EXHIBIT 10.12
Buffalo Wild Wings(R)
Area Development Agreement
Between
Buffalo Wild Wings International, Inc.
1600 Utica Avenue, Suite 700
Minneapolis, MN 55416
And
Effective Date:
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(To be completed by Us)
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TABLE OF CONTENTS
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SECTION
PAGE
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RECITALS 2
1.
DEFINITIONS..........................................................2
2. GRANT OF
DEVELOPMENT RIGHTS..........................................2
3. DEVELOPMENT
FEE......................................................2
4. DEVELOPMENT
SCHEDULE.................................................2
5. TERM2
6. YOUR
DUTIES..........................................................2
7. DEFAULT AND
TERMINATION..............................................2
8. RIGHTS AND
DUTIES OF PARTIES UPON TERMINATION OR EXPIRATION..........2
9.
TRANSFER.............................................................2
10.
MISCELLANEOUS........................................................2
APPENDICES
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A.
DEVELOPMENT TERRITORY
B.
DEVELOPMENT SCHEDULE
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BUFFALO WILD WINGS(R)
AREA DEVELOPMENT AGREEMENT
This
Area Development
Agreement is made this ____ day of , 2005
between
BUFFALO WILD WINGS
INTERNATIONAL, INC.,
an Ohio corporation with its principal
business located at 1600 Utica Avenue South, Suite 700,
Minneapolis,
Minnesota
55426 ("we" or "us") and , a(n) ......... whose principal business address is
("developer" or
"you"). If the
developer is a corporation, partnership or
limited liability
company, certain provisions of the Agreement also
apply to
your owners and will be noted.
RECITALS
A.
Our parent
company has developed
a unique system for operating video
entertainment
oriented, fast casual
restaurants
that feature
chicken wings,
sandwiches, unique food service and other products, beverages and
services using
certain standards and specifications;
B.
Many of the food
and beverage
products are prepared according to
specified recipes and procedures, some of which include proprietary sauces and
mixes;
C.
Our parent
company owns the BUFFALO WILD WINGS(R) Trademark and other
trademarks used in
connection
with the Operation of a BUFFALO WILD WINGS
restaurant;
D.
Our parent
company has granted to us the right to sublicense the right
to develop and operate BUFFALO WILD WINGS restaurants;
E.
You desire to develop and operate several BUFFALO WILD WINGS
restaurants and we, in
reliance on your
representations, have
approved your
franchise application to do so in accordance with this
Agreement.
In
consideration
of the foregoing and the mutual covenants and
consideration below, you and we agree as follows:
DEFINITIONS
1.
For purposes of this Agreement, the terms below have the
following
definitions:
A. "Menu
Items" means the chicken wings, sandwiches and other
products and beverages
prepared according to our specified recipes and
procedures, as we may modify and change them from time to time.
B. "Principal
Owner" means any person who directly or indirectly
owns
a 10% or greater
interest in the
developer when the
developer is a
corporation, limited liability company, a partnership, or a similar
entity.
However, if we are
entering into this Agreement totally or partially based
on
the financial qualifications, experience, skills or managerial
qualifications of any person or entity who directly or indirectly
owns less
than
a 10% interest in the
developer, we have the
right to designate that
person or entity as a Principal Owner for all purposes under this
Agreement, including,
but not limited to,
the execution
of the personal
guaranty referenced in Section 10.J below. In addition, if the
developer is
a
partnership
entity, then each general partner is a Principal
Owner,
regardless of the percentage ownership interest. If the developer
is one or
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more
individuals,
each individual is a Principal Owner of
the developer.
You
must have at least one Principal Owner.
C. "Restaurants"
means the BUFFALO WILD WINGS Restaurants you
develop and operate pursuant to this Agreement.
D. "System"
means the BUFFALO WILD
WINGS System, which
consists of
distinctive food and beverage products prepared according to special and
confidential recipes and formulas with unique storage, preparation,
service
and
delivery procedures and techniques, offered in a setting of
distinctive
exterior and interior layout, design and color scheme, signage,
furnishings
and
materials and using certain distinctive types of facilities,
equipment,
supplies, ingredients, business techniques, methods and procedures
together
with
sales promotion
programs, all of which
we may modify and change from
time
to time.
