EXHIBIT 10.4
EINSTEIN/NOAH BAGEL CORP.
AMENDED AND RESTATED
DEVELOPMENT AGREEMENT
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
DEVELOPER
TABLE OF CONTENTS
SECTION PAGE
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1. PREAMBLES.............................................................................................. 1
2. CERTAIN DEFINITIONS.................................................................................... 2
3. DEVELOPMENT RIGHTS AND OBLIGATIONS..................................................................... 10
A. GRANT OF DEVELOPMENT RIGHTS;
PRINCIPAL OWNERS' GUARANTY.................................................................... 10
B. TERRITORIAL RIGHTS............................................................................ 11
C. DEVELOPMENT OBLIGATIONS....................................................................... 11
D. RIGHTS RETAINED BY COMPANY.................................................................... 12
E. DEVELOPER'S OPTION TO DEVELOP TARGET SITES.................................................... 12
F. DEVELOPER'S OPTION TO PURCHASE CONVERSION SITES............................................... 14
G. POST-TERM DEVELOPMENT......................................................................... 15
4. OTHER DISTRIBUTION METHODS............................................................................. 17
A. SPECIAL DISTRIBUTION ARRANGEMENTS............................................................. 17
B. DELIVERY SERVICE.............................................................................. 17
C. CATERING SERVICE.............................................................................. 18
5. DEVELOPMENT AND OPERATION OF COMMISSARIES.............................................................. 19
A. OBLIGATION TO OPERATE COMMISSARIES............................................................ 19
B. DEVELOPMENT AND OPENING OF COMMISSARIES....................................................... 20
C. TRAINING AND GUIDANCE......................................................................... 20
D. COMMISSARY MANUALS............................................................................ 21
E. OPERATION OF THE COMMISSARY................................................................... 21
F. INSURANCE..................................................................................... 22
G. TRANSFERS..................................................................................... 22
H. EXPIRATION AND TERMINATION OF COMMISSARY OPERATIONS........................................... 23
I. RIGHTS AND OBLIGATIONS OF COMPANY AND DEVELOPER UPON TERMINATION OR
EXPIRATION OF RIGHT TO OPERATE A COMMISSARY................................................... 23
6. GRANT OF LICENSES AND ADVERTISING REQUIREMENT.......................................................... 24
A. SITE REVIEW AND APPROVAL...................................................................... 24
B. LEASE OF APPROVED SITES....................................................................... 25
C. EXECUTION OF LICENSE AGREEMENTS............................................................... 26
D. INITIAL LICENSE AND ROYALTY FEES.............................................................. 26
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SECTION PAGE
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6. E. ADVERTISING EXPENDITURES...................................................................... 27
7. INITIAL PAYMENTS....................................................................................... 27
A. DEVELOPMENT FEE............................................................................... 27
B. REAL ESTATE SERVICES FEE...................................................................... 27
8. MARKS.................................................................................................. 27
A. GOODWILL AND RIGHTS TO USE THE MARKS.......................................................... 27
B. LIMITATIONS ON DEVELOPER'S USE OF MARKS....................................................... 28
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS...................................................... 28
D. DISCONTINUANCE OF USE OF MARKS................................................................ 29
E. INDEMNIFICATION OF DEVELOPER.................................................................. 29
F. NON-DENIGRATION............................................................................... 29
G. MARKING REQUIREMENTS.......................................................................... 30
9. COPYRIGHTS............................................................................................. 30
A. OWNERSHIP OF COPYRIGHTED WORKS................................................................ 30
B. LIMITATION ON DEVELOPER'S USE OF COPYRIGHTED WORKS............................................ 31
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS...................................................... 31
D. DISCONTINUANCE OF USE OF ..................................................................... 31
10. COMPUTER SYSTEM AND SOFTWARE........................................................................... 32
A. GRANT OF LICENSE.............................................................................. 32
B. SOFTWARE LICENSE FEE.......................................................................... 34
C. SOFTWARE SUPPORT SERVICE...................................................................... 34
D. SOFTWARE SUPPORT SERVICE FEE.................................................................. 35
E. MODIFICATION, ENHANCEMENT AND REPLACEMENT
OF COMPUTER SYSTEM AND SOFTWARE............................................................... 35
F. WARRANTIES AND LIMITATION OF LIABILITY........................................................ 36
G. SUBCOMPONENT LICENSES AND THIRD-PARTY LICENSES................................................ 36
H. COVENANT TO USE ONLY SPECIFIED SOFTWARE AND
LICENSED PROGRAM SUPPORT/CONTROL PROGRAMS..................................................... 37
11. CONFIDENTIAL INFORMATION............................................................................... 37
12. EXCLUSIVE RELATIONSHIP................................................................................. 40
13. OBLIGATIONS OF DEVELOPER............................................................................... 41
A. FULL-TIME SUPERVISION......................................................................... 41
B. CHIEF OPERATING OFFICER....................................................................... 41
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SECTION PAGE
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13. C. DEVELOPMENT DIRECTOR AND REAL ESTATE MANAGERS................................................. 42
D. TRAINING DIRECTOR............................................................................. 42
E. MARKETING DIRECTOR............................................................................ 43
F. MANAGEMENT PERSONNEL AND TRAINING............................................................. 44
G. BUDGETS AND FINANCING PLANS................................................................... 45
H. INSURANCE..................................................................................... 45
I. RECORDS AND REPORTS........................................................................... 46
J. DEVELOPMENT MANUAL, COMMISSARY MANUALS
AND STORE MANUALS............................................................................. 48
K. COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES.............................................. 48
L. HUMAN RESOURCES............................................................................... 49
M. SPECIFICATIONS, STANDARDS AND PROCEDURES...................................................... 49
14. TRANSFER............................................................................................... 51
A. BY COMPANY.................................................................................... 51
B. THIS AGREEMENT IS NOT TRANSFERABLE BY DEVELOPER............................................... 51
C. CERTAIN RIGHTS TO TRANSFER
OWNERSHIP INTERESTS IN DEVELOPER.............................................................. 52
D. COMPANY'S RIGHT TO APPROVE TRANSFERS.......................................................... 52
E. PUBLIC OR PRIVATE OFFERINGS................................................................... 55
F. EFFECT OF CONSENT TO TRANSFER................................................................. 56
G. COMPANY'S RIGHT OF FIRST REFUSAL.............................................................. 57
H. OWNERSHIP STRUCTURE........................................................................... 58
I. DELEGATION BY COMPANY......................................................................... 58
J. PERMITTED TRANSFERS........................................................................... 58
15. TERMINATION OF AGREEMENT............................................................................... 58
A. BY DEVELOPER.................................................................................. 58
B. BY COMPANY.................................................................................... 59
C. TERMINATION OF THE DEVELOPMENT
TERM AND CERTAIN RIGHTS OF DEVELOPER.......................................................... 61
16. RIGHTS AND OBLIGATIONS OF COMPANY AND
DEVELOPER UPON TERMINATION OF THIS
AGREEMENT OR EXPIRATION OF THE AGREEMENT TERM.......................................................... 62
A. PAYMENT OF AMOUNTS OWED TO COMPANY............................................................ 62
B. MARKS AND COPYRIGHTED WORKS................................................................... 62
C. CONFIDENTIAL INFORMATION...................................................................... 63
D. COVENANT NOT TO COMPETE....................................................................... 64
E. EFFECT ON COMMISSARIES........................................................................ 65
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SECTION PAGE
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16. F. CONTINUING OBLIGATIONS........................................................................ 65
17. INDEPENDENT CONTRACTORS/INDEMNIFICATION................................................................ 65
18. ENFORCEMENT............................................................................................ 66
A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS............................................. 66
B. WAIVER OF OBLIGATIONS......................................................................... 67
C. INJUNCTIVE RELIEF............................................................................. 68
D. RIGHTS OF PARTIES ARE CUMULATIVE.............................................................. 69
E. COSTS AND LEGAL FEES.......................................................................... 69
F. GOVERNING LAW................................................................................. 69
G. CONSENT TO JURISDICTION/CHOICE OF FORUM....................................................... 69
H. LIMITATIONS OF CLAIMS......................................................................... 70
I. WAIVER OF PUNITIVE DAMAGES.................................................................... 70
J. WAIVER OF JURY TRIAL.......................................................................... 70
K. BINDING EFFECT................................................................................ 70
L. CONSTRUCTION.................................................................................. 70
M. REASONABLENESS; APPROVALS..................................................................... 71
19. NOTICES AND PAYMENTS................................................................................... 71
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EXHIBITS AND ATTACHMENTS
EXHIBIT A - CATERING RIDER
EXHIBIT B - DELIVERY RIDER
EXHIBIT C - DEVELOPMENT FEE
EXHIBIT D - DEVELOPMENT AREA(S)
EXHIBIT E - DEVELOPMENT SCHEDULE
EXHIBIT F - FORM LICENSE AGREEMENT
EXHIBIT G - PRINCIPAL OWNERS, OTHER OWNERS, KEY
MANAGERS, PERMITTED COMPETITIVE
BUSINESSES, AND INITIAL CAPITALIZATION
EXHIBIT H - DEVELOPER ACKNOWLEDGMENTS AND
REPRESENTATIONS STATEMENT
EXHIBIT I - GUARANTY AND ASSUMPTION OF DEVELOPER'S
OBLIGATIONS
EXHIBIT J - CONFIDENTIALITY AND NONCOMPETE AGREEMENT
EXHIBIT K - PRINCIPAL MARKS TO BE USED BY DEVELOPER
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EINSTEIN/NOAH BAGEL CORP.
DEVELOPMENT AGREEMENT
THIS AGREEMENT is made and entered into this 5th day of December, 1997
(the "EFFECTIVE Date"), by and between EINSTEIN/NOAH BAGEL CORP., a Delaware
corporation ("COMPANY"), and DEVELOPER (defined below).
"DEVELOPER": EINSTEIN/NOAH BAGEL PARTNERS, L.P.
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a DELAWARE LIMITED PARTNERSHIP
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Principal Address: 14123 DENVER WEST PARKWAY
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GOLDEN, CO 80401
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1. PREAMBLES.
COMPANY and its Affiliates (as defined below) have developed and are
continuing to develop and refine methods of operating a number of branded
retail food service businesses, each with its own concept and operated under
its own system and marks which are referred to in this Agreement as "UNITS"
(defined below), which feature Products (defined below) for on-premises dining
and carry-out. In addition to on-premises dining and carry-out, COMPANY may, in
its sole discretion, offer to an owner of a UNIT the right (a) to offer
Delivery Service (defined below) and/or (b) to offer Catering Service (defined
below) and/or (c) to operate Special Distribution Arrangements (defined below).
Each UNIT utilizes the Marks (defined below) and operates at a location that
features distinctive food service formats and trade dress and utilizes
distinctive business formats, specifications, employee selection and training
programs, signs, equipment, layouts, systems, recipes, methods, procedures,
software, designs and marketing and advertising standards and formats, all of
which COMPANY is continuing to develop and refine and may modify from time to
time in its sole discretion, and all of which may have one or more variations
approved or specified by COMPANY from time to time (the "SYSTEM"). COMPANY
operates, and grants franchises and licenses to certain qualified parties to
own and operate UNITS using the Marks and the System associated with the
Principal Marks (defined below) authorized by COMPANY.
COMPANY grants to certain qualified persons or entities who meet
COMPANY's qualifications and who are willing to undertake the investment and
effort, the right to develop a specified number of UNITS within a defined
geographic area. This Agreement governs the right and obligation of DEVELOPER
to enter into License Agreements (defined below) which grant the right to
develop UNITS which use the branded concept, the Principal Marks, the other
Marks associated with the Principal Marks and those elements of the System
associated with the
Principal Marks ("DEVELOPER Stores", as further defined below) within the
Development Area (defined below) in accordance with the Development Schedule
(defined below). The operation of each DEVELOPER Store will be governed by a
Franchise Agreement (defined below) or a License Agreement.
COMPANY and DEVELOPER have previously entered into a
Development Agreement dated as of June 17, 1996 (the "Original Development
Agreement") pursuant to which DEVELOPER was granted the right and undertook the
obligation to develop a specified number of UNITS within a defined geographic
territory.
COMPANY has also entered into various development agreements with
Colonial Bagels, L.P., Great Lakes Bagels, L.P., Gulfstream Bagels, L.P., and
Sunbelt Bagels, L.L.C. (collectively referred to as the "Area Developers" )
pursuant to which the Area Developers were granted the right and undertook the
obligation to develop a specified number of UNITS within defined geographic
territories (the "Other Development Agreements").
As of the date hereof, the Area Developers will merge with, and into,
DEVELOPER. As a result of said merger, (a) DEVELOPER will own and operate 555
UNITS pursuant to Franchise Agreements previously executed by DEVELOPER and the
Area Developers (the "Franchise Agreements") and (b) DEVELOPER desires to
undertake the remaining development obligations of the Area Developers under
the Other Development Agreements, all of which have been terminated by COMPANY
and the Area Developers as of the date hereof. In order to facilitate the
foregoing and the development of the UNITS and to amend, restate, replace and
substitute in full the obligations of COMPANY and DEVELOPER under the Original
Development Agreement, COMPANY and DEVELOPER desire to enter into this
Agreement, upon the terms and subject to the conditions set forth herein and as
an amendment, restatement, replacement and substitute for the Original
Development Agreement.
2. CERTAIN DEFINITIONS.
For purposes of this Agreement, the terms listed below have the
meanings that follow them. Other terms used in this Agreement are defined in
the context in which they occur.
"ACCOUNTING PERIOD" - One of thirteen periods of four consecutive
weeks in each fiscal year of COMPANY that is designated by COMPANY as an
accounting period of COMPANY.
"AFFILIATE" - Any person or legal entity that directly or indirectly
owns or controls COMPANY, that is directly or indirectly owned or controlled by
COMPANY, or that is under common control with COMPANY. For purposes of this
definition, "CONTROL" means the power to direct or cause the direction of the
management and policies of an entity.
"AGREEMENT TERM" - The period commencing upon the Effective Date and
ending upon
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the expiration or termination of the last to expire or terminate of the
Franchises or Licenses (defined below) and successor Franchises or Licenses
granted to DEVELOPER pursuant to this Agreement, unless terminated sooner in
accordance with the provisions of this Agreement.
"ALBERT EINSTEIN PUBLICITY SYMBOLS" - The full name Albert Einstein
and the likeness, image, caricature, photographs and signature of Albert
Einstein and up to two sayings or slogans originated by Albert Einstein and to
be selected by COMPANY from among his sayings and slogans.
"ALBERT EINSTEIN INDICIA" - All indicia of Albert Einstein (other than
the name Albert Einstein, sayings or slogans originated by Albert Einstein or
the likeness, image, caricature, photographs or signature of Albert Einstein),
including but not limited to references to (i) genius and human intelligence
(e.g., references to IQ), (ii) scientific formulas and mathematical equations
(e.g. E=MC2), (iii) scientific and mathematical theories (e.g., the theory of
relativity), and (iv) drawings or symbols of the atom or atomic particles.
"APPROVED SITE" - A site which COMPANY has approved as meeting its
minimum criteria for the development and operation of a DEVELOPER Store.
"BAGEL STORE" - A food service business, including a UNIT, which
derives a significant portion of its revenue from the sale of bagels and/or
bagel-related products or from any other product or service which is or
hereafter becomes a source of a significant portion of the revenue of a UNIT.
"CATERING AREA" - The geographic area in which COMPANY, in its sole
discretion, authorizes the owner of a Franchise or License (a "FRANCHISE OR
LICENSE OWNER") to provide Catering Service pursuant to a Catering Rider, which
area may be the same as, smaller than, larger than or different from the
Territory (defined in the Franchise Agreement) of a UNIT.
"CATERING RIDER" - The form of rider to this Agreement or to a
Franchise Agreement or License Agreement used by COMPANY from time to time to
authorize in its sole discretion a Franchise or License Owner to offer Catering
Service (defined below) within the applicable Catering Area. The current form
of COMPANY's Catering Rider is attached hereto as Exhibit A.
"CATERING SERVICE" - The delivery of Products prepared at a UNIT or a
separate facility approved by COMPANY in writing (such approved facility is
referred to herein as a "CATERING FACILITY") to customers in the Catering Area
pursuant to COMPANY's standards and specifications for the provision of such
service, which COMPANY may change from time to time in its sole discretion,
where
(1) such Products are intended to serve fifteen (15) or more
persons, or
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(2) in addition to the delivery of Products, DEVELOPER provides
ancillary services to a customer at such location within the Catering
Area, including, by way of example and without limitation, the
setting up for serving or distribution of Products.
"COMMISSARY" - A food preparation facility operated by DEVELOPER
pursuant to this Agreement that:
(1) procures and receives those Products, ingredients and
materials used in the preparation and packaging of Products, and
other materials and supplies used in the operation of Stores as
COMPANY may specify from time to time;
(2) prepares and packages Products in accordance with recipes,
methods, procedures, standards and specifications established by
COMPANY, in its sole discretion, from time to time; and
(3) distributes to DEVELOPER Stores Products and other materials
and supplies used in the operation of Stores.
"COMPETITIVE BUSINESS" - A business or enterprise, other than a UNIT
or Commissary, that:
(1) offers food and/or beverage products at wholesale or retail,
which are the same as or similar to the Products, through:
(a) on-premises dining;
(b) carry-out;
(c) delivery service;
(d) catering service; or
(e) other distribution channels similar to those used by
COMPANY; or
(2) grants or has granted franchises or licenses or establishes
or has established joint ventures, for the development and/or
operation of one or more businesses or enterprises described in the
foregoing clause (1); provided, however, that the term "Competitive
Business" shall not include:
(a) any Boston Market restaurant operated pursuant to a
valid franchise or license agreement with Boston
Chicken, Inc. or its successors; or
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(b) any business or enterprise that derives less than 10%
of its revenue from the sale of (i) bagels and/or
bagel related products (including but not limited to
cream cheese and other spreads, bagel sandwiches and
bagel chips) or (ii) any other product which accounts
for 15% or more of the revenue of any UNIT owned or
operated by COMPANY or a franchisee of COMPANY.
"COMPUTER SYSTEM" - Those brands, types, makes, and/or models of
communications and computer systems and hardware specified or required by
COMPANY for use by, between, or among the Stores and/or DEVELOPER including,
but not limited to:
(1) back office and point of sale systems, data, audio, video,
and voice storage, retrieval, and transmission systems for use at the
Stores and/or at DEVELOPER's office, between or among the Stores and
DEVELOPER and between or among Stores and/or DEVELOPER and COMPANY;
(2) security systems;
(3) printers; and
(4) archival and back-up systems.
"CONTROLLING INTEREST" - If DEVELOPER is a:
(1) corporation, such number of the voting shares of DEVELOPER
or such other rights as (a) shall permit voting control of DEVELOPER
on any issue and (b) shall prevent any other person, group,
combination, or entity from blocking voting control on any issue or
exercising any veto power; and
(2) general partnership, a managing partnership interest, such
percentage of the general partnership interests in DEVELOPER or such
other rights as (a) shall permit determination of the outcome on any
issue and (b) shall prevent any other person, group, combination, or
entity from blocking voting control on any issue or exercising any
veto power;
(3) limited partnership, general partnership interest, such
percentage of limited partnership interests or such other rights as
shall permit the replacement or removal of any general partner; and
(4) limited liability company, such percentage of the membership
interests of
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DEVELOPER or such other rights as (a) shall permit voting control of
DEVELOPER on any issue, and (b) shall prevent any other person,
group, combination, or entity from blocking voting control on any
issue or exercising any veto power.
"DELIVERY AREA" - The geographic area in which COMPANY, in its sole
discretion, authorizes a franchise owner to provide Delivery Service (defined
below) pursuant to a Delivery Rider (defined below), which area may be the same
as, smaller than, larger than or different from the Territory of a UNIT.
"DELIVERY RIDER" - The form of rider to this Agreement or to a
Franchise Agreement or License Agreement used by COMPANY from time to time to
authorize or require in its sole discretion a Franchise or License Owner of a
Store to offer Delivery Service within the applicable Delivery Area. The
current form of COMPANY's Delivery Rider is attached hereto as Exhibit B.
"DELIVERY SERVICE" - The delivery of Products prepared at a UNIT or a
separate delivery facility approved by COMPANY (such approved facility is
referred to herein as a "DELIVERY FACILITY") to customers in the Delivery Area
pursuant to COMPANY's standards and specifications for the provision of such
service, which COMPANY may change from time to time in its sole discretion,
where
(1) such Products are intended to serve fewer than fifteen (15)
persons, and
(2) such service involves the provision of no services other
than the delivery of Products to a customer at a location within the
Delivery Area.
"DEVELOPER STORES" - The UNITS developed, owned and operated by
DEVELOPER pursuant to this Agreement and/or Franchise Agreements or License
Agreements that operate using the Principal Marks, the other Marks associated
with the Principal Marks and the elements of the System associated with the
Principal Marks and pursuant to COMPANY's operational requirements associated
with such Principal Marks as in effect from time to time.
"DEVELOPMENT AREA" - The aggregate of the geographic areas described
in Exhibit D to this Agreement.
"DEVELOPMENT SCHEDULE" - The schedule of the number of DEVELOPER
Stores required to be open and operational at specified dates in each Sub-Area
(defined below) and the required opening dates for each of them set forth in
Exhibit E to this Agreement.
"DEVELOPMENT TERM" - The period during which DEVELOPER is authorized
and required to develop Developer Stores pursuant to this Agreement, which will
commence on the Effective Date and will expire, unless terminated earlier in
accordance with the terms of this
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Agreement, on the earlier to occur of (i) the last opening date set forth in
the Development Schedule; or (ii) the first date on which the number of
Developer Stores for which a Franchise Agreement (other than Franchise
Agreements in effect as of the date hereof) or License Agreement has been
executed and delivered for a location in the Development Area is equal to the
Total Development Quota (as defined in the Development Schedule set forth in
Exhibit E to this Agreement).
"EINSTEIN ALONE" - The name EINSTEIN in combination with no other
word, with or without a logo, and the name EINSTEIN in combination with another
word that is a generic or immediately descriptive reference to a product or
service or location (e.g. RESTAURANT, BAGELS or CREAM CHEESE).
"ENBC PROMOTIONAL ITEMS" - Goods intended to promote COMPANY's
restaurant services or food products, including and specifically limited to
magnets; pins; playing cards; flags; banners; umbrellas; name badges; key
chains; cups; glasses; bagel slicers; toasters; mugs; can cooler sleeves; golf
towels; clothing, namely, shirts, blouses, t-shirts, jackets, hats, caps,
visors, sweaters and sweatshirts; golf bags, flying discs and balls.
"FRANCHISE OR LICENSE " - The right to operate a UNIT at a particular
location and to use one or more of the Marks and the System in the operation
thereof.
"LICENSE AGREEMENT" - at COMPANY's option, either:
(1) the form of license agreement (including exhibits, riders,
addenda and attachments thereto) attached hereto as Exhibit F; or
(2) the form of license agreement (including all exhibits,
riders, guarantees and other agreements used in connection therewith)
used by COMPANY from time to time in the offering and granting of
Licenses in the United States of America,
in either instance revised by COMPANY in good faith to the extent necessary to
have the License Agreement reflect the substantive changes contained in
Addendum No. 1 to the License Agreement attached hereto as part of Exhibit F.
"IMMEDIATE FAMILY" - (1) The spouse of a person; and (2) the natural
and adoptive parents and natural and adopted children and siblings of such
person and their spouses; and (3) the natural and adoptive parents and natural
and adopted children and siblings of the spouse of such person; and (4) any
other member of the household of such person; provided, in the case of natural
and adopted children and siblings and their spouses and the parents, children
and siblings of spouses, that such person received or had access to
Confidential Information, including as an employee, supplier, officer,
director, stockholder or agent of DEVELOPER or any other operator of a UNIT.
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"LICENSED PROGRAM" - The retail store-level computer software programs
(other than the Support/Control Program, as defined below) developed by or for
COMPANY and designated by COMPANY from time to time as specified or required in
connection with utilization of the Computer System, which may include, without
limitation, COMPANY's required point-of-sale, bookkeeping, inventory, training,
marketing, employee selection, operations and financial information, collection
and retrieval systems (including COMPANY's general ledger system utilizing the
standard chart of accounts prescribed by COMPANY from time to time) for use in
connection with the operation of UNITS or franchise owners', license owners'
and developers' businesses, including any updates, supplements, modifications
or enhancements thereto made from time to time, all related documentation, the
tangible media upon which such programs are recorded, and the database file
structure thereof, but excluding any data or databases owned or compiled by
COMPANY or its Affiliates or their licensors for use with the Licensed Program
or otherwise or any data generated by the use of the Licensed Program. The
Licensed Program includes, but is not limited to, programs utilized by UNITS
for point-of-sale and cash management, customer feedback kiosks, inventory
management, order processing, employee feedback, production scheduling, labor
scheduling, ideal food costs, store operations and smart form reporting.
"MARKS" - The trademarks, service marks, logos and other commercial
symbols which COMPANY uses and authorizes developers, franchise owners and
license owners to use to identify, the services and/or products offered by
Stores, and the "TRADE DRESS" (defined in the License Agreement); provided that
such trademarks, service marks, logos, other commercial symbols, and the Trade
Dress are subject to modification and discontinuance at COMPANY's sole
discretion and may include additional or substitute trademarks, service marks,
logos, commercial symbols and trade dress as provided in this Agreement. The
Marks include the Principal Marks DEVELOPER is authorized to use in the
operation of the DEVELOPER Stores.
"OWNER" - Each person or entity holding direct or indirect, record or
beneficial Ownership Interests in DEVELOPER, and each person who has other
direct or indirect property rights in DEVELOPER or this Agreement.
"OWNERSHIP INTERESTS" - In relation to a: (i) corporation, the record
or beneficial ownership of one or more shares in the corporation; (ii)
partnership, the record or beneficial ownership of a general or limited
partnership interest; (iii) limited liability company, the record or beneficial
ownership of a membership interest in the limited liability company; or (iv)
trust, the ownership of a beneficial interest of such trust.
"PERMITTED COMPETITIVE BUSINESS" - A business which constitutes a
Competitive Business on the date of this Agreement and is disclosed in Exhibit
G to this Agreement, provided that such business (1) is not on the date of this
Agreement and does not at any time thereafter become a Bagel Store, and (2)
does not offer bagels or bagel-related products on its menu,
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provided that if such business is a franchised or licensed business of a
franchisor or licensor which, pursuant to an agreement executed prior to the
date of this Agreement and under which, after the date of this Agreement, the
franchisor or licensor specifies that such business offer bagels or
bagel-related products as a required menu item, it shall continue to be deemed
a Permitted Competitive Business so long as it does not become a Bagel Store.
"PRINCIPAL MARKS" - The Marks COMPANY authorizes DEVELOPER to use to
identify DEVELOPER Stores. The Principal Marks as of the date of this Agreement
are described in Exhibit K to this Agreement.
"PRINCIPAL OWNER" - Each Owner which:
(1) is a general partner in DEVELOPER; or
(2) has a direct or indirect equity interest of 10% or more
(regardless of whether such Owner is entitled to vote thereon) in (a)
DEVELOPER or (b) any UNIT or (c) any developer and/or franchise owner
of UNITS other than DEVELOPER; provided, however, that a reduction in
a Principal Owner's equity interest below 10% shall not affect
his/her/its status as a Principal Owner unless such reduction is the
result of the transfer of all his/her/its equity interests in
DEVELOPER, a UNIT or such developer and/or franchise owner of UNITS;
or
(3) is designated as a Principal Owner in Section 2 of Exhibit G
to this Agreement.
"PRODUCTS" - Products approved or required by COMPANY from time to
time, in its sole discretion, for sale at or from UNITS, including, without
limitation, bagels, bagel-related products, cream cheese and other spreads,
sandwiches, soups, salads, baked goods, breakfast items, an assortment of hot
and cold beverages, teas (leaves, bags, dry mixes and related forms), coffees
(beans, ground and related forms) and other food products and merchandise,
provided that the foregoing products are subject to modification or
discontinuance in COMPANY's sole discretion, from time to time, and may include
additional or substitute products.
"REQUIRED TELEVISION ADVERTISING" - Television advertising in the
Designated Market Area ("DMA") (as defined by A.C. Nielsen Co. from time to
time) in which the Development Area is located at a minimum of 200 gross
ratings points for a minimum of 36 weeks per calendar year, provided that
COMPANY may, in its sole discretion, from time to time use a market designation
comparable to, but different from, the DMA for purposes of this definition.
"SPECIAL DISTRIBUTION AGREEMENT" - A separate agreement whereby
COMPANY authorizes a Franchise owner or License owner to operate a Special
Distribution Arrangement (defined below) at a Special Distribution Location (as
defined below) designated by COMPANY.
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"SPECIAL DISTRIBUTION ARRANGEMENT" - The sale of all or some of the
Products, as designated by COMPANY, at or from a Special Distribution Location
(defined below), whether or not by or through on-premises food service
facilities or concessions, pursuant to COMPANY's standards and specifications
for such sales, which COMPANY may change from time to time in its sole
discretion.
"SPECIAL DISTRIBUTION LOCATION" - A facility or location, including by
way of example and without limitation, a grocery store, convenience store,
supermarket, school, hospital, office, work site, military facility,
entertainment or sporting facility or event, airport, bus or train station,
park, toll road or limited access highway facility, or other similar facility,
at or from which COMPANY, in its sole discretion, authorizes the operation of a
Special Distribution Arrangement pursuant to a Special Distribution Agreement,
which facility may be located within or outside the Development Area or any
Sub-Area.
"SPECIFIED SOFTWARE" - Such software (other than the Licensed Program
and Support/Control Programs), programming, and services which COMPANY from
time to time specifies or requires in connection with utilization of the
Computer System, the Licensed Program and the Support/Control Programs.
"STORES" - UNITS that operate using the Principal Marks, the other
Marks associated with the Principal Marks and the elements of the System
associated with the Principal Marks and pursuant to COMPANY's operational
requirements associated with such Principal Marks as in effect from time to
time.
"SUB-AREAS" - The geographic areas designated as Sub-Areas in Exhibit
D to this Agreement which, taken together, make up the Development Area.
"SUB-AREA TERM" - The period during which DEVELOPER is authorized and
required to develop DEVELOPER Stores in a given Sub-Area pursuant to this
Agreement, which will commence on the Effective Date and will expire, unless
terminated earlier in accordance with the terms of this Agreement, on the
earlier to occur of: (i) the last opening date set forth in Exhibit D to this
Agreement for that Sub-Area; or (ii) the first date on which the number of
Stores in the Sub-Area for which a License Agreement has been executed and
delivered is equal to the Sub-Area Quota (as set forth in Exhibit E ) for that
Sub-Area.
"SUPPORT/CONTROL PROGRAMS" - The computer software programs developed
by or for COMPANY and designated from time to time as specified or required in
connection with real estate services and other functions performed by COMPANY
pursuant to this Agreement or in connection with support, supervision,
reporting or control of UNITS and in connection with analysis, tracking,
maintenance, feedback and communication functions related thereto or to the
employees thereof, including but not limited to, Notes Databases, structured
reporting and related software.
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"UNIT" - A branded retail store that:
(1) offers Products for consumer consumption through on-premises
dining and carry-out, provided that COMPANY may, in its sole
discretion, authorize and/or require such business to offer Delivery
Service pursuant to a Delivery Rider and/or approve the Franchise
owner of such business to offer Catering Service pursuant to a
Catering Rider or to operate Special Distribution Arrangements
pursuant to a Special Distribution Agreement (defined below); and
(2) operates using the System and the Marks; and
(3) is either operated by COMPANY or its Affiliates or pursuant
to a valid franchise or license from COMPANY.
3. DEVELOPMENT RIGHTS AND OBLIGATIONS.
3.A. GRANT OF DEVELOPMENT RIGHTS;
PRINCIPAL OWNERS' GUARANTY.
DEVELOPER has requested that COMPANY grant to DEVELOPER the right to
develop, own and operate, strictly in accordance with the Sub-Area Development
Quotas and the Total Development Quota, Stores in the Development Area.
DEVELOPER's request, with respect to the Principal Marks, the other Marks
associated with the Principal Marks and those elements of the System associated
with the Principal Marks and concepts associated therewith (as listed on
Exhibit K attached hereto), has been approved by COMPANY in reliance upon all
of the representations made by DEVELOPER and its Owners in any submitted
application and/or during the application process and in the Developer
Acknowledgements and Representations Statement, a copy of which is attached to
this Agreement as Exhibit H and which shall be executed by DEVELOPER
concurrently with this Agreement. Within sixty (60) days of execution of this
Agreement, DEVELOPER agrees to prepare and submit to COMPANY for COMPANY's
review, amendment, and approval a real estate development plan for developing
DEVELOPER Stores in the Development Area (the "MARKET REAL ESTATE DEVELOPMENT
PLAN") (which shall utilize, among other sources, information from the
Demographic Detail Report (defined below in Section 6.A.) which DEVELOPER
purchases from COMPANY). Provided that DEVELOPER is in full compliance with all
of the terms and conditions of this Agreement, including, without limitation,
the development obligations contained in Section 3.C. hereof, and DEVELOPER is
in full compliance with all of their obligations under all License Agreements
executed pursuant hereto and the Franchise Agreements, COMPANY will grant to
DEVELOPER during the Development Term and in accordance with Section 6 hereof,
the right to develop and operate the number of Stores in each Sub-Area of the
Development Area as
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specified on Exhibit D to this Agreement. DEVELOPER acknowledges and agrees
that DEVELOPER's rights under this Agreement are limited to the designated
number of Stores for each Sub-Area and the schedule and timing of the opening
of Stores in each Sub-Area during the respective Sub-Area Terms as set forth on
Exhibit D to this Agreement. DEVELOPER is not granted any rights to develop or
operate, and DEVELOPER will not develop or operate, UNITS outside the
Sub-Areas, except pursuant to rights granted to DEVELOPER under other
agreements entered into with COMPANY.
DEVELOPER expressly acknowledges and agrees that it has no right to
renew its rights under this Agreement upon the expiration or termination of the
Agreement Term or the Development Term. DEVELOPER acknowledges and agrees that
the execution and delivery of this Agreement shall constitute notice to
DEVELOPER of non-renewal for purposes of fulfilling the requirements of any
applicable state or federal law governing the non-renewal of franchise or
development rights.
DEVELOPER shall cause all Principal Owners and their spouses as of the
Effective Date to execute and deliver to COMPANY concurrently with the
execution of this Agreement and all persons or entities that become Principal
Owners after the Effective Date and their spouses to promptly thereafter
execute and deliver to COMPANY, the form of Guaranty and Assumption of
Developer's Obligations ("GUARANTY") attached hereto as Exhibit I.
Notwithstanding the foregoing:
(a) DEVELOPER shall not be required to cause the execution
and delivery of the Guaranties referred to in this Section if, and for
such period of time as, DEVELOPER does not pay dividends,
distributions or unreasonable compensation to any Owner at any time
that the Owners' equity in DEVELOPER is either less than $5,000,000 or
would be reduced to below that amount by reason of such payment; and
(b) spouses of guarantors shall not be required to execute
any Guaranties referred to in this Section unless, under applicable
law (including, without limitation, the law of the state in which such
guarantors and/or their spouses reside), their failure to execute
would render the Guaranties null and void.
3.B. TERRITORIAL RIGHTS.
Except as otherwise provided in this Agreement (including, without
limitation, Section 4 and Sections 3.E. and 3.F.), and provided that DEVELOPER
is in full compliance with this Agreement and with all License Agreements and
Franchise Agreements, COMPANY and its Affiliates will not during the Sub-Area
Term for each Sub-Area operate or grant franchises or licenses for the
operation of Stores within such Sub-Area.
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3.C. DEVELOPMENT OBLIGATIONS.
DEVELOPER agrees that during the Development Term, it will
continuously exert its best efforts to promote and enhance the development of
Stores within the Development Area. Without limiting the foregoing obligation,
DEVELOPER agrees to have open and in operation in each Sub-Area the number of
Stores set forth as the respective Sub-Area Quota in Exhibit E attached hereto
by the opening dates specified therein, exclusive of Stores operating pursuant
to the Franchise Agreements. DEVELOPER and COMPANY acknowledge and agree that a
DEVELOPER Store that closes for more than five (5) days (not counting
COMPANY-approved holidays) during any period of 12 months shall not be counted
as open and in operation as of the next store opening date after such closing
for purposes of determining DEVELOPER's compliance with the Development
Schedule for the Sub-Area in which the DEVELOPER Store is located unless such
closing is due to circumstances listed in the last paragraph of Section 18.B of
this Agreement, in which case, the provisions of Section 18.B shall apply.
DEVELOPER also agrees that it will at all times faithfully, honestly and
diligently perform its obligations under this Agreement and that it will update
the Market Real Estate Development Plan as COMPANY requires from time to time.
DEVELOPER acknowledges that COMPANY makes no representations or warranties that
the Development Area or the Sub-Areas can support, or that there are sufficient
sites for, the number of Stores specified in the Development Schedule.
DEVELOPER acknowledges and agrees that its failure to open and operate Stores
pursuant to this Agreement shall be a material breach of this Agreement
entitling COMPANY to all remedies available to it pursuant to this Agreement
and applicable law.
3.D. RIGHTS RETAINED BY COMPANY.
COMPANY (on behalf of itself, its Affiliates and its designees)
retains all rights with respect to UNITS, the Marks, the Copyrighted Works, and
the sale of Products and any other products and services, anywhere in the
world, including, without limitation:
(1) the right to operate or grant others (including any person
or entity related to any manner whatsoever to COMPANY) the right to
operate food service businesses, including, without limitation, UNITS
and/or Bagel Stores, using the Principal Marks, any of the other
Marks or any other marks and using the System or any other system at
such locations within and/or outside the Development Area and each
Sub-Area, both during and upon expiration or termination of the
Development Term or Agreement Term, and on such terms and conditions
as COMPANY, in its sole discretion, deems appropriate (subject to the
rights expressly granted to DEVELOPER in Section 3.B. of this
Agreement); and
(2) subject to any rights of DEVELOPER under Section 4 of this
Agreement, the right, and the right to grant others (including any
person or entity related in any manner whatsoever to COMPANY) the
right, to develop, manufacture, market, distribute
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and/or sell Products and/or any other product or service within
and/or outside the Development Area and each Sub-Area through any
channel of distribution whatsoever, whether wholesale, retail or
otherwise, including, without limitation, through Special
Distribution Arrangements, Delivery Service, Catering Service and
BOSTON MARKET outlets under or in association with the Marks or any
other trademarks and/or to own or operate any other business under
the Marks or any other trademarks; and
(3) subject to Sections 3.E. and 3.F. below, the right to
develop Target Sites (defined below) and to acquire, operate and
convert to a UNIT using the Principal Marks or any of the other Marks
any business, including, without limitation, a business operating one
or more Bagel Stores (other than UNITS) or other food service
businesses located or operating within and/or outside the Development
Area and any Sub-Area.
3.E. DEVELOPER'S OPTION TO DEVELOP TARGET SITES.
Notwithstanding anything to the contrary in this Agreement, if during
the Sub-Area Term of a particular Sub-Area COMPANY locates a site within such
Sub-Area at which a Bagel Store is not then operated but which, in COMPANY's
judgment, is suitable for a UNIT (a "TARGET SITE"), COMPANY shall, as soon as
is practicable after the site is identified (taking into consideration any
applicable contractual or legal prohibitions or limitations), notify DEVELOPER
in writing of such Target Site if COMPANY intends that such Target Site be
developed and operated as a Store. Within ten (10) days after DEVELOPER's
receipt of COMPANY's notice regarding such Target Site (including any relevant
site-related materials in COMPANY'S possession), DEVELOPER shall notify COMPANY
if DEVELOPER desires to develop and operate a Store at such Target Site as
described in the notice.
If DEVELOPER timely notifies COMPANY in writing that DEVELOPER desires
to develop and operate a Store at such Target Site and COMPANY has fully
negotiated a lease or purchase agreement for such Target Site, then DEVELOPER
shall (1) obtain the consent of the landlord to execute and shall execute such
lease or an assignment and assumption of lease, if applicable, or (2) obtain
the consent of the seller to execute and shall execute a purchase agreement or
an assignment and assumption of purchase agreement, if applicable, and (3)
execute a License Agreement and such ancillary documents as are then
customarily used by COMPANY in the grant of licenses for Stores (collectively,
the "License Documents") as modified for use in connection with the Target
Site, as necessary, and (4) pay COMPANY a site location and negotiation fee
(the "SITE LOCATION AND NEGOTIATION FEE") equal to Twenty Thousand Dollars
($20,000.00) plus COMPANY's reasonable out-of-pocket expenses incurred in
locating such Target Site and negotiating the lease or purchase agreement, all
within ten (10) business days after COMPANY's delivery to DEVELOPER of the
lease or purchase agreement, as the case may be, and the License Documents. The
Site Location and Negotiation Fee is paid to compensate COMPANY for the
internal costs of the site location services it provides. COMPANY shall fully
cooperate with DEVELOPER in obtaining the landlord's consent to
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DEVELOPER's execution of such lease or the seller's consent to DEVELOPER's
execution of such purchase agreement or assignment of purchase agreement as the
case may be.
If DEVELOPER timely notifies COMPANY in writing that DEVELOPER desires
to develop and operate a Store at such Target Site and COMPANY has not fully
negotiated a lease or purchase agreement for such Target Site, then DEVELOPER
will have thirty (30) days in which to negotiate and deliver to COMPANY a lease
or purchase agreement for such Target Site in form for execution. If COMPANY
disapproves the lease or purchase agreement for failure to meet COMPANY's
requirements, DEVELOPER will have ten (10) business days within which to
negotiate and deliver to COMPANY a revised lease or purchase agreement for such
Target Site in form for execution. If COMPANY approves the lease or the
purchase agreement for such Target Site, then DEVELOPER will (1) execute such
lease or purchase agreement, as applicable, and (2) execute the Franchise
Documents, and (3) pay to COMPANY a site location fee (the "SITE LOCATION FEE")
equal to Ten Thousand Dollars ($10,000.00), plus COMPANY's reasonable
out-of-pocket expenses in locating such Target Site and, to the extent
applicable, partially negotiating the lease or purchase agreement, all within
ten business (10) days after COMPANY's delivery of the License Documents to
DEVELOPER.
If DEVELOPER (a) declines the option to develop a Target Site, (b)
fails to timely notify COMPANY of its election to develop a Target Site or (c)
fails to timely execute the approved lease or purchase agreement and License
Documents for a Target Site and pay the applicable fee as provided herein, then
COMPANY or its designee may develop and operate a Store at such Target Site.
Any Target Site for which DEVELOPER executes the License Documents and
develops and opens a UNIT will count toward the Sub-Area Quota for the Sub-Area
in which such Target Site is located. COMPANY will not be required to give
notice to DEVELOPER or offer to DEVELOPER a license to develop a Store with
regard to any suitable Target Site or Conversion Site (defined below) in a
Sub-Area that COMPANY desires to develop and operate as a Store after the total
number of sites for which DEVELOPER has executed a License Agreement and
accepted as Target Sites or Conversion Sites for that Sub-Area equals the
Sub-Area Quota.
3.F. DEVELOPER'S OPTION TO PURCHASE CONVERSION SITES.
If, during the applicable Sub-Area Term for a particular Sub-Area,
COMPANY acquires the shares or assets (which may include, by way of
illustration and not by way of limitation, furniture, fixtures, equipment,
leasehold improvements and/or leasehold interests) of any business operating a
Bagel Store at one or more sites located within such Sub-Area which meet
COMPANY's specifications and standards as in effect from time to time for
conversion to UNITS (the "CONVERSION SITES"), and COMPANY determines in its
sole discretion to convert such Conversion Sites to Stores, COMPANY agrees to
offer to sell such Conversion Sites to DEVELOPER for the price paid therefor by
COMPANY. Such price will include that portion
15
of the direct and indirect costs and liabilities incurred or assumed by COMPANY
in making such acquisition and allocated to such Conversion Site whether paid
or owed to the seller of such Conversion Sites, an Affiliate or third parties
and other expenses allocated or otherwise related to such Conversion Sites
(including losses, whether from continuing operations or closing acquired
units) plus interest at the COMPANY's cost of money on the balance of such
amounts from time to time, provided that:
(1) such sale will not, in the COMPANY's judgment, conflict with
any existing legal obligation of COMPANY or the business being
acquired; and
(2) such sale will not, in the COMPANY's judgment, preclude the
completion of the acquisition on the terms agreed to by COMPANY; and
(3) such sale will not, in COMPANY's judgment, interfere with
any other legal agreement, arrangement or combination or affect
federal or state income tax consequences arising from the acquisition
in a manner adverse to any of the parties thereto; and
(4) such sale may, at COMPANY's option, include (at a price
determined on the same basis as for Conversion Sites) certain
acquired stores which fall within the Development Area or any
Sub-Area but which do not meet COMPANY's criteria for conversion to
UNITS and which may have to be closed or sold to a third party
subsequent to DEVELOPER's acquisition; and
(5) DEVELOPER agrees to (a) execute, concurrently with
DEVELOPER's purchase, the License Documents, as modified for use in
connection with a Conversion Site as necessary, for each and every
such Conversion Site, (b) convert each such Conversion Site to a
Store as soon as practicable thereafter (but in no event later than
the date specified by COMPANY) in accordance with COMPANY's standards
and specifications and (c) close or sell, within the reasonable time
period specified by COMPANY, any acquired sites which are not
suitable for conversion.
