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EXHIBIT 10.2(b)
AGREEMENT DATED ____ DAY OF _____________, 2000
BETWEEN: THE FRANCHISOR REFERRED TO IN SCHEDULE B ("FRANCHISOR")
AND: THE FRANCHISEE REFERRED TO IN SCHEDULE B ("FRANCHISEE")
BACKGROUND FACTS
Franchisor and/or its Affiliated Companies have developed a unique and
valuable system for the preparation, marketing and sale of certain quality food
products under various trademarks, service marks and trade names owned by them.
The System is a comprehensive restaurant system for the retailing of a
limited menu of uniform and quality food products, emphasizing prompt and
courteous service in a clean and wholesome atmosphere which is intended to be
particularly attractive to families. The foundation and essence of the System is
the adherence by franchisees to standards and policies providing for the uniform
operation of all restaurants within the System including, but not limited to,
serving designated food and beverage products; the use of only prescribed
equipment and building layout and designs; and strict adherence to designated
food and beverage specifications and to prescribed standards of quality, service
and cleanliness in restaurant operations. Compliance by franchisees with the
foregoing standards and policies in conjunction with the trademarks, service
marks and trade names provides the basis for the valuable goodwill and wide
acceptance of the System. Moreover, Franchisee's performance of the obligations
contained in this Agreement and adherence to the tenets of the System constitute
the essence of the license provided for herein.
Franchisor is entitled to grant to third parties, and has agreed to
grant to Franchisee, the right to use the System, the System Property and the
Marks on the terms and conditions of this Agreement.
In this Agreement, capitalized terms have the meanings specified in
Schedule A. Site-specific information and financial terms are set forth in
Schedule B, and contractual modifications and amendments are set forth in
Schedule C.
THE PARTIES AGREE:
X. XXXXX OF FRANCHISE.
A. Franchisor grants to Franchisee the right to use the System,
the System Property and the Marks for the Term solely in
connection with the conduct of the Business at the Outlet and
subject to the terms and conditions of this Agreement.
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B. At all times during the Term, Franchisee will use its best
endeavors to develop the Business and to increase the
Revenues.
C. Franchisee will not, without Franchisor's prior written
approval:
1. conduct all or any part of the Business at any
location other than the Outlet; or
2. sub-license to any other party the right to use, or
otherwise permit or authorize any other party to use,
the System, the System Property or the Marks or any
part thereof.
D. No exclusive territory, protection or other right in the
contiguous space, area or market of the Outlet is reserves the
right to use, and to grant to other parties the right to use,
the Marks, the System and the System Property or any other
marks, names or systems in connection with any product or
service (including, without limitation, the Approved Products)
in any manner or at any location other than the Outlet.
Franchisee acknowledges that, as of the Date of Grant,
Franchisor and its Affiliated Companies and franchisees
operate Outlets conforming to the Concept and also operate
other systems for the sale of food products and services which
may be competitive with the System and may compete directly
with the Business.
II. INITIAL FEE AND CONTINUING FEE.
A. On or before the Date of Grant, Franchisee will pay the
initial fee specified in Schedule B to Franchisor.
B. On or before each Due Date, Franchisee will pay the Continuing
Fee to Franchisor. Each payment of the Continuing Fee will be
accompanied by a statement of the Revenues for the relevant
Accounting Period, in the form required by Franchisor from
time to time.
C. Franchisee's payments pursuant to Clauses 2.1 and 2.2 are in
consideration solely for the grant of rights in Clause 1.1 and
not for Franchisor's performance of any specific obligations
or services.
III. MANUALS AND STANDARDS.
A. At all times during the Term, Franchisee must comply with all
of the Standards and the Manuals and all applicable laws,
regulations, rules, by-laws, orders and ordinances in its
conduct of the Business. The Manuals are incorporated by
reference into this Agreement. To the extent of any
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inconsistency between any provision of the Manuals and any
provision of this Agreement, the provision of this Agreement
will prevail.
B. Franchisor may at any time change any of the Standards or
Manuals or introduce new Standards or Manuals by giving notice
to Franchisee. Franchisor will specify in the notice a period,
reflecting the nature of the change or introduction, within
which the new Standards or Manuals must be implemented.
Franchisee acknowledges and agrees that such changed or
introduced Standards or Manuals will bind Franchisee upon
receipt of Franchisor's notice as provided in Clause 22, and
Franchisee will implement such changes or introductions within
the period specified in the notice. In the event of any
inconsistency between Franchisor's version and Franchisee's
version of the Manuals, Franchisor's version will prevail.
C. In order to determine Franchisee's compliance with the Manuals
and the terms and conditions of this Agreement, Franchisor and
its agents or representatives will have the right at all times
during opening hours to enter and inspect the Outlet without
prior notice to Franchisee.
D. Franchisor will lend one copy of the Manuals to Franchisee,
and Franchisee will not reproduce or part with possession of
the Manuals without Franchisor's prior written approval.
Franchisee will return all copies of the Manuals to Franchisor
immediately upon the expiration or termination of this
Agreement or upon Franchisor's request.
IV. UPGRADES.
Franchisor may, by notice to Franchisee, at any time require Franchisee
to upgrade, modify, renovate or replace all or part of the Outlet or
any of its fittings, fixtures or signage or any of the equipment,
systems or inventory used in the Outlet, in order to procure compliance
by Franchisee with the Standards and the Manuals. Franchisee
acknowledges and agrees that such upgrades, modifications, renovations
or replacements may require significant capital expenditures and/or
periodic financial commitments by Franchisee. In its notice to
Franchisee, Franchisor will specify a period, reflecting the nature of
the upgrade, modification, renovation or replacement, within which the
upgrade, modification, renovation or replacement must be implemented,
and Franchisee will comply with the implementation period specified in
the notice.
