting system that we require from time
to
time.
|
|
Affiliate
Section
19.16
|
Any
Business
Entity directly or indirectly owned or controlled by a person, under
common control with a person controlled by a person.
|
|
Agreement
Introductory
Paragraph
|
The
Franchise
Agreement between EVOS USA, INC. and you.
|
|
Agreement
Date
Introductory
Paragraph
|
Date
of this
Agreement.
|
|
Annualized
Compensation
Section
9.3
|
The
aggregate
compensation (including wages/salary, bonus and other employers’ costs of
all taxes and benefits) payable to an employee (i) during the 12-month
period immediately preceding the date of such employee’s employment with
us, our affiliate or our franchise owners (if employed during an
entire
12-month period); or (ii) during the period of such employee’s employment
with us prorated on the basis of a 365 day year.
|
|
Anti-Terrorism
Section
1.3
|
Executive
Order 13224 issued by the President of the United States, the USA
PATRIOT
Act, and all other present and future federal, state and local laws,
ordinances, regulations, policies, lists and any other requirements
of any
governmental authority addressing or in any way relating to terrorist
acts
and acts of war.
|
|
Art
Section
4.2
|
The
paintings, pictures, photographs, murals, drawings, sculptures and
other
forms of art we designate, commission, loan or lease, or require
you to
commission, borrow, lease or possess for display at your
Site.
|
1
|
Term
|
Definition
|
|
Assignment
Notice
Section
3.3(c)(iii)
|
The
written
notice from us in the event of your default of the lease or the Franchise
Agreement that the lease will be assigned to us.
|
|
Business
Entity
Section
1.5
|
A
business
organization like a corporation, limited liability company or
partnership.
|
|
Capital
Modifications
Section
10.3
|
Additional
capital that you may be obligated to invest in the Restaurant because
of
System Standards modifications that we may make from time to
time.
|
|
Claims
Section
18.4
|
All
obligations, damages (actual, consequential or otherwise) and costs
reasonably incurred in the defense of any claim against any of the
Indemnified Parties, including, without limitation, reasonable
accountants’, arbitrators’, attorneys’ and expert witness fees, costs of
investigation and proof of facts, court costs, other expenses of
litigation, arbitration or alternative dispute resolution and travel
and
living expenses.
|
|
Competitive
Business
Section
9.2
|
Any
business
or facility owning, operating or managing, or granting franchises
or
licenses to others to do so, any restaurant or food service facility
(other than an EVOS® Restaurant operated under a franchise agreement with
us) that offers casual dining, catering, delivery service, kiosk-type
or
take-out of smoothies, shakes, healthier fare or organic or natural
type
sandwiches, wraps, burgers, salads, vegetable burgers, turkey burgers,
soy
burgers and other soy-based foods, lower fat French fries, lower
carb
foods, specialty ketchup, or any type of deli or fast foods and
beverages which are then offered by EVOS®
Restaurants.
|
|
Computer
System
Section
10.6
|
The
computer
equipment and operating software that we periodically specify and
that you
must use in developing and operating the
Restaurant.
|
2
|
Term
|
Definition
|
|
Confidential
Information
Section
8.1
|
Certain
confidential information that we have developed relating to the
development and operation of EVOS® Restaurants, which includes (a) the
System and the know-how related to its use; (b) plans, specifications,
size and physical characteristics of EVOS® Restaurants; (c) Site selection
criteria, land use and zoning techniques and criteria; (d) methods
in
obtaining licensing and meeting regulatory requirements; (e) sources
and
design of equipment, furniture, forms, materials and supplies; (f)
marketing, advertising and promotional programs for EVOS® Restaurants; (g)
staffing and delivery methods and techniques for personal services;
(h)
the selection, testing and training of personnel for EVOS® Restaurants;
(i) the recruitment, qualification and investigation methods to secure
employment for employment candidates; (i) any computer software we
make
available or recommend for EVOS® Restaurants; (j) methods, techniques,
formats, specifications, procedures, information and systems related
to
and knowledge of and experience in the development, operation and
franchising of EVOS® Restaurants; (k) knowledge of specifications for and
suppliers of certain products, materials, supplies, furniture, furnishings
and equipment; (l) recipes, formulas, preparation methods and serving
techniques; and (m) knowledge of operating results and financial
performance of EVOS® Restaurants other than those operated by you (or your
affiliates); (o) e-commerce related data.
|
|
Construction
Section
4.1(c)
|
Construction
of all required improvements to the Site.
|
|
Construction
Plans
Section
4.1
|
Those
preliminary layouts, construction plans, space plans and specifications
which you are obligated, at your expense, have an architect prepare
to
suit the shape and dimensions of the Site in connection with its
construction.
|
|
Control
Section
19.16
|
The
power to
direct or cause the direction of management and
policies.
|
|
Co-Op
Section
11.6
|
An
association of EVOS® Restaurant owners that may be established in the
geographic area in which your Restaurant is located.
