Exhibit 10.12
CALIFORNIA DEVELOPMENT
INCENTIVE AGREEMENT
This CALIFORNIA DEVELOPMENT
INCENTIVE AGREEMENT (this “Agreement”) is entered this
15 day of March, 2004 but effective as of January 1, 2004 (the
“Effective Date”), by and among TGI Friday’s Inc.
(“Friday’s”), Main St. California, Inc. (the
“Franchisee”), and Main Street and Main Incorporated
(the “Principal”).
RECITALS
A.
Friday’s and Franchisee are
parties to a Development Agreement dated
March , 2004 for certain counties in
Southern California (the “Development Agreement”) and
to the Franchise Agreements for the T.G.I. Friday’s
Restaurants located in Southern California (the
“Restaurants”) listed on Exhibit A
(collectively, and including any Franchise Agreements entered into
during the term of this Agreement, the “Franchise
Agreements”). Unique economic circumstances in Southern
California have resulted in increased development and operating
costs for the Restaurants as compared to restaurants in other areas
of the country.
B.
The Principal has an ownership
interest in or otherwise controls Franchisee, and as such is deemed
to be a “Principal” under the applicable Franchise
Agreements.
C.
Friday’s has agreed to provide
Franchisee certain development incentives as specifically described
in this Agreement conditioned upon Franchisee’s full and
timely compliance with the terms and conditions of this Agreement,
the Development Agreement and the Franchise Agreements.
AGREEMENT
NOW, THEREFORE, in consideration of
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by each of the parties hereto,
Friday’s, Franchisee and Principal agree as
follows:
1.
Term . The term of this
Agreement shall be from January 1, 2004 through
December 31, 2009 (the “Term”), unless earlier
terminated pursuant to the terms hereof.
2.
Modification of Royalty Payment
Obligation .
Throughout
the Term, Franchisee’s obligation to pay Royalty Fees (as
that term is defined in the Franchise Agreements) at the
Restaurants shall be as stated in the following Royalty
Modification Tables.
Royalty Modification Table
– Schedule A (2004 only)
|
Annual Gross Sales for
each Restaurant
|
|
Royalty Fee
|
|
|
Under $2 million
|
|
1.5
|
%
|
|
$2.0 - $2.5 million
|
|
2.0
|
%
|
|
$2.5 - $3.0 million
|
|
2.5
|
%
|
|
$3.0 - $3.5 million
|
|
3.0
|
%
|
|
$3.5 million and over
|
|
4.0
|
%
|
1
Royalty Modification Table
– Schedule B (2005 – 2009)
|
Annual Gross Sales for
each Restaurant
|
|
Royalty Fee
|
|
|
Under $ 2 million
|
|
1.5
|
%
|
|
$ 2.0 - $ 2.5
million
|
|
2.0
|
%
|
|
$2.5 - $3.0 million
|
|
2.5
|
%
|
|
$3.0 - $4.0 million
|
|
3.0
|
%
|
|
$4.0 million and over
|
|
4.0
|
%
|
3.
Modification of Franchise
Fee .
Throughout the Term, the Franchise Fee, as that term is defined in
the Development Agreement, for restaurants developed thereunder
(“New Restaurants”) shall be reduced from Fifty
Thousand dollars ($50,000) to Twenty Five Thousand dollars
($25,000).
4.
Modification of Royalty for
New Restaurants . The Royalty Fee for New Restaurants shall
be two percent (2%) for the first twelve months of operation,
regardless of annual gross sales. Thereafter, for the balance
of the Term, the Royalty Fee shall be as set forth in Paragraph 2
above. Following expiration or earlier termination of this
Agreement, the Royalty Fee shall be as set forth in the respective
Franchise Agreements.
5.
Performance of Development
Obligations .
(a)
Franchisee
acknowledges the requirement of Franchisee’s full and timely
compliance with both the Preliminary Site Consent dates and the
Open and Operating dates contained in the Development
Schedule in Section 3.A. of the Development
Agreement. A reasonable denial of site consent by
Friday’s, in accordance with the site approval procedures set
forth in the Development Agreement, shall not be deemed to be an
excuse of performance by Franchisee. Time is of the essence
with respect to each of the development obligations specified in
the Development Agreement.
(b)
In the event that
Franchisee fails to comply with any date set forth in the
Development Schedule, then automatically commencing the month
following such noncompliance, the Royalty Fees for the Restaurants
and New Restaurants shall be as set forth in the respective
Franchise Agreements (the “Original Royalty
Fee”). The Original Royalty Fees for all Restaurants
and New Restaurants shall be paid by Franchisee until the first day
of the month following the date on which Franchisee returns to full
compliance with the Development Schedule, at which time the
modified Royalty Fees as set forth in this Agreement shall be due
and payable.
(c)
If at any time during the term of
this Agreement Franchisee is not in compliance with the Development
Schedule for more than three (3) restaurants, then
automatically commencing the month following the noncompliance for
the fourth restaurant the Original Royalty Fees for the Restaurants
and New Restaurants as set forth in the respective Franchise
Agreements shall be retroactively reinstated to January 1,
2004 (or the later applicable Commencement Date for New
Restaurants) and any unpaid Royalty Fees (the “Unpaid Royalty
Fees”) shall be immediately due and payable as set forth in
Paragraph 8 below. This Agreement shall automatically
terminate upon the occurrence of such event.
2
6.
Sales Reporting
Obligation .
No later
than forty-five (45) days after December 31st of each year,
Franchisee shall provide to Friday’s true and complete sales
information for the Restaurants for the immediately preceding
twelve month period.
7.
Default and Early
Termination . If Franchisee defaults under
Section 10.01.A. of the Development Agreement or under
Section 10.01.A. of the Development Agreement between
Friday’s and Cornerstone Productions, Inc. (the “S.W.
Development Agreement”), then upon notification by
Friday’s the Original Royalty Fees for the Restaurants and
New Restaurants as set forth in the respective Franchise Agreements
shall be retroactively reinstated to January 1, 2004 (or the
later applicable Commence