V. APPROVED PRODUCTS AND SUPPLIES.
A. Franchisee will not prepare, market or sell any product or
service other than the Approved Products or conduct any
business other than the Business at the Outlet without
Franchisor's prior written approval. Franchisor will from
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time to time notify Franchisee of the Approved Products and
will specify those of the Approved Products which must be
offered for sale at the Outlet as permanent menu items and at
what times.
B. Franchisor may, by notice to Franchisee, at anytime change or
withdraw any Approved Product or add new Approved Products.
Franchisee will implement such changes, withdrawals and
additions within the period specified in the notice.
C. Franchisee will purchase the supplies, materials, equipment
and services used in the Business exclusively from suppliers
and using distributors who have been approved in writing by
Franchisor prior to the time of supply and distribution in
accordance with the approval procedures in the Manuals.
Franchisee will not have any claim or action against
Franchisor in connection with any non-delivery, delayed
delivery or non-conforming delivery of any supplier or
distributor whether or not approved by Franchisor.
VI. ADVERTISING.
A. Franchisee will not execute or conduct any advertising or
promotional activity in relation to the Business or the System
without Franchisor's prior written approval.
B. Franchisee will participate in such national and regional
advertising, promotions, research and tests as Franchisor from
time to time requires, and Franchisee will not have any claim
or action against Franchisor in connection with the level of
success of any such advertising, marketing, promotion,
research or test.
C. Franchisee will spend, in the manner directed by Franchisor in
writing from time to time, an amount not less than the
Advertising Contribution on advertising, promoting, marketing
and researching the products and services of the Business and
the System. Franchisor may at any time during the Term direct
Franchisee:
1. to pay all or part of the Advertising Contribution to
a national or regional co-operative
advertising/marketing fund specified by Franchisor;
or
2. to spend all or part of the Advertising Contribution
on such local or regional advertising, promotional
and research expenditures as are approved by
Franchisor, in accordance with the requirements and
guidelines set out in the Manuals; provided that if
Franchisee fails to spend the full amount as directed
by Franchisor, Franchisee will pay
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the unspent amount to Franchisor within the period
specified in a written demand from Franchisor, and
upon receipt of the unspent amount, Franchisor either
will contribute the amount to an applicable national
or regional co-operative advertising/marketing fund
or will spend the amount on national or regional
advertising, promotions or research conducted by
Franchisor in its discretion; or
3. without limiting the above, to pay all or part of the
Advertising Contribution to Franchisor, in which
event Franchisor will apply the Advertising
Contribution to the costs of national or regional
advertising, promotions and/or research conducted by
Franchisor in its discretion.
D. Any amount paid by Franchisee to a national or regional
co-operative advertising/marketing fund or to Franchisor
pursuant to Clause 6.3 will not be required to be spent for
the specific benefit, either direct or indirect, of Franchisee
or the Business and no express or implied trust will be
created in respect of such amount.
VII. TRAINING.
Franchisor will provide, or Franchisor may certify Franchisee to
provide, and Franchisee, the Principal Operator and all of Franchisee's
employees must undertake, such initial and ongoing training and
assistance as Franchisor in its discretion considers appropriate.
Franchisee will bear the full cost of attendance by Franchisee, the
Principal Operator and Franchisee's employees at training programs.
Franchisee will ensure that all store management working at the Outlet
have been certified by Franchisor as having successfully completed
Franchisor's current management training programs from time to time.
VIII. MARKS AND SYSTEM PROPERTY.
A. The Marks, the System Property and the goodwill associated
with them are the exclusive property of Franchisor and/or its
Affiliated Companies. Franchisee will acquire no right,
interest or benefit in or to them other than the rights of use
granted under this Agreement. All accretions in the goodwill
associated with the Marks and the System Property resulting
from Franchisee's use thereof are solely for the benefit of
Franchisor and its Affiliated Companies. Upon the expiration
or termination of this Agreement for any reason, Franchisee
will have no claim whatsoever against Franchisor for
compensation for any goodwill associated with the Marks and
the System Property.
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B. Franchisee will use the Marks only in such form and manner as
is specifically approved by Franchisor, and Franchisee will
follow Franchisor's instructions regarding proper usage of the
Marks in all respects. Franchisor may, by notice to
Franchisee, at any time change or withdraw any of the Marks or
designate new Marks, and Franchisee will implement such
changes, withdrawals and additions within the period specified
in the notice.
C. Franchisee will not use in the operation of the Business any
trademarks, service marks, trade names or indicia other than
the Marks without Franchisor's prior written approval.
Franchisee will not use, register or apply to register any
trademarks, service marks, trade names or indicia similar to
the Marks or that in any way suggest an association or
affiliation with the System.
D. Franchisee will do nothing to prejudice, damage or contest the
validity of the Marks, the System Property, the goodwill
associated with them or the ownership of them by Franchisor or
its Affiliated Companies. Franchisee will cooperate fully with
Franchisor in the protection and defense of the Marks and the
System Property, which will be undertaken solely by
Franchisor. Franchisee will promptly notify Franchisor of any
actual or potential infringements of, or claims or actions
brought by third parties in respect of, the Marks or the
System Property. Franchisor will take all appropriate actions
to protect and defend the Marks and the System Property and
will fund the costs of such actions, except where such actions
are necessitated or contributed to by the fault or negligence
of Franchisee.
