EXHIBIT F
STANDARD FORM
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
FRANCHISE AGREEMENT
-----------------------------------
(Location Address)
-----------------------------------
(Franchisee Name)
-----------------------------------
(Date)
2004
F-1
TABLE OF CONTENTS
RECITALS..................................................................
F-3
1.
FRANCHISE GRANT AND TERM.........................................
F-4
2.
UNIFORM STANDARDS................................................
F-5
3.
COMPLIANCE WITH THE SYSTEM.......................................
F-6
4.
GENERAL SERVICES OF FRANCHISOR...................................
F-6
5.
RESTAURANT SYSTEM AND PROCEDURES.................................
F-7
6.
TRAINING.........................................................
F-10
7.
RESTAURANT MAINTENANCE...........................................
F-10
8.
ADVERTISING......................................................
F-11
9.
FEES.............................................................
F-13
10.
RECORD KEEPING...................................................
F-15
11.
FRANCHISEE ORGANIZATION, AUTHORITY,
FINANCIAL CONDITION AND SHAREHOLDERS.............................
F-15
12.
TRANSFER.........................................................
F-18
13.
CONFIDENTIALITY; RESTRICTIONS....................................
F-22
14.
INSPECTIONS......................................................
F-23
15.
RELATIONSHIP OF PARTIES AND INDEMNIFICATION......................
F-25
16.
INSURANCE........................................................
F-27
17.
DEBTS AND TAXES..................................................
F-28
18.
TRADE NAMES, SERVICE MARKS AND TRADEMARKS........................
F-28
19.
EXPIRATION AND TERMINATION; OPTION TO
PURCHASE RESTAURANT; ATTORNEYS' FEES.............................
F-30
20.
NO WAIVER OF DEFAULT.............................................
F-35
21.
CONSTRUCTION, SEVERABILITY,
GOVERNING LAW AND JURISDICTION...................................
F-36
22.
INTERFERENCE WITH EMPLOYMENT RELATIONS...........................
F-37
23.
LIQUOR LICENSE...................................................
F-37
24.
FORCE MAJEURE....................................................
F-37
25.
MISCELLANEOUS....................................................
F-38
26.
ACKNOWLEDGMENTS..................................................
F-40
EXHIBIT 1:
ROYALTY FEE.................................................
F-42
APPENDIX A:
STATEMENT OF OWNERSHIP INTERESTS............................
F-43
APPENDIX B:
REVIEW AND CONSENT WITH
RESPECT TO TRANSFERS........................................
F-44
APPENDIX C:
CONFIDENTIALITY AGREEMENT...................................
F-45
2004
F-2
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
FRANCHISE AGREEMENT
This Agreement is made this ________ day of _____________________,
20______, by
and
between
APPLEBEE'S
INTERNATIONAL,
INC.,
a
Delaware
corporation
("FRANCHISOR"),
_____________________________________________,
a
(_______________ corporation, sole proprietorship,
_______________ partnership,
_______________
limited
partnership
[
strike
inappropriate
language
])
("FRANCHISEE")
and
______________________________________
______________________________
(collectively, the "PRINCIPAL SHAREHOLDERS" and,
individually,
a "PRINCIPAL
SHAREHOLDER"
of
Franchisee
if a
corporation
or
general
partner if
Franchisee is a limited
partnership
having as its general
partner
a
corporation)
and
________________________________________________________________________________
("GENERAL PARTNER" of Franchisee if Franchisee is a limited
partnership).*
*
(If
Franchisee
is
not a
corporation
or a
sole
proprietorship,
or if
Franchisee is a limited liability company,
the parties hereto hereby agree that
an Addendum
shall be attached to this
Agreement
so as properly to reflect the
responsibilities of the partners of any general partnership, the
general partner
of any limited partnership and the shareholders of any corporate
general partner
of any partnership, or the members of any limited liability
company.)
WITNESSETH:
RECITALS
A.
Franchisor
owns the rights to develop and operate a unique
system of
restaurants which specialize in the sale of high quality,
moderately priced food
and
alcoholic
beverages
in an
attractive,
casual
setting,
which
includes
proprietary
rights
in
certain
valuable
trade
names,
service
marks
and
trademarks,
including the service mark Applebee's
Neighborhood Grill & Bar and
variations
of such
mark,
designs,
decor and
color
schemes
for
restaurant
premises,
signs,
equipment,
procedures
and formulae for
preparing
food and
beverage
products,
specifications
for
certain
food and
beverage
products,
inventory
methods,
operating
methods,
financial control
concepts,
training
facilities and teaching techniques ("the System").
B.
Franchisor established, through its own development and operation,
and
through the granting of franchises,
a chain of Applebee's
Neighborhood Grill &
Bar restaurants which are distinctive;
which are similar in appearance,
design
and decor; and which are uniform in operation and product
consistency.
C.
The value of Franchisor's trade names, service marks and trademarks
is
based upon: (1) the maintenance of uniform high quality
standards in connection
with the preparation and sale of Franchisor-approved food and
beverage products,
(2) the uniform high standards of appearance of the individual
restaurant units
in the System, (3) the use of distinctive
trademarks,
service marks,
building
designs and advertising
signs
representing a uniformly high quality of product
and services,
and (4) the assumption by Franchisor
and its
franchisees of the
obligation
to maintain and enhance the goodwill
and public
acceptance
of the
System (and of Franchisor's
2004
F-3
trade
names,
service
marks and
trademarks)
by strict
adherence to the high
standards required by Franchisor.
D.
Franchisor,
Franchisee
and the Principal
Shareholders
have entered
into a Development
Agreement
dated
__________________,
20____
("Development
Agreement"),
relating
to
the
development
by
Franchisee
of
Applebee's
Neighborhood Grill & Bar restaurants.
E.
Franchisee
desires to use the System in connection with the operation
of an Applebee's
Neighborhood
Grill & Bar
restaurant at the location which is
specified in Subsection 1.1 of this Agreement, pursuant to the
terms, conditions
and provisions hereinafter set forth.
NOW, THEREFORE,
in consideration of the mutual obligations contained herein, it
is hereby agreed as follows:
1.
FRANCHISE GRANT AND TERM
1.1 Franchisor
grants
Franchisee,
for the term stated below,
the right,
license and privilege:
(a) to use the
System
incident
to the
operation
of an
Applebee's
Neighborhood Grill & Bar restaurant at
____________________________________
(the "Restaurant");
(b) to use
the
trade
names,
service
marks
and
trademarks
which
Franchisor
shall from time to time
designate
as part of the System,
but
only in connection
with the sale at the Restaurant of those products which
Franchisor has designated and approved; and
(c) to hold itself out to the public as a Franchisee of Franchisor.