DEVELOPER shall have thirty (30) days after receipt of COMPANY's offer in which
to accept or reject such offer by written notice to COMPANY. If accepted,
DEVELOPER shall have thirty (30) days from the date of acceptance within which
to complete the acquisition.
In the event DEVELOPER rejects or fails to timely accept COMPANY's
offer to sell such Conversion Sites or COMPANY is unable to extend such offer
for any of the aforementioned reasons, COMPANY agrees that, provided DEVELOPER
is in full compliance with this Agreement and all License Agreements and
Franchise Agreements to which they are parties, it will not utilize or license
the use of the Principal Marks at such Conversion Sites for one (1) year
following COMPANY's acquisition thereof; provided, however, that COMPANY
16
may operate, alter, modify, refurbish, remodel, promote and market any such
Conversion Sites and use the Licensed Program and Computer System in the
operation thereof during such one (1) year period. For purposes of this Section
3.F., all references to COMPANY shall be deemed to include its Affiliates.
Any Conversion Site for which DEVELOPER executes the License Documents
and develops and opens a Store shall count toward the Sub-Area Quota for the
Sub-Area in which such Conversion Site is located as of the date of conversion.
COMPANY agrees to use reasonable efforts to obtain input (including
market and competitive information) from DEVELOPER in connection with the due
diligence process undertaken by COMPANY in any potential acquisition of
Conversion Sites in a particular Sub-Area during the applicable Sub-Area Term.
3.G. POST-TERM DEVELOPMENT.
(1) Notwithstanding anything contained in this Section 3 to the
contrary, if, at any time during the period commencing 18 months
prior to expiration of the Development Term for each Sub-Area
(including any Sub-Areas added pursuant to Section 3.G) and ending 24
months following the expiration of the Development Term for such
Sub-Area (the "Post-Development Period"), either (a) COMPANY or its
Affiliates or (b) DEVELOPER determines that such Sub-Area may
accommodate additional Stores beyond those which are required under
the Agreement (the "Post-Development Stores") and desires to conduct
such additional development following the expiration of the
Development Term for such Sub-Area, the party desiring to conduct
such development shall provide the other with notice thereof
("Development Plan Notice"). Such notice shall contain any
demographic, competitive or market analysis on which the notifying
party based its determination and the development plan and schedule
proposed for such additional development.
(2) The parties shall, as soon as practicable following issuance
and receipt of a Development Plan Notice and for a period of 45 days
thereafter, engage in good faith negotiations for the execution of a
new development agreement (the "Post-Development Agreement") in the
form of development agreement then being used by COMPANY, which may
contain different terms and/or higher fees than the Agreement, for
the right to develop and acquire the license to operate the
agreed-upon number of Stores.
(3) If COMPANY and DEVELOPER timely agree on the terms of the
Post-Development Agreement within the period specified in paragraph
(2) above, COMPANY shall provide DEVELOPER with execution forms of
the Post-Development Agreement, and DEVELOPER shall execute and
return the Post-Development Agreement to COMPANY within 15 days of
its receipt thereof and pay all fees due upon the execution thereof.
17
(4) As to any particular Sub-Area, COMPANY shall have no
obligation to negotiate with DEVELOPER pursuant hereto and may
develop in such Sub-Area the Post-Development Stores itself, through
its Affiliates or other franchisees or licensees if:
(a) DEVELOPER fails to commence good faith negotiations
within seven (7) days of its receipt of a Development Plan
Notice from COMPANY; or
(b) DEVELOPER and COMPANY have engaged in good faith
negotiations as required hereunder but are unable to agree upon
a final development schedule or form of Post-Development
Agreement during the 45-day negotiation period; or
(c) DEVELOPER fails to execute the Post-Development
Agreement and pay all fees required thereunder within the
periods specified in subparagraph (3) below; or
(d) the Agreement is terminated, either in whole or with
respect to the applicable Sub-Area, prior to its expiration
date; or
(e) DEVELOPER or any of its Principal Owners receives a
notice to cure, termination or default from COMPANY with respect
to a breach or default of any provision of the Agreement, any
Franchise Agreement, License Agreement, or any other agreement
with COMPANY and which, if curable, has not been cured within
any applicable cure period; or
(f) the Post-Development Period expires without either
party issuing a Development Plan Notice.
4. OTHER DISTRIBUTION METHODS.
4.A. SPECIAL DISTRIBUTION ARRANGEMENTS.
DEVELOPER acknowledges and agrees that: (1) DEVELOPER is not granted,
and COMPANY has no obligation to offer to DEVELOPER, any rights to operate
Special Distribution Arrangements within or outside the Development Area or the
Sub-Areas pursuant to this Agreement; and (2) the right to operate or grant to
others the right to operate Special Distribution Arrangements is specifically
reserved to COMPANY or its designees. If COMPANY, at any time and in its sole
discretion, determines to offer DEVELOPER the right to operate a Special
Distribution Arrangement at a Special Distribution Location designated by
COMPANY, COMPANY will so notify DEVELOPER by delivering to DEVELOPER a form
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of Special Distribution Agreement. DEVELOPER will have fifteen (15)days after
its receipt thereof to execute and deliver to COMPANY such executed Special
Distribution Agreement. If DEVELOPER fails to execute and deliver to COMPANY
the executed Special Distribution Agreement within such fifteen (15) day period
or commence such Special Distribution Arrangement within the period specified
therein, then DEVELOPER shall have no right to operate such Special
Distribution Arrangement thereafter. COMPANY reserves the right under the
Special Distribution Agreement, at any time and in its sole discretion with or
without cause and regardless of the investment made by DEVELOPER in
establishing or operating the Special Distribution Arrangement or the length of
time the Special Distribution Arrangement has been in effect, to suspend or
terminate DEVELOPER's right to operate the Special Distribution Arrangement,
effective ninety (90) days after COMPANY's written notice to DEVELOPER.
Notwithstanding the foregoing, COMPANY agrees that, if during the Development
Term it intends to engage in a Special Distribution Arrangement at or from (a)
a military facility, (b) an entertainment or sporting facility or event, (c) an
airport, bus or train station, (d) a toll road or limited access highway
facility, or (e) any specialty kiosk located in or adjacent to any similar
facilities, located within the Development Area, COMPANY will offer DEVELOPER a
Special Distribution Agreement, the execution of which shall be governed by
this Section 4.A.
4.B. DELIVERY SERVICE.
DEVELOPER acknowledges and agrees that: (1) DEVELOPER is not granted,
and COMPANY has no obligation to offer to DEVELOPER, any rights within or
outside the Development Area or the Sub-Areas to offer Delivery Service from
any of the DEVELOPER Stores or otherwise pursuant to this Agreement; and (2)
the right to provide Delivery Service is specifically reserved to COMPANY or
its designees. If COMPANY, at any time and in its sole discretion, determines
to offer Delivery Service in a designated Delivery Area in which a DEVELOPER
Store is located, COMPANY will offer DEVELOPER the right to offer Delivery
Service by delivering to DEVELOPER a form of Delivery Rider to this Agreement
(or to the applicable Franchise Agreement or License Agreement). DEVELOPER will
have fifteen (15) days after its receipt thereof to execute and deliver to
COMPANY such executed Delivery Rider. A Delivery Facility will not be counted
as a separate DEVELOPER Store for purposes of the Sub-Area Quotas or the Total
Development Quota set forth in the Development Schedule. If DEVELOPER fails to
execute and deliver to COMPANY such executed Delivery Rider within such fifteen
(15) day period or commence Delivery Service within the specified period, then
DEVELOPER shall have no right to provide Delivery Service at such Store
thereafter.
If COMPANY determines in its sole discretion that all franchise owners
and license owners of Stores in the trade area where a DEVELOPER Store is
located, as such trade area is determined by COMPANY in its sole discretion and
which in no event shall exceed the Marketing Area (as defined in the License
Agreement), shall offer Delivery Service, COMPANY will notify DEVELOPER and
will deliver to DEVELOPER a Delivery Rider to this Agreement (or to the
applicable Franchise Agreement or License Agreement) which
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DEVELOPER shall execute and return to COMPANY within fifteen (15) days after
its receipt.
COMPANY reserves the right under the Delivery Rider, at any time and
in its sole discretion, with or without cause and regardless of the investment
made by DEVELOPER in establishing and conducting Delivery Service or the length
of time DEVELOPER has offered Delivery Service: (1) to reduce, modify or expand
the Delivery Area, effective upon COMPANY's written notice to DEVELOPER,
provided, however, that if a reduction or modification of the Delivery Area
amounts to a termination of substantially all of DEVELOPER's rights to provide
such services (except in the case of the exercise by COMPANY of its remedies
under Section 15.C of this Agreement), such reduction or modification shall not
be effective until 90 days after COMPANY's written notice to DEVELOPER; or (2)
to suspend or terminate DEVELOPER's right to offer Delivery Service, effective
ninety (90) days after COMPANY's written notice to DEVELOPER; and COMPANY may
otherwise terminate DEVELOPER's right to offer Delivery Service on the terms of
the Delivery Rider. In the event that COMPANY suspends or terminates
DEVELOPER's right to offer Delivery Service, COMPANY reserves the right to
require DEVELOPER to reinstate Delivery Service upon fifteen (15) days' prior
written notice to DEVELOPER.
4.C. CATERING SERVICE.
DEVELOPER acknowledges and agrees that: (1) DEVELOPER is not granted,
and COMPANY has no obligation to offer to DEVELOPER, any rights within or
outside the Development Area or the Sub-Areas to offer Catering Service from
any of the DEVELOPER Stores or otherwise pursuant to this Agreement; and (2)
the right to provide Catering Service is specifically reserved to COMPANY or
its designees. If COMPANY, at any time and in its sole discretion, determines
to offer Catering Service in a designated Catering Area in which a DEVELOPER
Store is located, COMPANY will offer DEVELOPER the right to offer Catering
Service by delivering to DEVELOPER a form of Catering Rider to this Agreement
(or to the applicable Franchise Agreement or License Agreement). DEVELOPER will
have fifteen (15) days after its receipt thereof to execute and deliver to
COMPANY such executed Catering Rider. A Catering Facility will not be counted
as a separate DEVELOPER Store for purposes of the Sub-Area Quotas or the Total
Development Quota set forth in the Development Schedule. If DEVELOPER fails to
execute and deliver to COMPANY such executed Catering Rider within such fifteen
(15) day period or commence Catering Service within the specified period, then
DEVELOPER shall have no right to provide Catering Service within the designated
Catering Area thereafter.
If COMPANY determines in its sole discretion that all franchise owners
and license owners of Stores in the trade area where a DEVELOPER Store is
located, as such trade area is determined by COMPANY in its sole discretion and
which in no event shall exceed the Marketing Area (as defined in the License
Agreement), shall offer Catering Service, COMPANY will notify DEVELOPER and
will deliver to DEVELOPER a Catering Rider to this Agreement
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(or to the applicable Franchise Agreement or License Agreement) which DEVELOPER
shall execute and return to COMPANY within fifteen (15) days after its receipt.
COMPANY reserves the right under the Catering Rider, at any time and
in its sole discretion, with or without cause and regardless of the investment
made by DEVELOPER in establishing and conducting Catering Service or the length
of time DEVELOPER has offered Catering Service: (1) to reduce, modify or expand
the Catering Area, effective upon COMPANY's written notice to DEVELOPER,
provided, however, that if a reduction or modification of the Catering Area
amounts to a termination of substantially all of DEVELOPER's rights to provide
such services (except in the case of the exercise by COMPANY of its remedies
under Section 15.C of this Agreement), such reduction or modification shall not
be effective until 90 days after COMPANY's written notice to DEVELOPER; or (2)
to suspend or terminate DEVELOPER's right to offer Catering Service, effective
ninety (90) days after COMPANY's written notice to DEVELOPER (in which case,
DEVELOPER will not fill any orders for Catering Service after the expiration of
such ninety (90) day period); and COMPANY may otherwise terminate DEVELOPER's
right to offer Catering Service pursuant to the terms of the Catering Rider. In
the event that COMPANY terminates or suspends DEVELOPER's right to offer
Catering Service, COMPANY reserves the right to require DEVELOPER to reinstate
Catering Service upon fifteen (15) days' prior written notice to DEVELOPER.
5. DEVELOPMENT AND OPERATION OF COMMISSARIES.
5.A. OBLIGATION TO OPERATE COMMISSARIES.
DEVELOPER acknowledges and agrees that in order to meet COMPANY's
standards and specifications for Products (including, without limitation, the
preparation and packaging of Products) and to maintain appropriate quality
controls as required by this Agreement and the Franchise Agreements and License
Agreements entered into by DEVELOPER, it will be necessary for DEVELOPER to
establish one or more Commissaries in the Development Area. DEVELOPER agrees
that, subject to this Agreement and such Franchise Agreements and License
Agreements, it will establish and operate the number of Commissaries reasonably
determined by COMPANY from time to time to be sufficient to supply the
DEVELOPER Stores.
DEVELOPER agrees that each Commissary (and, where the Commissary is
operated under the same roof as a DEVELOPER Store or other approved retail
establishment, that part of such facility which functions as the Commissary):
(1) will not under any circumstances offer for sale or sell to the general
public any products or services; (2) will procure, prepare and distribute to
DEVELOPER Stores only those Products and other materials and supplies specified
by COMPANY; and (3) will not use a Commissary or its premises for any purpose
other than the operation of the Commissary on the terms of this Agreement.
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5.B. DEVELOPMENT AND OPENING OF COMMISSARIES.
The location of any Commissary established by DEVELOPER pursuant to
this Agreement shall be subject to COMPANY's approval in the manner described
in Section 6.A. of this Agreement, and Section 6.B. of this Agreement shall
apply to the lease for the Commissary. Each Commissary shall be developed,
constructed and equipped in the manner described in Sections 4.B., 4.C. and 4.D
of the Franchise Agreements and License Agreement. Section 4.F. of the
Franchise Agreements and License Agreement shall apply to the opening and
commencement of operation of the Commissary and Sections 4.H. and 4.I. of the
Franchise Agreements and License Agreement shall apply to the relocation and
financing of the Commissary, respectively. Notwithstanding the foregoing,
DEVELOPER shall not be required to utilize the Trade Dress at a Commissary and
DEVELOPER shall not be obligated to commence operation of a Commissary until
180 days after receipt of written notice that COMPANY requires DEVELOPER to
develop a Commissary to supply the DEVELOPER Stores specified in such notice.
5.C. TRAINING AND GUIDANCE.
DEVELOPER shall employ and maintain at all times at each Commissary
throughout its operation at least one (1) Commissary Manager and one (1)
Additional Commissary Manager. The Commissary Manager shall be the full time
manager of the Commissary and the Additional Commissary Manager shall perform
on a full-time basis such other operations for DEVELOPER as COMPANY may
reasonably specify from time to time and both must successfully complete to
COMPANY's satisfaction a COMPANY-certified management training program for the
operation of the Commissary. DEVELOPER shall also employ the number of
assistant managers and other personnel required for adequate staffing of each
Commissary, and shall at all times keep COMPANY advised of the identities of
the Commissary Manager, the Additional Commissary Manager and the assistant
managers of each Commissary. Each Commissary at all times shall be under the
direct, on-site supervision of a Commissary Manager, an Additional Commissary
Manager or an assistant manager who has completed a training program conducted
by COMPANY or DEVELOPER (if applicable) and who has been certified under the
terms of the Development Agreement. DEVELOPER shall hire all employees of each
Commissary and shall be exclusively responsible for the terms of their
employment and compensation and for the proper training of such employees in
the operation of a Commissary.
In the event the certified Commissary Manager and/or the certified
Additional Commissary Manager ceases to hold such position at the Commissary,
DEVELOPER shall have thirty (30) days in which to appoint a substitute or
replacement Commissary Manager and/or Additional Commissary Manager, who must
attend and complete to COMPANY's satisfaction the initial management training
program as specified above promptly after appointment. If COMPANY in its sole
discretion determines that the Commissary Manager or Additional
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Commissary Manager or any subsequently appointed Manager or Additional
Commissary Manager has failed to satisfactorily complete the initial management
training program or any additional or refresher training program, DEVELOPER
shall immediately hire a substitute Commissary Manager or Additional Commissary
Manager and promptly arrange for such person to complete the initial management
training program to the satisfaction of COMPANY.
5.D. COMMISSARY MANUALS.
COMPANY shall loan to DEVELOPER, for its sole use, one (1) copy of a
set of COMPANY's confidential manuals relating to the development and operation
of Commissaries (collectively the "Commissary Manuals"). The Commissary Manuals
shall be furnished in the same manner and on the same terms as set out in
Section 5.C. of the Franchise Agreements and License Agreement with respect to
the Store Manuals.
5.E. OPERATION OF THE COMMISSARY.
DEVELOPER shall operate each Commissary in accordance with the
standards, specifications and procedures which the COMPANY prescribes, and
which COMPANY may change, in its sole discretion, from time to time, as set
forth in the Commissary Manuals or otherwise in writing. Such standards,
specifications and procedures may include, without limitation, requirements
for: (1) Product preparation; (2) delivery drivers and delivery vehicles
(whether or not owned by DEVELOPER); (3) management of the Commissary; (4)
training of Commissary personnel involved in Product preparation and delivery;
(5) Commissary design, layout, equipment, fixtures and signage; (6) Product
packaging; and (7) materials and supplies used in the operation of the
Commissary.
Without limiting the foregoing, DEVELOPER agrees to:
(1) require all Commissary delivery drivers to strictly comply
with all regulations, laws and ordinances applicable to the operation
of motor vehicles and to use due care, taking into consideration road
conditions, when operating motor vehicles in connection with
Commissary operations;
(2) require all Commissary delivery drivers to maintain adequate
motor vehicle liability insurance that complies with all applicable
laws and regulations and that extends to the operation of a motor
vehicle used for commercial delivery;
(3) maintain all Commissary motor vehicles in good and safe
operating condition in full compliance with all applicable laws and
regulations;
(4) conduct initial and periodic (at least once every six (6)
months) driving records checks on all Commissary delivery drivers;
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(5) require all Commissary delivery drivers to possess and
maintain a valid driver's license;
(6) suspend or, where appropriate under COMPANY's specifications
and standards as in effect from time to time, terminate any
Commissary delivery driver who does not conform to COMPANY's
applicable standards and specifications for Commissary operations;
(7) ensure that each Commissary is adequately stocked at all
times with food and beverage products, ingredients and other items
necessary to prepare and supply to the Stores serviced by the
Commissary sufficient Products and other materials and supplies to
ensure the optimum performance of those Stores;
(8) ensure that each Commissary and its facilities are kept
clean and are operated in a first class, sanitary, attractive and
efficient manner and in accordance with COMPANY's standards and
specifications;
(9) ensure that the food preparation personnel at each
Commissary are properly trained in the preparation of Products and
that they prepare Products at all times in accordance with COMPANY's
standards and specifications; and
(10) use the Commissary, the premises of the Commissary and the
motor vehicles used in the operation of the Commissary solely for the
purposes contemplated by this Agreement.
DEVELOPER agrees that COMPANY may conduct quality, service,
cleanliness and other inspections of any Commissary from time to time and
without notice in order to determine compliance with this Agreement and
with the standards and specifications applied by COMPANY from time to
time.
COMPANY and DEVELOPER acknowledge and agree that the term "Royalty
Base Revenue" (as defined in the License Agreement) shall not include
revenue, if any, derived from DEVELOPER's or a Commissary's sale of
products or other materials and supplies to Stores for resale to the
public at such Stores.
5.F. INSURANCE.
During the operation of each Commissary, DEVELOPER shall maintain in
force policies of insurance for the Commissary in the same manner as is
required for the DEVELOPER Stores pursuant to Section 12.G. of the Franchise
Agreements and License Agreement.
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5.G. TRANSFERS.
DEVELOPER agrees that no obligations, rights or interests of DEVELOPER
in (a) A Commissary, (b) the lease for the premises of a Commissary or (c) the
assets of a Commissary may be transferred without the prior written consent of
COMPANY. Any purported transfer in violation of this Section shall constitute a
breach of this Agreement and shall convey to the transferee no rights or
interests in the foregoing.
As used in this Section, the term "transfer" shall have the meaning
ascribed to it in the License Agreement. In addition to the foregoing, a
transfer will require the prior written consent of COMPANY where such transfer
occurs by reason of: (a) divorce; (b) insolvency; (c) dissolution of a
corporation, partnership or limited liability company; (d) will; (e) intestate
succession; or (f) declaration of or transfer in trust.
No transfer restricted by this Section may be effected unless a
transfer of the DEVELOPER Stores which are serviced by the Commissary is made
simultaneously to the same transferee.
In granting its approval of a proposed transfer, COMPANY may also
impose reasonable conditions upon its consent, including, without limitation,
those conditions provided for in the License Agreement. Furthermore, any
proposed transfer under this Section shall be subject to a right of first
refusal of COMPANY on the terms set forth in Section 16.H. of the Franchise
Agreements and the License Agreement.
5.H. EXPIRATION AND TERMINATION OF COMMISSARY OPERATIONS.
COMPANY may require DEVELOPER to cease operation of a Commissary in
the event that DEVELOPER does not comply with this Agreement with respect to
such Commissary. Unless earlier terminated as provided herein, DEVELOPER's
right and obligation to operate a Commissary shall expire when the Franchise
Agreement or License Agreement for the last Store serviced by the Commissary
has been terminated or has expired without renewal. Furthermore, DEVELOPER
agrees that, notwithstanding any other provision of this Agreement to the
contrary, COMPANY may, at any time and in its sole discretion with or without
cause and regardless of the investment made by DEVELOPER in establishing a
Commissary or the length of time DEVELOPER has operated the Commissary, require
DEVELOPER to cease operation of the Commissary, effective upon 90 days written
notice from COMPANY (except in the case of the exercise by COMPANY of its
remedies under Section 15.C of this Agreement, in which case, the obligation to
cease such operations shall be effective immediately upon written notice from
COMPANY).
25
5.I. RIGHTS AND OBLIGATIONS OF COMPANY
AND DEVELOPER UPON TERMINATION OR
EXPIRATION OF RIGHT TO OPERATE A COMMISSARY.
Upon the expiration or termination of DEVELOPER's right to operate a
Commissary, DEVELOPER shall immediately remove the Marks from all vehicles used
in the operation of the Commissary and shall return to COMPANY all copies of
the Commissary Manuals.
Furthermore, COMPANY shall have the right to purchase the assets of
the Commissary on the same terms as set forth in Section 19.F. of the Franchise
Agreements and License Agreement, including the ancillary rights set forth in
Section 19.F.
6. GRANT OF LICENSES AND ADVERTISING REQUIREMENT.
6.A. SITE REVIEW AND APPROVAL.
Annually throughout the Development Term, DEVELOPER shall purchase
from COMPANY market plans on the demographics of each Sub-Area ("MARKET PLANS")
in which DEVELOPER retains the right to develop DEVELOPER Stores. Such Market
Plan shall be available to DEVELOPER at COMPANY's or its designee's
then-current charges. At DEVELOPER's request, COMPANY or its designee may
provide other demographic services at COMPANY's or its designee's then-current
charges. Those charges will vary with the type of service requested.
At DEVELOPER's request, COMPANY will provide to DEVELOPER, at
COMPANY's or its designee's then-current charges, a report and grid map
containing certain demographic information concerning a proposed site and
surrounding area, which report and grid map may be prepared by COMPANY, its
designee or by an independent demographic statistics service at COMPANY's
direction.
DEVELOPER shall comply with COMPANY's specifications and requirements
regarding site selection, development and construction, including, without
limitation, those concerning relations with and use of approved general
contractors, subcontractors, real estate developers and lessors and, if
requested by COMPANY, real estate broker(s). DEVELOPER shall submit to COMPANY
a complete site approval request package and location feasibility analysis (a
"SITE PACKAGE") on COMPANY's specified forms (containing such demographic,
commercial, and other information and photographs as COMPANY may require from
time to time) for each site at which DEVELOPER proposes and intends in good
faith to establish and operate a Store and which DEVELOPER reasonably believes
to conform to certain minimum site selection criteria established by COMPANY
from time to time in its sole discretion. Each such Site Package shall include
a designation of the type of UNIT DEVELOPER intends to develop at the site. In
approving or disapproving any proposed site, COMPANY may consider such
26
matters as it deems material from time to time, which factors may (but are not
required to) include, without limitation, the type of UNIT proposed,
demographic characteristics, traffic patterns, parking, visibility, allowed
signage, the predominant character of the neighborhood, competition from other
businesses providing similar services within the area (including other UNITS),
the proximity to other businesses, the exclusivity granted to other franchise
owners, license owners, or developers of UNITS, the nature of other businesses
in proximity to the site, and other commercial characteristics (including the
purchase price or rental obligations and other lease terms for the proposed
site) and the size, appearance, and other physical characteristics of the
proposed site. DEVELOPER acknowledges and agrees that COMPANY may alter the
criteria or impose additional criteria for acceptable sites for UNITS at any
time or from time to time in its sole discretion, that DEVELOPER shall abide by
such site criteria as they exist from time to time and comply with its
development obligations hereunder (including, but not limited to, Exhibit F
hereof) and that no extension or alteration of the Opening Date (as set forth
in Exhibit E) of any UNIT shall arise by reason of such altered or additional
site criteria).
DEVELOPER further acknowledges that each such proposed site will be
evaluated based on the information provided in the Site Package and on the
circumstances existing at the time of such evaluation. Consequently, a proposed
site might be rejected when submitted, but if later re-submitted, approved for
development by DEVELOPER, another developer, license owner, or franchise owner
or by COMPANY or its Affiliates, subject to DEVELOPER's rights to exclusivity
under this Agreement.
COMPANY will approve or disapprove sites by delivery of written notice
to DEVELOPER. (A site which COMPANY has approved pursuant hereto is referred to
as an "APPROVED SITE.") COMPANY agrees to exert its reasonable best efforts to
deliver such notification to DEVELOPER within thirty (30) days after receipt by
COMPANY of a complete Site Package and such other materials requested by
COMPANY from time to time, containing all information required by COMPANY.
COMPANY shall have the right in its sole discretion to approve or disapprove a
site, and DEVELOPER acknowledges and agrees that COMPANY shall have no
liability therefor. Notwithstanding any other provision of this Agreement,
COMPANY's failure to provide DEVELOPER with notice of its approval or
disapproval of one or more proposed sites shall in no event constitute a waiver
of COMPANY's right to approve or disapprove such sites or cause any extension
of the applicable Development Schedule.
6.B. LEASE OF APPROVED SITES.
DEVELOPER acknowledges that COMPANY has developed a standard form
lease (the "FORM STORE LEASE") for Stores. COMPANY will furnish DEVELOPER with
a copy of the current forms of Form Store Lease and DEVELOPER acknowledges that
COMPANY may modify such forms from time to time in its sole discretion.
DEVELOPER shall present the Form Store Lease to the lessor of an Approved Site,
as applicable, and use its best efforts to cause the lessor or seller of such
Approved Site to execute the Form Store Lease as the lease,
27
sublease or assignment of lease (referred to herein as the "SITE AGREEMENT"),
as applicable, for such Approved Site. If DEVELOPER fails to obtain the
lessor's agreement to use the Form Store Lease as the Site Agreement, DEVELOPER
shall cause lessor to include in the Site Agreement such standard lease terms
as COMPANY may require or otherwise specifically approve in writing from time
to time in its sole discretion.
After receiving a copy of a proposed Site Agreement in form for
execution, COMPANY shall have the right, in its sole discretion, to approve,
approve with modification or disapprove such proposed Site Agreement, and
DEVELOPER acknowledges and agrees that COMPANY shall have no liability
therefor. COMPANY agrees to exert its best efforts to deliver such notification
to DEVELOPER within twenty (20) days after receipt by COMPANY of the proposed
Site Agreement. DEVELOPER agrees that it will not execute a Site Agreement
without the prior written approval of COMPANY, and any such Site Agreement
shall contain the express condition precedent of COMPANY's prior written
approval thereof. DEVELOPER shall deliver to COMPANY a copy of the fully signed
Site Agreement as previously approved within fifteen (15) days after its full
execution. DEVELOPER further agrees that it will not execute or agree to any
modification of the Site Agreement which would affect COMPANY's rights without
the prior written approval of COMPANY.
If DEVELOPER fails to obtain lawful possession of an Approved Site
(through lease, sublease or assignment) within sixty (60) days after delivery
of COMPANY's approval of the Approved Site, COMPANY may, in its sole
discretion, withdraw approval of such site at any time.
If DEVELOPER owns an Approved Site, DEVELOPER will, at the request of
COMPANY, enter into a lease with COMPANY under COMPANY's then-current form of
lease for a term equal to the term of the Franchise and for a rental equal to
the Approved Site's fair market rental value, and will sublease the Approved
Site from COMPANY on the same terms as the prime lease. If DEVELOPER and
COMPANY cannot agree on the fair market rental value of such an Approved Site,
then such rental value shall be determined by an independent appraiser selected
by COMPANY and DEVELOPER, and if they are unable to agree on an independent
appraiser, COMPANY and DEVELOPER shall each select an independent appraiser,
who shall select a third independent appraiser, and the fair market rental
value shall be deemed to be the average of the three (3) independent appraisals
made by such appraisers.
6.C. EXECUTION OF LICENSE AGREEMENTS.
Provided that (1) DEVELOPER is then in full compliance with all of the
terms and conditions of this Agreement, (2) DEVELOPER is in full compliance
with all Franchise Agreements and License Agreements it has entered into, and
(3) DEVELOPER has obtained legal possession of an Approved Site, COMPANY agrees
to offer to DEVELOPER a License to operate a Store at such Approved Site by
delivering to DEVELOPER a License Agreement in
28
form for execution by DEVELOPER and its Principal Owners. Such License
Agreement shall be executed and returned to COMPANY at the earlier of fifteen
(15) days after COMPANY's delivery thereof, or prior to the opening of the
Store, together with the fees required to be paid upon execution thereof.
COMPANY may withdraw its offer to grant a License for a Store at such Approved
Site and withdraw its approval of such site at any time prior to COMPANY's
receipt of all applicable payments and COMPANY's execution of the License
Agreement. In no event may a DEVELOPER Store developed hereunder be opened for
business prior to DEVELOPER's receipt of written notice from COMPANY
authorizing the opening of such Store.
6.D. INITIAL LICENSE AND ROYALTY FEES.
For each License granted pursuant to this Agreement during the
Development Term or the applicable Sub-Area Term, the fees shall be as provided
in the then-current form of License Agreement, except that the Initial License
Fee (defined in the License Agreement) shall be Thirty-Five Thousand Dollars
($35,000.00), and the Royalty Fee (as defined in the License Agreement) shall
be an amount equal to eight percent (8%) of the Store's Royalty Base Revenue
(as defined in the License Agreement).
6.E. ADVERTISING EXPENDITURES.
DEVELOPER shall cause each DEVELOPER Store to contribute to the Local
Ad Fund (as defined in the License Agreement) for such DEVELOPER Store an
amount equal to the standard Local Ad Fund contribution required pursuant to
the applicable License Agreement; provided, however, that, on notice from
COMPANY, DEVELOPER shall also cause each such DEVELOPER Store to contribute to
the standard Local Ad Fund such additional amounts which, when aggregated with
the Local Ad Fund contributions of the other DEVELOPER Stores, will be
sufficient to enable DEVELOPER, through the Local Ad Fund, to commence Required
Television Advertising within one year of the opening of the first Store and to
continue Required Television Advertising thereafter throughout the Agreement
Term.
7. INITIAL PAYMENTS.
7.A. DEVELOPMENT FEE.
Concurrently with the execution of this Agreement, DEVELOPER shall pay
to COMPANY the sum set forth on Exhibit C hereof as a nonrefundable development
fee (the "DEVELOPMENT FEE") which shall be deemed fully earned by COMPANY upon
execution of this Agreement. The Development Fee shall equal the sum derived by
multiplying the number of Stores to be developed under this Agreement, as set
forth on Exhibit E, by Five Thousand Dollars ($5,000.00). The Development Fee
is paid to compensate COMPANY for its services in connection with this
Agreement, including but not limited to providing assistance in the
29
development of DEVELOPER's Market Real Estate Development Plan and providing
initial orientation training programs.
7.B. REAL ESTATE SERVICES FEE.
Concurrently with the execution of this Agreement, DEVELOPER shall pay
to COMPANY a nonrefundable real estate services fee (the "Real Estate Services
Fee"), which fee shall be deemed fully earned by COMPANY upon execution of this
Agreement. The Real Estate Services Fee shall equal the total derived by
multiplying the number of Stores to be developed under this Agreement, as set
forth on Exhibit E, by Five Thousand Dollars ($5,000.00). The Real Estate
Services Fee is paid to compensate COMPANY for its services in connection with
this Agreement, including but not limited to providing certain advisory
services regarding demographic analysis and cannibalization studies for trade
areas related to proposed and established UNITS, maintenance of lease files and
compliance with reporting requirements thereunder, and general advisory
services regarding other real estate matters.
8. MARKS.
8.A. GOODWILL AND RIGHTS TO USE THE MARKS.
DEVELOPER acknowledges that DEVELOPER right to use the Marks, as
described in this Agreement and which include the Principal Marks set forth in
Exhibit K hereto, is derived solely from this Agreement and is limited to the
development of Stores by DEVELOPER pursuant to and in compliance with this
Agreement and all applicable standards, specifications, and procedures
prescribed by COMPANY from time to time during the Agreement Term. Developer
further acknowledges that COMPANY'S right to use and sublicense the use of
certain of the Marks may derive from agreements between COMPANY and third-party
licensors. Any unauthorized use of the Marks by DEVELOPER shall constitute a
breach of this Agreement and an infringement of the rights of COMPANY in and to
the Marks and may constitute a breach by COMPANY of its license agreement(s)
with its licensor(s). DEVELOPER acknowledges and agrees that all usage of the
Marks by DEVELOPER and any goodwill established thereby shall inure to the
exclusive benefit of COMPANY or its licensor(s), as applicable, and that this
Agreement does not confer any goodwill or other interests in the Marks upon
DEVELOPER, other than the right to use the Principal Marks and the other Marks
associated with the Principal Marks in the development of the DEVELOPER Stores
in compliance with this Agreement. All provisions of this Agreement applicable
to the Marks shall apply to any other trademarks, service marks, commercial
symbols and trade dress hereafter authorized, in writing (including by
inclusion in any trademark usage or similar guide or manual issued to franchise
owners and license owners by COMPANY), for use by and licensed to DEVELOPER by
COMPANY.
30
8.B. LIMITATIONS ON DEVELOPER'S USE OF MARKS.
Except with the written consent of COMPANY, DEVELOPER shall not use
any Mark as part of any corporate name or other name of DEVELOPER or with any
prefix, suffix, or other modifying words, terms, designs, or symbols, or in any
modified form, nor may DEVELOPER use any Mark in connection with the
performance or sale of any unauthorized services or products or in any other
manner not expressly authorized in writing by COMPANY. DEVELOPER agrees to
clearly identify itself as an independent operator/developer and licensee of
COMPANY and to display the Marks prominently in the manner prescribed by
COMPANY. DEVELOPER agrees to give such notices of trademark and service mark
registrations as COMPANY specifies and to obtain such business name
registrations as may be required under applicable law.
8.C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.
DEVELOPER shall immediately notify COMPANY of any apparent
infringement of or challenge to DEVELOPER's use of any Mark, or claim by any
person of any rights in any Mark. DEVELOPER shall not communicate with any
person other than COMPANY and its counsel and, if applicable, COMPANY'S
licensor and its counsel, with respect to any such infringement, challenge or
claim. COMPANY (and its licensor, if applicable) shall have sole discretion to
take such action as it deems appropriate in connection with the foregoing, and
the right to control exclusively any settlement, litigation, arbitration or
Patent and Trademark Office or other proceeding arising out of any such alleged
infringement, challenge or claim or otherwise relating to any Mark. DEVELOPER
agrees to execute any and all instruments and documents, render such
assistance, and do such acts and things as may, in the opinion of COMPANY's
counsel, be necessary or advisable to protect and maintain the interests of
COMPANY in any litigation or other proceeding or to otherwise protect and
maintain the interests of COMPANY in the Marks. COMPANY will reimburse
DEVELOPER for the reasonable out-of-pocket expenses incurred and paid by
DEVELOPER in complying with the requirements imposed by this Section; provided,
however, that if any action taken by COMPANY results in any monetary recovery
for DEVELOPER (by way of counterclaim or otherwise) which exceeds DEVELOPER's
costs, then DEVELOPER must pay its own costs and share pro rata in COMPANY's
costs therefor up to the amount of DEVELOPER's share of such recovery.
8.D. DISCONTINUANCE OF USE OF MARKS.
If it becomes advisable at any time in COMPANY's sole judgment, or
pursuant to any agreement between COMPANY and a licensor of any of the Marks,
for DEVELOPER to modify or discontinue use of any Mark and/or for DEVELOPER to
use one or more additional or substitute trademarks or service marks or an
additional or substitute type of trade dress, DEVELOPER agrees to immediately
comply with COMPANY's directions to modify or otherwise discontinue the use of
such Mark, and/or to use one or more additional or substitute
31
trademarks, service marks, logos or commercial symbols or additional or
substitute trade dress after notice thereof by COMPANY. Neither COMPANY nor its
Affiliates shall have any obligation to reimburse DEVELOPER for any
expenditures made by DEVELOPER to modify or discontinue the use of a Mark or to
adopt additional or substitute marks for discontinued Marks, including, without
limitation, any expenditures relating to advertising or promotional materials
or to compensate DEVELOPER for any goodwill related to the discontinued Mark.
8.E. INDEMNIFICATION OF DEVELOPER.
COMPANY agrees to indemnify DEVELOPER against and to reimburse
DEVELOPER for all damages for which DEVELOPER is held liable in any claim,
action or proceeding brought by any person or entity claiming to have trademark
or other rights to any of the Marks licensed hereunder or any name or trademark
similar thereto arising out of DEVELOPER's authorized use of the Marks,
pursuant to and in compliance with this Agreement, and for all costs reasonably
incurred by DEVELOPER in the defense of any such claim brought against
DEVELOPER or in any proceeding in which DEVELOPER is named as a party, provided
that DEVELOPER has timely notified COMPANY of such claim or proceeding, has
given COMPANY sole control of the defense and settlement of any such claim, has
otherwise complied with the requirements of this Agreement regarding use of the
Marks, and this Agreement is in full force and effect, and provided further,
that the indemnification provided by this Section 8.E shall not extend to any
claim, action or proceeding brought by any person or entity alleging any prior
common law trademark rights.
8.F. NON-DENIGRATION.
If COMPANY authorizes DEVELOPER to use the Albert Einstein Indicia,
the word EINSTEIN Alone or the Albert Einstein Publicity Symbols, DEVELOPER
agrees not to use the Albert Einstein Indicia, the Albert Einstein Publicity
Symbols or any name that includes the name "EINSTEIN" in any manner that
denigrates, disparages, defames or otherwise reflects poorly on the character
of Albert Einstein.
8.G. MARKING REQUIREMENTS.
If COMPANY authorizes DEVELOPER to use the Albert Einstein Indicia,
the word EINSTEIN Alone or the Albert Einstein Publicity Symbols, DEVELOPER
agrees that it will use such marks in a manner that is consistent with good
trademark practice, and shall affix onto substantially all written advertising
material, written promotional material, and the ENBC Promotional Items, to the
extent practicable as to size and being readily visible, a legend indicating
that such marks are being used under license from the Hebrew University of
Jerusalem. The following is an example of a satisfactory legend or words:
"Intellectual Property of Albert Einstein is used under license from Hebrew
University represented by The Roger Richman Agency of Beverly Hills." In the
event DEVELOPER uses the Albert Einstein
32
Indicia, the word EINSTEIN Alone or the Albert Einstein Publicity Symbols
hereunder in connection with a television or radio advertisement, DEVELOPER
shall cause such legend or words to appear on the leader.
9. COPYRIGHTS.
9.A. OWNERSHIP OF COPYRIGHTED WORKS.
DEVELOPER and COMPANY acknowledge and agree (1) that COMPANY may
authorize DEVELOPER to use certain copyrighted or copyrightable works (the
"Copyrighted Works"), (2) that the Copyrighted Works are the valuable property
of COMPANY or its Affiliates or, as applicable, their licensors and (3) that
the DEVELOPER's rights to use the Copyrighted Works are granted to DEVELOPER
solely on the condition that DEVELOPER complies with the terms of this Section.
DEVELOPER acknowledges and agrees that COMPANY owns or is the licensee of the
owner of the Copyrighted Works and may further create, acquire or obtain
licenses for certain copyrights in various works of authorship used in
connection with the operation of UNITS, including, but not limited to, all
categories of works eligible for protection under the United States copyright
laws, all of which shall be deemed to be Copyrighted Works under this
Agreement. Such Copyrighted Works include, but are not limited to, the
Development Manual, advertisements, promotional materials, labels, menus,
posters, coupons, gift certificates, signs and store designs, plans and
specifications and may include all or part of the Marks, Trade Dress (defined
in the License Agreement), Licensed Program and other portions of the System.
DEVELOPER acknowledges that this Agreement does not confer any interest in the
Copyrighted Works upon DEVELOPER, other than the right to use them in
connection with the development of the Stores in compliance with this
Agreement. If COMPANY authorizes DEVELOPER to prepare any adaptation,
translation or work derived from the Copyrighted Works, or if DEVELOPER
prepares any Copyrighted Works such as menus, advertisements, posters or
promotional materials, DEVELOPER hereby agrees that such adaptation,
translation, derivative work or Copyrighted Work shall be the property of
COMPANY and DEVELOPER hereby assigns all its right, title and interest therein
to COMPANY (or such other person identified by COMPANY). DEVELOPER agrees to
execute any documents, in recordable form, which COMPANY determines are
necessary to reflect such ownership. DEVELOPER shall submit all such
adaptations, translations, derivative works and Copyrighted Works to COMPANY
for approval prior to use.
9.B. LIMITATION ON DEVELOPER'S USE OF COPYRIGHTED WORKS.
DEVELOPER acknowledges that DEVELOPER's right to use the Copyrighted
Works, as described in this Agreement, is derived solely from this Agreement
and is limited solely to uses directly connected with the development of Stores
by DEVELOPER during the Development Term pursuant to and in compliance with
this Agreement and all applicable standards, specifications, and operating
procedures prescribed by COMPANY from time to time.
33
DEVELOPER shall ensure that all Copyrighted Works used hereunder shall bear an
appropriate copyright notice under the Universal Copyright Convention or other
copyright laws prescribed by COMPANY specifying that COMPANY or an Affiliate of
COMPANY is the owner of the copyright therein. Any unauthorized use,
adaptation, publication, reproduction, preparation of derivative works,
distribution of copies (whether by sale or other transfer of ownership, or by
rental, lease or lending), or attempts to recreate all or a portion of such
Copyrighted Works shall constitute a breach of this Agreement and an
infringement of the rights of COMPANY in and to the Copyrighted Works.
9.C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.
DEVELOPER shall immediately notify COMPANY of any actual or apparent
infringement of or challenge to any of the Copyrighted Works, or claim by any
person of any rights in the Copyrighted Works. DEVELOPER shall not communicate
with any person other than COMPANY and its counsel in connection with any such
infringement, challenge or claims. COMPANY shall have the sole discretion to
take such action as it deems appropriate in connection with the foregoing, and
the right to control exclusively any settlement, litigation, arbitration or
administrative proceeding arising out of any such alleged infringement,
challenge or claim or otherwise relating to the Copyrighted Works. DEVELOPER
agrees to execute any and all instruments and documents, render such
assistance, and do such acts and things as may, in the opinion of COMPANY's
counsel, be necessary or advisable to protect and maintain the interests of
COMPANY in any litigation or other proceeding or to otherwise protect and
maintain the interests of COMPANY in the Copyrighted Works. COMPANY will
reimburse DEVELOPER for the reasonable out-of-pocket expenses incurred and paid
by DEVELOPER in complying with the requirements imposed by this Section;
provided, however, that if any action taken by COMPANY results in any monetary
recovery for DEVELOPER (by way of counterclaim or otherwise) which exceeds
DEVELOPER's costs, then DEVELOPER must pay its own costs and share pro rata in
COMPANY's costs therefor up to the amount of DEVELOPER's share of such
recovery.
9.D. DISCONTINUANCE OF USE OF COPYRIGHTED WORKS.
If it becomes advisable at any time in COMPANY's sole judgment for
DEVELOPER to modify or discontinue use of any of the Copyrighted Works and/or
for DEVELOPER to use one or more additional or substitute copyrighted or
copyrightable items, DEVELOPER agrees to immediately comply with COMPANY's
directions to modify or otherwise discontinue the use of the Copyrighted Works
and/or to use one or more substitute materials. Neither COMPANY nor its
Affiliates shall have any obligation to reimburse DEVELOPER for any
expenditures made by DEVELOPER to modify or discontinue the use of any
Copyrighted Work or to adopt additional or substitute copyrighted or
copyrightable items.
34
10. COMPUTER SYSTEM AND SOFTWARE.
10.A. GRANT OF LICENSE.
COMPANY hereby grants to DEVELOPER a nonexclusive, nontransferable,
nonassignable license to use the Licensed Program and Support/Control Programs,
subject to the following terms and conditions:
(1) The Licensed Program and Support/Control Programs shall be
installed and tested on the Computer System at DEVELOPER's
principal office by COMPANY or its designee. If DEVELOPER does
not purchase the Computer System from COMPANY, DEVELOPER must
pay COMPANY or its designee a reasonable installation and
testing fee upon completion of COMPANY's or its designee's
installation and testing of the operation of the Licensed
Program and Support/Control Programs with the Computer System.