E. "Trademarks"
means the BUFFALO WILD
WINGS Trademark and
Service
Mark
that have been
registered in the
United States and elsewhere and the
trademarks, service
marks and trade names set forth in each Franchise
Agreement, as we may
modify and change
from time to time,
and the trade
dress and other
commercial symbols
used in the
Restaurants. Trade
dress
includes the designs,
color schemes and
image we authorize you
to use in
the
operation of the Restaurants from time to time.
GRANT OF DEVELOPMENT RIGHTS
---------------------------
2.
The following
provisions
control with respect
to the rights
granted
hereunder:
A. We
grant to you, under the terms and conditions of this
Agreement,
the right to develop
and operate _________
(___) BUFFALO WILD
WINGS Restaurants (the
"Restaurants")
within the territory
described on
Appendix A ("Development Territory").
B. You
are bound by the development schedule ("Development
Schedule") set
forth in Appendix B. Time is of the essence for the
development of each Restaurant in accordance with the Development
Schedule.
Each
Restaurant
must be developed and operated pursuant to a separate
Franchise Agreement
that you enter into
with us pursuant
to Section 4.B
below.
C. If you are in
compliance with the Development Schedule set forth
on
Appendix B, we will not develop or operate or grant anyone else a
franchise to develop and operate a BUFFALO WILD WINGS Restaurant business
(except for the Special Sites and Limited Seating Facilities defined in
Section 2.D or as otherwise set forth in this Agreement) in the
Development
Territory prior to the earlier of (i) the expiration or termination
of this
Agreement; (ii) the
date on which you must execute the Franchise Agreement
for
your last restaurant pursuant to the terms of the Development
Schedule
or
(iii) the date on which the Designated Area for your final Restaurant
under this
Agreement is determined. However, in the event that the
Development Territory
covers more than one city, county or designated
market area, the protection for each particular city, county or designated
market area shall
expire upon the
earliest of (1) any of the foregoing
events or (2) the date when the Designated Area for your final Restaurant
to
be developed in such city, county or designated market area under this
Agreement is determined. Notwithstanding anything in this
Agreement, upon
the
earliest occurrence of
any of the foregoing events (i) the Development
Territory shall expire and (ii) we will be entitled to develop and
operate,
or
to franchise others to develop and operate, BUFFALO WILD WINGS
restaurants in the
Development
Territory,
except as may be otherwise
provided under any Franchise Agreement that has been executed
between us
and
you and that has not
been terminated.
At the time you
execute your
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final Franchise Agreement under the Development Schedule,
you must have an
Authorized Location for your final Restaurant.
D. The rights
granted under this
Agreement are limited to the right
to
develop and operate
Restaurants located in
the Development
Territory,
and
do not include (i) any right to sell products and Menu Items
identified
by
the Trademarks at any
location or through any other channels or methods
of
distribution,
including the internet
(or any other existing
or future
form
of electronic commerce), other than at Restaurants within the
Development Territory,
(ii) any right to sell products and Menu Items
identified by the
Trademarks to any person or entity for resale or further
distribution, or (iii)
any right to exclude,
control or impose conditions
on
our development or
operation of franchised, company or affiliate owned
restaurants at any
time or at any
location outside of the Development
Territory. You may not
use any the words BUFFALO, WILD or WINGS or any of
the
other Trademarks as part of the name of your corporation,
partnership,
limited liability company or other similar entity.
You acknowledge and agree that we and our affiliates have the right
to
operate and franchise others the right to operate restaurants or any other
business within and
outside the
Development Territory
under trademarks
other than the BUFFALO WILD WINGS Trademarks, without compensation to any
franchisee, except
that our operation of, or association or affiliation
with, restaurants
(through franchising or otherwise) in the
Development
Territory that compete
with BUFFALO WILD
WINGS restaurants
in the video
entertainment
oriented, fast casual
restaurant
segment will only occur
through some form of merger or
acquisition
with an existing restaurant
chain. Outside of the Development Territory, we and our affiliates
have the
right to grant other franchises or develop and operate company or
affiliate
owned BUFFALO WILD WINGS restaurants and offer, sell or distribute any
products or
services associated with the System (now or in the future)
under the Trademarks or any other trademarks, service marks or trade names
or
through any distribution channel or method, all without
compensation to
any
franchisee.
We and our affiliates
have the right to
offer, sell or
distribute,
within and outside the
Development
Territory,
any frozen,
pre-packaged
items or other products or services associated with the System (now or in
the
future) or
identified
by the Trademarks, or any other trademarks,
service marks or trade
names, except for Prohibited Items (as defined
below), through any distribution channels or methods, without compensation
to
any franchisee. The
distribution channels
or methods include,
without
limitation, grocery
stores, club stores,
convenience stores,
wholesale,
hospitals, clinics, health care facilities, business or industry locations
(e.g.
manufacturing site,
office building), military installations,
military commissaries or the internet (or any other existing or
future form
of
electronic commerce).