1.2 The term of the franchise shall commence as of the
Commencement
Date,
as hereinafter defined, and shall end twenty (20) years thereafter,
unless this
Agreement is terminated
prior to that date in accordance
with its
provisions.
"Commencement
Date,"
as used
herein,
shall
mean the
date
upon
which
the
Restaurant
opens for business.
The parties agree to affix to this Agreement an
addendum
expressly setting forth the Commencement Date, which, when so
affixed,
shall become a part of this Agreement.
1.3 At the expiration of the term hereof,
Franchisee
shall have an option
to
operate
the
Restaurant
for four (4)
successive
terms of five (5)
years
(unless the franchise
agreement with respect to that
additional term is sooner
terminated in accordance with its provisions),
provided that immediately
prior
to each such five (5) year term (a) Franchisee
satisfies the requirements which
Franchisor
then-imposes on its new franchisees,
(b) all other restaurant units
within the System which Franchisee
then-operates
substantially
comply, in the
opinion of Franchisor, with Franchisor's then-current standards,
specifications,
requirements and instructions, and (c) Franchisee executes the form
of franchise
agreement which Franchisor is then
2004
F-4
using with
respect to new
restaurants
within the
System,
with the amount of
royalty and
advertising
fees
payable at the rates
then-prevailing
under the
franchise
agreements which Franchisor is then using for new restaurants
within
the System,
and
Franchisee
pays to Franchisor
for each of said five (5) year
periods a franchise fee equal to ten percent (10%) of the
prevailing
franchise
fee
paid by new
franchisees
at
that
time.
Any
franchise
agreement
which
Franchisee executes for such additional term will also contain
options to obtain
an
assignment
of
Franchisee's
lease with a third
party
and/or to
purchase
certain property or to purchase or lease the Restaurant premises
exercisable by
Franchisor
upon
termination
thereof
and an option to
purchase
or lease the
Restaurant
premises
exercisable by Franchisor
upon
expiration of the renewal
term (subject to any then-existing
renewal rights of Franchisee).
Such options
will contain provisions
substantially similar to the provisions of Franchisor's
options
described in Subsection 19.4 hereof.
Franchisee
shall give Franchisor
written
notice of its desire to exercise
its option to operate the
Restaurant
for an
additional
term no earlier than twelve (12)
months,
and no later than
seven (7) months,
prior to expiration of the initial term. If Franchisee
gives
that notice,
Franchisor,
in its sole discretion,
reasonably exercised,
shall
determine whether
Franchisee has satisfied the foregoing
requirements.
Within
forty-five (45) days of receiving the notice described
above,
Franchisor shall
notify
Franchisee in writing
whether or not Franchisee is eligible to exercise
the option described in this Subsection.
1.4 During the period from the date of this
Agreement to the expiration or
earlier
termination
of
this
Agreement,
Franchisor
shall
not
establish
a
restaurant unit utilizing the System, or license another franchisee
to establish
a restaurant
unit utilizing the System,
at any location within the lesser of a
three (3) mile radius of the
Restaurant or a radius from the
Restaurant
which
includes either a daytime or residential
population of forty thousand
(40,000)
or more
people.
Notwithstanding
the
foregoing,
Franchisor
may
establish a
restaurant
unit or may license a
restaurant
unit to a third party
within the
geographic
area set forth in the
preceding
sentence,
provided
that (i) such
restaurant
is located
within an
airport
(serviced
by one or more
public or
charter carrier), arena, stadium, state or national park, or
military fort, post
or base,
(ii) is
located
across an
international
border,
or (iii) does not
utilize the System or utilize the
Applebee's
Neighborhood
Grill & Bar service
mark.
1.5 Franchisee, in consideration of the benefits and privileges
provided to
it by this
Agreement,
agrees to operate the Restaurant and perform as required
hereunder for the full term of this Agreement.
1.6 This Agreement is entered into pursuant to and subject to the
terms and
conditions which are set forth in the Development Agreement.
2.
UNIFORM STANDARDS
2.1 The System is a
comprehensive
restaurant
system for the retailing of
certain
uniform and quality food and
beverage
products
(including
alcoholic
beverages),
emphasizing a varied menu of high quality,
moderately
priced food
products
(including
appetizers,
creative
sandwiches,
dinner
entrees
and
desserts),
a
selection
of
alcoholic
and other
beverages,
and
prompt
and
courteous service in a clean,
wholesome,
casual atmosphere.
The foundation of
the System is the establishment and maintenance of a reputation
among the public
for the operation of high quality restaurant units. A fundamental
requirement of
the System,
this Franchise Agreement and franchises which Franchisor will grant
to others is adherence by all franchisees to
2004
F-5
Franchisor's
standards and policies
providing for the uniform operation of all
restaurant units within the System,
including,
but not limited to, (a) selling
only those products which Franchisor has designated and approved,
(b) using only
Franchisor's prescribed building layout and designs,
equipment, signs, interior
and exterior decor items,
fixtures and
furnishings,
(c) adhering
strictly to
Franchisor's standards and specifications
relating to the selection,
purchase,
storage,
preparation,
packaging,
service
and sale of all
food and
beverage
products being sold at the
Restaurant,
and (d) satisfying all of
Franchisor's
prescribed
standards of quality,
service and
cleanliness.
Compliance
by all
franchisees
with the foregoing
standards and policies in conjunction
with the
use of Franchisor's trade names, service marks and trademarks
provides the basis
for
the
wide
public
acceptance
of the
System
and its
valuable
goodwill.
Accordingly, strict adherence by all franchisees to all aspects of
the System is
required at all times.
2.2 The provisions of the Agreement
shall be interpreted to give effect to
the intent of the parties
stated in this
Section 2 to assure
that
Franchisee
shall
operate the
Restaurant
in conformity
with the System,
through
strict
adherence to
Franchisor's
standards and policies as they now exist and as they
may be modified from time to time.
3.
COMPLIANCE WITH THE SYSTEM
Franchisee
acknowledges that every component of the System is important to
Franchisor, to all franchisees and to the operation of the
Restaurant, including
the
requirements
(a) that only those
products
designated and approved by the
Franchisor are sold at the Restaurant,
and (b) that there is uniformity of food
and beverage specifications,
preparation methods, quality, appearance, building
and interior design, color and decor, landscaping,
facilities and service among
all restaurant units in the System. Accordingly,
Franchisee agrees to and shall
comply
with
all
aspects
of the
System
(as it now
exists
and as it may be
modified from time to time).
