STANDARD FORM
XXXXXXXX'X NEIGHBORHOOD GRILL & BAR
DEVELOPMENT AGREEMENT
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(Name of Developer)
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(Date)
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(General Description of Territory)
TABLE OF CONTENTS
RECITALS ................................................... 1
1. GRANT OF DEVELOPMENT RIGHTS........................ 2
2. INITIAL DEVELOPMENT SCHEDULE....................... 2
3. SUBSEQUENT DEVELOPMENT SCHEDULE;
DEVELOPMENT OBLIGATIONS GENERALLY.................. 3
4. FRANCHISE FEE AND ROYALTY RATE..................... 5
5. SITE APPROVALS: PLANS AND SPECIFICATIONS.......... 6
6. FEES AND FRANCHISE AGREEMENTS...................... 7
7. DEVELOPER ORGANIZATION, AUTHORITY,
FINANCIAL CONDITION AND SHAREHOLDERS............... 7
8. TRANSFER........................................... 9
9. TERMINATION........................................ 13
10. PREREQUISITES TO OBTAINING FRANCHISES
FOR INDIVIDUAL RESTAURANT UNITS.................... 15
11. RESTRICTIONS....................................... 16
12. DEVELOPMENT PROCEDURES............................. 18
13. NO WAIVER OF DEFAULT............................... 19
14. FORCE MAJEURE...................................... 20
15. CONSTRUCTION, SEVERABILITY, GOVERNING
LAW AND JURISDICTION............................... 20
16. MISCELLANEOUS...................................... 21
APPENDIX A: TERRITORY
APPENDIX B: FORM OF FRANCHISE AGREEMENT
APPENDIX C: STATEMENT OF OWNERSHIP INTERESTS
APPENDIX D: REVIEW AND CONSENT WITH RESPECT TO TRANSFERS
APPENDIX E: CONFIDENTIALITY AGREEMENT AND COVENANT NOT
TO COMPETE
APPENDIX F: CONFIDENTIALITY AGREEMENT
XXXXXXXX'X NEIGHBORHOOD GRILL & BAR
DEVELOPMENT AGREEMENT
This Agreement is made this ________ day of _____________________, 19______, by
and between XXXXXXXX'X INTERNATIONAL, INC., a Delaware corporation
("FRANCHISOR"), _____________________________________________, a
(_______________ corporation, sole proprietorship, _______________ partnership,
_______________ limited partnership [strike inappropriate language])
("DEVELOPER") and ______________________________________
______________________________ (collectively, the "PRINCIPAL SHAREHOLDERS" and,
individually, a "PRINCIPAL SHAREHOLDER" of Developer if a corporation or general
partner if Developer is a limited partnership having as its general partner a
corporation) and
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("GENERAL PARTNER" of Developer if Developer is a limited partnership).
WITNESSETH:
RECITALS
A. Franchisor owns the rights to develop and operate a unique system
of restaurants which specialize in the sale of high quality, moderately priced
food and alcoholic beverages in an attractive, casual setting, which include
proprietary rights in certain valuable trade names, service marks and
trademarks, including the service xxxx Xxxxxxxx'x Neighborhood Grill & Bar and
variations of such xxxx, designs, decor and color schemes for restaurant
premises, signs, equipment, procedures and formulae for preparing food and
beverage products, specifications for certain food and beverage products,
inventory methods, operating methods, financial control concepts, training
facilities and teaching techniques (the "System").
B. Franchisor has established, through its own development and
operation, and through the granting of franchises, a chain of Xxxxxxxx'x
Neighborhood Grill & Bar restaurants which are distinctive; which are similar in
appearance, design and decor; and which are uniform in operation and product
consistency.
C. The value of Franchisor's trade names, service marks and
trademarks is based upon: (1) the maintenance of uniform high quality standards
in connection with the preparation and sale of Franchisor-approved food and
beverage products, (2) the uniform high standards of appearance of the
individual restaurant units in the System, (3) the use of distinctive
trademarks, service marks, building designs and advertising signs representing a
uniformly high quality of product and services, and (4) the assumption by
Franchisor and its franchisees of the obligation to maintain and enhance the
goodwill and public acceptance of the System (and of Franchisor's trade names,
service marks and trademarks) by strict adherence to the high standards required
by Franchisor.
D. Developer desires to obtain the exclusive right to develop
restaurant units franchised by Franchisor within the geographic area specified
in Appendix A hereto ("Territory"), for the period specified in Subsection 1.1,
pursuant to the terms, conditions and provisions which are set forth in this
Agreement.
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NOW, THEREFORE, in consideration of Franchisor granting to Developer the
exclusive right to develop restaurant units franchised by Franchisor which
employ the System ("Restaurants") in the Territory for such period, and in
consideration of the mutual obligations which are provided for herein, it is
hereby agreed as follows:
1. GRANT OF DEVELOPMENT RIGHTS
1.1 Franchisor grants Developer the exclusive right to develop
Restaurants only in the Territory for a period commencing on the date hereof and
expiring on _____________________, ________, unless sooner terminated as
hereinafter provided. Developer has no rights under this Agreement to develop
Restaurants outside of the Territory or to develop restaurants which do not
employ the System, including the Xxxxxxxx'x Neighborhood Grill & Bar service
xxxx.
1.2 During the term of this Agreement, Franchisor shall not operate a
restaurant utilizing the System or license any other person to operate a
restaurant utilizing the System in the Territory. However, nothing in this
Agreement shall prohibit or infringe upon Franchisor's right to operate a
restaurant or license any other person to operate a restaurant in the Territory
which does not utilize the System or use the Xxxxxxxx'x Neighborhood Grill & Bar
service xxxx. Further, Developer acknowledges and agrees that Franchisor or any
one (1) or more of its subsidiary or affiliated companies or divisions shall
have the right to operate or license any other person to operate such other
restaurants which may or will compete with the Restaurants, so long as such
other restaurants do not utilize the System or the Xxxxxxxx'x Neighborhood Grill
& Bar service xxxx.
1.3 After this Agreement expires or is terminated, Franchisor shall
have the complete and unrestricted right to operate or license other persons to
operate a restaurant utilizing the System in the Territory.
2. INITIAL DEVELOPMENT SCHEDULE
2.1 Developer shall develop a total of ___________ (____) Restaurants
franchised by Franchisor in the Territory during the period commencing on the
date hereof and expiring on ______________, ________, in accordance with the
following development schedule:
(a) During the first Initial Development Period under this
Agreement, Developer shall develop at least _________ (____) Restaurants
within the Territory, each of which shall be open for operation and doing
business on __________________, ________ (the end of the first Initial
Development Period under this Agreement).
(b) During the second Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within the
Territory necessary to result in the existence of ___________ (____) such
Restaurants developed by Developer which are open for operation and doing
business on _____________, ________ (the end of the second Initial
Development Period under this Agreement).
(c) During the third Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within the
Territory necessary to result in the existence of ___________ (____) such
Restaurants developed by Developer which are open for operation and doing
business on ______________, ________ (the end of the third Initial
Development Period under this Agreement).
Each of the periods specified in Subparagraphs (a) through (____) hereof is
sometimes referred to hereinafter as an "Initial Development Period."
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2.2 During any Initial Development Period, subject to the provisions
of this Agreement, Developer is free to develop more than the total minimum
number of Restaurants which Developer is required to develop during that Initial
Development Period. Any such Restaurants developed, open for operation and doing
business during an Initial Development Period in excess of the minimum number
required to be developed during that Initial Development Period shall be applied
to satisfy Developer's development obligation during the next succeeding Initial
Development Period or next succeeding Subsequent Development Period (as defined
in Section 3 hereof), if any, as the case may be. Notwithstanding the above,
Developer shall not develop more than the total number Restaurants approved by
Franchisor for development under this Agreement.
2.3 Strict compliance with the development schedule specified in
Subsection 2.1 hereof is of the essence of this Agreement. If Developer fails to
fulfill its specified development obligation with respect to any of the Initial
Development Periods specified in Subsection 2.1 hereof, this Agreement shall
terminate sixty (60) days after the end of the Initial Development Period in
question, unless by the end of such sixty (60) day period Developer has
fulfilled the development obligation relating to such Initial Development
Period.
3. SUBSEQUENT DEVELOPMENT SCHEDULE; DEVELOPMENT
OBLIGATIONS GENERALLY
3.1 During the period commencing on _________________, ________ and
expiring on _________________, ________, Developer shall develop and open for
business in the Territory, from time to time in accordance with the development
schedule established under Subsection 3.2, that number of additional Restaurants
as is required to achieve at the end of such period a total number of
Restaurants open for business within the Territory which, after including the
Restaurants developed during the Initial Development Periods, would be equal to
(a) one (1) Restaurant for every twenty-five thousand (25,000) households within
the Territory having an income of twenty-five thousand dollars ($25,000) or
more, or (b) one (1) Restaurant for every seventy-five thousand (75,000)
individuals within the Territory who are between the ages of twenty (20) and
fifty-four (54) years old, whichever computation results in a lesser number of
Restaurants.
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3.2 (a) Each consecutive twelve (12) month period, commencing with
the period beginning on _______________, ________, is hereafter referred to as a
"Subsequent Development Period." Each period consisting of two (2) consecutive
Subsequent Development Periods, commencing with the period beginning on
________________, ________, is hereinafter referred to as a "Calculation
Period."