The Prohibited Items are the following items that
we
will not sell in the Development Territory through other distribution
channels or methods:
any retail food service Menu Items that are cooked or
prepared to be served to the end user or customer for consumption at the
retail location (unless sold at the limited seating facilities referenced
in
subparagraph (i) of
the paragraph above).
For example,
chicken wings
cooked and served to
customers at a grocery
store or convenience store
would be a Prohibited Item,
but the sale of frozen or pre-packaged chicken
wings at a grocery store or convenience store would be a permitted form
of
distribution in the Development Territory.
You acknowledge
and agree that certain locations within the
Development Territory
are by their nature unique and separate in character
from
sites generally
developed as BUFFALO WILD WINGS restaurants. As a
result, you agree
that the following locations ("Special Sites") are
excluded from the Development Territory and we have the right,
subject to
our
then-current Special
Sites Impact Policy, to develop or franchise such
locations: (1)
military bases; (2) public transportation facilities; (3)
sports facilities,
including race tracks; (4) student unions or other
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similar buildings on
college or university
campuses; (5) amusement and
theme parks; and (6) community and special events.
In addition, you
acknowledge and agree that, subject to your right of
first refusal as set forth below, we and our affiliates have the right to
operate or
franchise within the Development Territory one or more
facilities selling, for dine in or take out, all or some of the
Menu Items,
using the Trademarks or any other trademarks, service marks or
trade names,
without compensation
to any franchisee, provided, however, that such
facilities shall not have an interior
area larger than 2,400
square feet
and
shall not have
seating capacity for more than 48 people ("Limited
Seating Facilities").
If we develop a model for a Limited Seating Facility
and
determine that your Development Territory is an appropriate market
for
such
a facility, we will provide to you a written offer ("Offer")
specifying the terms
and conditions
for your development of the Limited
Seating Facility. You will have 90 days following your receipt of
the Offer
to
accept the Offer by delivering written notice to us of your
acceptance,
provided that you are
not in default
under this
Agreement or any other
Agreement with us or our affiliates. If you do not provide written
notice
to
us within the time period or if you are in default under this
Agreement
or
any other agreement with us or our affiliates, you will lose the right
to
develop the Limited
Seating Facility
and we may develop or
franchise
others to develop the
Limited Seating
Facility within your Development
Territory. You
acknowledge and agree
that if you accept the Offer, we may
require you to submit a full application, pay an initial fee and
sign a new
form
of franchise agreement.
E. This
Agreement is not a Franchise Agreement and you have no right
to
use in any manner the Trademarks by virtue of this Agreement. You have
no
right under this
Agreement to
sublicense
or subfranchise others to
operate a business or restaurant or use the System or the
Trademarks.
DEVELOPMENT FEE
---------------
3.
You must pay a
Development Fee as described below:
A. As
consideration
for the rights granted
in this Agreement,
you
must
pay us a "Development Fee" of $_________, representing one-half of
the
Initial Franchise
Fee for each
Restaurant
to be developed under this
Agreement. The
Initial Franchise Fee for the first Restaurant is
$___________. The
Initial Franchise Fee for the second Restaurant is
$__________. The
Initial Franchise Fee
for each subsequent
Restaurant is
$__________.
The Development
Fee is consideration for this Agreement and not
consideration for any
Franchise Agreement, is fully earned by us upon
execution of this Agreement and is non-refundable. The part of the Initial
Franchise Fee that is
included in the Development Fee is credited against
the
Initial Franchise Fee payable upon the signing of each individual
Franchise Agreement. The balance of the Initial Franchise Fee for
the first
Restaurant must be
paid at the time of execution of this Agreement,
together with the execution by you of the Franchise Agreement for
the first
Restaurant. The total
amount to be paid by you at the time of execution of
this
Agreement pursuant to this Section, including both the Development
Fee
and
the balance of the Initial Franchise Fee for your first
Restaurant is
$_______. The balance
of the Initial
Franchise Fee for each subsequent
Restaurant is due as specified in Section 3.B.