DEVELOPER acknowledges and agrees that COMPANY's current
installation and testing fee of $5,000 is reasonable. COMPANY
agrees that the installation and testing fee applicable to any
License Agreement executed pursuant to this Agreement will not
exceed $5,000.
(2) Except with the prior written consent of COMPANY, the Licensed
Program and Support/Control Programs shall not be operated by
persons other than DEVELOPER and employees of DEVELOPER, shall
not be operated on equipment other than the Computer System,
shall not be used in conjunction with any other computer
applications program, and shall not be operated at locations
other than DEVELOPER's principal office; provided, however, that
with prior notice to COMPANY, DEVELOPER may operate the Licensed
Program and Support/Control Programs on equipment other than the
Computer System and at a location other than DEVELOPER's
principal office to the extent required due to malfunction of
the Computer System or other cause beyond the reasonable control
of DEVELOPER, but not for any period longer than seven (7)
consecutive days unless otherwise agreed in writing by COMPANY.
(3) The Licensed Program and Support/Control Programs shall be used
in DEVELOPER's development and supervision of the DEVELOPER
Stores and shall not be used for any other purpose.
(4) Without limiting the foregoing, DEVELOPER shall not, and shall
not allow its employees or agents to: (a) sell, assign, lease,
sublicense, pledge, grant a security interest with respect to,
market or commercially exploit, in any way, the Licensed Program
or Support/Control Programs or any component thereof, or any
data generated by the use of the Licensed Program or
Support/Control
35
Programs or any component thereof; (b) disclose or grant access
to the Licensed Program or Support/Control Programs, or any data
generated by the use thereof or any component thereof, to any
third party other than one to whom COMPANY has consented in
writing and who has agreed in writing with COMPANY to keep them
confidential; (c) copy or reproduce the Licensed Program or
Support/Control Programs, or any data generated by the use
thereof or any component thereof, in any manner, except to the
extent necessary for normal back-up and operating thereof; or
(d) alter, modify or adapt the Licensed Program or
Support/Control Programs, any documentation relating thereto or
any component thereof, including, but not limited to, by
translating, decompiling, reverse engineering or disassembling
them.
(5) DEVELOPER acknowledges and agrees that the Licensed Program and
Support/Control Programs and any data generated by their use are
the valuable, proprietary property and trade secret of COMPANY
or, as applicable, of COMPANY's licensor, and DEVELOPER agrees
to use the utmost care to safeguard the Licensed Program and
Support/Control Programs and any data generated by their use and
to maintain the copyright protection and the secrecy and
confidentiality thereof. DEVELOPER shall not undertake to
patent, copyright or otherwise assert proprietary rights to the
Licensed Program or Support/Control Programs or any data
generated by their use or any portion thereof. DEVELOPER
recognizes that all or part of the Licensed Program and
Support/Control Programs and any data generated by their use may
be copyrighted and agrees that this shall not be construed as
causing the copyrighted material to be public information.
DEVELOPER will ensure that all copies of the Licensed Program
and Support/Control Programs and any data generated by their use
or any components thereof in its possession contain an
appropriate copyright notice under the Universal Copyright
Convention or other notice of proprietary rights specified by
COMPANY.
(6) DEVELOPER shall promptly disclose to COMPANY all ideas and
suggestions for modifications or enhancements of the Licensed
Program and/or Support/Control Programs conceived or developed
by or for DEVELOPER, and COMPANY and its Affiliates shall have
the right to use and license such ideas and suggestions. All
modifications and enhancements made to the Licensed Program or
Support/Control Programs together with the copyright therein
shall be the property of COMPANY or its licensor, as applicable,
without regard to the source of the modification or enhancement,
and DEVELOPER hereby assigns all of its right, title, and
interest in any ideas, modifications, and enhancements to
COMPANY (or such other persons designated by COMPANY). DEVELOPER
agrees to execute any document, in recordable form, which
COMPANY determines is necessary to reflect such ownership.
36
(7) COMPANY or its designee shall have the right at all times to
access the Licensed Program and Support/Control Programs and to
retrieve, analyze and use all data in the files of DEVELOPER
related thereto.
(8) COMPANY or its designee shall provide to DEVELOPER all upgrades,
modifications, improvements, enhancements, extensions and other
changes to the Licensed Program and Support/Control Programs
approved by COMPANY for use in connection with the operation of
Stores, and DEVELOPER shall promptly implement their use.
(9) Upon expiration or termination of this Agreement, DEVELOPER
shall allow COMPANY's or its designee's employees or agents to
remove the Licensed Program and Support/Control Programs from
the Computer System, shall immediately return the Licensed
Program and Support/Control Programs, each component thereof,
and any data generated by their use to COMPANY or its designee,
and shall immediately destroy any and all back-up or other
copies of the Licensed Program, the Support/Control Programs,
any parts thereof, documentation for the Licensed Program and
Support/Control Programs and any data generated by their use,
and other materials or information which relate to or reveal the
Licensed Program and Support/Control Programs, their operation
or any data generated by their use.
10.B. SOFTWARE LICENSE FEE.
DEVELOPER agrees to pay to COMPANY or its designee(s) upon
installation of the Licensed Program on DEVELOPER's Computer System, a software
license fee (the "Software License Fee") in the amount of Sixteen Thousand
Dollars ($16,000.00). The Software License Fee shall be fully earned by COMPANY
or its designee upon installation of the Licensed Program on the Computer
System and is non-refundable in whole or in part.
10.C. SOFTWARE SUPPORT SERVICE.
During the Agreement Term and, provided that DEVELOPER is in
compliance with the terms of this Agreement, COMPANY or its designee shall
provide to DEVELOPER such support services as COMPANY deems reasonably
necessary to cause the Licensed Program and Support/Control Programs to perform
on the Computer System in accordance with the standards therefor as specified
from time to time by COMPANY. Such support services shall not extend to (a)
error corrections, operational support and assistance resulting from
DEVELOPER's use or operation of software which is not authorized by COMPANY for
use on the Computer System, (b) software training or (c) hardware maintenance.
Such support service shall include non-procedural Help Desk calls. All
procedural Help Desk calls will be handled by COMPANY for an additional fee of
$25 per call.
37
10.D. SOFTWARE SUPPORT SERVICE FEE.
For the software support service with respect to the Licensed Program
provided to DEVELOPER, as described above, DEVELOPER agrees to pay to COMPANY
or its designee a periodic software support service fee ("Software Support
Fee") in the amount of Four Hundred Dollars ($400.00). Such fee shall be
payable in advance for each Accounting Period on or before the eighth (8th) day
prior to commencement of such period commencing on the installation of the
Licensed Program on the Computer System. The Software Support Fee may be
increased by COMPANY from time to time, at its sole option, upon written notice
to DEVELOPER, subject to any limitation set forth in the License Agreement.
For the software support service relating to the Support/Control
Programs provided to DEVELOPER by COMPANY, no additional fee will be charged.
In the event DEVELOPER requests, and COMPANY, in its sole discretion,
determines to perform, other support services (e.g., software training,
hardware maintenance) not provided for in this Agreement, COMPANY will charge
DEVELOPER an additional fee at COMPANY's then-current hourly rate, plus
expenses for such support services. DEVELOPER acknowledges that COMPANY's
current rate for such services is $75 per hour and agrees that such rate is
reasonable.
10.E. MODIFICATION, ENHANCEMENT AND REPLACEMENT
OF COMPUTER SYSTEM AND SOFTWARE.
DEVELOPER acknowledges that COMPANY may, during the term of this
Agreement, require DEVELOPER to modify, enhance and/or replace all or any part
of the Computer System, the Licensed Program, the Support/Control Programs
and/or the Specified Software at DEVELOPER's expense, and agrees, within sixty
(60) days of receipt of notice from COMPANY, to acquire, or acquire the right
to use for the remainder of the term of this Agreement and implement, the
modified, enhanced or replacement version of the Computer System, the Licensed
Program, the Support/Control Programs and/or Specified Software as specified by
COMPANY and to take any and all other actions as may be necessary to enable
them to operate as specified by COMPANY. Any such modifications, enhancements,
and replacements may require DEVELOPER to incur additional costs to purchase,
lease and/or license new or modified computer hardware and/or software or other
equipment and to obtain different and/or additional service and support
services during the term of this Agreement. DEVELOPER acknowledges that COMPANY
cannot estimate the costs of future enhancements, modifications, and
replacements to the Computer System, the Licensed Program, the Support/Control
Programs and/or Specified Software, and that the cost to DEVELOPER of obtaining
such enhancements, modifications, and replacements, may not be fully
amortizable over the remainder of the Development Term or the Agreement Term.
Nonetheless, DEVELOPER agrees to incur such costs in connection therewith,
provided that the COMPANY
38
is then currently specifying the same enhancements, modifications, and
replacements for use in COMPANY-operated Stores.
10.F. WARRANTIES AND LIMITATION OF LIABILITY.
COMPANY represents and warrants to DEVELOPER that: (1) COMPANY has the
right to license the Licensed Program and Support/Control Programs to
DEVELOPER, as set forth in this Agreement; and (2) to the best of COMPANY's
knowledge, the Licensed Program and Support/Control Programs do not, and as a
result of any enhancements, improvements or modifications provided by COMPANY,
will not infringe upon any United States patent, copyright or other proprietary
right of any third party. In the event DEVELOPER's use of the Licensed Program
or Support/Control Programs or any portion thereof, as provided by COMPANY, is
enjoined as a result of a claim by a third party of patent or copyright
infringement or violation of proprietary rights, COMPANY shall, in its sole
discretion, either (i) procure for DEVELOPER the right to continue use of the
Licensed Program or Support/Control Programs as contemplated hereunder, or (ii)
replace the Licensed Program or Support/Control Programs or modify it such that
there is no infringement of the third party's rights. Such action by COMPANY
shall be DEVELOPER's sole and exclusive remedy against COMPANY in such event.
Neither COMPANY nor its designee represents or warrants to DEVELOPER,
and expressly disclaims any warranty, that the Licensed Program or
Support/Control Programs are error-free or that their operation and use by
DEVELOPER will be uninterrupted or error-free. Neither COMPANY nor its designee
shall have any obligation or liability for any expense or loss incurred by
DEVELOPER arising from use of the Licensed Program or Support/Control Programs
in conjunction with any other computer program.
EXCEPT FOR THE ABOVE EXPRESS LIMITED WARRANTIES, COMPANY AND/OR ITS
DESIGNEE MAKE NO WARRANTIES, EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT
TO THE LICENSED PROGRAM, SUPPORT/CONTROL PROGRAMS, PROGRAM DOCUMENTATION, OR
ANY OTHER MATERIAL FURNISHED HEREUNDER, OR ANY COMPONENT THEREOF AND THERE ARE
EXPRESSLY EXCLUDED ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT THERETO.
10.G. SUBCOMPONENT LICENSES AND THIRD-PARTY LICENSES.
DEVELOPER acknowledges that the Licensed Program and Support/Control
Programs contain third-party components and subcomponents which COMPANY has the
authority to license to DEVELOPER as part of the Licensed Program and
Support/Control Programs pursuant to and in accordance with software license
agreements with third-party vendors
39
(collectively, the "Component Licenses"). In addition, DEVELOPER acknowledges
that acquisitions by DEVELOPER of all or portions of the Computer System and
the Specified Software from or through the COMPANY are governed by license or
other agreements by and between third-party vendors and COMPANY, which
agreements specifically permit COMPANY to sell and/or sublicense all or
portions of the Computer System and the Specified Software to DEVELOPER or
specifically require DEVELOPER to agree to be bound by the terms thereof
(either type of license hereinafter referred to as the "Third Party Licenses").
DEVELOPER therefore hereby agrees to be bound by the terms of each Component
License and, to the extent DEVELOPER purchases all or portions of the Specified
Software or the Computer System from or through COMPANY, each relevant Third
Party License, in each case as if DEVELOPER was a party thereto, and agrees
that the vendors and licensors of all or portions of the Specified Software and
the Computer System and the licensors of all or portions of the Licensed
Program (collectively, the "Vendors") are third-party beneficiaries of this
Agreement with full rights to enforce this Agreement as it pertains to the
purchased items and the Licensed Program and Support/Control Programs.
DEVELOPER further agrees to indemnify and hold harmless COMPANY and each of the
Vendors from and against all costs, expenses, and damages arising out of or
based upon any breach or claim of a breach of this Agreement, the Third Party
Licenses or Component Licenses by DEVELOPER, its directors, officers,
employees, agents and owners.
10.H. COVENANT TO USE ONLY SPECIFIED SOFTWARE AND
LICENSED PROGRAM SUPPORT/CONTROL PROGRAMS.
DEVELOPER acknowledges that operating non-Specified Software on the
Computer System with the Specified Software and/or the License Program and
Support/Control Programs may cause errors or other interruptions to or problems
with the Specified Software, Licensed Program and/or Support/Control Programs.
Therefore, DEVELOPER hereby agrees to operate only Specified Software, the
Licensed Program and the Support/Control Programs on the Computer System.
11. CONFIDENTIAL INFORMATION.
COMPANY or its licensors, as applicable, possess and may further
develop and acquire certain confidential and proprietary information and trade
secrets, including, but not limited to, the following categories of
information, methods, techniques, procedures and knowledge developed or to be
developed by COMPANY or its Affiliates or their consultants, contractors or
designees, and/or franchise owners, license owners, and developers (the
"CONFIDENTIAL INFORMATION"):
(1) methods, techniques, equipment, specifications (including Design
Specifications, as defined in the License Agreement), standards, policies,
procedures, information, concepts and systems relating to and knowledge of
and experience in the
40
development, operation, franchising and licensing of UNITS and the
development and operation of Commissaries; and
(2) marketing and promotional programs for UNITS; and
(3) knowledge concerning the logic, structure and operation of
computer software programs which COMPANY authorizes for use in connection
with the operation of UNITS (including, without limitation, the Licensed
Program), and all additions, modifications and enhancements thereof, and
all data generated from use of such programs and the logic, structure and
operation of database file structures containing such data and all
additions, modifications and enhancements thereof; and
(4) sales data and information concerning consumer preferences and
inventory requirements for Products, materials and supplies, and
specifications for and suppliers of certain materials, equipment and
fixtures for UNITS (including, without limitation, the Stores) and for
Commissaries; and
(5) ingredients, formulas, mixes, spices, seasonings, recipes for and
methods of preparation, baking, cooking, freezing, serving, packaging,
catering and delivery of, Products and other items sold at UNITS; and
(6) information concerning Product sales, operating results,
financial performance and other financial data of UNITS (including,
without limitation, the Stores); and
(7) the Development Manual (defined in Section 13.J. of this
Agreement), the Commissary Manuals (defined in Section 5.D of this
Agreement) and the Store Manuals (defined in the License Agreement); and
(8) customer lists and Product sales of the DEVELOPER Stores; and
(9) employee selection procedures, training and staffing levels.
COMPANY will disclose to DEVELOPER such parts of the Confidential
Information as COMPANY deems necessary or advisable from time to time in its
sole discretion for the development of Stores and Commissaries in providing
training and in guidance and assistance furnished to DEVELOPER under this
Agreement. DEVELOPER may also learn or otherwise obtain from COMPANY and its
Affiliates and other licensors of components or elements of the System
additional Confidential Information during the Agreement Term. DEVELOPER
acknowledges and agrees that neither DEVELOPER nor any other person or entity
will acquire by or through DEVELOPER any interest in or right to use the
Confidential Information, other than the right to use it in the development of
Stores and Commissaries pursuant to this
41
Agreement, and that the use or duplication of the Confidential Information in
any other business would constitute an unfair method of competition with
COMPANY and with other UNIT developers, franchise owners and license owners.
DEVELOPER agrees to disclose the Confidential Information to Owners and to its
employees only to the extent reasonably necessary for the development of Stores
pursuant to this Agreement and only if such individuals have agreed to maintain
such information in confidence in an agreement enforceable by COMPANY.
DEVELOPER acknowledges and agrees that the Confidential Information is
confidential to and a valuable asset of COMPANY or its licensors, as
applicable, is proprietary, includes trade secrets of COMPANY and is disclosed
to DEVELOPER solely on the condition that DEVELOPER, its Owners and employees
who have access to the Confidential Information agree, and DEVELOPER does
hereby agree that, during and after the Agreement Term, DEVELOPER, its Owners
and such employees:
(a) will not use the Confidential Information in any other business
or capacity (unless, in the case of the Licensed Program, separately
licensed by the owner thereof); and
(b) will maintain the absolute confidentiality of the Confidential
Information; and
(c) will not make unauthorized copies of any portion of the
Confidential Information disclosed in written or other tangible form; and
(d) will adopt and implement all reasonable procedures prescribed
from time to time by COMPANY to prevent unauthorized use or disclosure of
the Confidential Information, including, without limitation, requiring
employees and Owners who will have access to such information to execute
non-competition and confidentiality agreements in the form attached hereto
as Exhibit J (the "CONFIDENTIALITY AND NON-COMPETITION AGREEMENT").
DEVELOPER shall provide COMPANY, at its request, executed originals of
each such Confidentiality and Non-Competition Agreement.
Nothing contained in this Agreement shall be construed to prohibit
DEVELOPER from using the Confidential Information in connection with the
operation of any Store pursuant to a Franchise Agreement, License Agreement, or
pursuant to another development agreement between COMPANY and DEVELOPER.
Notwithstanding anything to the contrary contained in this Agreement and
provided DEVELOPER shall have obtained COMPANY's prior written consent, the
restrictions on DEVELOPER's disclosure and use of the Confidential Information
shall not apply to the following:
42
(i) information, methods, procedures, techniques and knowledge which
are or become generally known in the food service business within the
Development Area, other than through disclosure (whether deliberate or
inadvertent) by DEVELOPER or any other party having an obligation of
confidentiality to COMPANY; and
(ii) the disclosure of the Confidential Information in judicial or
administrative proceedings to the extent that DEVELOPER is legally
compelled to disclose such information, provided DEVELOPER has notified
COMPANY prior to disclosure and shall have used its best efforts to
obtain, and shall have afforded COMPANY the opportunity to obtain an
appropriate protective order or other assurance satisfactory to COMPANY of
confidential treatment for the information required to be so disclosed.
DEVELOPER agrees to disclose to COMPANY all ideas, concepts, methods,
techniques and products conceived or developed by DEVELOPER, Owners, affiliates
or employees thereof during the Agreement Term relating to the development and
operation of UNITS and Commissaries, provided that the aforementioned parties
will not be obligated to make such disclosures if doing so would violate any
contractual obligations of DEVELOPER which:
(A) arose prior to DEVELOPER's execution of this Agreement; and
(B) DEVELOPER disclosed to COMPANY in writing prior to the Effective
Date.
DEVELOPER hereby assigns to COMPANY and agrees to procure from its Owners,
affiliates and employees assignment of any such ideas, concepts, methods,
techniques and products which DEVELOPER is required to disclose to COMPANY
hereunder. COMPANY shall have no obligation to make any lump sum or on-going
payments to DEVELOPER or its Owners, affiliates or employees with respect to
any such idea, concept, method, technique or product. DEVELOPER agrees that
DEVELOPER will not use nor will it allow any other person or entity to use any
such concept, method, technique or product without obtaining COMPANY's prior
written approval.
12. EXCLUSIVE RELATIONSHIP.
DEVELOPER acknowledges and agrees that COMPANY would be unable to
protect the Confidential Information against unauthorized use or disclosure and
would be unable to encourage a free exchange of ideas and information among
franchise owners, license owners, and developers of UNITS, if developers,
franchise owners, license owners and their Principal Owners (and members of
their Immediate Families) were permitted to engage in, hold interests in or
perform services for Competitive Businesses. DEVELOPER further acknowledges and
agrees that the restrictions contained in this Section will not hinder its
activities or the activities of its Principal Owners (or members of their
Immediate Families) under this Agreement or in
43
general. COMPANY has entered into this Agreement with DEVELOPER on the express
condition that, with respect to the development and operation of food service
businesses that sell Products, DEVELOPER and its Principal Owners and members
of their respective Immediate Families will deal exclusively with COMPANY.
DEVELOPER therefore agrees that, during the Agreement Term, neither DEVELOPER
nor any Principal Owner of DEVELOPER, nor any member of the Immediate Family of
DEVELOPER or of a Principal Owner of DEVELOPER, shall directly or indirectly:
(a) have any interest as a record or beneficial owner in any
Competitive Business (this restriction shall not be applicable to the
ownership of shares of a class of securities listed on a stock exchange or
traded on the over-the-counter market and quoted by a national
inter-dealer quotation system that represent less than three percent (3%)
of the number of shares of that class of securities issued and
outstanding); or
(b) perform services as a director, officer, manager, employee,
consultant, representative, agent, or otherwise for any Competitive
Business; or
(c) divert or attempt to divert any business or any customers of any
UNIT to any Competitive Business.
DEVELOPER further agrees that, during the Agreement Term, neither DEVELOPER nor
any Principal Owner of DEVELOPER, nor any member of the Immediate Family of
DEVELOPER or a Principal Owner of DEVELOPER shall directly or indirectly employ
or seek to employ any person who is employed by COMPANY, its Affiliates or by
any other developer, franchise owner or license owner of UNITS, nor induce nor
attempt to induce any such person to leave said employment without the prior
written consent of such person's employer.
Furthermore, if DEVELOPER is a corporation, limited liability company
or partnership, it will not engage in any business or other activity, directly
or indirectly, other than the development and operation of Stores.
DEVELOPER acknowledges and agrees that the failure of any person or
entity restricted pursuant to this Section to comply with the restrictions of
this Section (regardless of whether that person or entity actually has executed
this Agreement or a Confidentiality and Non-Competition Agreement) shall
constitute a breach of this Agreement.
The restrictions of this Section shall not be construed to prohibit
DEVELOPER, any Principal Owner of DEVELOPER, or any member of the Immediate
Family of DEVELOPER or its Principal Owners from having a direct or indirect
Ownership Interest in any UNITS, development agreements, franchise agreements
or license agreements for the development or operation of UNITS, or any entity
owning, controlling or operating UNITS, or from providing services to any such
UNITS pursuant to other agreements with COMPANY. Furthermore, the
44
restrictions of this Section shall not prohibit DEVELOPER, any Principal Owner
or any member of the Immediate Family of DEVELOPER or a Principal Owner (to the
extent such person is an individual) from performing services for or having an
Ownership Interest in a Permitted Competitive Business, or from conducting
customary promotion and advertising of a Permitted Competitive Business. Such
person(s) and business(es), if any, are identified on Exhibit G attached
hereto.
13. OBLIGATIONS OF DEVELOPER.
13.A. FULL-TIME SUPERVISION.
DEVELOPER (or the Principal Owner(s) designated in Exhibit G of this
Agreement and approved by COMPANY) and the Chief Operating Officer (as defined
below) shall exert full-time efforts to fulfill the obligations of DEVELOPER
under this Agreement and shall not engage in any other business or other
activity, directly or indirectly, that requires any significant management
responsibility or time commitments, or that may otherwise conflict with
DEVELOPER's obligations under this Agreement.
13.B. CHIEF OPERATING OFFICER.
Prior to or concurrently with the execution of this Agreement,
DEVELOPER has designated the person identified on Exhibit G to this Agreement
to act as the Chief Operating Officer of the business conducted by DEVELOPER
pursuant to this Agreement (the "CHIEF OPERATING OFFICER"). DEVELOPER
represents that the Chief Operating Officer holds and will continue to hold a
significant, direct equity interest in DEVELOPER at all times during the
Agreement Term. If the relationship of the Chief Operating Officer with
DEVELOPER terminates or if he is unable to satisfactorily complete COMPANY's
management training program, DEVELOPER agrees to promptly designate a
replacement Chief Operating Officer acceptable to COMPANY, in its sole
discretion, who shall at DEVELOPER's expense and subject to COMPANY's
then-current training charges, satisfactorily complete the management training
program.
13.C. DEVELOPMENT DIRECTOR AND REAL ESTATE MANAGERS.
Upon COMPANY's written request, DEVELOPER shall designate a person
(other than the persons serving as the Chief Operating Officer, the Training
Director and the Marketing Director ) acceptable to COMPANY to act as the
Development Director of DEVELOPER (the "DEVELOPMENT DIRECTOR") during the
Development Term. If the relationship of the Development Director with
DEVELOPER terminates, DEVELOPER agrees to promptly designate a replacement
Development Director acceptable to COMPANY.
The Development Director's duties will include, without limitation:
45
(1) preparing and implementing a development plan for the
Development Area in form satisfactory to COMPANY; and
(2) consulting with COMPANY concerning the adaptation of
COMPANY's existing site criteria and lease (or purchase) requirements
for the Development Area; and
(3) directing and coordinating the site evaluation efforts of
DEVELOPER; and
(4) negotiating leases or purchase agreements for proposed
DEVELOPER Store sites; and
(5) developing Stores in the Development Area.
DEVELOPER shall also hire and maintain the number of real estate
managers meeting COMPANY's qualifications as COMPANY shall specify.
13.D. TRAINING DIRECTOR.
Upon COMPANY's written request, DEVELOPER shall designate a person
(other than the persons serving as the Chief Operating Officer, the Development
Director or the Marketing Director) acceptable to COMPANY to act as the
Training Director of DEVELOPER (the "TRAINING DIRECTOR") who must
satisfactorily complete COMPANY's management training program. If the proposed
Training Director completes the management training program to COMPANY's
satisfaction, COMPANY will certify him to fulfill the duties of the Training
Director. Thereafter, DEVELOPER agrees to send the Training Director, from time
to time as determined by COMPANY, to one or more locations which COMPANY
designates for a period to be determined by COMPANY in order for COMPANY to
re-certify the Training Director. So long as the Training Director's
certification is current, the Training Director shall be responsible for
training the employees of each DEVELOPER Store and each Commissary at
DEVELOPER's training facility, provided that (i) DEVELOPER has been authorized
in writing by COMPANY to operate such a facility and (ii) such facility meets,
and has been approved by COMPANY, in writing, as meeting, the specifications
COMPANY prescribes for training facilities from time to time. If the Training
Director ceases to be an employee of DEVELOPER or if the proposed Training
Director is unable to satisfactorily complete the management training program
or any subsequent training program, DEVELOPER agrees to promptly designate a
replacement Training Director acceptable to COMPANY, who must, at DEVELOPER's
expense and subject to COMPANY's then-current standard charges, satisfactorily
complete COMPANY's management training program and be certified by COMPANY as
provided above. COMPANY may, in its sole discretion as it deems necessary,
require the Training Director to attend or to participate in, at DEVELOPER's
expense, additional or refresher training programs
46
at locations designated by COMPANY during the term of this Agreement.
The Training Director's duties will include, without limitation:
(1) training and supervising Store and Commissary personnel; and
(2) furnishing on-site assistance to the personnel of Stores and
Commissaries in connection with Store and Commissary openings; and
(3) ongoing consultation with COMPANY and Store and Commissary
management personnel concerning training matters; and
(4) periodic reporting to COMPANY concerning DEVELOPER's
training programs established and operated by DEVELOPER.
DEVELOPER agrees, if authorized and required by COMPANY, in its sole
discretion, to develop, operate and maintain throughout the Agreement Term a
training program (including appropriate training facilities) for its employees
in the use of the System in accordance with specifications prescribed by
COMPANY from time to time.
13.E. MARKETING DIRECTOR.
Upon COMPANY's written request, DEVELOPER shall designate a person
(other than the persons serving as the Chief Operating Officer, the Development
Director and the Training Director) acceptable to COMPANY to act as the
Marketing Director of DEVELOPER (the "MARKETING DIRECTOR"). If the relationship
of the Marketing Director with DEVELOPER terminates, DEVELOPER agrees to
promptly designate a replacement Marketing Director acceptable to COMPANY.
The Marketing Director's duties will include, without limitation:
(1) consulting with COMPANY concerning the adaptation of
COMPANY's existing marketing programs and materials for the
Development Area; and
(2) preparing and, subject to COMPANY's approval, implementing
marketing plans for the grand opening of the DEVELOPER Stores; and
(3) preparing and, subject to COMPANY's approval, implementing
local marketing plans and marketing budgets for the DEVELOPER Stores;
and
(4) coordinating the direction and administration of any local
marketing efforts of the DEVELOPER Stores; and
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(5) reporting periodically to COMPANY concerning local marketing
programs of DEVELOPER in the Development Area.
13.F. MANAGEMENT PERSONNEL AND TRAINING.
In addition to hiring, training and maintaining the personnel
described in Paragraphs B. through E. of this Section, DEVELOPER shall hire,
train and maintain the number and level of management personnel required for
the conduct of its business pursuant to this Agreement, including, without
limitation, a full-time Store Manager and a full-time Additional Manager for
each DEVELOPER Store and a full-time Commissary Manager and a full-time
Additional Commissary Manager for each Commissary, in accordance with
guidelines established from time to time by COMPANY. DEVELOPER shall keep
COMPANY advised of the identities of such personnel. DEVELOPER shall be
responsible for ensuring that such personnel are properly trained to perform
their duties. COMPANY will from time to time make available a management
training program for such personnel at times and locations designated by
COMPANY. Such management training program will be made available at no charge
to DEVELOPER's initial Chief Operating Officer, Development Director, Training
Director and Marketing Director and, at DEVELOPER's request and at COMPANY's
then-current standard charges, including, without limitation, travel and
lodging expenses of COMPANY personnel for training not conducted at COMPANY's
principal offices, additional DEVELOPER personnel and any replacement or
substitute Chief Operating Officer, Development Director, Training Director
and/or Marketing Director, subject to space availability in COMPANY's regularly
scheduled management training programs. All management personnel shall be
required to complete to COMPANY's satisfaction either COMPANY's management
training program, a management training program provided by DEVELOPER and
approved by COMPANY or another management training program certified and
accredited by COMPANY.
After COMPANY has certified him pursuant to this Agreement,
DEVELOPER's Training Director shall provide an initial management training
program to the Store Manager and Additional Manager of each DEVELOPER Store and
the Commissary Manager and Additional Commissary Manager of each Commissary at
a training facility (including a facility maintained by DEVELOPER if COMPANY so
requires) certified and accredited by COMPANY in accordance with COMPANY's
requirements therefor. COMPANY will provide DEVELOPER with appropriate training
materials or refresher or updated training materials at COMPANY's then-current
standard charges therefor.
13.G. BUDGETS AND FINANCING PLANS.
DEVELOPER shall maintain sufficient financial resources to fulfill its
obligations under this Agreement and under Franchise Agreements executed
pursuant to this Agreement. Within 30 days after the execution of this
Agreement, DEVELOPER shall submit to COMPANY for its
48
approval, in a format specified by COMPANY, a written plan for the funding of
the development of DEVELOPER Stores pursuant to this Agreement (a "Funding
Plan"), which plan shall be reasonably acceptable to COMPANY and which shall
include details of the sources and terms of such funding and such other
information or documents required by COMPANY. Among other factors, COMPANY may
consider DEVELOPER's proposed debt/equity ratio and amount of indebtedness in
reviewing such plan. Once a Funding Plan is approved by COMPANY, DEVELOPER must
execute and adhere to the plan. The plan shall be subject to periodic review by
COMPANY which may require, in its sole discretion, modifications to meet its
then current minimum standards for developer financing plans.
13.H. INSURANCE.
During the Agreement Term, in addition to insurance required to be
maintained in connection with the development and operation of each Store,
DEVELOPER agrees to maintain under policies of insurance issued by insurers
rated "A-" or better by Alfred M. Best Company, Inc. and approved by Company:
(1) such insurance as is necessary to comply with all legal
requirements concerning insurance coverage (including, without
limitation, workers' compensation requirements and insurance
coverage) for persons attending COMPANY training programs on
behalf of DEVELOPER; and
(2) commercial general liability insurance (including, but
not limited to, coverage for motor vehicles used in the
development of Stores and in the operation of Commissaries
hereunder, whether or not such vehicles are owned by DEVELOPER)
against claims for bodily and personal injury, death and
property damage caused by or occurring in conjunction with the
conduct of business by DEVELOPER pursuant to this Agreement,
under one or more policies of insurance containing minimum
liability coverage prescribed by COMPANY from time to time.
COMPANY may periodically increase the amounts of coverage required under such
insurance policies and require different or additional kinds of insurance at
any time, including excess liability insurance, to reflect inflation,
identification of new risks, changes in law or standards of liability, higher
damage awards or other relevant changes in circumstances. Each insurance policy
shall name COMPANY as an additional named insured, shall contain a waiver of
all subrogation rights against COMPANY, its Affiliates, and their successors
and assigns, and shall provide for thirty (30) days' prior written notice to
COMPANY of any material modification, cancellation, or expiration of such
policy. The maintenance of insurance coverage which meets the minimum
requirements described in this Section and such additional coverages which
DEVELOPER determines are appropriate for its particular circumstance shall be
the responsibility of DEVELOPER.
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Upon execution of this Agreement, DEVELOPER shall provide COMPANY with
evidence of such insurance. Thereafter, prior to the expiration of each
insurance policy, DEVELOPER shall furnish to COMPANY a copy of each renewal or
replacement insurance policy to be maintained by DEVELOPER for the immediately
following term and evidence of the payment of the premium therefor.
DEVELOPER's obligation to maintain insurance coverage as herein
described shall not be affected in any manner by reason of any separate
insurance maintained by COMPANY, nor shall the maintenance of such insurance
relieve DEVELOPER of any indemnification obligations under this Agreement.
13.I. RECORDS AND REPORTS.
DEVELOPER shall maintain and use at its principal office the Computer
System, in such form as is specified by COMPANY from time to time, and shall
transmit information to, or allow the electronic collection of information by,
COMPANY therefrom. DEVELOPER agrees, at its expense, to maintain and preserve
at its principal office, full, complete and accurate records and reports and,
if required by COMPANY, computer diskettes and databases in the form specified
by COMPANY from time to time pertaining to the development and operation of
DEVELOPER Stores and the performance by DEVELOPER of its obligations under this
Agreement, including but not limited to, records and information relating to
the following: site reports, Site Agreements for DEVELOPER Stores, supervisory
reports relating to operation of Stores, records reflecting the financial
condition and performance of DEVELOPER (utilizing COMPANY's bookkeeping,
accounting, recordkeeping and records retention system including, without
limitation, a general ledger system which utilizes a standard chart of accounts
prescribed by COMPANY from time to time and timely entry of information into
data bases of the Computer System and periodic printouts of reports generated
from the Computer System), and information relating to employee turnover. To
determine whether DEVELOPER is complying with this Agreement, COMPANY or its
agents shall have the right at any reasonable time to inspect, audit and copy
any books, records, reports, computer data bases and documents pertaining to
DEVELOPER's obligations hereunder. DEVELOPER agrees to cooperate fully with
COMPANY in connection with any such inspection or audit.
In addition to the reports and information required in connection with
the development and operation of DEVELOPER Stores, DEVELOPER shall adopt a
fiscal year consistent with the fiscal year adopted by COMPANY from time to
time and furnish to COMPANY in the form and format from time to time prescribed
by COMPANY (including, without limitation, via computer diskette and restated
in accordance with COMPANY's financial reporting periods and consistent with
COMPANY's then-current financial reporting periods and accounting practices and
procedures):
(1) weekly reports of sales and Royalty Base Revenue for
DEVELOPER
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Stores each Monday (for the preceding Monday through Sunday period)
and, if requested by COMPANY, daily reports of sales and Royalty Base
Revenue for DEVELOPER Stores, by facsimile or telephone no later than
10:00 a.m. Rocky Mountain time on the following day; and
(2) by the twentieth (20th) day of each Accounting Period, a
report (in such form as COMPANY may request from time to time) on
DEVELOPER's financing plan and DEVELOPER's activities during the
immediately preceding Accounting Period including, but not limited
to, DEVELOPER's activities in locating and developing sites and
monitoring the operation of DEVELOPER Stores, training activities,
employee statistics and violations of health codes and other laws;
and
(3) upon request by COMPANY, such other data, reports,
information and supporting records for such periods as COMPANY may
from time to time prescribe (including, without limitation, daily and
weekly sales reports by means of telephonic, facsimile or other
reporting system).
(4) within sixty (60) days after the end of DEVELOPER's fiscal
year, a fiscal year end balance sheet, an income statement for such
fiscal year reflecting all year-end adjustments and a statement of
changes in cash flow, prepared in accordance with generally accepted
accounting principles consistently applied and in the format
prescribed by COMPANY from time to time; and
(5) at least sixty (60) days prior to each required opening date
on the Development Schedule, an anticipated development program/plan,
in form prescribed by COMPANY from time to time, for the next
succeeding required opening date; and
Each such report and financial statement submitted by DEVELOPER shall
be signed to DEVELOPER and verified as correct in the manner prescribed in
COMPANY.
DEVELOPER agrees to maintain and to furnish to COMPANY upon request
complete copies of all income, sales, value added, use and service tax returns,
and employee withholding, worker's compensation and similar reports filed by
DEVELOPER reflecting DEVELOPER's activities and the activities of the DEVELOPER
Stores.
DEVELOPER shall immediately report to COMPANY any events or
developments which may have a materially adverse impact on the operation of any
of the DEVELOPER Stores, the performance of DEVELOPER under this Agreement, or
the goodwill associated with the Marks and UNITS.
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13.J. DEVELOPMENT MANUAL, COMMISSARY MANUALS AND STORE MANUALS.
COMPANY will loan to DEVELOPER for DEVELOPER's sole use during the
Agreement Term one (1) copy of a confidential manual relating to the
development and operation of Stores and human resources policies and
procedures, which may consist of one or more volumes, handbooks, manuals,
written materials, video or audio cassette tapes, computer diskettes, and other
materials and intangibles, as may be modified, added to, replaced or
supplemented by COMPANY from time to time in its sole discretion (which
modifications, additions or supplements may contain information developed for
COMPANY by DEVELOPER with respect to the type of UNIT developed pursuant to
this Agreement), whether by way of supplements, replacement pages, bulletins,
or other official pronouncements or means (collectively the "DEVELOPMENT
MANUAL"). The Development Manual may be modified from time to time in COMPANY's
sole discretion to reflect changes in the System or specifications, standards,
policies and procedures for Stores or such other changes or additions as
COMPANY deems necessary or advisable. DEVELOPER shall keep its copy of the
Development Manual current by immediately inserting all modified pages or
materials furnished by COMPANY. In the event of a dispute about the contents of
the Development Manual, the master copies maintained by COMPANY at its
principal office shall be controlling. DEVELOPER acknowledges that the
Development Manual is part of the Confidential Information and will be
protected accordingly. DEVELOPER acknowledges and agrees that the content of
the Development Manual and the Commissary Manuals, as modified from time to
time, is incorporated herein by reference and that DEVELOPER will comply with
all procedures, standards, specifications and requirements specified therein as
though each such item were set forth in detail in this Agreement.
COMPANY also will loan to DEVELOPER for its use during the term of
each Franchise Agreement one (1) copy of the Store Manuals for each DEVELOPER
Store developed and opened by DEVELOPER under this Agreement. The Store Manuals
for the first Store to be developed under this Agreement will be made available
to DEVELOPER promptly after execution of this Agreement.
13.K. COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES.
DEVELOPER shall secure and maintain in force in its name all required
licenses, permits, and certificates relating to the conduct of its business
pursuant to this Agreement. DEVELOPER shall comply with all applicable laws,
ordinances and regulations, including, without limitation, laws and
governmental regulations relating to the preparation, purchase and handling of
food products, Delivery Service, Catering Service, Special Distribution
Arrangements and the operation of Commissaries (if applicable), occupational
hazards, health, safety and sanitation, worker's compensation insurance,
unemployment insurance, and withholding and payment of all taxes. All
advertising by DEVELOPER shall be approved by
52
COMPANY and be completely factual, in good taste in the judgment of COMPANY,
and conform to high standards of ethical advertising. DEVELOPER shall in all
dealings with its customers, suppliers, COMPANY and public officials adhere to
high standards of honesty, integrity, fair dealing and ethical conduct.
DEVELOPER agrees to refrain from any business or advertising practice which may
be injurious to the business of COMPANY and the goodwill associated with the
Marks and UNITS. DEVELOPER shall notify COMPANY in writing:
(1) within three (3) days after the commencement of any action, suit,
or proceeding, and of the issuance of any order, writ, injunction, award,
or decree of any court, agency, or other governmental instrumentality,
which may adversely affect the operation or financial condition of
DEVELOPER, the DEVELOPER Stores or the Commissaries
(2) immediately after receipt of any notice of violation of any law,
ordinance or regulation relating to health, sanitation or the operation of
the DEVELOPER Stores or the Commissaries.
13.L. HUMAN RESOURCES.
DEVELOPER shall adopt, observe and enforce those human resources policies,
programs and standards which COMPANY includes in the Development Manual, Store
Manuals and Commissary Manuals or otherwise designates in writing as mandatory.
13.M. SPECIFICATIONS, STANDARDS AND PROCEDURES.
DEVELOPER agrees to comply strictly with all of COMPANY's mandatory
specifications, standards and procedures relating to the DEVELOPER Stores and
Commissaries, which specifications, standards and procedures COMPANY may
modify, supplement or replace from time to time. Any failure by DEVELOPER to
adhere to such mandatory specifications, standards and procedures or to pass
COMPANY's periodic quality control inspections shall constitute a breach of
this Agreement. DEVELOPER agrees and acknowledges that COMPANY's mandatory
specifications, standards and operating procedures relating to the appearance,
function, cleanliness, days and hours of operation (days and hours of operation
may vary somewhat among Stores based on COMPANY's reasonable judgment of the
requirements of a Store's trade area and whether COMPANY has approved any
special services to be offered at or from a site), and operation of DEVELOPER
Stores, including, but not limited to:
(1) type, brand, quality, taste, weight, dimensions, ingredients,
uniformity, manner of preparation, preservation and sale of all Products
and Supplies and Materials; and
(2) sales and marketing procedures and customer service; and
53
(3) advertising and promotional programs; and
(4) layout, decor and color scheme of the Store; and
(5) recruitment, selection, training, appearance and dress of
employees, including, without limitation, use of COMPANY's employee
selection and training materials; and
(6) safety, maintenance, appearance, cleanliness, sanitation,
standards of service and operation of Stores; and
(7) submission of requests for approval of brands of food and
packaging products, supplies and suppliers; and
(8) use and illumination of signs, posters, displays, standard
formats and similar items; and
(9) identification of DEVELOPER (and/or the entity executing License
Agreements for Stores pursuant to the Development Agreement) as the owner
of DEVELOPER Stores in the Development Area; and
(10) types of and use of fixtures, furnishings, equipment, computer
hardware and software, vehicles, and signs; and
(11) carry-out, on-premises dining and (if authorized by COMPANY and
agreed to by DEVELOPER) Delivery Service, Catering Service and Special
Distribution Arrangements; and
(12) required and approved menu items; and
(13) general staffing levels for the Stores and number, type and
qualifications of Store personnel; and
(14) participation in market research and test programs required or
approved by COMPANY concerning various aspects of the System, including,
without limitation, procedures, systems, techniques, furnishings,
fixtures, equipment, ingredients, signs, labels, trade dress, logos,
packaging, supplies, marketing materials and strategies, merchandising and
new menu items and services. DEVELOPER agrees, if requested by COMPANY, to
participate in COMPANY's customer surveys and market research programs.
54
DEVELOPER acknowledges and agrees that all mandatory specifications, standards
and operating and inspection procedures prescribed from time to time by COMPANY
in the Store Manuals or otherwise communicated to DEVELOPER in writing, shall
constitute binding obligations on the part of DEVELOPER as if fully set forth
herein, and any failure by DEVELOPER to adhere to such mandatory
specifications, standards and operating and inspection procedures or to pass
COMPANY'S periodic quality control inspections shall constitute grounds for
termination of this Agreement by COMPANY, as provided for herein. All
references herein to this Agreement shall include all such mandatory
specifications, standards, and operating procedures.
14. TRANSFER.
14.A. BY COMPANY.
This Agreement is fully transferable by COMPANY and shall inure to the
benefit of any assignee or other legal successor to the interests of COMPANY
herein.
14.B. THIS AGREEMENT IS NOT TRANSFERABLE BY DEVELOPER.
DEVELOPER understands, acknowledges and agrees (and hereby represents
and warrants that its Owners understand and agree) that the rights and duties
created by this Agreement are personal to DEVELOPER and its Owners and that a
material cause for COMPANY's agreeing to enter into this Agreement is its
reliance on the individual and collective character, skill, aptitude, business
ability, and financial capacity of DEVELOPER and its Owners. Therefore, except
as provided in Section 14.C. below, no Ownership Interest in DEVELOPER, no
obligations of DEVELOPER under this Agreement, and no interest in this
Agreement may be transferred. Any purported transfer in violation of this
Section shall constitute a breach of this Agreement and shall convey to the
transferee no obligations under, rights to or interest in the foregoing.