|
|
Copyrights
Section
7.1
|
All
information capable of being rendered into tangible form created
by you or
others in connection with or used in connection with the System or
your
Restaurant, including, for example, Art, written materials, electronic
data, Software, Manuals, menus, brochures, music, live performances,
photography, the content compilation of website’s graphics and the
like.
|
|
Delivery
Area
Section
10.12
|
The
area, if
any, indicated in Exhibit C in which you are permitted or required
to
provide Delivery Services if we permit or require you to do
so.
|
|
Delivery
Services
Section
10.12
|
Those
delivery, catering or Other Services that we designate or
approve.
|
|
Designs
Section
4.1
|
Those
sets of
design plans for the Restaurant which we or our affiliates provide
to
you.
|
3
|
Term
|
Definition
|
|
Disability
Section
14.5
|
A
mental or
physical disability, impairment or condition that is reasonably expected
to prevent or actually does prevent you or an owner of a controlling
interest in you from managing and operating the
Restaurant.
|
|
Dispute
Section
20.2
|
Any
litigation, claim, dispute, suit, action, controversy, proceeding
or
otherwise between or involving you and us (and/or involving you and/or
any
claim against or involving any of our or our affiliates’ shareholders,
directors, partners, officers, employees, agents, attorneys, accountants,
affiliates, guarantors or otherwise).
|
|
Drive
Through Service
Section
10.12
|
Curbside
or a
drive through lane service we designate or approve.
|
|
e-commerce
Section
11.7
|
Internet,
Intranet, World Wide Web, wireless technology, digital cable, use
of
e-names, e-mail, home pages, bulletin boards, chatrooms, linking,
framing,
on-line purchasing cooperatives, marketplaces, barter exchanges,
and
related technologies, methods, techniques, registrations, networking,
and
any electronic communication, commerce, computations, or any means
of
interactive electronic documents contained in a network of computers
or
similar devices linked by communications software or
hardware.
|
|
e-names
Section
11.7
|
URLs,
domain
names, website addresses, metatags, links, key words, e-mail addresses
and
any other means of electronic identification or origin.
|
|
EVOS®
Restaurants
Section
1.1
|
A
restaurant
specializing in serving healthier fast food in a fast-casual environment,
operating under the Marks and our System.
|
|
Family
Member
Section
19.16
|
Parents,
spouses, offspring and siblings, and the parents and siblings of
spouses.
|
|
First
Installment
Section
17.5
|
The
first
portion of the purchase price which is paid at Closing.
|
|
Franchise
Owner
Introduction
|
You;
one or
more persons, a Business Entity, as the case may be.
|
|
Franchise
Section
2.1
|
The
franchise
we grant to you to operate an EVOS® Restaurant
|
|
Franchisee
Section
19.16
|
You;
one or
more persons, a Business Entity, as the case may be: Franchise
Owner
|
4
|
Term
|
Definition
|
|
Gross
Sales
Section
5.4
|
The
total
actual gross charges for all products (food and non-food) and services
sold to customers of the Restaurant for cash or credit, whether these
sales are made at or from the Restaurant premises, or any other
location. However, any amounts that you collect and transmit to
state or local authorities as sales, use or other similar taxes are
excluded from the definition of Gross Sales.
|
|
Improvements
Section
8.2
|
Ideas,
concepts, methods, techniques or improvements relating to your
Restaurant that you or your personnel may develop in the course of
the
operation of your Restaurant.
|
|
Indemnified
Parties
Section
18.4
|
Us,
our
affiliates and our respective shareholders, directors, officers,
employees, agents, successors and assignees that you must agree to
indemnify, defend and hold harmless against and to reimburse any
one or
more of for all claims, obligations and damages and any and all taxes
and
any and all claims and liabilities directly or indirectly arising
out of
the Restaurant’s operation (even if our negligence is alleged) or your
breach of this Agreement.
|
|
Lease
Section
3.3(b)
|
The
lease for
your Site.
|
|
Lease
Assignment
Section
3.3(a)
|
Our
then-current form of Lease Assignment of Lease Agreement that you
and any
lessor must sign before entering into a lease for the
Site.
|
|
Manuals
Section
10.1
|
Our
Manuals
consisting of such materials (including, as applicable, audiotapes,
videotapes, magnetic media, computer software and written materials)
that
we generally furnish to franchise owners from time to time for use
in
operating an EVOS® Restaurant
|
|
Marks
Section
1.1
|
Certain
trademarks, trade names, service marks, and other commercial symbols
used
in the operation of the Restaurants including the trade and service
xxxx,
“EVOS® (typed
drawing),”“EVOS™”
(word xxxx), and associated logos, Art, copyrighted works, designs,
artwork and trade dress, trademarks, service marks, commercial symbols
and
e-names that we create, commission, use, promote and license or may
create, commission, use and license.
|
|
MIS
System
Section
11.7
|
The
reporting
and accounting systems we specify that you must utilize to report
gross
sales and other business information to us including internet and
intranet
networks we establish.