B. You must
submit a separate
application for each Restaurant to be
established by you within the Development Territory as further
described in
Section 4. Upon our
consent to the site of your Restaurant, a separate
Franchise Agreement must be executed for each such
Restaurant,
at which
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time
the balance of the Initial Franchise Fee for that Restaurant is due
and
owing. Such payment
represents the balance of the appropriate Initial
Franchise Fee, as
described above in
Section 3.A. Upon the
execution of
each
Franchise Agreement, the terms and conditions of the Franchise
Agreement control the establishment and operation of such
Restaurant.
DEVELOPMENT SCHEDULE
--------------------
4.
The following provisions control with respect to your development
rights and obligations:
A. You
are bound by and strictly must follow the Development
Schedule. By the dates set forth under the Development Schedule, you must
enter into Franchise
Agreements with us pursuant to this Agreement for the
number of Restaurants
described under the Development Schedule. You also
must
comply with the Development Schedule requirements regarding (i) the
restaurant type to be
developed and the
opening date for each
Restaurant
and
(ii) the cumulative
number of Restaurants to be open and continuously
operating for business in the Development Territory. If you fail to either
execute a Franchise
Agreement or to open a
Restaurant
according to the
dates set forth in the Franchise Agreement, we have the right to (i)
require that you
hire a franchise development expert with recognized
experience in
developing franchises
in a similar line of business to ours
or
(ii) immediately
terminate this
Agreement pursuant to
Section 7.B. If
you
are developing 3 or more restaurants under this Agreement, you will
have
a "late opening
extension right" of
two weeks for each restaurant in
which we will
not have the right under (i) or (ii) in the previous
sentence. To take advantage of this late opening extension, you
must make a
request for the
extension 45 days
prior to the opening
date set forth in
the
Franchise Agreement and have been in continuous compliance throughout
the
term of this Agreement.
B. You may not
develop a Restaurant unless (i) at least 45 days, but
no
more than 60
days, prior to the date set forth in the Development
Schedule for the
execution of each Franchise Agreement, you send us a
notice (a) requiring that we send you our then current disclosure
documents, (b)
confirming
your intention to develop the particular
Restaurant and (c)
sending us all
information necessary
to complete the
Franchise Agreement
for the particular Restaurant and (ii) all of the
following conditions
have been met (these conditions apply to each
Restaurant to be developed in the Development Territory):
1. Your
Submission of Proposed
Site. You must find a
proposed
site for the Restaurant which you reasonably believe to conform to
our
site selection
criteria, as modified by us from time to time,
and
submit to us a complete site report (containing such demographic,
commercial, and other information and photographs as we may
reasonably
require) for such site.
2. Our Consent
to Proposed Site.
You must receive our
written
consent to your proposed site. We agree not to unreasonably withhold
consent to a proposed
site. Prior to
granting our consent to a site,
you must have the site
evaluated by the
proprietary site
evaluator
software that has been developed by GeoVue, Inc. You will pay GeoVue,
Inc. an evaluation fee of $400 per site evaluated, provided, that you
must purchase the
rights to have at least 3 sites evaluated, unless
you receive our prior approval to purchase less than 3 sites, based
on
the trade area. In
approving or
disapproving any
proposed site, we
will consider such matters as we deem material, including demographic
characteristics of the proposed site, traffic patterns, competition,
the proximity to other
businesses, the nature
of other businesses in
proximity to the site, and other commercial characteristics
(including
the purchase or lease
obligations for the proposed site) and the size
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of premises,
appearance
and other physical characteristics. Our
consent to a proposed site, however, does not in any way constitute
a
guaranty by us as to the success of the Restaurant.
3. Your
Submission of
Information. You must
furnish to us, at
least 30 days prior to the earliest of (i) the date set forth in
the
Development Schedule
by which you must execute a Franchise Agreement
or (ii) the actual
date in which the
Franchise Agreement would be
executed, a
franchise application for the proposed Restaurant,
financial
statements and
other information regarding you, the
operation of any of
your other Restaurants
within the Development
Territory and the development and operation of the proposed
Restaurant
(including, without limitation, investment and financing plans for
the
proposed Restaurant) as we may reasonably require.
4. Your
Compliance
with Our Then-Current Standards for
Franchisees. You must
receive written
confirmation from us
that you
meet our then-current
standards for franchisees, including financial
capability criteria
for the development of a new Restaurant. You
acknowledge and agree that this requirement is necessary to ensure
the
proper development and operation of your Restaurants, and preserve
and
enhance the
reputation
and goodwill of all BUFFALO WILD WINGS
restaurants and the goodwill of the Trademarks. Our confirmation that
you meet our
then-current
standards for the development of a new
Restaurant, however,
does not in any way
constitute a guaranty by us
as to your success.