As used in this Agreement, a "transfer" shall include, without
limitation, the following, whether voluntary, involuntary, direct or indirect,
or conditional:
(1) an assignment, sale, gift or pledge;
(2) the grant of a mortgage, lien or security interest,
including, without limitation, the grant of a collateral assignment;
(3) a merger, consolidation, share exchange or issuance of
additional Ownership Interests or securities representing or
potentially representing Ownership Interests or redemption of
Ownership Interests;
55
(4) a sale or exchange of voting interests or securities
convertible to voting interests, or an agreement granting the right to
exercise or control the exercise of voting rights of any holder of
Ownership Interests or to control the operations or affairs of
DEVELOPER; and
(5) except where specifically approved by COMPANY, a
management agreement whereby DEVELOPER delegates (i) any of its
obligations under this Agreement; or (ii) any or all of the management
functions with respect to a DEVELOPER Store or the business to be
conducted by DEVELOPER pursuant to this Agreement.
In addition to the foregoing, a transfer (as defined above) will require the
prior written consent of COMPANY where such transfer occurs by virtue of (a)
divorce; (b) insolvency; (c) dissolution of a corporation, partnership or
limited liability company; (d) will; (e) intestate succession; or (f)
declaration of or transfer in trust.
14.C. CERTAIN RIGHTS TO TRANSFER
OWNERSHIP INTERESTS IN DEVELOPER.
Subject to (1) COMPANY's rights of first refusal under Section 14.G
and (2) COMPANY's right to approve the proposed purchaser under Section 14.D.,
Ownership Interests (including stock options or other options to acquire
Ownership Interests) may be transferred if:
(1) the proposed transfer is by an Owner who is not a
Principal Owner; and
(2) the proposed transfer does not by itself or in
conjunction with other transfers, result in the transfer of a
Controlling Interest in DEVELOPER or of a change in the composition of
the group holding a Controlling Interest in DEVELOPER; and
(3) the proposed transfer is not to a Competitive Business or
to a direct or indirect owner of interests in a Competitive Business;
and
(4) DEVELOPER and its Owners are in full compliance with this
Agreement.
In addition, an Owner's Ownership Interests in DEVELOPER shall be
transferred to a transferee approved by COMPANY pursuant to Section 14.D within
a reasonable time, not to exceed nine (9) months, after the death, permanent
incapacity or liquidation of the Owner.
14.D. COMPANY'S RIGHT TO APPROVE TRANSFERS.
COMPANY reserves the right to approve the proposed purchaser and
transfer of any
56
Ownership Interests in DEVELOPER which are permitted or mandated under Section
14.C. to be transferred. If any Owner intends to transfer Ownership Interests,
DEVELOPER shall deliver to COMPANY written notice of such proposed transfer at
least thirty (30) days prior to its intended effective date. Such notice shall
describe in detail the proposed transfer (including, without limitation, the
nature of the transfer, the nature and amount of the interests being
transferred, the reason for the transfer, the price and terms of the transfer
and effective date) and identify and provide information regarding the proposed
purchaser. COMPANY shall have thirty (30) days from delivery of such notice
within which to evaluate the proposed transaction and to notify DEVELOPER of
its approval or disapproval (with reasons) of the proposed transfer. If
approved, the transfer must take place as described in the notice (as modified
by any conditions imposed by COMPANY in granting its approval) and within
thirty (30) days of the delivery of notice of COMPANY's approval. In evaluating
whether to grant its approval, COMPANY may evaluate any and all reasonable
factors including, without limitation:
(1) whether the proposed transferee and, if applicable, its owners
are (a) of good moral character, (b) otherwise meet COMPANY's then
applicable standards for developers of UNITS and (c) are in full
compliance with any other franchise agreements or development agreements
between COMPANY and them; and
(2) whether the price and terms of the proposed transfer are not so
burdensome as to adversely affect or have a potentially adverse affect on
COMPANY's rights and interest under this Agreement.
In granting its approval, COMPANY may also impose certain reasonable
conditions, including, without limitation, the following:
(1) that DEVELOPER reimburse COMPANY for any costs and expenses
incurred by COMPANY in evaluating the proposed transfer;
(2) that DEVELOPER, the transferring Owner or the proposed purchaser
pay a transfer fee in the amount of $10,000;
(3) that, if the transferring Owner finances any part of the sale
price, it agrees, in a manner satisfactory to COMPANY, that all
obligations of the purchaser under or pursuant to any promissory notes,
agreements or security interests reserved by the transferring Owner be
subordinate to any obligations of the purchaser to pay amounts due COMPANY
and its Affiliates;
(4) that the purchaser execute any individual undertakings then being
required by COMPANY of other Owners of developers, franchise owners or
license owners of Stores;
57
(5) that DEVELOPER, the transferring Owner and the purchaser (if the
purchaser is then the owner of interests in another developer, franchise
owner or license owner of UNITS) execute a general release and consent
agreement, in form satisfactory to COMPANY, of any and all claims against
COMPANY, its Affiliates, and their respective shareholders, officers,
directors, employees and agents for matters arising on or before the
effective date of the transfer; and
(6) that the transferring Owner execute a noncompetition agreement in
favor of COMPANY and the transferee, providing that the transferring Owner
shall not directly or indirectly (through a member of the Immediate Family
of the transferring Owner of DEVELOPER, or otherwise), for a period of two
(2) years commencing on the effective date of such transfer:
(a) have any interest as a disclosed or beneficial owner in any
Competitive Business located or operating:
(i) within a five (5) mile radius of any UNIT in operation
or under development in the Development Area on the effective
date of the transfer; or
(ii) within a five (5) mile radius of any other UNIT in
operation or under development on the effective date of the
transfer; or
(iii) within the Development Area; or
(iv) within the state(s) where the Development Area is
located;
or
(b) perform services as a director, officer, manager, employee,
consultant, representative, agent or otherwise for any Competitive
Business located or operating:
(i) within a five (5) mile radius of any UNIT in operation
or under development in the Development Area on the effective
date of the transfer; or
(ii) within a five (5) mile radius of any other UNIT in
operation or under development on the effective date of the
transfer; or
(iii) within the Development Area; or
58
(iv) within the state(s) where the Development Area is
located; or
(c) divert or attempt to divert any business or any customers of
any UNIT to any Competitive Business;
or
(d) employ or seek to employ any person who is employed by
COMPANY, its Affiliates or by any other developer, franchise owner or
license owner of COMPANY, nor induce nor attempt to induce any such
person to leave said employment without the prior written consent of
such person's employer.
The rights of Owners to transfer interests in DEVELOPER may be exercised
only by the Owners and shall not be exercisable by a receiver, trustee,
liquidator or other person acting in a comparable capacity with respect
thereto.
The restrictions of subparagraph (6)(a) of this Section 14.D. will not be
applicable to the ownership of shares of a class of securities listed on a
stock exchange or traded on the over-the-counter market and quoted by a
national inter-dealer quotation system that represent less than three percent
(3%) of the number of shares of that class of securities issued and outstanding
nor shall they be construed to prohibit DEVELOPER, any Principal Owner of
Developer or any member of the Immediate Family of DEVELOPER or any Principal
Owner from having a direct or indirect Ownership Interest in any UNIT,
development agreements or franchise agreements for the development or operation
of UNITS, or any entity owning, controlling or operating UNITS, or from
providing services to UNITS pursuant to other agreements with COMPANY.
Furthermore, the restrictions of this Section 14.D shall not prohibit
DEVELOPER, any Owner of DEVELOPER, or (to the extent of such person is an
individual) any member of the Immediate Family of an Owner of DEVELOPER from
performing services for or having an Ownership Interest in a Permitted
Competitive Business, or from conducting customary promotion and advertising of
a Permitted Competitive Business.
14.E. PUBLIC OR PRIVATE OFFERINGS.
DEVELOPER acknowledges and agrees that it is the intent of COMPANY and
DEVELOPER that DEVELOPER not be or become a public company or "reporting
company" (as defined in Sections 12(b), 12(g) or 15(d) of the Securities
Exchange Act of 1934, as amended, or otherwise) including by way of an initial
public offering or a transfer to or merger with an existing public company.
Accordingly, DEVELOPER agrees that securities of DEVELOPER or an entity owning
a direct or indirect equity interest in DEVELOPER or this Agreement, or any
Store, Franchise Agreement or License Agreement may not be offered pursuant to
a public offering. DEVELOPER further agrees that such securities will not be
59
offered pursuant to a private placement without COMPANY's prior written
consent. COMPANY hereby grants its consent to a private placement of securities
by DEVELOPER provided that DEVELOPER ensures that:
(1) such private placement complies with all applicable federal,
state and local laws governing offerings of securities and all applicable
agreements between DEVELOPER and COMPANY or its Affiliates;
(2) such private placement complies with each of the relevant
transfer procedures, requirements and limitations contained herein;
(3) such private placement does not result in any change in operating
control of DEVELOPER or any of DEVELOPER Stores or in the parties owning a
Controlling Interest or in the individual or individuals controlling the
management, policies or decision-making power of DEVELOPER;
(4) each person or entity receiving securities under such private
placement shall be an accredited investor, as defined by applicable law,
and shall have been identified and be reasonably acceptable to COMPANY;
provided, however, that DEVELOPER may allow unaccredited investors to
receive securities if DEVELOPER has complied with applicable law with
respect thereto;
(5) a draft of any offering memorandum or information proposed to be
used in connection with any such private placement is submitted to COMPANY
for review and comment within a reasonable time prior to its use, that the
reasonable comments and suggestions of COMPANY thereto are given due
consideration and that a final version of such memorandum or information
be provided to COMPANY at least five (5) days prior to its distribution to
prospective investors;
(6) any offering memorandum or information used in connection with
any such private placement shall clearly state that it is not an offering
by COMPANY and that COMPANY has not participated in its preparation and
has not supplied any financial information projections, budgets, cost
estimates or similar information contained therein (all of which shall be
the responsibility of DEVELOPER);
(7) each recipient of information relating to such private placement
agrees to maintain it in confidence;
(8) the structure, timing, allocation and nature of such private
placement is reasonably acceptable to COMPANY;
(9) DEVELOPER does not as a result of the private placement, become a
60
"Reporting Company" under Sections 12(b), 12(g) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
(10) each person who or entity which becomes an Owner or Principal
Owner as a result of such private placement agrees and undertakes to
become bound by any provisions of this Agreement pertaining to Owners or
Principal Owners, as applicable.
DEVELOPER agrees to indemnify COMPANY for and hold COMPANY harmless
against any and all costs, expenses, claims, actions, judgments and liabilities
(including, but not limited to, costs and expenses related to legal defense)
arising from or relating to any private placement approved by COMPANY pursuant
to this Section. DEVELOPER also agrees to reimburse COMPANY for its reasonable
expenses incurred in connection with any such private placement (including
attorney's fees) and to comply with all requirements of COMPANY in connection
with such offering, including, without limitation, adding appropriate
disclaimers to the offering documents and execution of appropriate
indemnification agreements.
14.F. EFFECT OF CONSENT TO TRANSFER.
COMPANY's consent to a transfer of this Agreement or any interest subject
to the restrictions of this Section shall not constitute a waiver of any claims
it may have against DEVELOPER (or its Owners), nor shall it be deemed a waiver
of COMPANY's right to demand full compliance with any of the terms or
conditions of this Agreement by the transferee. COMPANY's consent to any such
transfer shall not, unless expressly provided in such consent, effect a release
of DEVELOPER (or its Owners, as the case may be) post-transfer.
14.G. COMPANY'S RIGHT OF FIRST REFUSAL.
If DEVELOPER or any of its Owner(s) desire to make a transfer of an
interest that is permitted under this Agreement, DEVELOPER or its Owner(s)
shall obtain a bona fide, arms length executed purchase agreement (and any
proposed ancillary agreements) in complete and definitive form and not subject
to any financing or other material, substantive contingency and an earnest
money deposit (in the amount of ten percent (10%) or more of the purchase
price) from a qualified, responsible, bona fide and fully disclosed purchaser.
A true and complete copy of such purchase agreement (conditioned on COMPANY's
first refusal rights) and any proposed ancillary agreements shall immediately
be submitted to COMPANY by DEVELOPER, such Owner(s), or both. The purchase
agreement must apply only to an interest which is permitted to be transferred
under this Agreement, may not include the purchase of any other property or
rights of DEVELOPER (or such Owner(s)) and the price and terms of purchase
offered to DEVELOPER (or such Owner(s)) in the purchase agreement for the
aforementioned interests will reflect the bona fide price offered therefor and
shall not reflect any value for any other property or rights. If the proposed
purchaser proposes to buy any other property or rights from DEVELOPER (or such
Owner(s)) under a separate, contemporaneous purchase agreement,
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DEVELOPER shall submit to COMPANY a true and complete copy of a bona fide, arms
length executed purchase agreement (and any proposed ancillary agreements) in
complete and definitive form and not subject to any financing or other
material, substantive contingency. COMPANY shall have the right, exercisable by
written notice delivered to DEVELOPER (or such Owner(s)) within thirty (30)
days from the date of receipt by COMPANY of an exact copy of such purchase
agreement, together with payment of any applicable transfer fee, and a
completed executed application for COMPANY's consent to the transfer, to
purchase such interest for the price and on the terms and conditions contained
in such purchase agreement, provided that COMPANY may substitute cash, a cash
equivalent, or marketable securities of equivalent value for any form of
payment proposed in such purchase agreement, COMPANY's credit shall be deemed
equal to the credit of any proposed purchaser, and COMPANY shall have not less
than sixty (60) days to prepare for closing. Regardless of whether included in
the purchase agreement, COMPANY shall be entitled to all customary
representations and warranties given by the seller of a business, including,
without limitation, representations and warranties as to: (i) ownership,
condition and title to the Ownership Interests and/or assets being purchased;
(ii) absence of liens and encumbrances relating to such Ownership Interests or
assets; (iii) validity of contracts of any legal entity whose Ownership
Interests are purchased and (iv) liabilities, contingent or otherwise, of any
legal entity whose Ownership Interests are purchased. If COMPANY does not
exercise its right of first refusal, DEVELOPER (or such Owner(s)) may complete
the sale to such purchaser pursuant to and on the exact terms of the purchase
agreement, subject to COMPANY's approval of the transfer, as provided for in
this Agreement, provided that if the sale to such purchaser is not completed
within one hundred twenty (120) days after receipt of such purchase agreement
by COMPANY, or there is a change in the terms of the sale, COMPANY shall again
have an additional right of first refusal for thirty (30) days as set forth in
this Agreement on the modified or initial terms and conditions of sale.
14.H. OWNERSHIP STRUCTURE.
DEVELOPER represents and warrants that its Owners are as set forth on
Exhibit G and covenants that DEVELOPER will not permit the identity of such
Owners, or their respective interests in DEVELOPER, to change without complying
with this Agreement.
14.I. DELEGATION BY COMPANY.
DEVELOPER agrees that COMPANY shall have the right, from time to time,
to delegate the performance of any portion or all of its obligations and duties
under this Agreement to designees, whether the same are agents of COMPANY or
independent contractors with which COMPANY has contracted to provide such
services.
14.J. PERMITTED TRANSFERS.
Notwithstanding anything to the contrary contained in this Agreement
and provided
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(a) DEVELOPER reimburses any costs incurred by COMPANY in connection therewith,
(b) DEVELOPER, its Owners and the transferees comply with the provisions of the
HSR Act, if applicable, prior to such a transfer, (c) DEVELOPER, its Owners and
the transferees comply with all other restrictions of this Agreement applicable
to Owners and ownership interests (including, without limitation, those
restricting an Owner's ownership of interests in a Competitive Business), and
(d) the transfer does not, by itself or in conjunction with other transfers,
result in the transfer of a Controlling Interest in DEVELOPER or of a change in
the composition of the group holding a Controlling Interest in DEVELOPER, the
provisions of this Section 14 (including, without limitation, the requirement
of the payment of transfer fees under Section 14.D(2) and the right of first
refusal granted to COMPANY in Section 14.G) shall not restrict or apply to any
assignment, sale, transfer of an Ownership Interest which:
(1) is pursuant and according to the terms of a written stock or
other equity interest option or stock or other equity interest bonus plan
which benefits employees of DEVELOPER and/or of the Boston Chicken, Inc.
franchise owner which provides management services to DEVELOPER pursuant
to a support services agreement, and has been approved by COMPANY; or
(2) is made for bona fide estate planning purposes (a) to a
corporation, trust, partnership, or other entity controlled by the
transferring Owner or (b) pursuant to an inter vivos or testamentary
document or the laws of descent and distribution.
15. TERMINATION OF AGREEMENT.
15.A. BY DEVELOPER.
If DEVELOPER is in full compliance with this Agreement and with all
Franchise Agreements and License Agreements and COMPANY materially breaches
this Agreement, DEVELOPER may terminate this Agreement effective thirty (30)
days after COMPANY's receipt of written notice of termination if DEVELOPER
gives written notice of such breach to COMPANY and COMPANY does not:
(1) correct such breach within thirty (30) days after COMPANY's
receipt of such notice of material breach; or
(2) if such breach cannot reasonably be cured within thirty (30) days
after COMPANY's receipt of such notice, undertake within thirty (30) days
after COMPANY's receipt of such notice, and continue until completion,
reasonable efforts to cure such breach.
Any attempt to terminate this Agreement by DEVELOPER other than as provided in
this Section 15.A. shall be a breach by DEVELOPER of this Agreement.
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15.B. BY COMPANY.
COMPANY may terminate this Agreement, effective upon delivery of notice of
termination to DEVELOPER or, where expressly applicable, upon failure to cure
to COMPANY's satisfaction any breach of this Agreement before the expiration of
any period of time within which such breach may be cured in accordance with the
provisions set forth below, if:
(1) DEVELOPER fails to satisfy the development obligations for the
Development Area or any Sub-Area pursuant to this Agreement; or
(2) any person or entity makes an assignment or transfer in violation
of this Agreement; or
(3) DEVELOPER or any Principal Owner of DEVELOPER has made any
material misrepresentation or omission in its application or acquisition
of this Agreement or in connection with any transfer hereunder; or
(4) DEVELOPER or any Owner of DEVELOPER is convicted by a trial court
of, or pleads guilty or no contest to, a felony, or to any other crime or
offense that may adversely affect the reputation of UNITS or Stores or the
goodwill associated with the Marks, or engages in any misconduct which may
adversely affect the reputation of UNITS or Stores or the goodwill
associated with the Marks; or
(5) DEVELOPER or any of its Owners or employees makes any
unauthorized use of the Marks or the Copyrighted Works, makes any
unauthorized use, disclosure or duplication of the Confidential
Information, the Development Manual, the Commissary Manual, any of the
Store Manuals or the Copyrighted Works, or challenges or seeks to
challenge the validity of COMPANY's or its Affiliates' rights in and to
the Marks, the Copyrighted Works or the Confidential Information (unless
the foregoing prohibited act is inadvertent and does not have, or threaten
to have, an adverse effect upon COMPANY, its business concept, its
business operations, the business of any UNIT, any Mark, the Confidential
Information, the Development Manual, or the Copyrighted Works, and
DEVELOPER ceases and desists any such prohibited act promptly upon notice
and reimburses COMPANY for all damages, losses, costs, and expenses
incurred by COMPANY in connection with such prohibited acts); or
(6) DEVELOPER, its Principal Owners, or members of their Immediate
Families (whether or not bound by individual noncompetition undertakings)
or other persons who have executed such individual undertakings violate
the restrictions on the operation of Competitive Businesses during the
Agreement Term set forth in Section 11
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of this Agreement or Owners who have access to the Confidential
Information violate the covenants concerning competition and
confidentiality contained in the form of Confidentiality and
Non-Competition Agreement attached hereto as Exhibit J (regardless of
whether any such party has executed this Agreement or a Confidentiality
and Non-Competition Agreement); or
(7) DEVELOPER fails to deliver or adhere to the Funding Plan approved
by COMPANY as required pursuant to Section 13.G. of this Agreement and
does not correct such failure within ten (10) days after written notice of
such failure is delivered to DEVELOPER; or
(8) DEVELOPER fails to make payments of any amounts due to COMPANY
and does not correct such failure within ten (10) days after written
notice of such failure is delivered to DEVELOPER; or
(9) DEVELOPER fails to timely commence or provide:
(a) Delivery Service pursuant to a Delivery Rider executed by
COMPANY and DEVELOPER; or
(b) Catering Service pursuant to a Catering Rider executed by
COMPANY and DEVELOPER; or
(c) Special Distribution Arrangements pursuant to a Special
Distribution Agreement executed by COMPANY and DEVELOPER,
in accordance with COMPANY's standards, specifications, and procedures,
and does not correct such failure within 10 days after DEVELOPER's receipt
of COMPANY's written notice of such failure to comply; or, if such failure
cannot reasonably be corrected within the aforesaid 10-day period but can
be corrected within a reasonably short time (not to exceed an additional
30 days), undertake within 10 days after DEVELOPER's receipt of COMPANY's
written notice, and continue until completion, best efforts to correct
such failure within such reasonably short time (not to exceed an
additional 30 days) and furnish proof acceptable to COMPANY, upon its
request, of such efforts and the date full compliance will be achieved; or
(10) DEVELOPER fails to operate a Commissary at the time specified by
COMPANY and at the location approved by COMPANY in accordance with
COMPANY's standards, specifications and procedures and does not correct
such failure within 10 days after DEVELOPER's receipt of COMPANY's written
notice of such failure to comply; or, if such failure cannot reasonably be
corrected within the aforesaid 10-day period but can be corrected within a
reasonably short time (not to exceed an
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additional 30 days), undertake within 10 days after DEVELOPER's receipt of
COMPANY's written notice, and continue until completion, best efforts to
correct such failure within such reasonably short time (not to exceed an
additional 30 days) and furnish proof acceptable to COMPANY, upon its
request, of such efforts and the date full compliance will be achieved; or
(11) DEVELOPER or any of its Owners fail: (a) to comply with any
other provision of this Agreement, and does not correct such failure
within thirty (30) days after DEVELOPER's receipt of COMPANY's written
notice of such failure to comply; or (b) if such failure cannot reasonably
be corrected within the aforesaid thirty (30) day period but can be
corrected within a reasonably short time (not to exceed an additional
thirty (30) days), undertake within ten (10) days after DEVELOPER's
receipt of COMPANY's written notice, and continue until completion, best
efforts to correct such failure within such reasonably short time (not to
exceed an additional thirty (30) days) and furnish proof acceptable to
COMPANY, upon its request, of such efforts and the date full compliance
will be achieved; or
(12) DEVELOPER or any of its Principal Owners fails on three or more
separate occasions within any period of 18 consecutive months to comply
with this Agreement in any material respect; or
(13) COMPANY has delivered a notice of termination of a Franchise
Agreement or License Agreement in accordance with its terms and conditions
or DEVELOPER has attempted to terminate a Franchise Agreement or License
Agreement with COMPANY in breach thereof; or
(14) DEVELOPER becomes insolvent in the sense that it is unable to
pay its bills as they become due; or
(15) DEVELOPER has attempted to terminate this Agreement without
complying with Section 15.A. of this Agreement.
15.C. TERMINATION OF THE DEVELOPMENT
TERM AND CERTAIN RIGHTS OF DEVELOPER.
In the event COMPANY is entitled to terminate this Agreement in accordance
with Paragraph B. of this Section, COMPANY, in its sole discretion, shall have
the option to terminate any one or more of the following instead of terminating
this Agreement:
(1) DEVELOPER's right to develop Stores for which no License
Agreement has been executed under Section 3.A.; and
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(2) DEVELOPER's territorial rights granted pursuant to Section 3.A.
in some or all of the Sub-Areas; and
(3) DEVELOPER's option to develop Stores at Target Sites under
Section 3.E.; and
(4) DEVELOPER's option to purchase, and develop and operate Stores at
Conversion Sites under Section 3.F.; and
(5) any Delivery Rider(s) in effect between COMPANY and DEVELOPER;
and
(6) any Catering Rider(s) in effect between COMPANY and DEVELOPER;
and
(7) any Special Distribution Arrangement(s) in effect between COMPANY
and DEVELOPER, and
(8) require DEVELOPER to cease operation of one or more Commissaries,
effective ten (10) days after delivery of written notice thereof to DEVELOPER.
If any of such rights, options or arrangements are terminated in accordance
with this Paragraph, such termination shall be without prejudice to COMPANY's
right to terminate this Agreement or other such rights, options or arrangements
at any time thereafter for the same default or as a result of any additional
defaults of this Agreement in accordance with Paragraph B. of this Section.
16. RIGHTS AND OBLIGATIONS OF COMPANY AND DEVELOPER UPON TERMINATION OF THIS
AGREEMENT OR EXPIRATION OF THE AGREEMENT TERM.
16.A. PAYMENT OF AMOUNTS OWED TO COMPANY.
DEVELOPER shall immediately pay to COMPANY upon termination of this
Agreement or upon expiration of the Agreement Term any amounts owed by
DEVELOPER to COMPANY or its Affiliates which are then unpaid plus interest due
on any of the foregoing.
16.B. MARKS AND COPYRIGHTED WORKS.
Upon the termination of this Agreement or expiration of the Agreement
Term, DEVELOPER shall:
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(1) immediately cease use of all of the Marks and not thereafter
directly or indirectly at any time or in any manner identify itself or any
business as a current or former developer of or as otherwise associated
with COMPANY, or use any Mark, any colorable imitation thereof or use any
mark substantially identical to or deceptively similar to any Mark in any
manner or for any purpose, or utilize for any purpose any trade name,
trademark or service mark or other commercial symbol or trade dress that
suggests or indicates a connection or association with COMPANY and/or its
licensor(s), as applicable; and
(2) immediately remove all signs containing any Mark, and return to
COMPANY or destroy all forms, advertising and promotional materials and
other materials containing any Mark or otherwise identifying or relating
to the Marks; and
(3) immediately take such action as may be required to cancel or, at
COMPANY's option, to transfer to COMPANY or its designee, all fictitious
or assumed name or equivalent registrations relating to its use of any
Mark; and
(4) immediately cease use of all Copyrighted Works which were
furnished and/or licensed to DEVELOPER by COMPANY pursuant to this
Agreement and return to COMPANY or destroy, at COMPANY's option, all
forms, advertising and promotional materials or other materials containing
such Copyrighted Works.
DEVELOPER shall furnish to COMPANY within thirty (30) days after the effective
date of termination or expiration, evidence satisfactory to COMPANY of
DEVELOPER's compliance with all of the foregoing obligations. Notwithstanding
the foregoing, DEVELOPER shall continue to have the right to use the Marks and
Copyrighted Works pursuant to any Franchise Agreements and any License
Agreements it has entered into pursuant to this Agreement which are then in
effect.
16.C. CONFIDENTIAL INFORMATION.
DEVELOPER agrees that upon termination of this Agreement or expiration
of the Agreement Term:
(1) it, and all of its affiliates, Owners, employees, agents or other
representatives, will immediately cease to use and will maintain the
absolute confidentiality of any Confidential Information of COMPANY
disclosed to or otherwise learned or acquired by DEVELOPER and will
refrain from using such Confidential Information in any business or
otherwise; and
(2) it will return to COMPANY all copies of the Development Manual
and any other confidential materials which have been loaned or made
available to it by
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COMPANY pursuant to this Agreement.
16.D. COVENANT NOT TO COMPETE.
Upon expiration of the Agreement Term or termination of this Agreement by
COMPANY or by DEVELOPER, other than pursuant to Section 15.A., neither
DEVELOPER nor any of its Principal Owners shall directly or indirectly (through
a member of the Immediate Family of DEVELOPER or a Principal Owner of
DEVELOPER, or otherwise) for a period of two (2) years commencing on the
effective date of such termination or expiration or the date on which DEVELOPER
ceases to conduct its activities hereunder, whichever is later:
(1) have any interest as a disclosed or beneficial owner in any
Competitive Business located or operating:
(a) within a five (5) mile radius of any UNIT in operation or
under development in the Development Area on the effective date of
termination or expiration of this Agreement; or
(b) within a five (5) mile radius of any other UNIT in operation
or under development on the effective date of termination or
expiration of this Agreement; or
(c) within the Development Area; or
(d) within the state(s) where the Development Area is located;
or
(2) perform services as a director, officer, manager, employee,
consultant, representative, agent or otherwise for any Competitive
Business located or operating:
(a) within a five (5) mile radius of any UNIT in operation or
under development in the Development Area on the effective date of
termination or expiration of this Agreement; or
(b) within a five (5) mile radius of any other UNIT in operation
or under development on the effective date of termination or
expiration of this Agreement; or
(c) within the Development Area; or
(d) within the state(s) where the Development Area is located;
or
(3) divert or attempt to divert any business or any customers of any
UNIT to
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any Competitive Business; or
(4) employ or seek to employ any person who is employed by COMPANY,
its Affiliates or by any other developer, franchise owner or license owner
of COMPANY, nor induce nor attempt to induce any such person to leave said
employment without the prior written consent of such person's employer.
The restrictions of Subparagraph (1) of this Paragraph D. will not be
applicable to the ownership of shares of a class of securities listed on a
stock exchange or traded on the over-the-counter market and quoted by a
national inter-dealer quotation system that represent less than three percent
(3%) of the number of shares of that class of securities issued and outstanding
nor shall they be construed to prohibit DEVELOPER, any Principal Owner of
Developer or any member of the Immediate Family of DEVELOPER or any Principal
Owner from having a direct or indirect Ownership Interest in any UNIT,
development agreements or franchise agreements for the development or operation
of UNITS, or any entity owning, controlling or operating UNITS, or from
providing services to UNITS pursuant to other agreements with COMPANY.
Furthermore, the restrictions of this Paragraph D. shall not prohibit
DEVELOPER, any Principal Owner of DEVELOPER, or (to the extent of such person
is an individual) any member of the Immediate Family of DEVELOPER or a
Principal Owner of DEVELOPER from performing services for or having an
Ownership Interest in a Permitted Competitive Business, or from conducting
customary promotion and advertising of a Permitted Competitive Business.
16.E. EFFECT ON COMMISSARIES.
It is understood and agreed that the termination or expiration of the
Development Term or the Agreement Term shall not affect the operation of the
Commissaries which shall continue on the terms of this Agreement. DEVELOPER's
right and obligation to operate a Commissary pursuant to this Agreement shall
expire or terminate solely as set out in Section 5 of this Agreement.
16.F. CONTINUING OBLIGATIONS.
All obligations of COMPANY and DEVELOPER under this Agreement which
expressly or by their nature survive or are intended to survive the termination
of this Agreement or expiration of the Agreement Term shall continue in full
force and effect subsequent to and notwithstanding its expiration or
termination and until they are satisfied in full or by their nature expire.
17. INDEPENDENT CONTRACTORS/INDEMNIFICATION.
It is understood and agreed by the parties hereto that this Agreement does
not create a fiduciary relationship between them, that COMPANY and DEVELOPER
are and shall be
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independent contractors, and that nothing in this Agreement is intended to make
either party a general or special agent, joint venturer, partner, or employee
of the other for any purpose. DEVELOPER shall conspicuously identify itself in
all dealings with customers, suppliers, vendors, public officials, DEVELOPER
personnel, and others as a developer of UNITS licensed by COMPANY and shall
conspicuously and prominently place such other notices of independent ownership
on such forms, business cards, stationery, advertising, and such other
materials as COMPANY may require from time to time.
DEVELOPER agrees to defend and hold COMPANY, its Affiliates and their
respective shareholders, directors, officers, employees, agents, successors and
assignees harmless against and to reimburse them for:
(a) all claims, losses, obligations, damages and taxes described
in this Section;
(b) any and all claims, losses, damages and liabilities of
customers and others directly or indirectly arising out of this
Agreement, the development or operation of any Stores pursuant to
this Agreement or the development and operation of Commissaries
pursuant to this Agreement (including, without limitation, breach or
violation of any agreement, contract or commitment by DEVELOPER
resulting from DEVELOPER's execution and delivery of this Agreement
or performance of any of its obligations hereunder or liabilities
asserted by Owners or employees, agents or other representatives of
DEVELOPER arising in connection with training provided by COMPANY or
its Affiliates or designees or otherwise);
(c) the conduct of Catering Service or Delivery Service
(d) the operation of Special Distribution Arrangements;
(e) unauthorized activities conducted in association with the
Marks; or
(f) the transfer of any interest in this Agreement, any of
DEVELOPER Stores, to the extent that such claims, obligations,
damages, losses or liabilities do not arise solely from the gross
negligence or wrongful conduct of COMPANY.
For purposes of this indemnification, "claims" shall mean and include all
obligations, actual, consequential, special, and punitive damages and costs
reasonably incurred in the defense of any such claim against COMPANY or amounts
paid and costs reasonably incurred in the settlement of any such claims,
including, without limitation, reasonable accountants', attorneys', attorney
assistants', arbitrators' and expert witness fees, cost of investigation and
proof of facts, court costs, other litigation expenses, and travel and living
expenses. COMPANY shall have the right to defend any such claim against it in
such manner as COMPANY deems appropriate or
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desirable in its sole discretion. This indemnity shall continue in full force
and effect subsequent to and notwithstanding the expiration or termination of
this Agreement.
18. ENFORCEMENT.
18.A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.
If any provision of this Agreement relating to the in-term exclusive
dealing covenants is declared or made invalid or unenforceable by judicial
action, legislation or other government action, COMPANY may, if it believes in
its sole discretion that the continuation of this Agreement would not be in its
best interests, terminate this Agreement effective upon sixty (60) days' prior
written notice to DEVELOPER.
All other provisions of this Agreement are severable and this Agreement
shall be interpreted and enforced as if all completely invalid or unenforceable
provisions were not contained herein and partially valid and enforceable
provisions shall be enforced to the extent valid and enforceable. To the extent
the post-transfer restrictive covenants or post-termination/post-expiration
restrictive covenants contained herein are deemed unenforceable by virtue of
their scope in terms of geographic area, business activity prohibited, or
length of time, but may be made enforceable by reductions or alterations of
either or any thereof, DEVELOPER and COMPANY agree that same shall be enforced
to the fullest extent permissible under the laws and public policies applied in
the jurisdiction in which enforcement is sought. If any applicable and binding
law or rule of any jurisdiction requires a greater prior notice of the
termination of this Agreement than is required hereunder, or the taking of some
other action not required hereunder, or if under any applicable and binding law
or rule of any jurisdiction, any provision of this Agreement or any
specification, standard or operating procedure prescribed by COMPANY is invalid
or unenforceable, the prior notice and/or other action required by such law or
rule shall be substituted for the comparable provisions hereof, and COMPANY
shall have the right, in its sole discretion, to modify such invalid or
unenforceable provision, specification, standard or operating procedure to the
extent required to be valid and enforceable. Such modifications to this
Agreement shall be effective only in such jurisdiction and shall be enforced as
originally made and entered into in all other jurisdictions.
18.B. WAIVER OF OBLIGATIONS.
COMPANY and DEVELOPER may by written instrument unilaterally waive or
reduce any obligation of or restriction upon the other under this Agreement,
effective upon delivery of written notice thereof to the other or such other
effective date stated in the notice of waiver. Whenever this Agreement requires
COMPANY's prior approval or consent, DEVELOPER shall make a timely written
request therefor and such approval shall be obtained in writing.
With respect to this Agreement, the Franchise Agreements, the License
Agreements, the
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relationship of the parties, the DEVELOPER Stores, Catering Service, Delivery
Service, Special Distribution Arrangements or any other matter, COMPANY makes
no representations, warranties or guarantees upon which DEVELOPER may rely, and
assumes no liability or obligation to DEVELOPER, by granting any waiver,
approval, or consent to DEVELOPER, or by reason of any neglect, delay, or
denial of any request therefor. Any waiver granted by COMPANY: (1) shall be
without prejudice to any other rights COMPANY may have, (2) will be subject to
continuing review by COMPANY, and (3) as to continuing waivers, may be revoked
prospectively, in COMPANY's sole discretion, at any time and for any reason,
effective upon delivery to DEVELOPER of ten (10) days' prior written notice.
COMPANY and DEVELOPER shall not be deemed to have waived or impaired
any right, power or option reserved by this Agreement (including, without
limitation, the right to demand full compliance with every term, condition and
covenant in this Agreement, or to declare any breach thereof to be a default
and to terminate this Agreement prior to the expiration of its term), by virtue
of any:
(i) custom or practice of the parties at variance with the terms
hereof; or
(ii) failure, refusal, or neglect of COMPANY or DEVELOPER to
exercise any right under this Agreement or to insist upon full
compliance by the other with its obligations hereunder, including,
without limitation, any mandatory specification, standard or
operating procedure; or
(iii) waiver, forbearance, delay, failure, or omission by
COMPANY to exercise any right, power, or option, whether of the same,
similar or different nature, with respect to any UNIT or any
development or franchise agreement therefor; or
(iv) grant of a License Agreement to DEVELOPER; or
(v) the acceptance by COMPANY of any payments from DEVELOPER
after any breach of this Agreement.
Neither COMPANY nor DEVELOPER shall be liable for loss or damage or
deemed to be in breach of this Agreement if its failure to perform its
obligations results from any of the following and is not caused by the
non-performing party:
(vi) acts of God; or
(vii) acts of war or insurrection; or
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(viii) strikes, lockouts, boycotts, fire and other
casualties.
Any delay resulting from any of said causes shall extend the time allowed for
performance accordingly or excuse performance, in whole or in part, as may be
reasonable for the Store(s) directly affected thereby, except that such causes
shall not excuse payment of amounts owed at the time of such occurrence or
payment of any fees thereafter nor otherwise affect the Development Schedule or
the development of other UNITS to be developed under this Agreement, and as
soon as performance is possible the non-performing party shall immediately
resume performance and, in no event, shall non-performance be excused for more
than six (6) months.
18.C. INJUNCTIVE RELIEF.
Nothing in this Agreement shall bar COMPANY's right to seek specific
performance of the provisions of this Agreement and injunctive relief against
threatened conduct that will cause it loss or damages under customary equity
rules, including applicable rules for obtaining restraining orders and
preliminary injunctions. DEVELOPER agrees that COMPANY may obtain such
injunctive relief in addition to such further or other relief as may be
available at law or in equity. DEVELOPER agrees that COMPANY will not be
required to post a bond to obtain any injunctive relief and that DEVELOPER's
only remedy if an injunction is entered against DEVELOPER will be the
dissolution of that injunction, if warranted, upon due hearing (all claims for
damages by reason of the wrongful issuance of such injunction being expressly
waived hereby). Any such action shall be brought as provided in Paragraph G of
this Section.
18.D. RIGHTS OF PARTIES ARE CUMULATIVE.
The rights of COMPANY and DEVELOPER hereunder are cumulative and no
exercise or enforcement by COMPANY or DEVELOPER of any right or remedy
hereunder shall preclude the exercise or enforcement by COMPANY or DEVELOPER of
any other right or remedy hereunder or to which COMPANY or DEVELOPER is
entitled by law.
18.E. COSTS AND LEGAL FEES.
If COMPANY engages legal counsel in connection with any failure by
DEVELOPER to comply with this Agreement, DEVELOPER shall reimburse COMPANY for
costs and expenses incurred by COMPANY, including, without limitation,
reasonable accountants', attorneys', attorneys assistants', arbitrators' and
expert witness fees, cost of investigation and proof of facts, court costs,
other litigation expenses and travel and living expenses, whether incurred
prior to, in preparation for, in contemplation of or in connection with the
filing of any judicial or arbitration proceeding to enforce this Agreement.
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18.F. GOVERNING LAW.
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK ACT OF 1946
(LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.), THIS AGREEMENT AND THE
RELATIONSHIP BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF COLORADO EXCEPT THAT SUCH
STATE'S CHOICE OF LAW AND CONFLICT OF LAW RULES SHALL NOT APPLY AND ANY
FRANCHISE REGISTRATION, DISCLOSURE, RELATIONSHIP OR SIMILAR STATUTE WHICH MAY
BE ADOPTED BY THE STATE OF COLORADO SHALL NOT APPLY UNLESS ITS JURISDICTIONAL
REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS PARAGRAPH.
18.G. CONSENT TO JURISDICTION/CHOICE OF FORUM.
DEVELOPER AGREES THAT DEVELOPER SHALL, AND COMPANY MAY, AT ITS OPTION,
INSTITUTE ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY STATE
COURT OF GENERAL JURISDICTION IN JEFFERSON COUNTY, COLORADO OR THE UNITED
STATES FEDERAL DISTRICT COURT FOR THE DISTRICT OF COLORADO, OR THE STATE COURT
OF GENERAL JURISDICTION OR UNITED STATES FEDERAL DISTRICT COURT NEAREST TO
COMPANY'S EXECUTIVE OFFICE AT THE TIME SUCH ACTION IS FILED. DEVELOPER
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND WAIVES ANY
OBJECTION IT MAY HAVE TO EITHER THE JURISDICTION OR VENUE OF ANY SUCH COURT.
18.H. LIMITATIONS OF CLAIMS.
EXCEPT FOR CLAIMS BROUGHT BY COMPANY WITH REGARD TO DEVELOPER'S
OBLIGATIONS TO MAKE PAYMENTS TO COMPANY PURSUANT TO THIS AGREEMENT OR TO
INDEMNIFY COMPANY PURSUANT TO SECTION 17, ANY AND ALL CLAIMS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE RELATIONSHIP OF DEVELOPER AND COMPANY
PURSUANT HERETO SHALL BE BARRED UNLESS AN ACTION IS COMMENCED WITHIN: (1) TWO
(2) YEARS FROM THE DATE ON WHICH THE ACT OR EVENT GIVING RISE TO THE CLAIM
OCCURRED, OR (2) ONE (1) YEAR FROM THE DATE ON WHICH DEVELOPER OR COMPANY KNEW
OR SHOULD HAVE KNOWN, IN THE EXERCISE OF REASONABLE DILIGENCE, OF THE FACTS
GIVING RISE TO SUCH CLAIMS, WHICHEVER OCCURS FIRST.
75
18.I. WAIVER OF PUNITIVE DAMAGES.
COMPANY AND DEVELOPER HEREBY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY RIGHT OR CLAIM FOR ANY PUNITIVE, EXEMPLARY, CONSEQUENTIAL OR SPECULATIVE
DAMAGES AGAINST THE OTHER AND AGREE THAT IN THE EVENT OF A DISPUTE BETWEEN
THEM, EXCEPT AS OTHERWISE PROVIDED HEREIN, EACH SHALL BE LIMITED TO THE
RECOVERY OF ACTUAL DAMAGES SUSTAINED BY IT.
18.J. WAIVER OF JURY TRIAL.
COMPANY AND DEVELOPER IRREVOCABLY WAIVE TRIAL BY JURY ON ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY, BROUGHT BY EITHER OF
THEM.
18.K. BINDING EFFECT.
This Agreement is binding upon the parties hereto and their respective
executors, administrators, heirs, assigns, and successors in interest, and
shall not be modified except by written agreement signed by both DEVELOPER and
COMPANY.
18.L. CONSTRUCTION.
The preambles and exhibits are a part of this Agreement, this Agreement
constitutes the entire agreement of the parties, and there are no other oral or
written understandings or agreements between COMPANY and DEVELOPER relating to
the subject matter of this Agreement. Except as otherwise set forth herein,
nothing in this Agreement is intended, nor shall be deemed, to confer any
rights or remedies upon any person or legal entity not a party hereto. The
headings of the several sections and paragraphs hereof are for convenience only
and do not define, limit, or construe the contents of such sections or
paragraphs. The term "DEVELOPER" as used in this Agreement is applicable to one
or more persons or entities as the case may be, and the singular usage includes
the plural and the masculine and neuter usages include each other and the
feminine.
If two or more persons are at any time DEVELOPER hereunder, whether or not
as partners or joint venturers, their obligations and liabilities to COMPANY
shall be joint and several. This Agreement shall be executed in multiple
copies, each of which shall be deemed an original.
18.M. REASONABLENESS; APPROVALS.
COMPANY and DEVELOPER agree to act reasonably in all dealings with each
other
76
pursuant to this Agreement. Whenever the consent or approval of either party is
required or contemplated hereunder, the party whose consent or approval is
required agrees not to unreasonably withhold the same, unless expressly subject
to such party's sole discretion pursuant to the terms of this Agreement.
19. NOTICES AND PAYMENTS.
All written notices and reports permitted or required to be delivered by
the provisions of this Agreement or of the Development Manual shall be deemed
so delivered at the time delivered by hand, one (1) business day after
transmission by facsimile with proof of receipt, one (1) business day after
being placed in the hands of a commercial courier service for overnight
delivery, or three (3) business days after placement in the United States Mail
by Registered or Certified Mail, Return Receipt Requested, postage prepaid and
properly addressed. Unless otherwise notified in writing, all notices, reports
and/or payments to COMPANY shall be sent to COMPANY at 14123 Denver West
Parkway, Golden, Colorado 80401, to the attention of the Vice President,
Franchise Development, with a copy to Vice President, General Counsel, or its
most current principal business address of which DEVELOPER has been notified.
Notices to DEVELOPER shall be sent to DEVELOPER at the address shown on the
first page of this Agreement or to DEVELOPER's most current principal business
address of which COMPANY has been notified, as applicable. All payments and
reports required by this Agreement shall be directed to COMPANY at the above
address, or to such other persons and places as COMPANY may direct from time to
time. Any required payment or report not actually received by COMPANY during
regular business hours on the date due (or postmarked by postal authorities at
least two (2) days prior thereto) shall be deemed delinquent.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement in multiple originals on the day and year first above written and
COMPANY has accepted this Agreement in Jefferson County, Colorado.
EINSTEIN/NOAH BAGEL CORP. EINSTEIN/NOAH BAGEL PARTNERS, L.P.
------------------------------------- -------------------------------------
COMPANY DEVELOPER
By: Einstein/Noah Bagel Partners, Inc.