(b) Franchisor and Developer shall agree in writing on or
before the commencement of each Calculation Period on the number of Restaurants
which Developer must develop, each of which shall be open for operation and
doing business, during each of the two (2) Subsequent Development Periods
included in such Calculation Period; provided that such agreement is subject to
the following minimum and maximum development requirements: (i) Minimum
development requirements: Developer hereby agrees to develop during each
Subsequent Development Period at least that number of Restaurants, each of which
shall be open for operation and doing business, which will be equal to one-third
(1/3) of the total number of Restaurants (rounded to the nearest whole number)
which were required to be developed by Developer during all prior Initial
Development and Calculation Periods; and (ii) Maximum development requirements:
Notwithstanding the minimum development requirements, Developer shall not be
required to develop during any Subsequent Development Period more than that
number of Restaurants which, when added to the number of Restaurants which were
required to be developed by Developer during all prior Initial Development and
Calculation Periods, would exceed the number of Restaurants prescribed by the
formula set forth in Subsection 3.1, if such formula had been applied to
determine the total number of Restaurants required to service the Territory
immediately prior to the Calculation Period in question. No later than sixty
(60) days prior to the commencement of each Calculation Period, Franchisor shall
provide Developer with census data necessary for Developer to ascertain, for
purposes of the maximum development requirements, the number of Restaurants
which would be required in the Territory by application of the formula.
Franchisor shall use census figures provided by National Decision Systems, or
such other generally recognized demographic service as Developer and Franchisor
shall reasonably designate.
3.3 Strict compliance with the development schedule established in
accordance with Subsection 3.2 hereof is of the essence of this Agreement. If
Developer shall fail to fulfill its specified development obligation with
respect to any Subsequent Development Period, this Agreement shall automatically
terminate sixty (60) days after the end of the Subsequent Development Period in
question, unless by the end of such sixty (60) day period Developer has
fulfilled the development obligation relating to such Subsequent Development
Period.
3.4 If, during the term of this Agreement, (a) Developer transfers or
disposes of any Restaurant developed hereunder in accordance with the provisions
hereof, or for any other reason ceases to operate any Restaurant developed
hereunder, and (b) after such transfer or other cessation of operation the
premises no longer are utilized for the operation of a Restaurant, Developer's
development obligation in the Initial or Subsequent Development Period in which
such transfer or other cessation of operations occurred shall increase, subject
to the general limitations on Developer's development obligations set forth in
Section 2 and Section 3, by the number of Restaurants which Developer so
transferred, disposed of or which otherwise ceased to operate.
3.5 Franchisor represents that it is the sole owner of the service
xxxx Xxxxxxxx'x Neighborhood Grill & Bar. If Franchisor determines that a third
person has rights under the law of any state with respect to such xxxx which
precludes Developer from fulfilling any portion of its development obligations
pursuant to this Agreement, Franchisor and Developer shall negotiate in good
faith for a revision of those development obligations, a redefinition of the
Territory, or such other modifications of this Agreement as may be reasonable in
the circumstances.
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4. FRANCHISE FEE AND ROYALTY RATE
4.1 Developer shall pay Franchisor a franchise fee of $_____________
with respect to each Restaurant which is developed pursuant to this Agreement
during the Initial Development Periods. Thereafter, Developer shall pay
Franchisor a franchise fee in an amount which is equal to the amount of the
franchise fee then in effect at the time of the issuance of the franchise
agreement for each additional restaurant to be opened during any Subsequent
Development Period. The amount of the franchise fee shall be set forth in the
franchise offering circular received by the Developer from Franchisor
immediately preceding the issuance of such franchise agreement. Simultaneously
with the execution of this Agreement, Developer shall pay to Franchisor, by
certified check, the amount of $______________ ("Franchise Fee Deposit"). Said
Franchise Fee Deposit shall be equal to the greater of (a) the franchise fee for
one of the Restaurants to be developed during the Initial Development Periods,
or (b) ten percent (10%) of the entire franchise fees covering the
_______________ (____) Restaurants to be developed during the first three (3)
Initial Development Periods pursuant to this Agreement (as reduced by a credit
of $6,000 based on Developer's prior payment, if so paid, of a non-refundable
$6,000 application fee). The remaining balance of the franchise fees for each of
the Restaurants to be developed during the three (3) Initial Development Periods
shall be paid by certified check as follows: one-half (1/2) of the balance shall
be paid upon signing a franchise agreement for that Restaurant and the remaining
balance shall be paid fourteen (14) days prior to the scheduled opening of the
Restaurant. The Franchise Fee Deposit shall be proportionately allocated to the
franchise fee due with respect to each Restaurant to which it applies. The
franchise fee with respect to each Restaurant to be developed during a
Subsequent Development Period or with respect to any additional Restaurants
developed during the Initial Development Periods shall be paid by certified
check in the same manner.
4.2 Except as provided in this Subsection 4.2 and in Subsection 19.1
of the form of franchise agreement which is attached hereto as Appendix B,
Developer shall have no right to recover from Franchisor, directly or
indirectly, any of the franchise fees which are prepaid pursuant to Subsection
4.1 hereof. If Developer's failure to develop the total number of Restaurants
specified in Subsection 2.1 of this Agreement is the result of the assertion of
rights by a third party as described in Subsection 3.5 hereof, those prepaid
franchise fees which relate to the Restaurants which cannot be so developed
shall be refunded to Developer in cash.
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4.3 As partial consideration for the rights granted to Developer
pursuant to the franchise agreements covering the Restaurants which Developer
develops hereunder, Developer (as franchisee under each such franchise
agreement) shall pay Franchisor a monthly royalty fee as determined by
Franchisor, not to exceed five percent (5%) of each calendar month's gross sales
(as that term is defined in the form of franchise agreement which is attached
hereto as Appendix B).
4.4 Pursuant to its obligations hereunder and under the applicable
franchise agreements, Franchisor will make various expenditures in connection
with the development of prospective Restaurant sites by Developer, including
expenditures for travel, lodging, meals, obtaining of information about
prospective sites, demographic information, traffic counts, and inquiries into
local laws and ordinances. Developer shall promptly notify Franchisor of a
decision to cease development of a prospective Restaurant site. In the event
that Developer fails to open a restaurant at any such site, in lieu of the
payment of the franchise fee therefor, Franchisor in its sole discretion may
require Developer to reimburse Franchisor for Franchisor's expenditures with
respect to that site. In such event, Franchisor shall provide Developer with an
itemized list of Franchisor's expenditures with respect to that site within
thirty (30) business days after Franchisor receives notice that Developer no
longer intends to develop a Restaurant at that site, and Developer shall
reimburse Franchisor for such costs within thirty (30) days after receiving such
list.
5. SITE APPROVALS: PLANS AND SPECIFICATIONS
5.1 Developer assumes all cost, liability, expense and responsibility
for locating, obtaining, financing and developing sites for Restaurants, and for
constructing and equipping Restaurants at such sites. To assist Developer in the
site selection process, Franchisor will provide Developer with certain
demographic information regarding the site, will conduct an on-site inspection
and will review any lease or contract under negotiation for the prospective
site, such services to be provided to Developer at no additional cost. The
development of a Restaurant at any site must be approved by Franchisor in
accordance with its then-existing site approval procedure. In connection with a
request for approval of a proposed site for a Restaurant, Developer shall
provide a related contract of sale or lease agreement and such other information
and material as the Franchisor may reasonably require. Franchisor's approval of
a prospective Restaurant site shall not be unreasonably withheld. Franchisor
shall notify Developer whether it approves a proposed site and the related
contract of sale or lease agreement within thirty (30) business days of
receiving Developer's request for approval. Failure of Franchisor to so notify
Developer within such thirty (30) business day period shall be deemed to be an
approval of such site and the related contract of sale or lease agreement.
Developer acknowledges that Franchisor's approval of a prospective site for a
Restaurant does not constitute a representation, promise or guarantee by
Franchisor that a Restaurant operated at that site will be profitable or
otherwise successful. Developer shall not make any binding commitment to a
prospective vendor or lessor of real estate with respect to a site for a
Restaurant unless Franchisor has approved that site in accordance with
Franchisor's then-existing site approval procedure. After Franchisor has
approved a site for a Restaurant, Developer shall provide Franchisor with a copy
of the executed contract of sale or lease, as applicable, relating to the site
within a reasonable period of time.
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5.2 For each Restaurant which Developer develops pursuant to this
Agreement, Franchisor will make available to Developer Franchisor's
specifications for a typical Restaurant. Developer will obtain architectural and
engineering services independently and at its own expense. Franchisor shall have
the right to review all such architectural and/or engineering plans which
Developer obtains and to prohibit the implementation of any plan, or part
thereof, which Franchisor, in its sole and absolute discretion, believes is not
consistent with the best interests of the System. In the event that Franchisor
desires to prohibit the implementation of any such plan, or part thereof,
Franchisor shall so notify Developer within thirty (30) business days of
receiving such architectural and/or engineering plans for review. Failure of
Franchisor to so notify Developer within such thirty (30) business day period
shall be deemed to be an approval of such plans. In the event Franchisor does
object to any such plan, Franchisor shall provide Developer with a reasonable
detailed list of changes necessary to make such plans acceptable to Franchisor.