E. Any improvements to, and inventions and products derived from
the Marks, the System Property or the Business during the
Term, including those attributable to Franchisee, will be the
exclusive property of Franchisor or its Affiliated Companies
and will be promptly disclosed by Franchisee to Franchisor.
Franchisee hereby assigns to Franchisor all present and future
right, title and interest throughout the world in and to any
such improvements, inventions and products. Franchisee will
take all actions and execute all documents required by
Franchisor for this purpose.
F. Where appropriate, Franchisor will apply to enter Franchisee
as a registered or permitted user of the Marks with any
governmental entity, and Franchisee agrees to join with
Franchisor in any such application. Franchisee acknowledges
that upon termination or expiration of this Agreement,
Franchisor may unilaterally cancel such entry.
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IX. CONFIDENTIALITY.
Franchisee will at all times during and after the Term keep
confidential and not disclose to any person, other than with
Franchisor's prior written approval, the terms of this Agreement and
any related agreements, the Standards, the Manuals, all other materials
containing or referring to the System Property and all other
information concerning the System, the System Property, the Approved
Products or Franchisor's business and affairs which may come to
Franchisee by any means during the Term. Franchisee may disclose the
Manuals to Franchisee's employees, on a need-to-know basis, only for
the purposes of the Business and provided that Franchisee at all times
uses best endeavors to ensure that Franchisee's employees retain in
confidence the Manuals and any other materials or information disclosed
to them with Franchisor's approval. This obligation of confidentiality
does not apply in respect of information in the public domain or
previously known to Franchisee otherwise than by breach of any
obligation of confidentiality, or disclosure required by law or an
order of any court or tribunal. Franchisee acknowledges that any breach
of this obligation of confidentiality may cause substantial irreparable
damage to Franchisor and that, in addition to damages or other monetary
compensation, injunctive or other equitable or immediate relief may be
appropriate.
X. ACCOUNTING RECORDS.
A. Franchisee will establish and maintain an accounting system
incorporating methods, procedures, records and equipment
approved by Franchisor and in compliance with the Manuals.
B. Franchisee will retain all records relating to the Business
for the period required by the relevant tax authorities and
Franchisor and its agents or representatives will have the
right at any reasonable time to inspect and audit the records
wherever they are located. Franchisee will fully cooperate and
will instruct its employees, agents or representatives to
fully cooperate with Franchisor and its agents or
representatives during such inspections and audits. If any
inspection or audit discloses a deficiency in Franchisee's
payment of any amount payable or required to be spent by
Franchisee pursuant to this Agreement, Franchisee will
immediately pay to Franchisor the deficiency plus late payment
interest pursuant to Clause 11.2. If the deficiency is equal
to or greater than 2% of the correct amount, Franchisee will
also immediately pay to Franchisor all of the costs incurred
by Franchisor in the inspection or audit.
XI. PAYMENTS BY FRANCHISEE.
A. Franchisee will pay all amounts due to Franchisor pursuant to
this Agreement:
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1. in the currency specified in Schedule B or such other
currency as Franchisor notifies Franchisee from time
to time using, where applicable, the exchange rate
for conversion to the specified currency which is
posted on the day before the due date for payment by
such bank as is specified by Franchisor from time to
time;
2. into the bank account specified in Schedule B or in
such other manner as Franchisor notifies Franchisee
from time to time; and
3. without any deduction or set-off and free of any
taxes payable in respect of such payments, other than
as required by law.
B. Without limiting Franchisor's right to terminate this
Agreement pursuant to Clause 15, in the event that any amount
is not paid by Franchisee to Franchisor when due:
1. such amount will bear late payment interest
calculated on a daily basis from the due date for
payment at the r-ate specified in Schedule B, and
this interest will continue to apply after any
judgment; and
2. without limiting the foregoing, Franchisor may apply
any amount or credit owed by Franchisor to Franchisee
towards satisfaction of the outstanding amount due
from Franchisee.
C. Franchisor reserves the right to apply payments from
Franchisee in any manner and to any indebtedness owed to
Franchisor as Franchisor may deem appropriate.
D. Franchisee will pay promptly when due all taxes, duties,
charges and levies payable in respect of the Business and all
debts and other financial obligations incurred in the
operation of the Business, including, without limitation, all
obligations to suppliers.
XII. INSURANCE, INDEMNITY AND GUARANTEE.
A. At all times during the Term, Franchisee will at its cost
maintain the insurances prescribed in the Manuals. Franchisor
must be named as an additional insured party on the policies
of insurance. Franchisee will on demand deliver to Franchisor
certificates of insurance and will not commit any act or
omission which may render the insurances void or voidable.
B. Franchisee will indemnify and keep indemnified Franchisor, its
Affiliated Companies and their agents, employees, directors,
successors and assigns
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from and against any and all claims, liabilities, losses,
costs and damages (including legal costs and expenses) arising
directly or indirectly in connection with or related to
Franchisee's conduct of the Business, Franchisor's exercise of
any right pursuant to this Agreement (including, without
limitation, any exercise of any power of attorney granted by
Franchisee to Franchisor) or any act or omission by any agent,
representative, contractor, licensee or invitee of Franchisee,
other than where any such claim, liability, loss, cost or
damage arises solely as a result of Franchisor's fault or
negligence.
C. As a precondition to the grant of rights pursuant to Clause
1.1, Franchisee will procure the execution by the Guarantors
of a guarantee of Franchisee's obligations and liabilities
under this Agreement, in the form required by Franchisor and
including such covenants by the Guarantors regarding the terms
and conditions of this Agreement as Franchisor may require.