Franchisee
recognizes and agrees that
Franchisor
may
prohibit
the use of the System and its trade
names,
notwithstanding
the
granting of this Agreement, if Franchisee fails to design,
construct,
equip or
furnish its
Restaurant
in
compliance
with the
specifications
designated by
Franchisor, unless prior written approval has been received from
Franchisor.
4.
GENERAL SERVICES OF FRANCHISOR
4.1 Franchisor
shall advise and consult with
Franchisee
periodically
in
connection with the operation of the Restaurant,
and at other
reasonable times
upon
Franchisee's
request.
Franchisor
will provide to Franchisee such of its
know-how,
new developments,
techniques and improvements in areas of restaurant
design, management,
food and beverage preparation,
sales promotion and service
concepts as may be pertinent to the construction and operation of
the Restaurant
under the
System.
Franchisor
may
provide the
foregoing
information
(a) by
sending
representatives
to visit the Restaurant,
(b) by providing
written or
other
material,
(c) at meetings or seminars,
and (d) at training
sessions at
Franchisor's training facility and/or such other locations as may
be selected by
Franchisor from time to time. Franchisor also shall make available
to Franchisee
all additional
services,
facilities,
rights and privileges
which
Franchisor
makes available from time to time to its franchisees of the System
generally.
2004
F-6
4.2 For approximately eight (8) days prior to the opening of the
Restaurant
and the first six (6) days that the Restaurant is open for
business,
Franchisor
shall provide Franchisee,
at Franchisor's expense, with the services of up to a
maximum of six (6) of
Franchisor's
training
personnel
to
facilitate
proper
operation
of the
kitchen,
bar and dining room areas during that period and to
assist in correcting any operational problems which may arise.
Franchisee shall
reimburse Franchisor for any additional training support required
or requested.
4.3 From time to time during the term of this
Agreement,
Franchisor
will
develop and test new menu items. The menu consists of approved
national food and
beverage
selections.
Franchisee
shall
comply
with
all menu
changes
which
generally
occur every six (6) months.
The menu may be modified to reflect food
and beverage items peculiar to Franchisee's
local area, subject to Franchisor's
testing and approval.
5.
RESTAURANT SYSTEM AND PROCEDURES
5.1
Franchisor
shall
furnish
Franchisee
with advice and
assistance in
managing and operating the Restaurant,
and
Franchisor's
representatives
will
visit
the
Restaurant
periodically.
Franchisor
will
assist
Franchisee
in
coordinating
the
Restaurant's
pre-opening
activities,
and
as
noted
more
particularly
in
Subsection
4.2
hereof,
shall
provide
Franchisee
with the
services of certain of Franchisor's
personnel to facilitate proper operation of
the Restaurant when it opens for business.
5.2
Franchisee
shall
designate
an
employee
who
will
supervise
the
Restaurant,
and devote his or her full time, best efforts and constant personal
attention to the day-to-day operation of the Restaurant (the
"General Manager").
Franchisee
also shall
designate an employee who will
supervise the Restaurant
kitchen,
and devote his or her full time,
best efforts and
constant
personal
attention to the day-to-day
operation of the
Restaurant
kitchen (the "Kitchen
Manager").
5.3 Franchisee shall require that the General Manager,
the Kitchen Manager
and each of Franchisee's
employees who serve as Restaurant managers to maintain
his or her principal
personal residence within a usual driving time of not more
than
approximately
one (1) hour from the Restaurant.
Franchisor
reserves the
right to require
that,
as a condition
of his or her
employment,
the General
Manager
must
successfully
complete
Franchisor's
interview
process
and
a
psychological
profile
test in a manner
which
satisfies
a
uniform
standard
established by Franchisor. The test shall be administered by
Franchisor, or by a
testing agency designated by Franchisor, at Franchisee's expense.
5.4
Unless
Franchisor
shall
have
given
its
prior
written
approval,
Franchisee
shall keep the
Restaurant
open for business
only during the hours
which are specified by Franchisor in the Franchise
Operations Manual or in such
other
materials
or
manuals
provided
or
made
available
by
Franchisor
to
Franchisee
(collectively
the
"Manuals"),
provided
that
such
hours
do not
conflict with state laws or local
ordinances
relating to the sale of alcoholic
beverages or governing the hours during which restaurant
establishments
may be
open for business. In addition, Franchisee expressly agrees to:
2004
F-7
(a)
operate
the
Restaurant
in a clean,
safe and
orderly
manner,
providing courteous, first-class service to the public;
(b) diligently
promote and make every
reasonable
effort to increase
the business of the Restaurant;
(c)
advertise
the
business
of the
Restaurant
by
the
use of the
Franchisor's
trade
names,
service
marks and
trademarks
and such other
insignia,
slogans,
emblems,
symbols,
designs
and
other
identifying
characteristics
as may be
developed or
established
from time to time by
Franchisor
and
included in the
Manuals,
subject to the
limitations
of
Subsections 8.4 and 8.5 hereof;
(d) prohibit and, to the best of Franchisee's ability, prevent the
use
of the
Restaurant
for any
immoral or illegal
purpose,
or for any other
purpose,
business
activity,
use
of
function
which
is
not
expressly
authorized hereunder or in the Manuals; and
(e) comply fully with all applicable laws and regulations,
including,
but not limited to, those
relating to building
construction,
maintenance
and safety, environmental,
fire prevention, food safety, public access and
the sale of alcoholic beverages.
5.5
Franchisee
hereby
acknowledges
receipt
and
loan
of a copy of the
Manuals
heretofore
or
hereinafter
furnished
to
Franchisee,
and
agrees to
faithfully, completely and continuously perform, fulfill, observe
and follow all
instructions,
requirements,
standards, specifications,
systems and procedures
contained
therein,
including (a) those relating to the
construction,
design,
decor,
building and
equipping
of the
Restaurant,
(b) those
relating to the
selection,
purchase, storage,
preparation,
packaging, service and sale of all
products being sold at the Restaurant, (c) those relating to the
maintenance and
repair of Restaurant building,
grounds, equipment, signs, interior and exterior
decor
items,
fixtures
and
furnishings,
and (d) those
relating
to employee
uniforms
and
dress,
accounting,
bookkeeping,
record
retention,
and
other
business systems, procedures and operations. The Manuals are
incorporated herein
by reference and hereby made part of this Agreement. Franchisee
acknowledges and
agrees that the materials
contained in the Manuals are integral,
necessary and
material elements of the System.