|
|
Notification
Date
Section
17.5(a)
|
The
date on
which we notify you whether or not we are exercising our option upon
termination of this Agreement to purchase the Restaurant from you,
including the leasehold rights to the Site.
|
|
Opening
Date
Section
2.2
|
The
date your
Restaurant opens for business.
|
|
Operating
Assets
Section
4.3
|
All
fixtures,
furnishings, equipment (signs, including cash registers, telecopiers
and
computer hardware and software) used in connection with your
Restaurant.
|
|
Other
Services
Section
10.4
|
New
or
additional products or services through your Business, like catering,
Delivery Service, Drive-Thru service and any other products and services
we may designate from time to time.
|
5
|
Term
|
Definition
|
|
Owner
Section
19.16
|
Any
person
holding a direct or indirect, legal or beneficial ownership interest
or
voting rights in another person (or a transferee of this Agreement
or an
interest in you), including any person who has a direct or indirect
interest in you or this Agreement and any person who has any other
legal
or equitable interest, or the power to vest in himself any legal
or
equitable interest, in the revenue, profits, rights or
assets.
|
|
Payment
Day
Section
5.2
|
3rd
business day
following the end of the Accounting Period when Royalty payments
must be
made.
|
|
Person
Section
19.16
|
Any
individual or Business Entity.
|
|
Preferred
Vendor Agreements
Section
4.5
|
The
agreements we may require you to enter into with Preferred Vendors
in
order to participate in the Preferred Vendor Programs.
|
|
Preferred
Vendors
Section
4.5
|
Those
approved suppliers which we designate for participation in Approved
Vendor
Programs.
|
|
Preferred
Vendor Programs
Section
4.5
|
Those
programs and terms which we or our affiliates develop in connection with
our, our affiliates’ or our franchise owners’ receipt of benefits or
certain negotiated terms from approved suppliers.
|
|
Program
Rules
Section
4.5
|
The
rules we
designate for Preferred Vendor Programs.
|
|
Proprietary
Materials
Section
10.8
|
All
articles
that you must purchase from manufacturers or us or our approved suppliers
that are used in operating the Restaurant and bearing any of the
Marks or
which utilize any of our proprietary recipes, or food service preparation
methods, including certain foods, ingredients, condiments, paper
goods,
employee clothing (such as shirts, hats and aprons) and
menus.
|
|
Report
Day
Section
5.2
|
3rd
day of each
Accounting Period when you must report your Gross Sales to us for
the
preceding Accounting Period.
|
|
Response
Notice
Section
15.2
|
Written
notice given to you not more than 90 days after you give us notice
of your
election to acquire a successor franchise of our decision: (1) to
grant
you a successor franchise; (2) to grant you a successor franchise
on the
condition that deficiencies of the Restaurant, or in your operation
of the
Restaurant, are corrected; or (3) not to grant you a successor franchise
based on our determination that you and your owners have not substantially
complied with this Agreement during its term.
|
|
Restaurant
Materials
Section
4.3
|
All
supplies,
materials, food and beverage products and magazines, reading materials
and
the like for use in connection with your Restaurant.
|
|
Restaurant
Section
1.1
|
The
EVOS®
Restaurants that you operate under this Agreement.
|
|
Royalty
Section
5.2
|
A
royalty in
the amount of 5.5% of your Gross Sales for each Accounting
Period.
|
6
|
Term
|
Definition
|
|
Second
Installment
Section
17.5
|
The
second
portion of the purchase price less the First Installment which is
paid
after Closing.
|
|
Section
Section
19.16
|
A
section or
subsection of this Agreement.
|
|
Site
Section
2.1
|
Location
that
we have approved for your Restaurant.
|
|
System
Section
1.1
|
The
distinctive business formats, employee selection and training programs,
methods, procedures, designs, layouts, signs, equipment, menus, use
of
certain soy-based products, recipes, trade dress, standards and
specifications and the Marks under which the Restaurants operate,
all of
which we (or our affiliates) may improve, further develop or otherwise
modify from time to time.
|
|
System
Contributions
Section
11.1
|
Contributions
not to exceed 2% of your Gross Sales per to the System
Fund.
|
|
System
Fund
Section
11.1
|
A
fund used
to develop advertising, marketing and public relations programs and
materials that we deem necessary or appropriate for the goodwill
and
public image of EVOS® Restaurants on a system-wide
basis.
|
|
System
Standards
Section
10.1
|
The
mandatory
and suggested specifications, standards, operating procedures and
rules
that we prescribe from time to time for the operation of EVOS® Restaurants
and information relating to your other obligations under this Agreement
and related agreements.
|
|
Term
Section
2.2
|
Begins
on the
Agreement Date and expires 10 years after the Opening
Date.
|
|
Trade
Area
Section
2.3
|
The
Site and
the area designated in Exhibit C as the Trade Area.
|
|
Transfer
Section
14.2
|
Your
(or your
owners’) voluntary, involuntary, direct or indirect assignment, sale,
gift or other disposition of any interest in: (1) this Agreement;
(2) you;
or (3) the Restaurant.
|
7