XIII. PROTECTION OF SYSTEM PROPERTY AND GOODWILL OF SYSTEM.
A. Franchisee covenants that, during the Term, neither Franchisee
nor any Affiliated Company of Franchisee will directly or
indirectly in any capacity, whether on its own account or as a
member, shareholder, director, employee, agent, partner, joint
venturer, advisor, consultant or lender, have any interest in,
be engaged in or perform any services for any business within
the in-Term area specified in Schedule B involving the
wholesale or retail preparation, marketing or sale of any food
products without Franchisor's prior written approval, provided
that Franchisor will not unreasonably withhold its approval
unless one of the following categories of products
individually constitutes more than 20% of the food products
sold in the business:
1. pizza products; or
2. pizza and pasta products (collectively); or
3. ready-to-eat chicken products; or
4. Mexican food products; or
5. beef burger products.
B. Franchisee covenants that, for the period specified in
Schedule B following the expiration, termination or transfer
of this Agreement, neither Franchisee nor any Affiliated
Company of Franchisee will directly or indirectly in any
capacity, whether on its own account or as a member,
shareholder, director,
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employee, agent, partner, joint venturer, advisor, consultant
or lender, have any interest in, be engaged in or perform any
services for any business within the post-Term area specified
in Schedule B involving the preparation, marketing or sale of
products similar to the food products sold in the Business
under the Marks.
XIV. TRANSFERS AND CHARGES.
A. Franchisee will not charge, pledge or otherwise create any
encumbrance, security interest or lien in respect of any
interest in or right under this Agreement. Franchisee will not
charge, pledge or otherwise create any encumbrance, security
interest or lien in respect of any other interest in or other
asset of the Business without Franchisor's prior written
approval.
B. Franchisee will not sell, transfer or gift the Business or
this Agreement or any interest in this Agreement without first
obtaining Franchisor's written approval of the proposed
transferee and then complying with all of Franchisor's
transfer procedures specified in the Manuals, including,
without limitation:
1. in the case of transfers to parties other than a
spouse, daughter or son of Franchisee (or an entity
wholly owned or controlled by such spouse, daughter
or son), paying to Franchisor the transfer fee
specified in Schedule B and the costs and expenses
incurred by Franchisor in connection with the
transfer and all accrued monetary obligations owed by
Franchisee to Franchisor;
2. in the case of transfers to a spouse, daughter or son
of Franchisee (or an entity wholly owned or
controlled by such spouse, daughter or son), paying
to Franchisor the transfer fee for family members
specified in Schedule B and the costs and expenses
incurred by Franchisor in connection with the
transfer and all accrued monetary obligations owed by
Franchisee to Franchisor;
3. executing a deed of release in the form required by
Franchisor; and
4. procuring the execution by the transferee, and by
such guarantors as Franchisor requires, of such
guarantee and other documentation as Franchisor
requires.
C. Franchisee will not, directly or indirectly:
1. permit any sale, transfer, gift, charge or pledge by
any party of any interest or share in Franchisee;
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2. issue any new share in Franchisee to any party who is
not a shareholder at the Date of Grant; or
3. permit any reconstruction, reorganization,
amalgamation or other material change in the
structure or financial condition of Franchisee,
without first obtaining Franchisor's written approval and, in
the event of a change in the direct or indirect control of
Franchisee, then complying with all of Franchisor's transfer
procedures specified in the Manuals, including, without
limitation:
(i) In the case of transfers of the controlling interest
or shareholding to parties other than a spouse,
daughter or son of the controlling shareholder (or an
entity wholly owned or controlled by such spouse,
daughter or son) of Franchisee, paying to Franchisor
the transfer fee specified in Schedule B and the
costs and expenses incurred by Franchisor in
connection with the transfer;
(ii) in the case of a transfer of the controlling interest
or shareholding to the spouse, daughter or son of the
controlling shareholder (or an entity wholly owned or
controlled by such spouse, daughter or son) of the
Franchisee, paying to Franchisor the transfer fee for
family members specified in B and the costs and
expenses incurred by Franchisor in connection with
the transfer; and
(iii) procuring the execution by the former and new
controlling shareholders of such guarantee and deed
of release documentation as Franchisor requires.
D. If Franchisee proposes any sale or transfer of the Business,
this Agreement, any interest in this Agreement or any interest
or shareholding in Franchisee, Franchisee will notify
Franchisor of the agreed terms and conditions, and Franchisor
will have the right itself to elect to proceed, or to nominate
a third party who will proceed, as the purchaser/transferee
with the sale or transfer at the same purchase price and
otherwise on substantially the same terms and conditions
within 60 days of receipt of Franchisee's notice. If
Franchisor exercises this right, Franchisee will proceed in
good faith to complete the sale or transfer to Franchisor or
the nominated third party as soon as practicable. If
Franchisor does not exercise this right, Franchisee will apply
to Franchisor for written approval of the proposed transferee
pursuant to Clauses 14.2 and 14.3. If Franchisee does not
complete the sale or transfer to the proposed transferee
within 60 days of receipt of notice from Franchisor declining
to exercise this right, then Franchisor's right of first
refusal under this Clause will be reinstated.
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XV. DEFAULT AND TERMINATION.