5.6 Franchisee understands,
acknowledges and agrees that strict conformity
with the System, including the standards,
specifications,
systems, procedures,
requirements and instructions contained in this Agreement and in
the Manuals, is
vitally important, not only to the success of Franchisor,
but to the collective
success of all of
Franchisor's
other
franchisees,
by reason of the
benefits
which
Franchisor
and all of its
franchisees
will derive from
uniformity
in
products sold, identity, quality,
appearance,
facilities and service among all
restaurant
units which are part of the System.
Without limiting the generality
of the
foregoing
provisions,
Franchisee
agrees
to
adhere
strictly
to the
requirements in the Manuals
relating (a) to the
construction,
design,
decor,
building and equipping of the Restaurant,
(b) to the maximum
permissible ratio
of sales of alcoholic
beverages to sales of food at the Restaurant,
and (c) to
the
limitations
on the number of video games or similar
devices
which may be
placed on the
Restaurant
premises.
Any
failure
to adhere to the
standards,
specifications,
systems,
requirements
or
instructions
contained
in
this
Agreement
or in
the
Manuals
shall
constitute
a
material
breach
of
this
Agreement.
2004
F-8
5.7 Franchisor
shall have the right, at any time and from time to time, in
the good faith exercise of its reasonable business judgment,
consistent with the
overall
best
interests
of the
System
generally,
having
due regard for the
financial
burden which may be placed upon its
franchisees,
to revise,
amend,
delete from and add to the System and the
material
contained
in the
Manuals.
Franchisee
expressly
agrees to
comply
with all such
revisions,
amendments,
deletions and additions.
5.8 Franchisee shall offer for sale from the Restaurant,
at all times when
the
Restaurant
is open for
business,
only the products
which are
expressly
designated in the Manuals, except, as noted more particularly in
Subsection 4.3,
to the extent that Franchisee has obtained Franchisor's prior
written consent to
a modification
of that
requirement.
No product shall be offered or sold at or
from the Restaurant
under, or in connection with, any trademark or service mark
other
than
Franchisor's
designated
trademarks
and
service
marks
without
Franchisor's prior written consent.
5.9
Franchisee
shall obtain all food and beverage
products,
equipments,
signs, interior and exterior decor items, fixtures,
furnishings,
supplies, and
other
products
and
materials
required
for the
operation
of or sold at the
Restaurant
solely from suppliers
(including
manufacturers,
distributors
and
other
sources)
who
demonstrate,
to
Franchisor's
continuing
reasonable
satisfaction,
the
ability
to meet
Franchisor's
then-current
standards
and
specifications
for such
items;
who
possess
adequate
quality
controls
and
capacity to supply
Franchisee's needs promptly and reliably;
and who have been
approved in writing by Franchisor
and not thereafter
disapproved.
The Manuals
contain a list of approved
suppliers.
If
Franchisee
desires to purchase
any
items from an
unapproved
supplier,
Franchisee
shall
submit to
Franchisor a
written
request for such approval,
which
approval
shall not be
unreasonably
withheld,
or shall request the supplier itself to do so.
Franchisor shall have
the right to inspect the supplier's facilities, and to require that
samples from
the supplier be delivered, at Franchisor's option, either to
Franchisor or to an
independent,
certified
laboratory
designated
by
Franchisor
for
testing.
Franchisee
or the
supplier
shall pay the costs of any such
test.
Franchisor
shall notify
Franchisee in writing within sixty (60) days of receiving any such
request whether it disapproves the supplier.
Failure by Franchisor to so notify
Franchisee
within
that
period
shall be
deemed
to
constitute
Franchisor's
approval of such
supplier.
Franchisor
reserves the right,
at its option,
to
reinspect the
facilities and retest
products of any such approved
supplier at
any time and to revoke its approval upon the
supplier's
failure to continue to
meet any of Franchisor's criteria.
Notwithstanding the foregoing,
any supplier
of goods having any trademark, trade name, service mark, logo or
symbol owned by
Franchisor
shall not be
approved
to supply
Franchisee
such goods until such
supplier
has
entered
a
written
agreement
with
Franchisor
regarding
the
production, use and sale of such goods.
5.10 No food or beverage
product,
interior or exterior decor item,
sign,
item of
equipment,
fixtures,
furnishings
or
supplies,
or other
product or
material
required
for the
operation
of the
Restaurant,
which
bears any of
Franchisor's trade names, service marks or trademarks,
shall be used or sold in
or upon the Restaurant
premises unless the same shall have been first submitted
to and approved in writing by Franchisor.
5.11 The Manuals and all related material furnished to Franchisee
hereunder
are and shall
remain
the
property
of
Franchisor,
and must be
returned
to
Franchisor, along with any copies
2004
F-9
made
thereof,
immediately
upon
request
or upon the
expiration
or
earlier
termination of this Agreement.
6.
TRAINING
6.1 Franchisor
shall make its operations
training course available to the
General Manager,
the Kitchen Manager,
and Franchisee's
Assistant Managers and
other Restaurant managers.
6.2 Before the Restaurant opens for business, and thereafter as
replacement
personnel are employed by Franchisee,
the General Manager,
the Kitchen Manager
and
each
Assistant
Manager
shall
attend
Franchisor's
operations
training
facility for such period of time as Franchisor shall deem
reasonably
necessary,
and
shall
successfully
complete
that
course
to
Franchisor's
reasonable
satisfaction.
If the General Manager,
Kitchen Manager or an Assistant
Manager
fails
to
successfully
complete
Franchisor's
operations
training
course,
Franchisor may require designation of a new General Manager,
Kitchen Manager or
Assistant
Manager,
as the case may be, and
Franchisee
shall
designate a new
General Manager,
Kitchen Manager or Assistant Manager, who shall be required to
successfully complete such training course.
6.3 The General
Manager,
the Kitchen
Manager and each Assistant
Manager
shall,
from time to time as
reasonably
required
by
Franchisor,
attend
and
successfully
complete
to
Franchisor's
reasonable
satisfaction
a
Franchisor-provided refresher course in restaurant operations.
6.4 Franchisee
shall be responsible for the
Restaurant's
compliance with
the operating standards, methods, techniques and material taught at
Franchisor's
operations
training course,
and shall cause the employees of the Restaurant to
be trained in such
standards,
methods and
techniques
as are
relevant to the
performance of their respective duties.
6.5
Attendance
of the
General
Manager,
the
Kitchen
Manager
and each
Assistant Manager at any of Franchisor's training courses shall be
tuition-free.
Franchisee shall pay all other costs and expenses
relating to the attendance of
Franchisee's
personnel
at any of
Franchisor's
training
courses,
including,
without limitation,
the cost of travel,
lodging,
meals, and other related and
incidental expenses.