Its: General Partner
By: By:
-------------------------------- ----------------------------------
Paul A. Strasen
Its: Sr. Vice President Its:
-------------------------------- ---------------------------------
|
77
EXHIBIT A
TO THE DEVELOPMENT AGREEMENT
BY AND BETWEEN EINSTEIN/NOAH BAGEL CORP.
AND
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
DATED ______________________
CATERING RIDER
CATERING RIDER
THIS RIDER is made as of this _________ day of , 19___ by and between
EINSTEIN/NOAH BAGEL CORP., a Delaware corporation ("COMPANY"), and ________
__________________________________________________, a _________________________
("DEVELOPER"), and is attached to and incorporated into the Einstein/Noah Bagel
Corp. Franchise Agreement or License Agreement by and between COMPANY and
DEVELOPER (the "Agreement") dated as of ____________________. All capitalized
terms not defined in this Rider shall have the respective meanings set forth in
the Agreement. To the extent that the terms of this Rider are inconsistent with
any of the terms of the Agreement, the terms of this Rider shall supersede and
govern.
1. CATERING SERVICE. DEVELOPER agrees that, within ( ) days after
the execution date of this Rider and thereafter during the remainder of the
term of the Agreement, subject to earlier termination by COMPANY as provided
below in this Rider, DEVELOPER will offer and provide Catering Service (defined
below) from the Stores or, if required by COMPANY in its sole discretion, from
a catering facility ("CATERING FACILITY") to customers located within the
geographic area described in Schedule A attached hereto ("CATERING AREA"). As
used herein, "Catering Service" shall mean the delivery of Products prepared at
the Stores or a Catering Facility to customers in the Catering Area, where (a)
such Products are intended to serve fifteen (15) or more persons, or (b) in
addition to the delivery of Products, DEVELOPER provides ancillary services to
a customer at a location within the Catering Area, including, by way of example
and without limitation, setting up for serving or other distribution of
Products. The Stores or the Catering Facility, whichever is used for the
conduct of Catering Service by DEVELOPER, shall be referred to herein as the
"Catering Location" and shall be identified in Schedule A attached hereto
immediately after COMPANY approves such Catering Facility in writing pursuant
to the requirements of Paragraph 2 below. DEVELOPER acknowledges and agrees
that Catering Service shall not include Delivery Service, as defined in the
Agreement. DEVELOPER, at its sole expense, shall take such actions (including,
without limitation, constructing such improvements and acquiring fixtures,
equipment, vehicles, and other materials and supplies) and obtain such permits
as are required to commence Catering Service from the Catering Location within
the (___) day period specified above.
2. CATERING SERVICE STANDARDS. DEVELOPER agrees to provide Catering
Service in accordance with the standards, specifications and procedures for
Catering Service which COMPANY prescribes, and may change from time to time in
its sole discretion, in the Manuals or otherwise in writing, including, without
limitation, requirements for catering vehicles (owned and non-owned), training
and conduct of personnel involved in Catering Service, design, layout,
equipment, fixtures, furniture, signage, product packaging, materials and
supplies, and COMPANY's prototype plans and layout for a Catering Location.
A-1
In particular, and without limiting the foregoing, DEVELOPER shall:
a. require all catering drivers to strictly comply with all
regulations, laws and ordinances applicable to the operation of motor
vehicles and use due care, taking into consideration road conditions,
when performing catering services;
b. require all catering drivers to maintain adequate motor
vehicle liability insurance that complies with all applicable laws and
regulations and that extends to the operation of a motor vehicle for
use for commercial delivery;
c. maintain or cause drivers to maintain all catering vehicles
in good and safe operating condition in full compliance with all
applicable laws and regulations;
d. conduct initial and periodic (at least once every six
months) driving record checks on all catering drivers;
e. require all catering drivers to possess and maintain valid
drivers licenses and driving records free of disqualifying violations;
f. suspend, or where appropriate under COMPANY's specifications
and standards as in effect from time to time, terminate any catering
driver who does not conform to COMPANY's standards and specifications
for Catering Service; and
g. obtain and maintain all licenses, permits and other
governmental approvals necessary or advisable for the provision of
Catering Services, and the conduct of such Catering Service in a
manner which complies with all sanitary, safety and food preparation
and holding period standards.
DEVELOPER shall maintain the condition and appearance of, and perform
maintenance with respect to, the Catering Location, catering vehicles,
furniture, fixtures and equipment used in connection with the provision of
Catering Service in accordance with COMPANY's standards, specifications and
procedures, and consistent with the image of UNITS and related facilities as
first class, clean, sanitary, attractive and efficiently operated food service
businesses.
3. COMPANY'S REVIEW AND APPROVAL OF THE CATERING FACILITY. DEVELOPER
shall comply with COMPANY's specifications and requirements regarding site
selection (if applicable), development and construction of the Catering
Facility. DEVELOPER shall promptly submit to COMPANY after the execution date
of this Rider a complete site evaluation report and feasibility analysis (the
"CATERING FACILITY SITE PACKAGE") on COMPANY's specified form (containing such
commercial and other information and photographs as COMPANY may require from
time to time) for the site at which DEVELOPER proposes and intends in good
faith to establish and operate the Catering Facility and which DEVELOPER
reasonably believes to conform to certain minimum site criteria for catering
facilities established by COMPANY from
A-2
time to time in its sole discretion. In approving or disapproving any proposed
site for the Catering Facility, COMPANY will consider such matters as it deems
material, including, without limitation, the effect Catering Service will have
on the carry-out and on-premises dining services and Delivery Service (if any)
conducted at or from the STORE, traffic patterns, parking, the predominant
character of the neighborhood, the nature of other businesses in proximity to
the site, and other commercial characteristics (including the purchase price or
rental obligations and other lease terms for the proposed site, if applicable)
and the size, appearance, and other physical characteristics of the proposed
site.
COMPANY will approve or disapprove a proposed site for the Catering
Facility by delivery of written notice to DEVELOPER. COMPANY agrees to exert
its best efforts to deliver such notification to DEVELOPER within twenty (20)
days after receipt by COMPANY of a complete Catering Facility Site Package and
such other materials requested by COMPANY from time to time, containing all
information required by COMPANY. COMPANY shall have the right in its sole
discretion to approve or disapprove a proposed site for the Catering Facility,
and DEVELOPER acknowledges and agrees that COMPANY shall have no liability
therefor. Notwithstanding any other provision of this Rider, COMPANY's failure
to provide DEVELOPER with notice of its approval or disapproval of one or more
proposed sites shall in no event constitute a waiver of COMPANY's right to
approve or disapprove the site for the Catering Facility.
4. COMPANY'S RIGHT TO TERMINATE THE AGREEMENT OR CATERING SERVICE.
If DEVELOPER fails to provide Catering Service as required pursuant to this
Rider, DEVELOPER acknowledges and agrees COMPANY shall have the right to
terminate (a) the Agreement pursuant to and in accordance with the terms
specified in Section 3.C. of the Agreement, or (b) DEVELOPER's right to provide
Catering Service, among other rights, pursuant to and in accordance with the
terms specified in Section 18.B(8)(b) of the Agreement. If COMPANY terminates
DEVELOPER's right to perform Catering Service pursuant to this Paragraph 4,
COMPANY or its designee will have the right to offer Catering Service within
the Territory of the STORE from and after COMPANY's delivery of written notice
of such termination to DEVELOPER.
Notwithstanding the foregoing, COMPANY reserves the right, at any time
and in its sole discretion, with or without cause and regardless of the
investment made by DEVELOPER in establishing and conducting Catering Service or
the length of time DEVELOPER has offered Catering Service: (1) to reduce,
modify or expand the Catering Area, effective upon COMPANY's written notice to
DEVELOPER, provided, however, that if a reduction or modification of the
Catering Area amounts to a termination of substantially all of DEVELOPER's
rights to provide such services (except in the case of the exercise by COMPANY
of its remedies under Section 18.C of this Agreement), such reduction or
modification shall not be effective until 90 days after COMPANY's written
notice to DEVELOPER; or (2) to suspend or terminate DEVELOPER's right to offer
Catering Service, effective one hundred eighty (180) days after COMPANY's
written notice to DEVELOPER (in
A-3
which case, DEVELOPER will not file any orders for Catering Service after the
expiration of such one hundred eighty (180) day period). In the event of such
suspension or termination, COMPANY reserves the right to require DEVELOPER to
reinstate Catering Service upon fifteen (15) days' prior written notice to
DEVELOPER.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Rider in multiple originals as of the date of the Agreement.
-------------------------------- ----------------------------------
COMPANY DEVELOPER
By: By:
---------------------------- ----------------------------
Its: Its:
---------------------------- ----------------------------
|
A-4
SCHEDULE A
TO THE CATERING RIDER
TO THE EINSTEIN/NOAH BAGEL CORP.
DEVELOPMENT AGREEMENT
BY AND BETWEEN EINSTEIN/NOAH BAGEL CORP.
AND EINSTEIN/NOAH BAGEL PARTNERS, L.P.
DATED ________________
CATERING AREA AND CATERING FACILITY
1. CATERING AREA. The Catering Area will be as follows:
, provided that COMPANY may, at any time and in its sole discretion, with or
without cause and regardless of the investment made by DEVELOPER in
establishing and conducting Catering Service or the length of time DEVELOPER
has offered Catering Service, reduce, modify or expand the Catering Area.
2. CATERING FACILITY. The Catering Facility will be located at the
following address:
INITIALS:
COMPANY:
DEVELOPER:
A-1
EXHIBIT B
TO THE DEVELOPMENT AGREEMENT
BY AND BETWEEN EINSTEIN/NOAH BAGEL CORP.
AND
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
DATED ______________________
DELIVERY RIDER
DELIVERY RIDER
THIS RIDER is made as of this __________ day of , 19___ by and between
EINSTEIN/NOAH BAGEL CORP., a Delaware corporation ("COMPANY"), and ___________
____________________________________________________, a ______________________
("DEVELOPER"), and is attached to and incorporated into the Einstein/Noah Bagel
Corp. Franchise Agreement or License Agreement by and between COMPANY and
DEVELOPER (the "AGREEMENT") dated as of _____________________. All capitalized
terms not defined in this Rider shall have the respective meanings set forth in
the Agreement. To the extent that the terms of this Rider are inconsistent with
any of the terms of the Agreement, the terms of this Rider shall supersede and
govern.
1. DELIVERY SERVICE. DEVELOPER agrees that, within ( ) days after
the execution date of this Rider and thereafter during the remainder of the
term of the Agreement, subject to earlier termination by COMPANY as provided
below in this Rider, DEVELOPER will offer and provide Delivery Service (defined
below) from the Stores or, if required by COMPANY its sole discretion, from a
separate delivery facility approved by COMPANY in writing ("DELIVERY
FACILITY"), to customers located within the geographic area described in
Schedule A attached hereto ("DELIVERY AREA"). As used herein, "DELIVERY
SERVICE" shall mean the delivery of Products prepared at the Store or a
Delivery Facility to customers in the Delivery Area, where (a) such Products
are intended to serve fewer than fifteen (15) persons, and (b) such service
involves the provision of no services other than the delivery of Products to a
customer at a location within the Delivery Area. DEVELOPER acknowledges and
agrees that Delivery Service shall not include Catering Service, as defined in
the Agreement. DEVELOPER, at its sole expense, shall take such actions
(including, without limitation, constructing such improvements and acquiring
fixtures, equipment, delivery vehicles, and other materials and supplies) and
obtain such permits as required to commence Delivery Service within the _______
_________________ (__________ ) day period specified above.
2. DELIVERY SERVICE STANDARDS. DEVELOPER agrees to provide Delivery
Service in accordance with the standards, specifications and procedures for
Delivery Service which COMPANY prescribes, and which COMPANY may change from
time to time in its sole discretion, in the Manuals or otherwise in writing,
including, without limitation, requirements for delivery drivers, delivery
vehicles (owned and non-owned), delivery response time, training of personnel
involved in Delivery Service, design, layout, equipment, fixtures, signage,
product packaging, materials and supplies, and COMPANY's prototype plans and
layout for a delivery staging area within a UNIT or for a Delivery Facility, if
any, approved by COMPANY.
In particular, and without limiting the foregoing, DEVELOPER shall:
a. require all delivery drivers to strictly comply with all
regulations, laws and ordinances applicable to the operation of motor
vehicles and use due care, taking into
B-1
consideration road conditions, when performing delivery services;
b. require all delivery drivers to maintain adequate motor
vehicle liability insurance that complies with all applicable laws and
regulations and that extends to the operation of a motor vehicle for
use for commercial delivery;
c. maintain or cause drivers to maintain all delivery vehicles
in good and safe operating condition in full compliance with all
applicable laws and regulations;
d. conduct initial and periodic (at least once every six months)
driving record checks on all delivery drivers;
e. not guarantee to customers delivery within any specified time
or advertise or promote refunds or discounts for DEVELOPER's failure
to deliver within any specified time;
f. require all delivery drivers to possess and maintain valid
drivers licenses and driving records free of disqualifying violations;
and
g. suspend, or where appropriate under COMPANY's specifications
and standards as in effect from time to time, terminate any delivery
driver who does not conform to COMPANY's standards and specifications
for Delivery Service.
DEVELOPER shall maintain the condition and appearance of, and perform
maintenance with respect to the delivery vehicles, facilities, fixtures and
equipment used in connection with the provision of Delivery Service in
accordance with COMPANY's standards, specifications and procedures, and
consistent with the image of UNITS as first class, clean, sanitary, attractive
and efficiently operated food service businesses.
3. COMPANY'S RIGHT TO TERMINATE THE AGREEMENT OR DELIVERY SERVICE.
If DEVELOPER fails to provide Delivery Service as required pursuant to this
Rider, DEVELOPER acknowledges and agrees COMPANY shall have the right to
terminate (a) the Agreement pursuant to and in accordance with Section
18.B(8)(a) of the Agreement, or (b) DEVELOPER's right to provide Delivery
Service, among other rights, pursuant to and in accordance with Section 3.B of
the Agreement. If COMPANY terminates DEVELOPER's right to perform Delivery
Service pursuant to this Paragraph 3, COMPANY or its designee will have the
right to offer Delivery Service within the Development Area from and after
COMPANY's delivery of written notice of such termination to DEVELOPER.
Notwithstanding the foregoing, COMPANY reserves the right, at any time
and in its sole discretion, with or without cause and regardless of the
investment made by DEVELOPER in establishing and conducting Delivery Service or
the length of time DEVELOPER has offered Delivery Service: (a) to reduce,
modify or expend the Delivery Area, effective upon
B-2
COMPANY's written notice to DEVELOPER, provided, however, that if a reduction
or modification of the Delivery Area amounts to a termination of substantially
all of DEVELOPER's rights to provide such services (except in the case of the
exercise by COMPANY of its remedies under Section 18.C of this Agreement), such
reduction or modification shall not be effective until 90 days after COMPANY's
written notice to DEVELOPER; or (b) to suspend or terminate DEVELOPER's right
to offer Delivery Service, effective one hundred eighty (180) days after
COMPANY's written notice to DEVELOPER. In the event of such suspension or
termination, COMPANY reserves the right to require DEVELOPER to reinstate
Delivery Service upon fifteen (15) days' prior written notice to DEVELOPER.
4. DISPLAY OF MARKS. DEVELOPER is hereby granted a special, limited
license to display on delivery vehicles used in the performance of delivery
service pursuant to this Rider the Marks and logos in the form and manner
specified by COMPANY in the Manuals or otherwise. This license shall expire
automatically and without notice upon the expiration or termination of
DEVELOPER's right to provide delivery services pursuant to this Rider.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Rider in multiple originals as of the date of the Agreement.
-------------------------------- ---------------------------------
COMPANY DEVELOPER
By: By:
---------------------------- ----------------------------
Its: Its:
---------------------------- ----------------------------
|
B-3
SCHEDULE A
TO THE DELIVERY RIDER
TO THE EINSTEIN/NOAH BAGEL CORP. DEVELOPMENT AGREEMENT
BY AND BETWEEN
EINSTEIN/NOAH BAGEL CORP.
AND EINSTEIN/NOAH BAGEL PARTNERS, L.P.
DATED _________________
DELIVERY AREA
1. DELIVERY AREA. The Delivery Area of the Store will be as
follows:
, provided that COMPANY may, and DEVELOPER acknowledges and agrees that COMPANY
may, at any time and in its sole discretion with or without cause and regardless
of the investment made by DEVELOPER in establishing and conducting Delivery
Service or the length of time DEVELOPER has offered Delivery Service, reduce,
modify or expand the Delivery Area.
INITIALS:
COMPANY:
DEVELOPER:
B-1
EXHIBIT C
TO THE DEVELOPMENT AGREEMENT
BY AND BETWEEN EINSTEIN/NOAH BAGEL CORP.
AND
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
DATED _____________________________
DEVELOPMENT FEE
DEVELOPMENT FEE
1. DEVELOPMENT FEE. The Development Fee referred to in Section 7.A.
of this Agreement shall be FOUR MILLION FOUR HUNDRED FIFTEEN THOUSAND DOLLARS
($4,415,000). COMPANY shall credit DEVELOPER for the Development Fees
previously paid to COMPANY in the following manner: Colonial Bagels, L.P. -
$1,025,000, Great Lakes Bagels, L.P. - $1,125,000, Gulfstream Bagels, L.P. -
$990,000, Noah's Pacific, L.L.C. - $825,000 and Sunbelt Bagels, L.L.C. -
$450,000; which the parties acknowledge are in the aggregate Four Million Four
Hundred Fifteen Thousand Dollars ($4,415,000).
INITIALS:
COMPANY:
DEVELOPER:
C-1
EXHIBIT D
TO THE DEVELOPMENT AGREEMENT
BY AND BETWEEN EINSTEIN/NOAH BAGEL CORP.
AND
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
DATED ______________________
DEVELOPMENT AREA(S)
DEVELOPMENT AREA(S)
The Development Area referred to in Section 2 of this Agreement shall
consist of the aggregate of the Sub-Areas described as follows:
SUB-AREA NO. 1 - BOSTON DMA
Barnstable County, MA Nantucket County, MA
Belknap County, NH Norfolk County, MA
Cheshire County, NH Plymouth County, MA
Dukes County, MA Rockingham County, NH
Essex County, MA Strafford County, NH
Hillsborough County, NH Suffolk County, MA
Merrimack County, NH Windham County, VT
Middlesex County, MA Worcester County, MA
|
SUB-AREA NO. 2 - BURLINGTON/PLATTSBURGH DMA
Addison County, VT Grand Isle County, VT
Caledonia County, VT Lamoille County, VT
Chittenden County, VT Orange County, VT
Clinton County, NY Orleans County, VT
Essex County, NY Rutland County, VT
Essex County, VT Sullivan County, NH
Franklin County, NY Washington County, VT
Franklin County, VT Windsor County, VT
Grafton County, NH
|
SUB-AREA NO. 3 - CLEVELAND DMA
Ashland County, OH Lorain County, OH
Ashtabula County, OH Medina County, OH
Carroll County, OH Portage County, OH
Cuyahoga County, OH Richland County, OH
Erie County, OH Stark County, OH
Geauga County, OH Summit County, OH
Holmes County, OH Tuscarawas County, OH
Huron County, OH Wayne County, OH
Lake County, OH
|
SUB-AREA NO. 4 - COLUMBUS DMA
Coshocton County, OH Madison County, OH
Delaware County, OH Marion County, OH
Fairfield County, OH Morgan County, OH
Fayette County, OH Morrow County, OH
Franklin County, OH Perry County, OH
Hardin County, OH Pickaway County, OH
Hocking County, OH Pike County, OH
Knox County, OH Union County, OH
Licking County, OH
|
SUB-AREA NO. 5 - PITTSBURGH DMA
Allegheny County, PA Indiana County, PA
Armstrong County, PA Lawrence County, PA
Beaver County, PA Monongalia County, WV
Butler County, PA Preston County, WV
Clarion County, PA Venango County, PA
Fayette County, PA Washington County, PA
Forest County, PA Westmoreland County, PA
Greene County, PA
|
SUB-AREA NO. 6 - NEW YORK DMA
Bergen County, NJ Nassau County, NY
Bronx County, NJ New York County, NY
Dutchess County, NY Ocean County, NJ
Essex County, NJ Orange County, NY
Fairfield County CT Passaic County, NJ
Hudson County, NJ Pike County, PA
Hunterdon County, NJ Putnam County, NY
Kings County, NY Queens County, NY
Middlesex County, NJ Richmond County, NY
Monmouth County, NJ Rockland County, NY
Morris County, NJ Somerset County, NJ
|
SUB-AREA NO. 6 - NEW YORK DMA - CONT'D.
Suffolk County, NY Union County, NJ
Sullivan County, NY Warren County, NJ
Sussex County, NJ Westchester County, NY
Ulster County, NY
|
SUB-AREA NO. 7 - MILWAUKEE DMA
Dodge County, WI Racine County, WI
Jefferson County, WI Sheboygan County, WI
Kenosha County, WI Walworth County, WI
Milwaukee County, WI Washington County, WI
Ozaukee County, WI Waukesha County, WI
|
SUB-AREA NO. 8 - CHICAGO DMA
Cook County, IL Lake County, IL
De Kalb County, IL Lake County, IN
DuPage County, IL LaPorte County, IN
Grundy County, IL LaSalle County, IL
Jasper County, IN McHenry County, IL
Kane County, IL Newton County, IN
Kankakee County, IL Porter County, IN
Kendall County, IL Will County, IL
|
SUB-AREA NO. 9 - DETROIT DMA
Lapeer County, MI Oakland County, MI
Livingston County, MI St. Clair County, MI
Macomb County, MI Washtenaw County, MI
Monroe County, MI Wayne County, MI
|
SUB-AREA NO. 10 - MADISON DMA
Columbia County, WI Lafayette County, WI
Dane County, WI Marquette County, WI
Grant County, WI Richland County, WI
Green County, WI Rock County, WI
Iowa County, WI Sauk County, WI
Juneau County, WI
|
SUB-AREA NO. 11 - INDIANAPOLIS DMA
Bartholomew County, IN Johnson County, IN
Benton County, IN Lawrence County, IN
Blackford County, IN Madison County, IN
Boone County, IN Marion County, IN
Brown County, IN Miami County, IN
Carroll County, IN Monroe County, IN
Cass County, IN Montgomery County, IN
Clinton County, IN Morgan County, IN
Decatur County, IN Owen County, IN
Delaware County, IN Putnam County, IN
Fountain County, IN Randolph County, IN
Grant County, IN Rush County, IN
Hamilton County, IN Shelby County, IN
Hancock County, IN Tippecanoe County, IN
Hendricks County, IN Tipton County, IN
Henry County, IN Warren County, IN
Howard County, IN White County, IN
|
SUB-AREA NO. 12 - ST. LOUIS DMA
Bond County, IL Monroe County, IL
Calhoun County, IL Montgomery County, IL
Clinton County, IL Montgomery County, MO
Crawford County, MO Perry County, MO
Fayette County, IL Pike County, MO
Franklin County, MO Randolph County, IL
Gasconade County, MO St. Charles County, MO
Greene County, IL St. Clair County, IL
Iron County, MO St. Francois County, MO
Jefferson County, MO St. Louis (Independent City), MO
Jersey County, IL St. Louis County, MO
Lincoln County, MO Ste. Genevieve County, MO
Macoupin County, IL Warren County, MO
Madison County, IL Washington County, IL
Madison County, MO Washington County, MO
Marion County, IL
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SUB-AREA NO. 13 - KANSAS CITY DMA
Anderson County, KS Henry County, MO
Atchison County, KS Jackson County, MO
Bates County, MO Johnson County, KS
Brown County, KS Johnson County, MO
Carroll County, MO Lafayette County, MO
Cass County, MO Leavenworth County, KS
Cladwell County, MO Linn County, KS
Clay County, MO Linn County, MO
Clinton County, MO Livingston County, MO
Daviess County, MO Miami County, KS
Douglas County, KS Pettis County, MO
Franklin County, KS Platte County, MO
Gentry County, MO Ray County, MO
Grundy County, MO Saline County, MO
Harrison County, MO Wyandotte County, KS
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SUB-AREA NO. 14 - MINNEAPOLIS-ST. PAUL, DULUTH-SUPERIOR, LACROSSE-EAU CLAIRE DMA
Aitkin County, MN Douglas County, MN
Anoka County, MN Douglas County, WI
Ashland County, WI Dunn County, WI
Barron County, WI Eau Claire County, WI
Bayfield County, WI Gogebic County, MI
Beltrami County, MN Goodhue County, MN
Benton County, MN Grant County, MN
Big Stone County, MN Hennepin County, MN
Buffalo County, WI Houston County, MN
Burnett County, WI Hubbard County, MN
Carlton County, MN Iron County, WI
Carver County, MN Isanti County, MN
Cass County, MN Itasca County, MN
Chippewa County, MN Jackson County, MN
Chippewa County, WI Kanabec County, MN
Chisago County, MN Jackson County, WI
Cook County, MN Kandiyohi County, MN
Cottonwood County, MN Koochiching County, MN
Crawford County, WI La Crosse County, WI
Crow Wing County, MN Lac qui ParleCounty, MN
Dakota County, MN Lake County, MN
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SUB-AREA NO. 14 - MINNEAPOLIS-ST. PAUL, DULUTH-SUPERIOR,
LACROSSE-EAU CLAIRE DMA - CONT'D.
LeSueur County, MN Sherburne County, MN
Lyon County, MN Sibley County, MN
McLeod County, MN St. Croix County, WI
Meeker County, MN St. Louis County, MN
Mille Lacs County, MN Stearns County, MN
Monroe County, WI Steele County, MN
Morrison County, MN Stevens County, MN
Nicollet County, MN Swift County, MN
Pepin County, WI Todd County, MN
Pierce County, WI Tempealeau County, WI
Pine County, MN Traverse County, MN
Polk County, WI Vernon County, WI
Pope County, MN Wabasha County, MN
Ramsey County, MN Wadena County, MN
Redwood County, MN Waseca County, MN
Renville County, MN Washburn County, WI
Rice County, MN Washington County, MN
Rusk County, WI Winona County, MN
Sawyer County, WI Wright County, MN
Scott County, MN Yellow Medicine County, MN
|
SUB-AREA NO. 15 - AUSTIN DMA
Bastrop County, TX Lee County, TX
Blanco County, TX Llano County, TX
Burnet County, TX Mason County, TX
Caldwell County, TX Travis County, TX
Fayette County, TX Williamson County, TX
Hays County, TX
|
SUB-AREA NO. 16 - DALLAS DMA
Anderson County, TX Dallas County, TX
Bosque County, TX Delta County, TX
Collin County, TX Denton County, TX
Comanche County, TX Ellis County, TX
Cooke County, TX Erath County, TX
|
SUB-AREA NO. 16 - DALLAS DMA - CONT'D.
Fanin County, TX Lamar County, TX
Freestone County, TX Navarro County, TX
Hamilton County, TX Palo Pinto County, TX
Henderson County, TX Parker County, TX
Hill County, TX Rains County, TX
Hood County, TX Rockwall County, TX
Hopkins County, TX Somervell County, TX
Hunt County, TX Tarrant County, TX
Jack County, TX Van Zandt County, TX
Johnson County, TX Wise County, TX
Kaufman County, TX
|
SUB-AREA NO. 17 - HOUSTON DMA
Austin County, TX Liberty County, TX
Brazoria County, TX Matagorda County, TX
Calhoun County, TX Montgomery County, TX
Chambers County, TX Polk County, TX
Colorado County, TX San Jacinto County, TX
Fort Bend County, TX Walker County, TX
Galveston County, TX Waller County, TX
Grimes County, TX Washington County, TX
Harris County, TX Wharton County, TX
Jackson County, TX
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SUB-AREA NO. 18 - FT. MYERS/NAPLES DMA
Charlotte County, FL Glades County, FL
Collier County, FL Hendry County, FL
De Soto County, FL Lee County, FL
|
SUB-AREA NO. 19 - MIAMI/FT. LAUDERDALE DMA
Broward County, FL
Dade County, FL
Monroe County, FL
SUB-AREA NO. 20 - ORLANDO/DAYTONA BEACH/MELBOURNE DMA
Brevard County, FL Osceola County, FL
Flagler County, FL Seminole County, FL
Lake County, FL Sumter County, FL
Marion County, FL Volusia County, FL
Orange County, FL
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SUB-AREA NO. 21 - TAMPA/ST. PETERSBURG/SARASOTA DMA
Citrus County, FL Manatee County, FL
Hardee County, FL Pasco County, FL
Hernando County, FL Pinellas County, FL
Highlands County, FL Polk County, FL
Hillsborough County, FL Sarasota County, FL
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SUB-AREA NO. 22 - WEST PALM BEACH/FT. PIERCE DMA
Indian River County, FL Palm Beach County, FL
Martin County, FL St. Lucie County, FL
Okeechobee County, FL
|
SUB-AREA NO. 23 - ATLANTA DMA
Banks County, GA Douglas County, GA
Barrow County, GA Fayette County, GA
Bartow County, GA Floyd County, GA
Butts County, GA Forsyth County, GA
Carroll County, GA Fulton County, GA
Chattooga County, GA Gilmer County, GA
Cherokee County, GA Gordon County, GA
Clarke County, GA Greene County, GA
Clay County, GA Gwinnett County, GA
Clayton County, GA Habersham County, GA
Cleburne County, AL Hall County, GA
Cobb County, GA Haralson County, GA
Coweta County, GA Heard County, GA
Dawson County, GA Henry County, GA
DeKalb County, GA Jackson County, GA
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SUB-AREA NO. 23 - ATLANTA DMA - CONT'D.
Jasper County, GA Putnam County, GA
Lamar County, GA Rabun County, GA
Lumpkin County, GA Randolph County, AL
Meriwether County, GA Rockdale County, GA
Morgan County, GA Spalding County, GA
Newton County, GA Towns County, GA
Oconee County, GA Troup County, GA
Oglethorpe County, GA Union County, GA
Paulding County, GA Upson County, GA
Pickens County, GA Walton County, GA
Pike County, GA White County, GA
Polk County, GA
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SUB-AREA NO. 24 - CHARLOTTE DMA
Alexander County, NC Gaston County, NC
Anson County, NC Iredell County, NC
Ashe County, NC Lancaster County, SC
Avery County, NC Lincoln County, NC
Burke County, NC Mecklenberg County, NC
Cabarrus County, NC Richmond County, NC
Caldwell County, NC Rowan County, NC
Catawba County, NC Stanly County, NC
Chester County, SC Union County, NC
Chesterfield County, SC Watauga County, NC
Cleveland County, NC York County, SC
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SUB-AREA NO. 25 - BALTIMORE DMA
Anne Arundel County, MD Dorchester County, MD
Baltimore (Ind. City), MD Harford County, MD
Baltimore County, MD Howard County, MD
Caroline County, MD Kent County, MD
Carroll County, MD Queen Anne's County, MD
Cecil County, MD Talbot County, MD
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SUB-AREA NO. 26 - WASHINGTON, DC
Alexandria (City of), VA Jefferson County, WV
Allegany County, PA King George County, VA
Arlington County, VA Loudoun County, VA
Berkeley County, WV Mineral County, WV
Bowie (City of), MD Montgomery County, MD
Calvert County, MD Morgan County, WV
Charles County, MD Page County, VA
Clarke County, VA Prince George's County, MD
Culpepper County, VA Prince William County, VA
District of Columbia Rappahannock County, VA
Fairfax County, VA Shenandoah County, VA
Fauquier County, VA Spotsylvania County, VA
Franklin County, PA St. Mary's County, MD
Frederick County, MD Stafford County, VA
Frederick County, VA Warren County, VA
Gaithersburg (City of), MD Washington County, MD
Hampshire County, WV Westmoreland County, VA
Hardy County, WV
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SUB-AREA NO. 27 - RICHMOND DMA
Amelia County, VA Lancaster County, VA
Augusta County, VA Louisa County, VA
Brunswick County, VA Lunenburg County, VA
Buckingham County, VA Madison County, VA
Caroline County, VA Middlesex County, VA
Charles City County, VA Nelson County, VA
Chesterfield County, VA New Kent County, VA
Cumberland County, VA Northumberland County, VA
Dinwiddie County, VA Nottoway County, VA
Essex County, VA Orange County, VA
Fluvanna County, VA Powhatan County, VA
Goochland County, VA Prince Edward County, VA
Greensville County, VA Prince George County, VA
Hanover County, VA Richmond County, VA
Henrico County, VA Richmond (Ind. City), VA
King & Queen County, VA Sussex County, VA
King William County, VA
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SUB-AREA NO. 28 - PHILADELPHIA DMA
Atlantic County, NJ Gloucester County, NJ
Berks County, PA Kent County, DE
Bucks County, PA Lehigh County, PA
Burlington County, NJ Mercer County, NJ
Camden County, NJ Montgomery County, PA
Cape May County, NJ New Castle County, DE
Chester County, PA Northampton County, PA
Cumberland County, NJ Philadelphia County, PA
Delaware County, PA Salem County, NJ
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SUB-AREA NO. 29 - LOS ANGELES DMA
Inyo County, CA San Bernardino County, CA
Kern County, CA San Luis Obispo County, CA
Los Angeles County, CA Santa Barbara County, CA
Orange County, CA Ventura County, CA
Riverside County, CA
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SUB-AREA NO. 30 - PORTLAND DMA
Baker County, OR Linn County, OR
Benton County, OR Marion County, OR
Clackamas County, OR Multnomah County, OR
Clark County WA Polk County, OR
Clatsop County, OR Sherman County, OR
Columbia County, OR Skamania County, WA
Cowlitz County, WA Tillamook County, OR
Crook County, OR Union County, OR
Gilliam County, OR Wahkiakum County, WA
Harney County, OR Hood Wasco County, OR
River County, OR Washington County, OR
Jefferson County, OR Wheeler County, OR
Klickitat County, WA Yamhill County, OR
Lincoln County, OR
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SUB-AREA NO. 31 - SEATTLE/TACOMA DMA
Chelan County, WA Mason County, WA
Clallam County, WA Pacific County, WA
Grays Harbor County, WA Pierce County, WA
Island County, WA San Juan County, WA
Jefferson County, WA Skagit County, WA
King County, WA Snohomish County, WA
Kitsap County, WA Thurston County, WA
Lewis County, WA Whatcom County, WA
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SUB-AREA NO. 32 - SACRAMENTO/STOCKTON/MODESTO DMA
Amador County, CA San Joaquin County, CA
Calaveras County, CA Sierra County, CA
Colusa County, CA Solano County, CA
El Dorado County, CA Stanislaus County, CA
Nevada County, CA Sutter County, CA
Placer County, CA Tuolumne County, CA
Plumas County, CA Yolo County, CA
Sacramento County, CA Yuba County, CA
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SUB-AREA NO. 33 - SAN FRANCISCO/OAKLAND/SAN JOSE DMA
Alameda County, CA San Benito County, CA
Contra Costa County, CA San Francisco County, CA
Lake County, CA San Mateo County, CA
Marin County, CA Santa Clara County, CA
Mendocino County, CA Santa Cruz County, CA
Monterey County, CA Sonoma County, CA
Napa County, CA
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SUB-AREA NO. 34 - FRESNO/VISALIA DMA
Fresno County, CA Mariposa County, CA
Kings County, CA Merced County, CA
Madera County, CA Tulare County, CA
|
SUB-AREA NO. 35 - PALM SPRINGS DMA
Riverside County, CA (Central portion)
SUB-AREA NO. 36 - SAN DIEGO DMA
SAN DIEGO COUNTY, CA
SUB-AREA NO. 37 - PHOENIX
COCONINO COUNTY, AZ MARICOPA COUNTY, AZ
GILA COUNTY, AZ MOHAVE COUNTY, AZ
GRAHAM COUNTY, AZ NAVAJO COUNTY, AZ
GREENLEE COUNTY, AZ PINAL COUNTY, AZ
LA PAZ COUNTY, AZ YAVAPAI COUNTY, AZ
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SUB-AREA NO. 38 - TUCSON
Cochise County, AZ Santa Cruz County, AZ
Pima County, AZ
SUB-AREA NO. 39 - ALBUQUERQUE DMA
Apache County, AZ Los Alamos County, NM
Archuleta County, CO Luna County, NM
Bernalillo County, NM McKinley County, NM
Catron County, NM Montequma County, CO
Chaves County, NM Mora County, NM
Cibola County, NM Otero County, NM
Colfax County, NM Rio Arriba County, NM
Conejos County, CO Roosevelt County, NM
De Baca County, NM Sandoval County, NM
Eddy County, NM San Juan County, NM
Grant County, NM San Miguel County, NM
Guadalupe County, NM Santa Fe County, NM
Harding County, NM Sierra County, NM
Hidalgo County, NM Socorra County, NM
Lincoln County, NM Taos County, NM
La Plata County, CO Torrance County, NM
Lea County, NM Valencia County, NM
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SUB-AREA NO. 40 - DENVER
Adams County, CO Lake County, CO
Alamosa County, CO Lander County, NV
Arapahoe County, CO Larimer County, CO
Boulder County, CO Lincoln County, CO
Box Butte County, NE Logan County, CO
Campbell County, WY Mineral County, CO
Chaffee County, CO Moffat County, CO
Clear Creek County, CO Morgan County, CO
Costilla County, CO Park County, CO
Dawes County, NE Phillips County, CO
Douglas County, CO Pitkin County, CO
Eagle County, CO Prowers County, CO
Elbert County, CO Rio Blanco County, CO
Eureka County, NV Rio Grande County, CO
Fallon County, MT Routt County, CO
Garfield County, CO Saguache County, CO
Gilpin County, CO San Juan County, CO
Grand County, CO Sedgewick County, CO
Gunnison County, CO Summit County, CO
Hinsdale County, CO Washington County, CO
Jackson County, CO Weld County, CO
Jefferson County, CO Yuma County, CO
Kit Carson County, CO
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SUB-AREA NO. 41 - COLORADO SPRINGS
Baca County, CO Huerfano County, CO
Bent County, CO Kiowa County, CO
Cheyenne County, CO Las Animas County, CO
Crowley County, CO Otero County, CO
Custer County, CO Pueblo County, CO
El Paso County, CO Teller County, CO
Fremont County, CO
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SUB-AREA NO. 42 - LAS VEGAS
Clark County, NV Lincoln County, NV Nye County, NV
SUB-AREA NO. 43 - SALT LAKE CITY
Bear Lake County, ID Oneida County, ID
Beaver County, UT Piute County, UT
Box Elder County, UT Rich County, UT
Cache County, UT Salt Lake County, UT
Carbon County, UT San Juan County, UT
Caribou County, ID Sanpete County, UT
Daggett County, UT Sevier County, UT
Davis County, UT Sublette County, WY
Dolores County, CO Summit County, UT
Duchesue County, UT Sweetwater County, WY
Elko County, NV Teton County, WY
Emery County, UT Tooele County, UT
Franklin County, ID Uinta County, WY
Garfield County, UT Uintah County, UT
Grand County, UT Utah County, UT
Iron County, UT Wasatch County, UT
Juab County, UT Washington County, UT
Kane County, UT Wayne County, UT
Millard County, UT Weber County, UT
Morgan County, UT White Pine County, NV
INITIALS:
COMPANY:
-------------
DEVELOPER:
-----------
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EXHIBIT E
TO THE DEVELOPMENT AGREEMENT
BY AND BETWEEN EINSTEIN/NOAH BAGEL CORP.
AND
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
DATED _________________________
DEVELOPMENT SCHEDULE
DEVELOPMENT SCHEDULE
1. STORE DEVELOPMENT. DEVELOPER agrees to develop a total of EIGHT
HUNDRED EIGHTY-THREE (883) Stores in accordance with the terms of this
Agreement.
1. DEVELOPMENT OBLIGATIONS. DEVELOPER agrees to have the number of
Stores specified below open during each specified "Quarter" shown below and to
have open and in operation in each Quarter indicated, the cumulative numbers of
Stores shown below:
DEVELOPMENT QUOTA/ DEVELOPMENT QUOTA/
QUARTER QUARTER CUMULATIVE
------- ------------------ ------------------
12/01/97 - 12/28/97 20 20
12/29/97 - 04/19/98 30 50
04/20/98 - 07/12/98 35 85
07/13/98 - 10/04/98 55 140
10/05/98 - 12/27/98 55 195
12/28/98 - 04/18/99 40 235
04/19/99 - 07/11/99 45 280
07/12/99 - 10/03/99 45 325
10/04/99 - 12/26/99 45 370
12/27/99 - 04/16/00 40 410
04/17/00 - 07/09/00 45 455
07/10/00 - 10/01/00 45 500
10/02/00 - 12/31/00 45 545
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E-1
DEVELOPMENT QUOTA/ DEVELOPMENT QUOTA/
QUARTER QUARTER CUMULATIVE
------- ------------------ ------------------
01/01/01 - 04/22/01 40 585
04/23/01 - 07/15/01 45 630
07/16/01 - 10/07/01 45 675
10/08/01 - 12/30/01 45 720
12/31/01 - 04/21/02 40 760
04/22/02 - 07/14/02 40 800
07/15/02 - 10/06/02 40 840
10/07/02 - 12/29/02 43 883
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TOTAL DEVELOPMENT QUOTA FOR THE
DEVELOPMENT AREA (THE "TOTAL
DEVELOPMENT QUOTA"):
883
INITIALS:
COMPANY:
DEVELOPER:
E-2
EXHIBIT F
TO THE DEVELOPMENT AGREEMENT
BY AND BETWEEN EINSTEIN/NOAH BAGEL CORP.
AND
EINSTEIN/NOAH BAGEL PARTNERS, L.P.
DATED ________________
FORM LICENSE AGREEMENT
EINSTEIN/NOAH BAGEL CORP.