A. Franchisor may terminate this Agreement by notice to
Franchisee effective upon receipt by Franchisee of the notice,
and/or adopt any of the remedies specified in Clause 15.2, if
any of the following events occur:
1. Franchisee is unable to pay its debts as and when
they become due or becomes insolvent or a liquidator,
receiver, manager, administrator or trustee in
bankruptcy (or local equivalent) of Franchisee or the
Business is appointed, whether provisionally or
finally, or an application or order for the winding
up of Franchisee is made or Franchisee enters into
any composition or scheme of arrangement;
2. Franchisee or any Guarantor breaches any of the terms
and conditions of Clauses 1.3, 5.1, 8, 9,13 and 14;
3. subject to any cure period enjoyed by the Guarantors
pursuant to Clause 15.1(i), any Guarantor breaches
any term or condition of the guarantee referred to in
Clause 12.3;
4. Franchisee or any Guarantor commits any crime,
offence or act which in Franchisor's reasonable
judgment is likely to adversely affect the goodwill
of the Business, the Marks, the System or the System
Property;
5. Franchisee knowingly or negligently maintains false
records in respect of the Business or submits any
false report to Franchisor;
6. Franchisee abandons or ceases to operate the Business
for more than 3 consecutive days without Franchisor's
prior written approval, provided that such approval
will not be unreasonably withheld by Franchisor where
the abandonment or cessation is caused by war, civil
commotion, fire, flood, earthquake, act of God,
industrial action or unrest or any other cause beyond
Franchisee's control which Franchisee has used best
endeavors to prevent and remedy;
7. Franchisee takes any action to prejudice, damage or
contest the validity of the Marks or the System
Property, the goodwill associated with them or the
ownership of them by Franchisor or its Affiliated
Companies;
8. any other agreement between Franchisor and Franchisee
(or between their respective Affiliated Companies or
between one party and an Affiliated Company of the
other party) is terminated;
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9. Franchisor notifies Franchisee that Franchisee or any
Guarantor has breached any term or condition of this
Agreement (other than Clauses 1.3, 5.1, 8, 9, 13 and
14) or any other agreement between Franchisor and
Franchisee and/or any Guarantor (or their respective
Affiliated Companies) relating to the Business and
Franchisee or the Guarantor does not fully cure the
breach to Franchisor's satisfaction within the cure
period which is specified by Franchisor in the notice
as reflecting the nature of the breach; or
10. Franchisee or any Guarantor breaches any term or
condition of this Agreement (other than Clauses 1.3,
5.1, 8, 9,13 and 14) or any other agreement between
Franchisor and Franchisee and/or any Guarantor (or
their respective Affiliated Companies) relating to
the Business in circumstances where, in the preceding
24-month period, Franchisee has been sent 2 notices
pursuant to Clause 15.1(i), whether or not Franchisee
or the relevant Guarantor cured the prior breaches to
Franchisor's satisfaction.
B. If any event specified in Clause 15.1 occurs, Franchisor may,
in addition and without prejudice to its rights under Clause
15.1:
1. terminate, by notice to Franchisee, Franchisee's
right under Clause 18 to renew the franchise;
2. terminate any development or option rights in respect
of any system or concept granted to Franchisee
pursuant to any other agreement between Franchisee
and Franchisor (or their respective Affiliated
Companies);
3. itself take whatever actions it considers necessary
to cure the breach at Franchisee's cost (including,
without limitation, administrative costs), such cost
to be payable by Franchisee to Franchisor within the
period specified in a written demand from Franchisor;
or
4. limit or withhold the supply of any products,
supplies, materials, equipment or services supplied
to Franchisee by Franchisor or its Affiliated
Companies.
C. Without limiting Clause 15.2, if any event specified in Clause
15.1 occurs, Franchisor may, in addition and without prejudice
to its rights under Clause 15.1, take control of the Business
for such period as Franchisor considers appropriate, for the
purpose of rectifying any breach of this Agreement and
retraining Franchisee and/or Franchisee's employees at
Franchisee's cost,
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such cost to be payable by Franchisee within the period
specified in a written demand from Franchisor. During this
period, Franchisee and its employees must continue to attend
the Outlet to perform their responsibilities in the conduct of
the Business, but subject to the directions of Franchisor. Any
obligations, liabilities or costs incurred in respect of the
Business during this period will be Franchisee's
responsibility, and the indemnity in Clause 12.2 will apply.
Franchisee agrees that the provisions of Clause 17 will also
apply in respect of any entry into the Outlet by Franchisor
pursuant to this clause.
D. Franchisor's exercise of any of its rights under this Clause
15 will be in addition to and not in limitation of any other
rights and remedies it may have in the event of any breach or
default by Franchisee.
XVI. CONSEQUENCES OF TERMINATION.
A. Immediately upon the expiration or termination of this
Agreement, Franchisee will:
1. pay all amounts owing to Franchisor;
2. discontinue all use of the Marks and the System
Property and otherwise cease holding out any
affiliation or association with Franchisor or the
System unless authorized pursuant to another written
agreement with Franchisor;
3. dispose of all materials bearing the Marks and all
proprietary supplies in accordance with Franchisor's
instructions; and
4. if Franchisor so requires, de-identify the Outlet in
accordance with Franchisor's instructions.
B. If Franchisee fails to fulfill any of its obligations under
Clause 16.1, Franchisor may itself take whatever actions it
considers necessary to fulfill those obligations and invoice
Franchisee for the full cost of such actions, such invoice to
be payable within 7 days.
C. For 60 days from the termination of this Agreement, Franchisor
will have the option to purchase, or to nominate a third party
to purchase, any of the supplies held by Franchisee at cost
price and any of the equipment or signage at the Outlet at a
price equal to book value less depreciation or as otherwise
agreed, and free of any charges or other security interests.
D. The rights and obligations under Clauses 8, 9, 10.2, 11, 12.2,
13.2, 15.2(c), and 16 will survive the expiration or
termination of this Agreement.
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XVII. RIGHTS OF ENTRY.