Franchisor shall, upon resubmission of such plans, with such changes as
Developer has prepared, notify Developer within fifteen (15) business days of
receiving such plans whether they are acceptable. Failure to so notify Developer
within such fifteen (15) business day period shall be deemed to be an approval
of such amended plans.
5.3 If Developer acquires a leasehold interest in a site, that
leasehold interest shall be for a term which is at least as long as the term of
the form of franchise agreement which is attached hereto as Appendix B, and the
lease shall provide that if the applicable franchise agreement is terminated
prior to the expiration of that term for whatever reason, Developer may assign
the lease to Franchisor without the lessor having any right to impose conditions
on such assignment or to obtain any payment in connection therewith.
6. FEES AND FRANCHISE AGREEMENTS
Not later than ninety (90) days prior to the scheduled opening of any
Restaurant which has been developed pursuant to this Agreement, Developer shall
deliver to Franchisor an executed franchise agreement substantially in the form
which is attached hereto as Appendix B, provided however, that the franchise
agreement which Developer executes shall require the payment of a franchise fee
in the amount described in Subsection 4.1, royalty fees as described in
Subsection 4.3, and advertising payments at the rates then established by
Franchisor with respect to new Restaurants, except that in no event shall such
rates exceed five percent (5%) of a Restaurant's gross sales (as defined in
Subsection 9.3 of the form of a franchise agreement which is attached hereto as
Appendix B).
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7. DEVELOPER ORGANIZATION, AUTHORITY, FINANCIAL
CONDITION AND SHAREHOLDERS
7.1 Developer and each Principal Shareholder represent and warrant
that: (a) Developer is a corporation duly incorporated, validly existing and in
good standing under the laws of the state of its incorporation; (b) Developer is
duly qualified and is authorized to do business and is in good standing as a
foreign corporation in each jurisdiction in which its business activities or the
nature of the properties owned by it requires such qualification; (c) the
execution and delivery of this Agreement and the transactions contemplated
hereby are within Developer's corporate power; (d) the execution and delivery of
this Agreement have been duly authorized by the Developer; (e) the articles of
incorporation and by-laws of Developer delivered to Franchisor are true,
complete and correct, and there have been no changes therein since the date
thereof; (f) the certified copies of the minutes electing the officers of
Developer and authorizing the execution and delivery of this Agreement are true,
correct and complete, and there have been no changes therein since the date(s)
thereof; (g) the specimen stock certificate delivered to Franchisor is a true
specimen of Developer's stock certificate; (h) the financial statement of
Developer and financial statements of its Principal Shareholders, heretofore
delivered to Franchisor, are true, complete and correct, and fairly present the
financial positions of Developer and each Principal Shareholder, respectively,
as of the date thereof; (i) such financial statements have been prepared in
accordance with generally accepted accounting principles; and (j) there have
been no materially adverse changes in the condition, assets or liabilities of
Developer or Principal Shareholders since the date or dates thereof.
7.2 Developer and each Principal Shareholder covenant that during the
term of this Agreement: (a) Developer shall do or cause to be done all things
necessary to preserve and keep in full force its corporate existence and shall
be in good standing as a foreign corporation in each jurisdiction in which its
business activities or the nature of the properties owned by it requires such
qualification; (b) Developer shall have the corporate authority to carry out the
terms of this Agreement; and (c) Developer shall print, in a conspicuous fashion
on all certificates representing shares of its stock when issued, a legend
referring to this Agreement and the restrictions on and obligations of Developer
and Principal Shareholders hereunder, including the restrictions on transfer of
Developer's shares.
7.3 Prior to development of the first Restaurant pursuant to this
Agreement, Developer shall maintain an average monthly balance of five hundred
thousand dollars ($500,000) in liquid assets. For purposes of this Agreement,
"liquid assets" shall consist of cash, cash available to Developer pursuant to
an irrevocable line of credit issued by a commercial bank in favor of Developer,
marketable securities, or any other similar asset which Franchisor's Chief
Financial Officer designates in writing as a liquid asset. After development of
the first Restaurant pursuant to this Agreement, and at any time thereafter in
which Developer is operating one (1) Restaurant in the Territory, Developer
shall maintain an average monthly balance of three hundred twenty-five thousand
dollars ($325,000) in liquid assets. After development of the second Restaurant
pursuant to this Agreement, and thereafter, so long as Developer is operating at
least two (2) Restaurants in the Territory, Developer shall maintain an average
monthly balance of one hundred fifty thousand dollars ($150,000) in liquid
assets. At all times Developer shall maintain the necessary financial resources
to satisfy its development obligations hereunder.
7.4 In addition to its obligations pursuant to Subsections 7.1 and
7.3 hereof, Developer and Principal Shareholders shall provide Franchisor with
such financial information as Franchisor may reasonably request from time to
time, including, on an annual basis, copies of the then-most current financial
statements of Developer and each Principal Shareholder, dated as of the end of
the last preceding fiscal year of the Developer or Principal Shareholder, said
statements to be delivered to Franchisor no later than April 15 of each year,
which financial statements shall conform to the standards set forth in
Subsection 7.1 hereof.
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7.5 Developer and each Principal Shareholder represent, warrant and
covenant that all Interests (as defined in Subsection 8.4 hereto) in Developer
are owned as set forth on Appendix C hereto, that no Interest has been pledged
or hypothecated (except in accordance with Section 8 of this Agreement), and
that no change will be made in the ownership of any such Interest other than as
permitted by this Agreement, or otherwise consented to in writing by Franchisor.
Developer and Principal Shareholders agree to furnish Franchisor with such
evidence as Franchisor may request, from time to time, for the purpose of
assuring Franchisor that the Interests of Developer and Principal Shareholders
remain as represented herein.
7.6 Each Principal Shareholder, jointly and severally, hereby
personally and unconditionally guarantees each of Developer's financial
obligations to Franchisor (including, but not limited to, all obligations
relating to the payment of fees by Developer to Franchisor). Each Principal
Shareholder agrees that Franchisor may resort to such Principal Shareholder (or
any of them) for payment of any such financial obligation, whether or not
Franchisor shall have proceeded against Developer, any other Principal
Shareholder or any other obligor primarily or secondarily obligated to
Franchisor with respect to such financial obligation. Each Principal Shareholder
hereby expressly waives presentment, demand, notice of dishonor, protest, and
all other notices whatsoever with respect to Franchisor's enforcement of this
guaranty. In addition, each Principal Shareholder agrees that if the performance
or observance by Developer of any term or provision hereof is waived or the time
of performance thereof extended by Franchisor, or payment of any such financial
obligation is accelerated in accordance with any agreement between Franchisor
and any party liable in respect thereto or extended or renewed, in whole or in
part, all as Franchisor may determine, whether or not notice to or consent by
any Principal Shareholder or any other party liable in respect to such financial
obligations is given or obtained, such actions shall not affect or alter the
guaranty of each Principal Shareholder described in this Subsection.
8. TRANSFER
8.1 There shall be no Transfer of any Interest of Developer, or of a
Principal Shareholder in Developer, in whole or in part (whether voluntarily or
by operation of law), directly, indirectly or contingently, except in accordance
with the provisions of this Section 8. "Transfer" and "Interest" are defined in
Subsections 8.2, 8.3 and 8.4.
8.2 Except as provided in Subsection 8.3, "Transfer" shall mean any
assignment, sale, pledge, hypothecation, gift or any other such event which
would change ownership of or create a new Interest, including, but not limited
to:
(a) any change in the ownership of or rights in or to any shares of
stock or other equity interest in Developer which would result from the
act of any shareholder of Developer ("Shareholder"), such as a sale,
exchange, pledge or hypothecation of shares, or any interest in or rights
to any of Developer's profits, revenues or assets, or any such change
which would result by operation of law; and
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(b) any change in the percentage interest owned by any Shareholder
in the shares of stock of Developer, or interests in its profits,
revenues or assets which would result from any act of Developer such as a
sale, pledge or hypothecation of any Restaurant assets (other than a
pledge of assets to secure bona fide loans made or credit extended in
connection with acquisition of the assets pledged, provided that
immediately before and after such transaction Developer satisfies the
applicable liquid asset requirement described in Subsection 7.3 of this
Agreement); any sale or issuance of any shares of Developer's stock; the
retirement or redemption of any shares of Developer's stock; or any sale
or grant to any person of any right to participate in or otherwise to
share or become entitled to any part of Developer's profits, revenues,
assets or equity.
8.3 "Transfer" shall not include (a) a change in the ownership of or
rights to any shares or other equity interest in Developer pursuant to a public
offering of Developer's securities registered under the Securities Act of 1933,
or (b) a change in the ownership of or rights to any securities or other equity
interest in Developer pursuant to a private offering of Developer's securities
exempted from registration under such Act, provided that Developer provides
Franchisor with a copy of its prospectus and/or offering memorandum ten (10)
days prior to its filing with the Securities and Exchange Commission or
circulation to third parties so that Franchisor may comment and, if necessary,
correct any information concerning Franchisor and/or the System, and further
provided that after giving effect to any such public or private offering, the
Principal Shareholders, or any of them, "control" Developer. For purposes of
this Section 8, "control" means either (1) owning legal and equitable title to
fifty-one percent (51%) or more of the outstanding voting securities of
Developer, which are not subject to a proxy granted to or contract with any
other person or party granting that party the right to vote part or all of such
securities, or (2) having and continually exercising the contractual power
presently to designate a majority of the directors of Developer.