LICENSE AGREEMENT
LICENSE OWNER
TABLE OF CONTENTS
SECTION PAGE
1. INTRODUCTION AND CERTAIN DEFINITIONS................................................................... 1
A. INTRODUCTION.................................................................................. 1
B. DEFINITIONS................................................................................... 2
2. GRANT OF LICENSE....................................................................................... 8
A. GRANT OF LICENSE; TERM; PRINCIPAL OWNERS' GUARANTY............................................ 8
B. TERRITORIAL RIGHTS............................................................................ 9
C. RIGHTS RETAINED BY COMPANY.................................................................... 9
D. LICENSE OWNER'S OPTION TO PURCHASE CONVERSION SITES........................................... 10
3. OTHER DISTRIBUTION METHODS............................................................................. 11
A. SPECIAL DISTRIBUTION ARRANGEMENTS............................................................. 11
B. DELIVERY SERVICE.............................................................................. 12
C. CATERING SERVICE.............................................................................. 13
4. DEVELOPMENT AND OPENING OF THE STORE................................................................... 14
A. SITE SELECTION AND LEASE...................................................................... 14
B. STORE DESIGN SPECIFICATIONS AND CONSTRUCTION PLANS............................................ 14
C. DEVELOPMENT OF THE STORE...................................................................... 14
D. EQUIPMENT, FIXTURES, FURNISHINGS AND SIGNS.................................................... 15
E. COMPUTER SYSTEM............................................................................... 15
F. STORE OPENING................................................................................. 16
G. GRAND OPENING PROGRAM......................................................................... 16
H. RELOCATION OF THE STORE....................................................................... 17
I. FINANCING PLAN................................................................................ 17
5. TRAINING AND GUIDANCE.................................................................................. 18
A. TRAINING...................................................................................... 18
B. GUIDANCE AND ASSISTANCE....................................................................... 18
C. STORE MANUALS................................................................................. 19
6. MARKS.................................................................................................. 20
A. GOODWILL AND OWNERSHIP OF MARKS............................................................... 20
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SECTION PAGE
B. LIMITATIONS ON LICENSE OWNER'S USE OF MARKS................................................... 20
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS...................................................... 20
D. DISCONTINUANCE OF USE OF MARKS................................................................ 21
E. INDEMNIFICATION OF LICENSE OWNER.............................................................. 21
7. COPYRIGHTS............................................................................................. 22
A. OWNERSHIP OF COPYRIGHTED WORKS................................................................ 22
B. LIMITATION ON LICENSE OWNER'S USE OF COPYRIGHTED WORKS........................................ 22
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS...................................................... 23
D. DISCONTINUANCE OF USE OF COPYRIGHTED WORKS.................................................... 23
8. LICENSED PROGRAM AND COMPUTER SYSTEM................................................................... 23
A. GRANT OF SOFTWARE LICENSE..................................................................... 23
B. SOFTWARE LICENSE FEE.......................................................................... 26
C. SOFTWARE SUPPORT SERVICE...................................................................... 26
D. SOFTWARE SUPPORT SERVICE FEE.................................................................. 26
E. MODIFICATION, ENHANCEMENT,
AND REPLACEMENT OF COMPUTER SYSTEM,
LICENSED PROGRAM AND SPECIFIED SOFTWARE....................................................... 26
F. WARRANTIES AND LIMITATION OF LIABILITY........................................................ 27
G. SUBCOMPONENT LICENSES AND THIRD-PARTY LICENSES................................................ 27
9. CONFIDENTIAL INFORMATION............................................................................... 28
10. EXCLUSIVE RELATIONSHIP................................................................................. 31
11. FEES................................................................................................... 32
A. INITIAL LICENSE FEE........................................................................... 32
B. ROYALTY FEE................................................................................... 32
C. DEFINITION OF "ROYALTY BASE REVENUE".......................................................... 33
D. INTEREST ON LATE PAYMENTS..................................................................... 33
E. APPLICATION OF PAYMENTS....................................................................... 33
F. ELECTRONIC FUNDS TRANSFER..................................................................... 33
12. STORE IMAGE AND OPERATION.............................................................................. 34
A. CONDITION AND APPEARANCE OF THE STORE......................................................... 34
B. STORE MENU AND SERVICES....................................................................... 36
C. APPROVED PRODUCTS, DISTRIBUTORS AND SUPPLIERS................................................. 37
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ii
SECTION PAGE
D. SPECIFICATIONS, STANDARDS AND PROCEDURES...................................................... 38
E. COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES.............................................. 40
F. MANAGEMENT AND PERSONNEL OF THE STORE......................................................... 41
G. INSURANCE..................................................................................... 41
H. CREDIT CARDS AND OTHER METHODS OF PAYMENT..................................................... 42
13. ADVERTISING............................................................................................ 43
A. MARKETING FUND................................................................................ 43
B. LOCAL ADVERTISING FUND........................................................................ 45
C. ADVERTISING BY LICENSE OWNER.................................................................. 47
14. ACCOUNTING, REPORTS AND FINANCIAL STATEMENTS........................................................... 48
15. INSPECTIONS AND AUDITS................................................................................. 49
A. COMPANY'S RIGHT TO INSPECT THE STORE.......................................................... 49
B. COMPANY'S RIGHT TO AUDIT...................................................................... 50
16. TRANSFER............................................................................................... 51
A. BY COMPANY.................................................................................... 51
B. NONTRANSFERABILITY OF CERTAIN RIGHTS.......................................................... 51
C. COMPANY'S RIGHT TO APPROVE TRANSFERS.......................................................... 52
D. CONDITIONS FOR APPROVAL OF TRANSFERS.......................................................... 53
E. DEATH OR INCAPACITY OF LICENSE OWNER.......................................................... 56
F. PUBLIC OR PRIVATE OFFERING.................................................................... 56
G. EFFECT OF CONSENT TO TRANSFER................................................................. 58
H. COMPANY'S RIGHT OF FIRST REFUSAL.............................................................. 58
I. OWNERSHIP STRUCTURE........................................................................... 59
J. DELEGATION BY COMPANY......................................................................... 59
K. PERMITTED TRANSFERS........................................................................... 59
17. GRANT OF SUCCESSOR LICENSES............................................................................ 60
A. LICENSE OWNER'S RIGHT TO A SUCCESSOR LICENSE.................................................. 60
B. NOTICES....................................................................................... 61
C. SUCCESSOR LICENSE AGREEMENT/RELEASES.......................................................... 61
18. TERMINATION OF THE LICENSE............................................................................. 62
A. BY LICENSE OWNER.............................................................................. 62
B. BY COMPANY.................................................................................... 62
C. TERMINATION OF CERTAIN RIGHTS OF LICENSE OWNER................................................ 65
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iii
SECTION PAGE
19. RIGHTS AND OBLIGATIONS OF COMPANY AND LICENSE
OWNER UPON TERMINATION OR EXPIRATION OF THE AGREEMENT.................................................. 66
A. PAYMENT OF AMOUNTS OWED TO COMPANY............................................................ 66
B. MARKS, TRADE DRESS, AND COPYRIGHTED WORKS..................................................... 66
C. CONFIDENTIAL INFORMATION...................................................................... 67
D. COVENANT NOT TO COMPETE....................................................................... 68
E. CONTINUING OBLIGATIONS........................................................................ 69
F. COMPANY'S RIGHT TO PURCHASE ASSETS OF THE STORE............................................... 69
20. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION............................................................ 71
A. INDEPENDENT CONTRACTORS....................................................................... 71
B. NO LIABILITY FOR ACTS OF OTHER PARTY.......................................................... 71
C. TAXES......................................................................................... 71
D. INDEMNIFICATION............................................................................... 71
21. ENFORCEMENT............................................................................................ 72
A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS............................................. 72
B. WAIVER OF OBLIGATIONS......................................................................... 73
C. INJUNCTIVE RELIEF............................................................................. 74
D. RIGHTS OF PARTIES ARE CUMULATIVE.............................................................. 74
E. COSTS AND LEGAL FEES.......................................................................... 74
F. GOVERNING LAW................................................................................. 75
G. CONSENT TO JURISDICTION/CHOICE OF FORUM....................................................... 75
H. LIMITATIONS OF CLAIMS......................................................................... 75
I. WAIVER OF PUNITIVE DAMAGES.................................................................... 75
J. WAIVER OF JURY TRIAL.......................................................................... 76
K. BINDING EFFECT................................................................................ 76
L. CONSTRUCTION.................................................................................. 76
M. REASONABLENESS; APPROVALS..................................................................... 76
22. NOTICES AND PAYMENTS................................................................................... 76
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iv
EXHIBITS AND ATTACHMENTS
EXHIBIT A - CATERING RIDER
EXHIBIT B - DELIVERY RIDER
EXHIBIT C - LICENSE OWNER ACKNOWLEDGMENTS AND
REPRESENTATIONS STATEMENT
EXHIBIT D - PERMITTED COMPETITIVE BUSINESSES, FORM
DEVELOPMENT AGREEMENT (FOR SINGLE-STORE
FRANCHISES) AND IDENTITY OF DEVELOPER AND DATE
OF DEVELOPMENT AGREEMENT
EXHIBIT E - PRINCIPAL OWNERS, OTHER OWNERS, DESIGNATED
PRINCIPAL OWNERS, STORE MANAGER, SUPERVISING
OWNERS AND INITIAL CAPITALIZATION
EXHIBIT F - SITE AND TERRITORY
EXHIBIT G - GUARANTY AND ASSUMPTION OF LICENSE OWNER'S OBLIGATIONS
EXHIBIT H - CONFIDENTIALITY AND NON-COMPETE AGREEMENT
EXHIBIT I - AUTHORIZATION AGREEMENT FOR PREARRANGED PAYMENTS
(DIRECT DEBITS)
EXHIBIT J - COLLATERAL ASSIGNMENT OF TELEPHONE NUMBERS AND LISTINGS
EXHIBIT K - PRINCIPAL MARKS TO BE USED BY LICENSE OWNER
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v
EINSTEIN/NOAH BAGEL CORP.
LICENSE AGREEMENT
THIS AGREEMENT is made and entered into this day of , (the "EFFECTIVE
DATE"), by and between EINSTEIN/NOAH BAGEL CORP., a Delaware corporation
("COMPANY"), and LICENSE OWNER (as defined below).
LICENSE OWNER":
a
Principal Address:
1. INTRODUCTION AND CERTAIN DEFINITIONS
1.A. INTRODUCTION
COMPANY and its Affiliates (as defined below) have developed and may
continue to develop methods of operating a number of branded retail food
service businesses, each with its own concept and operated under its own system
and marks referred to in this Agreement as a "UNIT" (defined below), which
feature Products (defined below) for carry-out and on-premises dining. In
addition to carry-out and on-premises dining, COMPANY may, in its sole
discretion, offer to LICENSE OWNER the right to offer Delivery Service (defined
below); or Catering Service (defined below) or to operate Special Distribution
Arrangements (defined below) in connection with the UNIT. UNITS utilize the
Marks (defined below) and operate at locations that feature distinctive food
service formats and Trade Dress (defined below) and utilize distinctive
business formats, specifications, employee selection and training programs,
signs, equipment, layouts, systems, recipes, methods, procedures, software,
designs and marketing and advertising standards and formats, all of which
COMPANY may modify from time to time in its sole discretion (the "System").
COMPANY operates, and grants licenses to certain qualified parties to own and
operate UNITS using the System and the Marks.
LICENSE OWNER has requested that COMPANY grant it a license to own and
operate a UNIT at the Site (defined below) using the branded concept, Principal
Marks (defined below) and System described in Exhibit K (a "Store"). LICENSE
OWNER's request and the Site have been approved by COMPANY in reliance upon all
of the representations made in LICENSE OWNER'S application, in LICENSE OWNER's
Site Approval Package (as defined in the Development Agreement), during the
application process and in the License Owner Acknowledgments and
Representations Statement, a copy of which is attached hereto as Exhibit C,
which shall be executed by LICENSE OWNER concurrently with this Agreement.
Pursuant to the terms of the Development Agreement (defined below)
COMPANY has granted to LICENSE OWNER (referred to in the Development Agreement
as "DEVELOPER") the right to acquire the license to own and operate one (1) or
more Stores.
1.B. DEFINITIONS
For purposes of this Agreement, the terms listed below have the
meanings that follow them. Other terms used in this Agreement are defined in
the context in which they occur.
"ACCOUNTING PERIOD" - One of thirteen periods of four consecutive
weeks in each fiscal year of COMPANY that is designated by COMPANY as an
accounting period of COMPANY.
"AFFILIATE" - Any person or legal entity that directly or indirectly
owns or controls COMPANY, that is directly or indirectly owned or controlled by
COMPANY, or that is under common control with COMPANY. For purposes of this
definition, "control" means the power to direct or cause the direction of the
management, policies and operation of an entity.
"BAGEL STORE" - A food service business, including a UNIT, which
derives a significant portion of its revenue from the sale of bagels and/or
bagel-related products or from any other product or service which is or
hereafter becomes a source of a significant portion of the revenue of any UNIT.
"CATERING AREA" - The geographic area in which COMPANY, in its sole
discretion, authorizes LICENSE OWNER to provide Catering Service pursuant to a
Catering Rider, which area may be the same as, smaller than, larger than or
different from the Territory (defined below).
"CATERING RIDER" - The form of rider to a License Agreement (as
defined in the Development Agreement) used by COMPANY from time to time to
authorize in its sole discretion a license owner of a UNIT to offer Catering
Service (defined below) within the applicable Catering Area. The current form
of COMPANY's Catering Rider is attached hereto as Exhibit A.
"CATERING SERVICE" - The delivery of Products prepared at a UNIT or a
separate facility approved by COMPANY in writing (such approved facility is
referred to herein as a "Catering Facility") to customers in the Catering Area
pursuant to COMPANY's standards and specifications for the provision of such
service, which COMPANY may change from time to time in its sole discretion,
where
(1) such Products are intended to serve fifteen (15) or more
persons, or
(2) in addition to the delivery of Products, LICENSE OWNER
provides ancillary services to a customer at a location within the
Catering Area, including, by way of example and without limitation,
the setting up for serving or distribution of Products.
"COMMISSARY" - A food preparation facility operated by LICENSE OWNER
pursuant to
2
this Agreement that:
(1) procures and receives Products, ingredients and materials
used in the preparation and packaging of Products, and other materials
and supplies used in the operation of UNITS;
(2) prepares and packages Products in accordance with
recipes, methods, procedures, standards and specifications established
by COMPANY, in its sole discretion, from time to time; and
(3) distributes to UNITS Products and other materials and
supplies used in the operation of UNITS.
"COMPETITIVE BUSINESS" - A business or enterprise, other than a UNIT
or Commissary, that:
(1) offers food and/or beverage products at wholesale or
retail, which are the same as or similar to the Products through:
(a) on-premises dining;
(b) carry-out;
(c) delivery service;
(d) catering service; or
(e) other distribution channels; similar to those used
by COMPANY; or
(2) grants or has granted licenses or franchises or
establishes or has established joint ventures, for the development
and/or operation of one or more businesses or enterprises described in
the foregoing clause (1); provided, however, that the term
"Competitive Business" shall not include:
(a) any Boston Market restaurant operated pursuant to
a valid franchise agreement or license agreement
with Boston Chicken, Inc. or its successors; or
(b) any business or enterprise that derives less than
10% of its revenue from the sale of (i) bagels
and/or bagel related products (including but not
limited to cream cheese and other spreads, bagel
sandwiches and bagel chips) or (ii) any other
product which accounts for 15% or more of the
revenue of any UNIT owned or
3
operated by COMPANY or a franchisee or a licensee
of COMPANY.
"COMPUTER SYSTEM" - Those brands, types, makes, and/or models of
communications and computer systems and hardware specified or required by
COMPANY for use by, between, or among UNITS, including, but not limited to:
(1) back office and point of sale systems, data, audio,
video, and voice storage, retrieval, and transmission systems for use
at the Store, between or among UNITS, and between and among the Store
and COMPANY and/or LICENSE OWNER;
(2) security systems;
(3) printers; and
(4) archival and back-up systems.
"CONTROLLING INTEREST" - If LICENSE OWNER is a:
(1) corporation, such number of the voting shares of LICENSE
OWNER or such other rights as (a) shall permit voting control of
LICENSE OWNER on any issue and (b) shall prevent any other person,
group, combination, or entity from blocking voting control on any
issue or exercising any veto power; and
(2) general partnership, a managing partnership interest,
such percentage of the general partnership interests in LICENSE OWNER
or such other rights as (a) shall permit determination of the outcome
on any issue and (b) shall prevent any other person, group,
combination, or entity from blocking voting control on any issue or
exercising any veto power;
(3) limited partnership, a general partnership interest, or
such percentage of limited partnership interests or such other rights
as shall permit the replacement or removal of any general partner; and
(4) limited liability company, such percentage of the
membership interests of LICENSE OWNER or such other rights as (a)
shall permit voting control of LICENSE OWNER on any issue and (b)
shall prevent any other person, group, combination or entity from
blocking voting control on any issue or exercising any veto power.
"DELIVERY AREA" - The geographic area in which COMPANY, in its sole
discretion, authorizes LICENSE OWNER to provide Delivery Service (defined
below) pursuant to a Delivery Rider (defined below), which area may be the same
as, smaller than, larger than or
4
different from the Territory (defined below).
"DELIVERY RIDER" - The form of rider to a License Agreement used by
COMPANY from time to time to authorize or require in its sole discretion a
license owner of a UNIT to offer Delivery Service within the applicable
Delivery Area. The current form of COMPANY's Delivery Rider is attached hereto
as Exhibit B.
"DELIVERY SERVICE" - The delivery of Products prepared at a UNIT or a
separate delivery facility approved by COMPANY (such approved facility is
referred to herein as a "Delivery Facility") to customers in the Delivery Area
pursuant to COMPANY's standards and specifications for the provision of such
service, which COMPANY may change from time to time in its sole discretion,
where
(1) such Products are intended to serve fewer than fifteen
(15) persons, and
(2) such service involves the provision of no services other
than the delivery of Products to a customer at a particular location
within the Delivery Area.
"DEVELOPMENT AGREEMENT" - The Einstein/Noah Bagel Corp. Amended and
Restated Development Agreement executed by COMPANY and LICENSE OWNER, as
Developer, dated as of the date stated in Exhibit D attached hereto, pursuant
to which LICENSE OWNER was granted the right to develop one (1) or more UNITS
in a geographic area in which the Store is located.
"IMMEDIATE FAMILY" - (1) The spouse of a person; and (2) the natural
and adoptive parents and natural and adopted children and siblings of such
person and their spouses; and (3) the natural and adoptive parents and natural
and adopted children and siblings of the spouse of such person; and (4) any
other member of the household of such person; provided, in the case of natural
and adopted children and siblings and their spouses and the parents, children
and siblings of spouses, that such person received or had access to
Confidential Information, including as an employee, supplier, officer,
director, stockholder or agent of LICENSE OWNER or any other operator of a
UNIT.
"LICENSED PROGRAM" - The computer software programs developed by or
for COMPANY and/or designated by COMPANY from time to time as specified or
required in connection with utilization of the Computer System, which may
include, without limitation, COMPANY's point-of-sale, bookkeeping, inventory,
training, marketing, employee selection, operations and financial information,
collection and retrieval systems (including COMPANY's general ledger system
utilizing the standard chart of accounts prescribed by COMPANY from time to
time) for use in connection with the operation of UNITS or franchise or license
owners' and developers' businesses, including any updates, supplements,
modifications or enhancements thereto made from time to time, all related
documentation, the tangible media upon which such programs are recorded, and
the database file structure thereof, but excluding any data or
5
databases owned or compiled by COMPANY or its Affiliates or their licensors for
use with the Licensed Program or otherwise or any data generated by the use of
the Licensed Program.
"MARKETING AREA" - The geographic area in which the Store and other
UNITS (regardless of the principal Mark under which the UNITS operate) are
located which COMPANY designates from time to time in its sole discretion as a
distinct area for marketing purposes. In making such determination, COMPANY may
take into consideration:
(1) information obtained from Arbitron, A. C. Nielsen Co. or
a comparable source; or
(2) penetration of various forms of media such as radio,
cable television, broadcast television, local and regional newspapers
and similar media; or
(3) demographic characteristics (for example, urban versus
suburban); or
(4) political, man-made, or natural boundaries (for example,
city, county or other political boundaries, expressways, railroads or
rivers); or
(5) other reasonable factors, including, without limitation,
any combination of the foregoing.
"MARKS" - The trademarks, service marks, logos and other commercial
symbols which COMPANY uses and authorizes developers and franchise or license
owners to use to identify the services and/or products offered by UNITS, and
the Trade Dress (defined below); provided that such trademarks, service marks,
logos, other commercial symbols, and the Trade Dress are subject to
modification and discontinuance at COMPANY's sole discretion and may include
additional or substitute trademarks, service marks, logos, commercial symbols
and trade dress as provided in this Agreement. The Marks include the Principal
Marks which LICENSE OWNER is authorized to use in the operation of the Store.
"OWNERSHIP INTERESTS" - In relation to a: (i) corporation, the record
or beneficial ownership of one or more shares in the corporation; (ii)
partnership, the record or beneficial ownership of a general or limited
partnership interest; (iii) limited liability company, the record or beneficial
ownership of a membership interest in the limited liability company; or (iv)
trust, the ownership of a beneficial interest of such trust.
"OWNER" - Each person or entity holding direct or indirect, record or
beneficial Ownership Interests in LICENSE OWNER and each person who has other
direct or indirect property rights in LICENSE OWNER, this Agreement, or the
Store.
"PERMITTED COMPETITIVE BUSINESS" - A business which constitutes a
Competitive Business and is disclosed in Exhibit D to this Agreement, provided
that such business (1) was not
6
on the date of the Development Agreement and does not at any time thereafter
become a Bagel Store, and (2) does not offer bagels or bagel-related products
on its menu, provided that if such business is a franchised or licensed
business of a franchisor or licensor which, pursuant to an agreement which is
executed prior to the date of the Development Agreement and under which, after
the date of the Development Agreement, the franchisor or licensor specifies
that such business offer bagels or bagel-related products as a required menu
item, it shall be deemed a Permitted Competitive Business so long as it does
not become a Bagel Store.
"PRINCIPAL MARKS" - The Marks COMPANY authorizes LICENSE OWNER to use
to identify the Store. The Principal Marks as of the date of this Agreement are
described in Exhibit K to this Agreement.
"PRINCIPAL OWNER" - Each Owner which:
(1) is a general partner or managing member in LICENSE OWNER;
or
(2) has a direct or indirect equity interest of 10% or more
(regardless of whether such Owner is entitled to vote thereon) in (a)
LICENSE OWNER or (b) any Store or (c) any developer and/or license
owner of UNITS other than LICENSE OWNER; provided, however, that a
reduction in a Principal Owner's equity interest below 10% shall not
affect his/her/its status as a Principal Owner unless such reduction
is the result of the transfer of all his/her/its equity interests in
LICENSE OWNER, a UNIT or such developer and/or license owner of a
UNIT; or
(3) is designated as a Principal Owner in Exhibit E to this
Agreement.
"PRODUCTS" - Products approved or required by COMPANY from time to
time in its sole discretion for sale at or from UNITS, including, without
limitation, bagels, bagel-related products, cream cheese and other spreads,
sandwiches, soups, salads, baked goods, breakfast items, an assortment of hot
and cold beverages, teas (leaves, bags, dry mixes and related forms), coffees
(beans, ground and related forms) and other food products and merchandise,
provided that the foregoing products are subject to modification or
discontinuance in COMPANY's sole discretion from time to time and may include
additional or substitute products.
"SITE" - The location identified in Exhibit F of this Agreement. As
used herein, the term "Site" also refers to the interior and exterior of the
structure housing the Store.
"SPECIAL DISTRIBUTION AGREEMENT" - A separate agreement whereby
COMPANY authorizes a license owner of a UNIT to operate a Special Distribution
Arrangement (defined below) at a Special Distribution Location (defined below)
designated by COMPANY.
"SPECIAL DISTRIBUTION ARRANGEMENT" - The sale of all or some of the
Products, as designated by COMPANY, at or from a Special Distribution Location
(defined below), whether
7
or not by or through on-premises food service facilities or concessions,
pursuant to COMPANY's standards and specifications for such sales, which
COMPANY may change from time to time in its sole discretion.
"SPECIAL DISTRIBUTION LOCATION" - A facility or location, including by
way of example and without limitation, a grocery store, convenience store,
supermarket, school, hospital, office, work site, military facility,
entertainment or sporting facility or event, airport, bus or train station,
park, toll road or limited access highway facility or other similar facility,
at or from which COMPANY, in its sole discretion, authorizes the operation of a
Special Distribution Arrangement pursuant to a Special Distribution Agreement,
which facility may be located within or outside the Territory.
"SPECIFIED SOFTWARE" - Such software, programming, and services, other
than the Licensed Program, which COMPANY from time to time specifies or
requires in connection with utilization of the Computer System.
"STORE" - The UNIT which LICENSE OWNER is licensed to operate at the
Site pursuant to this Agreement that operates using the System and Principal
Marks identified in Exhibit K hereto and pursuant to COMPANY's operational
requirements associated with such Principal Marks as in effect from time to
time.
"TERRITORY" - The geographic area described in Exhibit F of this
Agreement.
"TRADE DRESS" - The design, decor and image which COMPANY authorizes
and requires for use in connection with the operation of the Store, as it may
be revised and further developed by COMPANY or its Affiliates from time to time
and as further described in the Manuals (defined below).
"UNIT" - A branded retail store that:
(1) offers Products (defined below) for consumer consumption
through on-premises dining and carry-out, provided that COMPANY may,
in its sole discretion, authorize such business to offer Delivery
Service pursuant to a Delivery Rider and/or approve the owner of such
business to offer Catering Service pursuant to a Catering Rider or to
operate Special Distribution Arrangements pursuant to a Special
Distribution Agreement (defined below); and
(2) operates using the System and the Marks; and
(3) is either operated by COMPANY or its Affiliates or
pursuant to a valid franchise or license from COMPANY.
8
2. GRANT OF LICENSE
2.A. GRANT OF LICENSE; TERM; PRINCIPAL OWNERS' GUARANTY
Subject to the provisions of this Agreement, COMPANY hereby grants to
LICENSE OWNER a license (the "License") to operate the Store at the Site, and
to use the Marks and System in the operation thereof, for a term of fifteen
(15) years commencing on the date of this Agreement. Termination or expiration
of this Agreement shall constitute a termination or expiration of the License
and any and all licenses granted herein. LICENSE OWNER agrees that it will at
all times faithfully, honestly and diligently perform its obligations
hereunder, and that it will continuously exert its best efforts to promote and
enhance the business of the Store and the goodwill of the Marks. LICENSE OWNER
shall not conduct the business of the Store from any location other than the
Site, except as otherwise provided under this Agreement, and will not offer
Catering Service, Delivery Service or Special Distribution Arrangements within
or outside the Territory, except as provided in Section 3 of this Agreement.
LICENSE OWNER shall cause all persons or entities who are Principal Owners as
of the Effective Date, and their spouses, to execute and deliver to COMPANY
concurrently with this Agreement, and all persons or entities which become
Principal Owners thereafter, and their spouses, to execute and deliver to
COMPANY promptly thereafter, the form of Guaranty and Assumption of License
Owner's Obligations ("GUARANTY") attached hereto as Exhibit G.
Notwithstanding the foregoing:
(a) LICENSE OWNER shall not be required to
cause the execution and delivery of the
Guaranties referred to in this Section if,
and for such period of time as, LICENSE
OWNER does not pay dividends or
unreasonable compensation to any Owner at
any time that members' equity is either
less than $5,000,000 or would be reduced to
below that amount by reason of such
payment; and
(b) spouses of guarantors shall not be required
to execute any Guaranties referred to in
this Section unless, under applicable law
(including, without limitation, the law of
the state in which such guarantors and/or
their spouses reside), their failure to
execute would render the Guaranties null
and void.
2.B. TERRITORIAL RIGHTS
Except as otherwise provided in this Agreement (including, without
limitation, Section 2.D. and Section 3) and provided that LICENSE OWNER is in
full compliance with this Agreement, COMPANY and its Affiliates will not during
the term of this Agreement, operate or grant licenses or franchises for the
operation of Stores within the Territory other than the License granted to
LICENSE OWNER pursuant to this Agreement.
9
2.C. RIGHTS RETAINED BY COMPANY
COMPANY (on behalf of itself, its Affiliates and its designees)
retains all rights with respect to UNITS, the Marks, Copyrighted Works (defined
below), and the sale of Products and any other products and services, anywhere
in the world, including, without limitation:
(1) the right to operate or grant others (including any
person or entity related in any manner whatsoever to COMPANY) the
right to operate food service businesses, including, without
limitation, UNITS and/or Bagel Stores, using the Marks or any other
marks and using the System or any other system at such locations
within and/or outside the Territory, both during and upon expiration
or termination of the term of this Agreement, and on such terms and
conditions as COMPANY, in its sole discretion, deems appropriate
(subject to the rights expressly granted to LICENSE OWNER in Section
2.B. of this Agreement); and
(2) subject to any rights of LICENSE OWNER under Section 3 of
this Agreement, the right, and the right to grant others (including
any person or entity related in any manner whatsoever to COMPANY) the
right, to develop, manufacture, market, distribute and/or sell
Products and/or any other product or service within and/or outside the
Territory through any channel of distribution whatsoever, whether
wholesale, retail or otherwise, including, without limitation, through
Special Distribution Arrangements (including, without limitation,
through BOSTON MARKET outlets), Delivery Service and Catering Service
under or in association with the Marks or any other trademark and/or
to own or operate any other business under the Marks or any other
trademarks; and
(3) subject to Section 2.D. below, the right to acquire,
operate and convert to a UNIT any business, including, without
limitation, a business operating one or more Bagel Stores (other than
UNITS) or other food service businesses located or operating within
and/or outside the Territory.
2.D. LICENSE OWNER'S OPTION TO PURCHASE CONVERSION SITES
If, during the term of this Agreement, COMPANY acquires the shares or
assets (which may include, by way of illustration and not by way of limitation,
furniture, fixtures, equipment, leasehold improvements and/or leasehold
interests) of any business operating a Bagel Store at one or more sites located
within the Territory which meet COMPANY's specifications and standards as in
effect from time to time for conversion to UNITS (the "Conversion Sites"), and
COMPANY determines to convert such Conversion Sites to Stores, COMPANY agrees
to offer to sell such Conversion Sites to LICENSE OWNER for the price paid
therefor by COMPANY. Such price will include that portion of the direct and
indirect costs and liabilities incurred or assumed by COMPANY in making such
acquisition and allocated to such Conversion Sites whether paid or owed to the
seller of such Conversion Sites, an Affiliate or any other party, and
10
other expenses allocated or otherwise related to such Conversion Sites
(including losses, whether from continuing operations or closing acquired
locations) plus interest at COMPANY's cost of money on the balance of such
amounts from time to time, provided that:
(1) such sale will not in COMPANY's judgment conflict with
any existing legal obligation of COMPANY or the business being
acquired; and
(2) such sale will not in COMPANY's judgment preclude the
completion of the acquisition on the terms agreed to by COMPANY; and
(3) such sale will not, in COMPANY's judgment, interfere with
any other legal agreement, arrangement or combination or affect
federal or state income tax consequences arising from the acquisition
in a manner adverse to any of the parties thereto; and
(4) such sale may, at COMPANY's discretion, include (at a
price determined on the same basis as for Conversion Sites) certain
acquired stores which fall within the Territory but which do not meet
COMPANY's criteria for conversion to UNITS and which may have to be
closed or sold to a third party subsequent to LICENSE OWNER's
acquisition; and
(5) LICENSE OWNER agrees to (a) execute, concurrently with
LICENSE OWNER's purchase, COMPANY's then current form of standard
license agreement containing COMPANY's then current fees and expense
requirements and such ancillary documents (including guarantees) as
are then customarily used by COMPANY in the grant of licenses for
UNITS, as modified for use in connection with a Conversion Site as
necessary, for each and every such Conversion Site, (b) convert each
such Conversion Site to a Store as soon as practicable thereafter (but
in no event later than the date specified by COMPANY) in accordance
with COMPANY's standards and specifications, and (c) close or sell,
within the reasonable time period specified by COMPANY, any acquired
sites which are not suitable for conversion.
LICENSE OWNER shall have thirty (30) days after receipt of COMPANY's offer in
which to accept or reject such offer by written notice to COMPANY. If accepted,
LICENSE OWNER shall have 30 days from the date of acceptance within which to
complete the acquisition.
In the event LICENSE OWNER rejects or fails to timely accept COMPANY's
offer to sell such Conversion Sites or COMPANY is unable to extend such offer
for any of the aforementioned reasons, COMPANY agrees that, provided that
LICENSE OWNER is in full compliance with this Agreement, it will not utilize or
license the use of the Marks at such Conversion Sites for a period of one (1)
year following COMPANY's acquisition thereof; provided, however, that COMPANY
may operate, alter, modify, refurbish, remodel, promote or market any such
Conversion Sites and use the Licensed Program and Computer System in the
11
operation thereof during such one (1) year period. For purposes of this
Section, all references to COMPANY shall be deemed to include its Affiliates.
COMPANY agrees to use reasonable efforts to obtain input (including
market and competitive information) from LICENSE OWNER in connection with the
due diligence process undertaken by COMPANY in any potential acquisition of
Conversion Sites in a particular Sub-Area during the applicable Sub-Area Term.
3. OTHER DISTRIBUTION METHODS
3.A. SPECIAL DISTRIBUTION ARRANGEMENTS
LICENSE OWNER acknowledges and agrees that: (1) LICENSE OWNER is not
granted, and COMPANY has no obligation to offer to LICENSE OWNER, any rights to
operate Special Distribution Arrangements within or outside the Territory
pursuant to this Agreement; and (2) the right to operate or grant to others the
right to operate Special Distribution Arrangements is specifically reserved to
COMPANY or its designees. If COMPANY, at any time and in its sole discretion,
determines to offer LICENSE OWNER the right to operate a Special Distribution
Arrangement at a Special Distribution Location designated by COMPANY, COMPANY
will so notify LICENSE OWNER by delivering to LICENSE OWNER a form of Special
Distribution Agreement. LICENSE OWNER will have fifteen (15) days after its
receipt thereof to execute and deliver to COMPANY such executed Special
Distribution Agreement. If LICENSE OWNER fails to execute and deliver to
COMPANY the executed Special Distribution Agreement within such fifteen (15)
day period or commence such Special Distribution Arrangement within the period
specified therein, then LICENSE OWNER shall have no right to operate such
Special Distribution Arrangement thereafter. COMPANY reserves the right under
the Special Distribution Agreement, at any time and in its sole discretion with
or without cause and regardless of the investment made by LICENSE OWNER in
establishing or operating the Special Distribution Arrangement or the length of
time the Special Distribution Arrangement has been in effect, to suspend or
terminate LICENSE OWNER's right to operate the Special Distribution
Arrangement, effective ninety (90) days after COMPANY's written notice to
LICENSE OWNER.
Notwithstanding the foregoing, COMPANY agrees that, if during the Development
Term it intends to engage in a Special Distribution Arrangement at or from (a)
a military facility, (b) an entertainment or sporting facility or event, (c) an
airport, bus or train station, (d) a toll road or limited access highway
facility or (e) any specialty kiosk located in or adjacent to any similar
facilities, located within the Territory, COMPANY will offer LICENSE OWNER a
Special Distribution Agreement, the execution of which shall be governed by
this Section 3.A.
3.B. DELIVERY SERVICE
LICENSE OWNER acknowledges and agrees that: (1) LICENSE OWNER is not
12
granted, and COMPANY has no obligation to offer to LICENSE OWNER, any rights
within or outside the Territory to offer Delivery Service from the Store or
otherwise pursuant to this Agreement; and (2) the right to provide Delivery
Service is specifically reserved to COMPANY or its designees. If COMPANY, at
any time and in its sole discretion, determines to offer Delivery Service in a
designated Delivery Area in which the Store is located, COMPANY will offer to
LICENSE OWNER, or to DEVELOPER pursuant to the Development Agreement, the right
to offer Delivery Service by delivering to LICENSE OWNER (or DEVELOPER) a form
of Delivery Rider to this Agreement (or a Delivery Rider to the Development
Agreement). LICENSE OWNER (or DEVELOPER) will have fifteen (15) days after its
(or DEVELOPER's) receipt thereof to execute and deliver to COMPANY such
executed Delivery Rider. If LICENSE OWNER (or DEVELOPER) fails to execute and
deliver such executed Delivery Rider to COMPANY within such fifteen (15) day
period or to commence Delivery Service within the specified period, then
LICENSE OWNER (or DEVELOPER) shall have no right to provide Delivery Service at
the Store thereafter.
If COMPANY determines in its sole discretion that all franchise owners
and license owners of UNITS in the trade area where the Store is located (as
such trade area is determined by COMPANY in its sole discretion and which in no
event shall exceed the Marketing Area) shall offer Delivery Service, COMPANY
will notify LICENSE OWNER (or DEVELOPER) and will deliver to LICENSE OWNER (or
DEVELOPER) a Delivery Rider to this Agreement (or the Development Agreement)
which LICENSE OWNER (or DEVELOPER) shall execute and deliver to COMPANY within
fifteen (15) days after its receipt.
COMPANY reserves the right under the Delivery Service Rider, at any
time and in its sole discretion, with or without cause and regardless of the
investment made by LICENSE OWNER (or DEVELOPER) in establishing and conducting
Delivery Service or the length of time LICENSE OWNER (or DEVELOPER) has offered
Delivery Service: (1) to reduce, modify or expand the Delivery Area, effective
upon COMPANY's written notice to LICENSE OWNER, provided, however, that if a
reduction or modification of the Delivery Area amounts to a termination of
substantially all of LICENSE OWNER's rights to provide such services (except in
the case of the exercise by COMPANY of its remedies under Section 18.C of this
Agreement), such reduction or modification shall not be effective until 90 days
after COMPANY's written notice to LICENSE OWNER; or (2) to suspend or terminate
LICENSE OWNER's (or DEVELOPER's) right to offer Delivery Service, effective
ninety (90) days after COMPANY's written notice to LICENSE OWNER (or
DEVELOPER); and COMPANY may otherwise terminate LICENSE OWNER's (or
DEVELOPER's) right to offer Delivery Service pursuant to the terms of the
Delivery Rider. In the event that COMPANY suspends or terminates LICENSE
OWNER's (or DEVELOPER's) right to offer Delivery Service, COMPANY reserves the
right to require LICENSE OWNER (or DEVELOPER) to reinstate Delivery Service
upon fifteen (15) days' prior written notice to LICENSE OWNER (or DEVELOPER).
3.C. CATERING SERVICE
13
LICENSE OWNER acknowledges and agrees that: (1) LICENSE OWNER is not
granted, and COMPANY has no obligation to offer to LICENSE OWNER, any rights
within or outside the Territory to offer Catering Service from the Store or
otherwise pursuant to this Agreement; and (2) the right to provide Catering
Service is specifically reserved to COMPANY or its designees. If COMPANY, at
any time and in its sole discretion, determines to offer Catering Service in a
designated Catering Area in which the Store is located, COMPANY will offer
LICENSE OWNER, or to DEVELOPER pursuant to the Development Agreement the right
to offer Catering Service by delivering to LICENSE OWNER (or DEVELOPER) a form
of Catering Rider to this Agreement (or to the Development Agreement). LICENSE
OWNER (or DEVELOPER) will have fifteen (15) days after its (or DEVELOPER's)
receipt thereof to execute and deliver to COMPANY the executed Catering Rider.
If LICENSE OWNER (or DEVELOPER) fails to execute and deliver such executed
Catering Rider to COMPANY within such fifteen (15) day period or commence
Catering Service within the specified period, then LICENSE OWNER (or DEVELOPER)
shall have no right to provide Catering Service within the designated Catering
Area thereafter.
If COMPANY determines in its sole discretion that all franchise owners
and license owners of UNITS in the trade area where a Store is located (as such
trade area is determined by COMPANY in its sole discretion and which in no
event shall exceed the Marketing Area), shall offer Catering Service, COMPANY
will notify LICENSE OWNER (or DEVELOPER) and will deliver to LICENSE OWNER (or
DEVELOPER) a Catering Rider to this Agreement (or to the Development Agreement)
which LICENSE OWNER (or DEVELOPER) shall execute and return to COMPANY within
fifteen (15) days after its receipt. COMPANY reserves the right under the
Catering Rider, at any time and in its sole discretion, with or without cause
and regardless of the investment made by LICENSE OWNER (or DEVELOPER) in
establishing and conducting Catering Service or the length of time LICENSE
OWNER (or DEVELOPER) has offered Catering Service: (1) to reduce, modify or
expand the Catering Area, effective upon COMPANY's written notice to LICENSE
OWNER, provided, however, that if a reduction or modification of the Catering
Area amounts to a termination of substantially all of LICENSE OWNER's rights to
provide such services (except in the case of the exercise by COMPANY of its
remedies under Section 18.C of this Agreement), such reduction or modification
shall not be effective until 90 days after COMPANY's written notice to LICENSE
OWNER; or (2) to suspend or terminate LICENSE OWNER's (or DEVELOPER's) right to
offer Catering Service, effective ninety (90) days after COMPANY's written
notice to LICENSE OWNER (or DEVELOPER) (in which case LICENSE OWNER (or
DEVELOPER) will not fill any orders for Catering Service after the expiration
of such ninety (90) day period); and COMPANY may otherwise terminate LICENSE
OWNER's (or DEVELOPER's) right to offer Catering Service pursuant to the terms
of the Catering Rider. In the event that COMPANY terminates or suspends LICENSE
OWNER's (or DEVELOPER's) right to offer Catering Service, COMPANY reserves the
right to require LICENSE OWNER (or DEVELOPER) to reinstate Catering Service
upon fifteen (15) days' prior written notice to LICENSE OWNER (or DEVELOPER).
14
4. DEVELOPMENT AND OPENING OF THE STORE
4.A. SITE SELECTION AND LEASE
Prior to execution of this Agreement, LICENSE OWNER shall have
obtained COMPANY's approval of and the legal right of possession of the Site in
accordance with the terms of the Development Agreement.
4.B. STORE DESIGN SPECIFICATIONS AND CONSTRUCTION PLANS
COMPANY will furnish to LICENSE OWNER specifications of COMPANY's
requirements for design, decoration, layout, equipment, furnishings, fixtures
and signs for Stores using the Principal Marks designed on Exhibit K and the
Trade Dress and operating procedures associated therewith (the "Design
Specifications"). LICENSE OWNER acknowledges and agrees that the Design
Specifications, which include Trade Dress, are an integral part of the System
and that the Store will be designed and constructed in accordance with the
Design Specifications. LICENSE OWNER will cause to be prepared and submitted to
COMPANY for approval the preliminary layout for the Store (if not already
submitted to and approved by COMPANY) and detailed construction plans and
specifications and space plans for the Store (the "Construction Plans") that
comply with the Design Specifications and all applicable ordinances, building
codes, permit requirements, and lease requirements and restrictions.
4.C. DEVELOPMENT OF THE STORE
Within one hundred twenty (120) days after the date of execution of
this Agreement, LICENSE OWNER agrees at its expense to do or cause to be done
the following:
(1) secure all financing required to fully develop the Store
in accordance with this Section; and
(2) submit the Construction Plans and preliminary layout to
COMPANY for approval; and
(3) obtain all required zoning changes, planning consents,
building, utility, sign, health, sanitation and business permits,
licenses and approvals and any other required permits and licenses;
and
(4) construct all required improvements in compliance with
Construction Plans approved by COMPANY; and
(5) decorate and lay out the Store in compliance with Design
Specifications and plans and specifications approved by COMPANY; and
15
(6) (a) acquire the Computer System for the Store and acquire
the right to use, for the remainder of the term of this Agreement, the
Specified Software in the manner specified by COMPANY; (b) obtain any
and all peripheral equipment and accessories and arrange for any and
all support services that may be necessary to enable the Computer
System, the Licensed Program, and the Specified Software to operate as
specified by COMPANY, and (c) take all other actions (including but
not limited to installation of electrical wiring and cabling, and
temperature and humidity controls) that may be necessary to prepare
the Store to enable the Computer System, the Licensed Program, and the
Specified Software to operate as specified by COMPANY; and
(7) purchase or lease and install all required equipment,
vehicles, furnishings, fixtures and signs; and
(8) purchase an adequate opening inventory of Products, and
Supplies and Materials (defined below); and
(9) obtain all customary contractors' sworn statements and
partial and final waivers of lien for construction, remodelling,
decorating and installation services; and
(10) open the Store for business and thereafter operate the
Store on a regular and continuing basis for the term hereof.
4.D. EQUIPMENT, FIXTURES, FURNISHINGS AND SIGNS
LICENSE OWNER agrees to use in the development and operation of the
Store only those brands, types and/or models of equipment, vehicles, signs
displaying the Marks, fixtures and furnishings which meet COMPANY's
specifications. LICENSE OWNER may purchase approved brands, types and/or models
of equipment, fixtures and signs which meet the COMPANY's specifications only
from suppliers designated or approved by COMPANY, which may include COMPANY. At
LICENSE OWNER's request, COMPANY will from time to time supply LICENSE OWNER
with a list of suppliers who sell items which meet COMPANY's specifications.
4.E. COMPUTER SYSTEM
LICENSE OWNER agrees to use in the development and operation of the
Store only those brands, types, makes, and/or models of communications and
computer systems or hardware which COMPANY has from time to time specified or
required for the Computer System. LICENSE OWNER also agrees to use in the
development and operation of the Store only the Specified Software and the
Licensed Program, as comprised from time to time in accordance with the
specifications and requirements of COMPANY.
16
4.F. STORE OPENING
LICENSE OWNER agrees not to open the Store for business until:
(1) COMPANY notifies LICENSE OWNER in writing that all of
LICENSE OWNER's obligations pursuant to Paragraphs A, B, C and D of
this Section 4 have been fulfilled; and
(2) preopening training of Store personnel has been completed
to COMPANY's satisfaction; and
(3) all amounts then due to COMPANY and its Affiliates have
been paid and all required Guaranties are executed and delivered to
COMPANY; and
(4) COMPANY has been furnished with copies of all insurance
policies required pursuant to this Agreement, or such other evidence
of insurance coverage and payment of premiums as COMPANY requests.
LICENSE OWNER agrees to comply with these conditions and to be prepared to open
the Store for business within one hundred twenty (120) days after the date of
this Agreement. COMPANY's determination that LICENSE OWNER has met all of
COMPANY's pre-opening requirements shall not constitute a waiver of
non-compliance by LICENSE OWNER or of COMPANY's right to demand full compliance
with such requirements. LICENSE OWNER further agrees to open the Store for
business and commence conduct of business at the Store pursuant to this
Agreement within five (5) days after COMPANY gives notice to LICENSE OWNER
stating that the Store is ready for opening.
4.G. GRAND OPENING PROGRAM
LICENSE OWNER agrees to conduct a grand opening advertising and
promotional program for the Store during the period commencing thirty (30) days
prior to, and ending ninety (90) days after, the opening of the Store and to
expend no less than Ten Thousand Dollars ($10,000.00) on such advertising and
promotion during such period.
Such advertising and promotional program shall:
(1) be in addition to advertising and promotion conducted
pursuant to Section 13 of this Agreement; and
(2) utilize marketing and public relations programs and media
and advertising materials approved by COMPANY; and
(3) be conducted in accordance with COMPANY's specifications
and standards and pursuant to a grand opening plan which LICENSE OWNER
shall prepare
17
and submit to COMPANY for approval at least forty-five (45) days prior
to the opening date of the Store. If LICENSE OWNER does not prepare a
grand opening program and obtain COMPANY's approval of such plan,
COMPANY may prepare the grand opening plan for the Store.
COMPANY may, in its discretion, reduce the amount of required spending for the
grand opening program, reduce the time period during which the grand opening
program shall be conducted, and/or direct that a portion of such funds be
re-directed to a Local Ad Fund established pursuant to Section 13.B of this
Agreement; provided that (a) COMPANY reasonably determines that the Marketing
Area in which the Store is opened has been sufficiently covered by the opening
of other UNITS, and (b) COMPANY is acting comparably with respect to its own
UNITS in similar situations.
4.H. RELOCATION OF THE STORE
If LICENSE OWNER's lease or sublease for the Site of the Store expires
or terminates without fault of LICENSE OWNER, if the Site is destroyed,
condemned or otherwise rendered unusable as a UNIT in accordance with this
Agreement, or if, in the judgment of COMPANY and LICENSE OWNER, there is a
change in the character of the location of the Site sufficiently detrimental to
its business potential to warrant its relocation, COMPANY will not unreasonably
withhold permission for relocation of the Store to a site within the Territory
which meets COMPANY's then-current site criteria, subject to the rights of
existing franchisees or licensees under their agreements with COMPANY. Any such
relocation shall be at LICENSE OWNER's sole expense. LICENSE OWNER shall seek
and obtain COMPANY's approval of the replacement site pursuant to COMPANY's
then current site approval process, and the Store shall re-open at the
replacement Site as soon as reasonably practicable but in no event more than
ninety (90) days after the closing of the original location.