7.
RESTAURANT MAINTENANCE
7.1 Franchisee shall, at Franchisee's
sole cost and expense,
maintain the
Restaurant in conformity with the standards,
specifications and requirements of
the
System,
as the same may be
designated
by
Franchisor
from time to time.
Franchisee
specifically
agrees to repair or replace,
at Franchisee's cost and
expense,
equipment,
signs,
interior
and
exterior
decor
items,
fixtures,
furnishings,
supplies,
and
other
products
and
materials
required
for the
operation
of the
Restaurant
as
necessary
or
desirable,
and to obtain,
at
Franchisee's cost and expense, any new or additional equipment,
signs, interior
and exterior decor items,
fixtures,
furnishings,
supplies, and other products
and materials which may be reasonably required by Franchisor for
new products or
procedures.
Except as may be expressly provided in the Manuals,
no alterations
or
2004
F-10
improvements,
or changes of any kind in design,
equipment,
signs, interior or
exterior
decor
items,
fixtures or
furnishings
shall be made in or about the
Restaurant
or
Restaurant
premises
without
the
prior
written
approval
of
Franchisor in each instance.
7.2 In order to assure the continued success of the Restaurant,
Franchisee
shall, at any time from time to time after ________________,
_________,
(
i.e.
,
six [6] years
after
the date of this
Agreement)
as
reasonably
required
by
Franchisor (taking into
consideration the cost and then-remaining
term of this
Agreement),
modernize the Restaurant premises,
equipment,
signs, interior and
exterior decor items,
fixtures,
furnishings,
supplies, and other products and
materials
required
for
the
operation
of
the
Restaurant,
to
Franchisor's
then-current standards and specifications,
provided that at the time Franchisor
requires Franchisee to so modernize the Restaurant premises at
least twenty-five
percent (25%) of Franchisor-owned
and operated
Restaurants meet such standards
and
specifications.
Franchisee's
obligations
under
this
Subsection
are in
addition to, and shall not relieve Franchisee from, any of its
other obligations
under this Agreement, including those contained in the Manuals.
7.3 If
Franchisee
is or
becomes
a lessee
of the
Restaurant
premises,
Franchisee shall have included in the lease provisions expressly
permitting both
Franchisee and Franchisor to take all actions and make all
alterations
referred
to under Subsections 7.1 and 7.2 hereof, requiring the lessor
thereunder to give
Franchisor reasonable notice of any contemplated termination, and
providing that
Franchisee has the unrestricted
right to assign the lease to Franchisor without
the lessor having any right to impose conditions on such assignment
or to obtain
any payment in connection
therewith.
Franchisee
shall not,
without the prior
written
consent
of
Franchisor,
execute
any lease or other
agreement
which
imposes,
or purports to impose,
any
limitations
on the ability of Franchisee
and/or
of
Franchisor
to
operate
additional
restaurants
at any
particular
location
beyond the geographic
limitation set forth in Section 1.4 hereof,
or
any lease the term of which is shorter than the term of this
Agreement.
8.
ADVERTISING
8.1 Franchisor shall develop and administer
advertising,
public relations
and sales
promotion
programs
designed to promote
and enhance the
collective
success of all
restaurant
units in the
System.
It is
expressly
understood,
acknowledged
and agreed that in all phases of such
advertising
and promotion,
including,
without limitation,
type, quantity, timing, placement and choice of
media and medium, market areas, advertising agencies and public
relations firms,
Franchisor's
decisions
shall be final and binding.
Franchisee
shall have the
right to
participate
actively in all such
advertising,
public
relations and
sales
promotion
programs,
but only in full and complete
accordance with such
terms and conditions as may be established by Franchisor for each
such program.
8.2 Franchisee
shall pay Franchisor,
in the manner described in Section 9
hereof, a minimum dollar amount equal to two and twenty-five
hundredths percent
(2.25%) of Franchisee's
gross sales, as defined in Subsection 9.3 hereof.
Such
funds shall become the sole and absolute property of Franchisor, to
be allocated
to a separate "advertising account" established by Franchisor.
Franchisor shall
use such
funds
for
market
studies,
advertising
and
marketing
studies
or
services,
production
of
commercials,
advertising
copy and layouts,
traffic
costs, agency fees, marketing personnel,
or any other costs associated with the
development,
marketing
and
testing
2004
F-11
of advertising,
and for the purchase of advertising time, space or materials in
national,
regional
or
other
advertising
media,
in a manner
determined
by
Franchisor in its sole
discretion.
Within six (6) months
following the end of
Franchisor's
fiscal year,
Franchisor
shall
provide all
franchisees
with an
accounting of all amounts
received from them and expended by Franchisor for the
matters set forth above. In addition,
Franchisee
shall expend a minimum dollar
amount equal to one and one-half percent (1.5%) of Franchisee's
gross sales, for
local promotional
activities,
subject to the provisions of Subsections 8.4 and
8.5 hereof.
Franchisor shall have the right at all times to review Franchisee's
books and records,
and to require
Franchisee to produce
evidence of its gross
sales and local promotional
activities,
to ensure Franchisee's compliance with
this Section.
Any amount
determined by said audit to be due Franchisor as part
of the advertising fee will be paid to Franchisor by Franchisee
within ten (10)
days thereafter.
At any time after execution of this Agreement,
Franchisor may
in its sole
discretion
increase,
to a maximum of four
percent
(4%) of gross
sales,
the percentage of gross sales which
Franchisee shall be required to pay
to Franchisor for allocation to a separate
advertising account pursuant to this
Subsection 8.2.
Franchisor
shall use the funds paid pursuant to that increased
percentage
requirement
solely for the purchase of advertising
time,
space or
materials
in
national,
regional
or
other
advertising
media,
in a
manner
determined by Franchisor in its sole discretion,
provided that in each calendar
year (or other
twelve [12] month period
established
by
Franchisor)
in which
Franchisor makes expenditures for advertising from such an
advertising
account,
so
long
as
Franchisee
is
in
compliance
with
its
obligations
hereunder,
Franchisor's
expenditures
for advertising in the Territory
encompassed by the
Development
Agreement
(including
expenditures
for
national
or
regional
advertising
in media which reach that
Territory)
shall be on a basis which is
roughly
proportional to Franchisee's
contribution to that advertising
account
during that calendar year or other twelve (12) month period.
Franchisor also may
increase the
percentage
of gross sales which
Franchisee
shall be required to
spend for local promotional activities, provided however, that in
no event shall
Franchisee be required to make
payments
pursuant to this
Subsection
8.2 in a
dollar amount in excess of five percent (5%) of gross sales.