5. Good
Standing. You must not be in default of this Agreement,
any Franchise Agreement entered into pursuant to this Agreement or
any
other agreement between you or any of your affiliates and us or any
of
our affiliates.
You also must have
satisfied on a timely basis all
monetary and material
obligations under the Franchise Agreements for
all existing Restaurants.
6. Execution of
Franchise Agreement. You and we must enter into
our then-current
form of Franchise Agreement for the proposed
Restaurant. You understand that we may modify the then-current form
of
Franchise Agreement
from time to time and that it may be
different
than the current form of Franchise Agreement, including different
fees
and obligations.
You understand and
agree that any and all Franchise
Agreements will
be construed and exist independently of this
Agreement. The continued existence of each Franchise Agreement will
be
determined by the terms and conditions of such Franchise Agreement.
Except as specifically set forth in this Agreement, the establishment
and operation of each
Restaurant must be in accordance with the terms
of the applicable Franchise Agreement.
C. You
must begin substantial construction of each of the
Restaurants at least
150 days before the deadline to open each of the
Restaurants if the
Restaurant
will be in a free
standing location or
at
least 120 days before the deadline to open the Restaurant if the
Restaurant
will
be in a non-free
standing location.
In addition, on or before the
deadlines to start
construction you must
submit to us executed
copies of
any
loan documents
and/or any other
document that proves that you have
secured adequate
financing to complete
the construction of the Restaurant
by
the date you are obligated to have that Restaurant open and in
operation. In the
event that you fail to comply with any of these
obligations,
we will have the right
to terminate this
Agreement without
opportunity to cure pursuant to subparagraph 7.B.
D. You
acknowledge
that
you have conducted an independent
investigation of the prospects for the establishment of Restaurants
within
the
Development
Territory,
and recognize that the business venture
contemplated by this
Agreement involves business and economic risks
and
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that
your financial and business success will be primarily
dependent upon
the
personal efforts of you and your management and employees. We
expressly
disclaim the making of, and you acknowledge that you have not
received, any
estimates,
projections,
warranties or
guaranties,
express or
implied,
regarding potential gross sales, profits, earnings or the financial
success
of
the Restaurants you develop within the Development Territory.
E. You recognize
and acknowledge that this Agreement requires you to
open
Restaurants in the
future pursuant to the Development Schedule. You
further acknowledge that the estimated expenses and investment
requirements
set
forth in Items 6 and 7 of our Uniform Franchise Offering Circular are
subject to increase
over time,
and that future
Restaurants
likely will
involve greater initial investment and operating capital
requirements than
those stated in the Uniform Franchise Offering Circular provided to you
prior to the execution of this Agreement. You are obligated to execute
all
the
Franchise Agreements and open all the Restaurants on the dates set
forth on the Development Schedule, regardless of (i) the requirement
of a
greater investment,
(ii) the financial
condition or
performance of
your
prior Restaurants,
or (iii) any other circumstances, financial or
otherwise. The
foregoing shall not be interpreted as imposing any
obligation upon us to execute the Franchise Agreements under this
Agreement
if
you have not complied with each and every condition necessary to
develop
the
Restaurants.
TERM
----
5.
Unless
sooner terminated in accordance with Section 7 of this
Agreement and subject
to the terms detailed
in Section 2.C,
the term of this
Agreement and all
rights granted to you
will expire on the date that your last
BUFFALO WILD WINGS
Restaurant is
scheduled to be opened under the Development
Schedule.
YOUR DUTIES
-----------
6.
You must perform
the following obligations:
A. You must
comply with all of the terms and conditions of each
Franchise Agreement, including the operating requirements specified
in each
Franchise Agreement.