4.I. FINANCING PLAN
Within ten (10) days after the execution of this Agreement, LICENSE
OWNER must submit a written plan for LICENSE OWNER's funding of the development
and operation of the Store, which plan shall be reasonably acceptable to
COMPANY and which shall include details of the sources and terms of such
funding and such other information or documents required by COMPANY from time
to time. LICENSE OWNER may not begin development of the Store until COMPANY has
given its approval of such plan, which approval COMPANY may give or withhold in
its sole discretion. Among other factors, COMPANY may consider LICENSE OWNER's
debt/equity ratio and amount of indebtedness in reviewing such plan. Once a
plan is approved by COMPANY, LICENSE OWNER must execute and adhere to the plan.
Any proposed material deviation from or modifications to the originally
approved plan must be submitted to COMPANY for prior approval.
5. TRAINING AND GUIDANCE
18
5.A. TRAINING
Prior to the commencement of the operation of the Store, the manager
of the Store (the "STORE MANAGER") and one (1) other management level employee
(the "ADDITIONAL MANAGER"), appointed by LICENSE OWNER in accordance with this
Agreement and identified in Section 4 of Exhibit E, must attend and complete to
COMPANY's satisfaction a COMPANY accredited and certified initial management
training program in the operation of a UNIT. Such training program may include
classroom training, instruction at designated facilities and hands-on training
in an operating UNIT. DEVELOPER's Training Director shall provide such training
program at DEVELOPER's training facilities in accordance with COMPANY's
requirements therefor, provided that DEVELOPER's Training Director is currently
certified to provide such training program under the terms of the Development
Agreement. In addition, whether DEVELOPER or COMPANY is providing such
training, COMPANY may, in its sole discretion as it deems necessary, require
the Store Manager and/or the Additional Manager to work full-time without
compensation by COMPANY and at LICENSE OWNER's expense for up to ten (10) weeks
at a UNIT selected by COMPANY.
COMPANY may, in its sole discretion as it deems necessary, require the
Store Manager, Additional Manager or assistant managers of the Store or LICENSE
OWNER to attend or to participate in updated, additional or refresher training
programs during the term of this Agreement. COMPANY also may charge for
updated, additional or refresher training materials supplied to LICENSE OWNER
or its personnel.
In the event the certified Store Manager and/or the certified
Additional Manager ceases to hold such position at the Store, LICENSE OWNER
shall have thirty (30) days in which to appoint a substitute or replacement
Store Manager and/or Additional Manager, who must attend and complete to
COMPANY's satisfaction the initial management training program as specified
above promptly after appointment. If COMPANY in its sole discretion determines
that the Store Manager or Additional Manager or any subsequently appointed
Store Manager or Additional Manager has failed to satisfactorily complete the
initial management training program or any additional or refresher training
program, LICENSE OWNER shall immediately hire a substitute Store Manager or
Additional Manager and promptly arrange for such person to complete the initial
management training program to the satisfaction of COMPANY.
LICENSE OWNER shall be responsible for the travel, living and other
expenses (including, without limitation, local transportation expenses) and
compensation of LICENSE OWNER, the Store Manager, the Additional Manager,
assistant managers, and any other agents or employees of LICENSE OWNER incurred
in connection with attendance at training programs or work at UNITS that is
part of their training.
5.B. GUIDANCE AND ASSISTANCE
19
COMPANY shall, in its sole discretion, furnish guidance to LICENSE
OWNER with respect to:
(1) recipes, methods, specifications, standards and operating
procedures utilized by UNITS and any modifications thereof; and
(2) purchasing approved equipment, fixtures, furnishings,
signs, Products, and Supplies and Materials (defined below); and
(3) development and implementation of local advertising and
promotional programs; and
(4) general operating and management procedures of UNITS; and
(5) establishing and conducting employee training programs at
the Store; and
(6) opening the Store.
Such guidance shall, in the discretion of COMPANY, be furnished in the form of
COMPANY's Manuals (defined below in this Section), bulletins, video or audio
cassette tapes, computer diskettes, written materials, reports and
recommendations, other materials and intangibles, refresher training programs
and/or telephonic consultations or consultations at the offices of COMPANY or
at the Store. If special training of Store personnel or other assistance in
operating the Store is requested by LICENSE OWNER and COMPANY determines in its
sole discretion that such training or assistance or assistance should take
place at the Store, all expenses for such training or assistance shall be paid
by LICENSE OWNER, including, without limitation, COMPANY's per diem charges and
travel and living expenses for COMPANY personnel.
5.C. STORE MANUALS
COMPANY shall loan to LICENSE OWNER, for its sole use, one (1) copy of
a set of COMPANY's confidential manuals relating to the development and
operation of Stores, which may consist of one or more volumes, handbooks,
manuals, written materials, video or audio cassette tapes, computer diskettes
or any other materials or intangibles, all of which may be modified, added to,
replaced or supplemented by COMPANY from time to time in its sole discretion
(which modifications, additions or supplements may contain information
developed by COMPANY by DEVELOPER or LICENSE OWNER with respect to the type of
UNIT developed pursuant to this Agreement), whether by way of supplements,
replacement pages, bulletins, or other official pronouncements or means
(collectively the "STORE MANUALS"). The Store Manuals may be modified from time
to time at COMPANY's sole discretion to reflect changes in the System or
specifications, standards, policies and procedures for UNITS, to specify
brands, types and/or models of equipment which must be used by LICENSE OWNER in
20
the operation of the Store, and to specify changes in the decor, format, image,
Products, services and operations of Stores prescribed by COMPANY or such other
changes or additions as COMPANY deems necessary or advisable. LICENSE OWNER
shall keep its copy of the Store Manuals current by immediately inserting all
modified pages or materials furnished by COMPANY. In the event of a dispute
about the contents of the Store Manuals, the master copies maintained by
COMPANY at its principal office shall be controlling. LICENSE OWNER
acknowledges that the Store Manuals are part of the Confidential Information
and will be used and protected accordingly. LICENSE OWNER acknowledges and
agrees that the content of the Store Manuals, as modified from time to time, is
incorporated herein by reference and that LICENSE OWNER will comply with all
procedures, standards, specifications and requirements specified therein as
though each such item were set forth in detail in this Agreement.
6. MARKS
6.A. GOODWILL AND OWNERSHIP OF MARKS
LICENSE OWNER acknowledges that LICENSE OWNER's right to use the
Marks, as described in this Agreement, is derived solely from this Agreement
and is limited to the development and operation of the Store by LICENSE OWNER
pursuant to and in compliance with this Agreement and all applicable standards,
specifications, and operating procedures prescribed by COMPANY from time to
time during the term of the License. Any unauthorized use of the Marks by
LICENSE OWNER shall constitute a breach of this Agreement and an infringement
of the rights of COMPANY in and to the Marks. LICENSE OWNER acknowledges and
agrees that all usage of the Marks by LICENSE OWNER and any goodwill
established thereby shall inure to the exclusive benefit of COMPANY and that
this Agreement does not confer any goodwill or other interests in the Marks
upon LICENSE OWNER, other than the right to use the Marks in the operation of
the Store in compliance with this Agreement. All provisions of this Agreement
applicable to the Marks shall apply to any other trademarks, service marks,
commercial symbols and trade dress hereafter authorized, in writing (including
by inclusion in any trademark usage or similar guide or manual issued to license
owners by COMPANY), for use by and licensed to LICENSE OWNER by COMPANY.
6.B. LIMITATIONS ON LICENSE OWNER'S USE OF MARKS
LICENSE OWNER agrees to use the Marks as the sole trade identification
of the Store and the Products, provided that LICENSE OWNER shall identify
itself as the independent owner and licensee of the Store in the manner
prescribed by COMPANY. Except with the written consent of COMPANY, LICENSE
OWNER shall not use any Mark as part of any corporate name or other name of
LICENSE OWNER or with any prefix, suffix, or other modifying words, terms,
designs, or symbols, or in any modified form, nor may LICENSE OWNER use any
Mark in connection with the performance or sale of any unauthorized services or
products or in any other manner not expressly authorized in writing by COMPANY.
LICENSE OWNER agrees to
21
display the Marks prominently in the manner prescribed by COMPANY at the Store
and in connection with advertising and marketing materials. LICENSE OWNER
agrees to give such notices of trademark and service mark registrations as
COMPANY specifies and to obtain such business name registrations as may be
required under applicable law.
6.C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS
LICENSE OWNER shall immediately notify COMPANY of any apparent
infringement of or challenge to LICENSE OWNER's authorized use of any Mark, or
claim by any person of any rights in any Mark, and LICENSE OWNER shall not
communicate with any person other than COMPANY and its counsel in connection
with any such infringement, challenge or claim. COMPANY shall have sole
discretion to take such action as it deems appropriate in connection with the
foregoing, and the right to control exclusively any settlement, litigation,
arbitration or U.S. Patent and Trademark Office or other proceeding arising out
of any such alleged infringement, challenge or claim or otherwise relating to
any Mark. LICENSE OWNER agrees to execute any and all instruments and
documents, render such assistance, and do such acts and things as may, in the
opinion of COMPANY's counsel, be necessary or advisable to protect and maintain
the interests of COMPANY in any litigation or other proceeding or to otherwise
protect and maintain the interests of COMPANY in the Marks. COMPANY will
reimburse LICENSE OWNER for the reasonable out-of-pocket expenses incurred and
paid by LICENSE OWNER in complying with the requirements imposed by this
Paragraph, provided, however, that if any action taken by COMPANY results in
any monetary recovery for LICENSE OWNER (by way of counterclaim or otherwise)
which exceeds LICENSE OWNER's costs, then LICENSE OWNER must pay its own costs
and share pro rata in COMPANY's costs therefor up to the amount of LICENSE
OWNER's share of such recovery.
6.D. DISCONTINUANCE OF USE OF MARKS
If it becomes advisable at any time in COMPANY's sole judgment for the
Store to modify or discontinue use of any Mark and/or for the Store to use one
or more additional or substitute trademarks or service marks or an additional
or substitute type of trade dress, LICENSE OWNER agrees to immediately comply
with COMPANY's directions to modify or otherwise discontinue the use of such
Mark, and/or to use one or more additional or substitute trademarks, service
marks, logos or commercial symbols or additional or substitute trade dress
after notice thereof by COMPANY. Neither COMPANY nor its Affiliates shall have
any obligation to reimburse LICENSE OWNER for any expenditures made by LICENSE
OWNER to modify or discontinue the use of a Mark or to adopt additional marks
or substitutes for a discontinued Mark, including, without limitation, any
expenditures relating to advertising or promotional materials or to compensate
LICENSE OWNER for any goodwill related to the discontinued Mark.
6.E. INDEMNIFICATION OF LICENSE OWNER
22
COMPANY agrees to indemnify LICENSE OWNER against and to reimburse
LICENSE OWNER for all damages for which LICENSE OWNER is held liable in any
claim, action or proceeding brought by any person or entity claiming to have
trademark or other rights to any of the Marks or any name or trademark similar
thereto arising out of LICENSE OWNER's authorized use of the Marks, pursuant to
and in compliance with this Agreement, and for all costs reasonably incurred by
LICENSE OWNER in the defense of any such claim brought against LICENSE OWNER or
in any proceeding in which LICENSE OWNER is named as a party, provided that
LICENSE OWNER has timely notified COMPANY of such claim or proceeding, has
given COMPANY sole control of the defense and settlement of any such claim, has
otherwise complied with the requirements of this Agreement regarding use of the
Marks, and this Agreement is in full force and effect, and provided further,
that the indemnification provided by this Section 6.E shall not extend to any
claim, action or proceeding brought by any person or entity alleging any prior
common law trademark rights.
7. COPYRIGHTS
7.A. OWNERSHIP OF COPYRIGHTED WORKS
LICENSE OWNER and COMPANY acknowledge and agree (1) that COMPANY may
authorize LICENSE OWNER to use certain copyrighted or copyrightable works (the
"COPYRIGHTED WORKS"), (2) that the Copyrighted Works are the valuable property
of COMPANY or its Affiliates or, as applicable, their licensors and (3) that
the LICENSE OWNER's rights to use the Copyrighted Works are granted to LICENSE
OWNER solely on the condition that LICENSE OWNER complies with the terms of
this Section. LICENSE OWNER acknowledges and agrees that COMPANY owns or is the
licensee of the owner of the Copyrighted Works and may further create, acquire
or obtain licenses for certain copyrights in various works of authorship used in
connection with the operation of UNITS, including, but not limited to, all
categories of works eligible for protection under the United States copyright
law, all of which shall be deemed to be Copyrighted Works under this Agreement.
Such Copyrighted Works include, but are not limited to, the Store Manuals,
advertisements, promotional materials, labels, menus, posters, coupons, gift
certificates, signs and store designs, plans and specifications and may include
all or part of the Marks, Licensed Program, Trade Dress and other portions of
the System. LICENSE OWNER acknowledges that this Agreement does not confer any
interest in the Copyrighted Works upon LICENSE OWNER, other than the right to
use them in the operation of the Store in compliance with this Agreement. If
COMPANY authorizes LICENSE OWNER to prepare any adaptation, translation or work
derived from the Copyrighted Works, or if LICENSE OWNER prepares any Copyrighted
Works such as menus, advertisements, posters or promotional material, LICENSE
OWNER hereby agrees that such adaptation, translation, derivative work or
Copyrighted Work shall be the property of COMPANY, and LICENSE OWNER hereby
assigns all its right, title and interest therein to COMPANY (or such other
person identified by COMPANY). LICENSE OWNER agrees to execute any documents, in
recordable form, which COMPANY determines are necessary to reflect such
ownership. LICENSE OWNER shall submit all such adaptations, translations,
23
derivative works and Copyrighted Works to COMPANY for approval prior to use.
7.B. LIMITATION ON LICENSE OWNER'S USE OF COPYRIGHTED WORKS
LICENSE OWNER acknowledges that LICENSE OWNER's right to use the
Copyrighted Works, as described in this Agreement, is derived solely from this
Agreement and is limited to the use of such Copyrighted Works pursuant to and
in compliance with this Agreement and all applicable standards, specifications,
and operating procedures prescribed by COMPANY from time to time during the
term of this Agreement. LICENSE OWNER shall ensure that all Copyrighted Works
used hereunder shall bear an appropriate copyright notice under the Universal
Copyright Convention or other copyright laws prescribed by COMPANY specifying
that COMPANY or an Affiliate of COMPANY is the owner of the copyrights therein.
Any unauthorized use, adaptation, publication, reproduction, preparation of
derivative works, distribution of copies (whether by sale or other transfer of
ownership, or by rental, lease or lending), or attempts to recreate all or a
portion of such Copyrighted Works shall constitute a breach of this Agreement
and an infringement of the rights of COMPANY in and to the Copyrighted Works.
7.C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS
LICENSE OWNER shall immediately notify COMPANY of any actual or
apparent infringement of or challenge to any of the Copyrighted Works, or claim
by any person of any rights in the Copyrighted Works. LICENSE OWNER shall not
communicate with any person other than COMPANY and its counsel in connection
with any such infringement, challenge or claims. COMPANY shall have the sole
discretion to take such action as it deems appropriate in connection with the
foregoing, and the right to control exclusively any settlement, litigation,
arbitration or administrative proceeding arising out of any such alleged
infringement, challenge or claim or otherwise relating to the Copyrighted
Works. LICENSE OWNER agrees to execute any and all instruments and documents,
render such assistance, and do such acts and things as may, in the opinion of
COMPANY's counsel, be necessary or advisable to protect and maintain the
interests of COMPANY in any litigation or other proceeding or to otherwise
protect and maintain the interests of COMPANY in the Copyrighted Works. COMPANY
will reimburse LICENSE OWNER for the reasonable out-of-pocket expenses incurred
and paid by LICENSE OWNER in complying with the requirements imposed by this
Paragraph provided, however, that if any action taken by COMPANY results in any
monetary recovery for LICENSE OWNER (by way of counterclaim or otherwise) which
exceeds LICENSE OWNER's costs, then LICENSE OWNER must pay its own costs and
share pro rata in COMPANY's costs therefor up to the amount of LICENSE OWNER's
share of such recovery.
7.D. DISCONTINUANCE OF USE OF COPYRIGHTED WORKS
If it becomes advisable at any time in COMPANY's sole judgment for
LICENSE
24
OWNER to modify or discontinue use of any of the Copyrighted Works and/or for
LICENSE OWNER to use one or more additional or substitute copyrighted or
copyrightable items, LICENSE OWNER agrees to immediately comply with COMPANY's
directions to modify or otherwise discontinue the use of the Copyrighted Works
and/or to use any substitute materials specified by COMPANY. Neither COMPANY
nor its Affiliates shall have any obligation to reimburse LICENSE OWNER for any
expenditures made by LICENSE OWNER to modify or discontinue the use of any
Copyrighted Work or to adopt additional or substitute copyrighted or
copyrightable items.
8. LICENSED PROGRAM AND COMPUTER SYSTEM
8.A. GRANT OF SOFTWARE LICENSE
COMPANY hereby grants to LICENSE OWNER a nonexclusive,
nontransferable, nonassignable license to use the Licensed Program, subject to
the following terms and conditions:
(1) The Licensed Program shall be installed and tested on the
Computer System by COMPANY or its designee. If LICENSE OWNER does
not purchase the Computer System from COMPANY, LICENSE OWNER must
pay COMPANY or its designee a reasonable installation and testing
fee upon completion of COMPANY's or its designee's installation
and testing of the operation of the Licensed Program with the
Computer System. LICENSE OWNER acknowledges and agrees that
COMPANY's current installation and testing fee of $3,500.00 is
reasonable. COMPANY agrees that the installation and testing fee
applicable pursuant to this Agreement will not exceed $3,500.
(2) Except with the prior written consent of COMPANY, the Licensed
Program (a) shall not be operated by persons other than LICENSE
OWNER and employees of LICENSE OWNER, (b) shall not be operated
on equipment other than the Computer System, (c) shall be used
only in conjunction with the Specified Software and not with any
other computer applications program, and (d) shall not be
operated at locations other than the Store and the LICENSE
OWNER's principal office; provided, however, that with prior
notice to COMPANY, LICENSE OWNER may operate the Licensed Program
on equipment other than the Computer System and at a location
other than the Store and the LICENSE OWNER's principal office to
the extent required due to malfunction of the Computer System or
other cause beyond the reasonable control of LICENSE OWNER, but
not for any period longer than seven (7) consecutive days unless
otherwise agreed in writing by COMPANY.
(3) The Licensed Program shall be used in LICENSE OWNER's operation
of the Store and shall not be used for any other purpose.
25
(4) Without limiting the foregoing, LICENSE OWNER shall not, and
shall not allow its employees or agents to: (a) sell, assign,
lease, sublicense, pledge, grant a security interest with respect
to, market or commercially exploit, in any way, the Licensed
Program or any component thereof, or any data generated by the
use of the Licensed Program or any component of the Licensed
Program; (b)disclose or grant access to the Licensed Program, or
any data generated by the use of the Licensed Program or any
component of the Licensed Program, to any third party other than
one to whom COMPANY has consented in writing and who has agreed
in writing with COMPANY to keep the Licensed Program confidential
; (c) copy or reproduce the Licensed Program, or any data
generated by the use of the Licensed Program or any component of
the Licensed Program, in any manner, except to the extent
necessary for normal back-up and operating thereof; or (d) alter,
modify or adapt the Licensed Program, any documentation relating
thereto or any component of the Licensed Program, including, but
not limited to, by translating, decompiling, reverse engineering
or disassembling the Licensed Program.
(5) LICENSE OWNER acknowledges and agrees that the Licensed
Program and any data generated by the use of the Licensed
Program is the valuable, proprietary property and trade
secret of COMPANY or, as applicable, COMPANY's licensor and
LICENSE OWNER agrees to use the utmost care to safeguard the
Licensed Program and any data generated by the use of the
Licensed Program and to maintain the copyright protection and
the secrecy and confidentiality thereof. LICENSE OWNER shall
not undertake to patent, copyright or otherwise assert
proprietary rights to the Licensed Program and any data
generated by the use of the Licensed Program or any portion
thereof. LICENSE OWNER recognizes that all or part of the
Licensed Program and any data generated by the use of the
Licensed Program may be copyrighted and agrees that this
shall not be construed as causing the copyrighted material to
be public information. LICENSE OWNER will ensure that all
copies of the Licensed Program and any data generated by the
use of the Licensed Program or any components of the Licensed
Program in its possession contain an appropriate copyright
notice under the Universal Copyright Convention or other
notice of proprietary rights specified by COMPANY.
(6) LICENSE OWNER shall promptly disclose to COMPANY all ideas
and suggestions for modifications or enhancements of the
Licensed Program conceived or developed by or for LICENSE
OWNER, and COMPANY and its Affiliates shall have the right to
use and license such ideas and suggestions. All modifications
and enhancements made to the Licensed Program together with
the copyright therein shall be the property of COMPANY,
without regard to the source of the modification or
enhancement, and LICENSE OWNER hereby assigns all of its
right, title, and interest in any ideas, modifications, and
enhancements to
26
COMPANY. LICENSE OWNER agrees to execute any document, in
recordable form, which COMPANY determines is necessary to
reflect such ownership.
(7) COMPANY or its designee shall have the right at all times to
access the Licensed Program and to retrieve, analyze and use all
data in the files of LICENSE OWNER for the Licensed Program.
(8) COMPANY or its designee shall provide to LICENSE OWNER all
upgrades, modifications, improvements, enhancements, extensions
and other changes to the Licensed Program approved by COMPANY for
use in connection with the operation of UNITS and LICENSE OWNER
shall promptly implement their use.
(9) Upon expiration or termination of this Agreement, LICENSE OWNER
shall allow COMPANY's or its designee's employees or agents to
remove the Licensed Program from the Computer System, shall
immediately return the Licensed Program, each component thereof,
and any data generated by the use of the Licensed Program to
COMPANY or its designee, and shall immediately destroy any and
all back-up or other copies of the Licensed Program or parts
thereof, documentation for the Licensed Program and any data
generated by the use of the Licensed Program, and other materials
or information which relate to or reveal the Licensed Program and
its operation and any data generated by the use of the Licensed
Program.
8.B. SOFTWARE LICENSE FEE
LICENSE OWNER agrees to pay to COMPANY or its designee upon
installation of the Licensed Program on LICENSE OWNER's Computer System, a
software license fee (the "Software License Fee") in the amount of Fifteen
Thousand Dollars ($15,000.00). The Software License Fee shall be fully earned
by COMPANY or its designee upon installation of the Licensed Program on the
Computer System and is non-refundable in whole or in part.
8.C. SOFTWARE SUPPORT SERVICE
During the term of this Agreement and, provided that LICENSE OWNER is
in compliance with the terms of this Agreement, COMPANY or its designee shall
provide to LICENSE OWNER such support services as COMPANY deems reasonably
necessary to cause the Licensed Program to perform on the Computer System in
accordance with the standards for the Licensed Program as specified from time
to time by COMPANY, provided, however, that in no event will such support
services be less than COMPANY or its designee provides to COMPANY-operated
UNITS. Such support services shall not extend to error corrections, operational
support and assistance resulting from LICENSE OWNER's use or operation of
software which is not authorized by this Agreement for use on the Computer
System, (b) software training or (c) hardware maintenance such support service
shall include non-
27
procedure Help Desk calls. All procedural Help Desk calls will be handled by
COMPANY for an additional fee of $25 per call.
8.D. SOFTWARE SUPPORT SERVICE FEE
For the software support service provided to LICENSE OWNER, as
described above, LICENSE OWNER agrees to pay to COMPANY or its designee a
periodic software support service fee ("Software Support Fee") in the amount of
Four Hundred Dollars ($400.00). Such fee shall be payable in advance for each
Accounting Period on or before the eighth (8th) day prior to commencement of
such period commencing on the installation of the Licensed Program on the
Computer System. The Software Support Fee may be increased by COMPANY from time
to time, at its sole option, upon written notice to LICENSE OWNER.
8.E. MODIFICATION, ENHANCEMENT,
AND REPLACEMENT OF COMPUTER SYSTEM,
LICENSED PROGRAM AND SPECIFIED SOFTWARE.
LICENSE OWNER acknowledges that COMPANY may, during the term of this
Agreement, require LICENSE OWNER to modify, enhance and/or replace all or any
part of the Computer System, the Licensed Program and/or the Specified Software
at LICENSE OWNER's expense, and agrees, within sixty (60) days of receipt of
notice from COMPANY, to acquire, or acquire the right to use for the remainder
of the term of this Agreement and implement, the modified, enhanced or
replacement version of the Computer System, the Licensed Program and/or the
Specified Software specified by COMPANY and to take any and all other actions
as may be necessary to enable them, as modified, enhanced or replaced, to
operate as specified by COMPANY. Any such modifications, enhancements, and
replacements may require LICENSE OWNER to incur costs to purchase, lease and/or
license new or modified computer hardware and/or software or other equipment
and to obtain different and/or additional service and support services during
the term of this Agreement. LICENSE OWNER acknowledges that COMPANY cannot
estimate the costs of such future enhancements, modifications, and replacements
and that such costs may not be fully amortizable over the remaining term of the
License Agreement. Nonetheless, LICENSE OWNER agrees to incur such costs, where
directed by COMPANY to do so, provided that the COMPANY is then currently
specifying the same enhancements, modifications, and replacements for use in
COMPANY-operated UNITS.
8.F. WARRANTIES AND LIMITATION OF LIABILITY
COMPANY represents and warrants to LICENSE OWNER that: (1) COMPANY has
the right to license the Licensed Program to LICENSE OWNER, as set forth in
this Agreement; and (2) to the best of COMPANY's knowledge the Licensed Program
does not, and as a result of any enhancements, improvements or modifications
provided by COMPANY, will not, to the best of COMPANY's knowledge, infringe
upon any United States patent, copyright or other proprietary right of any
third party. In the event LICENSE OWNER's use of the Licensed
28
Program as required by COMPANY is enjoined as a result of a claim by a third
party of patent or copyright infringement or violation of proprietary rights,
COMPANY shall, in its sole discretion, either (i) procure for LICENSE OWNER the
right to continue use of the Licensed Program as contemplated hereunder, or
(ii) replace the Licensed Program or modify it such that there is no
infringement of the third party's rights. Such action by COMPANY shall be
LICENSE OWNER's sole and exclusive remedy against COMPANY in such event.
Neither COMPANY nor its designee represents or warrants to LICENSE
OWNER, and expressly disclaims any warranty, that the Licensed Program is
error-free or that the operation and use of the Licensed Program by LICENSE
OWNER will be uninterrupted or error-free. Neither COMPANY nor its designee
shall have any obligation or liability for any expense or loss incurred by
LICENSE OWNER arising from use of the Licensed Program in conjunction with any
other computer program not authorized by COMPANY.
EXCEPT FOR THE ABOVE EXPRESS LIMITED WARRANTIES, COMPANY AND/OR ITS
DESIGNEE MAKE NO WARRANTIES, EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT
TO THE LICENSED PROGRAM, PROGRAM DOCUMENTATION, OR ANY OTHER MATERIAL FURNISHED
HEREUNDER, OR ANY COMPONENT THEREOF AND THERE ARE EXPRESSLY EXCLUDED ALL
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT
THERETO.
8.G. SUBCOMPONENT LICENSES AND THIRD-PARTY LICENSES
LICENSE OWNER acknowledges that the Licensed Program contains
third-party components and subcomponents which COMPANY has the authority to
license to LICENSE OWNER as part of the Licensed Program pursuant to and in
accordance with software license agreements with third-party vendors
(collectively, the "Component Licenses"). In addition, LICENSE OWNER
acknowledges that acquisitions by LICENSE OWNER of all or portions of the
Computer System and the Specified Software from or through the COMPANY are
governed by license or other agreements by and between third-party vendors and
COMPANY, which agreements specifically permit COMPANY to sell and/or sublicense
all or portions of the Computer System and the Specified Software to LICENSE
OWNER or specifically require LICENSE OWNER to agree to be bound by the terms
thereof (either type of license hereinafter referred to as the "Third Party
Licenses"). LICENSE OWNER therefore hereby agrees to be bound by the terms of
each Component License and each relevant Third Party License, in each case as
if LICENSE OWNER was a party thereto, and agrees that the vendors and licensors
of all or portions of the Specified Software and the Computer System and the
licensors of all or portions of the Licensed Program (collectively, the
"Vendors") are third-party beneficiaries of this Agreement with full rights to
enforce their respective rights under this Section 8 of this Agreement. LICENSE
OWNER further agrees to indemnify and hold harmless COMPANY and each of the
Vendors from and against all costs, expenses, and damages arising out of or
based upon any breach or claim of a breach of this Agreement, the Third Party
Licenses or Component
29
Licenses by LICENSE OWNER, its directors, officers, employees, agents and
owners.
9. CONFIDENTIAL INFORMATION
COMPANY or its licensors, as applicable, possess and may further
develop and acquire certain confidential and proprietary information and trade
secrets including, but not limited to, the following categories of information,
methods, techniques, procedures and knowledge developed or to be developed by
COMPANY, its consultants or contractors, its Affiliates or its designees,
and/or franchise or license owners and developers (the "CONFIDENTIAL
INFORMATION"):
(1) methods, techniques, equipment, specifications (including
Design Specifications), standards, policies, procedures, information,
concepts and systems relating to and knowledge of and experience in
the development, operation, licensing and franchising of UNITS; and
(2) marketing and promotional programs for UNITS; and
(3) knowledge concerning the logic, structure and operation
of computer software programs which COMPANY authorizes for use in
connection with the operation of UNITS (including, without limitation,
the Licensed Program) and all additions, modifications and
enhancements thereof, and all data generated from use of such programs
and the logic, structure and operation of the data base file
structures containing such data and all additions, modifications and
enhancements thereof; and
(4) sales data and information concerning consumer
preferences and inventory requirements for Products, materials and
supplies, and specifications for and knowledge of suppliers of certain
materials, equipment and fixtures for UNITS; and
(5) ingredients, formulas, mixes, spices, seasonings, recipes
for, and methods of preparation, baking, cooking, freezing, serving,
packaging, catering and delivery of, Products and other items sold at
UNITS; and
(6) information concerning customers, customer lists, Product
sales, operating results, financial performance and other financial
data of UNITS; and
(7) the Store Manuals and the Development Manual (defined in
the Development Agreement); and
(8) employee selection procedures, training and staffing
levels.
COMPANY will disclose to LICENSE OWNER such parts of the Confidential
Information as COMPANY deems necessary or advisable from time to time in its
sole discretion for the operation of a Store during training, and in guidance
and assistance furnished to
30
LICENSE OWNER during the term of the License, and LICENSE OWNER may learn or
otherwise obtain from COMPANY and its Affiliates and other licensors of
components or elements of the System, other developers, other license owners
and franchise owners additional Confidential Information of COMPANY during the
term of the License. LICENSE OWNER acknowledges and agrees that neither LICENSE
OWNER nor any other person or entity will acquire by or through LICENSE OWNER
any interest in or right to use the Confidential Information other than the
LICENSE OWNER's right to utilize it in the operation of the Store pursuant to
this Agreement, and that the use or duplication of the Confidential Information
in any other business would constitute an unfair method of competition with
COMPANY and other UNIT developers, franchise owners and license owners. LICENSE
OWNER agrees to disclose the Confidential Information to its Owners and to
employees of the Store only to the extent reasonably necessary for the
operation of the Store and only if such individuals have agreed to maintain
such information in confidence in an agreement enforceable by COMPANY.
LICENSE OWNER acknowledges and agrees that the Confidential
Information is confidential to and a valuable asset of COMPANY or its
licensors, if applicable, is proprietary, includes trade secrets of COMPANY,
and is disclosed to LICENSE OWNER solely on the condition that LICENSE OWNER,
its Owners and its employees who have access to the Confidential Information
agree, and LICENSE OWNER does hereby agree, that, during and after the term of
this Agreement, LICENSE OWNER, its Owners and such employees:
(a) will not use the Confidential Information in any other
business or capacity (unless in the case of the Licensed Program,
separately licensed by the owner thereof); and
(b) will maintain the absolute secrecy and confidentiality of
the Confidential Information; and
(c) will not make unauthorized copies of any portion of the
Confidential Information disclosed in written or other tangible form;
and
(d) will adopt and implement all reasonable procedures
prescribed from time to time by COMPANY to prevent unauthorized use or
disclosure of or access to the Confidential Information, including,
without limitation, requiring employees and Owners who will have
access to such information to execute non-competition and
confidentiality agreements in the form attached hereto as Exhibit H
(the "Confidentiality and Non-Competition Agreement"). LICENSE OWNER
shall provide COMPANY, at its request, executed originals of each such
Confidentiality and Non-Competition Agreement.
Notwithstanding the foregoing and any other provision of this
Agreement, LICENSE OWNER may use the Confidential Information in connection
with the operation of other UNITS (in addition to the Store) pursuant to other
license or franchise agreements with COMPANY.
31
Notwithstanding anything to the contrary contained in this Agreement
and provided LICENSE OWNER shall have obtained COMPANY's prior written consent,
the restrictions on LICENSE OWNER's disclosure and use of the Confidential
Information shall not apply to the following:
(i) information, methods, procedures, techniques and
knowledge which are or become generally known in the food service
business in the Territory, other than through disclosure (whether
deliberate or inadvertent) by LICENSE OWNER or any other party having
an obligation of confidentiality to COMPANY; and
(ii) the disclosure of the Confidential Information in
judicial or administrative proceedings to the extent that LICENSE
OWNER is legally compelled to disclose such information, provided
LICENSE OWNER has notified COMPANY prior to disclosure and shall have
used its best efforts to obtain, and shall have afforded COMPANY the
opportunity to obtain, an appropriate protective order or other
assurance satisfactory to COMPANY of confidential treatment for the
information required to be so disclosed.
LICENSE OWNER agrees to disclose to COMPANY all ideas, concepts,
methods, techniques and products conceived or developed by LICENSE OWNER, its
affiliates, Owners or employees during the term of this Agreement relating to
the development and operation of UNITS, provided that LICENSE OWNER will not be
obligated to make such disclosures if doing so would violate any contractual
obligations of LICENSE OWNER (or DEVELOPER, if applicable) which:
(A) arose prior to DEVELOPER's execution of the Development
Agreement (or, if there is no Development Agreement, then which arose
prior to LICENSE OWNER's execution of this Agreement); and
(B) DEVELOPER disclosed to COMPANY in writing prior to or
upon execution of the Development Agreement.
LICENSE OWNER hereby grants to COMPANY and agrees to procure from its
Affiliates, Owners or employees a perpetual, non-exclusive, and worldwide right
to use any such ideas, concepts, methods, techniques and products in all food
service businesses operated by COMPANY or its Affiliates, licensees,
franchisees and designees. COMPANY shall have no obligation to make any lump
sum or on-going payments to LICENSE OWNER with respect to any such ideas,
concepts, methods, techniques or products. LICENSE OWNER agrees that LICENSE
OWNER will not use nor will it allow any other person or entity to use any such
concept, method, technique or product without obtaining COMPANY's prior written
approval.
10. EXCLUSIVE RELATIONSHIP
32
LICENSE OWNER acknowledges and agrees that COMPANY would be unable to
protect the Confidential Information against unauthorized use or disclosure and
would be unable to encourage a free exchange of ideas and information among
franchise owners, license owners and developers of UNITS if license owners,
franchise owners, developers and their Principal Owners (and members of their
Immediate Families) were permitted to engage in, hold interests in or perform
services for Competitive Businesses. LICENSE OWNER further acknowledges and
agrees that the restrictions contained in this Section 10 will not hinder its
activities or the activities of its Principal Owners (or member of their
Immediate Families) under this Agreement or in general. COMPANY has entered
into this Agreement with LICENSE OWNER on the express condition that, with
respect to the operation of food service businesses that sell Products, LICENSE
OWNER and its Principal Owners and members of their respective Immediate
Families will deal exclusively with COMPANY. LICENSE OWNER therefore agrees
that during the term of this Agreement, neither LICENSE OWNER nor any Principal
Owner of LICENSE OWNER, nor any member of the Immediate Family of LICENSE OWNER
or of any Principal Owner, shall directly or indirectly:
(a) have any interest as a record or beneficial owner in any
Competitive Business (this restriction shall not be applicable to the
ownership of shares of a class of securities listed on a stock
exchange or traded on the over-the-counter market and quoted on a
national inter-dealer quotation system that represent less than three
percent (3%) of the number of shares of that class of securities
issued and outstanding);
(b) perform services as a director, officer, manager,
employee, consultant, representative, agent, or otherwise for any
Competitive Business; or
(c) divert or attempt to divert any business or any customers
of any UNIT to any Competitive Business.
LICENSE OWNER also agrees that, during the term of this Agreement, neither
LICENSE OWNER nor any Principal Owner of LICENSE OWNER, nor any member of the
Immediate Family of LICENSE OWNER or a Principal Owner shall directly or
indirectly employ or seek to employ any person who is employed by COMPANY, its
Affiliates or by any other developer, franchise owner, or license owner of
UNITS, nor induce any such person to leave said employment without the prior
written consent of such person's employer.
Furthermore, if LICENSE OWNER is a corporation, limited liability
company or partnership, it will not engage in any business or other activity,
directly or indirectly, other than the development and operation of the Store
and other UNITS developed and operated pursuant to other agreements with
COMPANY.
LICENSE OWNER acknowledges and agrees that the failure of any person
or entity restricted pursuant to this Section 10 to comply with the
restrictions of this Section 10 (regardless of whether that person or entity
actually has executed this Agreement or a Confidentiality and
33
Non-Competition Agreement) shall constitute a breach of this Agreement.
The restrictions of this Section 10 shall not be construed to prohibit
LICENSE OWNER, any Principal Owner of LICENSE OWNER, or any member of the
Immediate Family of LICENSE OWNER or its Principal Owners from having a direct
or indirect ownership interest in any UNIT, development agreements, license
agreements or franchise agreements for the development or operation of UNITS,
or any entity owning, controlling or operating UNITS, or from providing
services to any such UNITS pursuant to other agreements with COMPANY.
Furthermore, the restrictions of this Section 10 shall not prohibit LICENSE
OWNER, any Principal Owner, or any member of the Immediate Family of LICENSE
OWNER or a Principal Owner (to the extent any such person is an individual)
from performing services for or having an ownership interest in a Permitted
Competitive Business, or from conducting customary promotion and advertising of
a Permitted Competitive Business. Such person(s) and business(es), if any, are
identified in Exhibit D attached to this Agreement.
11. FEES
11.A. INITIAL LICENSE FEE
LICENSE OWNER agrees to pay to COMPANY upon execution of this
Agreement an initial license fee (the "Initial License Fee") in the amount of
Thirty-Five Thousand Dollars ($35,000.00). The Initial License Fee (and any
deposits applicable thereto under the Development Agreement) shall be fully
earned by COMPANY upon the earlier of payment thereof or execution of this
Agreement. The Initial License Fee is non-refundable in whole or in part and is
paid to compensate COMPANY for various services provided to LICENSE OWNER,
including but not limited to providing initial training, furnishing plans and
specifications for the Store and inspecting the Store prior to opening. The
Initial License Fee is not compensation for the use of the Marks or the
Copyrighted Works.
11.B. ROYALTY FEE
LICENSE OWNER agrees to pay to COMPANY a continuing royalty fee (the
"ROYALTY FEE") in an amount equal to eight percent (8%) of the Store's Royalty
Base Revenue (as defined in Paragraph C of this Section). The Royalty Fee shall
be payable to COMPANY on or before the twentieth (20th) day of each Accounting
Period based on the Store's Royalty Base Revenue for the immediately preceding
Accounting Period. The Royalty Fee is paid, in part, to compensate COMPANY for
various services provided to LICENSE OWNER after the Store opens, including,
but not limited to, quality, service, and cleanliness inspections. COMPANY,
upon written notice to LICENSE OWNER shall have the right to change the timing
of LICENSE OWNER's payments of Royalty Fees and Marketing Contributions (as
defined below) due under this Agreement, provided that COMPANY shall make such
payments due no more frequently than twice each Accounting Period. LICENSE
OWNER shall not subordinate to any other obligation its obligation to pay the
Royalty Fee or any other fee or charge hereunder. Each
34
payment of Royalty Fees shall be accompanied by a report, in a form approved by
COMPANY, reflecting the calculation of the amount of the Royalty Fee remitted,
the amount of Local Expenditures (defined below) for the period covered as well
as such other information as COMPANY requires from time to time (a "Royalty
Reporting Form").
11.C. DEFINITION OF "ROYALTY BASE REVENUE"
As used in this Agreement, the term "ROYALTY BASE REVENUE" shall mean
and include the gross revenue from all sales of Products and all other products
and services sold or performed by or for LICENSE OWNER or the Store in, at,
from, or away from the Store, or through or by means of the business conducted
pursuant to this Agreement, whether for cash or credit, including any assumed
gross revenue calculated for the purpose of an insurance claim for lost profits
to the extent such claim is paid by the insurer, but excluding: (1) all sales
or service taxes collected from customers and paid or payable to the
appropriate taxing authority; (2) all customer refunds, valid discounts and
coupons, and credits made by the Store (such exclusions shall not include any
reductions for credit card user fees, returned checks or reserves for bad
credit or doubtful accounts); (3) any portion of employee meals for which
LICENSE OWNER does not charge the employee; and (4) any monies received by the
Store from other UNITS as a result of and directly attributable to any approved
Commissary operated out of the Store.
11.D. INTEREST ON LATE PAYMENTS
All fees and other amounts which LICENSE OWNER owes to COMPANY or its
Affiliates, shall bear interest after due date for the number of days which
such payment is overdue at a rate equal to the lesser of: (1) eighteen percent
(18%) per annum; or (2) the highest legal rate permitted by applicable law.
LICENSE OWNER acknowledges that this Paragraph shall not constitute COMPANY's
agreement to accept such payments after same are due or a commitment by COMPANY
to extend credit to, or otherwise finance LICENSE OWNER's operation of the
Store. Further, LICENSE OWNER acknowledges that failure to pay all such amounts
when due shall, notwithstanding the provisions of this Paragraph, constitute
grounds for termination of this Agreement, as provided in this Agreement.
11.E. APPLICATION OF PAYMENTS
Notwithstanding any designation by LICENSE OWNER, COMPANY shall have
sole discretion to apply any payments received from LICENSE OWNER or any
indebtedness of COMPANY to LICENSE OWNER, to any past due indebtedness, of
whatever nature, of LICENSE OWNER to COMPANY or its Affiliates.
11.F. ELECTRONIC FUNDS TRANSFER
COMPANY reserves the right to require LICENSE OWNER to remit fees and
other amounts due to COMPANY hereunder via electronic funds transfer or other
similar means
35
utilizing the Computer System or otherwise. If COMPANY notifies LICENSE OWNER
to use such payment method, LICENSE OWNER agrees to comply with procedures
specified by COMPANY and/or perform such acts and deliver and execute such
documents, including authorization (in the form attached hereto as Exhibit I or
such other form as COMPANY shall accept) for direct debits from LICENSE OWNER's
business bank operating account, as may be necessary to assist in or accomplish
payment by such method. Under this procedure LICENSE OWNER shall authorize
COMPANY to initiate debit entries and/or credit correction entries to a
designated checking or savings account for payments of fees and other amounts
payable to COMPANY and its Affiliates and any interest charges due thereon.
LICENSE OWNER shall make the funds available to COMPANY for withdrawal by
electronic transfer no later than the due date for payment therefor. If LICENSE
OWNER has not timely reported the Store's Royalty Base Revenue to COMPANY for
any reporting period, then COMPANY shall be authorized, at COMPANY's option, to
debit LICENSE OWNER's account in an amount equal to (a) the fees transferred
from LICENSE OWNER's account for the last reporting period for which a report
of the Store's Royalty Base Revenue was provided to COMPANY as required
hereunder or (b) the amount due based on information retrieved from the
Computer System.
12. STORE IMAGE AND OPERATION
12.A. CONDITION AND APPEARANCE OF THE STORE
LICENSE OWNER agrees that:
(1) neither the Store nor the Site will be used for any
purpose other than the operation of a UNIT in full compliance with
this Agreement; and
(2) LICENSE OWNER will maintain the condition and appearance
of the Store, its equipment, furnishings, fixtures, signs and vehicles
in accordance with the specifications and standards of COMPANY and
consistent with the image of a UNIT as a first-class, clean, sanitary,
attractive and efficiently operated food service business; and
(3) LICENSE OWNER will perform such maintenance (including,
without limitation, maintenance procedures and routines which COMPANY
prescribes from time to time) with respect to the decor, equipment,
fixtures, furnishings, vehicles, and signs of the Store and the Site,
as may be required or directed by COMPANY from time to time to
maintain such condition, appearance, and efficient operation,
including, without limitation:
(a) continuous and thorough cleaning and sanitation of
the interior and exterior of the Store; and
(b) thorough repainting and redecorating of the interior
and exterior of the Store and/or the Site at reasonable
intervals; and
36
(c) interior and exterior repair of the Store and/or the
Site; and
(d) repair or replacement of damaged, worn out or
obsolete furnishings, equipment, vehicles, fixtures and
signs; and
(4) LICENSE OWNER will not make any material alterations to
the Site, or to the appearance of the Store as originally developed,
without the prior approval of COMPANY; and
(5) subject to approval by COMPANY of plans, layouts and
designs, LICENSE OWNER will remodel, expand, redecorate, re-equip and
refurnish the Site and the Store at reasonable intervals determined by
COMPANY to reflect changes in the appearance and operation of UNITS
prescribed by COMPANY and required of new UNIT license owners and
franchise owners provided that:
(a) COMPANY has initiated a program to begin such
changes with respect to other UNITS operated within the
Marketing Area, to the extent COMPANY has the contractual
right to require any such UNITS to do so; and
(b) LICENSE OWNER shall have a reasonable time period
remaining in the term of this Agreement (not less than five
(5) years) to amortize the costs of such improvements, or
equipment (excluding the Computer System, Licensed Program
and/or Specified Software), vehicles, fixtures and
furnishings;
it being understood and agreed by LICENSE OWNER that the provision of
Delivery Service from the Store and/or Catering Service from a
Catering Facility, if authorized or required by COMPANY, may require
LICENSE OWNER to incur additional costs to obtain equipment, vehicles,
fixtures, furnishings and furniture and improve the Store to provide
such services in accordance with COMPANY's standards and
specifications therefor; and
(6) LICENSE OWNER will place or display at the Store
(interior and exterior) only such signs, emblems, lettering, logos,
and display and advertising materials that are from time to time
approved by COMPANY.