8.3 Franchisee shall submit to Franchisor,
for Franchisor's
approval,
an
advertising
campaign
plan
relating
to the
promotion
of the
opening of the
Restaurant
which is
sufficient
to meet the needs of the
market.
The Manuals
contain a Press
Release kit to assist
Franchisee
in this
regard.
Franchisee
shall conduct the approved
advertising
campaign and make all
expenditures for
advertising
to promote the opening of the
Restaurant
no later than sixty (60)
days after the Restaurant
opens for business.
Franchisor
will reimburse fifty
percent (50%) of Franchisee's
out-of-pocket opening advertising expenditures up
to a maximum of two thousand five hundred dollars ($2,500),
if Franchisee meets
the following criteria:
(a)
Franchisee's
opening
advertising
expenditures
are made within
sixty (60) days after the opening of the Restaurant;
(b) Franchisee
submits to Franchisor
within one hundred twenty (120)
days after the
opening of the
Restaurant
documentation
for the
opening
advertising expenditures,
such as paid invoices from suppliers of goods or
services evidencing expenditure on the opening advertising
promotion; and
2004
F-12
(c) Franchisee's opening advertising expenditures are made pursuant
to
the approved
advertising
campaign plan and in
accordance
with the Grand
Opening Reimbursement Program Policy Guidelines set forth in the
Manuals.
8.4
Nothing
in the
foregoing
Subsections
shall be deemed
to
prohibit
Franchisee from making additional expenditures for local
promotional activities.
All of the
Franchisee's
local
promotional
activities
shall utilize approved
advertising media. "Approved advertising media" are limited to the
following:
(a) Newspapers, magazines and other such periodicals;
(b) Radio and television;
(c) Outdoor advertising by signs displayed on billboards or
buildings;
and
(d) Handbills, flyers, door-hangers and direct mail.
In the event Franchisee wants to use a form of advertising
medium not set forth
above,
Franchisee
shall submit a description of such medium and advertising to
Franchisor.
Franchisor shall notify
Franchisee
whether it approves the use of
such
medium
within
thirty
(30)
days of
Franchisee's
request.
Failure
by
Franchisor
to so
notify
Franchisee
within
that
period
shall be
deemed to
constitute
Franchisor's
approval
of
such
request.
Guidelines
for
local
promotional
activities
are
contained in the Manuals,
including
Franchisee's
required participation in any co-operative marketing program.
8.5 All
advertising
copy and other
materials
employed by
Franchisee in
local
promotional
activities shall be in strict accordance and conformity with
the standards,
formats and specimens contained in the Manuals and shall receive
the prior approval of Franchisor. In the event Franchisee wishes to
deviate from
the
materials
contained
in the
Manuals,
Franchisee
shall
submit,
in each
instance, the proposed advertising copy and materials to Franchisor
for approval
in advance of publication. Franchisor shall notify Franchisee in
writing, within
fifteen
(15)
days of such
submission,
whether
Franchisor
disapproves
such
advertising
copy and materials.
Failure by Franchisor to so notify
Franchisee
within that period shall be deemed to constitute
Franchisor's
approval of such
advertising
copy and
materials.
In no event
shall
Franchisee's
advertising
contain any statement or material
which may be
considered
(a) in bad taste or
offensive to the public or to any group of persons, (b) defamatory
of any person
or an
attack
on
any
competitor,
(c)
to
infringe
upon
the
use,
without
permission,
of any
other
persons'
trade
name,
trademark,
service
mark or
identification,
or (d)
inconsistent
with the public image of Franchisor or of
the System.
9.
FEES
9.1 As partial
consideration for the rights granted hereunder,
Franchisee
shall pay Franchisor:
2004
F-13
(a)
an
initial
franchise
fee
of
_____________________
dollars
($__________), to be paid in the manner prescribed in Subsection
4.l of the
Development Agreement as payment for the grant of the franchise;
(b) a monthly
royalty fee as determined by Franchisor,
not to exceed
five
percent (5%) of each
calendar
month's
gross sales,
as provided in
Subsection 4.3 of the Development
Agreement,
as payment for
Franchisee's
continuing
right to operate
the
Restaurant
as part of the
System
(see
Exhibit 1); and
(c) a
monthly
advertising
fee
equal
to
such
percentage
of each
calendar
month's
gross
sales
as
Franchisor
may
require
pursuant
to
Subsection 8.2 hereof.
9.2 The fees referred to in
Subsections
9.l(b) and (c) (the "Fees") shall
be paid by check mailed and
postmarked on or before the twelfth day of the next
full month immediately
following the month to which the Fees relate.
Any Fees,
including
the
initial
franchise
fee,
which are not paid when due shall bear
interest
from and after the due dates
thereof at the rate of eighteen
percent
(18%) per annum or the highest rate
permitted by applicable
law,
whichever is
less.
9.3 (a) Except for the sale of a gift
certificate
(on which royalty shall
be due and payable upon
redemption of the gift
certificate
and as provided in
Subsection
9.3(b) hereof,
the term "gross
sales," as used in this
Agreement,
shall mean all receipts
(cash,
cash
equivalents
or credit) or revenues
from
sales from all business conducted upon or from the Restaurant
premises,
whether
evidenced
by check,
cash,
credit,
charge
account,
exchange
or
otherwise,
including,
but not limited to, amounts
received from the sale of goods,
wares
and
merchandise
(including
sales of food
beverages and tangible
property of
every kind and nature,
promotional or otherwise),
from all services
performed
from or at the Restaurant premises, and from all orders taken or
received at the
Restaurant
premises,
regardless
of where such orders are filled.
Gross sales
shall not be reduced by any deductions for cash shortages incurred
in connection
with the transaction of business with customers,
credit card company charges or
theft which is
reimbursed
by insurance
or is not reported to the
appropriate
police
authorities.
Each charge or sale upon
installment
or credit
shall be
treated as a sale for the full price in the month
during
which such
charge or
sale shall be first made, irrespective of the time when Franchisee
shall receive
payment (whether full or partial) therefor.