B. You and your
owners, officers, directors, shareholders, partners,
members and managers
(if any) acknowledge that your entire knowledge of the
operation of a BUFFALO WILD WINGS Restaurant and the System,
including the
knowledge or know-how regarding the specifications, standards and
operating
procedures of the services and activities, is derived from information we
disclose to you and that certain information is proprietary,
confidential
and
constitutes our trade
secrets. The term
"trade secrets" refers to the
whole or any portion
of know-how, knowledge, methods, specifications,
processes, procedures
and/or improvements
regarding the business
that is
valuable and
secret in the sense
that it is not
generally known to our
competitors and any
proprietary
information
contained in the
manuals or
otherwise communicated to you in writing, verbally or through the
internet
or
other online or
computer
communications, and
any other knowledge
or
know-how concerning
the methods of operation of the Restaurants. You and
your
owners, officers, directors, shareholders, partners, members and
managers (if any),
jointly and severally,
agree that at all
times during
and
after the term of this Agreement, you will maintain the absolute
confidentiality of all such proprietary information and will not
disclose,
copy, reproduce, sell
or use any such information in any other business or
in
any manner not specifically authorized or approved in advance in
writing
by us. We may require
that you obtain
nondisclosure
and confidentiality
agreements in a form satisfactory to us from the individuals
identified in
the
first sentence of this paragraph and other key employees.
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C. You must
comply with all requirements of federal, state and local
laws, rules and regulations.
D. If you at
some time in the future desire to make either a public
or a
private offering of your securities, prior to such offering and
sale,
and
prior to the public release of any statements, data, or other
information of
any kind relating to the proposed offering of your
securities, you must
secure our written approval, which approval will not
be
unreasonably withheld.
You must secure our prior written consent to any
and
all press releases, news releases and any and all other publicity,
the
primary purpose of
which is to generate
interest in your
offering. Only
after we have given our written approval may you proceed to file,
publish,
issue, and release and make public any said data, material and information
regarding the securities offering. It is specifically understood that any
review by us is solely for our own information, and our approval does not
constitute any kind of authorization, acceptance, agreement, endorsement,
approval, or ratification of the same, either expressly or implied.
You may
make
no oral or
written notice of any kind whatsoever indicating or
implying that
we and/or our affiliates have any interest in the
relationship
whatsoever to the
proposed offering other than acting as
Franchisor. You agree to indemnify, defend, and hold us and our
affiliates
harmless, and our affiliates' directors, officers, successors and assigns
harmless from all
claims, demands,
costs, fees, charges, liability or
expense (including
attorneys'
fees) of any kind
whatsoever arising
from
your
offering of information published or communicated in
actions taken in
that
regard.
E. If neither
you, your Principal Owner, nor any other person in
your
organization
possesses,
in our judgment,
adequate experience and
skills to allow you to locate, obtain and develop prime locations in the
Development Territory
to allow you to meet
your development
obligations
under this Agreement,
we can require that you hire or engage a person with
those necessary skills.
DEFAULT AND TERMINATION
-----------------------
7.
The following provisions apply with respect to default and
termination:
A. The
rights and territorial protection granted to you in this
Agreement have
been granted in reliance on your representations and
warranties, and strictly on the conditions set forth in Sections 2,
4 and 6
of
this Agreement,
including the
condition that you comply strictly with
the
Development Schedule.
B. You will be
deemed in default under this Agreement if you breach
any
of the terms of this
Agreement,
including the failure to meet the
Development Schedule,
or the terms of any Franchise Agreement or any other
agreements between you
or your affiliates and
us or our affiliates.
All
rights granted in this Agreement immediately terminate upon written
notice
without opportunity
to cure if:
(i) you become insolvent, commit any
affirmative action
of insolvency or file any action or petition of
insolvency, (ii) a
receiver (permanent
or temporary) of your
property is
appointed by a court of competent authority, (iii) you make a general
assignment or other similar arrangement for the benefit of
your creditors,
(iv)
a final judgment
remains unsatisfied of
record for 30 days or longer
(unless supersedeas
bond is filed),
(v) execution is
levied against your
business or property,
(vi) suit to foreclose any lien or mortgage against
the
premises or
equipment is instituted against you and not dismissed
within 30 days, or is not in the process of being dismissed, (vii)
you fail
to
meet the development
obligations set forth in the Development Schedule
attached as Appendix B, (viii) failure to start substantial
construction of
any
of the Restaurants by the date established in Section 4.C (ix)
failure
to
secure financing for
the construction of
any of the Restaurants by the
date
set forth in Section
4.C (x) you violate
the provisions
of Section
8
<PAGE>
10.N; (xi) you fail to
comply with any other
provision of this
Agreement
and
do not correct the failure within 30 days after written
notice of that
failure is delivered to you, or (xii) we have delivered to you a notice of
termination of a
Franchise Agreement in accordance with its terms and
conditions.
RIGHTS AND DUTIES OF PARTIES UPON TERMINATION OR EXPIRATION
-----------------------------------------------------------
8.