A. Notwithstanding anything to the contrary in Clause 3.3,
Franchisee expressly authorizes Franchisor and its agents or
representatives to enter the Outlet, without prior notice to
Franchisee, for the purposes of Clauses 10.2, 15.2(c) and
16.2.
B. Franchisee hereby waives, and releases Franchisor from, any
rights, actions or claims which Franchisee may at any time
have against Franchisor in connection with Franchisor's entry
into the Outlet for the purposes of this Agreement, provided
that Franchisor and its agents and representatives use all
reasonable care in exercising such rights of entry.
C. Franchisee will execute any documents required by Franchisor
in connection with Franchisor's entry into the Outlet and use
its best endeavors to procure any consent required from any
third party in connection with Franchisor's entry into the
Outlet.
XVIII. RENEWAL.
A. If the conditions set forth below are satisfied upon the
expiration of the Term, Franchisee shall have the right to
renew this Agreement once, upon the identical contractual and
financial terms set forth herein (except this Clause 18), for
one renewal term specified in Schedule B:
1. Franchisee requests the renewal in writing no more
than 18 months and no less than 12 months prior to
the expiration of the Term;
2. Franchisee satisfies Franchisor's operational and
other renewal criteria specified in Schedule B;
3. Franchisee's right to renew the franchise has not
been terminated under Clause 15.2(a);
4. Franchisee is not, at the expiration of the Term, in
breach of any term or condition of this Agreement or
any other agreement between Franchisor and Franchisee
(or their respective Affiliated Companies);
5. Franchisee timely and fully has paid all amounts due
to Franchisor pursuant to this Agreement during the
12 months preceding the expiration of the Term;
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6. No Guarantor or Affiliated Company of Franchisee is,
at the expiration of the Term, in violation of
Clauses 8,9,13 or 14;
7. Franchisee upgrades the Outlet to Franchisor's then
current Standards for new outlets prior to the
expiration of the Term;
8. Franchisee pays the renewal fee specified in Schedule
B to Franchisor at least 90 days prior to the
expiration of the Term;
9. Franchisee obtains an extension of the lease for the
Outlet, if applicable, for the period of the renewal
term; and
10. Franchisee is in compliance with and obtains all
necessary governmental approvals and documentation
for such renewal.
If Franchisee timely and fully satisfies each of the above conditions
prior to and upon expiration of the Term, Franchisor will memorialize
the renewal by transmitting to Franchisee a Notice of Renewal.
Franchisee's right to renew is exercisable only once, however, and this
Clause 18 shall be excluded from and of no effect during any renewal
term.
XIX. DISPUTE RESOLUTION.
A. Franchisor and Franchisee will endeavor to resolve by mutual
negotiation any dispute arising between them in connection
with this Agreement.
B. If Franchisor and Franchisee fail to resolve any dispute by
mutual negotiation, the parties may refer the dispute to a
mutually agreed mediator for non-binding mediation. The
parties will bear the costs of any mediation equally.
C. Such dispute resolution procedures will not in any way
prejudice or limit Franchisor's ability to exercise its rights
under Clause 15 at any time, including, without limitation,
Franchisor's rights to apply for any order, judgment or other
form of relief in any court or tribunal,
XX. PRINCIPAL OPERATOR.
Franchisee hereby appoints the Principal Operator specified in Schedule
B to be primarily responsible for the management of the Business and to
transact with Franchisor, on behalf of Franchisee, in relation to all
matters arising under this Agreement. Franchisee acknowledges that
Franchisor will deal with the Principal Operator on the basis that the
Principal Operator will have the authority to transact
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with Franchisor on behalf of and in the name of Franchisee. Franchisee
may not change the Principal Operator without prior notice to
Franchisor.
XXI. EMPLOYEE TRANSFERS.
During the Term, Franchisee will not, without Franchisor's prior
written approval, directly or indirectly employ or seek to employ any
employees at or above the grade of manager who at the time is, or any
time during the prior six (6) months was, employed by Franchisor or any
other franchisee of Franchisor.
XXII. NOTICES.
Any notice or other communication required or permitted under this
Agreement will be in writing and properly addressed to the addressee at
the address specified in Schedule B of this Agreement (or any other
address notified by the addressee) and will be deemed received by the
addressee on the earlier of the date of delivery, the date of
transmission if sent by facsimile with receipt confirming completion of
transmission or, if sent by pre-paid security or registered post, the
deemed postal receipt date specified in Schedule B.
XXIII. MISCELLANEOUS.
A. This Agreement constitutes the entire agreement between the
parties with respect to its subject matter and supersedes all
prior negotiations, agreements or understandings.
B. Franchisee is an independent contractor and is not an agent,
representative, joint venturer, partner or employee of
Franchisor. No fiduciary relationship exists between
Franchisor and Franchisee.
C. This Agreement will inure to the benefit of Franchisor, its
successors and assigns and may be transferred by Franchisor to
any party without Franchisee's prior approval upon notice to
Franchisee. With effect from receipt by Franchisee of such
notice, Franchisor is released from all obligations of this
Agreement, and Franchisee will have a new contract on the same
terms as this Agreement with the transferee, successor or
assignee named in the notice.
D. The delay or failure of any party to exercise any right or
remedy pursuant to this Agreement will not operate as a waiver
of the right or remedy and a waiver of any particular breach
will not be a waiver of any other breach. All rights and
remedies under this Agreement are cumulative and the exercise
of one right or remedy will not limit the exercise of any
other right or remedy.