(b) Gross sales shall not
include:
(i) the sale of
merchandise
for
which cash has been
refunded or,
except as provided in the second
sentence of
Subsection
9.3(a),
not received,
or allowances made for
merchandise,
if the
sales of any such returned or exchanged
merchandise
shall have been previously
included
in gross
sales,
(ii) the
amount
of any sales
tax
imposed
by any
federal,
state, municipal or other governmental authority directly on sales
and
intended to be collected
from
customers,
provided that the amount
thereof is
added
to the
selling
price
and
actually
paid
by the
Franchisee
to
such
governmental
authority,
(iii)
the
sale
of
merchandise
for
which
a
gift
certificate is redeemed,
if the initial sale of the gift certificate shall have
been previously
included in gross sales, (iv) the sale of waste products of the
Restaurant,
(v) telephone,
game and vending machine revenues, (vi) the sale of
non-food
items or
beverages
at a discount in
connection
with a
promotional
campaign,
(vii) one-time sale of furniture,
fixtures or equipment,
and (viii)
theft which is not
covered by
insurance
and is
reported
to the
appropriate
police authorities. In addition,
Franchisor may, from time to time, in writing,
permit or allow
2004
F-14
certain
other items to be excluded
from gross sales.
Any such
permission
or
allowance may be revoked or withdrawn at Franchisor's discretion.
10.
RECORD KEEPING
10.1 Franchisee shall employ a point of sale system approved by
Franchisor,
without
modification,
in
connection
with
the
business
of the
Restaurant.
Franchisee
shall use such
bookkeeping
and
record
keeping
forms as shall be
prescribed in the Manuals.
10.2
Franchisee
shall
complete and submit to
Franchisor,
on a regular,
continuous
basis, each of the following
reports,
in the form specified in the
Manuals:
(a) monthly Restaurant
reports,
on or before the twelfth day of each
calendar month following the month to which the report relates;
(b) annual Restaurant reports, on or before the fifteenth day of
April
of each year; and
(c) weekly gross sales reports, on or before the Tuesday following
the
calendar week to which the report relates.
10.3 The
annual
Restaurant
reports
referred
to above
shall
include a
balance sheet dated as of the end of
Franchisee's
fiscal year or calendar year
and a profit and loss
statement for such year,
together
with such
additional
financial
information as Franchisor may reasonably request.
Such balance sheet
and profit and loss
statement
shall be prepared in accordance
with
generally
accepted
accounting
principles,
certified
as
correct
and
complete
by
Franchisee's
chief executive
officer,
president,
chief financial
officer or
controller
and
reported
on
and
reviewed
by an
independent
state-licensed
certified public accountant. If Franchisee fails to provide
Franchisor with such
balance sheet and profit and loss statement,
Franchisor shall have the right to
have an independent audit made of Franchisee's books and records,
and Franchisee
shall promptly reimburse Franchisor for the cost thereof.
10.4 Each of the reports
referred to in this Section 10 shall be completed
by
Franchisee
or its
accountant
in the
respective
specimen
forms,
and in
accordance
with the
instructions,
contained in the Manuals.
Subsection
10.3
notwithstanding,
time is of the
essence
with
respect to the
completion
and
submission of each such report.
11.
FRANCHISEE ORGANIZATION, AUTHORITY, FINANCIAL CONDITION AND
SHAREHOLDERS
11.1 Franchisee and each Principal
Shareholder represent and warrant that:
(a) Franchisee is a corporation duly incorporated,
validly existing and in good
standing
under the laws of the State of its
incorporation;
(b)
Franchisee is
duly
qualified
and is
authorized
to do business and is in good standing as a
foreign corporation in each jurisdiction in which its business
activities or the
nature
of the
properties
owned by it
requires
such
qualification;
(c) the
execution and delivery of this Agreement and the transaction
contemplated hereby
are within Franchisee's
corporate
2004
F-15
power; (d) the execution and delivery of this Agreement has been
duly authorized
by the Franchisee;
(e) the articles of incorporation
and by-laws of Franchisee
delivered to Franchisor are true,
complete and correct,
and there have been no
changes therein since the date thereof;
(f) the certified copies of the minutes
electing the officers of Franchisee and
authorizing
the execution and delivery
of this Agreement are true, correct and complete, and there have
been no changes
therein since the date(s) thereof; (g) the specimen stock
certificate
delivered
to Franchisor
is a true specimen of
Franchisee's
stock
certificate;
(h) the
balance
sheet of
Franchisee
as of
____________________,
________
("Balance
Sheet")
and
the
balance
sheets
of
its
Principal
Shareholders
as
of
____________________,
________,
heretofore delivered to Franchisor,
are true,
complete and correct,
and fairly present the financial
positions of Franchisee
and each Principal Shareholder,
respectively,
as of the dates thereof; (i) the
Balance Sheet and each such balance sheet have been prepared in
accordance
with
generally accepted accounting principles;
and (j) there have been no materially
adverse
changes
in the
condition,
assets or
liabilities
of
Franchisee
or
Principal Shareholders since the date or dates thereof.
11.2
Franchisee
and each Principal
Shareholder
covenant that during the
term of this Agreement:
(a) Franchisee
shall do or cause to be done all things
necessary to preserve and keep in full force its
corporate
existence and shall
be in good standing as a foreign
corporation in each
jurisdiction in which its
business
activities or the nature of the
properties
owned by it requires such
qualification;
(b) Franchisee
shall have the corporate
authority to carry out
the terms of this
Agreement;
and (c) Franchisee
shall print, in a conspicuous
fashion on all
certificates
representing
shares of its stock when
issued,
a
legend
referring to this Agreement and the
restrictions
on and obligations of
Franchisee and Principal Shareholders
hereunder,
including the restrictions on
transfer of Franchisee's shares.
11.3 In addition to the financial
information which Franchisee is required
to provide to Franchisor under Subsections 10.2 and 11.1 hereof,
Franchisee and
Principal
Shareholders
shall
provide
Franchisor
with such
other
financial
information as Franchisor may reasonably
request from time to time,
including,
on an annual basis,
copies of the
then-most
current
financial
statements of
Franchisee
and
each
Principal
Shareholder,
dated
as of the end of the last
preceding
fiscal
year
of
the
Franchisee
or
Principal
Shareholder,
said
statements
to be delivered to
Franchisor
no later than April 15 of each year,
which
financial
statements
shall
conform
to
the
standards
set
forth
in
Subsection 11.1 hereof.
11.4
Franchisee
and each
Principal
Shareholder
represent,
warrant and
covenant that all Interests (as defined in Subsection 12.4 hereto)
in Franchisee
are owned as set forth on Appendix A hereto,
that no Interest
has been pledged
or hypothecated
(except in accordance with Section 12 of this
Agreement),
and
that no change will be made in the ownership of any such Interest
other than as
permitted by this Agreement, or otherwise consented to in writing
by Franchisor.
Franchisee
and Principal
Shareholders
agree to furnish
Franchisor
with such
evidence
as
Franchisor
may
request,
from time to time,
for the
purpose of
assuring Franchisor that the Interests of Franchisee and Principal
Shareholders
remain as represented herein.