Upon
termination or
expiration of this Agreement, all rights granted
to you will automatically terminate, and:
A. All remaining
rights granted to you to develop Restaurants under
this
Agreement will automatically be revoked and will be null and void.
You
will
not be entitled to any
refund of any fees.
You will have no right to
develop or operate any
business for which a
Franchise Agreement
has not
been
executed by us. We
will be entitled to
develop and
operate, or to
franchise others to develop and operate, BUFFALO WILD WINGS restaurants
in
the
Development Territory,
except as may be
otherwise provided
under any
Franchise Agreement
that has been executed between us and you and that has
not
been terminated.
B. You must
immediately
cease to operate your
business under
this
Agreement and must not thereafter, directly or indirectly,
represent to the
public or hold yourself out as a present or former developer of
ours.
C. You must take such action as may
be necessary to cancel or assign
to
us or our designee,
at our option, any assumed name or equivalent
registration that
contains the name or any of the words BUFFALO, WILD or
WINGS or any other Trademark of ours, and you must furnish us with
evidence
satisfactory to us of compliance with this obligation within 30 days after
termination or expiration of this Agreement.
D. You must
assign to us or our designee all your right, title, and
interest in and to your telephone numbers and must notify the telephone
company and all listing agencies of the termination or expiration of
your
right to use any
telephone number
in any regular, classified or other
telephone directory
listing associated with the Trademarks and to authorize
transfer of same at our direction.
E. You must
within 30 days of the
termination or expiration pay all
sums
owing to us and our
affiliates, including
the balance of the Initial
Franchise Fees that we
would have received
had you developed
all of the
Restaurants set forth
in the Development
Schedule. In addition to the
Initial Franchise Fees
for undeveloped
Restaurants,
you agree to pay
as
fair
and reasonable
liquidated
damages (but not as a penalty) an
amount
equal to $50,000
for each undeveloped Restaurant. You agree that this
amount is for lost revenues from Royalty Fees and other amounts
payable to
us,
including the fact that you were holding the
development
rights for
those Restaurants and precluding the development of certain
Restaurants in
the
Development Territory, and that it would be difficult to calculate
with
certainty the
amount of damage we will incur. Notwithstanding your
agreement, if a court
determines that this
liquidated damages
payment is
unenforceable, then we
may pursue all other available remedies, including
consequential damages.
All unpaid amounts
will bear interest at the rate of 18% per annum or
the
maximum contract rate of interest permitted by governing law,
whichever
is
less, from and after
the date of accrual.
In the event of
termination
for
any default by you, the sums due will include all damages,
costs, and
expenses, including reasonable attorneys' fees and expenses,
incurred by us
9
<PAGE>
as a
result of the default. You also must pay to us all damages,
costs and
expenses, including
reasonable attorneys' fees and expenses, that we incur
subsequent to the
termination or expiration of this Agreement in obtaining
injunctive or other relief for the enforcement of any provisions of this
Agreement.
F. If this
Agreement is
terminated solely for
your failure to meet
the
Development Schedule
and for no other reason whatsoever, and you have
opened at least 50% of the total number of Restaurants provided for in the
Development
Schedule, you
may continue to operate those existing
Restaurants under the
terms of the separate
Franchise Agreement
for each
Restaurant. On the
other hand, if this
Agreement is terminated under any
other circumstance, we
have the option to purchase from you all the assets
used
in the Restaurants
that have been
developed prior to the termination
of
this Agreement. Assets include leasehold improvements, equipment,
furniture,
fixtures, signs,
inventory,
liquor
licenses and other
transferable licenses and permits for the Restaurants.
We have the unrestricted right to assign this option to
purchase. We
or
our assignee will be entitled to all customary warranties and
representations given
by the seller of a business including, without
limitation,
representations and warranties as to (i) ownership, condition
and
title to assets; (ii)
liens and encumbrances
relating to the
assets;
and
(iii) validity of contracts and liabilities, inuring to us or
affecting
the
assets, contingent or
otherwise. The
purchase price for the assets of
the
Restaurants will be determined in accordance with the post-termination
purchase option
provision in the individual Franchise Agreement for each
Restaurant (with the purchase price to include the value of any
goodwill of
the
business attributable to your operation of the Restaurant if you
are in
compliance with the
terms and conditions
of the Franchise
Agreement for
that
Restaurant). The purchase price must be paid in cash at the closing
of
the
purchase, which must take place no later than 90 days after your
receipt of notice of exercise of this option to purchase, at which
time you
must
deliver instruments
transferring to us or our assignee: (i) good and
merchantable title to the assets purchased, free and clear of all
liens and
encumbrances (other
than liens and security interests acceptable to us or
our
assignee),
with all sales and
other transfer
taxes paid by you;
and
(ii)
all licenses and
permits of the
Restaurants that may
be assigned or
transferred. If you
cannot deliver
clear title to all of the purchased
assets, or in the event there are other unresolved issues, the closing of
the
sale will be accomplished through an escrow. We have the right to set
off
against and reduce the
purchase price by any
and all amounts owed
by
you
to us, and the amount of any encumbrances or liens against the assets
or
any obligations assumed by us. You and each holder of an interest
in you
must
indemnify us and our affiliates against all liabilities not so
assumed. You
must maintain in force all insurance policies required
pursuant to the
applicable Franchise
Agreement until the closing on the
sale.