8.4 "Interest" shall mean: when referring to interests or rights in
Developer, any shares of Developer's stock, and any other equitable or legal
right in or to any of Developer's stock, revenues, profits or assets; when
referring to rights or assets of Developer, Developer's rights under and
interest in this Agreement, any Restaurant and its revenues, profits and assets.
8.5 (a) The Interest of a Principal Shareholder may be transferred to
such Principal Shareholder's spouse or children or to a person designated in
such Principal Shareholder's will or trust (individually and collectively
referred to as "Successor"), upon such Principal Shareholder's death or
permanent incapacity, without Franchisor's approval, provided that such
Successor shall agree to be bound by the restrictions contained in this Section
8, and the other agreements and covenants of the Principal Shareholders
contained in this Agreement.
(b) The Interest of a Principal Shareholder may not be
transferred to another Principal Shareholder without Franchisor's approval,
which approval will not be unreasonably withheld.
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(c) The Interest of a Successor may only be transferred in
accordance with Subsection 8.5(b) or 8.8, regardless of whether such Transfer is
for consideration or by gift or will or other device.
8.6 Until such date as Developer has developed and opened for
operation the number of Restaurants required by Subsection 2.1 hereof and the
number of Restaurants required by Subsection 3.1 hereof, Developer shall have no
right to Transfer this Agreement or any rights or obligations under this
Agreement, and any franchise agreements to be issued pursuant hereto shall be
issued solely to the Developer, which as of the date of issuance of each such
franchise agreement shall be owned by the Principal Shareholders to the extent
hereinbefore provided. Any transfer or attempted transfer in contravention of
this provision shall be void and of no effect. If, after the date Developer has
developed and opened for operation the number of Restaurants required by
Subsection 2.1 and Subsection 3.1 hereof, the Principal Shareholders desire to
dispose of all or substantially all of the Interests of the Principal
Shareholders in Developer, or the Principal Shareholders (or Developer) desire
to dispose of all or substantially all of Developer's Interest in this Agreement
or in the assets which Developer has acquired pursuant to this Agreement, the
Principal Shareholders or Developer, as the case may be, shall notify Franchisor
of that desire, in writing, thirty (30) days before announcing that fact
publicly or engaging the services of a broker or sales agent.
8.7 (a) If at any time any of the Principal Shareholders or
Developer, as the case may be, obtains from a third party or third parties a
bona fide offer (the "Offer") in writing for the purchase of all or
substantially all of the Interests of the Principal Shareholders in Developer or
in the Restaurant assets which Developer has acquired as a result of this
Agreement, the Principal Shareholders or Developer shall give notice (the
"Selling Notice") to Franchisor stating that the Principal Shareholders or
Developer, as the case may be, have received the Offer, identifying the
prospective purchaser by name and address, specifying the proposed purchase
price and attaching a true and complete copy of the Offer. Notwithstanding the
foregoing, however, Developer and Principal Shareholders understand and agree
that, as provided in Subsection 8.6 hereof, until such time as Developer has
developed and opened for operation the number of Restaurants required by
Subsection 2.1 and Subsection 3.1 hereof, any portion of any Offer regarding the
right to develop Restaurants or Developer's Interest in this Agreement shall be
invalid and of no force or effect, it being expressly understood and agreed that
such rights may not be transferred, and any franchise agreements to be granted
hereunder shall be issued solely to Developer, which shall be owned by the
Principal Shareholders as hereinbefore set forth. At such time as Developer has
developed and opened for operation the number of Restaurants required by
Subsection 2.1 and Subsection 3.1, any portion of such an Offer regarding
Developer's Interest in this Agreement shall be effective in accordance with its
terms.
(b) Franchisor shall have an option to purchase (the
"Option"), exercisable within a period of forty-five (45) days after receipt of
the Selling Notice (the "Option Period"), such Interests at the price and on the
conditions set forth in the Offer, except that Franchisor shall not be obligated
to pay any finder's or broker's fee, and if the Offer provides for payment of
consideration other than cash, or if the Offer involves certain intangible
benefits, Franchisor may elect to purchase such Interests by offering a
reasonable dollar value substitute including, at Franchisor's option, cash or
the common stock or other securities of the Franchisor or any combination
thereof for the non-cash/intangible benefits part of the Offer.
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(c) The Option shall be exercisable by Franchisor delivering
to the Principal Shareholders or Developer, as the case may be, within the
Option Period, a notice (i) stating that the Option is being exercised, and (ii)
specifying the time, date and place at which such purchase and sale will take
place, which date shall be within forty-five (45) days after Franchisor delivers
such notice. Developer shall provide Franchisor access to and copies of such
information and documentation Franchisor shall request regarding the purchase.
The forty-five (45) day limitation described at the end of the preceding
sentence shall not apply if at the end of said forty-five (45) day period the
only issue which prevents completion of the purchase and sale is the need to
effect transfers of the applicable liquor licenses. In the event of such a
delay, the purchase and sale shall take place within seven (7) business days
after those liquor licenses have been transferred.
(d) If the Option is not exercised, the Principal
Shareholders or Developer, as the case may be, may sell the Interests in or of
Developer to the third party which made the Offer, on conditions no more
favorable to the third-party offerer than those set forth in the Offer, provided
that Franchisor approves the proposed transferee in accordance with the criteria
set forth in Appendix D and provided further that such sale takes place within
ninety (90) days after the expiration of the Option Period. The ninety (90) day
limitation described in the preceding sentence shall not apply if at the end of
said ninety (90) day period the issue which prevents completion of the purchase
and sale is either the need to effect transfers of the applicable liquor
licenses or consent or approval of the transaction by a state or federal
regulatory agency. In the event of such a delay, the purchase and sale shall
take place within seven (7) business days after those issues have been resolved
or waived by Franchisor.
(e) If the Option is not exercised, the Principal
Shareholders or Developer, as the case may be, shall immediately notify
Franchisor in writing of any change in the terms of an Offer. Any change in the
terms of an Offer shall cause it to be deemed a new Offer, conferring upon
Franchisor a new Option pursuant to this Subsection 8.7; the Option Period with
respect to the new Option shall be deemed to commence on the day on which
Franchisor receives written notice of a change in the terms of the original
Offer.
8.8 (a) Developer understands and acknowledges that the rights and
duties set forth in this Agreement are personal to Developer and that Franchisor
has entered into this Agreement in reliance on the business skill and financial
capacity of Developer, and the business skill, financial capability and personal
character of each Principal Shareholder. Any transfer of Principal Shareholders'
Interest in Developer or in Developer's Interest in this Agreement in
contravention of this Section 8 shall cause the immediate termination of all
development rights granted herein with respect to Restaurants not otherwise open
for operation. Except as otherwise set forth in this Section 8, the Principal
Shareholders shall at all times retain control of Developer. Except as otherwise
provided in this Section 8, no Transfer of any part of Developer's Interest in
this Agreement, and no Transfer of any Interest of any Principal Shareholder
shall be completed except in accordance with this Subsection 8.8. In the event
of such a proposed Transfer of any part of Developer's Interest in this
Agreement, or of any Interest of any Principal Shareholder, the party or parties
desiring to effect such Transfer shall give Franchisor notice in writing of the
proposed Transfer, which notice shall set forth the name and address of the
proposed transferee, its financial condition, including a copy of its financial
statement dated not more than ninety (90) days prior to the date of said notice,
and all the terms and conditions of the proposed Transfer. Upon receiving such
notice, Franchisor may (i) approve the Transfer, or (ii) withhold its consent to
the Transfer. Franchisor shall, within forty-five (45) days of receiving such
notice and all the information required therein, advise the party or parties
desiring to effect the Transfer whether it (1) approves the Transfer, or (2)
withholds its consent to the Transfer, giving the reasons for such disapproval.
Failure of Franchisor to so advise said party or parties within that forty-five
(45) day period shall be deemed to be approval of the proposed Transfer.
Appendix D sets forth the criteria for obtaining Franchisor's consent to a
proposed Transfer.
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(b) In the event that Franchisor approves the Transfer, and
the Transfer is not completed within ninety (90) days of the later of (i)
expiration of the forty-five (45) day notice period, or (ii) delivery of notice
of Franchisor's approval of the proposed Transfer, Franchisor's approval of the
proposed Transfer shall automatically be revoked. The ninety (90) day limitation
described in the preceding sentence shall not apply if at the end of said ninety
(90) day period the only issue which prevents completion of the Transfer is the
need to effect transfers of the applicable liquor licenses. In the event of such
a delay, the Transfer shall take place within seven (7) business days after
those liquor licenses have been transferred. Any subsequent proposal to complete
the proposed Transfer shall be subject to Franchisor's right of approval as
provided herein. The party which desires to effect the proposed Transfer shall
immediately notify Franchisor in writing of any change in the terms of a
Transfer. Any change in terms of a Transfer prior to closing shall cause it to
be deemed a new Transfer, revoking any approval previously given by Franchisor
and conferring upon Franchisor a new right to approve such Transfer, which shall
be deemed to commence on the day on which Franchisor receives written notice of
such change in terms.
8.9 In connection with any request for Franchisor's approval of a
proposed Transfer to this Section 8, the parties to the proposed Transfer shall
pay Franchisor a nonaccountable fee to defray the actual cost of review and the
administrative and professional expenses related to the proposed Transfer and
the preparation and execution of documents and agreements, up to a maximum of
two thousand five hundred dollars ($2,500).