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E. If any part of this Agreement is held to be void, invalid or
otherwise unenforceable, Franchisor may elect either to modify
the void, invalid or unenforceable part to the extent
necessary to render it legal, valid and enforceable or to
sever the void, invalid or unenforceable part, in which event
the remainder of this Agreement will continue in full force
and effect.
F. The terms and conditions of this Agreement may be changed only
in writing signed by both parties. Notwithstanding the above,
Franchisee acknowledges and agrees that Franchisor may change
the Standards and the Manuals from time to time pursuant to
Clause 3.2 upon notice to Franchisee.
G. This Agreement will be governed by and construed in accordance
with the law of the territory specified in Schedule B and the
parties agree to submit to the non-exclusive jurisdiction of
the courts of that territory.
H. Franchisee will pay to Franchisor all reasonable legal
expenses incurred by Franchisor in connection with this
Agreement, including, without limitation, any stamp duty and
any expenses incurred in connection with the lawful
enforcement of this Agreement, but excluding Franchisor's
internal legal costs in the preparation of this Agreement.
I. This Agreement is executed in English. A local language
translation may be attached, which the parties intend to be
identical to the English text. However, if any dispute arises
as to the interpretation of the language of this Agreement,
the English text will govern unless otherwise prohibited under
the law of the territory specified in Schedule X.
X. In the interpretation of this Agreement, unless the context
indicates a contrary intention:
1. the obligations of more than one party will be joint
and several;
2. words denoting the singular include the plural and
vice-versa and words denoting any gender include all
genders;
3. headings are for convenience only and do not affect
interpretation;
4. references to Clauses and Schedules are to clauses
and schedules of this Agreement and the Schedules
form part of this Agreement; and
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5. this Agreement may be executed in any number of
counterparts, each of which will be deemed an
original but which together will constitute one
instrument.
K. The terms and conditions set out in the Schedules are
incorporated into and form part of this Agreement. In the
event of any inconsistency between any provision of the
Schedules and any other provision of this Agreement, the
provisions of the Schedules will prevail.
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FRANCHISEE'S REPRESENTATION
Franchisee represents to Franchisor that:
(A) Franchisee has reviewed this Agreement with the assistance and advice
of independent legal counsel and understands and accepts the terms and
conditions of this Agreement;
(B) Franchisee has relied upon its own investigations and judgment in
entering this Agreement, after receiving legal and financial advice,
and no inducements, representations or warranties, other than those
expressly set forth in this Agreement, have been given in respect of
the System, the Business or this Agreement; and
(C) Franchisee acknowledges that the establishment and operation of the
Business will involve significant financial risks and that the success
of the Business will depend upon the skills and financial capacity of
Franchisee and also upon changing economic and market conditions and
that such risks, skills and conditions are not in any way guaranteed or
underwritten by Franchisor.
EXECUTED AS AN AGREEMENT
SIGNED FOR AND ON BEHALF OF FRANCHISOR
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SIGNED FOR AND ON BEHALF OF FRANCHISEE
--------------------------------------
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SCHEDULE C
ADDITIONAL PROVISIONS
C.1 The last sentence of Clause 3.2 is deleted.
C.2 Without limiting Clause 4, and subject to the renewal criteria of
Clause 18 and Schedule B, Franchisor undertakes:
(a) not to require Franchisee to complete, during the Term, more
than two comprehensive refurbishments of all fittings,
fixtures, signage, equipment, systems and inventory in the
front-of-house area of the Outlet to then current Standards
("FOH" Upgrades), and
(b) not to require Franchisee to complete, during the Term, more
than one comprehensive refurbishment of all fittings,
fixtures, signage, equipment, systems and inventory in the
back-of-house area of the Outlet to then current Standards
("BOH" Upgrades), and
(c) in any event, not to require Franchisee to complete an "FOH"
Upgrade or "BOH" Upgrade during the last two years of the
Term.
C.3 To clarify Clause 6, a regional marketing co-operative will operate
(until further notice) under the bylaws established for the CaribLA
Regional Marketing Fund. Franchisor reserves the right, in its sole
discretion, to redefine the countries that comprise the regional
co-operative.
C.4 To clarify Clause 6.1, Franchisee is not required to obtain written
approval from Franchisor for local store marketing programs unless such
programs deviate from Franchisor's instructions or guidelines
concerning the use of Franchisor's Marks and System Property.
C.5 Clause 6.3(a) is amended to include after the term "Franchisor" the
following: "(Franchisor and the parties to any such co-operative
marketing fund will attempt to negotiate and/or revise, as necessary,
in good faith the Constitution or Articles of Incorporation, the Board
Standing Rules or By-Laws, and the manner in which the funds will be
deployed)."
C.6 Clause 6.3(b) is deleted and replaced with the following: "to spend all
or part of the Advertising Contribution on such local or regional
advertising, promotional and research expenditures as are agreed upon
by Franchisor and Franchisee, in accordance with the requirements and
guidelines set out in the Manuals; provided that if Franchisee fails to
spend the full amount of the Advertising Contribution in any one year,
Franchisee will pay the unspent amount to Franchisor within the period
specified in a written demand from Franchisor, and upon receipt of the
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unspent amount, Franchisor either will contribute the amount to an
applicable national or regional co-operative advertising/ marketing
fund or will spend the amount on national or regional advertising,
promotions or research conducted by Franchisor in its discretion."
C.7 Clause 6.3(c) is deleted.
C.8 Clause 6.4 is deleted.
C.9 For purposes of Clause 9, Franchisor hereby approves Franchisee to make
limited disclosures to professional advisors and lending institutions
for the purpose of the Business, but only to the extent necessary to
accomplish such purpose and only after ensuring that such professional
advisors and lending institutions understand and agree to comply with
the confidentiality obligations of Clause 9.