G. All of our
and your obligations that expressly or by their nature
survive the expiration
or termination
of this Agreement will
continue in
full
force and effect subsequent to and notwithstanding its expiration or
termination and until they are satisfied or by their nature
expire.
TRANSFER
--------
9.
The following
provisions govern any transfer:
A. We have the
right to transfer
all or any part of our
rights or
obligations under this Agreement to any person or legal entity.
10
<PAGE>
B. This
Agreement is entered into by us with specific reliance upon
your
personal
experience,
skills
and managerial and financial
qualifications.
Consequently,
this Agreement,
and your rights and
obligations under it,
are and will remain
personal to you.
You may only
Transfer your rights and interests under this Agreement if you obtain our
prior written
consent and you
transfer all of your
rights and
interests
under all Franchise Agreements for Restaurants in the Development
Territory.
Accordingly, the
assignment
terms and conditions of the
Franchise Agreements
shall apply to any Transfer of your rights and
interests under
this Agreement. As used in this Agreement, the term
"Transfer" means any sale, assignment, gift, pledge, mortgage or any
other
encumbrance, transfer
by bankruptcy,
transfer by judicial order, merger,
consolidation, share
exchange, transfer by
operation of law or otherwise,
whether direct or indirect, voluntary or involuntary, of this
Agreement or
any
interest in it, or any rights or obligations arising under it, or of
any
material portion of your assets, or of any interest in you.
MISCELLANEOUS
10.
The parties agree to
the following provisions:
A. You agree to
indemnify, defend,
and hold us, our
affiliates and
our
officers, directors, shareholders and employees harmless from and
against any and all
claims, losses, damages and liabilities, however
caused, arising
directly or indirectly from, as a result of, or in
connection with, the development, use and operation of your
Restaurants, as
well
as the costs,
including attorneys'
fees, of defending
against them
("Franchise Claims").
Franchise Claims include, but are not limited to,
those arising from any death, personal injury or property damage
(whether
caused wholly or in
part through our or our affiliates active or passive
negligence), latent or
other defects in any Restaurant, or your employment
practices. In the
event a Franchise Claim is made against us or our
affiliates, we reserve
the right in our sole
judgment to select our own
legal counsel to represent our interests, at your cost.
B. Should
one or more
clauses of this Agreement be held void or
unenforceable for any reason by any court of competent jurisdiction, such
clause or clauses will be deemed to be separable in such
jurisdiction
and
the
remainder of this
Agreement is valid and
in full force and effect and
the
terms of this Agreement must be equitably adjusted so as to compensate
the
appropriate party for any consideration lost because of the
elimination
of
such clause or clauses.
C. No waiver by
us of any breach by you, nor any delay or failure by
us
to enforce any provision of this Agreement, may be deemed to be a
waiver
of
any other or
subsequent breach or
be deemed an estoppel to enforce our
rights with
respect to that or any other or subsequent breach. This
Agreement may not be
waived, altered or
rescinded,
in whole or in
part,
except by a writing signed by you and us. This Agreement
together with the
application form executed by you requesting us to enter into this
Agreement
constitute the sole
agreement between the parties with respect to the
entire subject matter of this Agreement and embody all prior
agreements and
negotiations with
respect to the business. You acknowledge and agree that
you
have not received any warranty or guarantee, express or implied, as to
the
potential volume,
profits or success of
your business.
There are no
representations or
warranties of any kind, express or implied, except as
contained in this
Agreement.
D. Except as
otherwise provided in this Agreement, any notice,
demand or
communication provided
for must be in writing and signed by the
party serving the same
and either delivered
personally or by a
reputable
overnig