9. TERMINATION
9.1 This Agreement shall expire on _______________, _______, unless
sooner terminated pursuant to the terms hereof.
9.2 Franchisor shall have the right to terminate this Agreement
immediately upon written notice to Developer stating the reason for such
termination, and Developer shall no longer have any of the rights created by
this Agreement, in the event of:
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(a) development by Developer of a Restaurant without first obtaining
approval from Franchisor of the Restaurant site or of Developer's
architectural and/or engineering plans in accordance with Section 5
hereof;
(b) any breach or default of any of the provisions of Sections 8 and
11 of this Agreement and Subsection 14.1 of any franchise agreement
entered into pursuant to this Agreement;
(c) the filing by Developer of a petition in bankruptcy, an
arrangement for the benefit of creditors, or a petition for
reorganization; the filing against Developer of a petition in bankruptcy,
an arrangement for the benefit of creditors, or petition for
reorganization, not dismissed within ninety (90) days of the filing
thereof; the making of an assignment by Developer for the benefit of
creditors; or the appointment of a receiver or trustee for Developer,
which receiver or trustee shall not have been dismissed within ninety
(90) days of such appointment;
(d) the discovery by Franchisor that Developer made any material
misrepresentation or omitted any material fact in the information which
was furnished to Franchisor in connection with this Agreement;
(e) failure by Developer to locate and employ a Director of
Operations who is approved by Franchisor in accordance with Subsection
12.2 within ninety (90) days of the date of this Agreement or, with
respect to a replacement Director of Operations, failure by Developer to
locate such a replacement who is approved by Franchisor in accordance
with Subsection 12.2 within one hundred eighty (180) days of the date on
which the last Director of Operations who was approved by Franchisor
ceased to be employed by Developer in that capacity;
(f) any part of this Agreement relating to the payment of fees to
Franchisor, or the preservation of any of Franchisor's trade names,
service marks, trademarks, trade secrets or secret formulae licensed or
disclosed hereunder or under any franchise agreement between Franchisor
and Developer, for any reason being declared invalid or unenforceable;
(g) Developer or any Principal Shareholder being convicted of or
pleading nolo contendere to a felony or any crime involving moral
turpitude; or
(h) the franchisee under any franchise agreement executed pursuant
to this Agreement committing a default subject to immediate termination
under the franchise agreement.
9.3 Except as provided above in Subsection 9.2, if Developer defaults
in the performance or observance of any of its other obligations hereunder or
under any franchise agreement between Developer and Franchisor, and any such
default continues for a period of thirty (30) days after written notice to
Developer specifying such default, Franchisor shall have the right to terminate
this Agreement upon written notice to Developer. If Developer defaults in the
performance or observance of the same obligation two (2) or more times within a
twelve (12) month period, Franchisor shall have the right to terminate this
Agreement immediately upon commission of the second act of default, upon written
notice to Developer stating the reason for such termination, without allowance
for any curative period.
9.4 This Agreement shall automatically terminate under the conditions
and at the times specified in Subsection 2.3 and 3.3.
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10. PREREQUISITES TO OBTAINING FRANCHISES FOR INDIVIDUAL
RESTAURANT UNITS
10.1 Developer understands and agrees that this Agreement does not
confer upon Developer a right to obtain a franchise for any Restaurant, but is
intended by the parties to set forth the terms and conditions which, if fully
satisfied, shall entitle Developer to obtain such a franchise, located within
the Territory. Developer further understands that until the date Developer opens
for operation all those Restaurants required under Subsection 2.1 and Subsection
3.1 of this Agreement, such aforesaid terms and conditions may only be satisfied
by Developer (and not an assignee or transferee thereof), who shall remain at
all times owned and controlled by the Principal Shareholders as herein set
forth.
10.2 In the event that Developer shall have obtained Franchisor's
approval of a particular proposed site for a Restaurant, and if Franchisor, in
the exercise of its sole discretion, has granted Developer operational,
financial and legal approval, then Franchisor will grant Developer a franchise
for a Restaurant at the site in question. As used herein, Franchisor will give
Developer "operational", "financial" and "legal" approval under the following
circumstances:
"Operational" approval will be granted if Franchisor has determined, in
the exercise of its sole discretion, that Developer is conducting the
operation of each of its Restaurants, and is capable of conducting the
operation of the proposed Restaurant, including physical aspects thereof,
(a) in accordance with the terms and conditions of this Agreement, (b) in
accordance with the provisions of the respective franchise agreements,
and (c) in accordance with the standards, specifications and procedures
set forth and described in the Franchise Operations Manual and in any
other materials or manuals provided or made available to Developer by
Franchisor (collectively, the "Manuals"), as such may be amended from
time to time. Developer understands that changes in said standards,
specifications and procedures may become necessary from time to time.
Developer agrees to accept said changes, and Developer further agrees
that it is within the sole discretion of Franchisor to make said changes.
"Financial" approval will be granted if (a) Developer is not in breach of
its obligations under Subsection 7.3 hereof and has been and is
faithfully performing all terms and conditions under each of its existing
franchise agreements with Franchisor, (b) Developer or its affiliates is
not in default of any money obligations owed to Franchisor, and (c)
Developer is not in default of any financial obligation to any of its
suppliers, unless any such obligation is being disputed in good faith by
the Developer. Developer acknowledges and agrees that it is vital to
Franchisor's interest that each of its franchisees be financially sound
to avoid failure of a franchised business (which would adversely affect
the reputation and good name of Franchisor and the System). Developer
acknowledges and agrees that it is vital to Franchisor's interest and to
the interests of the System that Developer (in its capacity as
franchisee) remain current in satisfying its financial obligations to it
suppliers.
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"Legal" approval will be granted if Franchisor has determined, in the
exercise of its sole discretion, that Developer has submitted to
Franchisor, in a timely manner as requested, all information and
documents requested by Franchisor prior to and as a basis for the
issuance of individual franchises or pursuant to any right granted to
Franchisor by this Agreement or by any franchise agreement between
Developer and Franchisor, and has taken such additional actions in
connection therewith as may be requested from time to time.
10.3 It is understood and agreed that the foregoing criteria apply to
the operational, financial and legal aspects of any Restaurant franchised by
Franchisor in which Developer or any Principal Shareholder has any legal or
equitable interest. It is further understood and agreed that Developer and
Principal Shareholders have an ongoing responsibility to operate each Restaurant
in which Developer or any Principal Shareholder has any legal or equitable
interest in a manner which satisfies the foregoing requirements for operational,
financial and legal approval.
11. RESTRICTIONS
11.1 Developer and its Principal Shareholders acknowledge that over
the term of this Agreement they are to receive proprietary information which
Franchisor has developed over time at great expense, including, but not limited
to, methods of site selection, marketing methods, product analysis and
selection, and service methods and skills relating to the development and
operation of Restaurants. They further acknowledge that this information, which
includes, but is not necessarily limited to, that contained in the Manuals, is
not generally known in the industry and is beyond their own present skills and
experience, and that to develop it themselves would be expensive, time-consuming
and difficult. Developer and Principal Shareholders further acknowledge that the
Franchisor's information provides a competitive advantage and will be valuable
to them in the development of their business, and that gaining access to it is
therefore a primary reason why they are entering into this Agreement.
Accordingly, Developer and its Principal Shareholders agree that Franchisor's
information, as described above, which may or may not be "trade secrets" under
prevailing judicial interpretations or statutes, is private and valuable, and
constitutes trade secrets belonging to Franchisor; and in consideration of
Franchisor's confidential disclosure to them of these trade secrets, Developer
and Principal Shareholders agree as follows:
(a) During the term of this Agreement, neither Developer nor any
Principal Shareholder, for so long as such Principal Shareholder owns an
Interest in Developer, may, without the prior written consent of
Franchisor, directly or indirectly engage in, or acquire any financial or
beneficial interest (including any interest in corporations,
partnerships, trusts, unincorporated associations or joint ventures) in,
advise, help, guarantee loans or make loans to, any restaurant business
whose menu or method of operation is similar to that employed by
restaurant units within the System which is either (i) located in the
Territory, (ii) located in the Area of Dominant Influence (as defined and
established from time to time by Arbitron Ratings Company) of any
Restaurant developed pursuant to this Agreement, (iii) located within a
five (5) mile radius of any restaurant unit within the System, or (iv)
determined by Franchisor, exercising reasonable good faith judgment, to
be a direct competitor of the System.
16
(b) Neither Developer, for two (2) years following the termination
of this Agreement, nor any Principal Shareholder, for two (2) years
following the termination of all of his or her Interest in Developer or
the termination of this Agreement, whichever occurs first, may directly
or indirectly engage in, or acquire any financial or beneficial interest
(including any interest in corporations, partnerships, trusts,
unincorporated associations or joint ventures) in, advise, help,
guarantee loans or make loans to, any restaurant business whose menu or
method of operation is similar to that employed by restaurant units
within the System which is located either (i) in the Territory, (ii) in
the Area of Dominant Influence (as defined and established from time to
time by Arbitron Ratings Company) of any Restaurant developed pursuant to
this Agreement, (iii) within a five (5) mile radius of any restaurant
unit within the System, or (iv) within any area for which an active,
currently binding development agreement has been granted by Franchisor to
another franchisee as of the date of termination.