In addition to any other remedies available to COMPANY, if LICENSE
OWNER does not maintain the condition and appearance of the Store as herein
required, COMPANY may, upon not less than ten (10) days' written notice (or, in
cases of health or sanitation hazards or other public endangerment, as
determined by COMPANY, in its sole discretion, immediately on oral or written
notice) to LICENSE OWNER:
(i) arrange for the necessary cleaning or sanitation, repair,
remodeling, upgrading, painting or decorating; or
37
(ii) replace, as necessary, fixtures, furnishings, equipment,
vehicles, or signs.
LICENSE OWNER shall pay the entire cost thereof on or before the fifth (5th)
day following the receipt of a bill for such work from COMPANY.
12.B. STORE MENU AND SERVICES
LICENSE OWNER agrees that the Store shall (1) offer for sale all
Products and all promotional and related items (for example, T-shirts, cups,
mugs, caps, hats and similar items) as may be directed by COMPANY from time to
time (and no other products) and (2) provide only the following services (and
no other services): (a) the carry-out service and on-premises dining that
COMPANY authorizes and requires, (b) the Delivery Service that COMPANY, in its
sole discretion, may authorize and/or require from time to time for the Store
pursuant to a Delivery Rider and (c) the Catering Service that COMPANY in its
sole discretion may authorize and/or require from time to time to provide from
the Store (or a Catering Facility) pursuant to a Catering Rider, all in
accordance with COMPANY's specifications, standards and procedures. LICENSE
OWNER agrees that the Store shall not under any circumstances offer for sale or
sell any products or services at or from the Store which have not been approved
by COMPANY prior to such offer or sale. LICENSE OWNER also acknowledges and
agrees that the preparation and packaging of Products for purposes of carry-out
service, on-premises dining, Delivery Service and Catering Service is important
to the image of the System, and that, therefore, LICENSE OWNER shall not sell
any Products that have not been prepared and packaged in accordance with
COMPANY's specifications, standards and procedures prescribed in the Store
Manuals or otherwise in writing. LICENSE OWNER also acknowledges and agrees
that if COMPANY requires the Store to offer new or substitute products or
services not currently offered at UNITS, LICENSE OWNER agrees to offer such
services and/or products in compliance with COMPANY's specifications, standards
and procedures and to diligently pursue obtaining any permits and take such
actions (including, without limitation, constructing improvements and acquiring
fixtures, furnishings, equipment, supplies and materials) required to offer
such products and/or services. LICENSE OWNER acknowledges and understands that
such modifications to the services and/or products to be offered by the Store
may require LICENSE OWNER to incur additional costs and expenses to operate the
Store, including, without limitation, the purchase and/or lease of additional
or substitute furnishings, furniture, fixtures, vehicles or equipment for
Catering Service and/or Delivery Service, and LICENSE OWNER agrees to incur
such expenses in connection therewith.
LICENSE OWNER acknowledges that COMPANY may conduct quality, service,
cleanliness, and other inspections of the Store from time to time without
notice to LICENSE OWNER to determine compliance with this Agreement and the
standards and specifications applied by COMPANY from time to time and that
performance meeting COMPANY's standards in such inspections is required
hereunder. COMPANY also may designate an independent
38
evaluation service to conduct a "mystery shopper" quality control and
evaluation program with respect to COMPANY-owned, licensed and/or franchised
UNITS. LICENSE OWNER agrees that the Store will participate in such mystery
shopper program, as prescribed and required by COMPANY, provided that
COMPANY-owned, and franchised UNITS also will participate in such program to
the extent COMPANY has the right to require such participation. LICENSE OWNER
agrees to timely pay the then-current charges imposed by such evaluation
service for the Store's participation in such program.
12.C. APPROVED PRODUCTS, DISTRIBUTORS AND SUPPLIERS
The reputation and goodwill of all UNITS are based upon, and can only
be maintained by, the sale of distinctive, high-quality Products, and the
presentation, packaging and service of Products in an efficient and appealing
manner. COMPANY has developed and shall continue to develop certain proprietary
food products which will be prepared by or for COMPANY according to COMPANY's
proprietary recipes and formulas. COMPANY also has developed and may continue
to develop standards and specifications for bagels and other food products,
ingredients, spreads, seasonings, spices, mixes, teas, coffees and other
beverages, materials and supplies incorporated in or used in the preparation,
freezing, baking, cooking, serving, packaging, catering and delivery of
prepared food products authorized for sale at or from UNITS.
COMPANY has approved and shall review and continue to approve
suppliers and distributors of the foregoing products, supplies and materials
that meet its standards and requirements including, without limitation,
standards and requirements relating to quality, quantity and portions, prices,
volume capability, frequency of delivery, distribution methods and locations,
standards of service, including prompt attention to complaints, consistency,
reliability, financial capability, labor and customer relations and other
criteria. LICENSE OWNER agrees that the Store shall:
(1) purchase those Products which are COMPANY's private label
food products, materials, supplies and proprietary food products
developed by or for COMPANY or its Affiliates whether or not pursuant
to a special recipe or formula or bearing the Marks (collectively
"PROPRIETARY ITEMS") only from COMPANY or designees required and
licensed by COMPANY to manufacture, prepare, distribute and/or sell
such products;
(2) purchase only from distributors and suppliers approved or
required by COMPANY all other goods and items authorized to be sold in
the Store, and other materials and supplies used in the preparation,
freezing, baking, cooking, serving, packaging, delivery and catering
of Products and equipment, menus, forms, paper and plastic products,
packaging or other materials (collectively "SUPPLIES AND MATERIALS");
and
39
(3) purchase only from distributors and suppliers approved or
required by COMPANY all Products other than Proprietary Items
("NON-PROPRIETARY PRODUCTS").
COMPANY may, in its sole discretion, designate which Products constitute
Proprietary Items, and which of such Proprietary Items: (a) are required to be
purchased from COMPANY or its designated suppliers; or (b) may be produced
and/or prepared at the Store. COMPANY may from time to time modify the list of
approved or required suppliers and distributors, and may designate itself or an
Affiliate as a required manufacturer, supplier and/or distributor of certain
equipment, products, materials, supplies or other items. LICENSE OWNER shall
not, after receipt in writing of such modification, reorder any product from
any supplier or distributor that is no longer approved. COMPANY may approve or
require a single distributor or supplier for any products, materials or
supplies and may approve or require a distributor or supplier only as to
certain products, materials and supplies, and such approval may be temporary
pending a further evaluation of such distributor or supplier by COMPANY.
COMPANY may concentrate purchases with one or more distributors or suppliers to
obtain lower prices and/or advertising support and/or services for the benefit
of the System and/or UNITS. COMPANY may establish COMPANY or Affiliate-owned
and operated food commissaries and distribution facilities which COMPANY may
designate as an approved or required distributor or supplier.
LICENSE OWNER shall notify COMPANY and submit to COMPANY such
information, specifications and samples as COMPANY requests if the LICENSE
OWNER proposes to purchase any Products or Supplies and Materials from a
distributor or supplier whom COMPANY has disapproved or not previously
approved. COMPANY shall use its reasonable best efforts to notify LICENSE OWNER
within one hundred twenty (120) days after receipt of all requested information
and materials whether LICENSE OWNER is authorized to purchase such products
from such distributor or supplier. If LICENSE OWNER fails to receive a notice
of approval or disapproval within such one hundred twenty (120) day period,
LICENSE OWNER may not purchase such products from such distributor or supplier.
COMPANY may require LICENSE OWNER to reimburse COMPANY for its reasonable costs
incurred in connection with the evaluation, inspection and supervision of such
distributor or supplier.
LICENSE OWNER shall at all times maintain an adequate inventory of
approved food and paper products, beverages, ingredients and other products
sufficient in quality and variety to realize the full potential of the Store.
LICENSE OWNER acknowledges and agrees that COMPANY may, in its sole
discretion, collect and retain all allowances, benefits, credits, monies,
payments or rebates (collectively "PROMOTIONAL ALLOWANCES") offered to LICENSE
OWNER or COMPANY or its Affiliates by manufacturers, suppliers and distributors
for promotional or advertising purposes based upon LICENSE OWNER's purchases of
Proprietary Items, Supplies and Materials and Non-Proprietary Products. LICENSE
OWNER assigns to COMPANY or its designee all of LICENSE OWNER's right, title
and interest in and to any and all such Promotional Allowances for authorizes
COMPANY or its designee to collect any such Promotional Allowances for
40
remission to: (a) the Marketing Fund (defined below) to the extent based on
LICENSE OWNER's purchase of Non-Proprietary Products and Supplies and
Materials, except as provided in clause (b) following; and (b) the general
operating funds of COMPANY to the extent based on LICENSE OWNER's purchases of
Proprietary Items, regardless of where purchased, as well as Non-Proprietary
Products and Supplies and Materials purchased from COMPANY or its Affiliates.
LICENSE OWNER acknowledges and agrees that under no circumstances will COMPANY
or its Affiliates be required to contribute to the Marketing Fund any revenue
made or collected by COMPANY or its Affiliates from sales to or purchases by
LICENSE OWNER of any goods or services.
12.D. SPECIFICATIONS, STANDARDS AND PROCEDURES
LICENSE OWNER acknowledges that the operation of the Store in strict
compliance with COMPANY's high standards is important to COMPANY and other
UNITS and LICENSE OWNER agrees to maintain such high standards in the operation
of the Store. The Store and all Products used and offered for sale at the Store
shall at all times be maintained in a safe and sanitary condition. LICENSE
OWNER agrees to comply strictly with all of COMPANY's mandatory specifications,
standards and operating procedures relating to the appearance, function,
cleanliness, days and hours of operation (days and hours of operation may vary
somewhat among UNITS based on COMPANY's reasonable judgment of the requirements
of the Store's trade area and whether COMPANY has approved any special services
to be offered at or from a site), and operation of a UNIT, including, but not
limited to:
(1) type, brand, quality, taste, weight, dimensions,
ingredients, uniformity, manner of preparation, preservation and sale
of all Products and Supplies and Materials; and
(2) sales and marketing procedures and customer service; and
(3) advertising and promotional programs; and
(4) layout, decor and color scheme of the Store; and
(5) recruitment, selection, training, appearance and dress of
employees, including, without limitation, use of COMPANY's employee
selection and training materials; and
(6) safety, maintenance, appearance, cleanliness, sanitation,
standards of service and operation of the Store; and
(7) submission of requests for approval of brands of food and
packaging products, supplies and suppliers; and
41
(8) use and illumination of signs, posters, displays,
standard formats and similar items; and
(9) identification of LICENSE OWNER as the owner of the
Store; and
(10) types of and use of fixtures, furnishings, equipment,
computer hardware and software, vehicles, and signs; and
(11) carry-out, on-premises dining and (if authorized by
COMPANY and agreed to by LICENSE OWNER) Delivery Service, Catering
Service and Special Distribution Arrangements; and
(12) required and approved menu items; and
(13) general staffing levels for the Store and number, type
and qualifications of Store personnel; and
(14) participation in market research and test programs
required or approved by COMPANY concerning various aspects of the
System, including, without limitation, procedures, systems,
techniques, furnishings, fixtures, equipment, ingredients, signs,
labels, trade dress, logos, packaging, supplies, marketing materials
and strategies, merchandising and new menu items and services. LICENSE
OWNER agrees, if requested by COMPANY, to participate in COMPANY's
customer surveys and market research programs.
LICENSE OWNER acknowledges and agrees that all mandatory specifications,
standards and operating and inspection procedures prescribed from time to time
by COMPANY in the Store Manuals or otherwise communicated to LICENSE OWNER in
writing, shall constitute binding obligations on the part of LICENSE OWNER as
if fully set forth herein, and any failure by LICENSE OWNER to adhere to such
mandatory specifications, standards and operating and inspection procedures or
to pass COMPANY's periodic quality control inspections shall constitute grounds
for termination of this Agreement by COMPANY, as provided for herein. All
references herein to this Agreement shall include all such mandatory
specifications, standards, and operating procedures.
12.E. COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES
LICENSE OWNER shall secure and maintain in force in its name all
required licenses, permits, and certificates relating to the conduct of its
business pursuant to this Agreement. LICENSE OWNER shall comply with all
applicable laws, ordinances and regulations, including, without limitation,
laws and governmental regulations relating to the preparation, purchase and
handling of food products, Delivery Service, Catering Service and Special
Distribution Arrangements (if applicable), occupational hazards, health, safety
and sanitation, worker's
42
compensation insurance, unemployment insurance, and withholding and payment of
all taxes. All advertising by LICENSE OWNER shall be approved by COMPANY and be
completely factual, in good taste in the judgment of COMPANY, and shall conform
to high standards of ethical advertising. LICENSE OWNER shall in all dealings
with its customers, suppliers, COMPANY, and public officials adhere to high
standards of honesty, integrity, fair dealing and ethical conduct. LICENSE
OWNER agrees to refrain from any business or advertising practice which may be
injurious to the business of COMPANY and the goodwill associated with the Marks
and other UNITS. LICENSE OWNER shall notify COMPANY in writing:
(1) within three (3) days after the commencement of any
action, suit, proceeding or issuance of any order, writ, injunction,
award, or decree of any court, agency, or other governmental
instrumentality, which may adversely affect the operation or financial
condition of LICENSE OWNER or the Store; or
(2) immediately upon the receipt of any notice of violation
of any law, ordinance or regulation relating to health, sanitation or
the operation of the Store.
12.F. MANAGEMENT AND PERSONNEL OF THE STORE
LICENSE OWNER (or the persons identified as supervising Owners in
Exhibit E hereto) shall supervise and oversee the operation of the Store.
LICENSE OWNER shall employ and maintain at all times during the term of this
Agreement at least one (1) Store Manager and one (1) Additional Manager at the
Store. The Store Manager shall be the full-time manager of the Store and the
Additional Manager shall perform on a full-time basis such other operations for
LICENSE OWNER as COMPANY may reasonably specify from time to time and both must
successfully complete to COMPANY's satisfaction a COMPANY certified initial
management training program for the operation of the Store. LICENSE OWNER also
shall employ the number of assistant managers and other personnel required for
adequate staffing of the Store, and shall at all times keep COMPANY advised of
the identities of the Store Manager, Additional Manager and assistant managers.
COMPANY shall have the right to deal with the Store Manager, Additional Manager
and assistant managers on matters pertaining to day-to-day operations of, and
reporting requirements for, the Store. The Store at all times shall be under
the direct, on-site supervision of the Store Manager, Additional Manager or an
assistant manager who has completed a training program conducted by COMPANY or
DEVELOPER (if applicable) and who has been certified under the terms of the
Development Agreement. LICENSE OWNER shall provide the Store Manager with a
compensation program reasonably acceptable to COMPANY designed to provide an
incentive to the Store Manager to use diligent efforts to cause the Store to be
operated in a profitable manner.
LICENSE OWNER shall hire all employees of the Store and shall be
exclusively responsible for the terms of their employment and compensation and
for the proper training of such employees in the operation of the Store.
43
12.G. INSURANCE
During the term of this Agreement, LICENSE OWNER shall maintain in
force, under policies of insurance issued by insurers rated "A-" or better by
Alfred M. Best & Company, Inc. and approved by COMPANY:
(1) such insurance as is necessary to comply with all legal
requirements concerning insurance coverage (including, without
limitation, workers' compensation requirements), and insurance
coverage for persons attending COMPANY training programs on behalf of
LICENSE OWNER;
(2) commercial general liability insurance (including, but
not limited to, coverage for motor vehicles used in the development
and operation of the Store, whether or not owned by LICENSE OWNER),
against claims for bodily and personal injury, death and property
damage caused by or occurring in conjunction with the operation of the
Store or otherwise in conjunction with the conduct of business by
LICENSE OWNER pursuant to this Agreement, under one or more policies
of insurance containing minimum liability coverage prescribed by
COMPANY from time to time; and
(3) all risk property and casualty insurance for the
replacement value of the Store and its contents (including leasehold
improvements, furnishings, fixtures, equipment, the Computer System,
signs, inventory, supplies, and materials).
COMPANY may periodically increase the amounts of coverage required
under such insurance policies and require different or additional kinds of
insurance at any time, including excess liability insurance, to reflect
inflation, identification of new risks, changes in law or standards of
liability, higher damage awards, or other relevant changes in circumstances.
Each insurance policy shall name COMPANY as an additional named insured, shall
contain a waiver of all subrogation rights against COMPANY, its Affiliates, and
their successors and assigns, and shall provide for thirty (30) days' prior
written notice to COMPANY of any material modification, cancellation, or
expiration of such policy. The maintenance of insurance coverage that meets the
minimum requirements described in this Section and such additional coverages
which LICENSE OWNER determines are appropriate for its particular circumstances
shall be the responsibility of LICENSE OWNER.
Upon execution of this Agreement, LICENSE OWNER shall provide COMPANY
with evidence of the insurance required under this Agreement. Thereafter, prior
to the expiration of the term of each insurance policy, LICENSE OWNER shall
furnish COMPANY with a copy of each renewal or replacement insurance policy to
be maintained by LICENSE OWNER for the immediately following term and evidence
of the payment of the premium therefor. If LICENSE OWNER fails or refuses to
maintain required insurance coverage, or to furnish satisfactory evidence
thereof and the payment of the premiums therefor, COMPANY, at its option and in
addition to its other rights and remedies under this Agreement, may obtain such
insurance
44
coverage on behalf of LICENSE OWNER and LICENSE OWNER shall fully cooperate
with COMPANY in its effort to obtain such insurance policies, promptly execute
all forms or instruments required to obtain or maintain any such insurance,
allow any inspections of the Store or vehicles which are required to obtain or
maintain such insurance, and pay to COMPANY, on demand, any costs and premiums
incurred by COMPANY.
LICENSE OWNER's obligations to maintain insurance coverage as herein
described shall not be affected in any manner by reason of any separate
insurance maintained by COMPANY, nor shall the maintenance of such insurance
relieve LICENSE OWNER of any indemnification obligations under this Agreement.
12.H. CREDIT CARDS AND OTHER METHODS OF PAYMENT
LICENSE OWNER shall at all times have arrangements in existence with a
full range of credit and debit card issuers or sponsors, check verification
services and electronic fund transfer systems as COMPANY designates in its sole
discretion from time to time in order that the Store may accept customers'
credit and debit cards, checks and other methods of payment. LICENSE OWNER
shall use only such methods of payment which COMPANY authorizes or approves.
13. ADVERTISING
13.A. MARKETING FUND
Recognizing the value of advertising and marketing to the goodwill and
public image of UNITS, COMPANY has instituted and LICENSE OWNER agrees that
COMPANY or its designee shall maintain and administer a marketing fund (the
"MARKETING FUND") for such advertising, media placement, marketing and public
relations programs, research and related activities as COMPANY, in its sole
discretion, may deem necessary or appropriate to generally promote UNITS and/or
the System. LICENSE OWNER shall contribute to the Marketing Fund two percent
(2%) of the Store's Royalty Base Revenue (without credit for any Promotional
Allowances collected by COMPANY and contributed pursuant to Section 12.C.),
payable to COMPANY by separate check or transfer at the same time and in the
same manner as the Royalty Fees due hereunder. UNITS which are owned by COMPANY
or its Affiliates, to the extent COMPANY has the right to require such
Affiliates to do so, shall contribute to the Marketing Fund on the same basis
as LICENSE OWNER. COMPANY shall have the right to require LICENSE OWNER from
time to time to increase LICENSE OWNER'S Marketing Fund contributions up to one
fourth of one percent (0.25%) per year.
COMPANY shall direct all advertising, media placement, marketing and
public relations programs and activities financed by the Marketing Fund, with
sole discretion over the strategic direction, creative concepts, materials and
endorsements used therein, and the geographic, market, and media placement and
allocation thereof. LICENSE OWNER agrees that the Marketing Fund may be used to
pay various costs and expenses, including, by way of example
45
and without limitation: preparing and producing video, audio and written
advertising materials; interest on borrowed funds; sponsorship of sporting,
charitable or similar events; reasonable salaries and expenses of employees of
COMPANY or its Affiliates working for or on behalf of the Marketing Fund or on
advertising, marketing, public relations materials, programs, or activities or
promotions for the benefit of the Marketing Fund and administrative costs and
overhead of COMPANY or its Affiliates incurred in activities reasonably related
to the administration of the Marketing Fund; administering advertising
programs, including, without limitation, purchasing direct mail and other media
advertising and employing advertising agencies to assist therewith; and
supporting public relations, market and consumer research and other
advertising, promotional and marketing activities, including testing and test
marketing programs, fulfillment charges, and development, implementation and
testing of Trade Dress and design prototypes. LICENSE OWNER agrees to
participate in all advertising, marketing, promotions, research and public
relations programs instituted by the Marketing Fund. The Marketing Fund shall
furnish LICENSE OWNER with reasonable quantities of marketing, advertising and
promotional formats and sample materials at cost.
The Marketing Fund shall be accounted for separately, but shall not be
required to be segregated, from the other funds of COMPANY and shall not be
used to defray any of COMPANY's general operating expenses, except for such
reasonable salaries, administrative costs and overhead as COMPANY may incur in
activities reasonably related to the administration and activities of the
Marketing Fund and creation or conduct of its marketing programs including,
without limitation, conducting market research, preparing advertising and
marketing materials and collecting and accounting for contributions to the
Marketing Fund. COMPANY may spend in a fiscal year an amount greater or less
than the aggregate contributions of all UNITS to the Marketing Fund in that
year. The Marketing Fund may borrow from COMPANY or other lenders at standard
commercial interest rates to cover deficits of the Marketing Fund or cause the
Marketing Fund to invest any surplus for future use by the Marketing Fund. All
interest earned on monies contributed to the Marketing Fund will be used to pay
costs of the Marketing Fund before other assets of the Marketing Fund are
expended. A summary statement of monies collected and costs incurred by the
Marketing Fund for COMPANY's immediately preceding fiscal year shall be made
available to LICENSE OWNER upon LICENSE OWNER's written request. COMPANY will
have the right to cause the Marketing Fund to be incorporated or operated
through an entity separate from COMPANY at such time as COMPANY deems
appropriate, and such successor entity shall have all rights and duties of
COMPANY pursuant to this Paragraph A.
Notwithstanding anything in this Agreement to the contrary, under no
circumstances will COMPANY or its Affiliates be required to contribute to the
Marketing Fund any revenue or profits (or an portion thereof) made or collected
by COMPANY or its Affiliates from sales to or purchases by LICENSE OWNER of any
goods or services.
LICENSE OWNER understands and acknowledges that the Marketing Fund is
intended to maximize recognition of the Marks and the System generally.
Although COMPANY will
46
endeavor to utilize the Marketing Fund to develop advertising and marketing
materials and programs, and to place advertising in order to benefit all UNITS,
COMPANY undertakes no obligation to ensure that expenditures by the Marketing
Fund in or affecting any geographic area are proportionate or equivalent to the
contributions to the Marketing Fund by UNITS operating in that geographic area
or that any UNIT will benefit directly or in proportion to its contribution to
the Marketing Fund from the development of advertising and marketing materials
or the placement of advertising. COMPANY may use the Marketing Fund to promote
any type of UNIT in the System. LICENSE OWNER acknowledges that its failure to
derive any such benefit will not serve as a basis for a reduction or
elimination of its obligation to contribute to the Marketing Fund. LICENSE
OWNER further acknowledges and agrees that the failure (whether with or without
COMPANY's permission) of any other license owner to make the appropriate amount
of contributions to the Marketing Fund shall not in any way release LICENSE
OWNER from or reduce LICENSE OWNER's obligations under this Paragraph A., such
obligations being separate and independent obligations of LICENSE OWNER under
this Agreement. Except as expressly provided in this Paragraph A., COMPANY
assumes no direct or indirect liability or obligation to LICENSE OWNER with
respect to the maintenance, direction, or administration of the Marketing Fund.
LICENSE OWNER understands and acknowledges that the monies it
contributes to the Marketing Fund shall be combined with contributions of other
license owners and franchise owners in the System, including those franchise
owners and license owners in the System that may operate their UNITs under
different brand names or Marks, or with trade dress and operations that differ
from LICENSE OWNER'S. Contributions to the Marketing Fund made by LICENSE OWNER
may be used to promote UNITS and brands that differ from the type of UNIT
LICENSE OWNER operates and the brands LICENSE OWNER uses, and contributions to
the Marketing Fund made by license owners in the System that use brands and
operate UNITS that differ from LICENSE OWNER'S brands and UNIT may be used to
promote the type of UNIT LICENSE OWNER operates. COMPANY undertakes no
obligation to insure that Marketing Fund monies will be spent to promote
various types of UNITS using various brands in proportion to the Marketing Fund
contributions made by franchise owners and license owners in the System of such
types of UNITS or using those brands.
COMPANY reserves the right, in its sole discretion, to suspend
contributions to and operations of the Marketing Fund for such periods that it
determines to be appropriate and to terminate the Marketing Fund upon written
notice to LICENSE OWNER. All unspent monies on the date of termination shall be
distributed to COMPANY and franchise owners and license owners in proportion to
their respective contributions to the Marketing Fund during the preceding
twelve (12) month period. COMPANY has the right to reinstate the Marketing Fund
upon the same terms and conditions set forth herein upon thirty (30) days'
prior written notice to LICENSE OWNER.
13.B. LOCAL ADVERTISING FUND
47
LICENSE OWNER agrees that, unless otherwise notified by COMPANY, in
its sole discretion, LICENSE OWNER shall participate in a local advertising
fund (a "Local Ad Fund") comprised of the UNIT(s) (including those owned by
COMPANY or its Affiliates, or other franchise owners or license owners, to the
extent COMPANY has the right to require any such Affiliate, license owner or
franchise owner to do so) located in the same Marketing Area (subject to the
rights of other license owners and franchise owners under their license
agreements or franchise agreements with COMPANY). COMPANY shall establish,
maintain and administer the Local Ad Fund for such advertising, media
placement, marketing and public relations programs and related activities as
COMPANY, in its sole discretion, may deem necessary or appropriate to promote
UNITS in the Marketing Area. LICENSE OWNER shall contribute to such Local Ad
Fund up to four percent (4%) of the Store's Royalty Base Revenue as determined
by COMPANY from time to time for each Accounting Period in which it
participates in the Local Ad Fund.
COMPANY shall have the right to require LICENSE OWNER from time to
time to increase LICENSE OWNER's Local Ad Fund contributions above four percent
(4%) up to one fourth of one percent (0.25%) each year. Amounts paid to such
Local Ad Fund by LICENSE OWNER shall be payable to COMPANY by separate check or
transfer at the same time and in the same manner as the Royalty Fees and
Marketing Fund Contributions due under this Agreement. UNITS located in the
same Marketing Area which are owned by COMPANY or its Affiliates, to the extent
COMPANY has the right to require such Affiliates to do so, shall contribute to
such Local Ad Fund on the same basis as license owners and franchise owners who
are members of such Local Ad Fund. Notwithstanding the foregoing, LICENSE OWNER
acknowledges and agrees that it may be required from time to time to contribute
to the Local Ad Fund an amount greater than that provided for herein to enable
the commencement and combination of "Required Television Advertising" (as
defined in the Development Agreement) as required pursuant to the Development
Agreement.
COMPANY or its designee shall direct all advertising, media placement,
marketing and public relations programs and activities of the Local Ad Fund,
with sole discretion over the strategic direction, creative concepts, materials
and endorsements used therein, and the geographic, market, and media placement
and allocation thereof within the Marketing Area. LICENSE OWNER may consult
with and advise COMPANY concerning activities of the Local Ad Fund. LICENSE
OWNER agrees that the Local Ad Fund may be used to pay the costs of: preparing,
adapting and producing video, audio and written advertising materials; interest
on borrowed funds; sponsorship of sporting, charitable or similar events;
reasonable salaries and expenses of employees of COMPANY or its Affiliates
working for or on behalf of the Local Ad Fund or on advertising, marketing,
public relations materials, programs, or activities or promotions for the
benefit of the Local Ad Fund and administrative costs and overhead of COMPANY
or its Affiliates incurred in activities reasonably related to the
administration or activities of the Local Ad Fund; administering advertising
programs, including, without limitation, purchasing direct mail and other media
advertising and employing advertising agencies to assist therewith; and
supporting public relations, market research and other
48
advertising, promotional and marketing activities, including testing and test
marketing, fulfillment charges and development, implementation, and testing of
Trade Dress and design prototypes. LICENSE OWNER agrees to participate in all
advertising, promotional events and public relations programs instituted by the
Local Ad Fund.
The Local Ad Fund shall be accounted for separately, but shall not be
required to be segregated, from the other funds of COMPANY and shall not be
used to defray any of COMPANY's general operating expenses, except for such
reasonable salaries, administrative costs and overhead as COMPANY may incur in
activities reasonably related to the administration or activities of the Local
Ad Fund and creation or conduct of its marketing programs (including, without
limitation, conducting marketing research, preparing advertising and marketing
materials and collecting and accounting for contributions to the Local Ad
Fund). COMPANY may spend in any fiscal year an amount greater or less than the
aggregate contributions of all UNITS to the Local Ad Fund in that year. The
Local Ad Fund may borrow from COMPANY or other lenders at standard commercial
interest rates to cover deficits of the Local Ad Fund or cause the Local Ad
Fund to invest any surplus for its future use. All interest earned on monies
contributed to the Local Ad Fund will be used to pay costs of the Local Ad Fund
before other assets are expended. A summary statement of monies collected and
costs incurred by the Local Ad Fund for COMPANY's immediately preceding fiscal
year shall be made available to LICENSE OWNER upon LICENSE OWNER's written
request. COMPANY will have the right to cause the Local Ad Fund to be
incorporated or operated through an entity separate from COMPANY at such time
as COMPANY deems appropriate, and such successor entity shall have all rights
and duties of COMPANY pursuant to this Paragraph B.
LICENSE OWNER understands and acknowledges that the Local Ad Fund is
intended to maximize recognition of the Marks and patronage of UNITS in the
Marketing Area. Although COMPANY will endeavor to utilize the Local Ad Fund to
develop advertising and marketing materials and programs, and to place
advertising in order to benefit all UNITS in the Marketing Area, COMPANY
undertakes no obligation to ensure that any UNIT in the Marketing Area will
benefit directly or in proportion to its contribution to the Local Ad Fund from
the development of advertising and marketing materials or the placement of
advertising by the Local Ad Fund. The COMPANY may use the Local Ad Fund to
promote any type of UNIT in the System. LICENSE OWNER acknowledges that its
failure to derive any such benefit will not serve as a basis for a reduction or
elimination of its obligation to contribute to the Local Ad Fund. LICENSE OWNER
further acknowledges and agrees that the failure (whether with or without
COMPANY's permission) of any other license owner or franchise owner to make the
appropriate amount of contributions to the Local Ad Fund shall not in any way
release LICENSE OWNER from or reduce LICENSE OWNER's obligations under this
Paragraph B., such obligations being separate and independent obligations of
LICENSE OWNER under this Agreement. Except as expressly provided in this
Paragraph B., COMPANY assumes no direct or indirect liability or obligation to
LICENSE OWNER with respect to the maintenance, direction, or administration of
the Local Ad Fund.
49
COMPANY reserves the right, in its sole discretion, to suspend
contributions to and operations of the Local Ad Fund for such periods that it
determines to be appropriate and to terminate the Local Ad Fund upon written
notice to LICENSE OWNER. All unspent monies on the date of termination shall be
distributed to COMPANY and license owners and franchise owners in proportion to
their respective contributions to the Local Ad Fund during the preceding twelve
(12) month period. COMPANY has the right to reinstate the Local Ad Fund upon
the same terms and conditions set forth herein upon thirty (30) days' prior
written notice to LICENSE OWNER. In the event that COMPANY terminates or
suspends operation of the Local Ad Fund, LICENSE OWNER shall spend as Local
Expenditures (defined below) at least such percentage of the Royalty Base
Revenue of the Store as shall be equal to the percentage which could have been
required to be paid to the Local Ad Fund under this Paragraph B.
13.C. ADVERTISING BY LICENSE OWNER
During each Accounting Period during the term of this Agreement in
which the Store does not participate in a Local Ad Fund during such Accounting
Period, LICENSE OWNER shall conduct local advertising and promotion for the
Store. Expenditures for such required advertising and promotion are referred to
herein as "LOCAL EXPENDITURES". LICENSE OWNER shall make Local Expenditures
during each Accounting Period during which the Store does not participate in
the Local Ad Fund of at least such percentage of the Store's Royalty Base
Revenue as shall be equal to the percentage which could have been required to
be paid to the Local Ad Fund under Paragraph B of this Section for such
Accounting Period. The following shall not count as Local Expenditures: (1)
moneys spent on classified telephone directory listings and advertisements,
advertising and promotional expenses required under the lease for the Store and
discounts and the redemption of coupons; and (2) the cost of goods or services
supplied without charge. Amounts spent for local advertising and promotion of
the Store shall not be credited toward LICENSE OWNER's Local Expenditures under
this Agreement to the extent that LICENSE OWNER is reimbursed for such
expenditures by, or such expenditures are made by, a supplier of the Store.
Prior to their use by LICENSE OWNER, samples of all advertising and
promotional materials not prepared or previously approved by COMPANY shall be
submitted to COMPANY for approval, in the form and manner prescribed by COMPANY
from time to time. If approval is not granted by COMPANY within fifteen (15)
days from the date of receipt by COMPANY of such materials, COMPANY shall be
deemed to have disapproved the submitted materials. LICENSE OWNER shall not use
any advertising or promotional materials that COMPANY has not approved, has
disapproved or that do not include the copyright registration notices and
trademark registration notices designated by COMPANY. COMPANY, in its sole
discretion, may disapprove on a prospective basis materials that it had
previously approved.
In order to promote efficiency and coordination of advertising of
UNITS, LICENSE OWNER shall only utilize advertising agencies designated by
COMPANY for the placement of local advertising with the various media.
50
14. ACCOUNTING, REPORTS AND FINANCIAL STATEMENTS
LICENSE OWNER shall install and use at the Store the Computer System
in such form as is specified by COMPANY from time to time and transmit to or
permit the electronic collection of information by COMPANY through use of the
Computer System. LICENSE OWNER, at its own expense, shall establish and
maintain at the Store, (i) a telephone modem and dedicated line or other data
transmission medium specified by COMPANY from time to time that COMPANY may use
to access the Computer System, (ii) full, complete and accurate records and
reports, and (iii) if required by COMPANY, computer diskettes and databases in
the form specified by COMPANY pertaining to the operation of the Store,
including, but not limited to, site reports on the Store prepared by LICENSE
OWNER and submitted to COMPANY, the Site Agreement, supervisory reports
relating to Store operations, a bookkeeping, accounting, recordkeeping and
records retention system conforming to the requirements prescribed by COMPANY
from time to time (including, without limitation, requirements for a general
ledger system which utilizes the standard chart of accounts prescribed by
COMPANY from time to time and for timely entry of information into data bases
of the Computer System and periodic printouts of reports generated from the
Computer System) and information relating to employee turnover. Each
transaction of the Store shall be processed on the Computer System in the
manner prescribed by COMPANY from time to time. COMPANY shall have, at all
times, the right to access and retrieve information from and data processed on
the Computer System with respect to the Store, and LICENSE OWNER shall take
such action as may be necessary to provide such access to COMPANY.
With respect to the operation and financial condition of the Store,
LICENSE OWNER shall adopt, until otherwise specified by COMPANY, a fiscal year
consisting of thirteen (13) four-week accounting periods which coincides with
COMPANY's then current fiscal year, as specified by COMPANY and furnish to
COMPANY or its designee in the form and format prescribed by COMPANY from time
to time, including, without limitation, via computer diskette and/or restated
in accordance with COMPANY's financial reporting periods consistent with
COMPANY's then-current financial reporting periods and accounting practices and
procedures:
(1) royalty reporting forms;
(2) weekly reports of the Store's sales and Royalty Base
Revenue each Monday (for the preceding Monday through Sunday period)
and, if requested by COMPANY, daily reports of Store's sales and
Royalty Base Revenue and, by facsimile or telephone no later than
10:00 a.m. Rocky Mountain time on the following day; and
(3) upon request by COMPANY, such other data, reports,
information, and supporting records for such periods as COMPANY from
time to time requires (including, without limitation, daily and weekly
reports of Product and/or service sales by category
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by means of telephonic, facsimile or other transmission system);
(4) within thirty (30) days after the end of each quarter of
LICENSE OWNER's fiscal year, LICENSE OWNER shall submit reports of
those income and expense items of the Store which COMPANY specifies
from time to time for use in any revenue, earnings, and/or cost
summary it chooses to furnish to prospective license owners, provided
that COMPANY will not identify to prospective license owners any
specific financial results of the Store; and
(5) within sixty (60) days after the end of LICENSE OWNER's
fiscal year, a fiscal year-end balance sheet, an income statement of
the Store for such fiscal year reflecting all year-end adjustments,
and a statement of changes in cash flow of LICENSE OWNER, prepared in
accordance with generally accepted accounting principles consistently
applied and in the format prescribed by COMPANY from time to time.
Each report and financial statement submitted by LICENSE OWNER to COMPANY or
its designee shall be signed by LICENSE OWNER and verified as correct in the
manner prescribed by COMPANY.
LICENSE OWNER agrees to maintain and to furnish to COMPANY and/or its
designee upon request complete copies of all income, sales, value added, use
and service tax returns, and employee withholding, worker's compensation, and
similar reports filed by LICENSE OWNER reflecting activities of the Store.
LICENSE OWNER shall immediately report to COMPANY and/or its designee
any events or developments which may have a materially adverse impact on the
operation of the Store, the performance of License owner under this Agreement,
or the goodwill associated with the Marks and UNITS.
15. INSPECTIONS AND AUDITS
15.A. COMPANY'S RIGHT TO INSPECT THE STORE
To determine whether LICENSE OWNER and the Store are complying with
this Agreement and with specifications, standards and operating procedures
prescribed by COMPANY for the operation of UNITS, COMPANY or its agents shall
have the right, at any reasonable time to: (1) inspect the Site, the Store, the
Computer System and other equipment, furnishings, fixtures, signs, vehicles,
operating materials and supplies of the Store; (2) observe, photograph and
video tape the operations of the Store for such consecutive or intermittent
periods as COMPANY deems necessary; (3) remove samples of any Products and
Supplies and Materials for testing and analysis; (4) interview personnel of the
Store; (5) interview customers of the Store; and (6) inspect and copy any
books, records, reports, computer data bases and documents relating to the
operation of the Store. LICENSE OWNER agrees to cooperate fully
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with COMPANY in connection with any such inspections, observations,
photographing and video taping, product removal and interviews. LICENSE OWNER
shall present to its customers such evaluation forms as are periodically
prescribed by COMPANY and shall participate and/or request its customers to
participate in any surveys performed by or on behalf of COMPANY. LICENSE OWNER
agrees that COMPANY may inspect and monitor electronically information
concerning LICENSE OWNER's sales and the Store's Royalty Base Revenue, and such
other information as may be contained or stored in the Computer System. COMPANY
shall have telephone access to LICENSE OWNER's Computer System as provided
herein at such times and in such manner as COMPANY shall from time to time
specify.
15.B. COMPANY'S RIGHT TO AUDIT
COMPANY shall have the right at any time during business hours, and
with reasonable notice to LICENSE OWNER, to inspect and audit, or cause to be
inspected and audited, the business records, bookkeeping and accounting
records, computer data bases, value added, sales, use, service, payroll,
employee withholding, worker's compensation, and income tax records and
returns, and other records of the Store and LICENSE OWNER and the books and
records of LICENSE OWNER if a corporation or partnership. LICENSE OWNER shall
fully cooperate with representatives of COMPANY and independent accountants
hired by COMPANY to conduct any such inspection or audit. COMPANY's right to
audit shall also include COMPANY's right to access the Computer System by
telephone as provided in this Agreement. In the event any such inspection or
audit shall disclose an understatement of the Store's Royalty Base Revenue or
an underpayment of any fees due under this Agreement, COMPANY shall be
authorized to initiate immediately a debit to LICENSE OWNER's account for in
the amount due plus interest via electronic funds transfer, as described in
Section 11.F. Alternatively, at COMPANY's option, LICENSE OWNER shall pay to
COMPANY, within fifteen (15) days after receipt of the inspection or audit
report, the fees due on the amount of such understatement, plus interest (at
the rate and on the terms provided for herein) from the date originally due
until the date of payment. Further, in the event such inspection or audit is
made necessary by the failure of LICENSE OWNER to furnish reports, supporting
records, other information or financial statements, as herein required, or to
furnish such reports, records, information or financial statements on a timely
basis, or if an understatement of Royalty Base Revenue for the period of any
audit is determined by any such audit or inspection to be greater than two
percent (2%), LICENSE OWNER shall reimburse COMPANY for the cost of such
inspection or audit, including, without limitation, legal fees and accountants'
fees, and the travel expenses, room and board and applicable per diem charges
for employees of COMPANY. The foregoing remedies shall be in addition to all
other remedies and rights of COMPANY hereunder or under applicable law.
16. TRANSFER
16.A. BY COMPANY
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This Agreement is fully transferable by COMPANY and shall inure to the
benefit of any transferee or other legal successor to the interests of COMPANY
herein.
16.B. NONTRANSFERABILITY OF CERTAIN RIGHTS
LICENSE OWNER understands, acknowledges and agrees (and hereby
represents and warrants that its Owners understand and agree) that the rights
and duties created by this Agreement are personal to LICENSE OWNER and its
Owners and that a material cause for COMPANY's willingness to enter into this
Agreement is its reliance upon the individual or collective character, skill,
aptitude, business ability and financial capacity of LICENSE OWNER and its
Owners. Therefore, LICENSE OWNER agrees that:
(1) no Ownership Interest in LICENSE OWNER; and
(2) no obligations, rights or interest of LICENSE OWNER in
(a) this Agreement, (b) the lease for the premises of the Store, (c)
the License, (d) the Store or (e) the assets of the Store
may be transferred without the prior written consent of COMPANY. This
restriction shall not apply to the sale of inventory in the ordinary course of
business. Any purported transfer in violation of this Section shall constitute
a breach of this Agreement and shall convey to the transferee no rights or
interests in the foregoing.
As used in this Agreement, the term "transfer" shall include, without
limitation, the following, whether voluntary or involuntary, conditional,
direct or indirect:
(1) an assignment, sale, gift or pledge; and
(2) the grant of a mortgage, charge, lien or security
interest, including, without limitation, the grant of a collateral
assignment; and
(3) a merger, consolidation, share exchange, issuance of
additional Ownership Interests or securities representing or
potentially representing Ownership Interests, or redemption of
Ownership Interests; and
(4) a sale or exchange of voting interests or securities
convertible to voting interests, or an agreement granting the right to
exercise or control the exercise of the voting rights of any holder of
Ownership Interests or to control the operations or affairs of LICENSE
OWNER; and
(5) except where specifically approved by COMPANY, a
management agreement whereby LICENSE OWNER delegates (i) any of its
obligations under this Agreement; or (ii) any or all of the management
functions with respect to a Store or the
54
business to be conducted by LICENSE OWNER pursuant to this Agreement.
In addition to the foregoing, a transfer (as defined above) will
require the prior written consent of COMPANY where such transfer occurs by
virtue of (a) divorce; (b) insolvency; (c) dissolution of a corporation,
partnership or limited liability company; (d) will; (e) intestate succession;
or (f) declaration of or transfer in trust.
16.C. COMPANY'S RIGHT TO APPROVE TRANSFERS
If LICENSE OWNER or any Owner intends to make a transfer of any
interests which, under Paragraph B of this Section, requires COMPANY's prior
written consent, LICENSE OWNER shall deliver to COMPANY written notice of such
proposed transfer at least thirty (30) days prior to its intended effective
date. Such notice shall describe in detail the proposed transfer (including,
without limitation, the nature of the transfer, the nature and amount of the
interests being transferred, the reason for the transfer, the consideration to
be paid and the terms of payment of such consideration and the effective date)
and shall identify and provide all pertinent background information regarding
the proposed purchaser. COMPANY shall have 30 days from delivery of such notice
within which to evaluate the proposed transactions and to notify LICENSE OWNER
of its approval or disapproval (with reasons) of the proposed transfer. If
approved, the transfer must take place as described in the notice (as modified
by any conditions imposed by COMPANY in granting its approval) and within 30
days of the delivery of notice of COMPANY's approval.
LICENSE OWNER agrees that it would be reasonable for COMPANY to
disapprove any proposed transfer based on any and all reasonable factors
including, without limitation, in the event that:
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