11.5 Each Principal Shareholder,
jointly and severally,
hereby personally
and
unconditionally
guarantees each of Franchisee's
financial
obligations to
Franchisor
(including,
but not
limited
to, all
obligations
relating to the
payment of fees by Franchisee to Franchisor).
Each Principal Shareholder agrees
that
Franchisor may resort to such Principal
Shareholder
(or
2004
F-16
any of them)
for
payment
of any such
financial
obligation,
whether
or not
Franchisor
shall
have
proceeded
against
Franchisee,
any
other
Principal
Shareholder
or
any
other
obligor
primarily
or
secondarily
obligated
to
Franchisor with respect to such financial obligation. Each
Principal Shareholder
hereby expressly waives presentment,
demand,
notice of dishonor,
protest, and
all other notices
whatsoever with respect to
Franchisor's
enforcement of this
guaranty. In addition, each Principal Shareholder agrees that if
the performance
or observance
by
Franchisee
of any term or provision
hereof is waived or the
time of
performance
thereof
extended
by
Franchisor,
or payment of any such
financial
obligation is
accelerated in accordance
with any agreement
between
Franchisor
and any party liable in respect
thereto or extended or renewed,
in
whole or in part, all as Franchisor
may determine,
whether or not notice to or
consent by any
Principal
Shareholder
or any other party
liable in respect to
such financial
obligations is given or obtained,
such actions shall not affect
or
alter
the
guaranty
of
each
Principal
Shareholder
described
in
this
Subsection.
11.6 Franchisee
and each
Principal
Shareholder
represent and warrant to
Franchisor that:
(a) Neither
Franchisee
nor any
Principal
Shareholder
or any other
person with a direct or indirect
ownership
interest in Franchisee is
identified,
either by name or an alias, pseudonym or nickname, on the
list
of
"Specially
Designated
Nationals
and
Blocked
Persons"
maintained by the U.S. Treasury
Department's Office of Foreign Assets
Control (texts available at
www.treas.gov/offices/enforcement/ofac/
).
Further,
Franchisee
and its
Principal
Shareholders
represent
and
warrant
that neither has violated and agree that neither will violate
any law (in effect now or which may become
effective
in the
future)
prohibiting corrupt business practices, money laundering or the aid
or
support of persons or entities
who
conspire to commit acts of terror
against any person or
government,
including
acts
prohibited by the
U.S.
Patriot
Act
(text
available
at
http://www.epic.org/privacy/terrorism/hr3162.html
),
U.S.
Executive
Order
13244
(text
available
at
http://treas.gov/offices/enforcement/ofac/sanctions/terrorism.html
),
or similar law;
(b) Franchisee has not made, nor has any Principal
Shareholder
made,
any
expenditures
other
than for
lawful
purposes
or
directly
or
indirectly
offered,
gave, promised to give or authorized the payment
or the gift of any
money,
or
anything
of value,
to any
person or
entity,
while
knowing or having reason to know that all or a portion
of such money or thing of value would be given or
promised,
directly
or
indirectly,
to
any
government
official,
official
of
an
international
organization,
officer
or
employee
of
a
foreign
government
or anyone
acting in an
official
capacity
for a foreign
government, for the purpose of (1) influencing any action, inaction
or
decision of such official in a manner
contrary to his or her position
or creating an improper
advantage;
or (2) inducing
such official to
influence
any
government
or
instrumentality
thereof
to effect or
influence any act or decision of such government or
instrumentality.
(c)
Franchisee
nor any Principal
Shareholder or any other person or
entity who has any direct or
indirect
ownership
interest is or will
become
directly or indirectly
owned or
controlled
by
governmental
authorities of any country that is subject to a United States
embargo;
and
2004
F-17
Franchisee understands and its Principal
Shareholders
understand and have
been advised by legal counsel on the
requirements
of the United States Foreign
Corrupt
Practices
Act
(currently
located
at
www.usdoj.gov/criminal/fraud/fcpa.html
, any local foreign corrupt practices laws
and
the
Patriot
Act
(currently
located
at
www.epic.org/privacy/terrorism/hr3162.html
,
acknowledge
the
importance
to
Franchisor and the Restaurants and the parties' relationship of
their respective
compliance
with
the
requirements
of these
laws,
including
any
applicable
auditing
requirements
and any
requirement
to
report
or
provide
access to
information to Franchisor or any government, that is made part of
any applicable
law,
and agree to take all steps
required
by their
consultants,
agents
and
employees
to comply
with such laws prior to
engaging
or
employing
any such
individuals or entities.
12.
TRANSFER
12.1 There
shall be no Transfer of any
Interest
of
Franchisee,
or of a
Principal Shareholder in Franchisee, in whole or in part (whether
voluntarily or
by operation of law), directly, indirectly or contingently, except
in accordance
with the provisions of this Section 12. "Transfer" and "Interest"
are defined in
Subsections
12.2, 12.3 and 12.4. Any proposed Transfer also shall be subject to
the provisions of the Development
Agreement,
which are incorporated
herein by
reference.
12.2 Except as
provided
in
Subsection
12.3,
"Transfer"
shall mean any
assignment,
sale,
pledge,
hypothecation,
gift or any other event which would
change
ownership
of or
change or create a new
Interest,
including,
but not
limited to:
(a) any
change in the
ownership
of or rights in or to any shares of
stock or other equity
interest in
Franchisee
which would result from the
act of any
shareholder
of
Franchisee
("Shareholder"),
such
as a sale,
exchange,
pledge or hypothecation of shares,
or any interest in or rights
to any of
Franchisee's
profits,
revenues
or assets,
or any such change
which would result by operation of law; and
(b) any change in the percentage
interest owned by any Shareholder in
the shares of stock of Franchisee, or interests in its profits,
revenues or
assets which would result from any act of Franchisee such as a
sale, pledge
or hypothecation of any Restaurant assets (other than a pledge of
assets to
secure
bona
fide
loans
made
or
credit
extended
in
connection
with
acquisition of the assets
pledged,
provided that
immediately
before and
after such
transaction the net worth of Franchisee
shall not be less than
the
amount
which
is
reflected
on
the
Balance
Sheet
referred
to in
Subsection 11.1 of this
Agreement);
any sale or issuance of any shares of
Franchisee's
stock;
the
retirement
or
redemption
of
any
shares
of
Franchisee's
stock;
or any sale or grant to any
person
of any
right to
participate
in or
otherwise
to share or become
entitled
to any part of
Franchisee's profits, revenues, assets or equity.
12.3
"Transfer"
shall not
include
(a) a change in the
ownership
of or
ri