11.2 Neither Developer nor any Shareholder shall at any time (a)
appropriate or use the trade secrets incorporated in the System, or any portion
thereof, in any other restaurant business which is not within the System, (b)
disclose or reveal any portion of the System to any person other than to
Developer's employees as an incident of their training, (c) acquire any right to
use any name, xxxx or other intellectual property right which may be granted
pursuant to any agreement between Franchisor and Developer, except in connection
with the operation of a Restaurant, or (d) communicate, divulge or use for the
benefit of any other person or entity any confidential information, knowledge or
know-how concerning the methods of development or operation of a restaurant
utilizing the System, which may be communicated by Franchisor in connection with
the Restaurants to be developed hereunder.
11.3 Developer and Principal Shareholders agree that the provisions
of this Section 11 are and have been a primary inducement to Franchisor to enter
into this Agreement, and that in the event of breach thereof Franchisor would be
irreparably injured and would be without an adequate remedy at law. Therefore,
in the event of a breach, or a threatened or attempted breach, of any of such
provisions Franchisor shall be entitled, in addition to any other remedies which
it may have hereunder or in law or in equity (including the right to terminate
this Agreement), to a preliminary and/or permanent injunction and a decree for
specific performance of the terms hereof without the necessity of showing actual
or threatened damage, and without being required to furnish a bond or other
security.
11.4 The restrictions contained in Subsection 11.1 above shall not
apply to ownership of less than two percent (2%) of the shares of a company
whose shares are listed and traded on a national securities exchange if such
shares are owned for investment only, and are not owned by an officer, director,
employee or consultant of such publicly traded company.
17
11.5 If any court or other tribunal having jurisdiction to determine
the validity or enforceability of this Section 11 determines that it would be
invalid or unenforceable as written, then the provisions hereof shall be deemed
to be modified or limited to such extent or in such manner as necessary for such
provisions to be valid and enforceable to the greatest extent possible.
12. DEVELOPMENT PROCEDURES
12.1 Franchisor will use its reasonable efforts to furnish Developer
with advice in developing Restaurants and in selecting sites therefor.
12.2 Developer shall designate an individual employee who shall be
personally responsible for Developer's activities during the term of this
Agreement, and who shall devote his or her full-time, best efforts and constant
personal attention, on a day-to-day basis, to Developer's activities in the
Territory (the "Director of Operations"). Developer shall require that the
Director of Operations maintain his or her principal personal residence in the
Territory. Franchisor reserves the right to require that, as a condition of his
or her employment with Developer, the Director of Operations, as well as each
supervisory employee referred to in Subsection 12.3, must successfully complete
Franchisor's interview process and a psychological profile test in a manner
which satisfies a uniform standard established by Franchisor. The test shall be
administered by Franchisor, or by a testing agency designated by Franchisor, at
Developer's expense. Developer's designation of the first Director of
Operations, and any subsequent Director of Operations, shall be subject to the
written approval of Franchisor, which approval shall not be arbitrarily
withheld, and shall also be subject to the time limitations described in
Subsection 9.2(e) hereof. Franchisor shall notify Developer in writing within
fourteen (14) business days of receipt of Developer's request whether Franchisor
disapproves such person. Failure by Franchisor to so notify Developer within
that period shall be deemed to constitute Franchisor's approval of such person.
12.3 In the event that Developer desires to designate an employee (in
addition to the Director of Operations) who will have supervisory authority over
the development of operation of more than one (1) Restaurant within the
Territory, Developer's designation of such a supervisory employee shall be
subject to the written approval of Franchisor, which approval shall not be
arbitrarily withheld. Franchisor shall notify Developer in writing within
fourteen (14) business days of receipt of Developer's request whether Franchisor
disapproves such person. Failure by Franchisor to so notify Developer within
that period shall be deemed to constitute Franchisor's approval of such person.
Developer shall require that any such supervisory employee maintain his or her
principal personal residence in the Territory.
12.4 Developer shall require the Director of Operations to execute a
confidentiality agreement and covenant not to compete in the form attached
hereto as Appendix E. In addition, at Franchisor's request, Developer shall
obtain from the Director of Operations an agreement verifying his or her
employment status. Developer shall require that each other employee of Developer
who will have supervisory authority over the development or operation of more
than one (1) Restaurant execute a confidentiality agreement in the form attached
hereto as Appendix F. Developer shall be responsible for compliance of its
employees with the agreements identified in this Subsection, including the
payment of any costs needed to enforce the obligations.
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12.5 (a) Developer shall require its Director of Operations and any
other supervisory employee designated pursuant to Subsection 12.3 to attend and
to successfully complete to Franchisor's reasonable satisfaction an operations
training course provided by Franchisor. If the Director of Operations or any
such supervisory employee fails to successfully complete Franchisor's operations
training course, Franchisor may require designation of a new Director of
Operations or replacement supervisory employee, as the case may be, and
Developer shall designate a new Director of Operations or replacement
supervisory employee who shall be required to successfully complete such
training course.
(b) The Director of Operations and supervisory employees
designated pursuant to Subsection 12.3 shall, from time to time as reasonably
requested by Franchisor, attend and successfully complete to Franchisor's
reasonable satisfaction a Franchisor-provided refresher course in restaurant
operations.
12.6 With respect to each Restaurant within the Territory developed
by Developer, Developer's employees must satisfy the training requirements
described in Section 6 of Appendix B hereto. After Developer opens it first
Restaurant pursuant to this Agreement, Franchisor may at its option, and subject
to such conditions as Franchisor deems necessary, permit Developer (at
Developer's own expense) to conduct a portion of the required training at one of
Developer's existing Restaurants. In that event, Developer will be required to
provide qualified personnel to administer training tests and to maintain records
relating to the training and performance of employees.
13. NO WAIVER OF DEFAULT
13.1 The waiver by any party to this Agreement of any breach or
default, or series of breaches or defaults, of any term, covenant or condition
herein, or of any same or similar term, covenant or condition contained in any
other agreement between Franchisor and any other person, shall not be deemed a
waiver of any subsequent or continuing breach or default of the same or any
other term, covenant or condition in this Agreement, or in any other agreement
between Franchisor and any other person.
13.2 All rights and remedies of Franchisor shall be cumulative and
not alternative, in addition to and not exclusive of any other rights or
remedies which are provided for herein or which may be available at law or in
equity in case of any breach, failure or default or threatened breach, failure
or default of any term, provision or condition of this Agreement. Franchisor's
rights and remedies shall be continuing and shall not be exhausted by any one
(1) or more uses thereof, and may be exercised at any time or from time to time
as often as may be expedient; and any option or election to enforce any such
right or remedy may be exercised or taken at any time and from time to time. The
expiration or earlier termination of this Agreement shall not discharge or
release Developer or any Principal Shareholder from any liability or obligation
then accrued, or any liability or obligation continuing beyond, or arising out
of, the expiration or earlier termination of this Agreement.
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14. FORCE MAJEURE
14.1 As used in this Agreement, the term "Force Majeure" shall mean
any act of God, strike, lock-out or other industrial disturbance, war (declared
or undeclared), riot, epidemic, fire or other catastrophe, act of any government
and any other similar cause not within the control of the party affected
thereby.
14.2 If the performance of any obligation by any party under this
Agreement is prevented or delayed by reason of Force Majeure, which cannot be
overcome by use of normal commercial measures, the parties shall be relieved of
their respective obligations to the extent the parties are respectively
necessarily prevented or delayed in such performance during the period of such
Force Majeure. The party whose performance is affected by an event of Force
Majeure shall give prompt notice of such Force Majeure event to the other party
by facsimile, telephone or telegram (in each case to be confirmed in writing),
setting forth the nature thereof and an estimate as to its duration, and shall
be liable for failure to give such timely notice only to the extent of damage
actually caused.
15. CONSTRUCTION, SEVERABILITY, GOVERNING LAW AND
JURISDICTION
15.1 If any part of this Agreement shall for any reason be declared
invalid, unenforceable or impaired in any way, the validity of the remaining
portions shall remain in full force and effect as if this Agreement had been
executed with such invalid portion eliminated, and it is hereby declared the
intention of the parties that they would have executed the remaining portion of
this Agreement without including therein any such portions which might be
declared invalid; provided however, that in the event any part hereof relating
to the payment of fees to Franchisor, or the preservation of any of Franchisor's
trade names, service marks, trademarks, trade secrets or secret formulae
licensed or disclosed hereunder or pursuant to any franchise agreement between
Franchisor and Developer is for any reason declared invalid or unenforceable,
then Franchisor shall have the option of terminating this Agreement upon written
notice to Developer. If any clause or provision herein would be deemed invalid
or unenforceable as written, it shall be deemed to be modified or limited to
such extent or in such manner as may be necessary to render the clause or
provision valid and enforceable to the greatest extent possible in light of the
interest of the parties expressed in that clause or provision, subject to the
provisions of the preceding sentence.