C.10 Clause 10.2 is amended to include the following: "Franchisee shall
provide to Franchisor annually an audited financial statement." To
clarify Clauses 10.2 and 17.1, Franchisor's right to enter the Outlet
to inspect and audit records shall require a three-day (3-day) written
notice.
C.11 Clause 12.3 is deleted.
C.12 Clause 14.1 of the Franchise Agreement is amended to permit
Franchisee, in the ordinary course of business, to enter into loan or
debt obligations with respect to the physical assets of the Business
only (no with respect to any interest in or right under this Agreement)
without Franchisor's prior written approval, provided such loan or debt
obligations do not materially adversely affect Franchisee's financial
condition or operating ability.
C.13 To clarify Clause 14, once Tricon has approved a proposed
transferee, the proposed transferee and such guarantors as Franchisor
requires must execute all documentation necessary for them to accept
all duties and obligations of the franchisee and guarantors,
respectively, under the existing International Franchise Agreement for
the remaining balance of the Term.
C.14 Franchisee and Xx. Xxxxxxx Xxxxxxxx ("Xxxxxxxx") represent and warrant
to Franchisor the following: (i) Uniservice Corporation ("Uniservice")
owns 99.97% of Franchisee's outstanding common stock; (ii) 100% of
Uniservice's outstanding Class A Common Stock is registered under
Section 12(g) of the Securities Exchange Act of 1934; (iii) Xxxxxxxx
owns 1,400,000 shares of Uniservice's outstanding Class B Common Stock;
and (iv) Xxxxxxxx does not have any interest in, is not engaged in, and
does not perform any services for any business within the terms of
Clause 13.1 of this Agreement. Without limiting Clause 14, Franchisee
agrees that each of the following shall constitute a breach of Clause
14 within the terms of Clause 15.1(b) of this Agreement: (a) any sale,
transfer, gift, charge, or pledge of any interest in
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Franchisee; and/or (b) any sale, transfer, gift, charge, or pledge of
any interest in Uniservice that decreases or dilutes Xxxxxxxx'x direct
voting control over Uniservice, through shares of Uniservice stock that
Xxxxxxxx owns personally and directly, to less than 51%. Subject to the
limitations of subparagraphs (a) and (b), above, Xxxxxxxx is permitted,
upon fourteen (14) days prior written notice to Franchisor, to sell
Class B shares in Uniservice either (1) in the public markets
(following conversion into Class A shares), or (2) to a spouse or child
of Xxxxxxxx or an Affiliated Company of Franchisee so long as any such
spouse, child, or Affiliated Company does not have any interest in, is
not engaged in, and does not perform any services for any business
within the terms of Clause 13.1 of the Agreement. Any sale, transfer,
gift, charge, or pledge of Uniservice Class B Common Stock to persons
or entities other than as described in the foregoing subparagraphs (1)
or (2) shall require Franchisor's prior, express, written approval;
Franchisee agrees that any such sale, transfer, gift, charge, or pledge
without Franchisor's prior, express, written approval shall constitute
a breach of Clause 14 within the terms of Clause 15.1(b) of this
Agreement. Franchisor agrees that the public trading of Uniservice's
Class A Common Stock shall not constitute a breach of Clause 14.3 of
this Agreement.
C.15 The 60-day period set forth in the last sentence of Clause 14.4 is
amended to 120 days.
C.16 Clause 15.1 (c) is deleted.
C.17 The terms "other agreement' in Clause 15. 1 (h) shall be limited to a
site outlet, franchise, or master franchise agreement, a shareholders'
deed, a guarantee, a release, or any other agreement that the parties
thereto expressly subject to this clause. Furthermore, where the "other
agreement" is a site outlet, franchise, or master franchise agreement
that is terminated for an outlet-level, operational default within the
control of the outlet manager, Clause 15. 1 (h) shall be operable only
where, in the preceding 24-month period, Franchisor has terminated for
any reason two other outlets operated by Franchisee or its Affiliated
Companies.
C.18 Line one of Clause 15.16) is amended to include the term "materially"
between the terms "Guarantor" and "breaches." Line five of Clause
15.1(j) is amended to include the term "material" between the terms
"prior" and "breaches."
C.19 Line two of Clause 15.2(c) is amended to substitute the terms
"out-of-pocket expenses, including but not limited to attorneys' fees
and other legal expenses" for the terms "administrative costs."
C.20 Clause 15.3 is deleted.
C.21 To clarify Clause 16.3, equipment or signage (but not supplies) shall
be valued at fair market value or book value less depreciation,
whichever is greater. If the parties
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fail to agree on a price, the value of equipment or signage shall be
determined by an agreed-upon appraiser.
C.22 To clarify Clause 18(e), a temporary and non-material delay in payment
that is caused by war, civil commotion, fire, flood, earthquake, act of
God, or industrial action or unrest and is cured timely shall not
constitute a violation of the Clause 18(e) renewal condition.
C.23 Clause 18(i) is deleted.
C.24 Clause 21 is amended to include the following: "During the Term,
Franchisor will not, without Franchisee's prior written approval,
directly or indirectly employ or seek to employ any employees at or
above the grade of manager who at the time is, or any time during the
prior six (6) months was, employed by Franchisee."
C.25 At its sole discretion, Franchisor may introduce or withdraw from
time-to-time Encroachment Policies that will be reflected in the
Franchise Policies Manual relevant to this Agreement. While determining
the need for and content of these policies will be at Franchisor's sole
discretion, Franchisor will seek appropriate Franchisee input.
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