15.2 DEVELOPER AND PRINCIPAL SHAREHOLDERS ACKNOWLEDGE THAT FRANCHISOR
MAY ENTER INTO OTHER DEVELOPMENT AGREEMENTS THROUGHOUT THE UNITED STATES ON
TERMS AND CONDITIONS SIMILAR TO THOSE SET FORTH IN THIS AGREEMENT, AND THAT IT
IS OF MUTUAL BENEFIT TO DEVELOPER AND PRINCIPAL SHAREHOLDERS AND TO FRANCHISOR
THAT THESE TERMS AND CONDITIONS BE UNIFORMLY INTERPRETED. THEREFORE, THE PARTIES
AGREE THAT TO THE EXTENT THAT THE LAW OF THE STATE OF KANSAS DOES NOT CONFLICT
WITH LOCAL FRANCHISE STATUTES, RULES AND REGULATIONS, KANSAS LAW SHALL APPLY TO
THE CONSTRUCTION OF THIS AGREEMENT AND SHALL GOVERN ALL QUESTIONS WHICH ARISE
WITH REFERENCE HERETO; PROVIDED HOWEVER, THAT PROVISIONS OF KANSAS LAW REGARDING
CONFLICTS OF LAW SHALL NOT APPLY HERETO.
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15.3 THE PARTIES AGREE THAT ANY CLAIM, CONTROVERSY OR DISPUTE ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE PERFORMANCE THEREOF WHICH CANNOT BE
AMICABLY SETTLED, EXCEPT AS OTHERWISE PROVIDED HEREIN, MAY, AT THE OPTION OF THE
CLAIMANT, BE RESOLVED BY A PROCEEDING IN A COURT IN XXXXXXX COUNTY, KANSAS, AND
DEVELOPER AND THE PRINCIPAL SHAREHOLDERS EACH IRREVOCABLY ACCEPT THE
JURISDICTION OF THE COURTS OF THE STATE OF KANSAS AND THE FEDERAL COURTS SERVING
XXXXXXX COUNTY, KANSAS FOR SUCH CLAIMS, CONTROVERSIES OR DISPUTES.
The parties agree that service of process in any proceeding arising
out of or relating to this Agreement or the performance thereof may be made as
to Developer and any Principal Shareholder by serving a person of suitable age
and discretion (such as the person in charge of the office) at the address of
Developer specified in this Agreement and as to Franchisor by serving the
president or a vice-president of Franchisor at the address of Franchisor or by
serving Franchisor's registered agent.
16. MISCELLANEOUS
16.1 All notices and other communications required or permitted to be
given hereunder shall be deemed given when delivered in person, by overnight
courier service, facsimile transmission or mailed by registered or certified
mail addressed to the recipient at the address set forth below, unless that
party shall have given written notice of change of address to the sending party,
in which event the new address so specified shall be used.
FRANCHISOR: Xxxxxxxx'x International, Inc.
0000 X. 000xx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxx 00000
Attention: President
DEVELOPER:
21
PRINCIPAL SHAREHOLDERS:
16.2 All terms used in this Agreement, regardless of the number and
gender in which they are used, shall be deemed and construed to include any
other number, singular or plural, and any other gender, masculine, feminine or
neuter, as the context or sense of this Agreement may require, the same as if
such words had been written in this Agreement themselves. The headings inserted
in this Agreement are for reference purposes only and shall not affect the
construction of this Agreement or limit the generality of any of its provisions.
The term "business day" means any day other than Saturday, Sunday, or the
following national holidays: New Year's Day, Xxxxxx Xxxxxx Xxxx Day,
Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving and Christmas.
16.3 This Agreement, the Uniform Franchise Offering Circular
currently in effect and the documents referred to herein constitute the entire
agreement between parties, superseding and canceling any and all prior and
contemporaneous agreements, understandings, representations, inducements and
statements, oral or written, of the parties in connection with the subject
matter hereof.
16.4 Except as expressly authorized herein, no amendment or
modification of this Agreement shall be binding unless executed in writing both
by Franchisor and by Developer and Principal Shareholders.
16.5 In the event that any party to this Agreement initiates any
legal proceeding to construe or enforce any of the terms, conditions and/or
provisions of this Agreement, including, but not limited to, its termination
provisions, or to obtain damages or other relief to which any party may be
entitled by virtue of this Agreement, the prevailing party or parties shall be
paid its reasonable attorneys' fees and expenses by other party or parties.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of the
date first above written.
FRANCHISOR:
ATTEST: XXXXXXXX'X INTERNATIONAL, INC.
By:
Name: Name:
Title: Title:
22
DEVELOPER:
ATTEST:
By:
Name: Name:
Title: Title:
PRINCIPAL SHAREHOLDER(S):
Witness Name:
Witness Name:
Witness Name:
Witness Name:
23
APPENDIX A TO DEVELOPMENT AGREEMENT
TERRITORY
APPENDIX B TO DEVELOPMENT AGREEMENT
FORM FRANCHISE AGREEMENT
APPENDIX C TO DEVELOPMENT AGREEMENT
STATEMENT OF OWNERSHIP INTERESTS
Percent of Issued
and Outstanding
Shareholder Shares of Developer
APPENDIX D TO DEVELOPMENT AGREEMENT
REVIEW AND CONSENT WITH RESPECT TO TRANSFERS
In determining whether to grant or to withhold consent to a
proposed Transfer, Franchisor shall consider all of the facts and circumstances
which it views as relevant in the particular instance, including, but not
limited to, any of the following: (i) work experience and aptitude of Proposed
New Owner and/or proposed new management (a proposed transferee of a Principal
Shareholder's Interest and/or a proposed transferee of this Agreement is
referred to as "Proposed New Owner"); (ii) financial background and condition of
Proposed New Owner, and actual and pro forma financial condition of Developer;
(iii) character and reputation of Proposed New Owner; (iv) conflicting interests
of Proposed New Owner; (v) the terms and conditions of Proposed New Owner's
rights, if the proposed Transfer is a pledge or hypothecation; (vi) the adequacy
of Developer's operation (as Franchisee) of any Restaurant and compliance with
the System and this Agreement; and (vii) such other criteria and conditions as
Franchisor shall then consider relevant in the case of an application for a new
franchise to operate a restaurant unit within the System by an applicant that is
not then currently doing so. Franchisor's consent also may be conditioned upon
execution by Proposed New Owner of an agreement whereby Proposed New Owner
assumes full, unconditional, joint and several liability for, and agrees to
perform from the date of such Transfer, all obligations, covenants and
agreements contained herein to the same extent as if it had been an original
party to this Agreement and may also require Developer and Principal
Shareholders, including the proposed Transferor(s), to execute a general release
which releases Franchisor from any claims they may have had or then have against
Franchisor. In the event Proposed New Owner is a partnership (including, but not
limited to, a limited partnership), Proposed New Owner will also be required to
execute an addendum to the Agreement which amends the references to Developer
and its Principal Shareholders to include the partnership approved by Franchisor
and Proposed New Owner's general partner(s) and the principal shareholders of
the general partner(s), if the general partner(s) is a corporation. This
addendum will contain a provision including in the definition of "Transfer" the
withdrawal, removal or voluntary/involuntary dissolution (if applicable) of the
general partner(s) or the substitution or addition of a new general partner.
Developer or Principal Shareholders, as the case may be, shall provide
Franchisor with such information as it may require in connection with a request
for approval of a proposed Transfer.
APPENDIX E TO DEVELOPMENT AGREEMENT
CONFIDENTIALITY AGREEMENT AND
COVENANT NOT TO COMPETE
THIS AGREEMENT is made this ________ day of ________________,
19______, by and between _______________________________________, a
_____________ corporation ("Developer"), and __________________________, an
individual employed by Developer ("Employee").
WITNESSETH:
WHEREAS, XXXXXXXX'X INTERNATIONAL, INC. ("Applebee's") is the owner
of all rights in and to a unique system for the development and operation of
restaurants (the "System"), which includes proprietary rights in valuable trade
names, service marks and trademarks, including the service xxxx Xxxxxxxx'x
Neighborhood Grill & Bar and variations of such xxxx, designs and color schemes
for restaurant premises, signs, equipment, procedures and formulae for preparing
food and beverage products, specifications for certain food and beverage
products, inventory methods, operating methods, financial control concepts, a
training facility and teaching techniques;
WHEREAS, Developer is the owner of the exclusive right to develop
restaurants franchised by Applebee's which utilize the System ("Restaurants")
for the period and in the territory described in the Development Agreement
between Applebee's and Developer (the "Development Agreement");
WHEREAS, Developer and Employee acknowledge that Applebee's
information as described above was developed over time at great expense, is not
generally known in the industry and is beyond Developer's own present skills and
experience, and that to develop it itself would be expensive, time-consuming and
difficult, that it provides a competitive advantage and will be valuable to
Developer in the development of its business, and that gaining access to it was
therefore a primary reason why Developer entered into the Development Agreement;
and
WHEREAS, in consideration of Applebee's confidential disclosure to
Developer of these trade secrets, Developer has agreed to be obligated by the
terms of Development Agreement to execute, with its Director of Operations, a
written agreement protecting Applebee's trade secrets and confidential
information entrusted to Employee, and protecting against unfair competition;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, the parties agree as follows:
(1) The parties acknowledge and agree that Employee is or will be
employed in a supervisory or managerial capacity and in such capacity will have
access to information and materials which constitute trade secrets and
confidential and proprietary information. The parties further acknowledge and
agree that any actual or potential direct or indirect competitor of Applebee's
or of any of its franchisees shall not have access to such trade secrets and
confidential information.
(2) The parties acknowledge and agree that the System includes
trade secrets and confidential information which Applebee's has revealed or will
reveal to Developer in confidence, and that protection of said trade secrets and
confidential information and protection of Applebee's against unfair competition
from others who enjoy or who have had access to said trade secrets and
confidential information are essential for the maintenance of goodwill and
special value of the System.
(3) Employee agrees that he or she shall not at any time (i)
appropriate or use the trade secrets incorporated in the System, or any portion
thereof, for use in any business which is not within the System; (ii) disclose
or reveal any portion of the System to any person other than to Developer's
employees as an incident of their training; (iii) acquire any right to use, or
to license or franchise the use of any name, xxxx or other intellectual property
right which is or may be granted by any franchise agreement between Applebee's
and Developer; or (iv) communicate, divulge or use for the benefit of any other
person or entity any confidential information, knowledge or know-how concerning
the methods of development or operation of a Restaurant which may be
communicated to Employee or of which Employee may be apprised by virtue of
Employee's employment by Developer. Employee shall divulge such confidential
information only to such of Developer's other employees as must have access to
that information in order to operate a Restaurant or to develop a prospective
site for a Restaurant. Any and all information, knowledge and know-how,
including, without limitation, drawings, materials, equipment, specifications,
techniques and other data, which Applebee's designates as confidential, shall be
deemed confidential for purposes of this Agreement.
(4) Employee agrees that for the duration of his or her employment
by Developer, and for two (2) years following termination thereof, Employee may
not, without the prior written consent of Applebee's, directly or indirectly,
for himself or through, on behalf of or in conjunction with any person,
partnership or corporation, engage in or acquire any financial or beneficial
interest (including any interest in corporations, partnerships, trusts,
unincorporated associations or joint ventures) in, advise, help, guarantee loans
or make loans to, any restaurant business whose menu or method of operation is
the same as or similar to that employed by restaurant units within the System
which is located either (a) in the Territory, as defined in the Development
Agreement, or (b) in the Area of Dominant Influence (as defined and established
from time to time by Arbitron Ratings Company) of any Restaurant developed
pursuant to the Development Agreement.
(5) Employee further acknowledges and agrees that the Franchise
Operations Manual and any other materials and manuals provided or made available
to Developer by Applebee's (collectively, the "Manuals"), described in Section 5
of the form of franchise agreement which is attached as Appendix B to the
Development Agreement are loaned by Applebee's to Developer for limited purposes
only, remain the property of Applebee's, and may not be reproduced, in whole or
in part, without the written consent of Applebee's.
(6) Employee agrees to surrender to Developer or to Applebee's each
and every copy of the Manuals and any other information or material in his or
her possession or control upon request, upon termination of employment, or upon
completion of the use for which said Manuals or other information or material
may have been furnished to Employee.
(7) The parties agree that in the event of a breach of this
Agreement, Applebee's would be irreparably injured and would be without an
adequate remedy at law. Therefore, in the event of a breach or a threatened or
attempted breach of any of the provisions hereof, Applebee's shall be entitled
to enforce the provisions of this agreement as a third-party beneficiary hereof
and shall be entitled, in addition to any other remedies which it may have
hereunder at law or in equity (including the right to terminate the Development
Agreement), to a temporary and/or permanent injunction and a decree for specific
performance of the terms hereof without the necessity of showing actual or
threatened damage, and without being required to furnish a bond or other
security.
(8) The restrictions in Subsection (4) hereof shall not apply to
ownership of less than two percent (2%) of the shares of a company whose shares
are traded on a national securities exchange if such shares are owned for
investment only, and are not owned by an officer, director, employee or
consultant of such publicly traded company.
(9) If any court or other tribunal having jurisdiction to determine
the validity or enforceability of this Agreement determines that it would be
invalid or unenforceable as written, the provisions hereof shall be deemed to be
modified or limited to such extent or in such manner necessary for such
provisions to be valid and enforceable to the greatest extent possible.
(10) In the event that any party to this Agreement or Applebee's
initiates any legal proceeding to construe or enforce any of the terms,
conditions and/or provisions of this Agreement, or to obtain damages or other
relief to which any party may be entitled by virtue of this Agreement, the
prevailing party or parties shall be paid its/their reasonable attorneys' fees
and expenses by other party or parties.
IN WITNESS WHEREOF, the undersigned have entered into this
Agreement as of the date first above written.
DEVELOPER: EMPLOYEE:
By: By:
Name: Name:
Title:
APPENDIX F TO DEVELOPMENT AGREEMENT
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made this ________ day of ________________,
19_______, by and between ________________________________________, a
_____________ corporation ("Developer"), and __________________________, an
individual employed by Developer ("Employee").
WITNESSETH:
WHEREAS, XXXXXXXX'X INTERNATIONAL, INC. ("Applebee's") is the
owner of all rights in and to a unique system for the development and
operation of restaurants (the "System"), which includes proprietary rights
in valuable trade names, service marks and trademarks, including the
service xxxx Xxxxxxxx'x Neighborhood Grill & Bar and variations of such
xxxx, designs and color schemes for restaurant premises, signs, equipment,
procedures and formulae for preparing food and beverage products,
specifications for certain food and beverage products, inventory methods,
operating methods, financial control concepts, a training facility and
teaching techniques;
WHEREAS, Developer is the owner of the exclusive right to develop
restaurants franchised by Applebee's which utilize the System
("Restaurants") for the period and in the territory described in the
Development Agreement between Applebee's and Developer (the "Development
Agreement"); and
WHEREAS, Developer acknowledges that Applebee's information as
described above was developed over time at great expense, is not generally
known in the industry and is beyond Developer's own present skills and
experience, and that to develop it itself would be expensive,
time-consuming and difficult, that it provides a competitive advantage and
will be valuable to Developer in the development of its business, and that
gaining access to it was therefore a primary reason why Developer entered
into the Development Agreement; and
WHEREAS, in consideration of Applebee's confidential disclosure
to Developer of these trade secrets, Developer has agreed to be obligated
by the terms of Development Agreement to execute, with each employee of
Developer who will have supervisory authority over the development or
operation of more than one Restaurant in the Territory described in the
Development Agreement, a written agreement protecting Applebee's trade
secrets and confidential information entrusted to Employee;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, the parties agree as follows:
(1) The parties acknowledge and agree that Employee is or will be
employed in a supervisory or managerial capacity and in such capacity will
have access to information and materials which constitute trade secrets and
confidential and proprietary information. The parties further acknowledge
and agree that any actual or potential direct or indirect competitor of
Applebee's, or of any of its franchisees, shall not have access to such
trade secrets and confidential information.
(2) The parties acknowledge and agree that the System includes
trade secrets and confidential information which Applebee's has revealed to
Developer in confidence, and that protection of said trade secrets and
confidential information and protection of Applebee's against unfair
competition from others who enjoy or who have had access to said trade
secrets and confidential information are essential for the maintenance of
goodwill and special value of the System.
(3) Employee agrees that he or she shall not at any time (i)
appropriate or use the trade secrets incorporated in the System, or any
portion thereof, for use in any business which is not within the System;
(ii) disclose or reveal any portion of the System to any person other than
to Developer's employees as an incident of their training; (iii) acquire
any right to use, or to license or franchise the use of any name, xxxx or
other intellectual property right which is or may be granted by any
franchise agreement between Applebee's and Developer; or (iv) communicate,
divulge or use for the benefit of any other person or entity any
confidential information, knowledge or know-how concerning the methods of
development or operation of a Restaurant which may be communicated to
Employee or of which Employee may be apprised by virtue of Employee's
employment by Developer. Employee shall divulge such confidential
information only to such of Developer's other employees as must have access
to that information in order to operate a Restaurant or to develop a
prospective site for a Restaurant. Any and information, knowledge and
know-how, including, without limitation, drawings, materials, equipment,
specifications, techniques and other data, which Applebee's designates as
confidential, shall be deemed confidential for purposes of this Agreement.
(4) Employee further acknowledges and agrees that the Franchise
Operations Manual and any other materials or manuals provided or made
available to Developer by Applebee's (collectively, the "Manuals"),
described in Section 5 of the applicable franchise agreement between
Applebee's and Developer, are loaned by Applebee's to Developer for limited
purposes only, remain the property of Applebee's, and may not be
reproduced, in whole or in part, without the written consent of Applebee's.
(5) Employee agrees to surrender to Developer or to Applebee's
each and every copy of the Manuals and any other information or material in
his or her possession or control upon request, upon termination of
employment or upon completion of the use for which said Manuals or other
information or material may have been furnished to Employee.
(6) The parties agree that in the event of a breach of this
Agreement, Applebee's would be irreparably injured and would be without an
adequate remedy at law. Therefore, in the event of a breach or a threatened
or attempted breach of any of the provisions hereof, Applebee's shall be
entitled to enforce the provisions of this Agreement as a third-party
beneficiary hereof and shall be entitled, in addition to any other remedies
which it may have hereunder at law or in equity (including the right to
terminate the Development Agreement), to a temporary and/or permanent
injunction and a decree for specific performance of the terms hereof
without the necessity of showing actual or threatened damage, and without
being required to furnish a bond or other security.
(7) If any court or other tribunal having jurisdiction to
determine the validity or enforceability of this Agreement determines that
it would be invalid or unenforceable as written, the provisions hereof
shall be deemed to be modified or limited to such extent or in such manner
necessary for such provisions to be valid and enforceable to the greatest
extent possible.
IN WITNESS WHEREOF, the undersigned have entered into this
Agreement as of the date first above written.
DEVELOPER EMPLOYEE
By: By:
Name: Name:
Title:
