<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 2000
REGISTRATION NO. 333-85601
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
CARLSON RESTAURANTS WORLDWIDE INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5812 75-2356076
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
7540 LBJ FREEWAY
DALLAS, TEXAS 75251
(972) 450-5400
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
WALLACE B. DOOLIN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CARLSON RESTAURANTS WORLDWIDE INC.
7540 LBJ FREEWAY
DALLAS, TEXAS 75251
(972) 450-5400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
GALE R. MELLUM, ESQ. EDWARD S. ROSENTHAL, ESQ.
FAEGRE & BENSON LLP FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
2200 NORWEST CENTER 350 SOUTH GRAND AVENUE
90 SOUTH SEVENTH STREET LOS ANGELES, CA 90071
MINNEAPOLIS, MN 55402
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Prospectus (Not Complete)
Issued , 2000
The information in this prospectus is not complete and may be changed without
notice. Carlson Restaurants may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities, and Carlson Restaurants is
not soliciting offers to buy these securities in any state where the offer or
sale of these securities is not permitted.
<PAGE>
<TABLE>
<S> <C> <C>
[CRW LOGO] 9,500,000 SHARES [TGIF LOGO]
CARLSON RESTAURANTS WORLDWIDE INC.
CLASS A COMMON STOCK
</TABLE>
----------------
Carlson Restaurants Worldwide Inc. is offering shares of Class A common
stock in a firmly underwritten offering. This is Carlson Restaurants' initial
public offering, and no public market currently exists for Carlson Restaurants'
shares. Carlson Restaurants anticipates that the initial public offering price
will be $14.00 per share. After the offering, the market price for Carlson
Restaurants' Class A common stock may be above or below this price.
------------------------
Application has been made for the Class A common stock to be approved for
listing on the New York Stock Exchange under the symbol "CWR."
------------------------
INVESTING IN THE CLASS A COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 9.
---------------------
<TABLE>
<CAPTION>
Per Share Total
--------- --------
<S> <C> <C>
Offering Price $ $
Discounts and Commissions to Underwriters $ $
Offering Proceeds to Carlson Restaurants $ $
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Carlson Restaurants Worldwide Inc. has granted the underwriters the right to
purchase up to an additional 1,425,000 shares of Class A common stock to cover
any over-allotments.
The underwriters can exercise this right at any time within thirty days after
the offering.
Banc of America Securities LLC expects to deliver the shares of Class A common
stock to investors on , 2000.
[BANC OF AMERICA SECURITIES LLCMERRILL LYNCH & CO MORGAN STANLEY DEAN WITTER]
------------------------
, 2000
<PAGE>
INSIDE FRONT COVER
"T.G.I. Friday's-Registered Trademark-: Domestic and International Locations"
"T.G.I. Fridays-Registered Trademark-: 1965 to Today"
[Pictures of T.G.I. Friday's employees, guests, menu items and branded retail
products.]
[Pictures of T.G.I. Friday's locations in Malta; Cancun; and Lewisville, Texas;
as well as pictorial examples of old and new T.G.I. Friday's locations.]
<PAGE>
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. This prospectus is not an offer to sell, nor is
it seeking an offer to buy, these securities in any state where the offer or
sale is not permitted. The information in this prospectus is complete and
accurate as of the date on the front cover, but the information may have changed
since that date.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Summary..................................................... 4
Risk Factors................................................ 9
Forward-Looking Statements.................................. 14
Use of Proceeds............................................. 15
Dividend Policy............................................. 15
Capitalization.............................................. 16
Dilution.................................................... 17
Selected Consolidated Financial Data........................ 18
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 19
Business.................................................... 26
Management.................................................. 38
Relationship with Carlson Companies and Related
Transactions.............................................. 46
Principal Stockholder....................................... 51
Shares Eligible for Future Sale............................. 51
Description of Capital Stock................................ 52
Plan of Distribution........................................ 56
Legal Matters............................................... 58
Experts..................................................... 58
Where You Can Find More Information......................... 58
Index to Consolidated Financial Statements.................. F-1
</TABLE>
------------------------
EXCEPT AS OTHERWISE STATED, ALL INFORMATION PRESENTED IN THIS PROSPECTUS
ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND ASSUMES
COMPLETION OF THE RECLASSIFICATION OF OUR OUTSTANDING COMMON STOCK INTO
18,500,000 SHARES OF CLASS B COMMON STOCK. T.G.I. FRIDAY'S-REGISTERED TRADEMARK-
AND FRIDAY'S-REGISTERED TRADEMARK-, AS WELL AS ADDITIONAL NAMES AND LOGOS
APPEARING IN THIS PROSPECTUS, ARE REGISTERED TRADEMARKS OF CARLSON RESTAURANTS
WORLDWIDE INC. THIS PROSPECTUS ALSO INCLUDES NAMES AND TRADEMARKS OF OTHER
COMPANIES WHICH ARE THE PROPERTY OF THEIR RESPECTIVE HOLDERS.
3
<PAGE>
SUMMARY
THE ITEMS IN THE FOLLOWING SUMMARY ARE DESCRIBED IN MORE DETAIL LATER IN
THIS PROSPECTUS. THIS SUMMARY PROVIDES AN OVERVIEW OF SELECTED INFORMATION AND
DOES NOT CONTAIN ALL THE INFORMATION YOU SHOULD CONSIDER. THEREFORE, YOU SHOULD
ALSO READ THE MORE DETAILED INFORMATION SET OUT IN THIS PROSPECTUS, INCLUDING
THE FINANCIAL STATEMENTS. THE TERMS "WE" AND "CARLSON RESTAURANTS" MEAN CARLSON
RESTAURANTS WORLDWIDE INC. AND ITS SUBSIDIARIES. THE TERM "CARLSON COMPANIES"
MEANS CARLSON COMPANIES, INC. AND ITS SUBSIDIARIES.
CARLSON RESTAURANTS WORLDWIDE INC.
Carlson Restaurants is a global leader in the development, operation and
franchising of casual dining restaurants, principally under the T.G.I. Friday's
brand. Our T.G.I. Friday's system has grown since its inception in 1965 to
become one of the largest casual dining restaurant companies worldwide. The
T.G.I. Friday's system, which currently includes T.G.I. Friday's, Front Row
Sports Grill and Friday's American Bar, includes 589 restaurants, with 142
restaurants located outside the United States. Of the 589 restaurants, 198 are
owned and operated by us or operated by us under management agreements and 391
are operated by our global franchise network. As part of our growth strategy, we
have developed or acquired seven additional restaurant concepts, totaling 30
company owned or operated and franchised restaurants. While we plan to focus our
growth on the T.G.I. Friday's system, we also intend to selectively expand some
of these innovative concepts based on strict performance criteria. Including
these additional concepts, Carlson Restaurants' worldwide system currently
includes over 600 company owned or operated and franchised restaurants located
in 52 countries which generated system-wide sales of over $1.7 billion in fiscal
1999.
Since the first T.G.I. Friday's opened in New York City in 1965, we have
offered guests high quality, moderately priced, innovative menu and drink items
served by a friendly, knowledgeable staff in a fun atmosphere. Our selection of
approximately 100 menu items includes signature dishes such as our Jack Daniel's
Grill items and Tex-Mex Tower, as well as a variety of other beef, chicken,
seafood and pasta items. Our entrees are complemented by a wide assortment of
appetizers, salads and desserts. Our menu variety, coupled with our extensive
selection of creative adult beverages, enables us to enhance the appeal of our
T.G.I. Friday's restaurants and attract guest traffic from lunch time through
late evening.
Our business strategy is to expand our position as a global leader of
branded restaurants based on the following:
- CAPITALIZE ON THE STRENGTH OF THE T.G.I. FRIDAY'S BRAND. As a global
leader of branded restaurants in the casual dining industry, our business
strategy is based on the continued investment in our successful brand.
Through the development of innovative food items and creative adult
beverages, and by using national advertising campaigns and our guest
loyalty program, we believe that we will be able to differentiate
ourselves from our competitors and continue enhancing the T.G.I. Friday's
brand.
- CONTINUE WORLDWIDE GROWTH OF THE T.G.I. FRIDAY'S SYSTEM. We intend to
continue the domestic and international expansion of the T.G.I. Friday's
system of restaurants by building upon our leadership position as one of
the largest systems of casual dining restaurants worldwide. Our new unit
development will focus on both company owned restaurants and restaurants
owned by our strong global network of franchisees. Together with our
franchisees, in fiscal 2000 we plan to open a total of 79 restaurants in
the T.G.I. Friday's system.
- CAPITALIZE ON OUR STRONG GLOBAL FRANCHISING NETWORK. Our development
agreements with experienced multi-unit restaurant operators will continue
to be a key component of our continuing expansion of the T.G.I. Friday's
system. We currently have 44 domestic franchisees operating 249
restaurants and 43 international franchisees operating 142 restaurants. In
addition
4
<PAGE>
to continuing the growth of our T.G.I. Friday's franchising system both
domestically and internationally, we currently offer our international
franchisees the opportunity to develop our Italianni's concept and plan to
offer both our domestic and international franchisees the opportunity to
develop additional concepts in the future.
- PROVIDE AN EXCEPTIONAL DINING EXPERIENCE. We offer our guests an
exceptional dining experience by providing innovative, cravable menu and
drink items, coupled with efficient and friendly service in a comfortable,
relaxing environment. We believe that our eleven consecutive quarters of
increases in comparable restaurant sales at company owned or operated
restaurants indicate our ability to consistently deliver exceptional value
to our guests.
- DELIVER ATTRACTIVE UNIT ECONOMICS. Our restaurants generate attractive
unit level economics. We currently own or operate 44 restaurants that are
similar in size to our 6,800 square foot prototype. We anticipate that
restaurants to be developed based on the 6,800 square foot prototype will
have average restaurant sales of approximately $3.1 million, average
operating income of approximately $360,000, or 11.6% of restaurant sales,
average cash investment of approximately $1.9 million and average cash
flow of approximately $597,000, or 31.4% of our average cash investment.
We have recently developed a smaller 5,600 square foot prototype which we
expect to have average restaurant sales of approximately $2.8 million,
average operating income of approximately $381,000, or 13.6% of restaurant
sales, average cash investment of approximately $1.6 million and average
cash flow of approximately $581,000, or 36.3% of our average cash
investment.
- UTILIZE OUR MANAGEMENT'S EXPERIENCE AND EXPERTISE. Our talented senior
management team, led by Wallace B. Doolin who has over 30 years of
experience in the restaurant industry, has extensive expertise in the
operation of company owned or operated restaurants and the management of
domestic and international franchisee networks. This expertise also
extends to the development and implementation of multiple concepts across
a broad range of dining segments.
- ENHANCE GROWTH THROUGH ADDITIONAL CONCEPTS. While we plan to focus our
growth on the T.G.I. Friday's system, we also intend to draw on our
industry and operational expertise by selectively expanding certain of our
additional concepts in order to capitalize on opportunities in attractive
segments of the dining market.
Several factors may pose obstacles to us in executing our business strategy
and achieving our anticipated growth. The growth of our system of restaurants
may be limited by an inability to locate and obtain suitable restaurant sites,
construct and develop new restaurants in a timely and cost-efficient manner and
recruit and retain qualified employees, including experienced management. In
addition, we will need to identify and attract suitable franchisees in order to
meet our desired restaurant expansion, particularly for our international
growth.
Carlson Restaurants was incorporated on December 13, 1990 as a Delaware
corporation. Through our subsidiary, TGI Fridays Inc., we have been operating
our T.G.I. Friday's system since 1965. TGI Fridays Inc. was a public company
from 1983 until it was purchased by a wholly-owned subsidiary of Carlson
Companies in 1990. Our principal executive offices are located at 7540 LBJ
Freeway, Suite 100, Dallas, Texas 75251, and our telephone number is
(972) 450-5400.
5
<PAGE>
CARLSON COMPANIES' OWNERSHIP INTEREST IN CARLSON RESTAURANTS
Carlson Companies, one of the largest privately held corporations in the
United States, is a leading provider of services to corporations and consumers,
with system-wide sales of approximately $29.7 billion in 1999. Carlson Companies
serves its corporate customers by providing expertise in integrated marketing
and relationship management services, business travel management and hospitality
services for business travelers. Carlson Companies serves consumers with its
worldwide restaurant, hotel, cruise and leisure travel agency brands. In
addition to the Carlson Restaurants' brands, Carlson Companies' brands include
Radisson Hotels Worldwide, Regent International Hotels, Country Inns & Suites by
Carlson, Radisson Seven Seas Cruises, Carlson Lifestyle Living, Carlson Vacation
Ownership, Carlson Wagonlit Travel, Travel Agents International and Carlson
Marketing Group. Carlson Companies operates in more than 140 countries around
the world.
Following this offering Carlson Companies will own 100% of our outstanding
Class B common stock, representing 95.1% of the voting power of all classes of
our voting stock and 66.1% of the total outstanding shares of our common stock.
Carlson Companies' voting power of all classes of our voting stock will be 94.4%
if the underwriters exercise their over-allotment option in full, representing
62.9% of the total outstanding shares of our common stock. We have been advised
by Carlson Companies that it has no present intention to dispose of any of the
shares of our capital stock that it will own after this offering.
Prior to this offering, there have been significant transactions between us
and Carlson Companies. These transactions have involved us utilizing certain of
Carlson Companies' marketing, financial and administrative support, purchasing
and other services. We have or will enter into various agreements and
relationships with Carlson Companies to provide for the continuity of these
services after this offering. For more information about these agreements, see
"Relationship with Carlson Companies and Related Transactions."
THE OFFERING
<TABLE>
<S> <C>
Class A common stock offered............................ 9,500,000 shares
Common stock to be outstanding after the offering:
Class A common stock.................................. 9,500,000 shares
Class B common stock.................................. 18,500,000 shares
Total............................................... 28,000,000 shares
Use of proceeds......................................... For repayment of intercompany indebtedness
to Carlson Companies. See "Use of
Proceeds."
Voting rights:
Class A common stock.................................. One vote per share
Class B common stock.................................. 10 votes per share
Other common stock provisions........................... Apart from the different voting rights, the
holders of Class A common stock and Class B
common stock generally have identical
rights. See "Description of Capital Stock."
</TABLE>
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1)
------------------------------------------ PRO FORMA
DECEMBER 29, DECEMBER 28, DECEMBER 27, DECEMBER 27,
1997 1998 1999(2) 1999(3)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenue
Company restaurant sales.................................. $418,468 $483,311 $563,729 $563,729
Managed restaurant revenue................................ 76,779 74,905 81,235 81,235
Franchising revenue....................................... 35,199 38,292 41,877 41,877
Licensing revenue......................................... 3,627 2,780 4,450 4,450
-------- -------- -------- --------
Total revenue........................................... 534,073 599,288 691,291 691,291
Cost of sales............................................... 143,228 165,221 187,512 187,512
Restaurant operating expenses............................... 286,077 315,513 370,638 370,638
General and administrative expenses(4)...................... 55,218 64,582 54,648 54,792
Depreciation and amortization expense....................... 23,401 27,457 31,198 31,198
Other (income) expense...................................... (863) 533 10,787 10,787
-------- -------- -------- --------
Income from operations.................................... 27,012 25,982 36,508 36,364
Interest expense............................................ 2,571 4,216 10,344 8,175
-------- -------- -------- --------
Income before income taxes.................................. 24,441 21,766 26,164 28,189
Provision for income taxes.................................. 8,740 7,875 9,155 9,925
-------- -------- -------- --------
Net income.................................................. $ 15,701 $ 13,891 $ 17,009 $ 18,264
======== ======== ======== ========
Pro forma net income per share
Basic..................................................... $ 0.92 $ 0.65
Diluted................................................... 0.92 0.65
Shares used in calculation of pro forma net income per share
(in thousands)
Basic..................................................... 18,500 28,000
Diluted................................................... 18,500 28,051
</TABLE>
- ------------------------
(1) Our fiscal year ends on the last Monday in December. All fiscal years
presented are comprised of 52 weeks. Our historical capital structure
consists of one share of common stock; therefore, net income per share
amounts for historical periods have not been presented.
(2) Pro forma net income per share in fiscal 1999 is based on the
reclassification of our one share of outstanding common stock into
18,500,000 shares of Class B common stock.
(3) The pro forma information gives effect to the offering of Class A common
stock and the application of the net proceeds of this offering as if the
offering occurred at the beginning of the relevant period. The resulting
adjustments are as follows:
- The addition of $900 in fiscal 1999 in general and administrative expenses
that we expect to incur on an annual basis following this offering as a
separately reporting public company.
- The elimination of $756 of compensation expense in fiscal 1999 related to
the replacement of our previous long-term incentive plan with a stock
option plan upon completion of this offering, under which we do not
anticipate incurring any compensation expense. See "Management-Incentive
Compensation Plans."
- The elimination of $10,019 of interest expense on debt from Carlson
Companies in fiscal 1999 and replacement of that interest with interest
expense of $7,850 in fiscal 1999 attributed to the refinancing of all
intercompany indebtedness, after giving effect to the application of the
net proceeds of this offering. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations-Overview."
- The inclusion of the 9,500,000 shares of Class A common stock issued in
this offering in the number of shares used in the calculation of pro forma
basic and diluted net income per share.
- The inclusion of common stock equivalents related to stock options
outstanding upon completion of the offering in the number of shares used
in the calculation of pro forma diluted net income per share.
(4) The fiscal years ended December 29, 1997, December 28, 1998 and
December 27, 1999 include Year 2000 remediation expenses of $550, $3,823 and
$2,001, respectively, which are included in general and administrative
expenses. Also included in general and administrative expenses is $7,142 and
$11,360 in expenses allocated to us by Carlson Companies in fiscal 1997 and
1998, respectively. No similar amounts were allocated to us in fiscal 1999.
See "Relationship with Carlson Companies and Related Transactions."
7
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 27, 1999
-----------------------
ACTUAL PRO FORMA(1)
-------- ------------
<S> <C> <C>
BALANCE SHEET DATA
Cash and cash equivalents................................... $ 14,121 $ 14,121
Total assets................................................ 324,722 324,722
Long-term obligations, less current maturities.............. 8,744 8,744
Long-term debt-affiliate.................................... 219,923 98,233
Stockholders' equity........................................ 8,632 130,322
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(2)
------------------------------------------
DECEMBER 29, DECEMBER 28, DECEMBER 27,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
RESTAURANT DATA
Total system sales:
T.G.I. Friday's system.................................. $1,294,206 $1,437,947 $1,625,702
Additional concepts..................................... 25,588 36,966 50,041
---------- ---------- ----------
Total................................................. $1,319,794 $1,474,913 $1,675,743
========== ========== ==========
Restaurants open (end of period):
T.G.I. Friday's system:
Company owned........................................... 128 149 170
Managed................................................. 27 27 26
Franchised.............................................. 293 333 379
---------- ---------- ----------
Total T.G.I. Friday's system.......................... 448 509 575
Additional concepts(3).................................... 17 25 29
---------- ---------- ----------
Total................................................. 465 534 604
========== ========== ==========
Change in T.G.I. Friday's domestic system comparable
restaurant sales(4):
Company owned........................................... 3.7% 3.7% 2.1%
Managed................................................. 2.9 1.6 4.2
Franchised system....................................... 2.6 4.3 2.8
Total T.G.I. Friday's domestic system................. 3.1 3.9 2.6
</TABLE>
- ------------------------------
(1) The pro forma as adjusted balance sheet data is adjusted to give effect to
the receipt by us of the estimated net proceeds of $121,690 from the sale of
9,500,000 shares of Class A common stock in this offering at an assumed
offering price of $14.00 per share and the repayment of $121,690 of
long-term debt-affiliate.
(2) Our fiscal year ends on the last Monday in December. All fiscal years
presented are comprised of 52 weeks.
(3) The number of restaurants open at December 28, 1998 includes four
restaurants which are part of a concept we no longer own. This concept,
which we originally sold in 1995, was repossessed by us in 1998 and sold in
the third quarter of 1999.
(4) Comparable restaurant sales include the food, beverage and merchandise sales
of restaurants that have been in operation for at least twelve months as of
the beginning of the fiscal year containing the relevant period.
8
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE YOU DECIDE
TO BUY OUR CLASS A COMMON STOCK. YOU SHOULD ALSO CONSIDER THE OTHER INFORMATION
IN THIS PROSPECTUS. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS,
FINANCIAL CONDITION, OPERATING RESULTS OR CASH FLOWS COULD BE MATERIALLY
ADVERSELY AFFECTED. THIS COULD CAUSE THE TRADING PRICE OF OUR CLASS A COMMON
STOCK TO DECLINE, AND YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT.
THE GROWTH AND PROFITABILITY OF OUR BUSINESS COULD BE LIMITED IF WE ARE UNABLE
TO EXPAND IN A TIMELY AND PROFITABLE MANNER
To continue to grow, we and our franchisees must open new restaurants on a
timely and profitable basis. We have experienced delays in restaurant openings
from time to time and may experience delays in the future. Delays or failures in
opening new restaurants could limit the growth of our business and
profitability. We opened 29 company owned or operated restaurants in fiscal 1999
and our franchisees opened 62 restaurants. To date in fiscal 2000 we have opened
three company owned restaurants and our worldwide franchise community has opened
14 restaurants. During the remainder of 2000 we plan to open 34 additional
restaurants and our franchisees plan on opening approximately 40 additional
restaurants. Our ability to expand successfully will depend on a number of
factors, some of which are beyond our control, including:
- identification and availability of suitable restaurant sites;
- competition for restaurant sites;
- negotiation of favorable leases;
- timely development in certain cases of commercial, residential, street or
highway construction near our restaurants;
- management of construction and development costs of new restaurants;
- securing required governmental approvals and permits;
- recruitment of qualified operating personnel, particularly culinary
experts and restaurant managers;
- competition in new markets; and
- general economic conditions.
In addition, we contemplate entering new markets, including international
markets and nontraditional locations, in which we have no or limited operating
experience. These new markets may have different demographic characteristics,
competitive conditions, consumer tastes and discretionary spending patterns than
our existing markets, which may cause our new restaurants to be less successful
in these markets than in our existing markets.
DIFFICULTIES IN OUR FRANCHISE OPERATIONS MAY LIMIT OUR GROWTH AND INCREASE THE
COSTS OF OPERATING OUR FRANCHISING PROGRAM
Our success is dependent, in part, on the development and growth of our
franchising program. There can be no assurance that we will continue to
successfully locate and attract suitable franchisees or that our franchisees
will have the business abilities or sufficient access to capital to open
restaurants or operate restaurants in a manner consistent with our concepts and
standards. The success of our franchising program will depend on factors such as
identifying the availability of suitable sites on acceptable lease or purchase
terms, obtaining necessary approvals and permits and adapting to changing
economic and business conditions. If a significant number of our franchisees
stop participating
9
<PAGE>
in purchases from the national distribution companies that are the primary
suppliers of our food, our ability to negotiate favorable terms with these
suppliers could be weakened. See "Business-Our Franchise System."
We are also subject to a substantial number of state and foreign laws
regulating the offer and sale of franchises. These laws impose registration and
disclosure requirements on franchisors in the offer and sale of franchises and
may also regulate termination, renewal fees and other substantive aspects of our
relationship with our franchisees. We are subject to Federal Trade Commission
regulations governing disclosure requirements in the sale of franchises. We
believe that we are in compliance with applicable laws and regulations governing
our operations.
OUR INTERNATIONAL FRANCHISE OPERATIONS ARE SUBJECT TO SOCIAL, POLITICAL AND
ECONOMIC RISKS
In fiscal 1999, approximately 1.8% of our net revenues came from franchise
royalties, franchise fees and concept fees paid by our international
franchisees. Social, economic and political conditions in these international
markets may adversely affect the profitability of our international franchisees
and restrict their ability to pay these fees, which could reduce our revenues.
The overall risks to our international franchisees include changes in foreign
governmental policies, and other political or economic developments. These
developments may lead to new pricing, tax or other policies and monetary
fluctuations which may result in increased costs to our international
franchisees. Continuing economic turmoil in Asia has slowed the expansion of our
franchising program in this region and the growth of revenues and cash flows
with respect to our franchisees' restaurants in Asia.
OUR IMPLEMENTATION OF NEW BUSINESS CONCEPTS AND STRATEGIES MAY NOT BE SUCCESSFUL
We continue to initiate new business concepts and strategies, including the
development of new restaurant concepts, the introduction of new menu items and
the development of international and nontraditional locations. We have limited
experience in the development, operation and franchising of restaurant concepts
other than T.G.I. Friday's. There can be no assurance that we will continue to
develop new concepts and strategies, that such concepts and strategies will be
successful or profitable or that such concepts and strategies will fill the
strategic roles we intend.
FLUCTUATIONS IN OUR OPERATING RESULTS MAY RESULT IN DECREASES IN OUR STOCK PRICE
Our operating results may fluctuate significantly due to several factors,
including the timing of new restaurant openings and related expenses,
profitability of new restaurants, increases or decreases in comparable
restaurant sales, interest rates, general economic conditions, consumer
confidence in the economy, changes in consumer preferences, competitive factors
and weather conditions. As a result, our operating results and profitability may
fall below the expectations of public market analysts and investors. In that
event, the price of our Class A common stock would likely decrease.
In the past, our preopening costs have varied significantly from quarter to
quarter primarily due to the timing of restaurant openings. We typically incur
most preopening costs for a new restaurant within the two months immediately
preceding, and the month of, its opening. In addition, our labor and operating
costs for a newly opened restaurant during the first three to six months of
operation are materially greater than what can be expected after that time, both
in aggregate dollars and as a percentage of restaurant sales. Accordingly, the
volume and timing of new restaurant openings in any quarter has had and is
expected to continue to have a significant impact on quarterly preopening costs,
labor and direct costs. Due to these factors, results for a quarter may not be
indicative of results to be expected for any other quarter or for a full fiscal
year. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of our historical operating results.
10
<PAGE>
WE COULD FACE LABOR SHORTAGES THAT MAY IMPAIR OUR ABILITY TO OPEN NEW STORES AND
PROVIDE QUALITY SERVICE
Our success depends in part upon our ability to attract, motivate and retain
a sufficient number of qualified employees, including restaurant managers,
kitchen staff and wait staff, necessary to meet our expansion schedule.
Qualified individuals needed to fill these positions are in short supply in
certain areas, and the inability to recruit and retain such individuals may
delay the planned openings of new restaurants or result in high employee
turnover in existing restaurants which could limit our ability to expand our
operations and provide quality customer service. Additionally, competition for
qualified employees could require us to pay higher wages to attract sufficient
employees, which could result in higher labor costs.
CHANGES IN CONSUMER PREFERENCES OR DISCRETIONARY CONSUMER SPENDING COULD REDUCE
OUR REVENUES AND CASH FLOWS
Most of our restaurants feature full-service food and beverage selections
served in a casual dining atmosphere. Our continued success depends, in part,
upon the popularity of our menu items and this style of casual dining. Shifts in
consumer preferences away from our cuisine or dining style could result in lower
revenues and cash flows. Also, our success depends to a significant extent on
numerous factors affecting discretionary consumer spending, including economic
conditions, disposable consumer income and consumer confidence. Adverse changes
in these factors could reduce guest visits or impose practical limits on
pricing, either of which could reduce our revenues and cash flows.
OUR OPERATIONS DEPEND ON GOVERNMENTAL LICENSES AND WE MAY FACE LIABILITY UNDER
"DRAM SHOP" STATUTES WHICH MAY RESULT IN SIGNIFICANT COSTS TO US
Our business depends on obtaining and maintaining required food service and
liquor licenses for each of our restaurants. If we fail to hold all necessary
licenses, we may be forced to delay or cancel new restaurant openings and close
or reduce operations at existing locations. In addition, our sale of alcoholic
beverages subjects us to "dram shop" statutes in most states. These statutes
allow an injured person to recover damages from an establishment that served
alcoholic beverages to an intoxicated person who caused the injury. If we
receive a judgment substantially in excess of our insurance coverage, or if we
fail to maintain our insurance coverage, we may be required to make
unanticipated payments that could decrease our profitability. See
"Business-Government Regulations" for a discussion of the regulations we must
comply with.
COMPLAINTS OR LITIGATION FROM GUESTS MAY HARM OUR REPUTATION AND REDUCE OUR
REVENUES
We are, from time to time, the subject of complaints or litigation from
guests alleging illness, injury or other food quality, health or operational
concerns. Adverse publicity resulting from these allegations may harm our
restaurants' reputation and reduce our revenues, regardless of whether the
allegations are valid or whether we are liable. These claims may divert our
financial and management resources that would otherwise be used to benefit the
future performance of our operations. Our reputation may be adversely affected
by publicity relating to restaurants operated by our franchisees. We have less
ability to assure compliance with our standards at our franchised restaurants
than we do at our company owned or operated restaurants.
LOSS OF OUR PRIMARY SUPPLIERS OR INCREASED FOOD COSTS COULD IMPAIR OUR
PROFITABILITY
Our profitability depends in part on our ability to anticipate and react to
changes in food costs. On January 31, 2000, our primary distributor of food and
supply items filed Chapter 11 bankruptcy under the U.S. Bankruptcy Code. We
recently transitioned from this one national distribution company to three
distribution companies as the primary domestic suppliers of our food and other
restaurant supplies. This transition resulted in increased food and supply cost.
Although we believe that alternative
11
<PAGE>
sources of supply are available, any increase in prices or failure to perform by
these national distribution companies could cause our food costs to increase.
Furthermore, various factors beyond our control, including adverse weather
conditions and governmental regulation, may affect our food costs. We cannot
predict whether we will be able to effectively anticipate and react to changing
food costs by adjusting our purchasing practices and menu prices, and a failure
to do so could decrease our profitability and our cash flows.
OUR LIMITED CASH RESERVES AND INCREASED DEBT OBLIGATIONS MAY IMPAIR OUR ABILITY
TO GROW OUR BUSINESS AND RESPOND TO CHANGING CONDITIONS
As a result of the $175.0 million dividend paid to Carlson Companies in
mid-1999, we have substantially no equity and increased debt obligations. The
net proceeds of this offering will be used to partially repay intercompany
indebtedness to Carlson Companies, including amounts outstanding under the
promissory note issued in partial payment of the dividend. Accordingly, after
this offering and application of the proceeds of this offering to reduce our
intercompany indebtedness, we will have limited cash reserves and will be
dependant upon cash generated from operations and external financing in order to
grow our business and respond to changing conditions.
OUR EXISTING STOCKHOLDER WILL RETAIN SIGNIFICANT CONTROL WHICH COULD DEPRESS THE
PRICE OF YOUR SHARES
Upon completion of this offering, our existing stockholder, Carlson
Companies, will own 100.0% of our outstanding Class B common stock. The shares
of Class B common stock are entitled to 10 votes per share on all matters
submitted to a vote of stockholders and the shares of Class A common stock are
entitled to one vote per share on all matters submitted to a vote of
stockholders. As a result, Carlson Companies will own approximately 95.1% of our
total voting power and will be able to control us and direct our affairs,
including the election of directors and approval of significant corporate
transactions. In addition, we are reliant upon Carlson Companies for various
corporate functions that they provide to us on a fee basis, such as purchasing,
accounting and insurance, that may make it difficult for another company to
acquire us. This concentration of ownership also may delay, defer or prevent a
change in our control, and make some transactions more difficult or impossible
without Carlson Companies' support. These transactions might include proxy
contests, mergers, tender offers, open market purchase programs or other
purchases of Class A common stock that could give our stockholders the
opportunity to realize a premium over the then prevailing market price for
shares of Class A common stock. See "Principal Stockholders" for information
about Carlson Companies and the number of shares it will control.
CHANGES IN OUR RELATIONSHIP WITH CARLSON COMPANIES COULD REQUIRE US TO NEGOTIATE
ALTERNATE AGREEMENTS WHICH MAY HAVE LESS FAVORABLE TERMS
After this offering, we will continue to obtain various services from
Carlson Companies under a shared services agreement. The services provided by
Carlson Companies under this agreement are material to our operations. These
services include obtaining supplies and providing insurance, accounting
services, human resources information services, benefits administration,
transaction processing services, various tax and treasury services and
information technology maintenance and systems development. The intention of
this agreement is to continue the relationship between us and Carlson Companies
in a manner consistent with past practices. If the shared services agreement is
terminated, we will have to obtain the services covered by the agreement on our
own. We may not be able to replace all of these services in a timely manner or
on terms, including cost, that are as favorable as those we receive from Carlson
Companies.
12
<PAGE>
CARLSON COMPANIES' POSITION AS OUR CONTROLLING STOCKHOLDER MAY RESULT IN
UNFAVORABLE AND COSTLY TERMS IN OUR ARRANGEMENTS WITH THEM
Carlson Companies' position as our controlling stockholder may cause
conflicts of interest to arise over the nature, quality and pricing of services
or products provided to us by Carlson Companies or by us to Carlson Companies
under the shared services agreement or other agreements. Furthermore, because we
are currently a wholly-owned subsidiary of Carlson Companies, none of our
agreements with Carlson Companies resulted from arm's-length negotiations and,
therefore, the prices we are charged for services provided by Carlson Companies
may be higher or lower than prices that would be charged to third parties. For
more information about these agreements, see "Relationship with Carlson
Companies and Related Transactions."
OUR PARTICIPATION IN CARLSON COMPANIES' CASH MANAGEMENT PROGRAM AND CARLSON
COMPANIES' POSITION AS OUR PRIMARY LENDER COULD RESTRICT OUR ACCESS TO CASH
As a part of our ongoing relationship with Carlson Companies, we participate
in its cash management program. Carlson Companies is our primary lender and
source of working capital. We have entered into a credit agreement with Carlson
Companies which covers all of our outstanding indebtedness to them and our
ongoing cash requirements. Our ability to borrow funds to finance our operations
is subject to Carlson Companies' ability to raise working capital and draw on
its own line of credit. Any impairment of Carlson Companies' ability to lend us
funds could impair our ability to satisfy our cash needs or limit our ability to
fund our planned capital expenditures.
We deliver all of our excess cash to Carlson Companies for inclusion in its
cash management program. While we are a debtor of Carlson Companies, this cash
will be used to pay down our intercompany indebtedness to them. Our intercompany
cash management account with Carlson Companies is an interest-earning asset or
an interest-bearing liability depending on the level of cash receipts and
disbursements. When our cash account with Carlson Companies is positive, we are
a general creditor of Carlson Companies with respect to such funds and our
rights to these funds are subject to Carlson Companies' financial condition and
the rights of other creditors. As a result, our rights to these funds may be
adversely affected by any financial difficulties or insolvency experienced by
Carlson Companies.
WE HAVE HISTORICALLY BEEN A MEMBER OF A CONSOLIDATED TAX GROUP WITH CARLSON
COMPANIES WHICH COULD LEAD TO LIABILITY FOR US
Prior to the completion of this offering, we and Carlson Companies are part
of a consolidated group for tax purposes. As a result, we are jointly and
severally liable with Carlson Companies for all tax liabilities incurred and
payable by any member of the Carlson Companies consolidated tax group. Upon
consummation of this offering we will no longer be a part of this consolidated
tax group for federal income tax purposes and we will no longer be part of a
combined tax group for purposes of taxation in a few states. However, we will
remain jointly and severally liable with Carlson Companies for all tax
liabilities relating to prior periods. In addition, we will continue to be part
of a combined tax group with Carlson Companies for purposes of taxation by some
states. Our tax sharing agreement with Carlson Companies allows Carlson
Companies to control our tax decisions with respect to periods and returns for
which we are part of a consolidated or combined tax group. As a result, Carlson
Companies may be able to make decisions in its collective best interest that may
not be in our best interest.
FIVE OF OUR DIRECTORS MAY HAVE CONFLICTS OF INTEREST BECAUSE THEY ARE ALSO
CARLSON COMPANIES DIRECTORS OR OFFICERS
Five of our directors are also directors or officers of Carlson Companies,
which may create conflicts of interest when our board of directors faces
decisions that affect both us and Carlson Companies.
13
<PAGE>
YOU MAY NOT BE ABLE TO RESELL THE CLASS A COMMON STOCK YOU BUY AT OR ABOVE THE
INITIAL PUBLIC OFFERING PRICE
We do not know the level of trading volume that will exist for our Class A
common stock after the offering. Trading volume levels may affect your ability
to sell your shares quickly at the current market price. If trading volume
levels are low, the limited demand from buyers may cause delays in selling your
shares at the then current market price or impair your ability to sell your
shares at a price equal to or greater than the price you paid. Because the
initial public offering price of our Class A common stock has been determined by
our negotiations with the underwriters, it is not necessarily indicative of the
market price that will develop for our Class A common stock, which may be higher
or lower than the price you pay.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE AND LIMIT OUR
ABILITY TO RAISE CAPITAL IN THE MARKET
Sales of substantial amounts of our stock in the public market, or the
perception that these sales may occur, could adversely affect the market price
of our stock and our ability to raise capital through a public offering of our
equity securities. After this offering, the shares offered under this prospectus
will be freely tradeable. The 18,500,000 outstanding shares of our Class B
common stock may be sold after their 180-day lock-up period, subject to the
restrictions of Rule 144 under the Securities Act of 1933. See "Shares Eligible
for Future Sale" for a discussion of potential future sales of our common stock.
PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, OUR BYLAWS AND DELAWARE LAW
COULD DISCOURAGE POTENTIAL ACQUISITION PROPOSALS AND DELAY OR PREVENT A CHANGE
IN CONTROL
Our certificate of incorporation will authorize the board of directors to
issue up to 10,000,000 shares of preferred stock and to determine the powers,
preferences, privileges, rights, including voting rights, qualifications,
limitations and restrictions of those shares without any further vote or action
by the stockholders. The rights of the holders of common stock will be subject
to, and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future. The charter and bylaws, among other
things, require that stockholder actions occur at duly called meetings of the
stockholders, limit who may call special meetings of stockholders, do not permit
cumulative voting in the special meetings of stockholders, do not permit
cumulative voting in the election of directors and require advance notice of
stockholder proposals and director nominations. Also, Section 203 of the
Delaware General Corporation Law restricts certain business combinations with
any "interested stockholder" as defined by the statute. These and other
provisions could have the effect of making it more difficult for a third party
to acquire a majority of outstanding voting stock, discourage a hostile bid or
delay, prevent or deter a merger, acquisition or tender offer in which our
stockholders could receive a premium for their shares, or a proxy contest for
control of the company or other changes in our management. See "Description of
Capital Stock."
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. These statements relate to our future plans, objectives,
expectations and intentions. These statements may be identified by the use of
words such as "expects," "anticipates," "believes," "intends," "plans" and
similar expressions. Our actual results could differ materially from those
discussed in these statements. Factors that could contribute to these
differences include those discussed in "Risk Factors" and elsewhere in this
prospectus. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
results or otherwise.
14
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the 9,500,000 shares of Class A common
stock offered by us are estimated to be approximately $121,690,000, after
deducting the underwriting discount and estimated offering expenses and assuming
an initial public offering price of $14.00, or approximately $140,244,000 if the
over-allotment option is exercised in full.
We intend to use the entire amount of the net proceeds of the offering to
repay a portion of our intercompany indebtedness to Carlson Companies. The
indebtedness to be repaid is covered by our credit agreement with Carlson
Companies. The interest rate on all advances made under this credit agreement is
1.25% over the three-month London Inter-Bank Offered Rate, or LIBOR, at the time
the advance is made. The credit agreement, as amended, will expire on
December 31, 2002, unless Carlson Companies' ownership of all outstanding shares
of our common stock falls below 50% in which case the credit agreement may be
terminated upon 90 days notice by either party. The credit agreement was entered
into to refinance existing indebtedness to Carlson Companies, including
$120.0 million incurred for the partial payment of a dividend to Carlson
Companies.
DIVIDEND POLICY
We currently intend to retain all future earnings for the operation and
expansion of our business and do not anticipate paying cash dividends on our
common stock in the foreseeable future. Any payment of cash dividends in the
future will be at the discretion of our board of directors and will depend upon
our results of operations, earnings, capital requirements, contractual
restrictions, outstanding indebtedness and other factors deemed relevant by our
board.
On June 16, 1999, our board of directors declared a dividend of
$175.0 million to our sole stockholder, Carlson Companies, of which
$55.0 million was paid in cash and $120.0 million was paid in the form of a
promissory note. Aside from this dividend, we have not declared or paid any cash
dividends on our common stock since 1991.
15
<PAGE>
CAPITALIZATION
The following table sets forth, at December 27, 1999, our cash and cash
equivalents and capitalization on two different bases. First, the information is
set forth on an actual basis, which reflects a $175.0 million dividend declared
on June 16, 1999, of which $120.0 million was paid in the form of a promissory
note and $55.0 million was paid in cash. Second, the information is set forth on
a pro forma basis to reflect the issuance of Class A common stock offered by us
in this offering and the application of the estimated net proceeds from the
offering to repay a portion of our intercompany indebtedness. The pro forma
information also gives effect to the reclassification of our one outstanding
share of common stock into 18,500,000 shares of Class B common stock. This table
should be read in conjunction with the consolidated financial statements and
their notes and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 27, 1999
----------------------
ACTUAL PRO FORMA
--------- ----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Cash and cash equivalents................................... $ 14,121 $ 14,121
======== ========
Long-term debt, excluding current portion:
Notes payable and capital lease obligations............... 8,744 8,744
Long-term debt-affiliate.................................. 219,923 98,233
Minority interests.......................................... 2,696 2,696
Stockholders' equity:
Preferred stock, par value $.01 per share, 10,000,000
shares authorized, no shares issued and outstanding..... - 0
Common stock, par value $1.00 per share, 100 shares
authorized, 1 share issued and outstanding.............. 0 -
Class A common stock, par value $.01 per share,
100,000,000 shares authorized, 9,500,000 shares issued
and outstanding(1)...................................... - 95
Class B common stock, par value $.01 per share, 40,000,000
shares authorized, 18,500,000 shares issued and
outstanding............................................. - 185
Additional paid-in capital................................ 2,479 123,889
Unrealized holding losses of marketable securities........ (279) (279)
Retained earnings......................................... 6,432 6,432
-------- --------
Total common stockholders' equity........................... 8,632 130,322
-------- --------
Total capitalization.................................. $239,995 $239,995
======== ========
</TABLE>
- ------------------------
(1) Excludes 2,073,827 shares of Class A common stock reserved for issuance upon
exercise of stock options granted effective upon consummation of this
offering and an additional 926,173 shares of Class A common stock reserved
for issuance upon exercise of future grants of stock options or other awards
under our stock option plan. See "Management-Incentive Compensation Plans"
for a description of our stock option plan.
16
<PAGE>
DILUTION
Our net tangible book value as of December 27, 1999 was a deficit of
approximately $20.8 million, or $(1.13) per share of common stock, after giving
effect to the reclassification of our common stock and assuming 18,500,000
shares of Class B common stock outstanding on such date. Net tangible book value
per share is determined by subtracting total liabilities from tangible assets
and dividing the remainder by the number of shares of common stock outstanding.
Assuming this offering was consummated on December 27, 1999, after giving effect
to the issuance of 9,500,000 shares of Class A common stock offered by us in
this offering at an assumed initial public offering price of $14.00 per share,
after applying the net proceeds of this offering and after deducting the
underwriting discount, commissions and estimated offering expenses, the as
adjusted net tangible book value as of December 27, 1999 would have been
$100.8 million, or $3.60 per share of common stock. This represents an immediate
increase in net tangible book value of $4.73 per share to Carlson Companies and
an immediate dilution of $10.40 per share to new investors purchasing Class A
common stock in this offering. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $ 14.00
Net tangible book value per share before this offering.... $ (1.13)
Increase per share attributable to new investors(1)....... 4.73
-------
As adjusted net tangible book value per share after this
offering.................................................. 3.60
-------
Dilution per share to new investors(2)...................... $ 10.40
=======
</TABLE>
- ------------------------
(1) After deducting the underwriting discount, commissions and estimated
expenses of this offering.
(2) Dilution is determined by subtracting net tangible book value per share
after giving effect to this offering from the initial public offering price
paid by a new investor for a share of Class A common stock.
The following table summarizes, as of December 27, 1999, the number of
shares of common stock purchased, the total consideration paid to us and the
average price per share paid by Carlson Companies for the shares of Class B
common stock that they will hold after the reclassification of our common stock
and by investors purchasing shares of Class A common stock in this offering,
assuming an initial public offering price of $14.00 per share and before
deducting the underwriting discount, commissions and our estimated offering
expenses.
<TABLE>
<CAPTION>
SHARES PURCHASED
--------------------------------------- TOTAL
PERCENT CONSIDERATION AVERAGE
OF SHARES PERCENT OF ----------------------- PRICE PER
NUMBER OUTSTANDING VOTING STOCK AMOUNT PERCENT SHARE
---------- ----------- ------------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Carlson Companies......... 18,500,000 66.1% 95.1% $ 80,088,000 37.6% $ 4.33
New investors............. 9,500,000 33.9 4.9 133,000,000 62.4 14.00
---------- ----- ----- ------------ -----
Total..................... 28,000,000 100.0% 100.0% 213,088,000 100.0%
========== ===== ===== ============ =====
</TABLE>
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS)
The following selected consolidated financial data for the five fiscal years
ended December 27, 1999 are derived from our audited consolidated financial
statements. The audited consolidated financial statements and their notes for
the three fiscal years ended December 27, 1999, and the report of independent
public accountants on those years, are included elsewhere in this prospectus.
This selected consolidated financial data should be read in conjunction with the
consolidated financial statements and their notes, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and other financial
information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1)
------------------------------------------------------------------------
DECEMBER 25, DECEMBER 30, DECEMBER 29, DECEMBER 28, DECEMBER 27,
1995 1996 1997 1998 1999
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenue
Company restaurant sales.............................. $403,717 $396,784 $418,468 $483,311 $563,729
Managed restaurant
revenue............................................. 69,996 73,317 76,779 74,905 81,235
Franchising revenue................................... 23,894 29,209 35,199 38,292 41,877
Licensing revenue..................................... 2,316 2,906 3,627 2,780 4,450
-------- -------- -------- -------- --------
Total revenue....................................... 499,923 502,216 534,073 599,288 691,291
Cost of sales........................................... 138,624 139,840 143,228 165,221 187,512
Restaurant operating expenses........................... 289,115 276,357 286,077 315,513 370,638
General and administrative expenses(2).................. 38,234 50,122 55,218 64,582 54,648
Depreciation and amortization expense................... 19,412 20,712 23,401 27,457 31,198
Other (income) expense.................................. 6,120 264 (863) 533 10,787
-------- -------- -------- -------- --------
Income from operations................................ 8,418 14,921 27,012 25,982 36,508
Interest expense........................................ 1,306 2,509 2,571 4,216 10,344
-------- -------- -------- -------- --------
Income before income taxes.............................. 7,112 12,412 24,441 21,766 26,164
Provision for income taxes.............................. 1,045 3,899 8,740 7,875 9,155
-------- -------- -------- -------- --------
Net income.............................................. $ 6,067 $ 8,513 $ 15,701 $ 13,891 $ 17,009
======== ======== ======== ======== ========
<CAPTION>
AS OF
------------------------------------------------------------------------
DECEMBER 25, DECEMBER 30, DECEMBER 29, DECEMBER 28, DECEMBER 27,
1995 1996 1997 1998 1999
------------ ------------ ------------ ------------ ------------
BALANCE SHEET DATA
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents............................... $ 4,323 $ 13,381 $ 27,061 $ 50,364 $ 14,121
Total assets............................................ 223,769 237,510 256,208 322,879 324,722
Long-term obligations, less current maturities.......... 5,802 5,988 6,009 8,797 8,744
Long-term debt-affiliate(3)............................. 30,843 27,409 32,007 70,359 219,923
Stockholder's equity(3)................................. 128,485 136,644 152,659 166,631 8,632
</TABLE>
- ------------------------------
(1) Our fiscal year ends on the last Monday in December. The fiscal year ended
December 30, 1996 is comprised of 53 weeks. The other fiscal years presented
are comprised of 52 weeks. Our historical capital structure consists of one
share of common stock; therefore, net income per share amounts for
historical periods have not been presented.
(2) The fiscal years ended December 29, 1997, December 28, 1998, and
December 27, 1999, include Year 2000 remediation expenses of $550, $3,823,
and $2,001, respectively, which are included in general and administrative
expenses. Also included in general and administrative expenses is $4,432,
$9,474, $7,142 and $11,360 in expenses allocated to us by Carlson Companies
in fiscal 1995, 1996, 1997 and 1998, respectively. No similar amounts were
allocated to us in fiscal 1999. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation-Overview."
(3) The balance sheet data reflects a $175,000 dividend declared on June 16,
1999, of which $120,000 was paid in the form of a promissory note on
June 28, 1999.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Our worldwide system of restaurants currently includes over 600 company
owned or operated and franchised restaurants located in 52 countries. Our T.G.I.
Friday's system includes T.G.I. Friday's, Front Row Sports Grill and Friday's
American Bar. In addition to the T.G.I. Friday's system, we opened our first
Italianni's restaurant in 1992 and have developed or acquired other additional
concepts since 1997. Our additional concepts currently include both company
owned or operated and franchised restaurants.
Our revenue consists primarily of company restaurant sales, managed
restaurant revenue and franchising revenue. Company restaurant sales include
food, beverage and merchandise sales at company owned restaurants. In fiscal
1999, alcoholic beverages accounted for approximately 22% of company restaurant
sales. Managed restaurant revenue includes management fees based on a percentage
of sales for restaurants we operate under management agreements and
reimbursement of expenses we incur in operating these restaurants. The
management agreements appoint us as the exclusive agent for the supervision,
direction and control of the operations and management of the applicable
restaurant. Franchising revenue includes royalty fees, franchise fees and
non-refundable concept fees from franchise operations. In addition, we receive
revenue from trademark licensing fees paid by manufacturers of our retail
branded food and beverage products.
Our revenue from domestic franchisees includes a 4.0% royalty on net sales
and franchise fees that must be paid for each restaurant prior to opening. Our
revenue from international franchisees typically includes a royalty ranging from
2.0% to 4.0% of net sales and franchise fees that must be paid for each
restaurant prior to opening, as well as individually negotiated concept fees.
Nonrefundable concept fees are paid by franchisees primarily based on the number
of potential restaurants that can be established in the franchisee's territory.
See "Business-Our Franchise System" for additional information regarding our
arrangements with franchisees.
Comparable restaurant sales include food, beverage and merchandise sales at
restaurants that have been in operation for twelve full months as of the
beginning of the fiscal year of the relevant period. As of December 27, 1999, we
had 129 company owned restaurants which met this criteria.
Cost of sales is composed primarily of the cost of food and beverages.
Restaurant operating expenses include labor, occupancy, marketing, management
training and other store-level costs. Cost of sales and restaurant operating
expenses include expenses incurred at our managed restaurants for which we are
reimbursed. The majority of the components of our cost of sales are variable and
are expected to generally increase with sales volume. Restaurant operating
expenses also generally increase with sales volume, but decline as a percentage
of revenue as sales increase. Occupancy costs generally include both a fixed
rental plus a percentage rental based on gross sales. General and administrative
expenses are composed of expenses associated with all corporate and
administrative functions that support existing operations and provide an
infrastructure to support future growth, including management and staff
salaries, employee benefits, travel, information systems, training and market
research. Depreciation and amortization includes depreciation of restaurant and
corporate fixed assets, as well as amortization of goodwill. Pre-opening costs
associated with new restaurants are expensed as incurred which may cause
fluctuations in our quarterly operating results depending on the timing of new
restaurant openings.
Our general and administrative expenses include expenses incurred by us,
including charges from Carlson Companies for services they provide, and prior to
1999 included additional amounts allocated to us for unspecified services by
Carlson Companies. Commencing in June 1997, as part of an overall review of the
services Carlson Companies provides to its subsidiaries, Carlson Companies
determined to change the manner in which it provides certain financial services
to its subsidiaries and the manner in which it receives financial information
from its subsidiaries. As a result, in the second quarter of fiscal 1999, the
financial services provided by Carlson Companies to us increased, which resulted
in an
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increase in our payments to Carlson Companies for these specified financial
services. See "Relationship with Carlson Companies and Related Transactions" for
an additional discussion of these services. We expect that this increase in
payments to Carlson Companies for additional financial services will be at least
partially offset by future decreases in our direct general and administrative
expenses to the extent we no longer perform certain of these services
internally. In addition, effective in fiscal 1999, the amounts historically
allocated to us by Carlson Companies for unspecified expenses, which were
$11.4 million in 1998 and $7.1 million in 1997, have been eliminated. This
resulted in an overall reduction in our general and administrative expenses in
fiscal 1999.
Carlson Companies is our primary lender and nearly all of our interest
expense consists of amounts we pay to Carlson Companies on outstanding
intercompany debt. On August 19, 1999, we entered into a credit agreement with
Carlson Companies which covers all of our intercompany indebtedness. During 1999
we experienced a significant increase in our interest expense as a result of the
$120.0 million in debt we incurred to Carlson Companies in partial payment of a
dividend, which will be partially repaid with the net proceeds of this offering.
In addition, we participate in Carlson Companies' cash management program which
holds our cash received from operations in Carlson Companies' centralized cash
accounts and funds our cash disbursements on a daily basis. Cash paid into our
intercompany cash management account may be used to reduce our indebtedness to
Carlson Companies. Interest expense on intercompany debt, net of amounts
capitalized, was $8.5 million in fiscal 1999 compared to $2.6 million in fiscal
1998.
Upon completion of this offering, Carlson Companies will beneficially own
shares of our common stock representing in the aggregate 95.1% of the combined
voting power of all of our outstanding common stock, or 94.4% if the
underwriters' over-allotment option is exercised in full. We have entered into,
or will enter into, agreements and arrangements with Carlson Companies governing
the relationships between us and Carlson Companies and providing for the
allocation of tax and other liabilities and obligations relating to periods
prior to and after this offering. We also plan to continue purchasing additional
goods and services from Carlson Companies and its affiliates in the ordinary
course of business. See "Relationship with Carlson Companies and Related
Transactions" for a discussion of our principal agreements and arrangements with
Carlson Companies and "Liquidity and Capital Resources" in this Management's
Discussion and Analysis of Financial Condition and Results of Operations for a
description of certain terms of our debt payable to Carlson Companies and other
relevant information.
Our fiscal year ends on the last Monday in December. Our 1999, 1998 and 1997
fiscal years each consisted of 52 weeks.
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RESULTS OF OPERATIONS
Our operating results for fiscal years 1997, 1998 and 1999, expressed as a
percentage of total revenue were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
DECEMBER 29, DECEMBER 28, DECEMBER 27,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenue
Company restaurant sales.............................. 78.3% 80.6% 81.5%
Managed restaurant revenue............................ 14.4 12.5 11.8
Franchising revenue................................... 6.6 6.4 6.1
Licensing revenue..................................... 0.7 0.5 0.6
----- ----- -----
Total revenue....................................... 100.0 100.0 100.0
Cost of sales........................................... 26.8 27.6 27.1
Restaurant operating expenses........................... 53.6 52.6 53.6
General and administrative expenses..................... 10.3 10.8 7.9
Depreciation and amortization expense................... 4.4 4.6 4.5
Other (income) expense, net............................. (0.2) 0.1 1.6
----- ----- -----
Income from operations................................ 5.1 4.3 5.3
Interest expense........................................ 0.5 0.7 1.5
----- ----- -----
Income before income taxes.............................. 4.6 3.6 3.8
Provision for income taxes.............................. 1.7 1.3 1.3
----- ----- -----
Net income.............................................. 2.9% 2.3% 2.5%
===== ===== =====
</TABLE>
FISCAL YEAR ENDED DECEMBER 27, 1999 COMPARED TO FISCAL YEAR ENDED DECEMBER 28,
1998
REVENUE. Total revenue increased by $92.0 million, or 15.4%, to
$691.3 million in 1999 from $599.3 million in 1998. This increase was primarily
a result of a $80.4 million increase in sales at company owned restaurants and a
$6.3 million increase in managed restaurant revenue.
Company restaurant sales increased by $80.4 million, or 16.6%, to
$563.7 million in 1999 from $483.3 million in 1998. The increase in company
restaurant sales was primarily comprised of $35.9 million in additional sales
resulting from the opening of 28 additional restaurants in fiscal 1999 and
$34.1 million in additional sales contributed by restaurants that were opened in
fiscal 1998. The total number of operating weeks for company owned restaurants
increased by 16% from 1998. Average sales per week for all company owned stores
were approximately $60,000 in both 1998 and 1999. The total number of company
owned restaurants increased to 183 at December 27, 1999 from 162 at
December 28, 1998. Sales at the 129 comparable restaurants increased by 2.1% in
fiscal 1999. This increase was primarily attributable to the full year impact of
menu price increases during the second half of 1998 and a shift in sales mix to
higher-priced items.
Managed restaurant revenue increased by $6.3 million, or 8.5%, to
$81.2 million in 1999 from $74.9 million in 1998. The increase was primarily the
result of a 4.2% increase in sales at comparable managed restaurants and an
increase in the aggregate number of operating weeks of approximately 4%.
Franchising revenue increased by $3.6 million, or 9.4%, to $41.9 million in
1999 from $38.3 million in 1998. The increase was driven primarily by an
increase in royalty fees associated with 62 additional franchise restaurants
opened in 1999. At December 27, 1999 franchisees operated 395 restaurants
worldwide compared to 333 restaurants at the end of the prior fiscal year.
COST OF SALES. Cost of sales as a percentage of revenue decreased to 27.1%
in 1999 from 27.6% in 1998. The reduction was primarily attributable to menu
price increases and favorable price variances in produce and dairy items which
were partially offset by meat and poultry cost increases.
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RESTAURANT OPERATING EXPENSES. Restaurant operating expenses as a percent
of revenue increased to 53.6% in 1999 from 52.6% in 1998. The increase resulted
equally from increased marketing expenses due to expanded national advertising
in 1999 and increased new store opening costs and increased restaurant labor
costs. The labor cost increase was driven by both higher wage costs and an
enhanced benefits package initiated in 1999 to attract and retain restaurant
management and employees.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses as
a percentage of revenue decreased to 7.9% in 1999 from 10.8% in 1998. This
decrease was primarily attributable to the elimination of $11.4 million of
expenses allocated from Carlson Companies. This decrease was partially offset by
increases in other corporate support costs.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense as a percentage of revenue decreased slightly to 4.5% in 1999 from 4.6%
in 1998.
OTHER (INCOME) EXPENSE, NET. Other expense as a percentage of revenue
increased to 1.6% in 1999 from 0.1% in 1998. We recorded a charge of
$2.2 million in 1999 to reflect the impairment of assets associated with two
company owned restaurants. Our charge associated with recording the impairment
of assets was $549,000 in 1998. In 1999 we closed five restaurants. We recorded
a charge of approximately $5.7 million as the anticipated cost of closures of
these restaurants, including settlement of lease obligations. Additionally we
recorded a charge of $2.2 million for the writeoff of goodwill associated with a
single unit restaurant concept. This writeoff was necessary because of
management's approval in fiscal 1999 of plans to significantly alter the unit's
operations. Other expenses in 1999 included $.8 million in expenses related to
the write down of the book value of an international equity investment as a
result of the entity's financial performance. The above charges are
significantly higher than similar charges typically incurred by us.
INTEREST EXPENSE. Interest expense as a percentage of revenue increased to
1.5% in 1999 from 0.7% in 1998. This $6.1 million increase was primarily due to
interest on intercompany indebtedness related to a $175 million dividend to
Carlson Companies in June 1999.
FISCAL YEAR ENDED DECEMBER 28, 1998 COMPARED TO FISCAL YEAR ENDED DECEMBER 29,
1997
REVENUE. Total revenue increased by $65.2 million, or 12.2%, to
$559.3 million in 1998 from $534.1 million in 1997. The increase was primarily
attributable to increased sales of $64.8 million at company owned restaurants
and increased franchising revenue of $3.1 million, partially offset by decreased
managed restaurant revenue of $1.9 million.
Company restaurant sales increased by $64.8 million, or 15.5%, to
$483.3 million in 1998 from $418.5 million in 1997. The increase in company
restaurant sales during 1998 was primarily the result of an increase in the
number of owned restaurants. Comparable company owned restaurant sales increased
by $14.4 million, or 3.5%, in 1998 from 1997. The increase in comparable company
owned restaurant sales in 1998 was primarily attributable to a menu price
increase of approximately 3.2%.
Managed restaurant revenue decreased by $1.9 million, or 2.4%, to
$74.9 million in 1998 from $76.8 million in 1997. The decrease in managed
restaurant revenue during 1998 was primarily the result of an approximate 5%
decrease in the aggregate number of restaurant operating weeks due to the timing
of restaurant openings and closures. This decrease was partially offset by a
1.6% increase in sales at comparable managed restaurants.
Franchising revenue increased by $3.1 million, or 8.8%, to $38.3 million in
1998 from $35.2 million in 1997. The increase in franchising revenue was
comprised primarily of an increase in royalty fees in 1998. The increase in
royalty fees was primarily attributable to an increase in the number of
franchised restaurants. In addition, comparable restaurant sales at domestic
franchised restaurants increased by 4.3% in 1998. The increase in franchising
revenue was partially offset by a $0.8 million reduction in royalty fees from
restaurants located in Asia due to poor economic conditions.
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COST OF SALES. Cost of sales as a percentage of revenue increased to 27.6%
in 1998 from 26.8% in 1997. This increase was primarily attributable to an
increase in food costs as a percentage of sales to 29.1% in 1998 from 28.4% in
1997, primarily resulting from a shift in the sales mix towards new higher-cost
menu items, as well as an approximate 9% increase in average costs of dairy
products. This increase was partially offset by a decrease in alcoholic beverage
costs as a percentage of sales to 27.6% in 1998 from 28.2% in 1997, primarily
due to a shift in the sales mix towards higher margin alcoholic beverage items.
RESTAURANT OPERATING EXPENSES. Restaurant operating expenses as a
percentage of revenue decreased to 52.6% in 1998 from 53.6% in 1997. This
decrease was primarily attributable to reduced labor costs at company owned or
operated restaurants resulting from savings generated by a tip sharing
initiative and labor productivity programs initiated during the second half of
1997.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses as
a percentage of revenue increased to 10.8% in 1998 from 10.3% in 1997. This
increase was primarily attributable to a $4.2 million increase in allocated
expenses from Carlson Companies and an increase in Year 2000 remediation
expenses from $550,000 in 1997 to $3.8 million in 1998.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense as a percentage of revenue increased to 4.6% in 1998 from 4.4% in 1997.
This increase resulted primarily from depreciation expense related to capital
additions at existing restaurants.
INTEREST EXPENSE. Interest expense as a percentage of revenue increased to
0.7% in 1998 from 0.5% in 1997 due to an increase in allocated indebtedness from
Carlson Companies in 1998.
QUARTERLY RESULTS
Our quarterly operating results may fluctuate significantly due to several
factors, including the timing of new restaurant openings and related expenses,
profitability of new restaurants, increases or decreases in comparable
restaurant sales, general economic conditions, consumer confidence in the
economy, changes in consumer preferences, competitive factors and weather
conditions.
In the past, our preopening costs have varied significantly from quarter to
quarter primarily due to the timing of restaurant openings. We typically incur
most preopening costs for a new restaurant within the two months immediately
preceding, and the month of, its opening. In addition, our labor and operating
costs for a newly opened restaurant during the first three to six months of
operation are materially greater than what can be expected after that time, both
in aggregate dollars and as a percentage of restaurant sales. Accordingly, the
volume and timing of new restaurant openings in any quarter has had, and is
expected to continue to have, a significant effect on quarterly preopening
costs, labor and direct costs. Due to these factors, results for a quarter may
not be indicative of results to be expected for any other quarter or for a full
fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
We have historically funded our capital requirements primarily with cash
flow from operations and borrowings from Carlson Companies. We currently have a
credit agreement with Carlson Companies which covers all of our intercompany
indebtedness.
Net cash provided by operating activities increased from $42.2 million in
fiscal 1997 to $44.1 million in fiscal 1998 and to $57.2 million in fiscal 1999.
The increases were due to increased profitability and favorable timing of
operational receipts and payments. Our working capital balance increased from
$9.4 million at December 29, 1997 to $33.4 million at December 28, 1998,
primarily due to an increase in levels of transfers of excess cash generated by
our operations to Carlson Companies' cash management program. Our working
capital balance declined to a deficit of $2.7 million at December 27, 1999,
principally as a result of the $55.0 million cash portion of the $175 million
dividend declared on June 16, 1999. Accounts receivable are due principally from
franchisees for
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royalties earned and goods and services provided. We had allowances of $823,000
as of December 29, 1997, $1.5 million as of December 28, 1998 and $1.6 million
as of December 27, 1999 to cover estimated loss exposures related to accounts
receivable. Accrued liabilities increases in 1999 stemmed primarily from
increased provisions for compensation and marketing related items.
Net cash used in investing activities increased from $31.3 million in fiscal
1997 to $61.6 million in fiscal 1998 and to $65.7 million in fiscal 1999. The
increases were primarily due to the increased development of company owned
restaurants. During fiscal 1997, we opened nine company owned restaurants.
During fiscal 1998 we opened 29 company owned restaurants and during fiscal 1999
we opened 28 company owned restaurants. Capital expenditures consist of
construction of new restaurants, purchases of new and replacement restaurant
furniture and equipment, ongoing restaurant remodeling programs, purchases of
land for future restaurant sites, and acquisitions of existing restaurants from
franchisees and third parties. Capital expenditures were $39.8 million in fiscal
1997, $57.1 million in fiscal 1998 and $71.6 million in fiscal 1999. Included in
1999 capital expenditures is approximately $6.6 million related to purchases of
six parcels of land for restaurant sites. The land was purchased in order to
secure strategic restaurant locations. At December 27, 1999 the company had sold
and leased back three of the land parcels. No gain or loss arose from the
sale/leaseback transactions. The Company plans to sell and leaseback the
remaining three land parcels in fiscal 2000. We expect our capital expenditures
to increase moderately in fiscal 2000 as we open an increasing number of new
restaurants. Our capital expenditure requirements were financed primarily
through internally generated funds and borrowings from Carlson Companies. In
March 1998, we acquired two additional restaurant concepts. The purchase price
of $6.9 million, which was paid in cash and notes, resulted in the recording of
$4.8 million of goodwill, $2.2 million of which was written off in 1999. With
the exception of this $2.2 million write-off, the impact of this acquisition has
not been material to our operating results.
Net cash provided by financing activities increased from $2.8 million in
fiscal 1997 to $40.8 million in fiscal 1998. The increase from fiscal 1997 to
fiscal 1998 was due to proceeds from debt allocated to us by Carlson Companies.
Net cash used in financing activities was $27.7 million in fiscal 1999. The
primary financing requirement in 1999 was the payment of the $55 million cash
portion of the dividend to Carlson Companies. On August 19, 1999, we entered
into a credit agreement with Carlson Companies, at which time all of our
outstanding intercompany indebtedness was refinanced into this facility. Under
this credit agreement, which bears interest at 1.25% over the three-month LIBOR
and expires on December 31, 2002, Carlson Companies will lend us up to
$250.0 million. We intend to use the net proceeds from this offering to repay a
portion of the outstanding indebtedness under this facility. Following the
completion of this offering and the application of the net proceeds, the
borrowing availability under this credit agreement will be reduced to
$125.0 million. Our outstanding obligation under this credit agreement was
$219.9 million at December 27, 1999.
On June 16, 1999, our board of directors declared a dividend of
$175.0 million to Carlson Companies. Of this total, $120.0 million was paid in
the form of a promissory note on June 28, 1999 and $55.0 million was paid in
cash thereafter.
We believe that the proceeds from this offering, combined with borrowings
available from Carlson Companies, liquid assets and cash generated from
operations, will provide sufficient funds for our capital requirements at least
through December 31, 2002, which is the term of our credit agreement with
Carlson Companies. In the event that additional capital is required, we may seek
to raise such capital through public or private equity or debt financings. There
can be no assurance that such capital will be available on favorable terms, if
at all.
INFLATION
The primary inflationary factors affecting our operations are food and labor
costs. A large number of our restaurant personnel are paid at rates based on the
applicable minimum wage, and increases in
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the minimum wage directly affect our labor costs. To date, inflation has not had
a material impact on our operating results.
YEAR 2000 COMPLIANCE
We have completed the transition to the Year 2000 with no material
disruptions in business critical systems or business activity. During 1999 we
expended $2.0 million to test and remediate our systems and applications for
Year 2000 compatability. The total cost of our remediation efforts was
$6.4 million.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates paid on our
intercompany debt payable to Carlson Companies. The intercompany debt bears
interest at 1.25% over the three-month LIBOR. The interest cost of the
intercompany debt will vary with changes in LIBOR, and significant increases in
LIBOR could adversely affect our operating results.
We have no derivative financial instruments or derivative commodity
instruments in our cash and cash equivalents and investments. We lend all of our
excess cash to Carlson Companies, which is collected daily under Carlson
Companies' cash management program. On any business day that we have excess cash
available, we may, at our option, use that cash to repay any outstanding debt to
Carlson Companies or make advances to Carlson Companies if no debt is
outstanding. Carlson Companies' cash management program uses cash collected to
pay down Carlson Companies' revolving line of credit or invests it in investment
grade, highly liquid investments consisting of money market instruments, bank
certificates of deposit, overnight investments in top-rated commercial paper and
U.S. government and governmental agency instruments.
We conduct business in 52 countries. Substantially all revenues derived from
international markets are royalty fees, franchise fees and concept fees.
Primarily all of our transactions are conducted, and our accounts denominated,
in United States dollars. However, since royalty fees are calculated based upon
net sales denominated in local currency, we are subject to foreign currency rate
fluctuations against the U.S. dollar.
We purchase certain commodities such as beef, chicken, flour and cooking
oil. These commodities are generally purchased under agreements based upon
market prices established with vendors, and are, therefore, subject to price
volatility caused by weather, production problems, delivery difficulties and
other factors which are outside of our control. These purchase arrangements may
contain contractual features that limit the price paid by establishing certain
price floors or caps. We do not use financial instruments to hedge commodity
prices because our purchase arrangements help control the ultimate cost paid and
any significant commodity price fluctuations are generally short term in nature.
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BUSINESS
OVERVIEW
Carlson Restaurants is a global leader in the development, operation and
franchising of casual dining restaurants, principally under the T.G.I. Friday's
brand. Since the first T.G.I. Friday's restaurant opened in New York City in
1965, the T.G.I. Friday's system, which includes T.G.I. Friday's, Front Row
Sports Grill and Friday's American Bar, has grown to 589 restaurants, including
142 restaurants located outside the United States. We own or operate 198
restaurants and our global franchise network, consisting of 44 domestic and 43
international franchisees, operates a total of 391 restaurants. Over the past
five years, the T.G.I. Friday's system has increased by more than 50 company
owned or operated restaurants and more than 220 franchised restaurants. During
this time period, we opened or franchised more than 100 new restaurants
internationally, expanding our international presence in 39 new countries. All
T.G.I. Friday's restaurants offer our innovative, signature menu and drink items
served by our knowledgeable staff in a fun, comfortable and relaxing atmosphere.
In addition to the concepts in our T.G.I. Friday's system, we have seven
additional cafe and dinner house dining concepts, five of which have been
developed or acquired since 1998, currently totaling 30 company owned or
operated and franchised restaurants. Our dinner house concepts include
Italianni's, which first opened in 1992 and has grown to 21 restaurants, and
Timpano Italian Chophouse which we opened in 1998, as well as the Star Canyon
and AquaKnox concepts acquired by us in 1998. Our cafe concepts include Samba
Room, which we opened in 1998, Tacqueria Canonita, which we opened in 1999, and
Mignon, which will open in 2000. We plan to focus our expansion efforts on the
T.G.I. Friday's system and, to a lesser degree, on those additional concepts
that meet our strict performance criteria. Carlson Restaurants' worldwide system
currently includes 619 company owned or operated and franchised restaurants
located in 52 countries.
BUSINESS STRATEGY
Our business strategy is to expand our position as a global leader of
branded restaurants by providing a consistently high quality restaurant
experience, innovative products and concepts and legendary service. We believe
that by drawing on the strength of the T.G.I. Friday's brand and our corporate
infrastructure, we can exceed the expectations of our guests, offer our
employees a quality working environment and increase stockholder value. Key
components of this strategy include:
CAPITALIZE ON THE STRENGTH OF THE T.G.I. FRIDAY'S BRAND
As a leader in the casual dining industry, we believe that the strong
consumer awareness of our brand name is one of our greatest strengths. By
continuing to invest in our trusted brand name through the development of
innovative food items and creative adult beverages, and by using national
advertising campaigns, we believe that we will be able to continue to grow our
business, expand our market penetration and improve our profitability. We strive
to retain our current guests, encourage increased restaurant visitation and
expand our guest base by responding quickly to changing consumer preferences,
advertising our menu variety and developing innovative food and beverage items.
We believe that our dedication to providing a wide variety of high quality food,
a fun atmosphere and legendary guest service will allow us to differentiate
ourselves from our competitors and maintain and enhance our brand recognition.
CONTINUE GLOBAL GROWTH OF THE T.G.I. FRIDAY'S SYSTEM
We intend to utilize our strong brand name and the core competencies
developed through years of experience to continue the domestic and international
expansion of the T.G.I. Friday's system of restaurants. Our growth will build
upon our leadership position as one of the largest systems of casual dining
restaurants worldwide. Our growth strategy will focus on adding new units that
are both
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company owned and owned by our strong global network of franchisees. We believe
that our knowledge base, internal operating structures and our ability to
continually innovate will allow us to obtain a leadership position in each of
the markets we enter by successfully developing new units and integrate them
into the T.G.I. Friday's system. Together with our franchisees, in fiscal 2000
we plan to open a total of 79 restaurants in the T.G.I. Friday's system.
CAPITALIZE ON OUR STRONG GLOBAL FRANCHISING NETWORK.
Our development agreements with experienced multi-unit restaurant operators
will continue to be a key component of our continuing expansion of the T.G.I.
Friday's system. We currently have 44 domestic franchisees operating 249
restaurants and 43 international franchisees operating 142 restaurants. In
addition to continuing to grow our T.G.I. Friday's franchising system both
domestically and internationally, we currently offer our international
franchisees the opportunity to develop our Italianni's concept and plan to offer
both our domestic and international franchisees the opportunity to franchise
additional concepts in the future. We believe that franchisee development of our
additional concepts will allow us to increase our penetration of existing
markets.
PROVIDE AN EXCEPTIONAL DINING EXPERIENCE
We continually evaluate all of our restaurants' menus to ensure that we are
providing our guests with highly desirable food and beverage items. We devote
substantial effort to developing innovative, cravable menu offerings, which
undergo extensive consumer testing prior to being added to our menus. We have a
35-year tradition of providing our guests with quick, efficient and friendly
service with the goal of exceeding every guest's expectations. We also offer a
comfortable, relaxing environment where guests can enjoy themselves. Our ability
to provide an exceptional dining experience has allowed our company owned or
operated T.G.I. Friday's restaurants to achieve eleven consecutive quarters of
monthly comparable restaurant sales increases. Our additional concepts have
menus tailored to the preferences of each concept's targeted segment of the
dining market. These innovative, chef-driven menus are supported by unique
interior decor, music, lights, layout and food presentation that contribute to
the overall dining experience.
DELIVER ATTRACTIVE UNIT ECONOMICS
We believe that our focus on operations at the restaurant level results in
attractive unit economics throughout our T.G.I. Friday's system. We currently
own and operate 44 restaurants that are similar in size to our 6,800 square foot
prototype. We anticipate that restaurants to be developed based on the 6,800
square foot prototype will have average restaurant sales of approximately
$3.1 million, average operating income of approximately $360,000, or 11.6% of
restaurant sales, average cash investment of approximately $1.9 million and
average cash flow of approximately $597,000, or 31.4% of our average cash
investment. We have also developed a smaller 5,600 square foot prototype which
we expect to have average restaurant sales of approximately $2.8 million,
average operating income of approximately $381,000, or 13.6% of restaurant
sales, average cash investment of approximately $1.6 million and average cash
flow of approximately $581,000, or 36.3% of our average cash investment.
CAPITALIZE ON OUR MANAGEMENT'S EXPERIENCE AND EXPERTISE
Our talented and experienced senior management team is led by President and
Chief Executive Officer Wallace B. Doolin who has worked in the restaurant
industry for over 30 years. In addition, our senior management team has
extensive expertise in the operation of company owned or operated restaurants
and the management of domestic and international franchisee networks. This
expertise also extends to the development and implementation of multiple
concepts across a broad range of dining segments. Many of our senior executives
are recognized as restaurant industry leaders, serving on numerous boards and
committees of prominent trade associations. We believe that these leadership
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roles allow us to help shape the direction of our industry and to anticipate and
capitalize on industry trends. We believe the experience and expertise of our
senior management team positions us to successfully execute our strategy and
grow our business.
ENHANCE GROWTH THROUGH ADDITIONAL CONCEPTS
We intend to enhance the growth of our business by drawing on our management
expertise and corporate infrastructure to selectively expand our existing cafe
and dinner house concepts and by developing new concepts. We plan to focus our
expansion efforts only on those concepts that meet strict economic return
criteria. We believe that our additional concepts provide excellent
opportunities to further penetrate existing markets, serve additional segments
of the dining market and expand into attractive new locations. We intend to
utilize our systems, experience and scale in the operation of our additional
concepts while conveying the image of independent restaurants to our guests.
OUR T.G.I. FRIDAY'S SYSTEM
T.G.I. FRIDAY'S
T.G.I. Friday's is a full-service casual dining restaurant featuring quality
food served by a friendly, knowledgeable waitstaff in a lively, fun atmosphere.
We have a broad guest base ranging from single adults to families with children
for whom we strive to create a memorable dining experience. Our lunch time
through late night service allows these guests to visit our restaurants at many
different times of the day. T.G.I. Friday's, which has a history of creating
innovative menu items, popularized the potato skins appetizer and many frozen
and ice cream drinks, such as the Mudslide. We have also introduced creative and
flavorful non-alcoholic beverages, such as Flings, to appeal to younger guests
and guests favoring non-alcoholic beverages.
Our T.G.I. Friday's menu offers guests a wide variety of trusted signature
entrees and appetizers, innovative menu items and a full assortment of desserts
and beverages at prices that appeal to a broad range of consumers and provide
exceptional value. For example, our Jack Daniel's Grill items add special flavor
to baby back ribs, pork chops, New York strip steak, chicken and salmon by
basting these fresh cuts of meat with a smoky maple sauce that captures the full
flavor of Jack Daniel's whiskey. Our Tex-Mex Tower is a trio of appetizers,
including nachos, quesadillas and our Fire Bites. Our Mudslides are frozen
drinks with the classic taste of T.G.I. Friday's Mocha Mud Pie. Menus are
updated several times a year with new product introductions to increase both
guest visits and profitability.
In addition to our wide variety of food items, our restaurants offer an
extensive selection of creative adult beverages, which we believe differentiates
us from our competitors. We believe that our beverage service contributes
substantially to our overall success and increases individual restaurant sales
and profitability. The merchandising of our adult beverages and the introduction
of new drink items is an important factor in the appeal of our restaurants and
enhances our late night success. During fiscal 1999, alcoholic beverages
accounted for 22% of total sales in our domestic company owned or operated
restaurants.
We offer a fun, comfortable and relaxing environment in each restaurant to
complement our high value menu. The exterior of each restaurant typically has
red and white awnings and many have a patio for outdoor dining. The decor of the
restaurant consists of informal seating with dark wood tables and booths,
Tiffany-style lamps, striped tabletops and nostalgic memorabilia. The bar area
features brass rails, stained glass and a prominent adult beverage display. We
focus on high quality decor and regularly reinvest in our restaurants to
maintain and enhance the quality of our atmosphere. Dressed in red and white
striped shirts and irreverent hats and buttons, our efficient staff and
entertaining bartenders provide the quality service necessary for an enjoyable
dining experience. Our restaurants range from 3,500 to 10,000 square feet of
interior space, with a dining seating capacity of 100 to 360
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persons. Most of our currently planned new restaurants will be prototype units
of 5,600 or 6,800 square feet, with a dining seating capacity of 200 to 235
persons.
Entree selections in our domestic company owned or operated restaurants
range in price from $5.99 to $16.49. A full-service bar is available at each of
these T.G.I. Friday's restaurants, offering a wide variety of cocktails, frozen
drinks and non-alcoholic beverages.
FRIDAY'S AMERICAN BAR
Friday's American Bar, an extension of the T.G.I. Friday's concept, is
designed as a small, neighborhood corner bar with a casual atmosphere. Friday's
American Bar has a more limited menu featuring traditional T.G.I. Friday's menu
items. A full-service bar is available at each Friday's American Bar, offering a
wide variety of alcoholic and non-alcoholic beverages.
There are currently six domestic company owned or operated and ten
international franchised Friday's American Bars located primarily in airports
and urban areas. Entree selections at domestic company owned or operated
Friday's American Bar restaurants range in price from $5.99 to $12.99. During
fiscal 1999, alcoholic beverages accounted for 36% of total sales at company
owned or operated Friday's American Bars.
FRONT ROW SPORTS GRILL
Front Row Sports Grill offers a broad dining and entertainment experience
combining the American past-times of food and sports in one location. There are
currently three domestic company operated and one international franchised Front
Row Sports Grills, including locations in The Ballpark in Arlington, Texas and
Bank One Ballpark in Phoenix, Arizona, which feature viewing access to the
playing field. We plan to open an additional Front Row Sports Grill in Miller
Park in Milwaukee, Wisconsin during fiscal 2001 and expect to limit the
development of additional Front Row Sports Grills to select large capacity
sporting arenas.
Entree selections at domestic company operated Front Row Sports Grills range
in price from $5.99 to $15.99. A full-service bar is available at each Front Row
Sports Grill, offering a wide variety of alcoholic and non-alcoholic beverages.
During fiscal 1999, alcoholic beverages accounted for 28% of total sales at
company operated Front Row Sports Grills.
T.G.I. FRIDAY'S RETAIL BRANDED PRODUCTS
We license our name to select producers and distributors of retail products.
These licensees offer a selection of frozen appetizers, frozen desserts and
premixed alcoholic beverages for retail sale. Retail branded products serve to
reinforce our brand image among consumers and increase brand awareness. We do
not currently license the right to sell our entrees and have no plans to do so
in the future. Licensees are required to conform to our product quality,
trademark usage and product placement requirements. Licensing revenues from
retail branded products represented approximately 0.6% of our total revenue in
fiscal 1999.
UNIT ECONOMICS
Historically, we developed T.G.I. Friday's units that ranged in size from
3,500 to 10,000 square feet. We currently plan to develop new T.G.I. Friday's
restaurants based on either a 6,800 square foot prototype or a smaller 5,600
square foot prototype, depending on market demographics and real estate
availability. We anticipate that restaurants to be developed based on the 6,800
square foot prototype will have average restaurant sales of approximately
$3.1 million, average operating income of approximately $360,000, or 11.6% of
restaurant sales, average cash investment of approximately $1.9 million and
average cash flow of approximately $597,000, or 31.4% of our average cash
investment.
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<PAGE>
Cash flow represents operating income before depreciation and amortization. We
currently own and operate 44 restaurants that are similar in size to our 6,800
square foot prototype, of which 32 had been open at least 12 months at
December 27, 1999. During this twelve-month period, these 32 restaurants had
average restaurant sales of approximately $3.5 million, average operating income
of approximately $580,000, or 16.5% of restaurant sales, and average cash flow
of approximately $752,000, or 39.6% of our average cash investment. Since the
beginning of fiscal 1998, our total cash investment per company owned 6,800
square foot prototype has averaged approximately $1.9 million, with additional
average pre-opening costs of approximately $119,000 per restaurant.
We anticipate that restaurants to be developed based on the 5,600 square
foot prototype will have average restaurant sales of approximately
$2.8 million, average operating income of approximately $381,000, or 13.6% of
restaurant sales, average cash investment of approximately $1.6 million and
average cash flow of approximately $581,000, or 36.3% of our average cash
investment. We currently own and operate 25 restaurants based on the 5,600
square foot prototype, of which only 12 had been open at least twelve months at
December 27, 1999. Most of these 12 restaurants were opened in the second half
of fiscal 1998 and therefore were not yet achieving anticipated results for the
full period of fiscal 1999 due to normal operational inefficiencies associated
with new restaurants. Since the beginning of fiscal 1998, our total cash
investment per 5,600 square foot prototype has averaged approximately
$1.6 million, with additional average pre-opening costs of approximately
$119,000 per restaurant.
OUR FRANCHISE SYSTEM
Our franchise system focuses on expanding our business through franchise
development with large franchisees, both domestically and internationally. Our
T.G.I. Friday's system includes 44 domestic franchisees operating 249
restaurants and 43 international franchisees operating 142 restaurants. We have
offered franchises for T.G.I. Friday's restaurants in the United States under
our current system since 1978 and in various international markets since 1986.
We are also utilizing our franchise system as a key component to the
international growth of our Italianni's concept, which currently includes 15
international restaurants. In fiscal 2000, we estimate that we will have a total
of approximately 25 franchised restaurant openings in the United States and 29
in foreign countries, of which 14 have already opened.
Our largest domestic franchisee is Main Street & Main Incorporated. Main
Street & Main operates 58 T.G.I. Friday's restaurants. Main Street & Main has
exclusive development rights to the T.G.I. Friday's concept in most of
California, Arizona and Nevada, as well as in some other areas. Our largest
international franchisee is Whitbread PLC. Whitbread operates 34 T.G.I. Friday's
restaurants, most of which are located in England.
DOMESTIC AND INTERNATIONAL DEVELOPMENT AND FRANCHISE AGREEMENTS. We offer
domestic and international franchisees an exclusive development agreement for an
identified geographic territory. Our franchisees enter into a development
agreement, which establishes the number, locations and opening schedule of
restaurants to be developed. We have a right to terminate a development
agreement if the development schedule is not met. A separate franchise agreement
is signed for each restaurant developed.
Upon signing the development agreement, our domestic franchisees pay a
deposit toward their franchise fees based on the number of stores to be
developed under their development agreement. The development fee is equal to
100% of the franchise fee for the first restaurant plus a lower percentage of
the franchise fees for each additional restaurant covered by the development
agreement. Our domestic franchise fees range from $50,000 to $75,000 per
restaurant. Our international franchisees pay nonrefundable concept fees under
their development agreements, which vary significantly based on the size of the
territory and the number and type of restaurants to be developed. The franchise
fee for
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international restaurants has ranged from approximately $40,000 to $100,000 per
restaurant over the last three fiscal years.
Domestic and international franchisees pay an ongoing royalty fee based on a
percentage of gross sales. Domestic royalty fees are 4.0% of net sales and
international royalty fees range from 2.0% to 4.0% of net sales. Our domestic
franchisees also must spend a total of up to 4.0% of each restaurant's annual
gross sales on national and local advertising, including a mandatory
contribution to a fund for national advertising. Our international franchisees
must spend a total of up to 2.0% of gross sales on advertising. There is no
international advertising fund.
QUALITY CONTROL. We provide our franchisees with physical specifications
for our prototype restaurants and reserve the right to modify or prohibit any
plan. Franchisees are responsible for selecting the restaurant site and
obtaining our consent to the location. While franchisees are not required to
purchase their equipment, supplies or services from us, they must use approved
suppliers and comply with our standards. Franchisees are granted a license to
use our proprietary marks and may use our information technology systems related
to restaurant operations. We reserve the right to inspect and monitor each
franchise restaurant for compliance with our standards of quality, service and
cleanliness. We have the right to terminate a franchise if the franchisee does
not operate and maintain its restaurants in accordance with these standards. We
also offer franchises for the other concepts in the T.G.I. Friday's system under
arrangements that may have terms which differ from our standard agreements.
TRAINING, SUPPORT AND REPRESENTATION OF FRANCHISEES. We provide advice and
assistance to franchisees in connection with the operation and management of
each restaurant through our training program, meetings, on-site visits and
written materials. We maintain a Franchise Advisory Council that acts in an
advisory capacity for the domestic franchisees to provide input and feedback on
advertising programs, operations and other aspects of our franchise system. The
members of the council are elected by the franchisees. Franchisees have the
right to review national advertising fund expenditures quarterly.
RESTAURANT LOCATIONS
The current locations of company owned or operated and franchised
restaurants in the T.G.I. Friday's system are described below:
<TABLE>
<CAPTION>
COMPANY OWNED OR
OPERATED FRANCHISED TOTAL
------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
OTHER OTHER OTHER
T.G.I. SYSTEM T.G.I. SYSTEM T.G.I. SYSTEM
FRIDAY'S CONCEPTS FRIDAY'S CONCEPTS FRIDAY'S CONCEPTS
--- --- --- -- --- --
DOMESTIC
Northeast................................. 35 2 23 - 58 2
Mid Atlantic.............................. 42 - 40 - 82 -
Southeast................................. 40 2 24 - 64 2
Midwest................................... 41 - 80 1 121 1
West...................................... 31 5 81 - 112 5
--- --- --- -- --- --
DOMESTIC TOTAL........................ 189 9 248 1 437 10
--- --- --- -- --- --
INTERNATIONAL
Europe/Middle East/Africa................. - - 20 3 20 3
Central Europe/Australia.................. - - 42 6 42 6
Americas.................................. - - 26 1 26 1
Asia...................................... - - 43 1 43 1
--- --- --- -- --- --
INTERNATIONAL TOTAL................... - - 131 11 131 11
--- --- --- -- --- --
WORLDWIDE TOTAL....................... 189 9 379 12 568 21
=== === === == === ==
</TABLE>
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In addition to the restaurants listed above, there are eight T.G.I. Friday's
restaurants owned or franchised by TGIFNY, Inc., an unrelated company with
exclusive rights to build and operate T.G.I. Friday's restaurants within a
seven-mile radius of Columbus Circle in New York City. These rights were
retained in the original sale of T.G.I. Friday's to us. We do not receive any
revenues from the operation of these restaurants and do not have any right to
operate or franchise others to operate T.G.I. Friday's in this area. See
Note 13 to the Notes to Consolidated Financial Statements for financial
information about our geographic areas.
OUR ADDITIONAL CONCEPTS
As part of our growth strategy, we have developed or acquired a total of
seven concepts outside of our T.G.I. Friday's system. These innovative concepts
convey the image of independent restaurants, while utilizing our systems,
processes and industry experience. These restaurants, which currently include
three cafe concepts and four dinner house concepts, provide us with the
opportunity to bring additional concepts to our existing markets and to new
markets. We intend to selectively expand these and other additional concepts
under the direction of our Senior Vice President-Emerging Brands in order to
capitalize on what we believe are trends towards more complex flavor profiles
and ethnic dining experiences.
CAFE CONCEPTS
SAMBA ROOM, A CUBAN BAR AND LATIN CAFE. This concept, influenced by Cuban,
Brazilian, Peruvian, Argentine and Caribbean culture, is an upscale white-linen
Latin cafe. Samba Room's menu selections include Cordero, a rack of lamb with a
banana-orange lentil salsa and mango-mint mojo, and Lechon, a roast pork
tenderloin with sweet potato hash, black beans and pickled red onions, served
with side dishes ranging from black beans and rice to exotic rum vanilla mashed
boniato. Bossa Nova dance rhythms, palm-tree accents and mango-infused aromas
accent the dining room and cocktail bar area. Samba Room serves fresh exotic
juices, a highly-caffeinated Cafe Cubano and Cuban cocktails. Entree selections
range in price from $7.50 to $19.00. We currently own and operate three Samba
Room restaurants, the first of which opened in December 1998. We expect to open
two additional Samba Rooms during fiscal 2000.
TAQUERIA CANONITA. This concept, created by renowned chef Stephan Pyles,
features the authentic taste of the marketplaces of Mexico. The menu offers
tacos, tamales, tostadas, gorditas and rellenos with grilled and roasted meats,
vegetables and seafood. Taqueria Canonita has a full-service bar, offering a
wide variety of cocktails, frozen drinks and non-alcoholic beverages. We
currently own and operate one Taqueria Canonita, which opened in June 1999 at
The Venetian Hotel-Resort-Casino in Las Vegas, Nevada. We expect to open one
additional Tacqueria Canonita in the second half of 2000.
MIGNON. This concept is modeled on a 1960's era French steakhouse featuring
menu selections such as steaks, whole trout, fondue and iced shellfish served in
atmosphere created by white table cloths on cafe tables with jazz and blues
music. Entree selections will range in price from $8.00 to $13.00 at lunch and
$13.00 to $26.00 at dinner. We plan to open the first Mignon in Dallas, Texas in
the second half of 2000.
DINNER HOUSE CONCEPTS
TIMPANO ITALIAN CHOPHOUSE. This concept revives the big city dining
experience of the classy restaurants and clubs of Chicago and New York in the
mid-fifties to early-sixties. The menu features signature selections such as
Bone-In New York Strip, Grilled Swordfish and One-Pound Center-Cut Pork Chops,
as well as Italian pastas and full-bodied red wines. The concept features swing
music, dark lighting and a full-service bar. Entree selections range in price
from $8.95 to $27.95. We currently own
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and operate three Timpano Italian Chophouse restaurants. We expect to open one
additional Timpano restaurant during the second half of fiscal 2000.
ITALIANNI'S. Italianni's restaurants serve large portions of both
traditional Italian fare and specialty signature dishes such as Salmon Oreganato
and Veal Saltimbocca. Italianni's provides authentic Italian cuisine in an
inviting old world atmosphere that encourages guests to share the dining
experience with friends and family. A full-service bar is available at each
Italianni's restaurant. Our Italianni's restaurants range in size from 6,000 to
8,000 square feet. Entree selections at domestic Italianni's restaurants range
in price from $6.95 to $16.95. There are currently five domestic and 15
international Italianni's restaurants, of which 16 are operated by franchisees,
including all of the international locations. We plan to grow this concept
exclusively in international markets through our franchisees.
STAR CANYON AND AQUAKNOX. Renowned chef Stephan Pyles created our
award-winning Star Canyon and AquaKnox concepts. Star Canyon features recipes
representing the many facets of the Lone Star State served in a sophisticated
Texas ranch style restaurant with cowboy accents. AquaKnox features a
contemporary selection of fresh seafood from around the globe in an atmosphere
displaying Asian influences and water themes. Entree selections at Star Canyon
and AquaKnox range in price from $18.00 to $28.00. We currently own and operate
two Star Canyon restaurants. The first originally opened in May 1994 in Dallas,
Texas and was acquired by us in March 1998. A second location opened in
May 1999 at The Venetian Hotel-Resort-Casino in Las Vegas, Nevada and we expect
to open a third location in Austin, Texas in the second half of 2000. We
currently own and operate one AquaKnox which originally opened in November 1997
in Dallas, Texas and was acquired by us in March 1998.
EXPANSION STRATEGY AND SITE SELECTION
We intend to concentrate our growth on the T.G.I. Friday's brand. We
anticipate that the expansion of our T.G.I. Friday's system will occur through
company owned or operated and franchisee owned restaurants domestically and
primarily through franchisee owned restaurants internationally. Our long-term
objective is to expand our restaurant concepts by opening additional units in
strategically desirable markets and developing new concepts for corporate and
franchise development, both domestically and internationally. The development
and expansion of our additional concepts will allow us to increase our
penetration of existing markets and will be based on our examination of each
concept's economic performance and long-term growth potential.
We believe that a restaurant's location is critically important to its
success and we devote significant effort to the site selection process. Our site
selection criteria focus on the demographics of the residents in the market area
of the location, traffic patterns, the size of the location and its proximity to
shopping and other centers of population concentration. Senior management
evaluates each location prior to opening a company restaurant or consenting to a
location for franchise development. We have identified all locations for company
owned or operated restaurants we plan to open during fiscal 2000. We have
completed lease negotiations and have signed operating leases for 25 of the 34
company operated restaurants that we plan to open during the remainder of 2000.
We are engaged in active lease negotiations for the remaining 9 sites and
anticipate signing lease agreements for all remaining fiscal 2000 openings by
the end of July 2000.
The variety of our restaurant concepts and unit prototypes gives us the
flexibility to take advantage of the opportunities presented by both traditional
locations and nontraditional locations, such as hotels, airports, food courts,
sports stadiums, theaters, theme parks and other family entertainment centers.
We anticipate that most of our future company owned or operated restaurants will
be constructed on leased property.
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The following table illustrates our restaurant openings to date during
fiscal 2000 and our current planned openings for the remainder fiscal 2000. Our
projections regarding planned openings by franchisees are based on information
provided to us by our franchisees.
<TABLE>
<CAPTION>
PLANNED OPENINGS FOR
YEAR TO DATE FISCAL 2000 OPENINGS REMAINDER OF FISCAL 2000
--------------------------------- -----------------------------
COMPANY OWNED COMPANY OWNED
OR OPERATED FRANCHISED OR OPERATED FRANCHISED
---------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
T.G.I. Friday's
Domestic.......................... 2 8 27 17
International..................... - 5 - 18
Other T.G.I. Friday's system
concepts
Domestic.......................... - - 1 -
International..................... - 1 - -
Cafe
Domestic.......................... - - 4 -
International..................... - - - -
Dinner houses
Domestic.......................... 1 - 2 -
International..................... - - - 5
-- -- -- --
TOTALS.............................. 3 14 34 40
== == == ==
</TABLE>
OPERATIONS AND MANAGEMENT
Our philosophy is to maintain and operate each concept in order to ensure
that the culture, recruitment, support services, training programs and unique
operating environments are preserved while relying on the benefits and
infrastructure of our corporate organization. We emphasize the quality and
service of each restaurant while maintaining the independent character of each
concept. These factors are critical to the long-term success of our concepts.
RESTAURANT MANAGEMENT. Each of our T.G.I. Friday's restaurants is led by a
management team including a general manager, a kitchen manager, and two or more
additional managers. T.G.I. Friday's markets are divided into regions and each
region is staffed by a Vice President of Operations, Directors of Operations, a
Director of Human Resources, Director of Marketing, a Facilities Manager and
Regional Managers. We have divided the United States into five regions and the
international territories into four regions. We provide restaurant managers with
a competitive performance-based compensation program based on unit-level sales
and profit, as well as guest and employee satisfaction as measured by Gallup
survey results.
RECRUITING AND TRAINING. We actively recruit qualified employees who share
our commitment to providing superior guest service and we develop our staff to
promote qualified employees into management positions within the company. We
provide an extensive training program for all restaurant managers. The training
program emphasizes adherence to company standards and covers all aspects of
managing a restaurant, including kitchen and bar management, food and beverage
preparation, inventory control, purchasing, labor management, training and
administrative procedures. The incentive plans and benefit packages we offer to
our management level employees encourage achievement of performance objectives
and foster a sense of loyalty and a personal commitment to providing high
quality guest service.
OPERATIONAL CONTROL SYSTEMS. Restaurant management and operating results
are monitored through daily reporting and frequent visits from our divisional
vice presidents and multi-unit managers. We
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utilize an integrated information system to manage the flow of information
within each of our restaurants and between restaurants and our corporate office.
This system includes a point-of-sale, or POS, local area network that helps
facilitate restaurant operations by recording sales transactions and printing
orders in the appropriate locations within the restaurant. Additionally, we
utilize the POS system to authorize and transmit credit card transactions,
record employee time clock information, schedule labor, assist in cost analysis
and produce a variety of management reports. Select information that is captured
from the POS system is transmitted to our corporate office on a daily basis,
which enables senior management to continually monitor operating results.
We use software and hardware developed by vendors experienced in the
restaurant industry. These systems are integrated to provide senior management
with daily and weekly sales and cost analysis, monthly detailed profit
statements and comparisons between actual and budgeted operating results.
MARKETING AND PROMOTION
To attract new guests and increase visits by our existing guests, we engage
national advertising agencies to create, develop and place our advertising in a
broad range of media including television, radio and print with national,
regional and local coverage. We focus our advertising primarily on the
introduction of new menu items. We and our domestic franchisees contribute to a
national advertising fund for maintaining, directly administering and preparing
standardized advertising and promotional activities and spend additional amounts
on local advertising. The restaurants in our T.G.I. Friday's system participate
in the Friday's Gold Points frequency program. This program, administered by
Gold Points Corporation, a wholly-owned subsidiary of Carlson Companies,
encourages and rewards guest loyalty and includes Carlson Companies' other
retail brands, such as Radisson Hotels and Country Inns & Suites, as well as
other consumer businesses. We have nearly five million members in Friday's Gold
Points and its predecessor program, Frequent Friday's.
PURCHASING
Our ability to maintain consistent product quality throughout each of our
restaurant concepts depends on the procurement of food and related items from
reliable sources. Provisions, a division of Carlson Companies, performs
centralized purchasing services for all of our company owned or operated and
franchised restaurants in our T.G.I. Friday's system and for Carlson Companies'
other retail businesses. Working with Provisions, we continually research and
evaluate various ingredients and products in an effort to maintain the highest
quality products and to be responsive to changing consumer tastes. To maximize
purchasing efficiencies and to provide for the freshest ingredients for our menu
items, each restaurant's management determines the quantities of food and
supplies required. To obtain the benefits of bulk purchasing, each of our
restaurants orders items primarily through one of the three independent national
distribution companies that obtains products on terms negotiated by Provisions.
We believe that all essential food and beverage products are available from
qualified suppliers at competitive prices should an alternative source be
required.
In order to present a uniform appearance of our T.G.I. Friday's restaurants
and consistent preparation of our menu items, we coordinate purchasing of
kitchen equipment, furniture and decorative memorabilia through selected
suppliers. Our franchisees are subject to standards and specifications for
establishing and operating their restaurants. The franchisees must use approved
suppliers when purchasing food and beverage products, kitchen equipment,
furniture and decorative memorabilia.
COMPETITION
The restaurant industry is highly competitive. There are a substantial
number of restaurant operations that compete directly and indirectly with us,
some of which may have greater financial and
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other resources than we do and may be better established in markets where we may
open future locations. Changes in consumer tastes, economic conditions,
demographic trends and the location and number of, and type of food served by,
competing restaurants could adversely affect our business as could the
unavailability of experienced management and hourly employees.
EMPLOYEES
At December 27, 1999, we employed approximately 20,700 persons, of whom
approximately 500 were corporate personnel, approximately 1,200 were restaurant
managers or management trainees and approximately 19,000 were employed in
non-management restaurant positions. We believe that our working conditions and
compensation packages are competitive and consider relations with our employees
to be good. None of our employees are covered by any collective bargaining
agreements and we have never experienced an organized work stoppage or strike.
PROPERTIES
We currently own or have a joint venture interest in 201 restaurants. Of
these restaurants, we lease the land and building for 193 sites and own the land
and building for eight sites. Our leases generally have an initial term of ten
or twenty years, with several renewal terms of four to five years, and generally
provide for a fixed rental plus a percentage rental based on gross sales. Our
headquarters are located in approximately 110,000 square feet of leased space in
Dallas, Texas.
INTELLECTUAL PROPERTY
Our registered servicemarks and logos include: "T.G.I. Friday's,"
"Friday's," "T.G.I. Friday's & Design," "Friday's American Bar," "Friday's
American Bar & Shield Design," "Friday's American Bar & Mirror Design" and
"Front Row Sports Grill." In addition to being registered with the United States
Patent and Trademark Office, several of these servicemarks and logos have also
been registered in foreign countries. As of December 27, 1999, we had registered
or pending servicemarks and logos in approximately 124 countries. We actively
use and pursue registration of our servicemarks and other proprietary rights and
we believe that they have significant value and are important to the marketing
of our restaurant concepts. We will continue to vigorously protect our
proprietary rights. However, we cannot predict whether steps taken by us to
protect our proprietary rights will be adequate to prevent misappropriation of
these rights or the use by others of restaurant features based upon, or
otherwise similar to, our concepts. It may be difficult for us to prevent others
from copying elements of our concepts and any litigation to enforce our rights
will likely involve significant costs. We license the Italianni's mark for its
use in connection with our restaurants in the United States and pursue
international registrations of the mark in our own name.
GOVERNMENT REGULATIONS
Our restaurants are subject to regulation by federal agencies and to
licensing and regulation by state and local health, sanitation, building,
zoning, safety, fire and other departments relating to the development and
operation of restaurants. These regulations include matters relating to
environmental, building construction, zoning requirements and the preparation
and sale of food and alcoholic beverages. Our facilities are licensed and
subject to regulation under state and local fire, health and safety codes.
The development and construction of additional restaurants will be subject
to compliance with applicable zoning, land use and environmental regulations.
There can be no assurance that we will be able to obtain necessary licenses or
other approvals on a cost-effective and timely basis in order to construct and
develop restaurants in the future. Various federal and state labor laws govern
our
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operations and our relationship with our employees, including minimum wage,
overtime, working conditions, fringe benefit and citizenship requirements.
Approximately 22% of total sales in domestic company owned or operated
restaurants in the T.G.I. Friday's system are attributable to the sale of
alcoholic beverages. We are required to comply with the alcohol licensing
requirements of the federal government, states and municipalities where our
restaurants are located. Alcoholic beverage control regulations require
applications to state authorities and, in some locations, county and municipal
authorities for a license and permit to sell alcoholic beverages. Typically,
licenses must be renewed annually and may be revoked or suspended for cause at
any time. Alcoholic beverage control regulations relate to numerous aspects of
the daily operations of the restaurants, including minimum age of guests and
employees, hours of operation, advertising, wholesale purchasing, inventory
control and handling, storage and dispensing of alcoholic beverages. Failure to
comply with federal, state or local regulations could cause our licenses to be
revoked or force us to terminate the sale of alcoholic beverages at one or more
of our restaurants.
We are subject to state "dram shop" laws and regulations, which generally
provide that anyone injured by an intoxicated person may seek to recover damages
from an establishment that wrongfully served alcoholic beverages to the
intoxicated person. We require our restaurant staff to go through training
regarding these laws and regulations. While we carry liquor liability coverage
as part of our existing comprehensive general liability insurance, there can be
no assurance that we will not be subject to a judgment in excess of our
insurance coverage or that we will be able to obtain or continue to maintain
liquor liability insurance coverage at reasonable costs, if at all.
The federal Americans with Disability Act prohibits discrimination on the
basis of disability in public accommodations and employment. We are required to
comply with the Americans with Disabilities Act and regulations relating to
accommodating the needs of the disabled in connection with the construction of
new facilities and with significant renovations of existing facilities.
The Federal Clean Air Act and similar state laws require state and local
areas to meet national air quality standards limiting emissions of ozone, carbon
monoxide and particulate matters, including caps on emissions from commercial
food preparation. Some areas have also adopted or are considering proposals that
would regulate indoor air quality. Many states, counties, cities and
municipalities have enacted laws governing smoking in bars and restaurants.
LEGAL PROCEEDINGS
From time to time, we are a defendant in litigation arising in the ordinary
course of business, including claims resulting from "slip and fall" accidents,
"dram shop" lawsuits, claims under federal and state laws governing access to
public accommodations, employment-related claims and claims from guests alleging
illness, injury or other food quality, health or operational concerns. To date,
none of such litigation, some of which is covered by insurance, has had a
material effect on us.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is certain information concerning our executive officers and
directors:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ---- -------- ---------------------------------------------------------------------
<S> <C> <C>
Curtis C. Nelson........... 36 Chairman of the Board
Wallace B. Doolin.......... 53 President, Chief Executive Officer and Director
Jeff D. Warne.............. 39 Vice President and Chief Financial Officer
Stephen M. King............ 42 Chief Operating Officer-T.G.I. Friday's Domestic Business
Richard T. Snead........... 48 Chief Operating Officer-International Business
John F. Gilbert............ 43 Senior Vice President-Marketing
Royce A. Ring.............. 49 Senior Vice President-Emerging Brands
Charles A. Ehmke, Jr....... 38 Vice President-Information Technology
Richard L. Richardson...... 40 Vice President-Development
Leslie Sharman............. 44 Vice President-Legal, General Counsel and Secretary
Anne Varano................ 41 Vice President-Human Resources and Operations Services
Ralph W. Beha.............. 49 Director
Eric A. Danziger........... 47 Director
Edwin C. Gage.............. 58 Director
Martyn R. Redgrave......... 47 Director
</TABLE>
CURTIS C. NELSON has served as Chairman of the Board since August 1999 and
as a director since June 1998. Mr. Nelson has been President of Carlson
Hospitality Group since January 1997, prior to which time he had served as
Executive Vice President and Chief Operating Officer since August 1995. Carlson
Hospitality Group is a wholly-owned subsidiary of Carlson Companies and our
direct parent corporation. From March 1993 to August 1995, Mr. Nelson held
various positions with Country Hospitality Worldwide, which operated a chain of
hotels and family dining restaurants, serving most recently as President and
Chief Executive Officer. From November 1989 until March 1993, Mr. Nelson held
various management and executive positions with Radisson Hotels International, a
Carlson Companies affiliate. Mr. Nelson is a director of DC International, a
provider of architectural and investment services and a franchisee and manager
of Radisson Hotels. Mr. Nelson also serves as a member of the Travel Business
Roundtable, a coalition of 70 chief executive officers representing the travel
and tourism industry, and the Alumni Board for the Carlson School of Management.
WALLACE B. DOOLIN has served as President, Chief Executive Officer and a
director since January 1994. From January 1992 to January 1994, he served as our
Executive Vice President of Development. Mr. Doolin has over 29 years of
experience in the restaurant industry including as president of Applebee's
Neighborhood Grill & Bar, Senior Vice President of Acquisitions and Concept
Development of the W.R. Grace Restaurant Division, President and Chief Executive
Officer of Flakey Jake's, director of operations of Steak and Ale Restaurants
and an independent restaurant proprietor. Mr. Doolin is active in many food
service industry groups and serves as a board member and member of the executive
committee of the National Restaurant Association, a director of the Employment
Policies Institute, chairperson for the COEX 2000 and fundraiser and volunteer
for two anti-hunger associations, Share Our Strength and The North Texas
Foodbank.
JEFF D. WARNE has served as Vice President and Chief Financial Officer since
December 1998. Prior to joining Carlson Restaurants, he worked for Carlson
Companies from December 1990 to December 1998, where he held the position of
Vice President of Business Planning from June 1996 to December 1998, and
Director of Business Planning from October 1994 to June 1996. He also worked for
the Coopers & Lybrand accounting firm from June 1984 to December 1990, most
recently as an
38
<PAGE>
audit manager, and is a member of the American Institute of Certified Public
Accountants and a Chartered Financial Analyst.
STEPHEN M. KING has served as Chief Operating Officer-T.G.I. Friday's
Domestic Business since January 1998. He joined Carlson Restaurants in
June 1984 as a financial analyst and has held various positions in the finance
department, as well as the position of Vice President of Development. Prior to
his current position, he was Executive Vice President of Operations from
July 1995 to January 1998. Mr. King served as Vice President of Finance and
Chief Financial Officer from February 1989 to July 1995.
RICHARD T. SNEAD has served as Chief Operating Officer-International
Business since January 1998. He joined Carlson Restaurants in April 1997 as
Executive Vice President. Prior to joining Carlson Restaurants, Mr. Snead was
Senior Vice President of Store Operations and Retail Development at Casual
Corner Group, a retail apparel company, from February 1996 to April 1997. Before
joining Casual Corner, Mr. Snead served as President of New Business Development
and head of the International Business of Lenscrafters, a retail optical
company, from December 1993 to January 1996. Mr. Snead also has over 14 years of
experience in the restaurant industry with Burger King, serving most recently as
President of Burger King-International, and over 10 years of experience in
international franchised restaurant operations.
JOHN F. GILBERT has served as Senior Vice President-Marketing since
January 1998. He joined Carlson Restaurants in March 1996 as Vice President of
Marketing. Prior to joining Carlson Restaurants, Mr. Gilbert was Vice President
of Marketing for General Cinema Theaters, a national movie theater company, from
June 1994 to February 1996, where he was responsible for consumer marketing
activities and the development of the non-traditional food business. He also
served as Senior Director of Marketing for KFC/PepsiCo from January 1990 through
June 1994.
ROYCE A. RING has served as Senior Vice President-Emerging Brands since
January 1998. He joined Carlson Restaurants as Vice President of Concept
Development in July 1997. Our emerging brands currently consist of our cafe and
dinner house concepts. Prior to joining Carlson Restaurants, Mr. Ring was Vice
President and a partner at Restaurant Development Group from September 1995
until July 1997 and was responsible for corporate development, marketing,
profitability and day-to-day operations of fifteen separately branded
full-service restaurant concepts in downtown Chicago.
CHARLES A. EHMKE, JR. has served as Vice President-Information Technology
since joining Carlson Restaurants in February 1998. Prior to joining Carlson
Restaurants, he served as Vice President of International Systems for Tricon
Global Restaurants from March 1991 through February 1998, where he was
responsible for creating and implementing strategic information technology plans
for the entire international organization, which encompassed three restaurant
brands and over 10,000 restaurants.
RICHARD L. RICHARDSON has served as Vice President-Development since
March 1999, after serving as one of our Vice Presidents of Operations since
February 1997. Previously, he held various operations positions within Carlson
Restaurants from October 1995 to February 1997. From July 1993 to July 1995,
Mr. Richardson was Vice President of Operations of the Florida Restaurant Group,
a nine unit franchisee of Black-Eyed Pea Restaurants. From July 1982 to July
1993, Mr. Richardson was the Vice President of Operations of Black-Eyed Pea
Restaurants.
LESLIE SHARMAN has served as Vice President-Legal, General Counsel and
Secretary since October 1995. Prior to joining Carlson Restaurants, Ms. Sharman
was with Burger King from October 1987 to October 1995, where she held the
position of Vice President and Assistant General Counsel from October 1991
through October 1995. Ms. Sharman is active in the restaurant industry, with
memberships in Roundtable for Women in Foodservice and MultiCultural Foodservice
and Hospitality Alliance. She is also on the Executive Committee and Board of
the Women's Foodservice Forum.
39
<PAGE>
ANNE VARANO has held several human resources management positions since
joining Carlson Restaurants in November 1995 and has served as Vice
President-Human Resources and Operations Services since January 2000. Prior to
joining Carlson Restaurants, Ms. Varano held various compensation and human
resources positions at other retail companies. She is a Certified Compensation
Professional from the American Compensation Association and recently received
her Senior Certification with the Society of Human Resource Management. She is
also active in the American Compensation Association and the Chain Restaurant
Compensation Association.
RALPH W. BEHA has served as a director since August 1999. Mr. Beha has been
Vice President and Corporate Secretary of Carlson Companies since January 2000
and previously served as Associate General Counsel and Secretary of Carlson
Companies from September 1997 to January 2000. From July 1992 to March 1997,
Mr. Beha served as General Counsel of Control Data Systems, a global systems
integration company. From 1982 until July 1992, he held various positions in the
Legal Department at Control Data Corporation.
ERIC A. DANZIGER has served as a director since April 2000. Mr. Danziger has
been the President and Chief Operating Officer of Carlson Hotels Worldwide since
February 1998. From June 1996 to February 1998, Mr. Danziger served as President
and Chief Executive Officer of Starwood Hotels and Resorts. From September 1990
to May 1996, he was President of Wyndham Hotels and Resorts. Prior to that, he
held various management positions in other hotel companies. Mr. Danziger is
active in the hotel industry, with memberships in the American Hotel and Motel
Association and the Urban Land Institute. He also serves on the board of
trustees for the American Hotel Foundation and is a member of the advisory board
for the Northern Arizona University School of Hotel and Restaurant Management.
EDWIN C. GAGE has served as a director since August 1999. Mr. Gage has been
the Chairman and Chief Executive Officer of Gage Marketing Group, an integrated
marketing services company, since 1992. From 1983 to 1992, Mr. Gage held various
positions at Carlson Companies, including President and Chief Executive Officer.
Mr. Gage also serves as a director of Carlson Companies, SuperValu, AHL Services
and Imaginet.
MARTYN R. REDGRAVE has served as a director since August 1999. Mr. Redgrave
has been the Executive Vice President and Chief Financial Officer of Carlson
Companies since February 1994. Prior to joining Carlson Companies, Mr. Redgrave
was with PepsiCo, a beverage, restaurant and snack foods company, for over 14
years, serving in a variety of executive and general management positions for
PepsiCo's corporate offices and subsidiaries, including Pizza Hut, Kentucky
Fried Chicken and Taco Bell. Most recently he served as the Senior Vice
President of Finance and Worldwide Chief Financial Officer of Kentucky Fried
Chicken from 1990 to 1994. Prior to joining PepsiCo, Mr. Redgrave was employed
by Arthur Andersen and Company for six years in various positions, including
Audit Manager.
BOARD OF DIRECTORS; COMMITTEES
Our board of directors currently consists of six members. We intend to
appoint three independent directors, prior to or upon completion of this
offering. In addition, prior to or upon completion of this offering, we will
establish an audit committee and a compensation committee and we may establish
additional committees of the board. All of the members of the audit and
compensation committees will be independent directors.
The audit committee of the board will be responsible for recommending to the
board the appointment of our independent auditors, analyzing the reports and
recommendations of the auditors and reviewing internal audit procedures and
controls.
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<PAGE>
The compensation committee of the board will be responsible for reviewing
and recommending the compensation structure for our officers and directors,
including salaries, participation in incentive compensation and benefit plans,
stock option plans and other forms of compensation.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to provisions of the Delaware General Corporation Law, our current
Certificate of Incorporation and Bylaws provide, and our Amended and Restated
Certificate of Incorporation and Restated Bylaws will provide, that our
directors shall not be personally liable for monetary damages to us or our
stockholders for a breach of fiduciary duty to the full extent that the law
permits the limitation or elimination of the liability of directors.
COMPENSATION OF DIRECTORS
Our directors receive an annual retainer of $15,000 for their service on the
board. The directors are paid $1,000 for each board or committee meeting they
attend and they are reimbursed for certain reasonable expenses incurred to
attend board and committee meetings. Non-employee directors who are also our
employees or employees of Carlson Companies receive no remuneration for services
as members of the board of directors or any board committee. Directors receive
an annual grant of an option to purchase 8,500 shares of our Class A common
stock each year that they serve on the board. See "Management-Incentive
Compensation Plans" for a discussion of director eligibility.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We have not yet established a compensation committee of our board of
directors. Prior to or upon completion of this offering, we will establish a
compensation committee. Decisions relating to our executive compensation are
currently made by our board of directors. Wallace B. Doolin is one of our
executive officers and a member of the board of directors. None of our executive
officers serves as a member of the board of directors or compensation committee
of any entity which has one or more than one executive officers serving as a
member of our board of directors or compensation committee.
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<PAGE>
EXECUTIVE COMPENSATION
The following table contains information concerning compensation for fiscal
1999 earned by our President and Chief Executive Officer and the four other most
highly compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------ LONG-TERM
ALL OTHER COMPENSATION
ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY(1) BONUS(2) COMPENSATION(3) COMPENSATION(4)
- --------------------------- --------- --------- --------------- ---------------
<S> <C> <C> <C> <C>
Wallace B. Doolin
President, Chief Executive Officer and
Director.................................. $482,018(5) $364,350 $ 0 $18,954
Jeff D. Warne
Vice President and Chief Financial
Officer................................... 194,083 136,291(6) 39,355 73,360
Stephen M. King
Chief Operating Officer-T.G.I. Friday's
Domestic Business......................... 285,050 197,018 0 17,998
Richard T. Snead
Chief Operating Officer-International
Business.................................. 259,615 162,088 0 7,500
John F. Gilbert
Senior Vice President-Marketing........... 198,240 88,876(6) 0 14,624
</TABLE>
- ------------------------------
(1) Includes amounts earned in fiscal 1999 but deferred under our 401(k) plan
($4,800 for each of the named executive officers) and deferred compensation
plan ($21,909 for Mr. Doolin, $25,888 for Mr. Warne, $19,836 for Mr. King
and $24,008 for Mr. Gilbert).
(2) Amounts paid to the named executive officers include bonuses granted
according to the Carlson Companies Annual Bonus Plan, which defines
performance-based goals for each of the participants. Fiscal 1999
performance goals were tied to financial factors, such as operating income
before tax and income after capital charge, and other objectives, such as
Year 2000 remediation efforts and strategic goals. Also includes $132,711
paid to Mr. King based on performance of the TGI Friday's brand restaurants
and $95,823 paid to Mr. Snead based on performance of our international
restaurants under their individual bonus arrangements. Also includes
discretionary bonuses of $6,378 paid to Mr. Warne, $7,599 paid to Mr. Snead
and $7,770 paid to Mr. Gilbert for performance and achievements beyond those
compensated under the general bonus agreements.
(3) Includes amount reimbursed to Mr. Warne for the payment of taxes incurred as
a result of the reimbursement of his moving expenses.
(4) All Other Compensation includes matching credits we provided under our
401(k) plan ($2,400 for each of the named executive officers) and under our
nonqualified deferred compensation plan ($8,754 for Mr. Doolin, $7,922 for
Mr. Warne, $10,498 for Mr. King and $7,124 for Mr. Gilbert). Also includes
amounts we paid as a car allowance ($7,800 for Mr. Doolin and $5,100 for
each other named executive officer). The amount listed for Mr. Warne also
includes $57,938 we paid to him for the reimbursement of moving expenses.
(5) Includes $43,385 of additional salary earned in fiscal 1999 that was
credited to Mr. Doolin's account under the Deferred Compensation Agreement
between TGI Friday's Inc. and Mr. Doolin. Under the agreement, we
automatically credit Mr. Doolin's account with an amount equal to 10% of his
base salary, before any pre-tax reductions. Additionally, the agreement
permits Mr. Doolin to defer up to 25% of his salary and all of his bonus.
(6) Includes amounts earned in fiscal 1999 but deferred under our deferred
compensation plan ($32,478 for Mr. Warne and $14,139 for Mr. Gilbert).
INCENTIVE COMPENSATION PLANS
CARLSON LEGACY PLAN
Our executives previously participated in Carlson Companies' Carlson Legacy
Plan. The plan is directed toward rewarding key executives of Carlson Companies
who have a major impact on Carlson Companies' performance. The selection of the
participants and the size of the grant are determined by the sole discretion of
the administrative committees. Participants are granted units, which are not
related to any underlying stock and are used only for bookkeeping purposes to
measure the amounts owed to the participant under the plan. Approximately
one-half of the units granted to each of the named executive officers are tied
to our performance and one-half are tied to the performance of
42
<PAGE>
Carlson Companies. The Management Compensation Committee of Carlson Companies
determines the value of the units each year based on formulas tied to the
performance of the relevant business units.
Upon exercise, the participant receives an amount equal to the difference
between the value of the exercised units on the date of exercise and their value
on the date of the grant. The units are considered vested in full at the end of
the third year after grant, at which time they are no longer subject to
forfeiture upon any type of termination of the participant's employment. The
units awarded may be exercised as to one-third of the units at the end of the
third year following the grant, as to two-thirds of the units at the end of the
fourth year following the grant and as to all of the units at the end of the
fifth year following the grant. Any units that have not been exercised at the
end of the sixth year must be paid out or deferred into the deferred
compensation plan.
All of our executives have elected to participate in our stock option plan
and, therefore, will no longer receive awards under the Carlson Legacy Plan.
Participants with vested units have elected to convert those units to either
cash or deferred compensation and will receive this conversion amount on or
about July 1, 2000. Participants will also receive stock options under our Stock
Option Plan, which is described below, to replace their vested and unvested
units.
In addition, participants with vested units, which are units granted prior
to 1998, will receive non-qualified stock options under our stock incentive plan
with an exercise price equal to the initial public offering price. The number of
non-qualified stock options granted to participants upon conversion of their
vested units will be determined by multiplying the number of vested units times
their current value. The product is then divided by the initial public offering
price, which will also be the exercise price, to determine the number of shares
that will be subject to the stock options. The stock options that replace the
units granted in 1995 will become exercisable in April 2001 and will expire in
December 2001. The stock options that replace the units granted in 1996 will
become exercisable in April 2001 and will expire in December 2002. The stock
options that replace the units granted in 1997 will become exercisable in
April 2002 and will expire in December 2002. If a participant's employment is
terminated due to retirement, death or disability, all of the options granted in
place of vested or unvested units will become exercisable and will remain
exercisable for two years following retirement or one year following death or
disability, or until their regular expiration date, if earlier. If a
participant's employment is terminated for any other reason, voluntary or
involuntary, all of the options that replace units granted in 1995, 1996 or 1997
will become exercisable for 90 days beyond the termination date.
Participants with unvested units, which are units granted during or after
1998, will receive non-qualified stock options with an exercise price
representing a discount from the initial public offering price under our stock
incentive plan. The number of non-qualified stock options granted to
participants upon conversion of their unvested units will be determined by
multiplying the number of unvested units times their current value. The product
is then divided by the initial public offering price to determine the number of
shares that will be subject to the stock options. The exercise price of the
options granted in place of unvested units will be discounted by an amount equal
to the appreciated value of the units. The aggregate appreciation of the
unvested units converted into stock options will be divided by the number of
replacement options granted to determine the per option discount. The discount
is then subtracted from the offering price to determine the exercise price. The
stock options that replace units granted in 1998 will become exercisable in
April 2002 and will expire in December 2003. The stock options that replace
units granted in 1999 will become exercisable in April 2002 and will expire in
December 2004. If a participant's employment is terminated involuntarily, all of
the options granted in place of unvested units will be exercisable for 90 days
following the termination. If a participant's employment is terminated
voluntarily before the options have become exercisable, all of the options will
be forfeited. If, however, a participant's employment is terminated voluntarily
when the options are exercisable, the options will remain exercisable for 90
days following the termination.
43
<PAGE>
The following table provides information concerning units granted to the
five named executive officers during fiscal 1999 under the Carlson Legacy Plan.
Each unit represents the right to receive an amount equal to the difference
between the value of the unit on the date of exercise, as determined by Carlson
Companies' compensation committee, less the value of the unit on the date of
grant.
LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR
OTHER PERIOD UNTIL ESTIMATED FUTURE PAYOUTS
NUMBER OF MATURATION OR UNDER NON-STOCK PRICE-BASED PLANS
NAME UNITS PAYOUT(1) MAXIMUM(2)
- ---- --------- ------------------ ---------------------------------
<S> <C> <C> <C>
Wallace B. Doolin................... 27,998 Three years 74,131
Jeff D. Warne....................... 7,079 Three years 19,241
Stephen M. King..................... 13,922 Three years 36,862
Richard T. Snead.................... 13,922 Three years 36,862
John F. Gilbert..................... 8,172 Three years 21,637
</TABLE>
- ------------------------
(1) The units previously vested after three years. However, upon completion of
this offering, the units will be converted into stock options under our
Stock Option Plan that will vest in two years and have a five year term.
(2) These payout amounts state the number of stock options into which the units
granted in fiscal 1999 will be converted upon consummation of this offering
based on an assumed initial public offering price of $14.00 per share. The
stock options issued upon conversion of the units will have an exercise
price of $12.78 per share, except for the stock options issued to Mr. Warne
upon conversion of his units, which will have an exercise price of $13.17
per share.
CARLSON RESTAURANTS WORLDWIDE INC. STOCK OPTION PLAN
It is anticipated that, prior to the consummation of this offering, our
board of directors and Carlson Companies, as our sole stockholder, will approve,
effective on the consummation of this offering, the Carlson Restaurants
Worldwide Inc. Stock Option Plan. A total of 3,000,000 shares of Class A common
stock will be reserved for issuance under the stock option plan. The stock
option plan authorizes the grant of options to purchase common stock intended to
qualify as incentive stock options, as defined in Section 422 of the Internal
Revenue Code of 1986, and the grant of options that do not so qualify. The
exercise price of options granted under the stock option plan must be at least
equal to the fair market value of the Class A common stock on the date of grant,
provided that grants of nonqualified stock options made pursuant to conversion
of awards under the Carlson Legacy Plan may be at less than fair market value.
The exercise price of incentive options granted to an optionee who owns stock
possessing more than 10% of the voting power of our outstanding capital stock
must be at least equal to 110% of the fair market value of the common stock on
the date of grant, and such optionee must exercise his or her option within five
years from the date of the grant of such option. The stock option plan provides,
that, upon a merger, consolidation or other fundamental change, all outstanding
plan options and other awards may be substituted with similar options or awards
of the corporation surviving any such merger or consolidation, or such options
or awards may be made immediately exercisable in full.
The stock option plan will be administered by our compensation committee. By
the terms of the stock option plan, the compensation committee selects the
individuals to whom options will be granted and determines the option exercise
price and other terms of each award, subject to the provisions of the stock
option plan. Incentive stock options may be granted under the stock incentive
plan to our key employees and the key employees of our affiliates within the
meaning of the Internal Revenue Code, including officers and directors who are
also employees. Nonqualified options may be granted under
44
<PAGE>
the stock incentive plan to officers and other employees and to directors and
other individuals providing services to us, whether or not they are our
employees.
STOCK OPTION GRANTS AS OF THE OFFERING
Immediately upon completion of the offering, our named executive officers
will hold the following options to purchase our Class A common stock under our
Stock Option Plan:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN OR BASE EXPIRATION ----------------------------------
NAME GRANTED(1) FISCAL YEAR PRICE(2) DATE 0%(3) 5%(3) 10%(3)
- ---- ---------- ------------ -------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Wallace B. Doolin.... 584,248 28.2% (4) (4) $158,568 $2,215,171 $4,981,341
Jeff D. Warne........ 87,584 4.2 (4) (4) 23,472 529,696 1,259,399
Stephen M. King...... 214,975 10.4 (4) (4) 78,847 1,087,018 2,502,763
Richard T. Snead..... 146,155 7.0 (4) (4) 78,847 879,712 2,018,461
John F. Gilbert...... 109,723 5.3 (4) (4) 46,283 55,952 1,275,427
</TABLE>
- ------------------------
(1) Includes options issued upon conversion of units and additional options that
will be granted as of the date the offering is completed.
(2) Calculated based upon an assumed initial public offering price of $14.00 per
share.
(3) The 5% and 10% rates of appreciation were set by the Securities and Exchange
Commission and are not intended to forecast future appreciation, if any, of
our Class A common stock.
(4) The number of securities underlying options granted include options with the
following exercise or base prices and expiration dates:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES EXERCISE OR EXPIRATION
NAME UNDERLYING OPTIONS GRANTED BASE PRICE DATE
- ---- -------------------------- ----------- ----------
<S> <C> <C> <C>
Wallace B. Doolin ............................... 109,620 $14.00 12/31/01
210,920 14.00 12/31/02
55,843 12.78 12/31/03
74,131 12.78 12/31/04
133,734 14.00 4/30/10
Jeff D. Warne ................................... 14,031 14.00 12/31/02
9,038 13.17 12/31/03
19,241 13.17 12/31/04
45,274 14.00 4/30/10
Stephen M. King ................................. 17,630 14.00 12/31/01
52,227 14.00 12/31/02
27,767 12.78 12/31/03
36,862 12.78 12/31/04
80,489 14.00 4/30/10
Richard T. Snead ................................ 15,024 14.00 12/31/02
27,767 12.78 12/31/03
36,862 12.78 12/31/04
66,502 14.00 4/30/10
John F. Gilbert ................................. 32,751 14.00 12/31/02
16,300 12.78 12/31/03
21,637 12.78 12/31/04
39,035 14.00 4/30/10
</TABLE>
45
<PAGE>
DEFERRED COMPENSATION PLANS
OUR 401(K) PLAN
All of our employees, including our executive officers, may participate in
our 401(k) plan. Participants may elect to contribute between one and 15% of
their basic salary under the plan each year, up to the annual federal limit
established by the Internal Revenue Service. Each year we make a matching
contribution to each participant's account equal to 50% of the participant's
contribution up to a maximum of six percent of the participant's base salary. We
may also make an additional discretionary matching contribution of up to a
maximum of 50% of the participant's contribution for the year, which may equal
between six and ten percent of the participant's base salary. Participants are
fully vested in their own compensation and our previous long-term incentive plan
payout contributions when the amounts are credited to their account. In addition
to other events that may accelerate vesting, a participant becomes fully vested
in the matching contribution made by the company upon the completion of the
employee's fourth year of service.
OUR DEFERRED COMPENSATION PLAN
We offer our executive officers and other highly compensated employees an
opportunity to defer amounts of their salary, bonus and long-term incentive plan
compensation under our deferred compensation plan. This is a nonqualified plan
that is only available for participants who have contributed the maximum amount
permitted under our 401(k) plan. Each year we make a contribution to the
participant's account based on the salary and/or bonus reduction agreement with
the participant for that year and an additional matching contribution equal to
50% of the participant's contribution up to a maximum of six percent of the
participant's base salary less the maximum permitted salary reduction under the
401(k) plan. Furthermore, we may make an additional discretionary matching
contribution equal to a maximum of 50% of the participant's contribution, which
may equal between six and ten percent of the participant's base salary less the
maximum permitted salary reduction under the 401(k) plan. Participants can defer
up to 25% of their salary compensation under the 401(k) plan and deferred
compensation plan. If the participant is a key employee, the entire amount of a
participant's bonus may be deferred under the deferred compensation plan.
Participants are fully vested in their own compensation and long-term incentive
plan payout contributions when the amounts are credited to their account. In
addition to other events that may accelerate vesting, a participant becomes
fully vested in the matching contributions made by the company upon the
completion of the employee's fourth year of service.
RELATIONSHIP WITH CARLSON COMPANIES AND RELATED TRANSACTIONS
Immediately prior to this offering, our sole stockholder is Carlson
Companies. Upon completion of this offering, Carlson Companies will beneficially
own 100% of our outstanding Class B common stock. The Class B common stock is
entitled to ten votes per share on any matter submitted to a vote of our
stockholders. Upon completion of this offering, the common stock beneficially
owned by Carlson Companies will represent in the aggregate 95.1% of the combined
voting power of all of our outstanding common stock, or 94.4% if the
underwriters' over-allotment option is exercised in full. For as long as Carlson
Companies continues to beneficially own shares of common stock representing more
than 50% of the combined voting power of our common stock, Carlson Companies
will be able to direct the election of all of the members of our board of
directors and exercise a controlling influence over our business and affairs,
including any determinations with respect to mergers or other business
combinations, the acquisition or disposition of assets, the incurrence of
indebtedness, the issuance of any additional common stock or other equity
securities, the repurchase or redemption of common stock or preferred stock and
the payment of dividends. Similarly, Carlson Companies will have the power to
determine matters submitted to a vote of our stockholders without the consent of
our other
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stockholders, will have the power to prevent a change in control of the company
and could take other actions that might be favorable to Carlson Companies.
Carlson Companies has advised us that its current intent is to continue to
hold all of the common stock beneficially owned by it following this offering.
However, Carlson Companies is not subject to any contractual obligations to
retain its controlling interest, except that Carlson Companies has agreed,
subject to certain exceptions, not to sell or otherwise dispose of any shares of
common stock for a period of 180 days after the date of this prospectus without
the prior written consent of Banc of America Securities LLC. As a result, there
can be no assurance as to the period of time during which Carlson Companies will
maintain its beneficial ownership of common stock of the company owned by it
following the offering.
We have entered into agreements and arrangements with Carlson Companies and
its affiliates, governing the relationships between us and Carlson Companies,
and providing for the allocation of tax and other liabilities and obligations
relating to periods prior to and after the offering. In 1999, we paid Carlson
Companies and its affiliates approximately $21.6 million under these agreements
and arrangements, which was comprised of $9.2 million for property and general
liability insurance, $2.1 million for tax, treasury, cash management,
administrative, information technology and management information services
support, $0.4 million for the rental of five restaurant properties and
$10.0 million for interest. We also paid to the Carlson Companies Employee
Benefit Trust $11.2 million for premium and other costs associated with health
and dental benefits. Notes 6, 7, 8 and 11 to the Notes to Consolidated Financial
Statements provide additional information on the amounts we have paid to Carlson
Companies under these agreements and arrangements in 1999 and prior years. We
also plan to continue purchasing goods and services from Carlson Companies and
its affiliates in the ordinary course of business. Copies of our agreements with
Carlson Companies are filed as exhibits to the registration statement of which
this prospectus is a part. Our principal agreements and arrangements with
Carlson Companies are described below. These agreements and arrangements were
negotiated between us and Carlson Companies, our sole stockholder, and its
affiliates and, therefore, are not the result of arms-length negotiations
between independent parties. There can be no assurance that these agreements or
the transactions for which they provide will be on terms as favorable to us as
could have been obtained from unaffiliated third parties.
TERMS OF THE SHARED SERVICES AGREEMENT. Carlson Companies has historically
provided certain services to us, including risk management and insurance
services, employee benefit services, certain tax, treasury, cash management and
administrative services, certain information technology and management
information services support, and the procurement of certain supplies. Beginning
April 1, 1999, Carlson Companies began providing additional services, including
certain accounts payable, accounts receivable, general ledger, fixed assets and
other accounting functions. On August 19, 1999, we formalized these arrangements
by entering into a shared services agreement with Carlson Companies. The shared
services agreement has a term of ten years subject to early termination if
Carlson Companies' ownership falls below 50% of the total outstanding shares of
our common stock. The methods of billing for all services are determined by the
type of service being provided and are comparable to the methods used to
calculate amounts billed to Carlson Companies' other subsidiaries and, in the
aggregate, reasonably approximate expenses we might incur on a stand-alone
basis. These methods include Carlson Companies' total cost of providing the
service, actual third-party costs plus administrative expenses incurred by
Carlson Companies, the company funded and employee funded payroll deductions for
participation in the employee benefit plans, the pro rata allocation across
Carlson Companies for savings realized by volume purchasing, and actuarially
determined or third-party premiums for insurance programs. We believe these
expense billing methods are commercially reasonable. We currently estimate that
we will pay $2.5 to $3.0 million to Carlson Companies under the shared services
agreement in fiscal 2000.
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TERMS OF THE TAX SHARING AGREEMENT. We are currently part of a consolidated
tax group with Carlson Companies and it has historically controlled all of our
tax decisions. Following this offering, we will no longer be part of Carlson
Companies' consolidated tax group for federal income tax purposes. We have
entered into a tax sharing agreement with Carlson Companies, effective as of
August 19, 1999, which provides for the allocation of tax benefits and
obligations during the periods that we are included in the consolidated federal
or combined state and local income tax returns filed by Carlson Companies. The
tax sharing agreement generally requires us to pay Carlson Companies the amount
of federal, state and local taxes that we would have been required to pay had we
filed our own tax return or returns and not been included in Carlson Companies'
consolidated or combined groups. The federal consolidated tax returns in which
we are included are currently under examination by the IRS for the years 1992
through 1997. In addition, the combined returns in two states in which we are
included are under examination for various years. We believe any changes in our
tax liability from these examinations will be insignificant. Carlson Companies
continues to control our tax decisions with respect to periods for which we are
part of Carlson Companies' consolidated or combined tax group.
Notwithstanding the tax sharing agreement, we are jointly and severally
liable for taxes due for all periods during which we are included in the Carlson
Companies' consolidated group.
TERMS OF AGREEMENT WITH PROVISIONS. We have used the services of
Provisions, a subsidiary of Carlson Companies, as a buying agent for the
negotiation of purchase arrangements and discounts with vendors of food,
beverages and other supplies for our owned and franchised restaurants. Effective
August 19, 1999, we entered into an agreement with Provisions to formalize this
arrangement. Our restaurants order items from one of three independent national
distribution companies that obtain products on terms negotiated by Provisions.
Provisions also provides us with additional services such as quality assurance
audits of vendors, assistance in developing product specifications and product
sourcing services. We do not pay Provisions for the services it provides to us,
except for a flat annual fee paid in monthly installments for restaurant
equipment purchasing services. This fee is calculated at the beginning of each
fiscal year based on the number of company owned restaurants we expect to open
during the year and is not adjusted for actual openings. The fee is currently
$12,368 per planned company owned restaurant. We also advance to Provisions the
equipment purchasing fees due from our franchises and we bear the risk of loss
for these payments except in the case of defective equipment or cash on delivery
orders. Provisions does receive compensation directly from vendors in the form
of discounts, commissions and other fees. We do not pay Provisions any fees for
food or other restaurant operating supplies purchased on terms negotiated by
Provisions. Additionally, if we receive a rebate from an equipment vendor due to
terms negotiated by Provisions, we pass that rebate on to Provisions.
TERMS OF INSURANCE ARRANGEMENTS. We participate in the company-wide risk
management and insurance program of Carlson Companies. We pay premiums,
determined annually by an independent actuary, to NAFCO Insurance
Company, Ltd., a wholly-owned subsidiary of Carlson Holdings, Inc., for retained
casualty losses for workers' compensation and liability insurance coverages.
Carlson Holdings, Inc. is the parent company of Carlson Companies. We pay for a
portion of the premium costs on insurance policies bought by Carlson Companies,
based on our proportion of loss experience under those policies. We also pay for
a portion of the Carlson Companies risk management and insurance administration
costs, including claims handling, actuarial services and letters of credit,
based primarily on our proportion of services used.
TERMS OF CASH MANAGEMENT PROGRAM AND INTERCOMPANY CREDIT
AGREEMENT. Historically, we have participated in Carlson Companies' centralized
cash management program. Cash received from operations is transferred to Carlson
Companies' centralized cash accounts and cash disbursements are funded from the
centralized cash accounts on a daily basis. On August 19, 1999, we entered into
an intercompany credit agreement with Carlson Companies, under which we will
continue to participate in Carlson Companies' cash management program. Cash
requirements for our day-to-day operating
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purposes, and for our capital expenditures, are met with advances under the
credit agreement. On any business day that we have excess cash available, we
may, at our option, use it to repay any outstanding advances we have under the
intercompany credit agreement, or make an advance to Carlson Companies if no
advances are outstanding. Advances we make to Carlson Companies bear interest at
the three-month LIBOR at the time of the advance.
The maximum borrowing availability under the intercompany credit agreement,
as amended, is $250.0 million prior to the completion of this offering, and
$125.0 million after completion of this offering and the application of the net
proceeds to repay a portion of our intercompany indebtedness. As part of the
intercompany credit agreement, a $120.0 million promissory note to Carlson
Companies in partial payment of a dividend and a $70.4 million note to Carlson
Companies, which represented indebtedness allocated to us by Carlson Companies,
were refinanced along with accrued interest. The proceeds from this offering
will be used to partially repay indebtedness to Carlson Companies. The interest
rate on all advances made under the intercompany credit agreement is 1.25% over
the three-month LIBOR at the time of the advance. The intercompany credit
agreement will expire on December 31, 2002, unless Carlson Companies' ownership
of all outstanding shares of our common stock falls below 50% in which case the
credit agreement may be terminated upon 90 days notice by either party.
TERMS OF FRIDAY'S GOLD POINTS PROGRAM. Our company owned or operated and
franchised T.G.I. Friday's and Italianni's restaurants participate in a loyalty
program that offers guests points for purchases made in the restaurants. The
points can be redeemed for in-restaurant food items and other awards. From 1995
through the first quarter of 1999, we participated in and administered a program
which operated under the names Frequent Friday's for T.G.I. Friday's restaurants
and Pasta Points for Italianni's restaurants. We converted the Frequent Friday's
and Pasta Points programs into Gold Points, which is a loyalty program
administered by Gold Points Corporation, a wholly-owned subsidiary of Carlson
Companies. We entered into a license agreement for the use of this program in
our restaurant systems. We paid Gold Points approximately $0.7 million in 1999
for the participation of our company owned or operated and franchised
restaurants in the loyalty program. This program may result in liability to us
if a franchisee ends participation in the program and does not fully fund the
estimated cost of redeeming outstanding guest points.
TERMS OF REAL ESTATE RELATIONSHIPS. We lease five properties from Carlson
Companies, or affiliates of Carlson Companies, for operation of our restaurants.
The lease terms generally range from five to twenty years with five-year renewal
options. The rental amounts we pay Carlson Companies under each lease include a
fixed rental fee plus a fee based on a percentage of our gross sales at that
restaurant. We paid Carlson Companies approximately $372,000 during fiscal 1999
under these lease agreements. In addition, Carlson Companies has guaranteed
payment of ten of our restaurant leases. Real estate commitments under such
guarantees were approximately $2.1 million as of December 27, 1999. We are also
the general partner in four limited partnerships which were formed for the
purpose of acquiring a restaurant site, constructing a restaurant on the site
and leasing the restaurant back to us. The limited partners in these limited
partnerships include some of our officers, employees and Carlson Companies. We
believe that the terms of these arrangements are no less favorable to us than
could be obtained from non-affiliated persons.
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The following organization chart illustrates the relationship between us and
the Carlson Companies' affiliates with which we are engaged in the transactions
described above and elsewhere in this prospectus.
[GRAPHICS]
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PRINCIPAL STOCKHOLDER
Prior to this offering, Carlson Companies, through its wholly-owned
subsidiary Carlson Hospitality Group, Inc., owned 100% of our capital stock.
Following this offering, Carlson Hospitality Group will beneficially own 100% of
our outstanding Class B common stock and, accordingly, will own common stock
representing approximately 66.1% of the economic interest in our company, or
62.9% if the underwriters' over-allotment options are exercised in full. This
represents approximately 95.1% of the combined voting power of our outstanding
common stock, or 94.4% if the underwriters' over-allotment option is exercised
in full. Beneficial ownership of at least 80% of our total voting power is
required in order for Carlson Hospitality Group to be able to effect a tax-free
spin-off or certain other tax-free transactions. The address of Carlson
Hospitality Group is Carlson Parkway, P.O. Box 59159, Minneapolis, Minnesota
55459-8249. All of the outstanding capital stock of Carlson Holdings, Inc., of
which Carlson Companies is a wholly-owned subsidiary, is held as follows.
One-half of the voting common stock is held in one or more trusts over which
Marilyn Carlson Nelson, as trustee, holds the sole voting power and one-half of
the voting common stock is held in one or more trusts over which Barbara Carlson
Gage, as trustee, holds the sole voting power. The address of Ms. Nelson is
Carlson Parkway, P.O. Box 59159, Minneapolis, Minnesota 55459-8249, and the
address of Ms. Gage is 10000 Highway 55, Minneapolis, Minnesota 55441. Ms.
Nelson and Ms. Gage are sisters. Ms. Nelson is the mother of Curtis C. Nelson,
the Chairman of our Board of Directors. Ms. Gage is the spouse of Edwin C. Gage,
one of our directors.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering, the 9,500,000 shares of Class A
common stock sold in this offering will be freely tradable without restriction
under the Securities Act of 1933, unless purchased by an "affiliate" of ours, as
that term is defined in Rule 144 under the Securities Act. Carlson Companies and
our directors and officers have agreed not to sell or dispose of any shares of
common stock or securities convertible into or exchangeable or exercisable for
common stock for a period of 180 days after the date of this prospectus without
the prior written consent of Banc of America Securities LLC. We can give no
assurance concerning how long these parties will continue to hold their common
stock after this offering.
After this offering, Carlson Companies will own 100% of our outstanding
Class B common stock. Any common stock held by one of our affiliates will be
subject to the resale limitations required by Rule 144. Rule 144 defines an
affiliate as a person that directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with
the issuer.
After this offering, Carlson Companies will be our affiliate. Therefore, as
long as Carlson Companies remains an affiliate, they may sell our common stock
only:
- under an effective registration statement under the Securities Act,
- under Rule 144, or
- under another exemption from registration.
Carlson Companies is not under any contractual obligation to retain our
common stock, except during the 180-day period noted above.
In general, under Rule 144 as currently in effect, a person, or persons
whose shares are aggregated, including an affiliate, who has beneficially owned
shares for at least one year, within any three-month period commencing 90 days
after the date of this prospectus, may sell a number of shares that does not
exceed the greater of:
- one percent of the number of shares of Class A common stock then
outstanding, this would be 95,000 shares immediately after this offering,
or
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- the average weekly trading volume of the Class A common stock during the
four calendar weeks preceding the sale.
Sales under Rule 144 are generally subject to certain manner of sale
provisions and notice requirements and to the availability of current public
information about us. Under Rule 144(k), a person who is not deemed to have been
our affiliate at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years, is
entitled to sell the shares without having to comply with the manner of sale,
public information, volume limitation or notice provisions of Rule 144.
We intend to file a registration statement on Form S-8 covering all shares
of common stock issuable upon exercise of stock options to be issued upon
completion of this offering and stock options to be granted under our stock
option plan. Upon the consummation of this offering, we will have outstanding
stock options with respect to an aggregate of 2,073,827 shares of common stock.
Upon this registration on Form S-8, the shares subject to these options,
together with the 926,173 additional shares of common stock available for future
grants of stock options, will be eligible for sale in the public market upon
exercise of the underlying stock options.
Prior to the offering, there has been no market for the Class A common
stock, and we cannot predict the effect, if any, that public sales of shares or
the availability of shares for sale will have on the market price prevailing
from time to time. Sales of substantial amounts of Class A common stock in the
public market following the offering, or the perception that sales may occur,
could adversely affect the prevailing market price of the Class A common stock
and our ability to raise capital through a public offering of our equity
securities.
DESCRIPTION OF CAPITAL STOCK
Upon consummation of this offering, our authorized capital stock will
consist of 140,000,000 shares of common stock, par value $.01 per share, and
10,000,000 shares of preferred stock, par value $.01 per share. Of the
140,000,000 shares of common stock, 100,000,000 shares will be designated as
Class A common stock and 40,000,000 shares will be designated as Class B common
stock. There are no shares of preferred stock outstanding as of the date of this
prospectus. Of the 100,000,000 shares of common stock designated as Class A
common stock, 9,500,000 shares are being sold by us in this offering and
18,500,000 shares are reserved for issuance upon conversion of Class B common
stock into Class A common stock. Of the 40,000,000 shares of common stock
designated as Class B common stock, 18,500,000 shares will be outstanding and
held by Carlson Companies upon consummation of this offering. A description of
the material terms and provisions of our Amended and Restated Certificate of
Incorporation affecting the relative rights of the Class A common stock, the
Class B common stock and the preferred stock is set forth below. The description
is intended as a summary and is qualified in its entirety by reference to the
form of our Amended and Restated Certificate of Incorporation and Restated
Bylaws filed with the registration statement relating to this prospectus.
DESCRIPTION OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK
VOTING RIGHTS. The holders of Class A common stock and Class B common stock
generally have identical rights except that holders of Class A common stock are
entitled to one vote per share while holders of Class B common stock are
entitled to ten votes per share on all matters to be voted on by the
stockholders. Holders of shares of Class A common stock and Class B common stock
are not entitled to cumulate their votes in the election of directors. Generally
all matters to be voted on by the stockholders must be approved by a majority of
the votes entitled to be cast by all shares of Class A common stock and Class B
common stock present in person or represented by a proxy, voting together as a
single class, subject to any voting rights granted to holders of any preferred
stock.
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DIVIDENDS. The holders of Class A common stock and Class B common stock
share equally in any dividends or distributions made by us. Our board of
directors currently intends to retain future earnings for the development of our
business and does not anticipate paying regular quarterly dividends on the
Class A common stock or Class B common stock for the foreseeable future. Under
Delaware law, the declaration of dividends is within the discretion of the board
of directors and future dividends, if any, will depend upon various factors,
including our net income, current and anticipated cash needs and any other
factors deemed relevant by the board of directors. By virtue of their stock
ownership, Carlson Companies will have the ability to change the size and
composition of our board of directors and control the payment of dividends by
us.
CONVERSION. Each share of Class B common stock is convertible into one
share of Class A common stock. Any shares of Class B common stock transferred to
a person or entity other than Carlson Holdings, Inc., or any of its
subsidiaries, or a direct descendant of Curtis L. Carlson, or an entity of which
the beneficial owners are direct descendants of Curtis L. Carlson, shall
automatically convert to shares of Class A common stock upon such disposition,
except for a disposition effected in connection with a transfer of Class B
common stock to the beneficial owners of Carlson Companies as a dividend
intended to be a tax-free spin-off. No assurance can be given that such
conversion would be consummated. Carlson Companies has no current plans with
respect to a tax-free spin-off of our company.
All shares of Class B common stock shall automatically convert into Class A
common stock if the number of outstanding shares of Class B common stock falls
below 20% of the outstanding shares of common stock. This will prevent Carlson
Companies from decreasing its economic interest in the company to less than 20%
while still retaining control of approximately 71% of the voting power of our
company. All conversions will be effected on a share-for-share basis.
Automatic conversion of the Class B common stock into Class A common stock
if Carlson Companies decreases its economic interest in our company to less than
20% is intended to ensure that Carlson Companies retains voting control by
virtue of its ownership of Class B common stock only if it has a sizable
economic interest in our company.
OTHER RIGHTS. In the event of our liquidation, dissolution or winding up,
after payment in full of the amounts required to be paid to holders of preferred
stock, all holders of common stock, regardless of class, are entitled to share
ratably in any assets available for distribution to holders of shares of common
stock.
No shares of either class of common stock are subject to redemption or have
preemptive rights to purchase additional shares of common stock.
Upon consummation of this offering, all the outstanding shares of Class A
common stock and Class B common stock will be legally issued, fully paid and
nonassessable.
Application has been made for the Class A common stock to be approved for
listing on the New York Stock Exchange under the symbol "CWR." In order to meet
the requirements for listing of our Class A common stock on that exchange, the
underwriters have undertaken to sell lots of 100 or more shares to a minimum of
2,000 beneficial owners and to sell a sufficient number of shares so that upon
completion of the offering there will be not less than 1,100,000 publicly held
shares of our Class A common stock having an aggregate market value of not less
than $60,000,000.
PREFERRED STOCK
Our Amended and Restated Certificate of Incorporation permits us to issue up
to 10,000,000 shares of preferred stock, from time to time, in one or more
series and with such designation and preferences for each series as are stated
in the resolutions providing for the designation and issue of each such series
adopted by our board of directors. Our board of directors is authorized by our
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Amended and Restated Certificate of Incorporation to determine the voting,
dividend, redemption and liquidation preferences and limitations pertaining to
such series. The board of directors, without stockholder approval, may issue
preferred stock with voting rights and other rights that could adversely affect
the voting power of the holders of our common stock and could have certain
anti-takeover effects. We have no present plans to issue any shares of preferred
stock. The ability of the board of directors to issue preferred stock without
stockholder approval could have the effect of delaying, deferring or preventing
a change in control of our company or the removal of existing management.
ADVANCE NOTICE PROVISION
Our Restated Bylaws will provide for an advance notice procedure for the
nomination, other than by or at the direction of the board of directors, of
candidates for election as directors as well as for other stockholder proposals
to be considered at annual meetings of stockholders. In general, notice of
intent to nominate a director or raise matters at such meetings will have to be
received by us not less than 60 days prior to the date fixed for the annual
meeting, and must contain certain information concerning the persons to be
nominated or the matters to be brought before the meeting and concerning the
stockholders submitting the proposal.
POTENTIAL ANTI-TAKEOVER EFFECT OF PROVISIONS OF CHARTER DOCUMENTS AND DELAWARE
GENERAL CORPORATION LAW
Our Amended and Restated Certificate of Incorporation will authorize our
board of directors to issue up to 10,000,000 shares of preferred stock and to
determine the powers, preferences, privileges, rights, including voting rights,
qualifications, limitations and restrictions of those shares without any further
vote or action by the stockholders. The rights of the holders of common stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. Our Amended and
Restated Certificate of Incorporation and Restated Bylaws, among other things,
also require that stockholder actions occur at duly called meetings of the
stockholders, limit who may call special meetings of stockholders, do not permit
cumulative voting in the special meetings of stockholders, do not permit
cumulative voting in the election of directors and require advance notice of
stockholder proposals and director nominations.
We are a Delaware corporation subject to Section 203 of the Delaware General
Corporation Law. Section 203 provides that, subject to certain exceptions, a
corporation shall not engage in any business combination with any "interested
stockholder" for a three-year period following the date that such stockholder
becomes an interested stockholder unless:
- prior to such date, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder:
- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; or
- on or subsequent to such date, the business combination is approved by the
board of directors of the corporation and by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.
Except as specified in Section 203 of the DGCL, an interested stockholder is
defined to include:
- any person that is the owner of 15% or more of the outstanding voting
stock of the corporation, or is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation, at any time within the three years immediately
prior to the relevant date; and
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- the affiliates and associates of any such person.
Under certain circumstances, Section 203 of the DGCL makes it more difficult
for an interested stockholder to effect various business combinations with the
company for a three-year period, although our stockholders may elect to exclude
us from the restrictions imposed thereunder, Carlson Companies is not an
interested stockholder within the meaning of Section 203 because its shares were
acquired solely through actions taken by us. By virtue of its beneficial
ownership of common stock, Carlson Companies is in a position to elect to
exclude us from the restrictions under Section 203, but currently has no
intention to do so.
TRANSFER AGENT AND REGISTRAR
Bank of New York has been appointed as the transfer agent and registrar for
our common stock.
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PLAN OF DISTRIBUTION
We are offering the shares of Class A common stock described in this
prospectus through a number of underwriters. Banc of America Securities LLC,
Merrill, Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co.
Incorporated are the representatives of the underwriters. We have entered into
an underwriting agreement with the representatives. Subject to the terms and
conditions of the underwriting agreement, we have agreed to sell to the
underwriters, and the underwriters have each agreed to purchase, the number of
shares of Class A common stock listed next to its name in the following table.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ----------
<S> <C>
Banc of America Securities LLC..............................
Merrill, Lynch, Pierce, Fenner & Smith
Incorporated.....................................
Morgan Stanley & Co. Incorporated...........................
----------
Total..................................................... 9,500,000
==========
</TABLE>
The underwriting agreement provides that the underwriters must buy all of
the shares if they buy any of them. The underwriters will sell the shares to the
public when and if the underwriters buy the shares from us.
The underwriters initially will offer shares to the public at the price
specified on the cover page of this prospectus. The underwriters may allow to
some dealers a concession of not more than $ per share. The underwriters may
also allow, and any other dealers may reallow, a concession of not more than $
per share to some other dealers. If all the shares are not sold at the initial
public offering price, the underwriters may change the offering price and the
other selling terms. The Class A common stock is offered subject to a number of
conditions, including:
- receipt and acceptance of the Class A common stock by the underwriters,
and
- the right on the part of the underwriters to reject orders in whole or in
part.
We have granted the underwriters an option to buy up to 1,425,000 additional
shares of Class A common stock. These additional shares would cover sales of
shares by the underwriters that exceed the number of shares specified in the
table above. The underwriters have 30 days to exercise this option. If the
underwriters exercise this option, they will each purchase additional shares
approximately in proportion to the amounts specified in the table above.
We and Carlson Companies, as our sole stockholder, have entered into lock-up
agreements with the underwriters. Under these agreements, we may not issue any
new shares of common stock (except on exercise of outstanding options), and
Carlson Companies may not dispose of any common stock or securities convertible
into or exchangeable for shares of common stock. These restrictions will be in
effect for a period of 180 days after the date of this prospectus. At any time
and without notice, Banc of America Securities LLC may, in its sole discretion,
release all or some of the securities from these lock-up agreements.
We will indemnify the underwriters and their controlling persons against
some liabilities, including liabilities arising under the Securities Act of 1933
and liabilities resulting from breaches of our representations and warranties
contained in the underwriting agreement. Our indemnity obligations do not extend
to liabilities which arise from the acts of the underwriters resulting from
their bad faith or
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willful misconduct, written information relating to any of the underwriters that
the underwriters provide to us expressly for use in the registration statement
or this prospectus, or if such liabilities result from other failures of the
underwriters to fulfill their legal obligations, as described in the
underwriting agreement.
If we are unable to provide this indemnification, we will contribute to
payments the underwriters may be required to make in respect of those
liabilities. The amount of such payments will be based upon a proportion
appropriate to reflect the relative benefits received by us, on the one hand,
and the underwriters, on the other hand, from this offering.
In connection with this offering, the underwriters may purchase and sell
shares of Class A common stock in the open market. These transactions may
include:
- short sales,
- stabilizing transactions, and
- purchases to cover positions created by short sales.
Short sales involve the sale by the underwriters of a greater number of
shares than they are required to purchase in this offering. Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the Class A common stock while this
offering is in progress.
The underwriters also may impose a penalty bid. This means that if the
representatives purchase shares in the open market in stabilizing transactions
or to cover short sales, the representatives can require the underwriters that
sold those shares as part of this offering to repay the underwriting discount
received by them.
The underwriters may engage in activities that stabilize, maintain or
otherwise affect the price of the Class A common stock, including:
- over-allotment,
- stabilization,
- syndicate covering transactions, and
- imposition of penalty bids.
The underwriters may effect syndicate covering transactions by creating a
short position in the Class A common stock for the account of the underwriters
by selling more Class A common stock in connection with the offering than they
are committed to purchase from us. In these instances, the underwriters may
purchase Class A common stock in the open market following completion of this
offering to cover all or a portion of the underwriters' short position. The
underwriters may also cover all or a portion of their short position by
exercising the underwriters' over-allotment option referred to above.
As a result of these activities, the price of the Class A common stock may
be higher than the price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue them at any time.
The underwriters may carry out these transactions on the New York Stock
Exchange, in the over-the-counter market or otherwise.
Each of the principal underwriters intends to sell shares of Class A common
stock they purchase in this offering to accounts over which they exercise
discretionary authority, although these sales are not expected to exceed 5% of
the total number of shares of Class A common stock offered by this prospectus.
57
<PAGE>
Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be negotiated between us and the
underwriters. Among the factors to be considered in such negotiations are:
- our history and prospects, taking into account the prospects of the
industries in which we compete,
- our past and present financial performance,
- an assessment of our management,
- the present state of our development,
- the prospects for our future earnings,
- the prevailing market conditions of relevant United States securities
markets at the time of this offering, and
- market valuations of publicly traded companies that we and the
representatives believe to be comparable to us.
LEGAL MATTERS
The validity of the shares of Class A common stock offered by this
prospectus and other legal matters will be passed upon for us by Faegre & Benson
LLP, Minneapolis, Minnesota. The validity of the shares of Class A common stock
offered by this prospectus will be passed upon for the underwriters by Fried,
Frank, Harris, Shriver & Jacobson (a partnership including professional
corporations), Los Angeles, California.
EXPERTS
The consolidated financial statements and schedule included in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the SEC for the
stock we are offering by this prospectus. This prospectus does not include all
of the information contained in the registration statement. You should refer to
the registration statement and its exhibits for additional information. Whenever
we make reference in this prospectus to any of our contracts, agreements or
other documents, the references are not necessarily complete and you should
refer to the exhibits attached to the registration statement for copies of the
actual contract, agreement or other document. When we complete this offering, we
will also be required to file annual, quarterly and special reports, proxy
statements and other information with the SEC.
You can read our SEC filings, including the registration statement, over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference facilities at 450
Fifth Street, NW, Washington, DC 20549, 7 World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. You may also obtain copies of the documents at
prescribed rates by writing to the Public Reference Section of the SEC at 450
Fifth Street, NW, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference facilities. Our
SEC filings are also available at the offices of the New York Stock Exchange at
20 Broad Street, New York, New York 10005.
58
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------------------------
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 28, 1998 and
December 27, 1999......................................... F-3
Consolidated Statements of Operations for the fiscal years
ended December 29, 1997 and December 28, 1998 and
December 27, 1999......................................... F-4
Consolidated Statements of Stockholder's Equity for the
fiscal years ended December 29, 1997, December 28, 1998
and December 27, 1999..................................... F-5
Consolidated Statements of Cash Flows for the fiscal years
ended December 29, 1997, December 28, 1998 and
December 27, 1999......................................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholder of
Carlson Restaurants Worldwide Inc.:
We have audited the accompanying consolidated balance sheets of Carlson
Restaurants Worldwide Inc. (a Delaware corporation, and a subsidiary of Carlson
Hospitality Group, Inc.) and subsidiaries as of December 28, 1998 and
December 27, 1999, and the related consolidated statements of operations,
stockholder's equity, and cash flows for each of the three fiscal years in the
period ended December 27, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Carlson Restaurants
Worldwide Inc. and subsidiaries as of December 28, 1998 and December 27, 1999,
and the results of their operations and their cash flows for each of the three
fiscal years in the period ended December 27, 1999, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
February 18, 2000
F-2
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 27,
1998 1999
------------ -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 50,364 $ 14,121
Accounts and notes receivable, net........................ 18,669 23,154
Inventories............................................... 6,126 6,428
Prepaid expenses and other assets......................... 4,972 6,433
Assets held for sale, net................................. 4,116 4,489
-------- --------
Total current assets.................................... 84,247 54,625
PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET................... 180,791 212,594
DEFERRED INCOME TAXES....................................... 7,614 11,891
GOODWILL, net............................................... 27,298 22,651
OTHER ASSETS, net........................................... 22,929 22,961
-------- --------
Total assets............................................ $322,879 $324,722
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term obligations............... $ 1,498 $ 63
Accounts payable.......................................... 12,866 8,795
Accrued liabilities....................................... 36,475 48,463
-------- --------
Total current liabilities............................... 50,839 57,321
LONG-TERM OBLIGATIONS, less current maturities.............. 8,797 8,744
LONG-TERM DEBT-AFFILIATE.................................... 70,359 219,923
OTHER LIABILITIES........................................... 23,559 27,406
-------- --------
Total liabilities....................................... 153,554 313,394
MINORITY INTERESTS.......................................... 2,694 2,696
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, par value $1.00 per share, 100 shares
authorized, 1 share issued and outstanding.............. - -
Additional paid-in capital................................ 80,088 2,479
Unrealized holding losses of marketable securities........ (271) (279)
Retained earnings......................................... 86,814 6,432
-------- --------
Total stockholder's equity.............................. 166,631 8,632
-------- --------
Total liabilities and stockholder's equity.............. $322,879 $324,722
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
DECEMBER 29, DECEMBER 28, DECEMBER 27,
1997 1998 1999
------------ ------------ -------------
<S> <C> <C> <C>
REVENUE:
Company restaurant sales.............................. $418,468 $483,311 $563,729
Managed restaurant revenue............................ 76,779 74,905 81,235
Franchising revenue................................... 35,199 38,292 41,877
Licensing revenue..................................... 3,627 2,780 4,450
-------- -------- --------
Total revenue....................................... 534,073 599,288 691,291
COST AND EXPENSES:
Cost of sales......................................... 143,228 165,221 187,512
Restaurant operating expenses......................... 286,077 315,513 370,638
General and administrative expenses................... 55,218 64,582 54,648
Depreciation and amortization expense................. 23,401 27,457 31,198
Other (income) expense, net........................... (863) 533 10,787
-------- -------- --------
INCOME FROM OPERATIONS.................................. 27,012 25,982 36,508
INTEREST EXPENSE, NET................................... 2,571 4,216 10,344
-------- -------- --------
INCOME BEFORE INCOME TAXES.............................. 24,441 21,766 26,164
PROVISION FOR INCOME TAXES.............................. 8,740 7,875 9,155
-------- -------- --------
NET INCOME.............................................. $ 15,701 $ 13,891 $ 17,009
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN COMPREHENSIVE RETAINED
STOCK CAPITAL INCOME EARNINGS TOTAL
----------------- ---------- ------------- ---------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, December 30, 1996......... $ - $80,088 $ (666) $ 57,222 $136,644
Comprehensive income:
Net income..................... - - - 15,701
Change in unrealized losses on
marketable securities, net of
tax.......................... - - 314 -
Total comprehensive income..... - - - - 16,015
----------------- ------- ------- -------- --------
BALANCE, December 29, 1997......... - 80,088 (352) 72,923 152,659
Comprehensive income:
Net income..................... - - - 13,891
Change in unrealized losses on
marketable securities, net of
tax.......................... - - 81 -
Total comprehensive income..... - - - - 13,972
----------------- ------- ------- -------- --------
BALANCE, December 28, 1998......... - 80,088 (271) 86,814 166,631
Comprehensive income:
Net income..................... - - - 17,009
Changes in unrealized losses on
marketable securities, net of
tax.......................... - - (8) -
Total comprehensive income..... - - - - 17,001
Dividend on common stock......... - (77,609) - (97,391) (175,000)
----------------- ------- ------- -------- --------
BALANCE, December 27, 1999......... $ - $ 2,479 $ (279) $ 6,432 $ 8,632
================= ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
DECEMBER 29, DECEMBER 28, DECEMBER 27,
1997 1998 1999
------------ ------------ -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................................ $ 15,701 $ 13,891 $ 17,009
Non-cash items included in net income:
Depreciation and amortization......................... 23,401 27,457 31,198
Store closure provisions.............................. - - 5,714
Provision for deferred compensation................... 2,017 3,543 2,937
Recognition of deferred franchise revenue............. (1,531) (1,260) (1,260)
Deferred income taxes................................. 1,091 (2,998) (4,311)
Loss on impairment of assets.......................... 237 549 2,190
Write-off of intangible assets........................ - - 2,160
Other non-cash items, net............................. (1,315) 681 933
Changes in:
Accounts receivable................................... (1,239) (4,686) (6,833)
Inventories........................................... (172) (505) (386)
Prepaid expenses and other assets..................... 3,241 (635) (1,323)
Accounts payable...................................... 586 2,618 (4,071)
Accrued liabilities................................... 149 5,402 13,196
-------- -------- --------
Net cash provided by operating activities........... 42,166 44,057 57,153
-------- -------- --------
INVESTING ACTIVITIES:
Purchases of property, equipment and improvements......... (39,827) (57,113) (71,630)
Investments in unconsolidated joint ventures.............. (269) (4,197) (791)
Distributions from unconsolidated joint ventures.......... 2,035 2,034 2,821
Acquisition of other assets............................... (607) (5,831) (725)
Proceeds from sale of land, restaurants and facilities.... 1,408 2,440 4,495
Collection of notes receivable............................ 5,951 1,110 97
-------- -------- --------
Net cash used in investing activities............... (31,309) (61,557) (65,733)
-------- -------- --------
FINANCING ACTIVITIES:
Dividend paid............................................. - - (55,000)
Proceeds from long-term obligations....................... 51 2,591 449
Proceeds from long-term debt-affiliate.................... 4,598 38,352 28,383
Principal payments on long-term obligations............... (1,826) (140) (1,495)
-------- -------- --------
Net cash provided by (used in) financing
activities........................................ 2,823 40,803 (27,663)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 13,680 23,303 (36,243)
CASH AND CASH EQUIVALENTS, beginning of period.............. 13,381 27,061 50,364
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of period.................... $ 27,061 $ 50,364 $ 14,121
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
1. SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
Carlson Restaurants Worldwide Inc. and subsidiaries (the "Company") is a
wholly owned subsidiary of Carlson Hospitality Group, Inc., which is a
subsidiary of Carlson Companies, Inc., which is 100% owned by Carlson
Holdings, Inc. (collectively referred to as "Carlson Companies").
The Company develops, operates and franchises various restaurant concepts in
both the United States and international markets.
The Company's fiscal year ends on the last Monday in December. All fiscal
years presented are comprised of 52 weeks.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Carlson
Restaurants Worldwide Inc., its wholly owned subsidiaries, and certain majority
owned joint ventures. Investments in unconsolidated joint ventures in which the
Company owns 20% to 50% are accounted for by the equity method. The Company's
related share of income or loss is included in other (income) expenses, net in
the accompanying consolidated statements of operations. All material
intercompany accounts and transactions have been eliminated.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash equivalents, marketable securities, accounts and
notes receivable, accounts payable and debt approximate fair value.
CASH AND CASH EQUIVALENTS
The Company considers amounts receivable from credit card companies and all
highly liquid temporary investments with original maturities of three months or
less to be cash equivalents. Through July 1999, the Company participated in
Carlson Companies' cash management program pursuant to which the Company could
make deposits with or borrow funds from Carlson Companies. The funds deposited
with or borrowed from Carlson Companies did not earn interest income or incur
interest expense. The Company had deposits under the terms of this arrangement
of $38,092,000 at December 28, 1998 which are included in cash and cash
equivalents in the accompanying consolidated balance sheets. Effective August
1999, in conjunction with the Company entering into an Intercompany Credit
Agreement with Carlson Companies, all excess cash is applied against the
outstanding balance of affiliate debt (see Note 6).
ACCOUNTS AND NOTES RECEIVABLE
Accounts receivable are due principally from franchisees for royalties
earned and goods and services provided, and from third parties under the terms
of various equipment purchasing and asset sale agreements. The Company had an
allowance of $1,526,000 and $1,597,000 as of December 28, 1998 and December 27,
1999, respectively, to cover estimated loss exposures related to accounts
receivable.
F-7
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
1. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist primarily of food and beverages.
ASSETS HELD FOR SALE
Assets held for sale include net assets that are in the process of being
sold and are recorded at the lower of carrying value or fair market value less
cost to sell.
PROPERTY, EQUIPMENT AND IMPROVEMENTS
Property and equipment are carried at cost and are depreciated over their
estimated useful lives (ranging from 3 to 20 years), using the straight-line
method. Depreciation of leasehold improvements is based upon the lesser of the
applicable lease term, in the event of a lease, or the estimated useful lives of
such assets, using the straight-line method.
GOODWILL
The excess of purchase price over tangible net assets acquired is recorded
at cost and amortized over their estimated useful lives, which range from 5 to
25 years. The Company assesses the recoverability of goodwill and other
intangible assets by determining whether the asset balance can be recovered over
its remaining life through undiscounted future operating cash flows of the
acquired assets. Accordingly, for the fiscal year ended December 27, 1999, a
pre-tax expense of $2,160,000 was recorded in other (income) expense, net in the
accompanying consolidated statements of operations to reduce the carrying value
of goodwill associated with one restaurant. As of December 28, 1998 and
December 27, 1999, accumulated goodwill amortization was $13,190,000 and
$15,440,000, respectively.
OTHER ASSETS
The Company has investments in a number of joint ventures, which are
accounted for using the equity method. The Company's total investments in joint
ventures were $14,086,000 and $11,250,000 at December 28, 1998 and December 27,
1999, respectively. Equity in earnings of joint ventures included within other
(income) expense, net was $751,000, $218,000 and $96,000 for the fiscal years
ended December 29, 1997, December 28, 1998 and December 27, 1999, respectively.
In 1999, the Company closed a restaurant which was operated under the terms of a
joint venture agreement. An expense of $902,000 associated with the write-down
of joint venture assets is included within other (income) expense, net.
Trademarks, liquor licenses, and lease acquisition costs and other
identifiable intangible assets are recorded at cost and amortized over their
estimated useful lives, which range from 5 to 40 years. The total amount of such
assets, net of accumulated amortization, was $6,382,000 and $6,857,000 at
December 28, 1998 and December 27, 1999, respectively.
Marketable securities, categorized as available for sale, consist of an
investment in equity securities of a franchisee with a cost basis of $1,100,000.
The Company records changes in fair value, net of tax, as a separate component
of stockholder's equity until a gain or loss is realized, at which time gain or
F-8
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
1. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
loss is recognized in net income. Net unrealized holding losses at December 28,
1998 and December 27, 1999, were $271,000 and $279,000, respectively.
Other assets also include notes receivable of $296,000 and $2,943,000, less
allowances of $50,000 as of December 28, 1998 and December 27, 1999,
respectively. In July 1999, the Company sold the assets and rights to four Dalts
restaurants, previously recorded in assets held for sale in the consolidated
balance sheet, for $2,750,000. The purchase price was financed by a promissory
note from the purchaser, collateralized by restaurant assets, bearing interest
at 10% for the first twenty-four month period and 11% thereafter. The promissory
note requires monthly principal and interest payments with a final balloon
payment of $2,348,000 due at maturity, August 2006.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed Of," the Company evaluates its assets at the individual restaurant
level for units not selected for closure using each restaurant's historical
operating results as a primary indicator of potential impairment. The Company
deems a restaurant's assets to be impaired if management's estimate of
undiscounted future cash flows generated directly by the assets are less than
their respective carrying value. If a restaurant's assets are deemed to be
impaired, the loss is measured by the amount by which the carrying value exceeds
their estimated fair value. Accordingly, pre-tax expenses of $237,000, $549,000
and $2,190,000 were recorded in other (income) expense, net in the accompanying
consolidated statements of operations to reduce the carrying value of impaired
assets of ongoing restaurants for the fiscal years ended December 29, 1997,
December 28, 1998 and December 27, 1999, respectively.
INCOME TAXES
Deferred tax assets and liabilities are computed based on the difference
between the financial statement and income tax basis of assets and liabilities
using the enacted marginal tax rate. Deferred income tax expenses or benefits
are based on changes in the deferred tax asset or liability from period to
period.
REVENUE RECOGNITION
Company restaurant sales include proceeds from the sale of food, beverages
and merchandise at Company owned restaurants.
The Company operates various restaurants under long-term management
agreements. The operating responsibilities associated with the managed
restaurants are substantially the same for owned restaurants, including the
payment of wages, liabilities to vendors and insurance coverage. Management fee
income and reimbursable management operating costs are recognized as managed
restaurant revenue in the accompanying consolidated statements of operations
currently based upon services performed. Expenses incurred related to the
management of restaurant operations are reflected in cost of sales and
restaurant operating expenses.
Franchising revenue includes royalty fees, initial franchise fees and, in
the case of international franchisees, nonrefundable concept fees. Royalty fees
are recognized as income based on sales at
F-9
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
1. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
franchise restaurants. Revenue from initial franchise fees and concept fees was,
in the aggregate, $5,573,000, $4,953,000 and $4,660,000 for the fiscal years
ended December 29, 1997, December 28, 1998 and December 27, 1999, respectively.
Franchise fees and the related expenses are recognized as the Company's
obligations regarding services to be performed in opening a restaurant are
fulfilled, which generally is at the time a restaurant is opened. Nonrefundable
concept fees are related to international franchise development agreements and
are recognized as revenue upon restaurant openings on a pro-rata basis for the
total number of restaurants to be developed in a franchisee's territory as
specified in the development agreement.
Licensing revenue is recognized as income currently based upon sales of
retail branded products under various company trade names by third party
vendors.
ADVERTISING
Production costs of commercials are charged to operations as the commercials
are first aired. The costs of other marketing, promotion and advertising
programs are charged to operations in the year incurred. Advertising expense was
$10,763,000, $11,759,000 and $14,595,000 for the fiscal years ended
December 29, 1997, December 28, 1998 and December 27, 1999, respectively, and is
included in restaurant operating expenses in the consolidated statements of
operations.
PREOPENING EXPENSES
Preopening expenses, consisting primarily of managers' salaries and
relocation, advertising and employee payroll and related training costs incurred
prior to the opening of a restaurant, are expensed as incurred.
EARNINGS PER SHARE
Because there is only one share of common stock outstanding, earnings per
share amounts for all periods have not been presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
COMPREHENSIVE INCOME
The Company's comprehensive income transactions, as defined in Statement of
Financial Accounting Standard No. 130, "Reporting Comprehensive Income,"
resulted from net unrealized holding gains and losses on its marketable
securities categorized as available for sale and are classified as unrealized
holding losses of marketable securities on the accompanying consolidated balance
sheet.
F-10
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
1. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
RELATIONSHIP WITH SIGNIFICANT SUPPLIER
The Company utilized a single national distribution company as the primary
supplier of its food. Purchases from the distribution company were $142,400,000
in fiscal 1999. On January 31, 2000, the distribution company filed for
protection under Chapter 11 of the U.S. Bankruptcy Code (see Note 14).
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities."
Statement No. 133 requires companies to record derivatives on the balance sheet
as assets and liabilities measured at fair value. Gains or losses resulting from
changes in the fair values of those derivatives would be accounted for depending
on the use of the derivative and whether it qualifies for hedge accounting.
Statement No. 133, as amended by Statement No. 137, is effective for fiscal
years beginning after June 15, 2000, with earlier adoption encouraged. The
Company is not currently involved with derivative instruments or hedging
activities, and therefore, will measure the impact of this statement as it
becomes necessary.
2. PROPERTY, EQUIPMENT AND IMPROVEMENTS:
Property, equipment and improvements, net consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 27,
1998 1999
------------ -------------
<S> <C> <C>
Land................................................ $ 11,670 $ 11,004
Buildings and leasehold improvements................ 152,261 186,948
Furniture and equipment............................. 158,295 181,338
Construction in progress............................ 8,211 8,444
--------- ---------
330,437 387,734
Less-accumulated depreciation and amortization...... (149,646) (175,140)
--------- ---------
Property, equipment and improvements, net........... $ 180,791 $ 212,594
========= =========
</TABLE>
Depreciation and amortization expense related to property, equipment and
improvements amounted to $21,148,000, $24,814,000 and $28,302,000 for the fiscal
years ended December 29, 1997, December 28, 1998 and December 27, 1999,
respectively.
F-11
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
3. ACCRUED LIABILITIES:
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 27,
1998 1999
------------- -------------
<S> <C> <C>
Accrued compensation................................ $10,985 $14,992
Gift certificates liability......................... 4,573 5,701
Deferred franchise revenue.......................... 4,181 3,690
Advertising expenses................................ 2,893 4,998
Property taxes...................................... 2,756 3,506
Sales taxes......................................... 2,847 3,383
Federal income taxes................................ 1,016 2,419
Other............................................... 7,224 9,774
------- -------
$36,475 $48,463
======= =======
</TABLE>
The gift certificates liability is recorded at the time of sale of the
certificates. The liability is relieved and revenues recognized upon redemption
of the gift certificates at any company owned restaurant. Gift certificates sold
by the Company and redeemed at managed and franchised restaurants reduce the
liability with no impact on revenues.
Deferred franchise revenue consists of fees received from franchisees for
initial franchise fees and concept fees related to restaurants which have not
opened as of the end of the period. The Company is obligated to provide certain
design, construction and store opening assistance for future restaurant
openings.
4. OTHER LIABILITIES:
Other liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 27,
1998 1999
------------ -------------
<S> <C> <C>
Deferred franchise revenue.......................... $ 8,964 $ 8,168
Deferred compensation arrangements (see Note 11).... 7,510 9,414
Other............................................... 7,085 9,824
------- -------
$23,559 $27,406
======= =======
</TABLE>
5. INCOME TAXES:
The Company is included in the consolidated federal income tax return of
Carlson Companies. Under the provisions of a tax sharing agreement, the Company
is treated as a separate entity for purposes of determining the income tax
provision.
F-12
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
5. INCOME TAXES: (CONTINUED)
The components of the provision for income taxes reflected in the
accompanying consolidated statements of operations are as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------
DECEMBER 29, DECEMBER 28, DECEMBER 27,
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Current:
Federal............................................... $5,524 $ 8,482 $10,763
Foreign............................................... 1,042 970 980
State................................................. 1,083 1,421 1,723
------ ------- -------
7,649 10,873 13,466
------ ------- -------
Deferred:
Federal............................................... 851 (2,637) (3,651)
State................................................. 240 (361) (660)
------ ------- -------
1,091 (2,998) (4,311)
------ ------- -------
Total income tax provision.......................... $8,740 $ 7,875 $ 9,155
====== ======= =======
</TABLE>
Foreign taxes represent withholding taxes from international royalties.
F-13
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
5. INCOME TAXES: (CONTINUED)
The following table reconciles the effective tax rate provided in the
financial statements to the statutory rate:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------------------------
DECEMBER 29, DECEMBER 28, DECEMBER 27,
1997 1998 1999
------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Federal income taxes at the statutory
rate.................................. 35.0% 35.0% 35.0%
State income taxes, net of federal tax
benefit............................... 3.4 3.1 2.6
Amortization expense.................... 2.1 2.0 1.9
Tax credits............................. (5.7) (6.8) (6.4)
Other items, net........................ 1.0 2.9 1.9
---------------------- ---------------------- ----------------------
Effective income tax rate............... 35.8% 36.2% 35.0%
====================== ====================== ======================
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 27,
1998 1999
------------ -------------
<S> <C> <C>
Deferred tax assets:
Deferred revenue.................................. $ 4,998 $ 4,575
Deferred compensation............................. 1,744 2,468
Depreciation and amortization..................... - 2,370
Restaurant closure expenses....................... 1,187 2,082
Marketable securities............................. 1,482 1,482
Other............................................. 1,017 1,456
------- -------
Total deferred tax assets......................... 10,428 14,433
Deferred tax liabilities............................ (305) -
------- -------
Net deferred tax assets............................. $10,123 $14,433
======= =======
Current deferred tax assets......................... $ 2,509 2,542
======= =======
Noncurrent deferred tax assets...................... $ 7,614 $11,891
======= =======
</TABLE>
The Company did not record any valuation allowance for deferred tax assets
at December 28, 1998 or December 27, 1999.
F-14
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
6. LONG-TERM OBLIGATIONS:
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 27,
1998 1999
------------ ------------
<S> <C> <C>
Capital lease obligations........................... $ 8,312 $8,761
Promissory notes.................................... 1,805 -
Other obligations................................... 178 46
------- ------
10,295 8,807
Less-current portion................................ (1,498) (63)
------- ------
Long-term obligations, less current maturities...... $ 8,797 $8,744
======= ======
</TABLE>
Capital lease obligations consist primarily of long-term lease obligations
for restaurant facilities.
At December 27, 1999, payments on capital lease obligations due in each of
the next five fiscal years and thereafter are as follows (in thousands):
<TABLE>
<S> <C>
2000....................................................... $ 1,246
2001....................................................... 1,285
2002....................................................... 1,285
2003....................................................... 1,341
2004....................................................... 1,341
Thereafter................................................. 17,577
-------
24,075
Less-amounts representing interest......................... (15,314)
-------
Capital lease obligations, net............................. $ 8,761
=======
</TABLE>
Assets recorded under capital leases are included in property, equipment and
improvements as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 27,
1998 1999
------------ ------------
<S> <C> <C>
Building and leasehold improvements................. $ 5,592 $ 5,567
Furniture and equipment............................. 2,447 2,413
------- -------
8,039 7,980
Accumulated depreciation............................ (1,821) (2,431)
------- -------
$ 6,218 $ 5,549
======= =======
</TABLE>
The $1,805,000 unsecured promissory notes at December 28, 1998, principally
resulted from the acquisition of certain restaurant assets, bore interest at an
annual rate of 8.5%. Principal payments of
F-15
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
6. LONG-TERM OBLIGATIONS: (CONTINUED)
$1,363,000 were made in fiscal year 1999. The remaining principal balance of
$442,000 and accrued interest were assigned to Carlson Companies and converted
to Long-term Debt-Affiliate.
LONG-TERM DEBT-AFFILIATE
Prior to June 1999, debt and the related interest costs incurred by Carlson
Companies on behalf of the Company were allocated to the Company in the form of
a demand note which was due on December 31, 2001, at an interest rate based on
the cost of debt incurred by Carlson Companies on behalf of the Company (9.3%
during fiscal 1997 and 7.6% during fiscal 1998 and 1999). A debt balance of
$70,359,000 was outstanding at December 28, 1998.
In June 1999, the Company's Board of Directors declared a $175,000,000
dividend to Carlson Companies of which $120,000,000 was paid in the form of a
promissory note in June 1999 and $55,000,000 was paid in cash. The promissory
note bore annual interest at 7.8% and was due June 30, 2004. In August 1999, the
Company entered into an Intercompany Credit Agreement ("the Intercompany Credit
Agreement") with Carlson Companies, under which the Company can borrow up to
$225,000,000 prior to the completion of the anticipated initial public offering
of the Company's securities, and $105,000,000 after completion of the
anticipated offering and application of the net proceeds to repay a portion of
the intercompany indebtedness. All intercompany indebtedness was refinanced with
the Intercompany Credit Agreement. The amounts borrowed under the Intercompany
Credit Agreement bear interest at the three-month London Inter-Bank Offered Rate
("LIBOR") on the date of the advance plus 1.25%. The Intercompany Credit
Agreement expires on December 31, 2001, or earlier if certain events occur,
including if Carlson Companies' ownership of all outstanding shares of the
Company's common stock falls below 50%, in which case the agreement may be
terminated upon 90 days notice by either party.
INTEREST EXPENSE, NET
Interest expense, net includes the following (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
DECEMBER 29, DECEMBER 28, DECEMBER 27,
1997 1998 1999
------------ ------------ -------------
<S> <C> <C> <C>
Interest expense-affiliate.............................. $2,423 $ 4,136 $10,019
Interest expense-other.................................. 1,655 1,810 1,919
Interest income......................................... (776) (208) (85)
Interest capitalized.................................... (731) (1,522) (1,509)
------ ------- -------
$2,571 $ 4,216 $10,344
====== ======= =======
</TABLE>
7. OTHER RELATED-PARTY TRANSACTIONS:
The Company engages in various transactions with Carlson Companies and its
affiliates, including payment of amounts for federal and certain state income
taxes to Carlson Companies. Additionally, Provisions, a subsidiary of Carlson
Companies, acts as an agent of the Company for procurement of certain food,
beverages and restaurant equipment. Carlson Companies, through NAFCO Insurance
F-16
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
7. OTHER RELATED-PARTY TRANSACTIONS: (CONTINUED)
Company, Ltd., a wholly-owned subsidiary of Carlson Holdings, Inc., also
purchases certain insurance and pays certain insurance claims on behalf of the
Company (see Note 11), for which Carlson Companies receives an administrative
fee. Carlson Companies also has guaranteed the Company's performance under
certain leases of the Company's restaurants (see Note 8) and has leased certain
restaurant properties to the Company with annual rental expense of approximately
$372,000.
Through August 1999, various departments within Carlson Companies billed the
Company for administrative, information technology and corporate finance related
costs on an expense reimbursement or charge for services basis. These charges
are included as a component of general and administrative expenses and totaled
$1,415,000, $1,743,000 and $1,515,000 for the fiscal years ended December 29,
1997 and December 28, 1998 and for the fiscal period through August 1999,
respectively. In August 1999, the Company entered into a Shared Services
Agreement with Carlson Companies which covers services similar to those provided
in prior years as well as additional financial services. The charge for services
provided by Carlson Companies under the terms of the agreement is determined
based on the Company's utilization of the services and Carlsons Companies cost
of providing the underlying services. These charges are included as a component
of general and administrative expenses and totaled $577,000 in fiscal 1999. The
Shared Services Agreement has a term of ten years subject to early termination
if Carlson Companies' ownership falls below 50% of the total outstanding shares
of the Company's common stock.
The Company provides health and dental benefits to qualified employees
through Carlson Companies Employee Benefit Trust. Administrative costs, health
care premiums and funding requirements for this trust are determined based on
the Company's actual claims experience, costs incurred by the trust and
actuarially determined estimates of future losses. The Company's fundings
related to participation in this trust totalled $8,964,000, $9,889,000 and
$11,204,000 in fiscal years 1997, 1998 and 1999, respectively.
Prior to 1999, the Company operated a customer loyalty program that offered
guests points for purchases made in the restaurants. The points could be
redeemed for in-restaurant food items and other awards. During 1999, the Company
converted this program to a loyalty program administered by Gold Points
Corporation, a wholly-owned subsidiary of Carlson Companies. Ongoing payments to
Gold Points Corporation are determined based on estimated redemption costs for
points issued at restaurants and an administrative fee. Payments to Gold Points
Corporation totalled $2,508,000 in 1999 and included $1,823,000 for the
liability under the prior program.
Additionally, Carlson Companies previously allocated certain of its general
and administrative expenses to its subsidiaries based on each subsidiaries'
business activities, as measured by its sales, payroll expense and property, in
proportion to the business activity of all Carlson Companies affiliates. These
charges are included as a component of general and administrative expenses and
totaled $7,142,000 and $11,360,000 for the fiscal years ended December 29, 1997
and December 28, 1998, respectively. Beginning in fiscal 1999, the Company was
not allocated these general and administrative expenses and, accordingly, a
comparable expense is not reflected in the accompanying consolidated statement
of operations.
F-17
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
8. OPERATING LEASES:
The Company leases restaurant facilities, its corporate headquarters
building, and certain equipment under operating leases with fixed terms ranging
from two to twenty years. Most of the leases for restaurant facilities require
the Company to pay certain expenses and the greater of an annual base rent
amount or a percentage of annual gross sales, as defined.
Rent expense on operating leases included in the accompanying consolidated
statements of operations was (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
DECEMBER 29, DECEMBER 28, DECEMBER 27,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Minimum rentals......................................... $24,147 $25,944 $28,772
Contingent rentals...................................... 2,802 3,188 3,359
------- ------- -------
Total............................................... $26,949 $29,132 $32,131
======= ======= =======
</TABLE>
At December 27, 1999, the minimum rental commitments under the long-term
noncancelable leases are as follows (in thousands):
<TABLE>
<S> <C>
2000........................................................ $ 35,574
2001........................................................ 33,215
2002........................................................ 31,337
2003........................................................ 27,306
2004........................................................ 21,776
Thereafter.................................................. 59,450
--------
Total....................................................... $208,658
========
</TABLE>
Certain of these leases, with commitments totaling $38,310,000 at
December 27, 1999, are related to restaurants, which have been closed or sold to
franchisees. The underlying lease obligations for the sold restaurants have been
assumed by third parties, however, the Company remains the primary obligor on
these leases.
Carlson Companies has guaranteed repayment of certain of the aforementioned
leases. Rental commitments guaranteed by Carlson Companies were $2,126,000 at
December 27, 1999.
In addition, as part of its development program, the Company continues to
negotiate and enter into leases related to future restaurant sites. Generally, a
commitment is signed whereby rental payments commence upon the occurrence of
certain events. As of December 27, 1999, the Company had approved leases, not
included in the above table, which will require future base rental payments of
approximately $22,000,000 and had committed a total cost to the Company of
approximately $28,000,000 for such restaurants.
9. RESTAURANT CLOSINGS:
In the third quarter of 1999, the Company identified and decided to close
five restaurants due to substandard operating performance. The Company incurred
pre-tax charges of $2,310,000 and $3,404,000 to write-off restaurant assets and
provide for the estimated net present value of future
F-18
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
9. RESTAURANT CLOSINGS: (CONTINUED)
restaurant lease obligations, respectively. The charges were recorded in other
(income) expense, net in the accompanying consolidated statements of operations.
All five restaurants were closed prior to December 27, 1999.
10. STOCKHOLDER'S EQUITY:
The Company's outstanding common stock consists of one share of stock which
is held by Carlson Companies.
In fiscal 1999, the Company announced its plans and filed for registration
to sell shares of Class A common stock in an initial public offering. The
Company intends to use the net proceeds to repay a portion of the borrowings
under the Intercompany Credit Agreement (see Note 6). Expenses incurred in
connection with the initial public offering of $953,000 have been deferred and
are included within prepaid expenses and other assets in the accompanying
consolidated balance sheets at December 27, 1999.
11. OTHER COMMITMENTS AND CONTINGENCIES:
The Company and its subsidiaries are parties to various legal proceedings
and complaints arising in the ordinary course of business. Since most of these
matters are covered by insurance, management believes that the ultimate
resolution of these matters will not have a material adverse effect on the
Company's consolidated financial statements.
The Company's premiums and costs associated with employee health and dental
insurance are based upon the Company's actual claims. The occurrence of an
unusually large number of claims under the insurance program could have a
materially adverse effect on the Company's consolidated financial statements.
Casualty, general liability and property insurance premiums are paid based
on historical claims experience and the provisions of the insurance policies.
Insurance expense was $8,764,000, $8,520,000 and $9,934,000 for the fiscal years
ended December 29, 1997, December 28, 1998 and December 27, 1999, respectively,
of which $7,211,000, $7,313,000 and $9,226,000, respectively, was paid to an
insurance carrier owned by Carlson Companies.
The Company, through Carlson Companies, has standby letters of credit
totaling $2,907,000 at December 27, 1999 available to secure potential casualty
and general liability insurance costs.
The Company has a 401(k) plan. The plan allows eligible employees to
contribute up to 10 percent of their compensation on a pre-tax basis. The
Company makes a contribution match of 25 percent of employee contributions and
may make a discretionary contribution match up to 25 percent of employee
contributions based upon the Company's profitability. The Board of Directors
authorizes discretionary contributions to the plan. The contribution expense for
the plan was $1,191,000, $1,343,000 and $1,342,000 for the fiscal years ended
December 29, 1997, December 28, 1998 and December 27, 1999, respectively.
The Company has a non-qualified, unfunded deferred compensation plan for
highly compensated employees. The intent of the program is to allow these
employees to contribute to a retirement plan after reaching the maximum limits
of the 401(k) plan. The Company, for the benefit of the employees,
F-19
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
11. OTHER COMMITMENTS AND CONTINGENCIES: (CONTINUED)
administers contributions to the plan. The expense for the deferred compensation
plan was $338,000, $926,000, and $1,440,000 for the fiscal years ended
December 29, 1997, December 28, 1998 and December 27, 1999, respectively.
Certain employees of the Company participate in a long-term incentive plan,
which is administered by Carlson Companies. The expense for the long-term
incentive plan totaled $1,305,000, $1,454,000 and $756,000 for the fiscal years
ended December 29, 1997, December 28, 1998 and December 27, 1999, respectively.
12. SUPPLEMENTAL CASH FLOW INFORMATION:
The following is supplemental cash flow information (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
DECEMBER 29, DECEMBER 28, DECEMBER 27,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Cash paid for:
Interest.............................................. $3,543 $ 5,311 $ 11,522
Income taxes.......................................... 4,616 10,595 11,690
Non-cash investing and financing activities:
Dividend:
Paid with promissory note........................... - - 120,000
Acquisition of restaurant assets through forgiveness
of notes and other receivables...................... - 2,431 -
Debt incurred for purchase of restaurant assets....... - 1,805 -
Note receivable from sale of assets................... - - 2,750
</TABLE>
F-20
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
13. SEGMENT AND GEOGRAPHIC INFORMATION:
The Company has adopted Statement of Financial Accounting Standard No. 131,
"Disclosures About Segments of an Enterprise and Related Information," which
establishes standards for reporting certain information about operating
segments, their products and services, geographic areas of operations and major
customers. The Company's two reportable segments, United States and
international restaurant operations, are strategic business units that offer
similar restaurant products and services, but are managed separately.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. There are no intersegment sales
or transfers. The Company evaluates performance based on operating profit of the
respective segments, before income taxes, accounting changes, nonrecurring items
and interest income and expense.
Segment information for total assets and capital expenditures are not
presented as such information is not used by the Company in measuring the
segment's performance or allocating resources among segments and is impractical
to prepare.
UNITED STATES RESTAURANT OPERATIONS
The United States restaurant segment is responsible for the development,
operation, and franchising of restaurants. Revenues and operating profits for
the United States restaurant segment are derived from operations of company
owned or company operated restaurants, initial franchise fees and ongoing
royalty and licensing fees.
INTERNATIONAL RESTAURANT OPERATIONS
The international restaurant segment is primarily responsible for expanding
business through the franchise system, which includes franchise and joint
venture development. Revenues and operating profits for the international
segment are derived from franchise and concept fees for exclusive development
rights of a geographic territory and ongoing royalty fees. Additionally, the
international segment operating profit is primarily derived from franchise
activities which require minimal assets or capital expenditures.
F-21
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
13. SEGMENT AND GEOGRAPHIC INFORMATION: (CONTINUED)
Summarized financial information concerning the Company's reportable
segments is shown in the following table. The "Other" column includes corporate
items and other income and expense items not allocated to reportable segments
(in thousands):
<TABLE>
<CAPTION>
UNITED STATES INTERNATIONAL
RESTAURANT RESTAURANT
OPERATIONS OPERATIONS OTHER TOTAL
------------- ------------- -------- --------
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED DECEMBER 27, 1999
Revenues.......................................... $678,686 $12,605 $ - $691,291
Income (loss) before income taxes................. 47,507 3,058 (24,401) 26,164
Depreciation and amortization expense............. 29,556 423 1,219 31,198
Equity in losses of joint ventures................ 1,027 (931) - 96
FISCAL YEAR ENDED DECEMBER 28, 1998
Revenues.......................................... $586,678 $12,610 $ - $599,288
Income (loss) before income taxes................. 40,852 1,625 (20,711) 21,766
Depreciation and amortization expense............. 25,755 483 1,219 27,457
Equity in earnings of joint ventures.............. 214 4 - 218
FISCAL YEAR ENDED DECEMBER 29, 1997
Revenues.......................................... $521,820 $12,253 $ - $534,073
Income (loss) before income taxes................. 32,847 3,087 (11,493) 24,441
Depreciation and amortization expense............. 21,623 559 1,219 23,401
Equity in earnings of joint ventures.............. 739 12 - 751
</TABLE>
The following table presents the details of "Other" income (loss) before
income taxes (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
DECEMBER 29, DECEMBER 28, DECEMBER 27,
1997 1998 1999
------------ ------------ -------------
<S> <C> <C> <C>
Corporate expenses...................................... $ (7,689) $(11,510) $ (473)
Interest expense, net................................... (2,571) (4,216) (10,344)
Impaired asset writedown................................ (237) (549) (4,350)
Store closure provisions................................ - - (5,714)
Goodwill amortization expense........................... (1,219) (1,219) (1,219)
Other income (expense), net............................. 223 (3,217) (2,301)
-------- -------- --------
Total............................................... $(11,493) $(20,711) $(24,401)
======== ======== ========
</TABLE>
Corporate expenses primarily consisted of Carlson Companies' allocated
expenses in fiscal years 1997 and 1998.
F-22
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1997, DECEMBER 28, 1998 AND DECEMBER 27, 1999
13. SEGMENT AND GEOGRAPHIC INFORMATION: (CONTINUED)
The Company's long-lived assets are located in the following geographic areas
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 27,
1998 1999
------------ -------------
<S> <C> <C>
United States............................................... $227,731 $255,881
International............................................... 2,458 1,504
-------- --------
Total................................................... $230,189 $257,385
======== ========
</TABLE>
International long-lived assets include trademarks and investments accounted for
using the equity method.
14. SUBSEQUENT EVENT:
SIGNIFICANT SUPPLIER BANKRUPTCY
On January 31, 2000, the national distribution company which is the primary
supplier of the Company's food products filed Chapter 11 bankruptcy under the
U.S. Bankruptcy Code. The Company is transitioning its food distribution to two
national distribution companies. The Company does not believe that these events
will cause a material adverse effect on food costs, operating results or cash
flow of the Company.
F-23
<PAGE>
INSIDE BACK COVER
"CARLSON RESTAURANTS WORLDWIDE, INC. EMERGING BRANDS"
[Logos of Cafe and Dinner House concepts.]
<TABLE>
<S> <C>
SAMBA ROOM ITALIANNI'S RESTAURANTS
CAFES DINNER HOUSES
TAQUERIA CANONITA TIMPANO ITALIAN CHOPHOUSE
- - Mexico City Style Taqueria
</TABLE>
[Graphic of globe with CRW concept logos circling and names of all countries in
which CRW operates in background.]
[Pictures of Emerging Brands menu items.]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9,500,000 Shares
<TABLE>
<S> <C>
[CRW [TGIF
Logo] Logo]
</TABLE>
------------------------
Prospectus
, 2000
------------------------
[BANC OF AMERICA SECURITIES LLCMERRILL LYNCH & CO MORGAN STANLEY DEAN WITTER]
Until , 2000, all dealers that buy, sell or trade the Class A
common stock may be required to deliver a prospectus, regardless of whether they
are participating in the offering. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses in connection with the issuance and distribution of the shares of
Class A common stock being registered hereunder, other than underwriting
commissions and expenses, are set forth below.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 40,310
NASD filing fee............................................. 15,000
New York Stock Exchange listing fee......................... 116,100
Legal fees and expenses..................................... 450,000
Accounting fees and expenses................................ 550,000
Printing and engraving expenses............................. 600,000
Transfer agent fees and expenses............................ 15,000
Miscellaneous expenses...................................... 213,590
----------
Total................................................... $2,000,000
==========
</TABLE>
- ------------------------
* To be filed by amendment.
Each of the amounts set forth above, other than the SEC registration fee and
the NASD filing fee, is an estimate.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, or DGCL, permits
indemnification of officers, directors and other corporate agents under certain
circumstances and subject to certain limitations. The Registrant's Amended and
Restated Certificate of Incorporation and Restated Bylaws provide that the
Registrant shall indemnify its directors, officers, employees and agents to the
full extent permitted by the DGCL, including circumstances in which
indemnification is otherwise discretionary under Delaware law. In addition, the
Registrant plans to enter into separate indemnification agreements with its
directors and executive officers which will require the Registrant, among other
things, to indemnify them against certain liabilities which may arise by reason
of their status or service, other than liabilities arising from acts or
omissions not in good faith or willful misconduct. Carlson Companies, Inc. also
indemnifies its employees against claims, losses or damages incurred as a result
of their actions in the course of their employment, including service as a
director of the Registrant. The Registrant also maintains director and officer
liability insurance.
These indemnification provisions and the indemnification agreements to be
entered into between the Registrant and its executive officers and directors may
be sufficiently broad to permit indemnification of the Registrant's executive
officers and directors for liabilities, including reimbursement of expenses
incurred, arising under the Securities Act of 1933.
The Underwriting Agreement filed as Exhibit 1 to this Registration Statement
provides for indemnification by the Underwriters of the Registrant and its
officers and directors for certain liabilities arising under the Securities Act
or 1933, or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Not applicable.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant, as amended
and as currently in effect.*
3.2 Form of Amended and Restated Certificate of Incorporation of
the Registrant to be effective upon completion of this
offering.
3.3 Bylaws of the Registrant, as currently in effect.*
3.4 Form of Restated Bylaws of the Registrant to be effective
upon completion of this offering.
4 Specimen of Class A common stock certificate.
5 Opinion of Faegre & Benson LLP.
10.1 Shared Services Agreement.*
10.2 Tax Sharing Agreement.*
10.3 Intercompany Credit Agreement.
10.3(a) Intercompany Credit Agreement Amendment No. 1.
10.4 Form of Stock Option Plan.
10.5 TGI Friday's Inc. Deferred Compensation Plan, as amended.*
10.5(a) Amendment No. 3 to the TGI Friday's Inc. Deferred
Compensation Plan.
10.6 Deferred Compensation Agreement between TGI Friday's Inc.
and Wallace Doolin.*
10.7 Procurement Agreement.
10.8 Form of Domestic Development Agreement.
10.9 Form of Domestic Franchise Agreement.
10.10 Form of International Development Agreement.
10.11 Form of International Franchise Agreement.
10.12 Chief Operating Officer, Friday's Domestic-2000 Bonus
Program.
10.13 Chief Operating Officer, Friday's International-2000 Bonus
Program.
10.14 Sr. Vice President, Emerging Brands-2000 Bonus Program.
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Faegre & Benson LLP (included in Exhibit No. 5 to
the Registration Statement).
24.1 Powers of Attorney.*
24.2 Power of Attorney of Curtis C. Nelson.
24.3 Power of Attorney of Eric A. Danziger.
27 Financial Data Schedule.
</TABLE>
- ------------------------
* Previously Filed.
(b) FINANCIAL STATEMENT SCHEDULES
Schedule II, Valuation and Qualifying Accounts and Reserves
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions summarized in Item 14 above, or otherwise,
the Registrant has been advised that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification is
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act, and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the Underwriters,
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant under Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on April 20, 2000.
<TABLE>
<S> <C> <C>
CARLSON RESTAURANTS WORLDWIDE INC.
By: /s/ WALLACE B. DOOLIN
-----------------------------------------
Wallace B. Doolin
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities indicated on April 20, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ WALLACE B. DOOLIN President, Chief Executive Officer and
------------------------------------------- Director
Wallace B. Doolin (Principal Executive Officer and Director)
/s/ JEFF D. WARNE
------------------------------------------- Chief Financial Officer
Jeff D. Warne (Principal Financial and Accounting Officer)
/s/ CURTIS C. NELSON*
------------------------------------------- Director
Curtis C. Nelson
/s/ EDWIN C. GAGE*
------------------------------------------- Director
Edwin C. Gage
/s/ MARTYN R. REDGRAVE*
------------------------------------------- Director
Martyn R. Redgrave
/s/ RALPH W. BEHA*
------------------------------------------- Director
Ralph W. Beha
/s/ ERIC A. DANZIGER*
------------------------------------------- Director
Eric A. Danziger
</TABLE>
- ------------------------
* Wallace B. Doolin, by signing his name hereto, does hereby sign this
document on behalf of each of the above-named officers and/or directors of
the Registrant pursuant to powers of attorney duly executed by such persons.
<TABLE>
<S> <C> <C>
By: /s/ WALLACE B. DOOLIN
-----------------------------------------
Wallace B. Doolin, Attorney-in-Fact
</TABLE>
II-4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholder of
Carlson Restaurants Worldwide Inc.
We have audited in accordance with generally accepted auditing standards the
consolidated financial statements of Carlson Restaurants Worldwide Inc. and
subsidiaries included in this registration statement on Form S-1 and have issued
our report thereon dated February 18, 2000. Our audits were made for the purpose
of forming an opinion on the basic consolidated financial statements taken as a
whole. Schedule II, Valuation and Qualifying Accounts, is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Dallas, Texas,
February 18, 2000
S-1
<PAGE>
SCHEDULE II
CARLSON RESTAURANTS WORLDWIDE INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED (CREDITED)
BEGINNING OF TO EXPENSE BALANCE AT
PERIOD (INCOME) DEDUCTIONS(A) END OF PERIOD
------------ ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Allowance for non-collection of
accounts receivable:
1997............................... $1,359 $ 375 $ (911) $ 823
1998............................... 823 1,012 (309) 1,526
1999............................... 1,526 799 (728) 1,597
Allowance for non-collection of notes
receivable:
1997............................... 1,629 (925) (116) 588
1998............................... 588 9 (547) 50
1999............................... 50 - - 50
</TABLE>
- ------------------------
(a) Deductions result from write-off of accounts or notes receivable and the
related allowance for non-collection.
S-2
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant, as amended
and as currently in effect.*
3.2 Form of Amended and Restated Certificate of Incorporation of
the Registrant to be effective upon completion of this
offering.
3.3 Bylaws of the Registrant, as currently in effect.*
3.4 Form of Restated Bylaws of the Registrant to be effective
upon completion of this offering.
4 Specimen of Class A common stock certificate.
5 Opinion of Faegre & Benson LLP.
10.1 Shared Services Agreement.*
10.2 Tax Sharing Agreement.*
10.3 Intercompany Credit Agreement.
10.3(a) Intercompany Credit Agreement Amendment No. 1.
10.4 Form of Stock Option Plan.
10.5 TGI Friday's Inc. Deferred Compensation Plan, as amended.*
10.5(a) Amendment No. 3 to the TGI Friday's Deferred Compensation
Plan.
10.6 Deferred Compensation Agreement between TGI Friday's Inc.
and Wallace Doolin.*
10.7 Procurement Agreement.
10.8 Form of Domestic Development Agreement.
10.9 Form of Domestic Franchise Agreement.
10.10 Form of International Development Agreement.
10.11 Form of International Franchise Agreement.
10.12 Chief Operating Officer, Friday's Domestic-2000 Bonus
Program.
10.13 Chief Operating Officer, Friday's International-2000 Bonus
Program.
10.14 Sr. Vice President, Emerging Brands-2000 Bonus Program.
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Faegre & Benson LLP (included in Exhibit No. 5 to
the Registration Statement).
24.1 Powers of Attorney.*
24.2 Power of Attorney of Curtis C. Nelson.
24.3 Power of Attorney of Eric A. Danziger.
27 Financial Data Schedule.
</TABLE>
- ------------------------
* Previously filed.
<PAGE>
_______________ SHARES
CARLSON RESTAURANTS WORLDWIDE INC.
CLASS A COMMON STOCK
UNDERWRITING AGREEMENT
DATED ___________ ___, 2000
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................2
COMPLIANCE WITH REGISTRATION REQUIREMENTS.......................................................2
OFFERING MATERIALS FURNISHED TO UNDERWRITERS....................................................2
DISTRIBUTION OF OFFERING MATERIAL BY THE COMPANY................................................3
THE UNDERWRITING AGREEMENT......................................................................3
AUTHORIZATION OF THE COMMON SHARES..............................................................3
NO APPLICABLE REGISTRATION OR OTHER SIMILAR RIGHTS..............................................3
NO MATERIAL ADVERSE CHANGE......................................................................3
INDEPENDENT ACCOUNTANTS.........................................................................3
PREPARATION OF THE FINANCIAL STATEMENTS.........................................................4
INCORPORATION AND GOOD STANDING OF THE COMPANY AND ITS SUBSIDIARIES.............................4
CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS..................................................4
STOCK EXCHANGE LISTING;.........................................................................5
NON-CONTRAVENTION OF EXISTING INSTRUMENTS; NO FURTHER AUTHORIZATIONS OR APPROVALS REQUIRED......5
NO MATERIAL ACTIONS OR PROCEEDINGS..............................................................5
INTELLECTUAL PROPERTY RIGHTS....................................................................6
ALL NECESSARY PERMITS, ETC......................................................................6
TITLE TO PROPERTIES.............................................................................6
TAX LAW COMPLIANCE..............................................................................6
COMPANY NOT AN INVESTMENT COMPANY...............................................................6
INSURANCE.......................................................................................6
NO PRICE STABILIZATION OR MANIPULATION..........................................................7
RELATED PARTY TRANSACTIONS......................................................................7
NO UNLAWFUL CONTRIBUTIONS OR OTHER PAYMENTS.....................................................7
COMPANY'S ACCOUNTING SYSTEM.....................................................................7
COMPLIANCE WITH ENVIRONMENTAL LAWS..............................................................7
-i-
<PAGE>
ERISA COMPLIANCE................................................................................8
SECTION 2. PURCHASE, SALE AND DELIVERY OF COMMON SHARES.................................................9
THE FIRM COMMON SHARES..........................................................................9
THE FIRST CLOSING DATE..........................................................................9
THE OPTIONAL COMMON SHARES; THE SECOND CLOSING DATE.............................................9
PUBLIC OFFERING OF THE COMMON SHARES...........................................................10
PAYMENT FOR THE COMMON SHARES..................................................................10
DELIVERY OF THE COMMON SHARES..................................................................10
DELIVERY OF PROSPECTUS TO THE UNDERWRITERS.....................................................10
SECTION 3. ADDITIONAL COVENANTS OF THE COMPANY.........................................................10
REPRESENTATIVE'S REVIEW OF PROPOSED AMENDMENTS AND SUPPLEMENTS.................................11
SECURITIES ACT COMPLIANCE......................................................................11
AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS AND OTHER SECURITIES ACT MATTERS..................11
COPIES OF ANY AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS.....................................11
BLUE SKY COMPLIANCE............................................................................12
USE OF PROCEEDS................................................................................12
TRANSFER AGENT.................................................................................12
EARNINGS STATEMENT.............................................................................12
PERIODIC REPORTING OBLIGATIONS.................................................................12
AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES...........................................12
FUTURE REPORTS TO THE REPRESENTATIVES..........................................................13
SECTION 4. PAYMENT OF EXPENSES.........................................................................13
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS...........................................13
ACCOUNTANTS' COMFORT LETTER....................................................................14
COMPLIANCE WITH REGISTRATION REQUIREMENTS; NO STOP ORDER, NO OBJECTION FROM NASD...............14
NO MATERIAL ADVERSE CHANGE.....................................................................14
-ii-
<PAGE>
OPINION OF COUNSEL FOR THE COMPANY.............................................................14
OPINION OF COUNSEL FOR THE UNDERWRITERS........................................................15
OFFICERS' CERTIFICATE..........................................................................15
BRING-DOWN COMFORT LETTER......................................................................15
LOCK-UP AGREEMENT FROM CERTAIN STOCKHOLDERS OF THE COMPANY.....................................15
ADDITIONAL DOCUMENTS...........................................................................16
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES.....................................................16
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT.............................................................16
SECTION 8. INDEMNIFICATION.............................................................................16
INDEMNIFICATION OF THE UNDERWRITERS............................................................17
INDEMNIFICATION OF THE COMPANY, ITS DIRECTORS AND OFFICERS.....................................18
NOTIFICATIONS AND OTHER INDEMNIFICATION PROCEDURES.............................................18
SETTLEMENTS....................................................................................19
SECTION 9. CONTRIBUTION................................................................................19
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS.........................................21
SECTION 11. TERMINATION OF THIS AGREEMENT..............................................................21
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY........................................22
SECTION 13. NOTICES....................................................................................22
SECTION 14. SUCCESSORS.................................................................................23
SECTION 15. PARTIAL UNENFORCEABILITY...................................................................23
SECTION 16. GOVERNING LAW PROVISIONS...................................................................23
SECTION 17. GENERAL PROVISIONS.........................................................................23
SCHEDULES
- ---------
Schedule A........ Schedule of Underwriters
EXHIBITS
- --------
Exhibit A......... Form of Opinion of Counsel to the Company
-iii-
<PAGE>
Exhibit B......... Form of Lock-Up Agreement
</TABLE>
-iv-
<PAGE>
UNDERWRITING AGREEMENT
[Date]
BANC OF AMERICA SECURITIES LLC
MERRILL, LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
[As Representatives of the several Underwriters]
c/o BANC OF AMERICA SECURITIES LLC
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentlemen:
Carlson Restaurants Worldwide Inc., a Delaware corporation (the
"Company), proposes to issue and sell to the several underwriters named in
SCHEDULE A (the "Underwriters") an aggregate of [___] shares (the "Firm Common
Shares") of its Class A Common Stock, par value $[___] per share (the "Common
Stock"). In addition, the Company has granted to the Underwriters an option to
purchase up to an additional [___] shares (the "Optional Common Shares") of
Common Stock, as provided in Section 2. The Firm Common Shares and, if and to
the extent such option is exercised, the Optional Common Shares are
collectively called the "Common Shares". Banc of America Securities LLC,
Merrill, Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co.
Incorporated have agreed to act as representatives of the several Underwriters
(in such capacity, the "Representatives") in connection with the offering and
sale of the Common Shares.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (File No.
333-85601), which contains a form of prospectus to be used in connection with
the public offering and sale of the Common Shares. Such registration
statement, as amended, including the financial statements, exhibits and
schedules thereto, in the form in which it was declared effective by the
Commission under the Securities Act of 1933 and the rules and regulations
promulgated thereunder (collectively, the "Securities Act"), including any
information deemed to be a part thereof at the time of effectiveness pursuant
to Rule 430A or Rule 434 under the Securities Act, is called the "Registration
Statement". Any registration statement filed by the Company pursuant to Rule
462(b) under the Securities Act is called the "Rule 462(b) Registration
Statement", and from and after the date and time of filing of the Rule 462(b)
Registration Statement the term "Registration Statement" shall include the
Rule 462(b) Registration Statement. Such prospectus, in the form first used by
the Underwriters to confirm sales of the Common Shares, is called the
"Prospectus"; PROVIDED, HOWEVER, if the Company has, with the consent of Banc
of America Securities, elected to rely upon Rule 434 under the Securities Act,
the term "Prospectus" shall mean the Company's prospectus subject to
completion (each, a "preliminary prospectus") dated [___] (such preliminary
prospectus is called the "Rule 434 preliminary prospectus"), together with the
applicable term sheet (the "Term Sheet") prepared
-1-
<PAGE>
and filed by the Company with the Commission under Rules 434 and 424(b) under
the Securities Act and all references in this Agreement to the date of the
Prospectus shall mean the date of the Term Sheet. All references in this
Agreement to the Registration Statement, the Rule 462(b) Registration
Statement, a preliminary prospectus, the Prospectus or the Term Sheet, or any
amendments or supplements to any of the foregoing, shall include any copy
thereof filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval System ("EDGAR").
The Company hereby confirms its agreements with the Underwriters as
follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents, warrants and covenants to each
Underwriter as follows:
(a) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has
complied to the Commission's satisfaction with all requests of the
Commission for additional or supplemental information. No stop order
suspending the effectiveness of the Registration Statement or any Rule
462(b) Registration Statement is in effect and no proceedings for such
purpose have been instituted or are pending or, to the best knowledge of
the Company, are contemplated or threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied in
all material respects with the Securities Act and, if filed by electronic
transmission pursuant to EDGAR (except as may be permitted by Regulation
S-T under the Securities Act), was identical to the copy thereof delivered
to the Underwriters for use in connection with the offer and sale of the
Common Shares. Each of the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendment thereto, at the
time it became effective and at all subsequent times, complied and will
comply in all material respects with the Securities Act and did not and
will not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus, as amended or
supplemented, as of its date and at all subsequent times, did not and will
not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements
thereto, made in reliance upon and in conformity with information relating
to any Underwriter furnished to the Company in writing by the
Representatives expressly for use therein. There are no contracts or other
documents required to be described in the Prospectus or to be filed as
exhibits to the Registration Statement which have not been described or
filed as required.
(b) OFFERING MATERIALS FURNISHED TO UNDERWRITERS. The Company has
delivered to the Representatives one complete manually signed copy of the
Registration Statement and
-2-
<PAGE>
of each consent and certificate of experts filed as a part thereof, and
conformed copies of the Registration Statement (without exhibits) and
preliminary prospectuses and the Prospectus, as amended or supplemented,
in such quantities and at such places as the Representatives have
reasonably requested for each of the Underwriters.
(c) DISTRIBUTION OF OFFERING MATERIAL BY THE COMPANY. The Company has
not distributed and will not distribute, prior to the later of the Second
Closing Date (as defined below) and the completion of the Underwriters'
distribution of the Common Shares, any offering material in connection
with the offering and sale of the Common Shares other than a preliminary
prospectus, the Prospectus or the Registration Statement.
(d) THE UNDERWRITING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable in accordance with its terms,
except as rights to indemnification hereunder may be limited by
applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(e) AUTHORIZATION OF THE COMMON SHARES. The Common Shares to be
purchased by the Underwriters from the Company have been duly authorized
for issuance and sale pursuant to this Agreement and, when issued and
delivered by the Company pursuant to this Agreement, will be validly
issued, fully paid and nonassessable.
(f) NO APPLICABLE REGISTRATION OR OTHER SIMILAR RIGHTS. There are no
persons with registration or other similar rights to have any equity or
debt securities registered for sale under the Registration Statement or
included in the offering contemplated by this Agreement except for such
rights as have been duly waived.
(g) NO MATERIAL ADVERSE CHANGE. Except as otherwise disclosed in the
Prospectus, subsequent to the respective dates as of which information is
given in the Prospectus: (i) there has been no material adverse change, or
any development that could reasonably be expected to result in a material
adverse change, in the condition, financial or otherwise, or in the
earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity (any such change is called a
"Material Adverse Change"); (ii) the Company and its subsidiaries,
considered as one entity, have not incurred any material liability or
obligation, indirect, direct or contingent, not in the ordinary course of
business nor entered into any material transaction or agreement not in the
ordinary course of business; and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company or, except
for dividends paid to the Company or other subsidiaries, any of its
subsidiaries on any class of capital stock or repurchase or redemption by
the Company or any of its subsidiaries of any class of capital stock.
(h) INDEPENDENT ACCOUNTANTS. Arthur Andersen LLP, independent
auditors, who have expressed their opinion with respect to the financial
statements (which term as used in this Agreement includes the related
notes thereto) filed with the Commission as a part of the Registration
Statement and included in the Prospectus, are independent public or
certified public accountants as required by the Securities Act.
-3-
<PAGE>
(i) PREPARATION OF THE FINANCIAL STATEMENTS. The financial statements
filed with the Commission as a part of the Registration Statement and
included in the Prospectus present fairly the consolidated financial
position of the Company and its subsidiaries as of and at the dates
indicated and the results of their operations and cash flows for the
periods specified. Such financial statements have been prepared in
conformity with generally accepted accounting principles as applied in
the United States applied on a consistent basis throughout the periods
involved, except as may be expressly stated in the related notes thereto.
No other financial statements or supporting schedules are required to be
included in the Registration Statement. The financial data set forth in
the Prospectus under the captions "Summary--Summary Consolidated
Financial Data", and "Capitalization" fairly present the information set
forth therein on a basis consistent with that of the audited financial
statements contained in the Registration Statement.
(j) INCORPORATION AND GOOD STANDING OF THE COMPANY AND ITS
SUBSIDIARIES. Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation except, with
respect to such subsidiaries, where the failure to be duly incorporated
or in good standing would not result in a Material Adverse Change. Each
of the Company and its subsidiaries have corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and, in the case of the Company, to enter
into and perform its obligations under this Agreement, except, with
respect to such subsidiaries, where the lack of such power and authority
would not result in a Material Adverse Change. Each of the Company and
each subsidiary is duly qualified as a foreign corporation to transact
business and is in good standing in each other jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing
of property or the conduct of business, except such jurisdictions where
the failure to so qualify or to be in good standing would not,
individually or in the aggregate, result in a Material Adverse Change.
All of the issued and outstanding capital stock of each subsidiary has
been duly authorized and validly issued, is fully paid and nonassessable
and is owned by the Company, directly or through subsidiaries, free and
clear of any security interest, mortgage, pledge, lien, encumbrance or
claim except, with respect to such subsidiaries, where the lack of such
due authorization and valid issuance and full payment and
non-assesibility would not result in a Material Adverse Change. The
Company does not own or control, directly or indirectly, any corporation,
association or other entity other than the subsidiaries listed in Exhibit
22i to the Registration Statement.
(k) CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS. The authorized,
issued and outstanding capital stock of the Company is as set forth in
the Prospectus under the caption "Capitalization." The Common Stock
(including the Common Shares) conforms in all material respects to the
description thereof contained in the Prospectus. All of the issued and
outstanding shares of Common Stock have been duly authorized and validly
issued, are fully paid and nonassessable and have been issued in
compliance with federal and state securities laws. None of the
outstanding shares of Common Stock were issued in violation of any
preemptive rights, rights of first refusal or other similar rights to
subscribe for or purchase securities of the Company. There are no
authorized or outstanding options, warrants, preemptive rights, rights of
first refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock of
the Company or any of its subsidiaries other than those accurately
described in the Prospectus. The description of the Company's stock
option, stock bonus and other stock plans or
-4-
<PAGE>
arrangements, and the options or other rights granted thereunder, set
forth in the Prospectus accurately and fairly presents the information
required to be shown with respect to such plans, arrangements, options
and rights.
(l) STOCK EXCHANGE LISTING. The Common Shares have been approved for
listing on the New York Stock Exchange, subject only to official notice of
issuance.
(m) NON-CONTRAVENTION OF EXISTING INSTRUMENTS; NO FURTHER
AUTHORIZATIONS OR APPROVALS REQUIRED. Neither the Company nor any of its
subsidiaries is in violation of its charter or by-laws or is in default
(or, with the giving of notice or lapse of time, would be in default)
("Default") under any indenture, mortgage, loan or credit agreement,
note, contract, franchise, lease or other instrument to which the Company
or any of its subsidiaries is a party or by which it or any of them may
be bound or to which any of the property or assets of the Company or any
of its subsidiaries is subject (each, an "Existing Instrument"), except
for such Defaults as would not, individually or in the aggregate, result
in a Material Adverse Change. The Company's execution, delivery and
performance of this Agreement and consummation of the transactions
contemplated hereby and by the Prospectus (i) have been duly authorized
by all necessary corporate action and will not result in any violation of
the provisions of the charter or by-laws of the Company or any
subsidiary, (ii) will not conflict with or constitute a breach of, or
Default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
of its subsidiaries pursuant to, or require the consent of any other
party to, any Existing Instrument, except for such conflicts, breaches,
Defaults, liens, charges or encumbrances as would not, individually or in
the aggregate, result in a Material Adverse Change and (iii) will not
result in any violation of any law, administrative regulation or
administrative or court decree applicable to the Company or any
subsidiary. No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental or
regulatory authority or agency, is required for the Company's execution,
delivery and performance of this Agreement and consummation of the
transactions contemplated hereby and by the Prospectus, except such as
have been obtained or made by the Company and are in full force and
effect under the Securities Act, applicable state securities or blue sky
laws and from the National Association of Securities Dealers, Inc. (the
"NASD").
(n) NO MATERIAL ACTIONS OR PROCEEDINGS. There are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened (i) against or affecting the Company or
any of its subsidiaries, (ii) which has as the subject thereof any
officer or director of, or property owned or leased by, the Company or
any of its subsidiaries or (iii) relating to environmental or
discrimination matters, where in any such case (A) there is a reasonable
possibility that such action, suit or proceeding might be determined
adversely to the Company or such subsidiary and (B) any such action, suit
or proceeding, if so determined adversely, would reasonably be expected
to result in a Material Adverse Change or adversely affect the
consummation of the transactions contemplated by this Agreement. No
material labor dispute with the employees of the Company or any of its
subsidiaries, or with the employees of any principal supplier of goods or
services to the Company exists or, to the best of the Company's
knowledge, is threatened or imminent.
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(o) INTELLECTUAL PROPERTY RIGHTS. The Company and its subsidiaries own
or possess sufficient trademarks, trade names, patent rights, copyrights,
licenses, approvals, trade secrets and other similar rights
(collectively, "Intellectual Property Rights") reasonably necessary to
conduct their businesses as now conducted; and the expected expiration of
any of such Intellectual Property Rights would not result in a Material
Adverse Change. Neither the Company nor any of its subsidiaries has
received any notice of infringement or conflict with asserted
Intellectual Property Rights of others, which infringement or conflict,
if the subject of an unfavorable decision, would result in a Material
Adverse Change.
(p) ALL NECESSARY PERMITS, ETC. The Company and each subsidiary
possess such valid and current certificates, authorizations or permits
issued by the appropriate state, federal or foreign regulatory agencies
or bodies necessary to conduct their respective businesses, and neither
the Company nor any subsidiary has received any notice of proceedings
relating to the revocation or modification of, or non-compliance with,
any such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
could result in a Material Adverse Change.
(q) TITLE TO PROPERTIES. The Company and each of its subsidiaries has
good and marketable title to all the properties and assets reflected as
owned in the financial statements referred to in Section 1(i) above (or
elsewhere in the Prospectus), in each case free and clear of any security
interests, mortgages, liens, encumbrances, equities, claims and other
defects, except such as do not materially and adversely affect the value
of such property and do not materially interfere with the use made or
proposed to be made of such property by the Company or such subsidiary.
The real property, improvements, equipment and personal property held
under lease by the Company or any subsidiary are held under valid and
enforceable leases, with such exceptions as are not material and do not
materially interfere with the use made or proposed to be made of such
real property, improvements, equipment or personal property by the
Company or such subsidiary.
(r) TAX LAW COMPLIANCE. The Company and its consolidated subsidiaries
have filed all necessary federal, state and foreign income and franchise
tax returns or have properly requested extensions thereof and have paid
all taxes required to be paid by any of them and, if due and payable, any
related or similar assessment, fine or penalty levied against any of
them. The Company has made adequate charges, accruals and reserves in the
applicable financial statements referred to in Section 1(i) above in
respect of all federal, state and foreign income and franchise taxes for
all periods as to which the tax liability of the Company or any of its
consolidated subsidiaries has not been finally determined.
(s) COMPANY NOT AN "INVESTMENT COMPANY". The Company has been advised
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Company is not, and after
receipt of payment for the Common Shares will not be, an "investment
company" within the meaning of the Investment Company Act and will conduct
its business in a manner so that it will not become subject to the
Investment Company Act.
(t) INSURANCE. Each of the Company and its subsidiaries are insured or
reinsured by recognized, financially sound and reputable institutions with
policies in such amounts and with such deductibles and covering such risks
as are generally deemed adequate and
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customary for their businesses including, but not limited to, policies
covering real and personal property owned or leased by the Company and
its subsidiaries against theft, damage, destruction, acts of vandalism
and earthquakes. The Company has no reason to believe that it or any
subsidiary will not be able (i) to renew its existing insurance coverage
as and when such policies expire or (ii) to obtain comparable coverage
from similar institutions as may be necessary or appropriate to conduct
its business as now conducted and at a cost that would not result in a
Material Adverse Change. Neither of the Company nor any subsidiary has
been denied any insurance coverage which it has sought or for which it
has applied.
(u) NO PRICE STABILIZATION OR MANIPULATION. The Company has not taken
and will not take, directly or indirectly, any action designed to or that
might be reasonably expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or
resale of the Common Shares.
(v) RELATED PARTY TRANSACTIONS. There are no business relationships or
related-party transactions involving the Company or any subsidiary or any
other person required to be described in the Prospectus which have not
been described as required.
(w) NO UNLAWFUL CONTRIBUTIONS OR OTHER PAYMENTS. Neither the Company
nor any of its subsidiaries nor, to the best of the Company's knowledge,
any employee or agent of the Company or any subsidiary, has made any
contribution or other payment to any official of, or candidate for, any
federal, state or foreign office in violation of any law or of the
character required to be disclosed in the Prospectus.
(x) COMPANY'S ACCOUNTING SYSTEM. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles as applied in the United States and to
maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization;
and (iv) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(y) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as would not,
individually or in the aggregate, result in a Material Adverse Change (i)
neither the Company nor any of its subsidiaries is in violation of any
federal, state, local or foreign law or regulation relating to pollution
or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum and petroleum products
(collectively, "Materials of Environmental Concern"), or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environment
Concern (collectively, "Environmental Laws"), which violation includes,
but is not limited to, noncompliance with any permits or other
governmental authorizations required for the operation of the business of
the Company or its subsidiaries under applicable Environmental Laws, or
noncompliance with the terms and conditions
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thereof, nor has the Company or any of its subsidiaries received any
written communication, whether from a governmental authority, citizens
group, employee or otherwise, that alleges that the Company or any of its
subsidiaries is in violation of any Environmental Law; (ii) there is no
claim, action or cause of action filed with a court or governmental
authority, no investigation with respect to which the Company has
received written notice, and no written notice by any person or entity
alleging potential liability for investigatory costs, cleanup costs,
governmental responses costs, natural resources damages, property
damages, personal injuries, attorneys' fees or penalties arising out of,
based on or resulting from the presence, or release into the environment,
of any Material of Environmental Concern at any location owned, leased or
operated by the Company or any of its subsidiaries, now or in the past
(collectively, "Environmental Claims"), pending or, to the best of the
Company's knowledge, threatened against the Company or any of its
subsidiaries or any person or entity whose liability for any
Environmental Claim the Company or any of its subsidiaries has retained
or assumed either contractually or by operation of law; and (iii) to the
best of the Company's knowledge, there are no past or present actions,
activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge, presence or
disposal of any Material of Environmental Concern, that reasonably could
result in a violation of any Environmental Law or form the basis of a
potential Environmental Claim against the Company or any of its
subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of its subsidiaries has retained
or assumed either contractually or by operation of law.
(z) ERISA COMPLIANCE. The Company and its subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or
maintained by the Company, its subsidiaries or their "ERISA Affiliates"
(as defined below) are in compliance in all material respects with ERISA.
"ERISA Affiliate" means, with respect to the Company or a subsidiary, any
member of any group of organizations described in Sections 414(b),(c),(m)
or (o) of the Internal Revenue Code of 1986, as amended, and the
regulations and published interpretations thereunder (the "Code") of
which the Company or such subsidiary is a member. No "reportable event"
(as defined under ERISA) has occurred or is reasonably expected to occur
with respect to any "employee benefit plan" established or maintained by
the Company, its subsidiaries or any of their ERISA Affiliates. No
"employee benefit plan" established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates, if such "employee benefit
plan" were terminated, would have any "amount of unfunded benefit
liabilities" (as defined under ERISA). Neither the Company, its
subsidiaries nor any of their ERISA Affiliates has incurred or reasonably
expects to incur any liability under (i) Title IV of ERISA with respect
to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee
benefit plan" established or maintained by the Company, its subsidiaries
or any of their ERISA Affiliates that is intended to be qualified under
Section 401(a) of the Code is so qualified and nothing has occurred,
whether by action or failure to act, which would cause the loss of such
qualification.
Any certificate signed by an officer of the Company and delivered to
the Representatives or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the
matters set forth therein.
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SECTION 2. PURCHASE, SALE AND DELIVERY OF THE COMMON SHARES.
THE FIRM COMMON SHARES. The Company agrees to issue and sell to the
several Underwriters the Firm Common Shares upon the terms herein set forth.
On the basis of the representations, warranties and agreements herein
contained, and upon the terms but subject to the conditions herein set forth,
the Underwriters agree, severally and not jointly, to purchase from the
Company the respective number of Firm Common Shares set forth opposite their
names on SCHEDULE A. The purchase price per Firm Common Share to be paid by
the several Underwriters to the Company shall be $[___] per share.
THE FIRST CLOSING DATE. Delivery of certificates for the Firm Common
Shares to be purchased by the Underwriters and payment therefor shall be made
at the offices of Banc of America Securities, 600 Montgomery Street, San
Francisco, California (or such other place as may be agreed to by the Company
and the Representatives) at 6:00 a.m. San Francisco time, on _______ __, 2000,
or such other time and date not later than 10:30 a.m. San Francisco time, on
_______ __, 2000, as the Representatives shall designate by notice to the
Company (the time and date of such closing are called the "First Closing
Date"). The Company hereby acknowledges that circumstances under which the
Representatives may provide notice to postpone the First Closing Date as
originally scheduled include, but are in no way limited to, any determination
by the Company or the Representatives to recirculate to the public copies of
an amended or supplemented Prospectus or a delay as contemplated by the
provisions of Section 10.
THE OPTIONAL COMMON SHARES; THE SECOND CLOSING DATE. In addition, on
the basis of the representations, warranties and agreements herein contained,
and upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally and
not jointly, up to an aggregate of [___] Optional Common Shares from the
Company at the purchase price per share to be paid by the Underwriters for the
Firm Common Shares. The option granted hereunder is for use by the
Underwriters solely in covering any over-allotments in connection with the
sale and distribution of the Firm Common Shares. The option granted hereunder
may be exercised at any time (but not more than once) upon notice by the
Representatives to the Company, which notice may be given at any time within
30 days from the date of this Agreement. Such notice shall set forth (i) the
aggregate number of Optional Common Shares as to which the Underwriters are
exercising the option, (ii) the names and denominations in which the
certificates for the Optional Common Shares are to be registered and (iii) the
time, date and place at which such certificates will be delivered (which time
and date may be simultaneous with, but not earlier than, the First Closing
Date; and in such case the term "First Closing Date" shall refer to the time
and date of delivery of certificates for the Firm Common Shares and the
Optional Common Shares). Such time and date of delivery, if subsequent to the
First Closing Date, is called the "Second Closing Date" and shall be
determined by the Representatives and shall not be earlier than three nor
later than five full business days after delivery of such notice of exercise.
If any Optional Common Shares are to be purchased, each Underwriter agrees,
severally and not jointly, to purchase the number of Optional Common Shares
(subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the total
number of Optional Common Shares to be purchased as the number of Firm Common
Shares set forth on SCHEDULE A opposite the name of such Underwriter bears to
the total number of Firm Common Shares. The Representatives may
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cancel the option at any time prior to its expiration by giving written notice
of such cancellation to the Company.
PUBLIC OFFERING OF THE COMMON SHARES. The Representatives hereby
advise the Company that the Underwriters intend to offer for sale to the
public, as described in the Prospectus, their respective portions of the
Common Shares as soon after this Agreement has been executed and the
Registration Statement has been declared effective as the Representatives, in
their sole judgment, have determined is advisable and practicable.
PAYMENT FOR THE COMMON SHARES. Payment for the Common Shares shall be
made at the First Closing Date (and, if applicable, at the Second Closing
Date) by wire transfer of immediately available funds to the order of the
Company.
It is understood that the Representatives have been authorized, for
their own account and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Common Shares and any Optional Common Shares the Underwriters have agreed
to purchase. Banc of America Securities, individually and not as the
Representatives of the Underwriters, may (but shall not be obligated to) make
payment for any Common Shares to be purchased by any Underwriter whose funds
shall not have been received by the Representatives by the First Closing Date
or the Second Closing Date, as the case may be, for the account of such
Underwriter, but any such payment shall not relieve such Underwriter from any
of its obligations under this Agreement.
DELIVERY OF THE COMMON SHARES. The Company shall deliver, or cause to
be delivered, to the Representatives for the accounts of the several
Underwriters certificates for the Firm Common Shares at the First Closing
Date, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. The Company
shall also deliver, or cause to be delivered, to the Representatives for the
accounts of the several Underwriters, certificates for the Optional Common
Shares the Underwriters have agreed to purchase at the First Closing Date or
the Second Closing Date, as the case may be, against the irrevocable release
of a wire transfer of immediately available funds for the amount of the
purchase price therefor. The certificates for the Common Shares shall be in
definitive form and registered in such names and denominations as the
Representatives shall have requested at least two full business days prior to
the First Closing Date (or the Second Closing Date, as the case may be) and
shall be made available for inspection on the business day preceding the First
Closing Date (or the Second Closing Date, as the case may be) at a location in
New York City as the Representatives may designate. Time shall be of the
essence, and delivery at the time and place specified in this Agreement is a
further condition to the obligations of the Underwriters.
DELIVERY OF PROSPECTUS TO THE UNDERWRITERS. Not later than 12:00 p.m.
on the second business day following the date the Common Shares are first
released by the Underwriters for sale to the public, the Company shall deliver
or cause to be delivered, copies of the Prospectus in such quantities and at
such places as the Representatives shall request.
SECTION 3. ADDITIONAL COVENANTS OF THE COMPANY.
The Company further covenants and agrees with each
Underwriter as follows:
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(a) REPRESENTATIVE'S REVIEW OF PROPOSED AMENDMENTS AND SUPPLEMENTS.
During such period beginning on the date hereof and ending on the later
of the First Closing Date or such date, as in the opinion of counsel for
the Underwriters, the Prospectus is no longer required by law to be
delivered in connection with sales by an Underwriter or dealer (the
"Prospectus Delivery Period"), prior to amending or supplementing the
Registration Statement (including any registration statement filed under
Rule 462(b) under the Securities Act) or the Prospectus, the Company
shall furnish to the Representatives for review a copy of each such
proposed amendment or supplement, and the Company shall not file any such
proposed amendment or supplement to which the Representatives reasonably
object.
(b) SECURITIES ACT COMPLIANCE. After the date of this Agreement, the
Company shall promptly advise the Representatives in writing (i) of the
receipt of any comments of, or requests for additional or supplemental
information from, the Commission, (ii) of the time and date of any filing
of any post-effective amendment to the Registration Statement or any
amendment or supplement to any preliminary prospectus or the Prospectus,
(iii) of the time and date that any post-effective amendment to the
Registration Statement becomes effective and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto or of any
order preventing or suspending the use of any preliminary prospectus or
the Prospectus, or of any proceedings to remove, suspend or terminate
from listing or quotation the Common Stock from any securities exchange
upon which it is listed for trading or included or designated for
quotation, or of the threatening or initiation of any proceedings for any
of such purposes. If the Commission shall enter any such stop order at
any time, the Company will use its best efforts to obtain the lifting of
such order at the earliest possible moment. Additionally, the Company
agrees that it shall comply with the provisions of Rules 424(b), 430A and
434, as applicable, under the Securities Act and will use its reasonable
efforts to confirm that any filings made by the Company under such Rule
424(b) were received in a timely manner by the Commission.
(c) AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS AND OTHER SECURITIES
ACT MATTERS. If, during the Prospectus Delivery Period, any event shall
occur or condition exist as a result of which it is necessary to amend or
supplement the Prospectus in order to make the statements therein, in the
light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if in the opinion of the Representatives or
counsel for the Underwriters it is otherwise necessary to amend or
supplement the Prospectus to comply with law, the Company agrees to
promptly prepare (subject to Section 3(a) hereof), file with the
Commission and furnish at its own expense to the Underwriters and to
dealers, amendments or supplements to the Prospectus so that the
statements in the Prospectus as so amended or supplemented will not, in
the light of the circumstances when the Prospectus is delivered to a
purchaser, be misleading or so that the Prospectus, as amended or
supplemented, will comply with law.
(d) COPIES OF ANY AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS. The
Company agrees to furnish the Representatives, without charge, during the
Prospectus Delivery Period, as many copies of the Prospectus and any
amendments and supplements thereto as the Representatives may request.
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(e) BLUE SKY COMPLIANCE. The Company shall cooperate with the
Representatives and counsel for the Underwriters to qualify or register
the Common Shares for sale under (or obtain exemptions from the
application of) the state securities or blue sky laws or Canadian
provincial Securities laws of those jurisdictions designated by the
Representatives, shall comply with such laws and shall continue such
qualifications, registrations and exemptions in effect so long as
required for the distribution of the Common Shares. The Company shall not
be required to qualify as a foreign corporation or to take any action
that would subject it to general service of process in any such
jurisdiction where it is not presently qualified or where it would be
subject to taxation as a foreign corporation. The Company will advise the
Representatives promptly of the suspension of the qualification or
registration of (or any such exemption relating to) the Common Shares for
offering, sale or trading in any jurisdiction or any initiation or threat
of any proceeding for any such purpose, and in the event of the issuance
of any order suspending such qualification, registration or exemption,
the Company shall use its best efforts to obtain the withdrawal thereof
at the earliest possible moment.
(f) USE OF PROCEEDS. The Company shall apply the net proceeds from the
sale of the Common Shares sold by it in the manner described under the
caption "Use of Proceeds" in the Prospectus.
(g) TRANSFER AGENT. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Common Stock.
(h) EARNINGS STATEMENT. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve-month
period ending that satisfies the provisions of Section 11(a) of the
Securities Act.
(i) PERIODIC REPORTING OBLIGATIONS. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and
the New York Stock Exchange all reports and documents required to be filed
under the Exchange Act. Additionally, the Company shall report the use of
proceeds from the issuance of the Common Shares as may be required under
Rule 463 under the Securities Act.
(j) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES. During the
period of 180 days following the date of the Prospectus, the Company will
not, without the prior written consent of Banc of America Securities
(which consent may be withheld at the sole discretion of Banc of America
Securities), directly or indirectly, sell, offer, contract or grant any
option to sell, pledge, transfer or establish an open "put equivalent
position" within the meaning of Rule 16a-1(h) under the Exchange Act, or
otherwise dispose of or transfer, or announce the offering of, or file
any registration statement under the Securities Act in respect of, any
shares of Common Stock, options or warrants to acquire shares of the
Common Stock or securities exchangeable or exercisable for or convertible
into shares of Common Stock (other than as contemplated by this Agreement
with respect to the Common Shares); PROVIDED, HOWEVER, that the Company
may issue shares of its Common Stock or options to purchase its Common
Stock, or Common Stock upon exercise of options, pursuant to any stock
option, stock bonus or other stock plan or arrangement described in the
Prospectus, but only if the holders of such shares, options, or shares
issued upon exercise of such options, agree in writing not to sell,
offer, dispose of or otherwise
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transfer any such shares or options during such 180 day period without
the prior written consent of Banc of America Securities (which consent
may be withheld at the sole discretion of the Banc of America Securities).
(k) FUTURE REPORTS TO THE REPRESENTATIVES. During the period of five
years hereafter the Company will furnish to the Representatives at 600
Montgomery Street, San Francisco, CA 94111 Attention: [ ] (i) as soon as
practicable after the end of each fiscal year, copies of the Annual
Report of the Company containing the balance sheet of the Company as of
the close of such fiscal year and statements of income, stockholders'
equity and cash flows for the year then ended and the opinion thereon of
the Company's independent public or certified public accountants; (ii) as
soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q,
Current Report on Form 8-K or other report filed by the Company with the
Commission, the NASD or any securities exchange; and (iii) as soon as
available, copies of any report or communication of the Company mailed
generally to holders of its capital stock.
Banc of America Securities, on behalf of the several Underwriters,
may, in its sole discretion, waive in writing the performance by the Company
of any one or more of the foregoing covenants or extend the time for their
performance.
SECTION 4. PAYMENT OF EXPENSES. The Company agrees to pay all costs,
fees and expenses incurred in connection with the performance of its
obligations hereunder and in connection with the transactions contemplated
hereby, including without limitation (i) all expenses incident to the issuance
and delivery of the Common Shares (including all printing and engraving
costs), (ii) all fees and expenses of the registrar and transfer agent of the
Common Stock, (iii) all necessary issue, transfer and other stamp taxes in
connection with the issuance and sale of the Common Shares to the
Underwriters, (iv) all fees and expenses of the Company's counsel, independent
public or certified public accountants and other advisors, (v) all costs and
expenses incurred in connection with the preparation, printing, filing,
shipping and distribution of the Registration Statement (including financial
statements, exhibits, schedules, consents and certificates of experts), each
preliminary prospectus and the Prospectus, and all amendments and supplements
thereto, and this Agreement, (vi) all filing fees, attorneys' fees and
expenses incurred by the Company or the Underwriters in connection with
qualifying or registering (or obtaining exemptions from the qualification or
registration of) all or any part of the Common Shares for offer and sale under
the state securities or blue sky laws or the provincial securities laws of
Canada, and, if requested by the Representatives, preparing and printing a
"Blue Sky Survey" or memorandum, and any supplements thereto, advising the
Underwriters of such qualifications, registrations and exemptions, (vii) the
filing fees incident to, and the reasonable fees and expenses of counsel for
the Underwriters in connection with, the NASD's review and approval of the
Underwriters' participation in the offering and distribution of the Common
Shares, (viii) the fees and expenses associated with listing the Common Shares
on the New York Stock Exchange, and (ix) all other fees, costs and expenses
referred to in Item 13 of Part II of the Registration Statement. Except as
provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the
Underwriters shall pay their own expenses, including the fees and
disbursements of their counsel.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Common
Shares as
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provided herein on the First Closing Date and, with respect to the Optional
Common Shares, the Second Closing Date, shall be subject to the accuracy of
the representations and warranties on the part of the Company set forth in
Section 1 hereof as of the date hereof and as of the First Closing Date as
though then made and, with respect to the Optional Common Shares, as of the
Second Closing Date as though then made, to the timely performance by the
Company of its covenants and other obligations hereunder, and to each of the
following additional conditions:
(a) ACCOUNTANTS' COMFORT LETTER. On the date hereof, the
Representatives shall have received from Arthur Andersen LLP, independent
public or certified public accountants for the Company, a letter dated
the date hereof addressed to the Underwriters, in form and substance
satisfactory to the Representatives, containing statements and
information of the type ordinarily included in accountant's "comfort
letters" to underwriters, delivered according to Statement of Auditing
Standards No. 72 (or any successor bulletin), with respect to the audited
and unaudited financial statements and certain financial information
contained in the Registration Statement and the Prospectus (and the
Representatives shall have received an additional [___] conformed copies
of such accountants' letter for each of the several Underwriters).
(b) COMPLIANCE WITH REGISTRATION REQUIREMENTS; NO STOP ORDER; NO
OBJECTION FROM NASD. For the period from and after effectiveness of this
Agreement and prior to the First Closing Date and, with respect to the
Optional Common Shares, the Second Closing Date:
(i) the Company shall have filed the Prospectus with the
Commission (including the information required by Rule 430A under the
Securities Act) in the manner and within the time period required by
Rule 424(b) under the Securities Act; or the Company shall have filed
a post-effective amendment to the Registration Statement containing
the information required by such Rule 430A, and such post-effective
amendment shall have become effective; or, if the Company elected to
rely upon Rule 434 under the Securities Act and obtained the
Representative's consent thereto, the Company shall have filed a Term
Sheet with the Commission in the manner and within the time period
required by such Rule 424(b);
(ii) no stop order suspending the effectiveness of the
Registration Statement, any Rule 462(b) Registration Statement, or any
post-effective amendment to the Registration Statement, shall be in
effect and no proceedings for such purpose shall have been instituted
or threatened by the Commission; and
(iii) the NASD shall have raised no objection to the fairness
and reasonableness of the underwriting terms and arrangements.
(c) NO MATERIAL ADVERSE CHANGE. For the period from and after the date
of this Agreement and prior to the First Closing Date and, with respect to
the Optional Common Shares, the Second Closing Date, in the judgment of
the Representatives there shall not have occurred any Material Adverse
Change.
(d) OPINION OF COUNSEL FOR THE COMPANY. On each of the First Closing
Date and the Second Closing Date the Representatives shall have received
the favorable opinion of Faegre & Benson LLP, counsel for the Company,
dated as of such Closing Date, the form of which is attached as EXHIBIT A
(and the Representatives shall have received an additional
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[___] conformed copies of such counsel's legal opinion for each of the
several Underwriters).
(e) OPINION OF COUNSEL FOR THE UNDERWRITERS. On each of the First
Closing Date and the Second Closing Date the Representatives shall have
received the favorable opinion of Fried, Frank, Harris, Shriver &
Jacobson, counsel for the Underwriters, dated as of such Closing Date,
with respect to the matters set forth in paragraphs (i), (vii) (with
respect to subparagraph (i) only, (viii), (ix), (x) (xi) and (xiii) (with
respect to the captions "Description of Capital Stock" and "Underwriting"
under subparagraph (i) only), (xii), and the next-to-last paragraph of
EXHIBIT A (and the Representatives shall have received an additional [___]
conformed copies of such counsel's legal opinion for each of the several
Underwriters).
(f) OFFICERS' CERTIFICATE. On each of the First Closing Date and the
Second Closing Date the Representatives shall have received a written
certificate executed by the Chairman of the Board, Chief Executive Officer
or President of the Company and the Chief Financial Officer or Chief
Accounting Officer of the Company, dated as of such Closing Date, to the
effect set forth in subsections (b)(ii) of this Section 5, and further to
the effect that:
(i) for the period from and after the date of this Agreement
and prior to such Closing Date, there has not occurred any Material
Adverse Change;
(ii) the representations, warranties and covenants of the
Company set forth in Section 1 of this Agreement are true and correct
with the same force and effect as though expressly made on and as of
such Closing Date; and
(iii) the Company has complied with all the agreements
hereunder and satisfied all the conditions on its part to be performed
or satisfied hereunder at or prior to such Closing Date.
(g) BRING-DOWN COMFORT LETTER. On each of the First Closing Date and
the Second Closing Date the Representatives shall have received from
Arthur Andersen LLP, independent public or certified public accountants
for the Company, a letter dated such date, in form and substance
satisfactory to the Representatives, to the effect that they reaffirm the
statements made in the letter furnished by them pursuant to subsection
(a) of this Section 5, except that the specified date referred to therein
for the carrying out of procedures shall be no more than three business
days prior to the First Closing Date or Second Closing Date, as the case
may be (and the Representatives shall have received an additional [___]
conformed copies of such accountants' letter for each of the several
Underwriters).
(h) LOCK-UP AGREEMENT FROM CERTAIN SECURITYHOLDERS OF THE COMPANY. On
the date hereof, the Company shall have furnished to the Representatives
an agreement in the form of EXHIBIT C hereto from each director, officer
and each beneficial owner of Common Stock (as defined and determined
according to Rule 13d-3 under the Exchange Act, except that a one hundred
eighty day period shall be used rather than the sixty day period set
forth therein), and such agreement shall be in full force and effect on
each of the First Closing Date and the Second Closing Date.
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(l) ADDITIONAL DOCUMENTS. On or before each of the First Closing Date
and the Second Closing Date, the Representatives and counsel for the
Underwriters shall have received such information, documents and opinions
as they may reasonably require for the purposes of enabling them to pass
upon the issuance and sale of the Common Shares as contemplated herein, or
in order to evidence the accuracy of any of the representations and
warranties, or the satisfaction of any of the conditions or agreements,
herein contained.
If any condition specified in this Section 5 is not satisfied when
and as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Optional Common Shares, at any time
prior to the Second Closing Date, which termination shall be without liability
on the part of any party to any other party, except that Section 4, Section 6,
Section 8 and Section 9 shall at all times be effective and shall survive such
termination.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this Agreement
is terminated by the Representatives pursuant to Section 5, Section 7, Section
10 or Section 11, or if the sale to the Underwriters of the Common Shares on
the First Closing Date is not consummated because of any refusal, inability or
failure on the part of the Company to perform any agreement herein or to
comply with any provision hereof, the Company agrees to reimburse the
Representatives and the other Underwriters (or such Underwriters as have
terminated this Agreement with respect to themselves), severally, upon demand
for all out-of-pocket expenses that shall have been reasonably incurred by the
Representatives and the Underwriters in connection with the proposed purchase
and the offering and sale of the Common Shares, including but not limited to
fees and disbursements of counsel, printing expenses, travel expenses,
postage, facsimile and telephone charges. The Company shall not be obligated
to provide reimbursement pursuant to the provisions of this Section 6 to any
of the Underwriters whose failure or refusal to purchase Common Shares that it
or they have agreed to purchase shall have caused or contributed to a default
under the provisions of Section 10.
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT.
This Agreement shall not become effective until the later of (i) the
execution of this Agreement by the parties hereto and (ii) notification by the
Commission to the Company and the Representatives of the effectiveness of the
Registration Statement under the Securities Act.
Prior to such effectiveness, this Agreement may be terminated by any
party by notice to each of the other parties hereto, and any such termination
shall be without liability on the part of (a) the Company to any Underwriter,
except that the Company shall be obligated to reimburse the expenses of the
Representatives and the Underwriters pursuant to Sections 4 and 6 hereof, (b)
of any Underwriter to the Company, or (c) of any party hereto to any other
party except that the provisions of Section 8 and Section 9 shall at all times
be effective and shall survive such termination.
SECTION 8. INDEMNIFICATION.
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(a) INDEMNIFICATION OF THE UNDERWRITERS. The Company agrees to
indemnify and hold harmless each Underwriter, its officers and employees,
and each person, if any, who controls any Underwriter within the meaning of
the Securities Act and the Exchange Act against any loss, claim, damage,
liability or expense, as incurred, to which such Underwriter or such
controlling person may become subject, under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company), insofar as
such loss, claim, damage, liability or expense (or actions in respect
thereof as contemplated below) arises out of or is based (i) upon any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement, or any amendment thereto, including any
information deemed to be a part thereof pursuant to Rule 430A or Rule 434
under the Securities Act, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading; or (ii) upon any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto), or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; or (iii) in whole or in part
upon any inaccuracy in the representations and warranties of the Company
contained herein; or (iv) in whole or in part upon any failure of the
Company to perform its obligations hereunder or under law; or (v) any act
or failure to act or any alleged act or failure to act by any Underwriter
in connection with, or relating in any manner to, the Common Stock or the
offering contemplated hereby, and which is included as part of or referred
to in any loss, claim, damage, liability or action arising out of or based
upon any matter covered by clause (i) or (ii) above, PROVIDED that the
Company shall not be liable under this clause (v) to the extent that a
court of competent jurisdiction shall have determined by a final judgment
that such loss, claim, damage, liability or action resulted directly from
any such acts or failures to act undertaken or omitted to be taken by such
Underwriter through its bad faith or willful misconduct; and to reimburse
each Underwriter and each such controlling person for any and all expenses
(including the fees and disbursements of counsel chosen by Banc of America
Securities) as such expenses are reasonably incurred by such Underwriter or
such controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action; PROVIDED, HOWEVER, that the foregoing indemnity
agreement shall not apply to any loss, claim, damage, liability or expense
to the extent, but only to the extent, arising out of or based upon any
untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written information
relating to any Underwriter furnished to the Company by the Representatives
expressly for use in the Registration Statement, any preliminary prospectus
or the Prospectus (or any amendment or supplement thereto); and PROVIDED,
FURTHER, that with respect to any preliminary prospectus, the foregoing
indemnity agreement shall not inure to the benefit of any Underwriter from
whom the person asserting any loss, claim, damage, liability or expense
purchased Common Shares, or any person controlling such Underwriter, if
copies of the Prospectus were timely delivered to the Underwriter pursuant
to Section 2 and a copy of the Prospectus (as then amended or supplemented
if the Company shall have furnished any amendments or supplements thereto)
was not sent or given by or on behalf of such Underwriter to such person,
if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Common Shares to
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such person, and if the Prospectus (as so amended or supplemented) would
have cured the defect giving rise to such loss, claim, damage, liability
or expense. The indemnity agreement set forth in this Section 8(a) shall
be in addition to any liabilities that the Company may otherwise have.
(b) INDEMNIFICATION OF THE COMPANY, ITS DIRECTORS AND OFFICERS. Each
Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, each of its directors, each of its officers who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act,
against any loss, claim, damage, liability or expense, as incurred, to
which the Company, or any such director, officer or controlling person may
become subject, under the Securities Act, the Exchange Act, or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected
with the written consent of such Underwriter), insofar as such loss, claim,
damage, liability or expense (or actions in respect thereof as contemplated
below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the
Registration Statement, any preliminary prospectus, the Prospectus (or any
amendment or supplement thereto), in reliance upon and in conformity with
written information furnished to the Company by the Representatives
expressly for use therein; and to reimburse the Company, or any such
director, officer or controlling person for any legal and other expense
reasonably incurred by the Company, or any such director, officer or
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action. The Company hereby acknowledges that the only information that the
Underwriters have furnished to the Company expressly for use in the
Registration Statement, any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) are the statements set forth (A) as
the last [two] paragraphs on the inside front cover page of the Prospectus
concerning stabilization by the Underwriters and (B) in the table after the
first paragraph and in the third paragraph under the caption "Underwriting"
in the Prospectus; and the Underwriters confirm that such statements are
correct. The indemnity agreement set forth in this Section 8(b) shall be in
addition to any liabilities that each Underwriter may otherwise have.
(c) NOTIFICATIONS AND OTHER INDEMNIFICATION PROCEDURES. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement
thereof, but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
for contribution or otherwise than under the indemnity agreement contained
in this Section 8 or to the extent it is not prejudiced as a proximate
result of such failure. In case any such action is brought against any
indemnified party and such indemnified party seeks or intends to seek
indemnity from an indemnifying party, the indemnifying party will be
entitled to participate in, and, to the extent that it shall elect, jointly
with all other indemnifying parties similarly
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<PAGE>
notified, by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; PROVIDED, HOWEVER, if the defendants in any such
action include both the indemnified party and the indemnifying party and
the indemnified party shall have reasonably concluded that a conflict
may arise between the positions of the indemnifying party and the
indemnified party in conducting the defense of any such action or that
there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the
right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be
liable to such indemnified party under this Section 8 for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified party
shall have employed separate counsel in accordance with the proviso to
the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with local counsel), approved by the
indemnifying party (Banc of America Securities in the case of Section
8(b) and Section 9), representing the indemnified parties who are
parties to such action) or (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement
of the action, in each of which cases the fees and expenses of counsel
shall be at the expense of the indemnifying party.
(d) SETTLEMENTS. The indemnifying party under this Section 8 shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party against any loss, claim, damage, liability or expense by
reason of such settlement or judgment. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 8(c) hereof, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than
30 days after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the indemnified
party in accordance with such request prior to the date of such settlement.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement, compromise or consent to the entry
of judgment in any pending or threatened action, suit or proceeding in
respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such action, suit or proceeding.
SECTION 9. CONTRIBUTION.
If the indemnification provided for in Section 8 is for any reason held
to be unavailable to or otherwise insufficient to hold harmless an indemnified
party in respect of any
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losses, claims, damages, liabilities or expenses referred to therein, then
each indemnifying party shall contribute to the aggregate amount paid or
payable by such indemnified party, as incurred, as a result of any losses,
claims, damages, liabilities or expenses referred to therein (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Underwriters, on the other hand, from the
offering of the Common Shares pursuant to this Agreement or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company on the one hand, and the Underwriters, on the other hand, in
connection with the statements or omissions or inaccuracies in the
representations and warranties herein which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand, and the Underwriters, on the other hand, in connection with the
offering of the Common Shares pursuant to this Agreement shall be deemed to
be in the same respective proportions as the total net proceeds from the
offering of the Common Shares pursuant to this Agreement (before deducting
expenses) received by the Company and the total underwriting discount
received by the Underwriters, in each case as set forth on the front cover
page of the Prospectus (or, if Rule 434 under the Securities Act is used, the
corresponding location on the Term Sheet) bear to the aggregate initial
public offering price of the Common Shares as set forth on such cover. The
relative fault of the Company on the one hand, and the Underwriters, on the
other hand, shall be determined by reference to, among other things, whether
any such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact or any such inaccurate or alleged
inaccurate representation or warranty relates to information supplied by the
Company, on the one hand, or the Underwriters, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(c), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 8(c) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 9; PROVIDED, HOWEVER,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 8(c) for purposes of indemnification.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no Underwriter shall
be required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Common Shares underwritten
by it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 9 are several, and not joint, in proportion to their
respective underwriting commitments
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as set forth opposite their names in SCHEDULE A. For purposes of this Section 9,
each officer and employee of an Underwriter and each person, if any, who
controls an Underwriter within the meaning of the Securities Act and the
Exchange Act shall have the same rights to contribution as such Underwriter,
and each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of the Securities Act and the Exchange Act shall have the
same rights to contribution as the Company.
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the several Underwriters shall fail or refuse to purchase Common
Shares that it or they have agreed to purchase hereunder on such date, and the
aggregate number of Common Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase does not exceed 10% of the
aggregate number of the Common Shares to be purchased on such date, the other
Underwriters shall be obligated, severally, in the proportions that the number
of Firm Common Shares set forth opposite their respective names on SCHEDULE A
bears to the aggregate number of Firm Common Shares set forth opposite the names
of all such non-defaulting Underwriters, or in such other proportions as may be
specified by the Representatives with the consent of the non-defaulting
Underwriters, to purchase the Common Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date. If, on the
First Closing Date or the Second Closing Date, as the case may be, any one or
more of the Underwriters shall fail or refuse to purchase Common Shares and the
aggregate number of Common Shares with respect to which such default occurs
exceeds 10% of the aggregate number of Common Shares to be purchased on such
date, and arrangements satisfactory to the Representatives and the Company for
the purchase of such Common Shares are not made within 48 hours after such
default, this Agreement shall terminate without liability of any party to any
other party except that the provisions of Section 4, Section 6, Section 8 and
Section 9 shall at all times be effective and shall survive such termination. In
any such case either the Representatives or the Company shall have the right to
postpone the First Closing Date or the Second Closing Date, as the case may be,
but in no event for longer than seven days in order that the required changes,
if any, to the Registration Statement and the Prospectus or any other documents
or arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
10. Any action taken under this Section 10 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
SECTION 11. TERMINATION OF THIS AGREEMENT. Prior to the First Closing
Date this Agreement may be terminated by the Representatives by notice given to
the Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the New
York Stock Exchange, or trading in securities generally on either the Nasdaq
Stock Market or the New York Stock Exchange shall have been suspended or
limited, or minimum or maximum prices shall have been generally established on
any of such stock exchanges by the Commission or the NASD; (ii) a general
banking moratorium shall have been declared by any of federal or New York
authorities; (iii) there shall have occurred any outbreak or escalation of
national or international hostilities or any crisis or
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calamity, or any change in the United States or international financial
markets, or any substantial change or development involving a prospective
substantial change in United States' or international political, financial or
economic conditions, as in the judgment of the Representatives is material
and adverse and makes it impracticable to market the Common Shares in the
manner and on the terms described in the Prospectus or to enforce contracts
for the sale of securities; (iv) in the judgment of the Representatives there
shall have occurred any Material Adverse Change; or (v) the Company shall
have sustained a loss by strike, fire, flood, earthquake, accident or other
calamity of such character as in the judgment of the Representatives may
interfere materially with the conduct of the business and operations of the
Company, taken as a whole, regardless of whether or not such loss shall have
been insured. Any termination pursuant to this Section 11 shall be without
liability on the part of (a) the Company to any Underwriter, except that the
Company shall be obligated to reimburse the expenses of the Representatives
and the Underwriters pursuant to Sections 4 and 6 hereof, (b) any Underwriter
to the Company, or (c) of any party hereto to any other party except that the
provisions of Section 8 and Section 9 shall at all times be effective and
shall survive such termination.
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Common Shares sold hereunder and any termination of this Agreement.
SECTION 13. NOTICES. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
Banc of America Securities LLC
600 Montgomery Street
San Francisco, California 94111
Facsimile: 415-913-5558
Attention: Richard A. Smith
with a copy to:
Banc of America Securities LLC
600 Montgomery Street
San Francisco, California 94111
Facsimile: (415) 913-5553
Attention: Jeffrey R. Lapic, Esq.
If to the Company:
Carlson Restaurants Worldwide Inc.
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7540 LBJ Freeway
Dallas, TX 75251
Attention: Leslie Sharman, Esq.
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
SECTION 14. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 10 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 8 and Section 9, and in
each case their respective successors, and no other person will have any right
or obligation hereunder. The term "successors" shall not include any purchaser
of the Common Shares as such from any of the Underwriters merely by reason of
such purchase.
SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 16. GOVERNING LAW PROVISIONS. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
SECTION 17. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
Each of the parties hereto acknowledges that it is a sophisticated
business person who was adequately represented by counsel during negotiations
regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding said provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 hereto
fairly allocate the risks in light of the ability of the parties to investigate
the Company, its affairs and its business in order to assure that adequate
disclosure has been made in the Registration
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Statement, any preliminary prospectus and the Prospectus (and any amendments
and supplements thereto), as required by the Securities Act and the Exchange
Act.
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
CARLSON RESTAURANTS
WORLDWIDE INC.
By:
-----------------------------
[Title]
The foregoing Underwriting Agreement is hereby confirmed and
accepted by the Representatives in San Francisco, California as of the date
first above written.
BANC OF AMERICA SECURITIES LLC
MERRILL, LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
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SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF
FIRM COMMON
UNDERWRITERS SHARES
TO BE PURCHASED
<S> <C>
Banc of America Securities LLC ........................... [___]
Merrill, Lynch, Pierce, Fenner
& Smith Incorporated...................................... [___]
Morgan Stanley & Co. Incorporated......................... [___]
Total............................................ [___]
</TABLE>
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EXHIBIT A
THE FINAL OPINION IN DRAFT FORM SHOULD BE ATTACHED AS EXHIBIT A AT THE TIME
THIS AGREEMENT IS EXECUTED.
Opinion of counsel for the Company to be delivered pursuant to
Section 5(d) of the Underwriting Agreement.
References to the Prospectus in this EXHIBIT A include any
supplements thereto at the Closing Date.
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the
Underwriting Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except for such
jurisdictions where the failure to so qualify or to be in good standing
would not, individually or in the aggregate, result in a Material Adverse
Change.
(iv) Each significant subsidiary of the Company (as defined in
Rule 405 under the Securities Act) has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, except, with respect to such
subsidiaries, where the failure to be duly incorporated or in good standing
would not result in a Material Adverse Change, has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus except, with respect to such
subsidiaries, where the lack of such power and authority would not result
in a Material Adverse Change, and, to the best knowledge of such counsel,
is duly qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except for such jurisdictions where the failure to so qualify or
to be in good standing would not, individually or in the aggregate, result
in a Material Adverse Change.
(v) All of the issued and outstanding capital stock of each such
significant subsidiary of the Company has been duly authorized and validly
issued, is fully paid and non-assessable and is owned by the Company,
directly or through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance or, to the best knowledge of such
counsel, any pending or threatened claim, except, with respect to such
subsidiaries, where the lack of such due authorization and valid issuance
and full payment and non-assesability would not result in a Material
Adverse Change.
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<PAGE>
(vi) The authorized, issued and outstanding capital stock of the
Company (including the Common Stock) conform to the descriptions thereof
set forth in the Prospectus. All of the outstanding shares of Common Stock
have been duly authorized and validly issued, are fully paid and
nonassessable and, to the best of such counsel's knowledge, have been
issued in compliance with the registration and qualification requirements
of federal and state securities laws. The form of certificate used to
evidence the Common Stock is in due and proper form and complies with all
applicable requirements of the charter and by-laws of the Company and the
General Corporation Law of the State of Delaware. The description of the
Company's stock option, stock bonus and other stock plans or arrangements,
and the options or other rights granted and exercised thereunder, set forth
in the Prospectus accurately and fairly presents the information required
to be shown with respect to such plans, arrangements, options and rights.
(vii) No stockholder of the Company or any other person has any
preemptive right, right of first refusal or other similar right to
subscribe for or purchase securities of the Company arising (i) by
operation of the charter or by-laws of the Company or the General
Corporation Law of the State of Delaware or (ii) to the best knowledge of
such counsel, otherwise.
(viii) The Underwriting Agreement has been duly authorized, executed
and delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as rights to
indemnification thereunder may be limited by applicable law and except as
the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles.
(ix) The Common Shares to be purchased by the Underwriters from the
Company have been duly authorized for issuance and sale pursuant to the
Underwriting Agreement and, when issued and delivered by the Company
pursuant to the Underwriting Agreement against payment of the consideration
set forth therein, will be validly issued, fully paid and nonassessable.
(x) The Registration Statement and the Rule 462(b) Registration
Statement, if any, has been declared effective by the Commission under the
Securities Act. To the best knowledge of such counsel, no stop order
suspending the effectiveness of either of the Registration Statement or the
Rule 462(b) Registration Statement, if any, has been issued under the
Securities Act and no proceedings for such purpose have been instituted or
are pending or are contemplated or threatened by the Commission. Any
required filing of the Prospectus and any supplement thereto pursuant to
Rule 424(b) under the Securities Act has been made in the manner and within
the time period required by such Rule 424(b).
(xi) The Registration Statement, including any Rule 462(b)
Registration Statement, the Prospectus, and each amendment or supplement to
the Registration Statement and the Prospectus, as of their respective
effective or issue dates (other than the financial statements and
supporting schedules included therein or in exhibits to or excluded from
the
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<PAGE>
Registration Statement, as to which no opinion need be rendered) comply
as to form in all material respects with the applicable requirements of the
Securities Act.
(xii) The Common Shares have been approved for listing on the New York
Stock Exchange.
(xiii) The statements (i) in the Prospectus under the captions "Risk
Factors--[Our Existing Stockholder Will Retain Significant Control Which
Could Depress The Price of Your Shares", "Risk Factors -- Four of Our
Directors May Have Conflicts of Interest . . ." Risk Factors -- Provisions
of our Certificate of Incorporation, our By-laws and Delaware Law Could
Discourage Potential Acquisition Proposals . . .," "Management -- Incentive
Compensation Plans", "Management -- Deferred Compensation Plans"]",
"Description of Capital Stock", "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources", "Business--Intellectual Property", "Business--Legal
Proceedings", "Relationship with Carlson Companies and Related
Transactions", "Shares Eligible for Future Sale", and "Underwriting" and
(ii) in Item 14 and Item 15 of the Registration Statement, insofar as such
statements constitute matters of law, summaries of legal matters, the
Company's charter or by-law provisions, documents or legal proceedings, or
legal conclusions, has been reviewed by such counsel and fairly present and
summarize, in all material respects, the matters referred to therein.
(xiv) To the best knowledge of such counsel, there are no legal or
governmental actions, suits or proceedings pending or threatened which are
required to be disclosed in the Registration Statement, other than those
disclosed therein.
(xv) To the best knowledge of such counsel, there are no Existing
Instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits
thereto; and the descriptions thereof and references thereto are correct in
all material respects.
(xvi) No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental authority or
agency, is required for the Company's execution, delivery and performance
of the Underwriting Agreement and consummation of the transactions
contemplated thereby and by the Prospectus, except as required under the
Securities Act, applicable state securities or blue sky laws and from the
NASD or the New York Stock Exchange.
(xvii) The execution and delivery of the Underwriting Agreement by the
Company and the performance by the Company of its obligations thereunder
(other than performance by the Company of its obligations under the
indemnification section of the Underwriting Agreement, as to which no
opinion need be rendered) (i) have been duly authorized by all necessary
corporate action on the part of the Company; (ii) will not result in any
violation of the provisions of the charter or by-laws of the Company or any
subsidiary except, with respect to any such subsidiary, for such violations
that would not result in a Material
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<PAGE>
Adverse Change; (iii) will not constitute a breach of, or Default under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its subsidiaries
pursuant to, any material Existing Instrument except, with respect to such
subsidiaries, for such violations that would not result in a Material
Adverse Change; or (iv) to the best knowledge of such counsel, will not
result in any violation of any law, administrative regulation or
administrative or court decree applicable to the Company or any subsidiary
except, with respect to any such subsidiary, for such violations that would
not result in a Material Adverse Change.
(xviii) The Company is not, and after receipt of payment for the Common
Shares will not be, an "investment company" within the meaning of
Investment Company Act.
(xix) Except as disclosed in the Prospectus, to the best knowledge of
such counsel, there are no persons with registration or other similar
rights to have any equity or debt securities registered for sale under the
Registration Statement or included in the offering contemplated by the
Underwriting Agreement, except for such rights as have been duly waived.
(xx) To the best knowledge of such counsel, neither the Company nor
any subsidiary is in violation of its charter or by-laws or any law,
administrative regulation or administrative or court decree applicable to
the Company or any subsidiary or is in Default in the performance or
observance of any obligation, agreement, covenant or condition contained in
any material Existing Instrument, except in each such case for such
violations or Defaults as would not, individually or in the aggregate,
result in a Material Adverse Change.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants
for the Company and with representatives of the Underwriters at which the
contents of the Registration Statement and the Prospectus, and any
supplements or amendments thereto, and related matters were discussed and,
although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus (other than as
specified above), and any supplements or amendments thereto, on the basis
of the foregoing, nothing has come to their attention which would lead them
to believe that either the Registration Statement or any amendments
thereto, at the time the Registration Statement or such amendments became
effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus, as of its
date or at the First Closing Date or the Second Closing Date, as the case
may be, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading
(it being understood that such counsel need express no belief as to the
financial statements or schedules or other financial or statistical data
derived therefrom, included in the Registration Statement or the Prospectus
or any amendments or supplements thereto).
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<PAGE>
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other than the
General Corporation Law of the State of Delaware or the federal law of the
United States, to the extent they deem proper and specified in such opinion,
upon the opinion (which shall be dated the First Closing Date or the Second
Closing Date, as the case may be, shall be satisfactory in form and substance
to the Underwriters, shall expressly state that the Underwriters may rely on
such opinion as if it were addressed to them and shall be furnished to the
Representatives) of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Underwriters; PROVIDED,
HOWEVER, that such counsel shall further state that they believe that they
and the Underwriters are justified in relying upon such opinion of other
counsel, and (B) as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company and public officials.
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<PAGE>
EXHIBIT B
[Date]
Banc of America Securities LLC
Merrill, Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
As Representatives of the Several Underwriters
c/o Banc of America Securities LLC
600 Montgomery Street
San Francisco, California 94111
RE: CARLSON RESTAURANTS WORLDWIDE INC. (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of
Common Stock of the Company ("Common Stock") or securities convertible into
or exchangeable or exercisable for Common Stock. The Company proposes to
carry out a public offering of Common Stock (the "Offering") for which you
will act as the representatives of the underwriters. The undersigned
recognizes that the Offering will be of benefit to the undersigned and will
benefit the Company by, among other things, repaying a portion of existing
intercompany indebtedness. The undersigned acknowledges that you and the
other underwriters are relying on the representations and agreements of the
undersigned contained in this letter in carrying out the Offering and in
entering into underwriting arrangements with the Company with respect to the
Offering.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not, without the prior written consent of Banc of America
Securities (which consent may be withheld in its sole discretion), directly
or indirectly, sell, offer, contract or grant any option to sell (including
without limitation any short sale), pledge, transfer, establish an open "put
equivalent position" within the meaning of Rule 16a-1(h) under the Securities
Exchange Act of 1934, or otherwise dispose of any shares of Common Stock,
options or warrants to acquire shares of Common Stock, or securities
exchangeable or exercisable for or convertible into shares of Common Stock
currently or hereafter owned either of record or beneficially (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended) by the
undersigned, or publicly announce the undersigned's intention to do any of
the foregoing, for a period commencing on the date hereof and continuing
through the close of trading on the date 180 days after the date of the
Prospectus. The undersigned also agrees and consents to the entry of stop
transfer instructions with the Company's transfer agent and registrar against
the transfer of shares of Common Stock or securities convertible into or
exchangeable or exercisable for Common Stock held by the undersigned except
in compliance with the foregoing restrictions.
With respect to the Offering only, the undersigned waives any registration
rights relating to registration under the Securities Act of any Common Stock
owned either of record or beneficially by the undersigned, including any
rights to receive notice of the Offering.
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<PAGE>
This agreement is irrevocable and will be binding on the undersigned and the
respective successors, heirs, personal representatives, and assigns of the
undersigned.
[CARLSON COMPANIES INC.]
- ------------------------------------
By:
Its:
[Directors and Officers]
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<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CARLSON RESTAURANTS WORLDWIDE INC.
The undersigned, Wallace B. Doolin and Leslie Sharman, certify that
they are the President and Secretary, respectively, of Carlson Restaurants
Worldwide Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Corporation"), and do hereby certify as follows:
1. The name of the Corporation is Carlson Restaurants Worldwide Inc.
The Corporation was originally incorporated under the name Friday's Holdings,
Inc., and the original Certificate of Incorporation of the Corporation was
filed in the office of the Secretary of State of the State of Delaware on
December 13, 1990.
2. This Amended and Restated Certificate of Incorporation was duly
adopted by the Corporation's stockholders by written action pursuant to
Sections 228, 242 and 245 of the General Corporation Law of the State of
Delaware and the written notice required by Section 228 of the General
Corporation Law of the State of Delaware (the "DGCL") has been given to all
stockholders.
3. The text of the Amended and Restated Certificate of Incorporation
as heretofore amended or supplemented is hereby restated and further amended
to read in its entirety as follows:
FIRST: The name of the Corporation is Carlson Restaurants Worldwide
Inc.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1013 Centre Road, in the City of Wilmington, County
of New Castle, Delaware 19805. The name of the registered agent of the
Corporation in the State of Delaware is Corporation Service Company.
THIRD: The purpose of this Corporation is to engage in any lawful
act or activity for which corporations may be organized under the DGCL as the
same exists or may hereafter be amended.
FOURTH:
Section 1. CAPITAL STOCK.
(a) The total number of shares of stock which the Corporation shall
have authority to issue is 150,000,000 shares, consisting of 140,000,000
shares of Common Stock, par value $.01 per share (the "Common Stock"), and
10,000,000 shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock"). The Common Stock of the Corporation shall be divided
into two classes, consisting of Class A Common Stock and Class B
<PAGE>
Common Stock. The Preferred Stock may be issued in one or more series having
such designations as may be fixed by the Board of Directors.
(b) The Board of Directors is authorized to provide for the issue of
all or any shares of the Common Stock and the Preferred Stock, to determine
the number of shares of and to fix for any series of Preferred Stock such
voting powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights,
and such qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions adopted by the Board of
Directors or a duly authorized committee thereof providing for the issue of
such series and as may be permitted by the DGCL.
(c) The number of authorized shares of any class or classes of stock
may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of a majority of the Common Stock
of the Corporation irrespective of the provisions of Section 242(b)(2) of the
DGCL.
Section 2. COMMON STOCK.
(a) ISSUANCE AND CONSIDERATION. Any unissued or treasury shares of
the Common Stock may be issued for such consideration as may be fixed in
accordance with applicable law from time to time by the Board of Directors.
(b) DIVIDENDS. Subject to the rights of holders of the Preferred
Stock, the holders of the Common Stock shall be entitled to receive, when and
as declared by the Board of Directors, out of the assets of the Corporation
which are by law available therefor, dividends payable either in cash, in
property, or in shares of stock and the holders of the Preferred Stock shall
not be entitled to participate in any such dividends (unless otherwise
provided by the Board of Directors in any resolution providing for the issue
of a series of Preferred Stock).
(c) NUMBER OF SHARES. Of the 140,000,000 shares of Common Stock of
the Corporation, 100,000,000 shares are designated as shares of Class A
Common Stock and 40,000,000 shares are designated as shares of Class B Common
Stock.
(d) POWERS, PREFERENCES, ETC. The following is a statement of the
powers, preferences and relative participating, optional or other special
rights and qualifications, limitations and restrictions of the Class A Common
Stock and Class B Common Stock of the Corporation:
(1) Except as otherwise set forth below in this Article Fourth,
the powers, preferences and relative participating, optional or other special
rights and qualifications, limitations or restrictions of the Class A Common
Stock and Class B Common Stock shall be identical in all respects.
2
<PAGE>
(2) Subject to the rights of the holders of Preferred Stock, and
subject to any other provisions of this Amended and Restated Certificate of
Incorporation, holders of Class A Common Stock and Class B Common Stock shall
be entitled to receive such dividends and other distributions in cash, stock
of any corporation or property of the Corporation as may be declared thereon
by the Board of Directors from time to time out of assets or funds of the
Corporation legally available therefor and shall share equally on a per share
basis in all such dividends and other distributions. In the case of
dividends or other distributions payable in Common Stock, including
distributions pursuant to stock splits or divisions of Common Stock of the
Corporation, only shares of Class A Common Stock shall be paid or distributed
with respect to Class A Common Stock and only shares of Class B Common Stock
shall be paid or distributed with respect to Class B Common Stock. Neither the
shares of Class A Common Stock nor the shares of Class B Common Stock may be
reclassified, subdivided or combined unless such reclassification,
subdivision or combination occurs simultaneously and in the same proportion
for each class.
(3) At every meeting of the stockholders of the Corporation
every holder of Class A Common Stock shall be entitled to one vote in person
or by proxy for each share of Class A Common Stock standing in his or her
name on the transfer books of the Corporation, and every holder of Class B
Common Stock shall be entitled to ten votes in person or by proxy for each
share of Class B Common Stock standing in his or her name on the transfer
books of the Corporation in connection with the election of directors and all
other matters submitted to a vote of stockholders. Except as may be
otherwise required by law or by this Article Fourth, the holders of Class A
Common Stock and Class B Common Stock shall vote together as a single class,
subject to any voting rights which may be granted to holders of Preferred
Stock, on all matters submitted to a vote of the holders of Common Stock.
(4) In the event of any dissolution, liquidation or winding up
of the affairs of the Corporation, whether voluntary or involuntary, after
payment in full of the amounts required to be paid to the holders of
Preferred Stock, the remaining assets and funds of the Corporation shall be
distributed pro rata to the holders of the Class A Common Stock and Class B
Common Stock. For the purposes of this paragraph (d)(4), the voluntary
sale, conveyance, lease, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the assets
of the Corporation or a consolidation or merger of the Corporation with one
or more other corporations (whether or not the Corporation is the corporation
surviving such consolidation or merger) shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary.
(5) (A) Each share of Class B Common Stock is convertible at the
option of the holder thereof into one share of Class A Common Stock. At the
time of a voluntary conversion, the holder of shares of Class B Common Stock
shall deliver to the office of the Corporation or any transfer agent for the
Class B Common Stock (i) the certificate or certificates representing the
shares of Class B Common Stock to be converted, duly endorsed in blank or
accompanied by proper instruments of transfer, and (ii) written notice to the
Corporation stating that such holder elects to convert such share or shares
and stating the name and address in which each certificate for shares of
Class A Common Stock issued upon such conversion is to be issued. Such
voluntary conversion shall be deemed to have been effected
3
<PAGE>
at the close of business on the date when such delivery is made to the
Corporation or such transfer agent of the shares to be converted, and the
person exercising such voluntary conversion shall be deemed to be the holder
of record of the number of shares of Class A Common Stock issuable upon such
conversion at such time. The Corporation shall promptly deliver certificates
evidencing the appropriate number of shares of Class A Common Stock to such
person.
(B) Each share of Class B Common Stock shall automatically convert
into one share of Class A Common Stock upon the transfer of such share if,
after such transfer, such share is not beneficially owned by (i) Carlson
Holdings, Inc., its wholly-owned subsidiaries or successors ("Carlson
Companies") unless such transfer is effected in connection with a transfer of
Class B Common Stock to the beneficial owners of Carlson Companies as a
dividend intended to be on a tax-free basis under the Internal Revenue Code
of 1986, as amended from time to time, or (ii) any lineal descendant of
Curtis L. Carlson or any trust solely for the benefit of one or more of such
lineal descedants or any other entity beneficially owned by such lineal
descendants. For purposes of this paragraph (d)(5), the term "beneficially
owned" with respect to shares of Class B common Stock means ownership by a
person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise controls the voting power (which
includes the power to vote or to direct the voting of) of such Class B Common
Stock.
Each share of Class B Common Stock shall automatically convert into
one share of Class A Common Stock on the date on which the number of shares
of Class B Common Stock outstanding is less than 20% of the outstanding
shares of Common Stock.
As promptly as practicable after the time of conversion, upon the
delivery to the Corporation of certificates formerly representing shares of
Class B Common Stock, the Corporation shall deliver or cause to be delivered,
to or upon the written order of the record holder of the surrendered
certificates formerly representing shares of Class B Common Stock, a
certificate of certificates representing the number of fully paid and
nonassessable shares of Class A Common Stock into which the shares of Class B
Common Stock formerly represented by such certificates have been converted in
accordance with the provisions of this paragraph (d)(5)(B).
(C) The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but
unissued Common Stock and its issued Common Stock held in its treasury for
the purpose of effecting any conversion of the Class B Common Stock pursuant
to this paragraph (d)(5), the full number of shares of Class A Common Stock
then deliverable upon any such conversion of all outstanding shares of Class
B Common Stock.
Immediately upon such conversion, the rights of the holders of shares
of Class B Common Stock as such shall cease and such holders shall be treated
for all purposes as having become the record owners of the shares of Class A
Common Stock issuable upon such conversion; provided, however, that such
persons shall be entitled to receive when paid any dividends declared on the
Class B Common Stock as of a record date preceding the time of such
conversion and unpaid as of the time of such conversion.
4
<PAGE>
(D) The Corporation will pay any and all documentary, stamp or
similar issue or transfer taxes payable in respect of the issue or delivery
of shares of one class of Common Stock on the conversion of shares of the
other class of Common Stock pursuant to this paragraph (d)(5); provided,
however, that the Corporation shall not be required to pay any tax which may
be payable in respect of any registration of transfer involved in the issue
or delivery of shares of one class of Common Stock in a name other than that
of the registered holder of the other class of Common Stock converted, and no
such issue or delivery shall be made unless and until the person requesting
such issue has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(E) Concurrently with any conversion of Class B Common Stock into
Class A Common Stock effected pursuant to paragraphs (d)(5)(A) and (B)
above, each share of Class B Common Stock that is converted (i) shall be
retired and canceled and shall not be reissued and (ii) shall proportionally
decrease the number of shares of Class B Common Stock designated hereby. The
Secretary of the Corporation shall be, and hereby is, authorized and directed
to file with the Secretary of State of the State of Delaware one or more
Certificates of Decrease of Designated Shares to record any such decrease in
designated shares of Class B Common Stock.
(F) Immediately upon the effectiveness of this Amended and Restated
Certificate of Incorporation each share of common stock of the Corporation,
par value $1.00 per share, that is issued and outstanding immediately prior
to such effectiveness, shall be changed into and reclassified as ___________
shares of Class B Common Stock.
Section 3. PREFERRED STOCK.
(a) SERIES AND LIMITS OF VARIATIONS BETWEEN SERIES. Any unissued or
treasury shares of the Preferred Stock may be issued from time to time in one
or more series for such consideration as may be fixed from time to time by
the Board of Directors and each share of a series shall be identical in all
respects with the other shares of such series, except that, if the dividends
thereon are cumulative, the date from which they shall be cumulative may
differ. Before any shares of Preferred Stock of any particular series shall
be issued, a certificate shall be filed with the Secretary of State of
Delaware setting forth the designation, rights, privileges, restrictions, and
conditions to be attached to the Preferred Stock of such series and such
other matters as may be required, and the Board of Directors shall fix and
determine, and is hereby expressly empowered to fix and determine, in the
manner provided by law, the particulars of the shares of such series (so far
as not inconsistent with the provisions of this Article Fourth applicable to
all series of Preferred Stock), including, but not limited to, the following:
(1) the distinctive designation of such series and the number of
shares which shall constitute such series, which number may be increased
(except where otherwise provided by
5
<PAGE>
the Board of Directors in creating such series) or decreased (but not below
the number of shares thereof then outstanding) from time to time by like
action of the Board of Directors;
(2) the annual rate of dividends payable on shares of such series,
the conditions upon which such dividends shall be payable and the date from
which dividends shall be cumulative in the event the Board of Directors
determines that dividends shall be cumulative;
(3) whether such series shall have voting rights, in addition to the
voting rights provided by law and, if so, the terms of such voting rights;
(4) whether such series shall have conversion privileges and, if so,
the terms and conditions of such conversion, including, but not limited to,
provision for adjustment of the conversion rate upon such events and in such
manner as the Board of Directors shall determine;
(5) whether or not the shares of such series shall be redeemable and,
if so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(6) whether such series shall have a sinking fund for the redemption
or purchase of shares of that series and, if so, the terms and amount of such
sinking fund;
(7) the rights of the shares of such series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
and
(8) any other relative rights, preferences and limitations of such
series.
Section 4. NO PREEMPTIVE RIGHTS. Except as otherwise set forth above
in this Article Fourth, no holder of shares of this Corporation of any class
shall be entitled, as such, as a matter of right, to subscribe for or
purchase shares of any class now or hereafter authorized, or to purchase or
subscribe for securities convertible into or exchangeable for shares of the
Corporation or to which there shall be attached or appertain any warrants or
rights entitling the holders thereof to purchase or subscribe for shares.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
Section 1. The management of the business and the conduct of the
affairs of the Corporation shall be vested in the Board of Directors. The
number of directors which
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shall constitute the whole Board of Directors shall be fixed by, or in the
manner provided in, the By-Laws. The phrase "whole Board" and the phrase
"total number of directors" shall be deemed to have the same meaning, to wit,
the total number of directors which the Corporation would have if there were
no vacancies. No election of directors need be by written ballot.
Section 2. Whenever the Corporation shall be authorized to issue
only one class of stock, each outstanding share shall entitle the holder
thereof to notice of, and the right to vote at, any meeting of stockholders.
Whenever the Corporation shall be authorized to issue more than one class of
stock, no outstanding share of any class of stock which is denied voting
power under the provisions of this Certificate of Incorporation shall entitle
the holder thereof to the right to vote at any meeting of stockholders
except as the provisions of paragraph (2) of subsection (b) of Section 242 of
the DGCL shall otherwise require.
SEVENTH: No director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty by such director as a director; provided, however, that this
Article Seventh shall not eliminate or limit the liability of a director to
the extent provided by applicable law (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the director received an improper personal benefit.
No amendment to or repeal of this Article Seventh shall apply to or have any
effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal. If the laws of the State of
Delaware are hereafter changed to permit further elimination or limitation of
the liability of directors, then the liability of each director of the
Corporation shall thereupon be eliminated or limited to the fullest extent
then permitted by law.
EIGHTH: The Corporation shall, to the fullest extent permitted by
Section 145 of the DGCL, as the same may be amended and supplemented,
indemnify any and all persons whom it shall have power to indemnify under the
DGCL from and against any and all of the expenses, liabilities or other
matters referred to in or covered by the DGCL, and the indemnification
provided for herein shall not be deemed exclusive of any other rights to
which those indemnified may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
his or her official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
NINTH: The Board of Directors shall have concurrent power with the
stockholders to adopt, alter, amend or repeal the By-Laws of the Corporation.
The Board of Directors may so adopt or change the By-Laws upon the
affirmative vote of the number of directors which shall constitute, under the
provisions of the By-Laws, the action of the Board of Directors.
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IN WITNESS WHEREOF, Carlson Restaurants Worldwide Inc. has caused
this Amended and Restated Certificate of Incorporation to be executed by
Wallace B. Doolin, its President, and attested to by Leslie Sharman, its
Secretary, on the ____ day of ________, 2000.
CARLSON RESTAURANTS WORLDWIDE INC.
By: ___________________________________
Wallace B. Doolin, President
ATTEST:
By: ___________________________________
Leslie Sharman, Secretary
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EXHIBIT 3.4
RESTATED
BYLAWS
OF
CARLSON RESTAURANTS WORLDWIDE INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
I. OFFICES........................................................................................................1
Section 1.01. Registered Office.........................................................................1
Section 1.02. Other Offices.............................................................................1
II. STOCKHOLDERS..................................................................................................1
Section 2.01. Place of Meetings.........................................................................1
Section 2.02. Annual Meetings...........................................................................1
Section 2.03. Special Meetings..........................................................................2
Section 2.04. Notice of Meetings........................................................................2
Section 2.05. Waiver of Notice..........................................................................2
Section 2.06. Quorum....................................................................................2
Section 2.07. Adjourned Meetings........................................................................3
Section 2.08. Voting....................................................................................3
Section 2.09. Proxies...................................................................................3
Section 2.10. Fixing Date for Determination of Stockholders of Record...................................4
Section 2.11. Action by Written Consent of Stockholders.................................................5
Section 2.12. Stockholder List..........................................................................6
Section 2.13. Voting Procedures and Inspectors of Elections.............................................6
III. BOARD OF DIRECTORS...........................................................................................7
Section 3.01. General Powers; Organization..............................................................7
Section 3.02. Number, Qualification and Term of Office..................................................7
Section 3.03. Resignation and Removal; Vacancies........................................................7
Section 3.04. Regular Meetings..........................................................................8
Section 3.05. Special Meetings..........................................................................8
Section 3.06. Notice of Special Meetings................................................................8
Section 3.07. Waiver of Notice..........................................................................8
Section 3.08. Quorum....................................................................................8
Section 3.09. Committees of Directors...................................................................9
Section 3.10. Conference Communications.................................................................9
Section 3.11. Action by Written Consent of Directors...................................................10
Section 3.12. Compensation.............................................................................10
Section 3.13. Nomination Procedures....................................................................10
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IV. OFFICERS.....................................................................................................11
Section 4.01. Number...................................................................................11
Section 4.02. Election, Term of Office and Qualifications..............................................11
Section 4.03. Compensation.............................................................................11
Section 4.04. Resignation and Removal; Vacancies.......................................................11
Section 4.05. Chief Executive Officer..................................................................11
Section 4.06. Chairman of the Board....................................................................11
Section 4.07. President................................................................................12
Section 4.08. Vice Presidents..........................................................................12
Section 4.09. Secretary................................................................................12
Section 4.10. Treasurer................................................................................12
Section 4.11. Authority and Other Duties...............................................................12
V. INDEMNIFICATION...............................................................................................13
Section 5.01. Indemnification..........................................................................13
Section 5.02. Insurance................................................................................14
Section 5.03. Expenses Payable in Advance..............................................................14
VI. STOCK........................................................................................................15
Section 6.01. Certificates for Stock...................................................................15
Section 6.02. Issuance of Stock........................................................................15
Section 6.03. Partly Paid Stock........................................................................16
Section 6.04. Registered Stockholders..................................................................16
Section 6.05. Transfer of Stock........................................................................16
Section 6.06. Lost, Stolen or Destroyed Certificates...................................................16
Section 6.07. Facsimile Signatures.....................................................................16
VII. MISCELLANEOUS...............................................................................................17
Section 7.01. Dividends................................................................................17
Section 7.02. Interested Directors and Officers........................................................17
Section 7.03. Voting Securities Held by the Corporation................................................18
Section 7.04. Execution of Instruments.................................................................18
Section 7.05. Advances.................................................................................18
Section 7.06. Fiscal Year..............................................................................18
Section 7.07. Corporate Seal...........................................................................18
Section 7.08. Form of Records..........................................................................19
Section 7.09. Power to Amend...........................................................................19
</TABLE>
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RESTATED BYLAWS OF
CARLSON RESTAURANTS WORLDWIDE INC.
I. OFFICES
Section 1.01. REGISTERED OFFICE. The Corporation shall
maintain a registered office and registered agent within the State of
Delaware at such place as may be designated from time to time by the Board of
Directors of the Corporation.
Section 1.02. OTHER OFFICES. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine or as the business of
the Corporation may require.
II. STOCKHOLDERS
Section 2.01. PLACE OF MEETINGS. Meetings of stockholders
may be held at the principal executive office of the Corporation or at such
other place as may be designated by the Board of Directors, the Chairman of
the Board or, in the event of the absence or disability of the Chairman of
the Board, the chief executive officer of the Corporation.
Section 2.02. ANNUAL MEETINGS. An annual meeting of
stockholders shall be held in each calendar year for the election of
directors on such date and at such time as shall be designated from time to
time by the Board of Directors. Any other proper business may be transacted
at the annual meeting, provided that such business is properly brought before
the meeting. To be properly brought before the meeting, business must be (a)
specified in the notice of meeting (or a supplement thereto) given by or at
the direction of the Board of Directors, (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (c)
properly brought before the meeting by a stockholder. For business to be
properly brought before the annual meeting by a stockholder, written notice
of such business must be delivered to, or mailed to and received by, the
Secretary of the Corporation at the principal executive offices of the
Corporation not less than 60 days before the date fixed for the annual
meeting; provided, however, that if less than 70 days' prior public
disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder shall be timely if received by the Secretary of the
Corporation not later than the close of business on the tenth day following
the day on which notice of the date of the meeting was mailed or on which
such public disclosure was made, whichever is earlier. In no event shall the
public disclosure of an adjournment of an annual meeting commence a new time
period for the giving of a stockholder's notice as described above. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting
and the reasons for conducting such business at the annual meeting, (b) the
name and address, as they appear on
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the Corporation's books, of the stockholder proposing such business and the
name and address of the beneficial owner, if different than the stockholder
of record, on whose behalf the proposal is made, (c) the class and number of
shares of the Corporation that are beneficially owned by the stockholder and
such beneficial owner, if any, and (d) any material interest of the
stockholder or such beneficial owner in such business. Notwithstanding
anything in these Bylaws to the contrary, no business shall be conducted at
any annual meeting except in accordance with the procedures set forth in this
Section. The Chairman of the Board or, in the event of the absence or
disability of the Chairman of the Board, the chief executive officer or other
person presiding at the annual meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section, and if he or she
should so determine, he or she shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
Section 2.03. SPECIAL MEETINGS. Except as otherwise
specifically provided by the Certificate of Incorporation, a special meeting
of stockholders, for any purpose or purposes, may be called by a majority of
the Board of Directors, the Chairman of the Board or, in the event of the
absence or disability of the Chairman of the Board, the chief executive
officer of the Corporation. Business transacted at any special meeting shall
be limited to the purposes stated in the notice of the meeting.
Section 2.04. NOTICE OF MEETINGS. A written notice stating
the place, date and hour of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
given not less then 10 nor more than 60 days before the date of such meeting
to each stockholder of record of the Corporation entitled to vote at such
meeting. Such notice shall be personally delivered or mailed and, if mailed,
shall be deemed to be given when deposited in the mail, postage prepaid,
addressed to the stockholder's mailing address shown upon the records of the
Corporation.
Section 2.05. WAIVER OF NOTICE. Notice of any meeting of
stockholders may be waived either before or after such meeting in a writing
signed by the person or persons entitled to the notice. Attendance of a
person at a meeting also shall constitute a waiver of notice of such meeting,
except when the person attends a meeting for the express purpose of objecting
at the beginning of the meeting to the transaction of any business because
the meeting is not lawfully called or convened.
Section 2.06. QUORUM. At each meeting of stockholders,
except where otherwise provided by law or the Certificate of Incorporation or
these Bylaws, the holders of a majority of the outstanding capital stock
entitled to vote at the meeting, present in person or represented by proxy,
shall constitute a quorum. If a quorum is once present at the meeting, the
stockholders may continue to transact business until adjournment
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
Section 2.07. ADJOURNED MEETINGS. The stockholders present
at any meeting may, by majority vote, adjourn the meeting from time to time
to a later day or hour or to
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another place. The stockholders entitled to vote at any meeting at which a
quorum is not present in person or represented by proxy may so adjourn the
meeting until a quorum shall be present or represented. If any adjournment is
for more than 30 days, or if after adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting. Otherwise, notice
of any adjourned meeting need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken. At an adjourned
meeting at which a quorum is present or represented by proxy, any business
may be transacted which might have been transacted at the meeting as
originally convened.
Section 2.08. VOTING.
(a) Except as otherwise provided in the Certificate of
Incorporation, each stockholder entitled to vote at any meeting of
stockholders shall have one vote for each share of stock having voting power
upon the matter in question that is held by such stockholder and registered
in the stockholder's name on the books of the Corporation as of the
applicable record date. Shares of its own stock belonging to the Corporation
or to another corporation, if a majority of the shares entitled to vote in
the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for quorum purposes; provided, however, that the foregoing shall not
limit the right of the Corporation to vote stock, including but not limited
to its own stock, held by it in a fiduciary capacity.
(b) All elections of directors shall be conducted by
written ballot, unless the Certificate of Incorporation provides otherwise.
The vote upon any other question before a meeting need not be by written
ballot, and need not be conducted by inspectors, unless otherwise determined
by the Board of Directors or the officer presiding at the meeting or
otherwise provided in Section 2.13. At all meetings of stockholders for the
election of directors a plurality of the votes cast shall be sufficient to
elect such directors. All other elections and questions at a meeting shall be
decided by a majority vote of the shares entitled to vote on the subject
matter, the holders of which are present in person or represented by proxy at
the meeting at the time of the vote, except where otherwise required by the
laws of Delaware, the Certificate of Incorporation or these Bylaws.
Section 2.09. PROXIES.
(a) Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him or her by
proxy by an instrument executed in writing, provided that no such proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. A stockholder may revoke any proxy that is not
irrevocable by attending the meeting and voting in person or by filing with
the Secretary of the Corporation an instrument in writing revoking the proxy
or another duly executed proxy
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bearing a later date. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power.
(b) A stockholder may sign or authorize the written
authorization by facsimile, telegram, cablegram or other means of electronic
transmission setting forth or submitted with information sufficient to
determine that the stockholder authorized such transmission. If it is
determined that such facsimlies, telegrams, cablegrams or other electronic
transmissions are valid, the inspectors or, if there are no inspectors, such
other persons making that determination shall specify the information upon
which they relied. Any copy, facsimile, telecommunication or other
reproduction of the original writing or transmission may be used in lieu of
the original, provided that it is a complete reproduction of the entire
original.
(c) If any written authorization designates two or
more persons to act as proxies, a majority of such persons present at the
meeting, or, if only one shall be present, then that one, shall have and may
exercise all of the powers conferred by such written instrument upon all of
the persons so designated unless the instrument shall otherwise provide.
Section 2.10. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS
OF RECORD.
(a) For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date not more
than 60 nor less than 10 days before the date of any such meeting. If no
record date is fixed, the record date for such purpose shall be at the close
of business on the day next preceding the day on which notice is given, or,
if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
(b) For the purpose of determining the stockholders
entitled to consent to corporate action in writing without a meeting, the
Board of Directors may fix a record date not more than 10 days after the date
upon which the resolution fixing the record date for such written action is
adopted by the Board of Directors. If no record date is fixed and prior
action of the Board of Directors with respect to the subject of such written
action is not required by the Delaware General Corporation Law, the record
date for such purpose shall be at the close of business on the first day on
which a written consent signed by a stockholder is delivered to the
Corporation by delivery to the registered office of the Corporation in
Delaware (which shall be by hand, by certified or registered mail, return
receipt requested, or by overnight receipted carrier), to the principal place
of business of the Corporation, or to the officer or agent of the Corporation
having custody of the Corporation's minutes of stockholders' meetings and
proceedings. If no record date is fixed and prior action of the Board of
Directors with respect to the subject of such written action is
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required by the Delaware General Corporation Law, the record date for such
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) For the purpose of determining the stockholders
entitled to receive any dividend or other distribution or allotment of any
rights, or to exercise any rights in respect of any change, conversion or
exchange of stock, or for the purpose of any other lawful action not
specified elsewhere in this Section 2.10, the Board of Directors may fix a
record date not more than 60 days before any such action. If no record date
is so fixed, the record date for such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
(d) In no event shall any record date fixed by the
Board of Directors pursuant to this Section 2.10 precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors.
Section 2.11. ACTION BY WRITTEN CONSENT OF STOCKHOLDERS.
(a) Unless otherwise provided in the Certificate of
Incorporation, any action required or permitted to be taken at any annual or
special meeting of the stockholders may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted, and shall be delivered to the
Corporation by delivery to its registered office in the State of Delaware
(which shall be by hand or by certified or registered mail, return receipt
requested), to the principal place of business of the Corporation or to the
officer or agent of the Corporation having custody of the Corporation's
minutes of stockholders' meetings and proceedings. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented
in writing.
(b) Every written consent shall bear the date of
signature of each stockholder who signs the consent and no written consent
shall be effective to take the corporate action referred to therein unless,
within 60 days of the earliest dated consent delivered in the manner required
by Section 2.11(a) to the Corporation, written consents signed by a
sufficient number of holders to take action are delivered to the Corporation
as required by Section 2.11(a).
Section 2.12. STOCKHOLDER LIST. The officer who has charge
of the stock ledger shall prepare and make, at least 10 days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose
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germane to the meeting, during ordinary business hours, for a period of at
least 10 days before the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any
stockholder who is present. Upon the willful neglect or refusal of the
directors to produce such a list at any meeting for the election of
directors, they shall be ineligible for election to any office at such
meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of stockholders
or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
Section 2.13. VOTING PROCEDURES AND INSPECTORS OF
ELECTIONS. The following provisions shall apply at such time as the
Corporation shall have a class of voting stock that is (1) listed on a
national securities exchange, (2) authorized for quotation on an inter-dealer
quotation system of a registered national securities association, or (3) held
of record by more than 2,000 stockholders.
(a) The Corporation shall, in advance of any meeting
of stockholders, appoint one or more inspectors to act at the meeting and
make a written report thereof. The Corporation may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If
no inspector or alternate is able to act at a meeting of the stockholders,
the person presiding at the meeting shall appoint one or more inspectors to
act at the meeting. Each inspector, before entering upon the discharge of his
or her duties, shall take and sign an oath faithfully to execute the duties
of inspector with strict impartiality and according to the best of his or her
ability.
(b) The inspectors shall: (1) ascertain the number of
shares outstanding and the voting power of each; (2) determine the shares
represented at a meeting and the validity of proxies and ballots; (3) count
all votes and ballots; (4) determine and retain for a reasonable period a
record of the disposition of any challenges made to any determination by the
inspectors; and (5) certify their determination of the number of shares
represented at the meeting, and their count of all votes and ballots. The
inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors.
(c) The date and time of the opening and the closing
of the polls for each matter upon which the stockholders will vote at a
meeting shall be announced at the meeting. No ballot, proxies or votes, nor
any revocations thereof or changes thereto, shall be accepted by the
inspectors after the closing of the polls.
(d) In determining the validity and counting of
proxies and ballots, the inspectors shall be limited to an examination of the
proxies, any envelopes submitted with those proxies, any information provided
in connection with an appointment of proxy by
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electronic transmission, ballots and the regular books and records of the
Corporation, except that the inspectors may consider other reliable
information for the limited purpose of reconciling proxies and ballots
submitted by or on behalf of banks, brokers, their nominees or similar
persons which represent more votes than the holder of a proxy is authorized
by the record owner to cast or more votes than the stockholder holds of
record. If the inspectors consider other reliable information for the limited
purpose permitted herein, the inspectors at the time they make their
certification pursuant to clause (b)(5) of this Section shall specify the
precise information considered by them including the person or persons from
whom they obtained the information, when the information was obtained, the
means by which the information was obtained and the basis for the inspectors'
belief that such information is accurate and reliable.
III. BOARD OF DIRECTORS
Section 3.01. GENERAL POWERS; ORGANIZATION. The business of
the Corporation shall be managed by or under the direction of its Board of
Directors, which may exercise all such powers of the Corporation and do all
such lawful acts and things as are not by the Delaware General Corporation
Law or by the Certificate of Incorporation or these Bylaws directed or
required to be exercised or done by the stockholders. The Board of Directors
may annually elect a Chairman of the Board from among its members who shall
preside at its meetings. The Secretary shall act as secretary of the meeting,
but in his or her absence the chairman of the meeting may appoint any person
to act as secretary of the meeting. Any meeting of the Board of Directors may
be held within or without the State of Delaware.
Section 3.02. NUMBER, QUALIFICATION AND TERM OF OFFICE. The
number of directors constituting the Board of Directors shall be fixed from
time to time by resolution of the Board of Directors, but shall be not more
than 15. Except as otherwise provided in the Certificate of Incorporation and
except as provided in Section 3.03 of these Bylaws, the directors shall be
elected at the annual meeting of the stockholders and each director elected
shall hold office until his or her successor is elected and qualified, or
until their earlier resignation, retirement or removal. Directors need not be
stockholders.
Section 3.03. RESIGNATION AND REMOVAL; VACANCIES.
(a) Any director may resign at any time upon giving
written notice to the Corporation. Directors may be removed only in
accordance with the applicable provisions of the Delaware General Corporation
Law and any applicable provisions of the Certificate of Incorporation.
(b) Except as otherwise provided in the Certificate of
Incorporation, vacancies (whether existing or to take effect at a future
date), and newly created directorships
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resulting from any increase in the authorized number of directors elected by
all of the stockholders having the right to vote as a single class, may be
filled by a majority of the directors then in office, in their sole
discretion and whether or not constituting less than a quorum, and the
directors so chosen shall hold office until the next election of directors
and until their successors are duly elected and qualified, or until their
earlier resignation, retirement or removal.
Section 3.04. REGULAR MEETINGS. Regular meetings of the
Board of Directors may be held without notice at such time and place as may
be designated from time to time by the Board of Directors.
Section 3.05. SPECIAL MEETINGS. Special meetings of the
Board of Directors may be called from time to time by the Chairman of the
Board, or, in the event of the absence or disability of the Chairman of the
Board, the President, and, upon request by any two directors, shall be called
by the Chairman or the President.
Section 3.06. NOTICE OF SPECIAL MEETINGS. Notice of each
special meeting of the Board of Directors stating the place, date and hour of
the meeting shall be given to each director by mail not less than 72 hours,
or personally or by facsimile, telephone, telegram, cablegram or other
electronic transmission not less than 72 hours, before the date and hour of
the meeting.
Section 3.07. WAIVER OF NOTICE. Notice of any meeting of
the Board of Directors may be waived either before or after such meeting in a
writing signed by each director or directors to whom the notice was not duly
given. Attendance of a director at a meeting also shall constitute a waiver
of notice of such meeting, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
Section 3.08. QUORUM. Unless otherwise specifically
provided by the Certificate of Incorporation or these Bylaws, at all
meetings of the Board of Directors a majority of the total number of
directors shall constitute a quorum for the transaction of business, and the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
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Section 3.09. COMMITTEES OF DIRECTORS.
(a) The Board of Directors may, by resolution adopted
by a majority of the total number of directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation and to have such name as may be determined by the Board of
Directors. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of the committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in place of any such absent
or disqualified member.
(b) Subject to subsection (c) of this Section 3.09 and
to the Delaware General Corporation Law, any committee may exercise the
powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation to the extent provided in the
resolution designating the committee, and may authorize the corporate seal,
if any, to be affixed to all papers that may require it.
(c) No committee shall have the power or authority to
amend the Certificate of Incorporation of the Corporation (except as
permitted by the Delaware General Corporation Law), to adopt an agreement of
merger or consolidation under Section 251 or 252 of the Delaware General
Corporation Law, to recommend to the stockholders the sale, lease or exchange
of all or substantially all of the Corporation's property and assets, to
recommend to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or to amend the Bylaws of the Corporation; and,
unless the resolution establishing the committee or the Certificate of
Incorporation expressly so provides, no such committee shall have the power
or authority to declare a dividend, to authorize the issuance of stock or to
adopt a certificate of ownership and merger pursuant to Section 253 of the
Delaware General Corporation Law.
(d) Each committee shall keep regular minutes of its
proceedings and report the same to the Board of Directors when required.
Unless the Board of Directors otherwise provides, each committee may make,
alter and repeal rules for the conduct of its business. In the absence of
such rules each committee shall conduct its business in the same manner as
the Board of Directors conducts it business pursuant to these Bylaws.
Section 3.10. CONFERENCE COMMUNICATIONS. Directors may
participate in any meeting of the Board of Directors, or of any duly
constituted committee thereof, by means of a conference telephone or other
comparable communications equipment which all persons participating in the
meeting can hear and communicate with each other. For the purpose of
establishing a quorum and taking any action at the meeting, such directors
participating pursuant to this Section 3.10 shall be deemed present in person
at the meeting.
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<PAGE>
Section 3.11. ACTION BY WRITTEN CONSENT OF DIRECTORS. Any
action required or permitted to be taken at a meeting of the Board of
Directors or any committee thereof may be taken without a meeting if all
directors or committee members consent thereto in writing and the writing or
writings are filed with the minutes of proceedings of the Board of Directors
or the committee.
Section 3.12. COMPENSATION. The Board of Directors shall
have the authority to fix the compensation of directors.
Section 3.13. NOMINATION PROCEDURES. No person (other than
a person nominated by or at the direction of the Board of Directors) shall be
eligible for election as a director at any annual or special meeting unless
timely notice is given in writing of such nomination by a stockholder of
record to the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to, or mailed to and received by, the Secretary of
the Corporation at the principal executive offices of the Corporation not
less than 60 days before the date fixed for the meeting; provided, however,
that in the event that less than 70 days' prior public disclosure of the date
of the meeting is given or made to stockholders, notice by the stockholder
shall be timely if received not later than the close of business on the tenth
day following the day on which notice of the date of the meeting is mailed or
on which such public disclosure was made, whichever is earlier. In no event
shall public disclosure of an adjournment of an annual meeting commence a new
time period for the giving of a stockholder's notice as described above. A
stockholder's notice to the Secretary shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or re-election as a
director, (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Corporation which are beneficially owned by
such person and (iv) if the solicitation of proxies is subject to Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended, any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
pursuant to said Regulation 14A; and (b) as to the stockholder giving notice
and the beneficial owner, if other than such record owner, on whose behalf
the nomination is made, (i) the name and address, as they appear on the
Corporation's records, of the stockholder and the name and address of such
other beneficial owner, if any, and (ii) the class and number of shares of
the Corporation which are beneficially owned by the stockholder or beneficial
owner. The Chairman of the Board or, in the event of the absence or
disability of the Chairman of the Board, the chief executive officer or other
person presiding at the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
provisions of this Section, and if he or she should so determine, he or she
shall so declare to the meeting and any such defective nomination shall be
disregarded.
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<PAGE>
IV. OFFICERS
Section 4.01. NUMBER. The Board of Directors shall elect a
President, a Secretary and a Treasurer, and it may, if it so determines,
elect a Chairman of the Board from among its members. The Board of Directors
may also choose one or more Vice Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers or any other officers or agents
as the Board of Directors may designate. Any person may hold two or more
offices.
Section 4.02. ELECTION, TERM OF OFFICE AND QUALIFICATIONS.
The Board of Directors shall elect the officers of the Corporation, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties not inconsistent with these Bylaws as shall be determined from
time to time by the Board of Directors. All officers of the Corporation shall
hold their offices until their respective successors are elected and
qualified, or until their respective offices are eliminated by vote of the
Board of Directors, or until their earlier resignation, retirement or
removal. Officers may be, but need not be, directors.
Section 4.03. COMPENSATION. The salaries of the officers of
the Corporation shall be fixed from time to time by the Board of Directors or
by the chief executive officer if authorized by the Board of Directors.
Section 4.04. RESIGNATION AND REMOVAL; VACANCIES.
(a) Any officer may resign at any time upon written
notice to the Corporation. Any such resignation, however, shall be without
prejudice to any contract rights of the Corporation as to such officer.
(b) Any officer may be removed from office, with or
without cause, by a vote of the Board of Directors. Any such removal,
however, shall be without prejudice to any contract rights of such officer as
to the Corporation.
(c) Any vacancy occurring in any office of the
Corporation may be filled by the Board of Directors.
Section 4.05. CHIEF EXECUTIVE OFFICER. The Board of
Directors shall designate the Chairman of the Board, or the President as the
chief executive officer of the Corporation. If the Board of Directors does
not designate a Chief Executive Officer, the President shall be the chief
executive officer. The chief executive officer shall have the general powers
and duties of management and supervision usually vested in and imposed upon
the chief executive officer of a corporation.
Section 4.06. CHAIRMAN OF THE BOARD. The Chairman of the
Board, if one is elected, shall preside at all meetings of the Board of
Directors. During the absence or disability of the
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<PAGE>
President, the Chairman of the Board shall exercise all the powers and discharge
all the duties of the President. The Chairman of the Board shall preside at
all meetings of the stockholders.
Section 4.07. PRESIDENT. The President, subject to the
control of the Board of Directors and the Chairman of the Board (if the
Chairman of the Board is the chief executive officer of the Corporation),
shall have general supervision of the business of the Corporation and shall
see that all orders and resolutions of the Board of Directors are carried
into effect.
Section 4.08. VICE PRESIDENTS. During the absence or
disability of the Chairman of the Board and the President, the Vice President
(or in the event there be more than one Vice President, the Vice Presidents
in the order designated by the Board of Directors or, in the absence of any
designation, in the order they were first elected as Vice Presidents) shall
perform the duties and have the authority of the President.
Section 4.09. SECRETARY. The Secretary (or in the absence
of the Secretary, any Assistant Secretary or other person appointed by the
Chairman of the Board to serve as Acting Secretary) shall keep the minutes of
the meetings of the stockholders, the Board of Directors and any committees
in a book to be kept for that purpose. The Secretary shall maintain the stock
ledger and prepare the stockholder list as required by these Bylaws. The
Secretary shall duly give notice of all meetings of the stockholders, the
Board of Directors and committees of the Board, if any.
Section 4.10. TREASURER. The Treasurer shall keep accurate
accounts of all moneys of the Corporation received or disbursed. He or she
shall deposit all moneys, drafts and checks in the name of and to the credit
of the Corporation in such banks and depositories as the Board of Directors
shall from time to time designate. The Treasurer shall have power to endorse
for deposit all notes, checks and drafts received by the Corporation. The
Treasurer shall render to the Board of Directors or the chief executive
officer of the Corporation, whenever required, an account of all his or her
transactions as Treasurer and of the financial condition of the Corporation.
Section 4.11. AUTHORITY AND OTHER DUTIES. All officers of
the Corporation shall be subject to the supervision and direction of the
Board of Directors and, in addition to the foregoing authority and duties,
all officers of the Corporation shall respectively have such authority and
perform such other duties in the management of the business of the
Corporation as may be designated from time to time by the Board of Directors.
Unless expressly prohibited by a resolution adopted by the Board of
Directors, an officer elected or appointed by the Board may, without the
approval of the Board, delegate some or all of the duties and powers of his
or her office to other persons.
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V. INDEMNIFICATION
Section 5.01. INDEMNIFICATION. The Corporation shall
indemnify its officers and directors, and former officers and directors, for
such expenses and liabilities, in such manner, under such circumstances, and
to such extent, as required or permitted by the Delaware General Corporation
Law, as amended from time to time. The determination of whether any such
person is eligible for indemnification under this Section 5.01 shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there are no
such directors, or if such directors so direct, by independent legal counsel
in a written opinion, or (3) by the stockholders; provided, however, that if
a Change in Control (as defined below) has occurred and the person seeking
indemnification so requests, a determination of whether such person is
eligible for indemnification under this Section 5.01 shall be made in a
written opinion rendered by independent legal counsel chosen by the person
seeking indemnification and not reasonably objected to by the Board of
Directors, and such determination shall be binding on the Corporation. The
fees and expenses of such independent counsel shall be paid by the
Corporation. For such purpose, (X) "independent legal counsel" shall mean
legal counsel other than an attorney, or a firm having associated with it an
attorney, who has been retained by or has performed services for the
Corporation or the person seeking indemnification within the previous three
years; and (Y) a "Change in Control" shall be deemed to have occurred if:
(i) a majority of the directors of the Corporation shall
be persons other than persons (A) who were directors of the Corporation
on the date this Section was adopted, (B) for whose election proxies
shall have been solicited by the Board of Directors or (C) who are then
serving as directors appointed by the Board of Directors to fill
vacancies on the Board of Directors caused by newly-created
directorships or the death or resignation (but not removal) of a
director;
(ii) 30 percent or more of the outstanding shares of
voting stock of the Corporation is acquired or beneficially owned (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, or any successor rule thereto) by any person (other than
(A) the Corporation, (B) a subsidiary of the Corporation, (C) Carlson
Holdings, Inc., its wholly-owned subsidiaries or successors, (D) any
lineal descendant of Curtis L. Carlson or any trust solely for the
benefit of one or more of such lineal descendants or any other entity
beneficially owned by such lineal descendants or (E) the person
seeking indemnification) or group of persons, not including the person
seeking indemnification, acting in concert;
(iii) the stockholders of the Corporation approve a
definitive agreement or plan to (A) merge or consolidate the
Corporation with or into another corporation (other than (1) a merger
or consolidation with a subsidiary of the Corporation or (2) a merger
in which the Corporation is the surviving corporation and no
outstanding voting stock of the Corporation (other than fractional
shares) held by stockholders immediately before the merger is
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converted into cash, securities, or other property), (B) sell or
otherwise dispose of all or substantially all of the assets of the
Corporation (in one transaction or a series of transactions) or (C)
liquidate or dissolve the Corporation, unless a majority of the voting
stock (or the voting equity interest) of the surviving corporation or
of any corporation (or other entity) acquiring all or substantially all
of the assets of the Corporation (in the case of a merger,
consolidation or disposition of assets) is, immediately following the
merger, consolidation or disposition of assets, beneficially owned by
the person seeking indemnification or a group of persons, including the
person seeking indemnification, acting in concert; or
(iv) the Corporation enters into an agreement in principle
or a definitive agreement relating to an event described in clause (i),
(ii) or (iii) above which ultimately results in an event described
therein, or a tender or exchange offer or proxy contest is commenced
which ultimately results in an event described therein.
Section 5.02. INSURANCE. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee, trustee or agent of another
corporation, partnership, limited liability company, joint venture, trust,
employee benefit plan or other enterprise, against any liability or expense
asserted against or incurred by such person in or arising from that capacity,
or arising out of his or her status as such, whether or not the Corporation
would otherwise have the power or the obligation to indemnify the person
against such liability or expense. The Company shall not be obligated under
these Bylaws to make any payment in connection with any claim made against
any person if and to the extent that such person has actually received
payment therefor under any insurance policy or policies.
Section 5.03. EXPENSES PAYABLE IN ADVANCE. Expenses
(including attorneys' fees and expenses) incurred by a director or officer,
or a former director or officer, in defending, investigating, preparing to
defend, or being or preparing to be a witness in, a threatened or pending
action, suit, proceeding or claim against him or her, whether civil or
criminal, shall be paid by the Corporation in advance of the final
disposition of such action, suit, proceeding or claim upon receipt by the
Corporation of a request therefor and an undertaking by or on behalf of the
director or officer, or former director or officer, to repay such amounts if
it ultimately shall be determined that he or she is not entitled to be
indemnified by the Corporation.
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VI. STOCK
Section 6.01. CERTIFICATES FOR STOCK.
(a) The shares of stock of the Corporation shall be
either certificated or uncertificated.
(b) Every holder of duly issued certificated shares of
stock in the Corporation shall be entitled to a certificate, to be in such
form as shall be prescribed by the Board of Directors, certifying the number
of shares owned by him or her. The certificates for such shares shall be
numbered in the order in which they shall be issued and shall be signed in
the name of the Corporation by the Chairman of the Board, the President or a
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary, and the seal of the Corporation, if any, shall be
affixed thereto.
(c) A certificate representing shares of stock issued
by the Corporation shall, if the Corporation is authorized to issue shares of
more than one class or series, set forth upon the face or back of the
certificate, or shall state that the Corporation will furnish to any
stockholder upon request and without charge, a full statement of the powers,
designations, preferences and relative, participating, optional or other
special rights of each class or series of stock and the qualifications,
limitations or restrictions of such preferences and/or rights of each class
or series authorized to be issued.
(d) The Board of Directors may provide by resolution
that some or all shares of any or all classes and series of the stock of the
Corporation will be uncertificated. Any such resolution shall not apply to
shares represented by a certificate until the certificate is surrendered to
the Corporation.
Section 6.02. ISSUANCE OF STOCK. The Board of Directors is
authorized to cause to be issued stock of the Corporation up to the full
amount authorized by the Certificate of Incorporation in such amounts and for
such consideration as may be determined by the Board of Directors. No shares
shall be allotted except in consideration of cash, labor, personal or real
property (or leases thereof), or a combination of the foregoing, or of an
amount transferred from surplus to stated capital upon a stock dividend. At
the time of such allotment of stock, the Board of Directors shall state its
determination of the fair value to the Corporation in monetary terms of any
consideration other than cash for which shares are allotted. The amount of
consideration to be received in cash or otherwise shall not be less than the
par value of the shares so allotted. Stock so issued shall be fully paid and
nonassessable. Treasury shares may be disposed of by the Corporation for such
consideration as may be fixed by the Board of Directors, or by the
stockholders if the Certificate of Incorporation so provides.
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Section 6.03. PARTLY PAID STOCK. The Corporation may issue
the whole or any part of its stock as partly paid and subject to call for the
remainder of the consideration to be paid therefor. The total amount of the
consideration to be paid for any partly paid stock and the amount paid
thereon shall be stated upon the face or back of each certificate issued to
represent any such partly paid stock (or, in the case of uncertificated
stock, on the books and records of the Corporation), the total amount of the
consideration to be paid therefor and the amount paid thereon shall be
stated. The Board of Directors may, from time to time, demand payment in
respect of each share of stock not fully paid, of such sum of money as the
necessities of the business may, in the judgment of the Board of Directors,
require, not exceeding in the whole the balance remaining unpaid on such
stock, and such sum so demanded shall be paid to the Corporation at such
times and by such installments as the directors shall direct.
Section 6.04. REGISTERED STOCKHOLDERS. The Corporation
shall be entitled to recognize the exclusive right of a person registered on
its books as the owner of shares to receive dividends, and to vote as such
owner, and to hold liable for calls and assessments a person registered on
its books as the owner of shares, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part
of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
Section 6.05. TRANSFER OF STOCK. Transfers of stock on the
books of the Corporation may be authorized only by the stockholder named in
the certificate, the stockholder's legal representative or the stockholder's
duly authorized attorney-in-fact and upon surrender of the certificate or the
certificates for such stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books. No new certificate or certificates shall be
issued in exchange for any existing certificate until such certificate shall
have been so canceled, except in cases provided for in Section 6.06.
Section 6.06. LOST, STOLEN OR DESTROYED CERTIFICATES. Any
stockholder claiming a certificate for stock to be lost, stolen or destroyed
shall make an affidavit of that fact in such form as the Corporation may
require and shall, if the Corporation so requires, give the Corporation a
bond of indemnity in form, in an amount, and with one or more sureties
satisfactory to the Corporation, to indemnify the Corporation against any
claims which may be made against it on account of the alleged loss, theft or
destruction of the certificate or issuance of such new certificate. A new
certificate may then be issued for the lost, stolen or destroyed certificate.
Section 6.07. FACSIMILE SIGNATURES. Any or all of the
signatures of the officers or agents of the Corporation on any stock
certificate may be facsimiles. In case any officer,
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transfer agent or registrar who has signed or whose facsimile signature has
been placed on any such certificate shall cease to be such officer, transfer
agent or registrar before such certificate is issued, it nevertheless may be
issued by the Corporation as though the person who signed such certificate or
whose facsimile signature or signatures had been placed thereon were such
officer, transfer agent or registrar at the date of issue.
VII. MISCELLANEOUS
Section 7.01. DIVIDENDS.
(a) Subject to any restrictions contained in the
Certificate of Incorporation, the Board of Directors may declare and pay
dividends upon the shares of the Corporation's capital stock from the
Corporation's surplus, or if there be none, out of its net profits for the
current fiscal year and/or the preceding fiscal year. Dividends may be paid
in cash, in property or in shares of capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation. Upon the
declaration of any dividend on fully paid shares, the Corporation shall
declare a dividend upon partly paid shares of the same class, but only upon
the basis of the percentage of the consideration actually paid thereon.
(b) If the dividend is to be paid in shares of the
theretofore unissued capital stock of the Corporation, the Board of Directors
shall, by resolution, direct that there be designated as capital in respect
of such shares an amount which is not less than the aggregate par value of
par value shares being declared as a dividend and, in the case of shares
without par value being declared as a dividend, such amount as shall be
determined by the Board of Directors; provided, however, that no such
designation as capital shall be necessary if shares are being distributed by
the Corporation pursuant to a split-up or division of its stock.
Section 7.02. INTERESTED DIRECTORS AND OFFICERS. No
contract or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for that reason, or solely because
an interested director or officer is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his or her vote is counted for
such purpose, if: (a) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to
the Board of Directors or the committee, and the Board of Directors or
committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; (b) the material facts as
to his or her relationship or interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote thereon, and
the contract or transaction is specifically approved in good faith by vote of
the
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<PAGE>
stockholders; or (c) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof, or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum
at a meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
Section 7.03. VOTING SECURITIES HELD BY THE CORPORATION.
Unless otherwise ordered by the Board of Directors, powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name
of and on behalf of the Corporation by the Chairman of the Board or the
President, and either such officer may, in the name of and on behalf of the
Corporation, take all such action as such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of other
corporations in which the Corporation may hold securities, and at any such
meeting such officer shall possess and may exercise any and all rights and
powers incident to the ownership of such securities that the Corporation
might have possessed and exercised if it had been present. The Board of
Directors may from time to time confer like powers upon any other person or
persons.
Section 7.04. EXECUTION OF INSTRUMENTS.
(a) All deeds, mortgages, notes, bonds, checks,
contracts and other instruments pertaining to the business and affairs of the
Corporation shall be signed on behalf of the Corporation by the Chairman of
the Board, if any, or the President, or any Vice President, or by such other
person or persons as may be designated from time to time by the Board of
Directors.
(b) If a document must be executed by persons holding
different offices or functions and one person holds such offices or exercises
such functions, that person may execute the document in more than one
capacity if the document indicates each such capacity.
Section 7.05. ADVANCES. The Corporation may, without a vote
of the directors, advance money to its directors, officers or employees to
cover expenses that can reasonably be anticipated to be incurred by them in
the performance of their duties and for which they would be entitled to
reimbursement in the absence of an advance.
Section 7.06. FISCAL YEAR. The fiscal year end of the
Corporation shall be the last Monday in December or such other date as may be
fixed from time to time by resolution of the Board of Directors.
Section 7.07. CORPORATE SEAL. The corporate seal, if one is
adopted by the Board of Directors, shall be circular in form and shall have
inscribed thereon the name of the Corporation, the word "Delaware" and the
words "Corporate Seal." The seal may be used by
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<PAGE>
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise placed on any document requiring it.
Section 7.08. FORM OF RECORDS. Any records maintained by
the Corporation in the regular course of its business, including its stock
ledger, books of account, and minute books, may be kept on, or be in the form
of, punch cards, magnetic tape, photographs, microphotographs, or any other
information storage device, provided that the records so kept can be
converted into clearly legible form within a reasonable time. The Corporation
shall so convert any records so kept upon the request of any person entitled
to inspect the same.
Section 7.09. POWER TO AMEND. These Bylaws may be altered,
amended or repealed or new Bylaws may be adopted by the stockholders or by
the Board of Directors, if such power is conferred upon the Board of
Directors by the Certificate of Incorporation, at any annual meeting of the
stockholders or of the Board of Directors, or at any special meeting of the
stockholders or of the Board of Directors if notice of such alteration,
amendment, repeal or adoption of new Bylaws be contained in the notice of
such special meeting. If the power to adopt, amend or repeal these Bylaws is
conferred upon the Board of Directors by the Certificate of Incorporation it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal these Bylaws.
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<TABLE>
<S><C>
[CARLSON RESTAURANTS LOGO]
CLASS A COMMON STOCK CLASS A COMMON STOCK
$.01 PAR VALUE $.01 PAR VALUE
NUMBER SHARES
CRW
CARLSON RESTAURANTS WORLDWIDE INC., INCORPORATED UNDER THE LAWS OF THE
STATE OF DELAWARE
THIS CERTIFIES THAT CUSIP 142811 10 8
Is the record holder of
[SEAL] FULLY PAID AND NONASSESSABLE SHARES OF THE CLASS A COMMON STOCK OF [GRAPHIC]
CARLSON RESTAURANTS WORLDWIDE INC. (THE "CORPORATION") TRANSFERABLE ON THE
BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON OR BY ITS DULY
AUTHORIZED ATTORNEY, UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE ISSUED AND SHALL BE
HELD SUBJECT TO ALL THE PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF THE CORPORATION AND THE BY-LAWS OF THE CORPORATION AND ANY
AMENDMENTS THERETO, TO ALL OF WHICH THE HOLDER BY ACCEPTANCE HEREOF ASSENTS.
THIS CERTIFICATE IS NOT VALID UNLESS COUNTERSIGNED AND REGISTERED BY THE
TRANSFER AGENT AND REGISTRAR.
WITNESS THE FACSIMILE SEAL OF THE CORPORATION AND THE FACSIMILE
SIGNATURES OF ITS DULY AUTHORIZED OFFICERS.
DATED:
COUNTERSIGNED AND REGISTERED
THE BANK OF NEW YORK
TRANSFER AGENT AND REGISTRAR PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY
AUTHORIZED SIGNATURE VICE PRESIDENT-LEGAL, GENERAL
COUNSEL AND SECRETARY
[T.G.I. FRIDAY'S LOGO]
</TABLE>
<PAGE>
CARLSON RESTAURANTS WORLDWIDE INC.
The Corporation will furnish without charge to each stockholder who
so requests a statement of the designations, powers, preferences and relative
participating, optional or other special rights of each class of stock or
series thereof of the Corporation and the qualifications, limitations or
restrictions of such preferences and/or rights. Such request may be made to
the Corporation or the Transfer Agent.
The following abbreviations, when used in the inscription on the
face of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -- ___Custodian___
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act _______________
survivorship and not as tenants (State)
in common
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, THE UNDERSIGNED HEREBY SELLS, ASSIGNS AND TRANSFERS UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------------------
--------------------------------------------------
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
____________________________________________________________________ SHARES
OF CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
_________________ __________________________________________________ ATTORNEY
TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH
FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED _________________
__________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WATEVER.
Signature(s) Guaranteed:
_____________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 5.1
FAEGRE & BENSON LLP
2200 Norwest Center, 90 South Seventh Street
Minneapolis, Minnesota 55402-3901
Telephone 612-336-3000
Facsimile 612-336-3026
April 20, 2000
Ladies and Gentlemen:
In connection with the proposed registration under the Securities Act of
1933, as amended, of 9,500,000 shares (the "Shares") of Class A Common Stock,
par value $.01 per share, of Carlson Restaurants Worldwide Inc., a Delaware
corporation (the "Company"), proposed to be sold by the Company, we have
examined such corporate records and other documents, including the Registration
Statement on Form S-1, as amended, relating to such shares (the "Registration
Statement"), and have reviewed such matters of law as we have deemed necessary
for this opinion, and we advise you that in our opinion:
1. The Company is a corporation duly organized and existing under the
laws of the State of Delaware.
2. When the shares of Class A Common Stock to be sold by the Company are
issued and sold as contemplated in the Registration Statement, all necessary
corporate action on the part of the Company will have been taken to authorize
the issuance and sale of such shares and such shares will be legally and validly
issued and fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of our name under the heading "Legal Matters" in the
prospectus constituting a part of the Registration Statement and to the
reference to our firm wherever appearing therein.
Very truly yours,
/s/ Faegre & Benson LLP
FAEGRE & BENSON LLP
<PAGE>
INTERCOMPANY CREDIT AGREEMENT
This INTERCOMPANY CREDIT AGREEMENT (this "Agreement") by and between
Carlson Companies, Inc., a Minnesota corporation ("CCI"), and Carlson
Restaurants Worldwide Inc., a Delaware corporation ("CRW"), is effective as
of August 19, 1999.
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS. The following terms, as used herein, have the
following meanings:
(a) "ADVANCE" means, an advance by CCI or CRW, as applicable, pursuant to
Section 2.01 or 2.02, which shall include, without limitation, advances by
CCI to CRW or on behalf of CRW and amounts owed by CRW and its Subsidiaries
for fees, costs and expenses under the Services Agreement between the
parties.
(b) "CCI BALANCE" means, with respect to an Interest Period, the net daily
balance of funds owed by CCI to CRW as set forth in the intercompany account
maintained by CCI pursuant to Section 2.05 hereof.
(c) "CODE" means, the Internal Revenue Code of 1986 as amended.
(d) "CRW BALANCE" means, with respect to an Interest Period, the net daily
balance of funds owed by CRW to CCI as set forth in the intercompany account
maintained by CCI pursuant to Section 2.05 hereof.
(e) "CRW PROMISSORY NOTE" means, that certain Promissory Note dated December
31, 1998 issued by CRW in the amount of approximately $70.4 million to
Carlson Companies, Inc.
(f) "DIVIDEND PROMISSORY NOTE" means, that certain Promissory Note dated
June 28, 1999 issued by CRW in the amount of $120 million to Carlson
Hospitality Group, Inc.
(g) "ERISA" means, the Employee Retirement Income Security Act of 1974,
together with all amendments from time to time thereto.
(h) "ERISA AFFILIATE" means, any trade or business (whether or not
incorporated) which is under common control with CRW within the meaning of
the regulations promulgated under the Internal Revenue Code of 1986 as
amended.
(i) "EVENT OF DEFAULT" means, any material default of the terms of this
Agreement or the Services Agreement.
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(j) "INDEBTEDNESS" means, with respect to any Person at any time, without
duplication, all obligations of such Person which, in accordance with
generally accepted accounting principles, consistently applied, should be
classified as liabilities on a consolidated balance sheet of such Person
prepared in accordance with generally accepted accounting principles,
consistently applied, but in any event shall include: (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (c) all obligations
of such Person upon which interest charges are customarily paid or accrued,
(d) all obligations of such Person under conditional sale or other title
retention agreements relating to property purchased by such Person, (e) all
obligations of such Person issued or assumed as the deferred purchase price
of property or services (other than accounts payable on normal payment terms
to suppliers incurred in the ordinary course of business), (f) all
obligations of others secured by any Lien on property owned or acquired by
such Person, whether or not the obligations secured thereby have been
assumed, (g) all capitalized lease obligations of such Person, (h) all
obligations of any partnership or joint venture as to which such Person is or
may become personally liable, (i) all guarantees by such Person of
Indebtedness of others, and (j) all contingent obligations of such Person.
(k) "INTEREST PERIOD" means, the period commencing on the date of an Advance
and ending on the date the Advance is paid.
(l) "INTEREST RATE" has the meaning ascribed to it in Section 2.03.
(m) "INVESTMENT" means, any investment in any Person, whether by means of
share purchase, capital contribution, loan or otherwise; in determining from
time to time the amount of Investments, share purchases and capital
contributions shall be taken at the original cost thereof regardless of any
subsequent appreciation or depreciation therein and loans shall be taken at
the principal amount thereof remaining unpaid.
(n) "LIBOR RATE" means, a rate equal to the LIBOR Rate, as the rate for the
Interest Period shall be published from time to time in the Money Rates
column of the "Money & Investing Section" of the WALL STREET JOURNAL as the
"LIBOR Rate" for three month borrowings.
(o) "MULTIEMPLOYER PLAN" means, the term as defined in Section 4001 (a)(3)
of ERISA to which CRW or and Subsidiary is making or accruing an obligation
to make contributions or has within any of the preceding three plan years
made or accrued an obligation to make contributions.
(p) "PLAN" means, each employee benefit plan (whether now in existence or
hereafter instituted), as such term is defined in Section 3 of ERISA,
maintained for the benefit of employees, officers or directors of CRW or any
Subsidiary.
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(q) "LIEN" means, any security interest, mortgage, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument, in, of, or on
any of the assets or properties, now owned or hereafter acquired, of CRW or
any Subsidiary, whether arising by agreement or operation of law.
(r) "PERSON" means, any natural person, corporation, partnership, joint
venture, firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether
acting in an individual, fiduciary or other capacity.
(s) "SERVICES AGREEMENT" means, the Services Agreement effective as of
August 19, 1999, between CCI and CRW, as it may be amended from time to time.
If the Services Agreement is terminated prior to the termination of this
Agreement, any references to the Services Agreement after its termination
shall mean the version of the Services Agreement in effect immediately prior
to the termination of the Services Agreement.
(t) "SUBSIDIARY" means, any corporation a majority of the shares of the
outstanding stock of which have ordinary voting power for the election of
directors is owned by CRW, either directly or through one or more of its
Subsidiaries.
ARTICLE II
ADVANCES AND CASH MANAGEMENT
SECTION 2.01 ADVANCES FROM CRW TO CCI. Any funds of CRW and its
Subsidiaries that are not required to meet the daily cash requirements of CRW
and its Subsidiaries will be transferred to CCI through a concentration
account on a daily basis as an Advance hereunder and/or applied, at the
discretion of CRW, to decrease the outstanding balance of Advances from CCI
pursuant to Section 2.02, as applicable. Any funds transferred from CRW to
CCI will be deemed as either an Advance to CCI, if there are no outstanding
Advances from CCI to CRW, or a decrease of Advances from CCI to CRW, if such
Advances exist. Any interest payable by CCI on an Advance from CRW (other
than interest payable upon or after termination of this Agreement) shall be
treated (effective as of the first day of the following Interest Period) as
an Advance from CRW for the purposes of this Agreement. Each Advance by CRW
under this Section 2.01 shall be deemed to be made by CRW notwithstanding the
fact that such Advance may involve cash of one or more Subsidiaries of CRW.
All funds which constitute Advances to CCI pursuant to this Section 2.01(and
not decreases in Advances from CCI to CRW) shall bear interest at the LIBOR
Rate.
SECTION 2.02 ADVANCES FROM CCI TO CRW. Subject to the following limit,
any funds needed by CRW and its Subsidiaries in order to meet daily cash
requirements of CRW and its Subsidiaries will be advanced by CCI. In
addition, subject to repayment as provided in Section 2.04 and simultaneously
with the execution of this Agreement,
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CCI will issue an Advance and satisfy the outstanding balance of the Dividend
Promissory Note and CRW Promissory Note. The outstanding balance of all
Advances from CCI to CRW and all of its Subsidiaries shall never exceed (i)
$225,000,000 in the aggregate at any time prior to an initial public offering
of stock of CRW, or (ii) $105,000,000 in the aggregate at any time after the
application of the proceeds of such initial public offering of stock of CRW.
Any funds transferred from CCI to CRW will be deemed as either an Advance to
CRW, if there are no outstanding Advances from CRW to CCI, or a decrease of
the Advances from CRW, if such Advances to CCI exist. Any interest payable by
CRW on an Advance from CCI (other than interest payable upon or after
termination of this Agreement) shall be treated (effective as of the first
day of the following Interest Period) as an Advance from CCI for the purposes
of this Agreement. Interest that accrues after the maximum borrowing amount
has been reached shall be considered an Advance notwithstanding the limits
set forth in this Section. Each Advance by CCI under this Section 2.02 shall
be deemed made by CCI notwithstanding the fact that such Advance may involve
cash of one or more Subsidiaries of CCI.
SECTION 2.03 INTEREST.
(a) Subject to the other provisions of this Section 2.03, interest shall
accrue on Advances at the rate (the "Interest Rate") of 125 basis points over
the LIBOR Rate in effect on the date of the Advance. Interest shall be
calculated on the basis of a 360 day year for the actual number of days
elapsed. Interest payments for Interest Periods ending (i) prior to the
termination of this Agreement shall be treated as Advances pursuant to
Sections 2.01 and 2.02 herein, as applicable, on the first day of the
following Interest Period and (ii) on the termination of this Agreement shall
be payable immediately (each an "Interest Payment"). Outstanding Advances and
Interest Payments for the final Interest Period not repaid when they become
due and payable upon the termination of this Agreement as provided in Section
4.03 shall bear interest from and after the required date of payment to the
date of payment at an annual rate equal to two and one-half percent (2-1/2 %)
per annum in excess of the rate applicable to the unpaid principal amount
immediately before it became due.
(b) The interest payable by CCI under this Agreement shall be calculated by
multiplying the Interest Rate by the CCI Balance for the applicable days in
the Interest Period. The interest payable by CRW under this Agreement shall
be calculated by multiplying the Interest Rate by CRW Balance for the
applicable days in the Interest Period. The Interest Payment required to be
made by each party is independent of the Interest Payment required to be paid
by the other party, and interest may be paid by both CCI and CRW for any
given Interest Period. CCI shall calculate the amount of interest payable by
both CCI and CRW for each Interest Period and, upon request, shall provide
notice thereof to CRW, together with supporting calculations.
(c) All calculations shall be performed by CCI and shall be subject to the
dispute resolution mechanisms provided for in Section 4.01.
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SECTION 2.04 REPAYMENT. During the term of this Agreement, all
Advances received by either party under this Agreement shall be offset
against and shall be treated as repaid to the extent of any Advances made by
such party to the other party. Repayments can be made at any time by either
party with interest payable up to the date of repayment. No prepayment
penalty may be levied. Upon termination of this Agreement, any Advances that
have not theretofore been repaid, together with accrued interest, will be
payable in full immediately following termination of this Agreement.
SECTION 2.05 INTERCOMPANY ACCOUNT. CCI shall maintain a ledger in
which all CCI Advances and CRW Advances and all repayments of such Advances
shall be recorded. CCI shall give CRW access, during normal business hours,
to such ledger and the other records relating to Advances and payments made
with respect thereto. CCI shall have until the 30th day following the end of
each Interest Period to make any calculations required to be made by it under
the provisions of this Agreement.
SECTION 2.06 REQUESTS FOR ADVANCES. Notice of a request for an Advance
hereunder (other than Advances made by CCI to CRW through intercompany
accounts) to meet the daily cash requirements of CRW and its Subsidiaries
will be made pursuant to a form and instructions provided separately by CCI.
Advances will be made according to a schedule to be agreed between the
parties.
SECTION 2.07 TRANSFERS OF FUNDS. All transfers of funds between CCI and
CRW will be initiated by CCI Treasury. All funds will be transferred through
intercompany accounts, or as otherwise agreed by the parties.
SECTION 2.08 TAXES. If CRW or CCI shall be required by law to deduct
any tax from or in respect of any sum payable hereunder to the other party:
(a) as soon as such party is aware that any such deduction, withholding or
payment of a tax is required, or of any change in any such requirement, it
shall notify the other party; (b) such party shall make such deductions, or
pay such tax, before any interest or penalty becomes payable; (c) such party
shall pay the full amount deducted to the relevant taxing authority or other
authority in accordance with applicable law; and (d) within thirty (30) days
after paying such tax, such party shall deliver to the other party
satisfactory evidence of that deduction, withholding or payment and (where
remittance is required) of the remittance thereof to the relevant taxing or
other authority.
SECTION 2.09 REQUIREMENT TO BORROW. CRW shall not borrow any funds from
any person other than CCI in order to satisfy its financial requirements
unless such borrowing is consented to by CCI in writing.
SECTION 2.10 USURY. All agreements between the parties, whether now
existing or hereafter arising and whether written or oral, are hereby limited
so that in no contingency, whether by reason of demand for payment or
acceleration of the maturity hereof or otherwise, shall the interest
contracted for, charged or received by either party exceed the maximum amount
permissible under applicable law. If, from any
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circumstance whatsoever, interest would otherwise be payable to either party
in excess of the maximum lawful amount, the interest payable to such party
shall be reduced to the maximum amount permitted under applicable law; and if
from any circumstance either party shall ever receive anything of value
deemed interest by applicable law in excess of the maximum lawful amount, an
amount equal to any excessive interest shall be applied to the reduction of
the principal hereof and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal hereof such excess shall be
refunded to the party deemed to have made such payment. All interest paid or
agreed to be paid to either party shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full period until payment in full of the principal (including the period of
any renewal or extension hereof) so that the interest hereon for such full
period shall not exceed the maximum amount permitted by applicable law. This
paragraph shall control all agreements between the parties.
ARTICLE III
COVENANTS OF CRW
Until the repayment of all Advances under this Agreement, CRW will:
SECTION 3.01 CORPORATE EXISTENCE. Maintain, and, except as provided in
Section 3.7 hereof, cause each Subsidiary to maintain, (a) its corporate
existence in good standing under the laws of the jurisdiction of its
incorporation, (b) its right to transact business in each jurisdiction in
which the character of the properties owned or leased by it or the business
conducted by it makes such qualification necessary and the failure to so
qualify would permanently preclude CRW or such Subsidiary from enforcing its
rights with respect to any material assets or expose CRW or such Subsidiary
to any material liability and (c) conduct and operate its business in a
lawful manner as presently conducted.
SECTION 3.02 COMPLIANCE WITH LAWS, ETC. Comply, and cause each
Subsidiary to comply, in all material respects with all applicable laws,
rules, regulations and orders (including without limitation Regulation X of
the Board of Governors of the Federal Reserve System), such compliance to
include, without limitation, paying before the same become delinquent all
taxes, assessments and governmental charges imposed upon it or upon its
property except to the extent contested in good faith by appropriate
proceedings and for which adequate reserves have been established.
SECTION 3.03 ERISA. At all times maintain, and cause each Subsidiary
to maintain, each of its Plans in compliance with all material applicable
requirements of ERISA and of the Code and with all material applicable
rulings and regulations issued under the provisions of ERISA and the Code;
and not permit any of its ERISA Affiliates to, (a) engage in any transaction
in connection with which CRW or any of its ERISA Affiliates would be
subject to either a civil penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed by Section 4975 of the Code, in either case in an
amount exceeding $1,000,000, (b) fail to make full payment when due of all
amounts which,
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under the provisions of any Plan, CRW or any of its ERISA Affiliates is
required to pay as contributions thereto, or permit to exist any accumulated
funding deficiency (as such term is defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, with respect to any Plan in
an aggregate amount exceeding $1,000,000 or (c) fail to make any payments in
an aggregate amount exceeding $1,000,000 to any Multiemployer Plan that the
CRW or any of its ERISA Affiliates may be required to make under any
agreement relating to such Multiemployer Plan or any law pertaining thereto.
SECTION 3.04 INSURANCE. Maintain, and cause each Subsidiary to
maintain, in full force and effect insurance comparable to present policies
in amounts and risks covered plus such additional insurance, if any, as may
from time to time be required to provide coverage customarily maintained by
similarly situated companies.
SECTION 3.05 LITIGATION. Notify the CCI in writing of all litigation
involving a claim against CRW or any Subsidiary of more than $5,000,000 and
of all other litigation and proceedings before any governmental or regulatory
agencies affecting CRW or any Subsidiary which, if adversely determined,
would materially affect the consolidated financial condition of CRW and the
Subsidiaries.
SECTION 3.06 LIENS. Not, and not permit any Subsidiary to, create,
incur, assume or suffer to exist, any Lien with respect to its right, title
and interest in or to any property or assets now owned or hereafter acquired
by CRW or any Subsidiary except (a) materialmen's, mechanics', suppliers',
tax, carriers or warehousemen's Liens, statutory Liens of landlords and other
like Liens arising in the ordinary course of business and liens for taxes,
assessments or other governmental charges, securing obligations which are not
yet due or which are being contested in good faith by appropriate
proceedings, and other like Liens in existence less than 120 days from the
date of creation thereof, (b) existing Liens on property acquired in
acquisitions, (c) any Lien on property owned by any Person (other than CRW or
a Subsidiary) in which CRW or a Subsidiary has made an Investment and which
Lien secures all obligation of such Person for which neither CRW nor any
Subsidiary has any liability, and (d) purchase money mortgages, liens,
security interests or encumbrances upon or in property acquired after the
date hereof, or mortgages, liens, lease purchase liens, security interests or
encumbrances existing in the property at the time of acquisition thereof,
provided that such mortgages, liens, security interests or encumbrances
extend only to the property then being acquired and secure only indebtedness
being created or assumed in connection with that acquisition.
SECTION 3.07 MERGER AND CONSOLIDATION. Not, and not permit any
Subsidiary to, merge or consolidate or enter into any analogous
reorganization or transaction with any other Person except that: (a) any
Subsidiary may merge or consolidate with, or be liquidated into, CRW or
another Subsidiary; (b) CRW may merge or consolidate with another Person if
(i) CRW is the surviving or resulting entity and (ii) no Event of Default
would result from, or would exist immediately after, such consolidation or
merger; (c) a Subsidiary may merge or consolidate with another Person if (i)
the Subsidiary is the surviving or resulting entity or such other Person
becomes a Subsidiary upon such
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consolidation or merger and (ii) no Event of Default or would result from, or
would exist immediately after, such consolidation or merger; and (d) any
Person may become a Subsidiary if no Event of Default would result from, or
would exist immediately after, such consolidation or merger.
SECTION 3.08 LOANS AND ADVANCES. Not, and not permit any Subsidiary
to, make or make any commitment to make, or permit to exist or remain
outstanding, any loan, advance or extension of credit to, or any Investment
in, any Person, except:
(a) loans, advances or extensions of credit to, or Investments in, a
Subsidiary which is engaged in a line of business similar to any line of
business in which CRW or any Subsidiary was engaged as of August 19, 1999;
(b) Investments in stock, obligations, securities or assets of a Person
provided such Person is engaged in a line of business similar to any line of
business engaged in by CRW or any Subsidiary as of August 19, 1999;
(c) obligations, securities or assets received in settlement of
Indebtedness of a Person to CRW or a Subsidiary and which was incurred in
the ordinary course of business of CRW or such Subsidiary, as the case
may be;
(d) trade receivables arising in the ordinary course of business; and
(e) loans, advances, extensions of credit, or Investments, approved by
CCI in writing.
SECTION 3.09 SALES OF ASSETS. Not, and not permit any Subsidiary to
sell (including sales with a view to the concurrent or subsequent acquisition
by lease ["sale-leaseback transactions"]), transfer, convey, lease or
otherwise dispose of (or enter into any commitment to do so) all or any part
of its assets except for:
(a) sales in the ordinary course of business;
(b) sale-leaseback transactions provided that the aggregate fair market
value of the assets sold under all such sale-leaseback transactions during
the Term shall not at any time exceed ten percent (10%) of CRWs equity
determined as of the last day of the fiscal quarter next preceding the most
recent such transaction, without the written consent of CCI;
(c) any other sale of assets (whether in one transaction or a series of
transactions), provided that the aggregate fair market value of the assets
sold pursuant to this paragraph (c) for any fiscal year of CRW shall not
exceed ten percent (10%) of CRWs equity as of the last day of the fiscal
quarter next preceding the most recent such transaction; and
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(d) transfers of assets between Subsidiaries or between CRW and any
Subsidiary.
SECTION 3.10 GUARANTIES AND CONTINGENT LIABILITIES. Not, and not
permit any Subsidiary to, guarantee, endorse, contingently agree to purchase
or to provide funds for the payment of, agree to maintain the net worth or
working capital or any other financial test of or otherwise become
contingently liable upon, any obligation of any other Person, or create,
incur, assume, suffer or permit to exist any other contingent liability
except:
(a) by the endorsement of negotiable instruments for deposit or
collection (or similar transactions) in the ordinary course of business;
(b) guaranties of the obligations of Persons given by CRW or a
Subsidiary in the ordinary course of business in connection with a franchise
agreement, management agreement or similar service agreement or customer
relationship between CRW or a Subsidiary and such Person, approved in writing
by CCI;
(c) reimbursement obligations with respect to standby letters of credit
furnished in the ordinary course of business to secure payment of insurance
premiums, deductible losses and similar miscellaneous charges in connection
with obtaining insurance coverage, approved in writing by CCI;
(d) reimbursement obligations with respect to standby letters of credit
furnished in the ordinary course of business in international trade
transactions;
(e) claims against CRW or any Subsidiary which are being contested by
CRW or such Subsidiary in good faith and by appropriate proceedings;
(f) guaranties by CRW of Indebtedness of any Subsidiary incurred in the
ordinary course of business in connection with a line of business engaged in
by CRW or any Subsidiary as of August 19, 1999; and
(g) guaranties by any Subsidiary of Indebtedness of CRW or any other
Subsidiary incurred in the ordinary course of business in connection with a
line of business engaged in by CRW or any Subsidiary as of August 19, 1999.
SECTION 3.11 REGULATIONS U, G AND X. Not, and not permit any Subsidiary
to, use any part of the proceeds of the Loans to extend credit to others for
the purpose of purchasing or carrying any margin stock (within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System) in
violation of any provision of Regulation U, G or X of said Board of
Governors. If requested by any Bank, it will furnish the Banks with a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in Regulation U.
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ARTICLE IV
ADMINISTRATION
SECTION 4.01 DISPUTES. All disputes under this Agreement shall be
handled in the manner provided for in Article 7.10 of the Services Agreement.
SECTION 4.02 LIMITATIONS ON LIABILITY. Neither party shall have any
liability under this Agreement (including any liability for its own
negligence) for damages, losses or expenses (including expenses or higher
interest rates incurred in order to obtain alternative financing sources)
suffered by the other party or its Subsidiaries as a result of the
performance or non-performance of such party's obligations hereunder, unless
such damages, losses or expenses are caused by or arise out of the willful
misconduct or gross negligence of such party or a breach by such party. In
no event shall either party have any liability to the other party for
indirect, incidental or consequential damages that such other party or its
Subsidiaries or any third party may incur or experience on account of the
performance or non-performance of such party's obligations hereunder. The
provisions of this Section 4.02 shall survive any termination of this
Agreement.
SECTION 4.03 TERM OF THE AGREEMENT. This Agreement commences on the
effective date of this Agreement as set forth above and will continue in
effect until 11:59 p.m., Central Time, on December 31, 2001. Notwithstanding
the foregoing, this Agreement may be sooner terminated, without liability to
the terminating party:
(a) by either party, upon 90 days' notice to the other party, if CCI ceases
to own, directly or indirectly, 50% or more of the outstanding common
stock of CRW;
(b) by either party, immediately upon notice to the other party, if (i) that
other party makes a general assignment of all or substantially all of
its assets for the benefit of its creditors; (ii) that other party
applies for, consents to or acquiesces in the appointment of a receiver,
trustee, custodian or liquidator for its business or all or
substantially all of its assets; (iii) that other party files, or
consents to or acquiesces in a petition seeking relief or reorganization
under any bankruptcy or insolvency laws; or (iv) a petition seeking
relief or reorganization under any bankruptcy or insolvency laws is
filed against that other party and is not dismissed within 90 days after
it was filed;
(c) by either party, immediately upon notice to the other party, if that
other party's material breach of this Agreement continues uncured or
uncorrected for 30 days after both the nature of that breach and the
necessary cure or correction has been agreed upon by the parties or
otherwise determined by the dispute resolution procedure described in
Section 3.01; provided that if the parties agree or it is determined by
the dispute resolution procedure that the material breach is not capable
of being cured or corrected, the termination shall be effective
immediately upon notice;
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(d) by either party, immediately upon notice to the other party, if it
determines that performance of its rights or obligations under this
Agreement is or becomes illegal;
(e) by either party, immediately upon notice to the other party, if payments
made by the other party are subject to any deduction or withholding for
or on account of any tax, unless the other party agrees to increase its
payments such that, after all required deductions have been made, the
party receives a net amount equal to the sum it would have received had
no such deductions been made;
(f) by either party, immediately upon notice to the other party, if it
determines that its compliance with any law or regulation or any
guideline or request from any central bank or governmental or regulatory
authority would create a cost or increase the cost of providing credit
under this Agreement, unless the other party agrees to pay amounts
sufficient to indemnify for such cost or increase in cost; or
(g) by either party, immediately upon notice to the other party, if the
Services Agreement has been terminated.
SECTION 4.04 RENEWAL. The parties may consent to successive one-year
renewal terms. If CRW wishes to renew the term of this Agreement, it shall
provide notice to CCI of that desire by June 30, 2001 and the same date of
each subsequent year. If CCI consents to such renewal, it shall provide
notice to CRW of that concurrence by July 30 of that year. If no notice of
desire to renew or subsequent consent is given, this Agreement will terminate
when the then current term expires.
SECTION 4.05 CONFIDENTIALITY. Confidentiality of matters will be
maintained in the manner set forth in Article 7.08 of the Services Agreement.
SECTION 4.06 SUCCESSORS AND ASSIGNS. Matters regarding succession and
assignment shall be determined in the manner set forth in the Services
Agreement.
SECTION 4.07 NO THIRD-PARTY BENEFICIARIES. Nothing expressed or implied
in this Agreement shall be construed to give any person or entity other than
the parties hereto any legal or equitable rights hereunder.
SECTION 4.08 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties on this subject, except that any administrative
matters not addressed herein shall be addressed in the manner set forth in
the Services Agreement. This Agreement replaces and supersedes any prior
agreement or understanding of the parties, whether written or oral, on this
subject not expressed or referred to in this Agreement.
SECTION 4.09 AMENDMENT. This Agreement may not be amended except by a
written instrument signed by the parties hereto.
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SECTION 4.10 WAIVERS. Either party hereto may (a) extend the time for
performance of any of the obligations or other act of the other party or (b)
waive compliance with any of the agreements contained herein. No waiver of
any term shall be construed as a waiver of the same term in any other
situation or a waiver of any other term of this Agreement. The failure of any
party to assert any of its rights hereunder will not constitute a waiver of
any such rights.
SECTION 4.11 SEVERABILITY. If any provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, such provision shall be deemed severable and all other provisions of
this Agreement shall nevertheless remain in full force and effect.
SECTION 4.12 HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
SECTION 4.13 NOTICES. All notices required hereunder shall be given in
the manner set forth in Article 7.09 of the Services Agreement.
SECTION 4.14 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of Minnesota,
without giving effect to any choice-of-law rules that may require the
application of the laws of another jurisdiction.
SECTION 4.15 CHANGES IN LAW. If at any time due to the adoption of any
law, rule, regulation, treaty or directive, or any change therein or in the
interpretation or administration thereof by any court, central bank,
governmental authority, agency or instrumentality, or comparable agency
charged with the interpretation or administration thereof, or for any other
reason arising subsequent to the date of this Agreement, it shall become
unlawful or impossible for CCI to make any Advance, the obligation of CCI to
provide such Advances shall, upon the happening of such event, forthwith be
suspended for the duration of such illegality or impossibility. If any such
event shall make it unlawful or impossible for CCI to continue any Advances
previously made by it hereunder, CCI shall, upon the happening of such event,
notify CRW thereof in writing, and CRW shall, at the time notified by CCI,
repay such Advances in full, together with accrued interest thereon.
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SECTION 4.16 COUNTERPARTS. This Agreement may be signed in any number of
counterparts, with the same effect as if all signatories had signed the same
document. All counterparts shall be construed together to constitute one,
and the same, document.
IN WITNESS WHEREOF, CCI and CRW have caused this Agreement to be executed as
of the date first above written.
CARLSON COMPANIES, INC. CARLSON RESTAURANTS WORLDWIDE INC.
By: /s/ Martyn R. Redgrave By: /s/ Wallace B. Doolin
------------------------- ----------------------------
Martyn R. Redgrave Wallace B. Doolin
Title: Executive V.P. and CFO Title: President and CEO
---------------------- -------------------------
Date: August 19, 1999 Date: August 19, 1999
----------------------- --------------------------
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EXHIBIT 10.3(a)
INTERCOMPANY CREDIT AGREEMENT
AMENDMENT #1
This INTERCOMPANY CREDIT AGREEMENT AMENDMENT #1 (the "Amendment")
amends and modifies as follows that certain Intercompany Credit Agreement by and
between Carlson Companies, Inc., a Minnesota corporation ("CCI"), and Carlson
Restaurants Worldwide Inc., a Delaware corporation ("CRW"), dated as of August
19, 1999.
1. The third sentence of SECTION 2.02 ADVANCES FROM CCI TO CRW is hereby deleted
in its entirety and replaced with the following:
"The outstanding balance of all Advances from CCI to CRW and all of its
Subsidiaries shall never exceed (i) $250,000,000 in the aggregate at
any time prior to an initial public offering of stock of CRW, or
(ii)$125,000,000 in the aggregate at any time after the application of
the proceeds of such initial public offering of stock of CRW."
2. In SECTION 4.03 TERM OF THE AGREEMENT the termination date of December 31,
2001 is deleted and replaced with the termination date of December 31, 2002.
3. The Amendment shall be effective as of April 18, 2000.
4. As modified by this Amendment, the Agreement remains in full force and
effect.
IN WITNESS WHEREOF, CCI and CRW have caused this Agreement to be executed April
18, 2000.
CARLSON COMPANIES, INC. CARLSON RESTAURANTS WORLDWIDE INC.
By: /s/ John M. Diracles, Jr. By: /s/ Wallace B. Doolin
----------------------------------- ------------------------------
Title: Vice President - Treasurer Title: President and CEO
-------------------------------- ---------------------------
Date: April 18, 2000 Date: April 18, 2000
--------------------------------- ----------------------------
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EXHIBIT 10.4
CARLSON RESTAURANTS WORLDWIDE INC.
STOCK OPTION PLAN
1. PURPOSE OF PLAN.
Under this Stock Option Plan (the "Plan"), the Company may grant
Options to Employees and Directors to purchase shares of the Company's Common
Stock. The Plan is designed to enable the Company and its subsidiaries to
attract, retain and motivate Participants by providing them the opportunity to
acquire equity ownership in the Company. The Plan provides for Options which
qualify as Incentive Stock Options under Code Section 422, as well as
Non-Qualified Stock Options which do not so qualify.
2. DEFINITIONS.
The following terms will have the meanings set forth below, unless the
context clearly otherwise requires:
2.1 "AFFILIATE" means any of the following:
(a) Carlson Companies, Inc.
(b) Carlson Holdings, Inc.
(c) Any entity that is directly or indirectly controlled
by the Company, Carlson Companies, Inc., or Carlson
Holdings, Inc.
(d) Any entity in which the Company, Carlson Companies,
Inc., or Carlson Holdings, Inc. has a significant
equity interest.
(e) Any lineal descendant of Curtis L. Carlson or any
trust solely for the benefit of one or more of such
lineal descendants or any other entity beneficially
owned by such lineal descendants.
2.2 "BOARD" means the Board of Directors of the Company.
2.3 "BROKER EXERCISE NOTICE" means a written notice pursuant to
which a Participant, upon exercise of an Option, irrevocably instructs a
broker or dealer to sell a sufficient number of shares or loan a sufficient
amount of money to pay all or a portion of the exercise price of the Option
and/or any related withholding tax obligations and remit such sums to the
Company and directs the Company to deliver stock certificates to be issued
upon such exercise directly to such broker or dealer.
2.4 "CHANGE IN CONTROL" means an event described in Section 8.1.
2.5 "CODE" means the Internal Revenue Code of 1986, as amended.
2.6 "COMMITTEE" means any group appointed under Section 3 to
administer the Plan.
2.7 "COMMON STOCK" means the Class A common stock of the Company.
2.8 "COMPANY" means Carlson Restaurants Worldwide Inc., a Delaware
corporation.
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2.9 "DIRECTOR" means each director of the Company who is not an
Employee.
2.10 "DISABILITY" means any disability that entitles the
Participant to receive disability income benefits pursuant to the long-term
disability plan of the Company or any Affiliate then covering the Participant
or, if no such plan exists or is applicable to the Participant, the permanent
and total disability of the Participant within the meaning of Code Section
22(e)(3).
2.11 "EMPLOYEE" means an employee of the Company or any Affiliate.
2.12 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
2.13 "EXPIRATION DATE" means the date an option is scheduled to
expire and no longer be exercisable. The Expiration Date of an Option will in
no case be later than 10 years after the date the Option was granted.
2.14 "FAIR MARKET VALUE" of a share of Common Stock as of a
particular day means:
(a) If the Common Stock is then Publicly Traded: The
closing price of such stock as of the day in
question (or, if such day is not a trading day in
the principal securities market or markets for such
stock, on the nearest preceding trading day), as
reported with respect to the market (or the
composite of markets, if more than one) in which
such stock is then traded, or, if no such closing
prices are reported, on the basis of the mean
between the high bid and low asked prices that day
on the principal market or quotation system on
which such stock is then quoted, or, if not so
quoted, as furnished by a professional securities
dealer making a market in such stock selected by
the Board or Committee.
(b) If the Common Stock is then not Publicly Traded: The
price at which one could reasonably expect such
stock to be sold in an arm's length transaction,
for cash, other than on an installment basis, to a
person not employed by, controlled by, in control
of or under common control with the Company. Such
Fair Market Value shall be determined for this
purpose by the Board or Committee, or by an
independent appraiser selected by the Board or
Committee. The determination of Fair Market Value
by the Board, Committee, or appraiser shall be
conclusive and binding notwithstanding the
possibility that other persons might make a
different determination.
2.15 "FUNDAMENTAL CHANGE" means a dissolution or liquidation of
the Company, a sale of substantially all of the assets of the Company, a
merger or consolidation of the Company with or into any other corporation,
regardless of whether the Company is the surviving corporation, or a
statutory share exchange involving capital stock of the Company.
2.16 "INCENTIVE STOCK OPTION" means a right to purchase Common
Stock that qualifies as an "incentive stock option" within the meaning of
Code Section 422.
2.17 "NON-EMPLOYEE DIRECTOR" means a member of the Board who is
considered (i) a non-employee director within the meaning of Exchange Act
Rule 16b-3 and (ii) an outside director within the meaning of Code
Section 162(m).
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2.18 "NON-QUALIFIED STOCK OPTION" means a right to purchase
Common Stock that does not qualify as an Incentive Stock Option.
2.19 "OPTION" means an Incentive Stock Option or a Non-Qualified
Stock Option.
2.20 "OPTION AGREEMENT" means a written agreement through which
the Company agrees to grant an Option to a Participant and specifies the
terms of that Option. An Option Agreement may take the form of a letter or
notice to the Participant, or a contract to be signed by the Participant.
2.21 "PARTICIPANT" means an Employee or Director who receives
one or more Options under the Plan.
2.22 "PREVIOUSLY ACQUIRED SHARES" means shares of Common Stock
that are already owned by the Participant.
2.23 "PUBLICLY TRADED" means the Common Stock is listed or
admitted to unlisted trading privileges on a national securities exchange or
on the NASDAQ National Market or if sales or bid and offer quotations are
reported in the automated quotation system ("NASDAQ") operated by the
National Association of Securities Dealers, Inc.
2.24 "RETIREMENT" of a Participant means the Participant's
Termination of Service under either of the following circumstances:
(a) The Termination of Service occurs on or after the date
the Participant attained age 55, and the sum of his
attained age on his last birthday and his full
years of service is 75 or more. "Service" for this
purpose means aggregate service as an employee
and/or director of the Company or any Affiliate.
(b) The Termination of Service occurs on or after the date
the Participant attained age 62, regardless of his
length of service.
2.25 "SECURITIES ACT" means the Securities Act of 1933, as amended.
2.26 "TERMINATION OF SERVICE" means that a Participant has
ceased to be an Employee or Director. Termination of Service does not include
transfer among the Company and one or more Affiliates.
3. PLAN ADMINISTRATION.
The Plan shall be administered by the Board or by a Committee appointed
by the Board. If the Company has a class of equity securities registered under
Section 12 of the Exchange Act, any such Committee shall consist solely of not
less than two members of the Board who are Non-Employee Directors. The Board or
any such Committee shall have the following authority, subject to the terms of
the Plan:
(a) To determine which Employees and Directors will be
designated as Participants and granted Options.
(b) To determine the terms of each Option including the
number of shares of Common Stock subject to the
Option, the exercise price, the terms under which
the Option will vest or become exercisable, the
expiration date of the Option, and the period of
time (if any) following Termination of Service that
the option may be exercised.
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(c) To determine whether the Option will be granted as an
Incentive Stock Option or as a Non-Qualified Stock
Option, recognizing that certain individuals, such
as non-Employee Directors, are not eligible to
receive Incentive Stock Options.
(d) To modify the terms of any outstanding Option in any
manner; provided, however, that the modified terms
are permitted by the Plan as then in effect and
that any Participant adversely affected by the
modified terms has consented to such modification.
(e) To exercise any other authority delegated to the Board
or Committee by the Plan, and to do whatever is
necessary to properly administer the Plan. The
Board or Committee may assign non-discretionary
responsibilities with regard to the Plan to
employees of the Company or an Affiliate.
(f) To delegate to persons who are not Non-Employee
Directors all or any part of its authority under
the Plan with regard to granting and administering
Options for persons who are not then subject to the
reporting requirements of Section 16 of the
Exchange Act. (However, options so granted
generally will not qualify as "performance based
compensation" for purposes of Code Section 162(m).)
4. SHARES AVAILABLE FOR ISSUANCE.
4.1 MAXIMUM NUMBER OF SHARES AVAILABLE. Subject to adjustment
as provided in Section 4.3, the maximum number of shares of Common Stock that
will be available for issuance under the Plan will be _______________ shares.
4.2 ACCOUNTING FOR OPTIONS. Shares of Common Stock that are
issued under the Plan or that are subject to outstanding Options will be
applied to reduce the maximum number of shares of Common Stock remaining
available for issuance under the Plan. Any shares of Common Stock that are
subject to an Option that lapses, expires, is forfeited or for any reason is
terminated unexercised or unvested will automatically again become available
for issuance under the Plan. However, shares withheld for the purpose of
paying applicable withholding taxes will not again become available for
issuance under the Plan.
4.3 ADJUSTMENTS TO SHARES AND OPTIONS. In the event of any
reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights
offering, divestiture or extraordinary dividend (including a spin-off) or any
other change in the corporate structure or shares of the Company, the Board
or Committee (or, if the Company is not the surviving corporation in any such
transaction, the board of directors of the surviving corporation) will make
appropriate adjustment (which determination will be conclusive) as to the
number and kind of securities available for issuance under the Plan and, in
order to prevent dilution or enlargement of the rights of the Participants,
the number, kind and, where applicable, exercise price of securities subject
to outstanding Options.
5. PARTICIPATION.
The Board or Committee may designate any Employee or Director as a
Participant.
6. OPTIONS.
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6.1 GRANTS. An Employee or Director may be granted one or more
Options under the Plan, and such Options will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be
determined by the Board or Committee in its sole discretion. The Board or
Committee may designate whether an Option is an Incentive Stock Option or a
Non-Qualified Stock Option, recognizing that certain individuals such as
outside directors are not eligible to receive Incentive Stock Options. The
aggregate number of shares on which Options may be granted to any one
Employee during the duration of the Plan may not exceed 15% of the total
shares of Common Stock available for issuance under the Plan. If an Option
granted to an Employee is canceled, said Option will nevertheless be included
in applying said 15% limit. If an outstanding Option is amended to reduce the
exercise price, and the amendment is not made pursuant to Section 4.3, the
transaction shall be treated as a cancellation of the original Option and the
grant of a new Option, and both the original Option and the new Option will
be included in applying the 15% limit.
6.2 EXERCISE PRICE. The per share price to be paid by a
Participant upon exercise of an Option will be determined by the Board or
Committee in its discretion at the time of the Option grant and may be
greater or less than the Fair Market Value at the time of grant. However, the
exercise price per share for any Incentive Stock Option shall not be less
than 100% of the Fair Market Value of one share of Common Stock on the date
of grant.
6.3 EXERCISABILITY AND DURATION. An Option will become
exercisable at such times and in such installments as may be determined by
the Board or Committee in its sole discretion at the time of grant; provided,
however, that no Option may be exercisable after 10 years from its date of
grant. The terms of each Option will be set forth in a written Option
Agreement. Each Option Agreement will specify the length of time (if any) the
Option will remain in effect after a Participant's Termination of Service.
However, in no event will an Option remain exercisable after its Expiration
Date. The Option Agreement may specify different terms depending on the
reason for the Termination of Service (E.G., retirement, Disability, death,
voluntary termination, involuntary termination, etc.).
6.4 PAYMENT OF EXERCISE PRICE. The total purchase price of the
shares to be purchased upon exercise of an Option will be paid entirely in
cash (including check, bank draft or money order); provided, however, that
the Board or Committee, in its sole discretion and upon terms and conditions
established by the Board or Committee, may allow such payments to be made, in
whole or in part, by tender of a Broker Exercise Notice, Previously Acquired
Shares, Attestation, or by a combination of such methods. "Attestation" means
delivery by a Participant to the Company of a written affidavit of ownership
of Previously Acquired Shares having a fair market value equal to the
exercise price of the Option in lieu of actual delivery of such Previously
Acquired Shares. Upon receipt of such attestation of Previously Acquired
Shares, the Company shall deliver to the Participant a stock certificate for
the number of Option shares so exercised, minus the number of Previously
Acquired Shares attested to in the written affidavit, and minus any shares
required to cover tax withholding obligations.
6.5 MANNER OF EXERCISE. An Option may be exercised by a
Participant in whole or in part from time to time, subject to the conditions
contained in the Plan and Option Agreement, by delivery in person, by
facsimile or electronic transmission or through the mail of written notice of
exercise to the Company (Attention: Secretary) at its principal executive
office and by paying in full the total exercise price for the shares of
Common Stock to be purchased in accordance with Section 6.4.
6.6 DEFERRAL OF GAIN UPON EXERCISE. The Board or Committee, in
its discretion, may permit a Participant to elect that the gains realized
upon exercise of a Non-Qualified Stock Option will be deferred until after
the exercise date. The terms of any such deferral opportunity will be
specified in the Option Agreement.
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7. PAYMENT OF WITHHOLDING TAXES.
The Company is entitled to (a) withhold and deduct from future wages of
the Participant (or from other amounts that may be due and owing to the
Participant from the Company or an Affiliate), or make other arrangements for
the collection of, all legally required amounts necessary to satisfy any and all
federal, state and local withholding and employment-related tax requirements
attributable to an Option, or (b) require the Participant promptly to remit the
amount of such withholding to the Company before taking any action, including
issuing any shares of Common Stock, with respect to an Option. The Board or
Committee may, in its sole discretion and upon terms and conditions established
by the Board or Committee, permit or require a Participant to satisfy, in whole
or in part, any withholding or employment-related tax obligation by means of a
Broker Exercise Notice, or by reducing the number of shares delivered to the
Participant, or by a combination of such methods.
8. CHANGE IN CONTROL.
8.1 CHANGE IN CONTROL. For purposes of the Plan, a "Change in
Control" of the Company will mean the following:
(a) the sale, lease, exchange or other transfer, directly
or indirectly, of substantially all of the assets
of the Company (in one transaction or in a series
of related transactions) to a person or entity that
is not controlled by the Company or its Affiliates;
(b) the approval by the shareholders of the Company of any
plan or proposal for the liquidation or dissolution
of the Company;
(c) a merger or consolidation to which the Company is a
party if the shareholders of the Company
immediately prior to effective date of such merger
or consolidation have "beneficial ownership" (as
defined in Rule 13d-3 under the Exchange Act),
immediately following the effective date of such
merger or consolidation, of securities of the
surviving corporation representing 50% or less of
the combined voting power of the surviving
corporation's then outstanding securities
ordinarily having the right to vote at elections of
directors; or
(d) any person, entity or group which is not an Affiliate
becomes after the effective date of the Plan the
"beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 50%
or more of the combined voting power of the
Company's outstanding securities ordinarily having
the right to vote at elections of directors.
The Board or Committee may, in its sole discretion, provide in an
Option Agreement or at any time after the grant of an Option that in the event
of a Change in Control, the Option will be modified through one or a combination
of the methods described in Sections 8.2, 8.3 and 8.4.
8.2 SUBSTITUTION OF SUCCESSOR STOCK. The Board or Committee
may, in its sole discretion, provide in an Option Agreement or at any time
after the grant of an Option, that if there is a Change in Control of the
Company while the Option remains outstanding, the Option will be adjusted as
provided in Section 4.3 of the Plan. Such adjustment may involve adjusting
the number of shares, or substituting shares of a successor corporation for
the shares of Company Stock on which the Option was originally granted. If
such adjustment
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is made, the Option will remain subject to its original terms regarding
vesting and exercisability, unless otherwise provided by the Board or
Committee in its sole discretion.
8.3 ACCELERATION OF VESTING. The Board or Committee may, in its
sole discretion, provide in an Option Agreement or at any time after the
grant of an Option, that if there is a Change in Control of the Company while
the Option remains outstanding, the Option will become immediately
exercisable in full and will remain exercisable for the remainder of its term
or for a shorter period designated by the Board or Committee, regardless of
whether the Participant to whom such Option was granted remains in the employ
or service of the Company or any Affiliate after the Change in Control.
8.4 CASH PAYMENT FOR OPTIONS. The Board or Committee may, in
its sole discretion, provide in an Option Agreement or at any time after the
grant of an Option, that if there is a Change in Control of the Company while
the Option remains outstanding, the Participant holding that Option will
receive, with respect to the shares of Common Stock subject to such Option,
as of the effective date of the Change in Control, cash in an amount equal to
the excess of the Fair Market Value of such shares immediately prior to the
effective date of such Change in Control over the exercise price per share of
such Option, whereupon such Option will be canceled.
9. RIGHTS OF RECIPIENTS AND PARTICIPANTS; TRANSFERABILITY.
9.1 EMPLOYMENT. Nothing in the Plan will interfere with or
limit in any way the right of the Company or any Affiliate to terminate the
employment of any Employee at any time, nor confer upon any Employee any
right to continue in the employ of the Company or any Affiliate.
9.2 RIGHTS AS A SHAREHOLDER. As a holder of Options a
Participant will have no rights as a shareholder unless and until such
Options are exercised and the Participant becomes the holder of record of
such shares. No adjustment will be made for dividends or distributions with
respect to such Options as to which there is a record date preceding the date
the Participant becomes the holder of record of such shares, except as the
Board or Committee may determine in its discretion.
9.3 RESTRICTIONS ON TRANSFER. Any Option granted under this
Plan shall by its terms be nontransferable by the optionee other than by will
or the laws of descent and distribution and shall be exercisable during the
optionee's lifetime only by the optionee or by the optionee's guardian or
legal representative, except that an Option which is not intended to be an
Incentive Stock Option may, if the Option Agreement so provides, also be
transferable to members of the optionee's Immediate Family, to a partnership
whose members are only the optionee and/or members of the optionee's
Immediate Family, or to a trust for the benefit of only the optionee and/or
members of the optionee's Immediate Family. "Immediate Family" for purposes
of this section includes only the optionee's spouse, parents, children, and
other direct descendants of the optionee and his or her spouse (including
children and other descendants by adoption).
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10. SECURITIES LAW AND OTHER RESTRICTIONS.
Notwithstanding any other provision of the Plan or any Option
Agreement, the Company will not be required to issue any shares of Common Stock
under this Plan, and a Participant may not sell, assign, transfer or otherwise
dispose of shares of Common Stock issued pursuant to Options granted under the
Plan, unless (a) there is in effect with respect to such shares a registration
statement under the Securities Act and any applicable state securities laws or
an exemption from such registration under the Securities Act and applicable
state securities laws, and (b) there has been obtained any other consent,
approval or permit from any other regulatory body which the Board or Committee,
in its sole discretion, deems necessary or advisable. The Company may condition
such issuance, sale or transfer upon the receipt of any representations or
agreements from the parties involved, and the placement of any legends on
certificates representing shares of Common Stock, as may be deemed necessary or
advisable by the Company in order to comply with such securities law or other
restrictions.
11. PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may suspend or terminate the Plan or any portion thereof at
any time, and may amend the Plan from time to time in such respects as the Board
may deem advisable in order that Options under the Plan will conform to any
change in applicable laws or regulations or in any other respect the Board may
deem to be in the best interests of the Company. No termination, suspension or
amendment of the Plan may adversely affect any outstanding Option without the
consent of the affected Participant; provided, however, that this sentence will
not impair the right of the Committee to take whatever action it deems
appropriate under Sections 4.3, 8 and 13.4 of the Plan.
12. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan is effective as of _______________. The Plan will terminate
ten years after said effective date, and may be terminated prior to such time to
by Board action, and no Option will be granted after such termination. Options
outstanding upon termination of the Plan may be exercised in accordance with
their terms.
13. MISCELLANEOUS
13.1 GOVERNING LAW. The validity, construction, interpretation,
administration and effect of the Plan and any rules, regulations and actions
relating to the Plan will be governed by and construed exclusively in accordance
with the laws of the State of Delaware.
13.2 SUCCESSORS AND ASSIGNS. The Plan will be binding upon and
inure to the benefit of the successors and permitted assigns of the Company.
13.3 BREACH OF CONFIDENTIALITY OR NONCOMPETE AGREEMENTS.
Notwithstanding anything in the Plan to the contrary, in the event that a
Participant materially breaches the terms of any confidentiality or noncompete
agreement entered into with the Company or any Affiliate, whether such breach
occurs before or after termination of such Participant's employment with the
Company or any Affiliate, the Board or Committee in its sole discretion may
immediately terminate all rights of the Participant under the Plan and any
Option Agreements without notice of any kind.
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EXHIBIT 10.5(a)
AMENDMENT NO. 3
TO THE
TGI FRIDAY'S INC. DEFERRED COMPENSATION PLAN
WHEREAS, TGI Friday's Inc. (the "Company") maintains the TGI Friday's
Inc. Deferred Compensation Plan, effective as of January 1, 1995 (the "Plan"),
for the benefit of a select group of management and key employees; and
WHEREAS, the Company has previously adopted two amendments to the Plan;
and
WHEREAS, pursuant to Article XV of the Plan permitting the Company to
amend the Plan from time to time, the Company desires to further amend the Plan
in certain respects, as hereinafter provided;
NOW THEREFORE; the Plan is hereby amended as follows, effective as of
October 1, 1999, except as otherwise provided:
1. Section 2.01(n) is amended to provide as follows:
"(n) ENTRY DATE: the first day of each calendar month."
2. Effective January 1, 2000, Section 2.01(q) is amended to provide as
follows:
"(q) HOUR OF EMPLOYMENT: Each hour (i) for which an
Employee is on an Authorized Leave of Absence or is
directly or indirectly paid or entitled to payment by
his Employer or any Affiliate for the performance of
duties or for reasons other than the performance of
duties, or (ii) for which back-pay (irrespective of
mitigation of damages) has been either awarded or
agreed to by the Employer or any Affiliate. Hours of
Employment shall be determined from records
maintained by each Employer or Affiliate; provided,
however, that an Employer or any Affiliate may elect
to determine Hours of Employment for any
classification of Employees which is reasonable,
nondiscriminatory and consistently applied, on the
basis that Hours of Employment include forty-five
(45) Hours of Employment for each week or portion
thereof during which an Employee is credited with one
(1) Hour of Employment.
Except to the extent otherwise permitted by the
Committee in its sole discretion, Hours of Employment
completed with an Affiliate or a Participating
Employer prior to the date on which such Affiliate or
Employer was included within a controlled group of
corporations (as defined in Section 414(b) of the
Code) which includes the Company shall not be
recognized under this Plan."
<PAGE>
3. Effective January 1, 2000, Sections 2.01(ee) and (ff) are amended to
provide as follows:
"(ee) SERVICE: A Participant's Service shall include both
(i) his period of employment with the Employers or
any Affiliate determined in accordance with Section
3.02, and (ii) any period of whole Plan Years in
which the Participant was employed by a Company
franchisee, or held a franchise from the Company.
(ff) SEVERANCE FROM SERVICE: With respect to an Employee,
the earlier of (i) the date on which he terminates
his employment with the Employer, or (ii) the date of
his Retirement, Disability or death; provided,
however, that a Severance from Service shall not be
deemed to occur upon a transfer between Employers or
Affiliates."
4. Effective January 1, 2000, the last paragraph of Section 3.01 is
revised to provide as follows:
"A Participant who incurs a Severance from Service and who is
subsequently re-employed by an Employer shall reenter the Plan
as a Participant on the Entry Date next following such
reemployment, but only if (i) he continues to qualify as a Key
Employee and (ii) prior to such date he shall have again
undertaken the actions specified in Section 3.03 hereof. In
the event that a Participant shall cease to qualify as a Key
Employee, his Participation shall thereupon cease but he shall
continue to accrue Service hereunder during the period of his
continued employment with the Employer or any Affiliate."
5. For the 1999 Plan year, the Additional Matching Contribution
provided pursuant to Section 4.01(c) shall be credited to those Key Employees
who are employed on the last day of the Plan year, without regard to the number
of Hours of Employment completed in such year. Effective January 1, 2000,
Sections 4.01(b) and (c) are amended in their entirety to provide as follows:
4.01
"(b) MATCHING CONTRIBUTION. For each Year, each Employer shall
credit a Matching Employer Contribution equal to fifty per
cent (50%) of each Key Employee's Savings Contributions (but
not to exceed a Savings Contribution equal to 6% of base
salary reduced by the maximum permitted salary reduction for
the Year under the FYI Plan).
(c) ADDITIONAL MATCHING CONTRIBUTION. In addition, for each Year,
each Employer may credit an additional Matching Employer
Contribution equal to fifty per cent (50%) of Savings
Contributions in excess of 6% of base salary, but not to
<PAGE>
exceed 10% of base salary (reduced by the maximum permitted
salary reduction for the Year under the FYI Plan), to be
credited only to those Key Employees who are employed on the
last day of the Plan year."
6. To correct a scrivener's error, and effective January 1, 1998,
Section 4.01 of the Plan shall be amended by inserting Section 4.01(d), to be
and read as follows:
"(d) LTIP DEFERRALS -- The LTIP provides that certain amount
derived from conversion of a Participant's LTIP Units to a
fixed dollar amount will be transferred to the Participant's
Account under this Plan. Such amounts will be credited to an
account for the Participant identified as Account B."
7. For the 1999 Plan year, the Additional Matching Contribution
provided pursuant to Section 5.01(b) shall be credited to those General Managers
who are employed on the last day of the Plan year, without regard to the number
of Hours of Employment completed in such year. Effective January 1, 2000,
Section 5.01(b) of the Plan is amended in its entirety to provide as follows:
"(b) ADDITIONAL MATCHING CONTRIBUTION -- For each Year, each
Employer shall credit a Matching Employer Contribution equal
to fifty percent (50%) of each General Manager's Savings
Contributions (but not to exceed a Savings Contribution equal
to 6% of total bonuses). In addition, for each Year, each
Employer may credit an additional Matching Employer
Contribution equal to fifty per cent (50%) of General
Manager's Savings Contributions in excess of 6% of total
bonuses, but not to exceed 10% of total bonuses, to be
credited only to those General Managers who are employed on
the last day of the Plan year."
8. Effective January 1, 2000, if a Participant has an Hour of
Employment subsequent to January 1, 2000, the vesting table in Section 7.02 of
the Plan is deleted, and the following vesting table is inserted in lieu
thereof:
<TABLE>
<CAPTION>
Years of Service Vested Percentage Forfeited Percentage
<S> <C> <C>
Less than 1 0% 100%
1 but less than 2 25% 75%
2 but less than 3 50% 50%
3 but less than 4 75% 25%
4 or more 100% 0%
</TABLE>
<PAGE>
9. Section 7.03 ELECTION OF IN-SERVICE PAYMENT OF BENEFITS, is deleted
and the following substituted in lieu thereof:
"7.03 ELECTION OF IN-SERVICE PAYMENTS.
(a) EMPLOYER CONTRIBUTION ACCOUNT AND SAVINGS
CONTRIBUTION ACCOUNT. Upon the initial enrollment of
each Participant in the Plan, a one-time election
shall be available to direct that all or a portion of
the vested percentage of the Participant's Employer
Contribution Account and/or Savings Contribution
Account be paid in a lump sum on the date certain
that is at least three (3) years after such
enrollment, if it occurs earlier than the date
otherwise determined for payment of benefits under
Sections 7.01 and 7.02 hereof. Such election shall be
irrevocable. If a Participant elects in-service
payment of his Employer Contribution Account and/or
Savings Contribution Account, in order to continue to
participate in the Plan subsequent to the date of
payment, such Participant shall be required to
complete a new salary and/or bonus reduction
agreement in accordance with the provisions of
Sections 3.03, 4.02 and 5.02 of the Plan, as
applicable. Except as provided herein and in Sections
7.03(b), 10.01, 10.02 and 10.03, no election for
in-service payment of benefits shall be available.
(b) ACCOUNT B. Upon the initial crediting of amounts to a
Participant's Account B, representing LTIP Units
transferred to the Plan, a Participant may make an
election to receive a distribution of all or a
portion of the Participant's Account B on a date (or
dates) certain that is at least three (3) years after
such initial crediting, if it occurs earlier than the
date otherwise determined for payment of benefits
from Account B under Section 11.01 hereof. Except as
set forth in Section 10.03, such election shall be
irrevocable. After the initial crediting of amounts
to a Participant's Account B, no election for
in-service payment of Account B shall be available
except as set forth in Sections 10.01 and 10.03."
10. Effective January 1, 2000, Section 7.04(b) is amended to provide as
follows:
"(b) FORFEITURES. Upon a Participant's or former
Participant's Severance from Service for any reason
other than Retirement, death, or Disability, he shall
immediately forfeit that portion of his Account to
which he is not entitled under Section 7.02."
<PAGE>
11. The first sentence of Section 7.05 is deleted, and the following is
inserted in lieu thereof:
"For purposes of Sections 7.01 and 7.02, the amount credited
to the Accounts of a Participant on the books of the Company shall be
determined by the Committee as of the Valuation Date immediately
preceding the day on which benefit payment is made."
12. Section 10.03, VOLUNTARY WITHDRAWALS, is deleted and the following
Section 10.03 is inserted in lieu thereof to provide as follows:
"10.03 IRREVOCABLE PAYMENT ELECTIONS. A Participant may at any
time make an irrevocable election, effective as of the next Entry Date,
to have all or a portion of the vested percentage of the balance in his
Employer Contribution Account, Savings Contribution Account and/or
Account B, paid to him on a fixed date (or dates) specified in such
election, each of which is at least three (3) years following such
Entry Date (unless his termination of employment should occur in the
interim, in which case his vested Account would be paid in accordance
with the provisions of Section 11.02). The amount of the payment
pursuant to the irrevocable election shall be determined based upon the
Valuation Date immediately preceding the date specified.
Participants who, upon their initial enrollment in the Plan,
made an election to receive a lump sum distribution of the entire
vested percentage of their Accounts on a date certain, which date is on
or after January 1, 2000, shall be permitted to rescind such elections
no later than October 31, 1999, by delivery of an irrevocable notice of
rescission in writing to the Plan Committee. Absent a rescission of
such election, the provisions of the Plan in force at the time of their
enrollment elections shall continue to apply with respect to their date
certain elections."
13. The first sentence of Section 11.02, FORM OF BENEFIT, is deleted,
and the following sentence is inserted in lieu thereof:
"11.02 FORM OF BENEFIT. Except for (i) date certain in-service
payment elections under Section 7.03, (ii) hardship withdrawals under
Section 10.01, or (iii) irrevocable payment elections under Section
10.03, the form of payment shall be determined based upon the amount
credited to the Participant's or former Participant's Accounts as of
the close of business on the last business day preceding the day on
which the benefit payment commences as set forth below."
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Amendment No. 3 to the
TGI Friday's Inc. Deferred Compensation Plan to be executed as of October 1,
1999, by its duly authorized officer.
TGI FRIDAY'S INC.
By: /s/ Leslie Sharman
-------------------------------------
Name: Leslie Sharman
-----------------------------------
Title: Vice President - General Counsel
----------------------------------
ATTEST:
/s/ Jean N. Jacquemetton
- --------------------------------
<PAGE>
EXHIBIT 10.7
PROCUREMENT AGREEMENT
BETWEEN
CARLSON RESTAURANTS WORLDWIDE INC.
AND
CARLSON HOSPITALITY WORLDWIDE PROCUREMENT GROUP, INC.
AUGUST 15, 1999
This Agreement, effective August 15, 1999, is entered into between
Carlson Restaurants Worldwide Inc., a Delaware corporation ("CRW") and
Carlson Hospitality Worldwide Procurement Group, Inc., a Minnesota
corporation ("Provisions.")
WHEREAS, CRW is in the business of developing, owning and franchising
restaurants throughout the world; and
WHEREAS, Provisions is in the business of negotiating and contracting
for the procurement of food and beverages, supplies, uniforms, furniture,
fixtures and equipment for restaurants and other hospitality industry
establishments; and
WHEREAS, CRW and Provisions have done business with each other in the
past and wish to continue doing business with each other;
NOW, THEREFORE, the parties hereto agree as follows:
1. SCOPE OF ENGAGEMENT. CRW, for CRW owned and operated restaurants, and
franchised restaurants that choose to be included in this Agreement,
("Sites"), agrees to hire Provisions to source for each Site substantially
all food, beverages, supplies, packaging, selected pieces of the uniforms
for staff and other operating supplies used in the day to day operation of
the Site (sometimes hereinafter referred to as "Food Product"), as well as
furniture, fixtures and equipment used by a Site in its operations,
including non-food items used in daily operations, kitchen equipment and
utensils, and decor used at the Site (sometimes hereinafter referred to as
"FFE"). Collectively, Food Product and FFE may hereinafter be referred to
as "Goods". Food Product does not currently include produce (including
fruits and vegetables), milk, ice cream, half and half, alcoholic
1
<PAGE>
beverages, eggs and certain breads, and any other exceptions set forth in
Exhibit A attached hereto, which may be amended throughout the term by the
parties. Other than as set forth below, during the term of this Agreement,
neither CRW nor any individual Site will, outside of the scope of this
Agreement, purchase Goods from a supplier under contract with Provisions.
Provisions agrees to provide such sourcing of Goods for each Site.
2. SOURCING OF GOODS.
(a) Provisions will negotiate contracts with suppliers of Goods to secure
Goods and shall use commercially reasonable efforts to obtain the
lowest available pricing for such Goods that is reasonably available
in the market. Suppliers may be international, national, regional or
local and, with respect to sourcing Goods for Sites outside of the
United States, Goods may be exported to the Site country or they may
be sourced locally. Provisions will take all reasonable steps to
assure that suppliers comply with all pertinent national and local
laws and regulations pertaining to the procurement and sale of Food
Products. Prior to finalizing any purchasing commitment on behalf of
CRW, Provisions shall first obtain written consent from CRW as to the
Supplier and all material terms of the purchasing commitment, which
consent shall not be unreasonably withheld.
(b) CRW agrees to cooperate with Provisions to approve secondary and
alternative suppliers so that Provisions can use all reasonable
efforts to negotiate the best quality product for the most competitive
price.
(c) Provided Provisions is in full compliance with the terms of this
Agreement and the relevant distribution or suppler agreement, CRW
shall indemnify and hold Provisions harmless for any Goods in a
distributor's possession or held pursuant to a written commitment
signed by a supplier and CRW that have been determined by CRW to be
obsolete or outdated for any reason. Provisions will undertake all
reasonable efforts to seek disposition alternatives and to limit the
amount of obsolete Goods.
2
<PAGE>
(d) CRW may from time to time form a committee comprised of
representatives from its franchisees and corporate owned restaurants
(the Purchasing Committee"). The Purchasing Committee procedures
shall be mutually established by CRW and Provisions, with input from
the franchisee representatives. Provisions shall actively participate
in the Purchasing Committee in accordance with the established
procedures.
(e) From time to time, executive chefs for various CRW restaurant brands
may develop food items or concepts, for which the chef and Provisions
jointly agree that a suitable Food Product may best be obtained from
a source other than Provisions or its suppliers. In such situations,
at the reasonable discretion of the executive chef, those specific
Food Products may be obtained from sources other than Provisions or
its suppliers.
(f) From time to time, a CRW restaurant or an executive chef may have a
special promotion or a special menu item that does not appear
permanently or daily at the restaurant. In such instances that the
promotion is being conducted in at least 25 restaurants and is to be
offered for at least a three month period, Food Products used in such
special promotions shall be obtained from Provisions, provided however
if Provisions is unable to reasonably fill such an order, the Food
Products may be procured by CRW elsewhere.
3. QUALITY ASSURANCE.
(a) Provisions will either itself, or through the services of a qualified
third party, and at no additional direct cost to a Site or CRW: (a)
inspect Goods to reasonably assure the Site and CRW that the Goods
comply with written quality specifications developed for such Goods.
Quality specifications shall be developed jointly by Provisions and
CRW. The inspection and testing criteria shall include the following:
3
<PAGE>
(i) All protein and other potentially hazardous food products
(products that carry pathogens, raw, uncooked products
containing potentially hazardous disease-causing agents
such as a living micro-organism including but not limited to
Salmonella, E coli, Staphylococcus aureus, Listeria, etc.
Uncooked meats, chicken and seafood naturally containing some
pathogens in small numbers) shall be tested once per month.
Potentially hazardous imported items shall be inspected lot by
lot upon entry to the country, prior to shipment to the
distribution centers.
(ii) Proprietary items shall be tested once every 6 months
(iii) Products with complaints shall be tested as needed
(b) Products shall be tested for chemical, microbiological and physical
analysis. Products shall be pulled from CRW approved distributors at
the direction of Q.A. Provisions determines the sampling process to
be used for specific distribution centers.
(c) Provisions shall inspect all new food suppliers and other high volume
food suppliers and distributors to insure compliance with CRW and
Provisions quality assurance specifications, as well as all
governmental health, sanitation and other safety standards. The
following types of product vendors may, at Provisions discretion, not
be inspected:
(i) Grocery items
(ii) National brands (Heinz, etc.)
(iii) Beverage (Coke, liquor, etc.)
(d) Provisions shall physically audit or review evidence of an accredited
audit of the manufacturing plants for compliance to government
regulations and Provisions requirements. Plants producing protein
products shall be audited twice a year and other proprietary items
shall be audited once per year.
4
<PAGE>
4. DISTRIBUTION OF GOODS.
(a) With respect to Food Products, CRW shall agree on the selection of a
distribution company (the "Distributor") and shall mutually secure the
services of the Distributor. Provisions and CRW shall enter into a
distribution contract with the Distributor for the distribution of
Food Products to Sites, upon reasonable terms and conditions. A
process shall be adopted with the Distributor, whereby a Site shall
place its order for Food Products directly with the Distributor, which
shall make deliveries of Food Product to the Site on an agreed upon
timetable. In the event that the Distributor is unable or unwilling
to fill or deliver a reasonable order, Provisions, upon written notice
from the Site, shall be responsible for sourcing alternative
distribution services for delivering the Food Product in a reasonable
time and manner to the Site. Distributor shall invoice CRW directly
for Food Product delivered to CRW-owned Sites. CRW shall be
responsible for paying to Distributor its own Food Product invoices.
Franchisees of CRW shall have the option of purchasing Food Products
through the Distributor. In such instances, the Franchisee shall be
responsible for paying to the Distributor its own Food Product
invoices.
(b) Provisions shall administer and manage the agreement between CRW and
the Distributor to ensure proper accounting from the suppliers of all
rebates, incentives and other consideration based on Food Product
delivered through the Distributor.
(c) With respect to FFE, franchisees of CRW shall have the option of
utilizing the purchasing services of Provisions. In such instances, a
franchisee or, in the case of CRW-owned Sites, CRW, will complete a
"check list" provided by CRW. The checklist will indicate which FFE
is being ordered for the Site. Based on the completed checklist,
Provisions, on behalf of CRW, will submit purchase orders to FFE
suppliers with whom Provisions has negotiated price agreements. The
supplier will deliver FFE directly to the Site and will invoice CRW
for the FFE.
5
<PAGE>
5. PAYMENTS.
(a). FOOD PRODUCTS.
(i) PAYMENTS TO DISTRIBUTOR. Each franchisee owned Site and CRW on
behalf of CRW owned Sites shall be solely responsible for paying
Distributor the amounts set forth in the Distributor's invoice.
(ii) Payments to Provisions. Neither CRW, Franchisee, nor any site
shall be responsible for making any payments to Provisions for
services rendered of Food and Supply Products. However,
Provisions shall be entitled to certain remuneration paid
directly by the suppliers of Food and Supply Products such as
volume incentives, growth fees, brokerage commissions,
purchasing fees, sales incentives, consolidation fees,
administration fees, export and related international services,
distribution or any other compensation paid by a supplier to
Provisions for such related services. These agreements will be
made between Provisions and the supplier and maintained
completely separate from any supply agreements made on behalf of
CRW and its franchisees by Provisions. Any compensation earned
will be the sole property of Provisions. CRW and its
franchisees will not be entitled to any or part of fees
Provisions earns. The amount of any fee established with each
supplier will be determined by Provisions and Supplier based on
a mutually agreed upon criteria. These fees may vary from
supplier to supplier dependent on the function performed.
(iii) PAYMENT TO A FRANCHISE SITE OR TO CRW.
(a) From time to time Provisions may negotiate a rebate to
Sites that order Food Product from that supplier.
Suppliers pay the rebate upon proof of sale of food product
from distributor to Site. Those rebates may be provided by
the Supplier to Provisions for further distribution or
Provisions may be required to invoice the Supplier for the
rebate based on the volume of Food
6
<PAGE>
Product ordered by the Site according to invoice. In all
cases where supplier rebates are not distributed directly to
a Site, Provisions will collect and redistribute such
rebates to the franchise Site, or to CRW for all CRW-owned
Sites, according to the rebate formula determined by the
Supplier and Provisions
(b) From time to time Distributor may provide a rebate or a
"Freight Incentive" to Sites based on a formula determined
by Distributor. These rebates are "distributed" directly to
the franchise Site or to CRW by the Distributor issuing a
credit that appears on the Distributor's invoice to the Site
for Food Products. Such rebates are the sole property of
the entity to which the invoice containing the rebate is
addressed. In the event Distributor does not have the
ability to distribute the rebate directly to CRW and
franchisees, Provisions will redistribute any such rebates
actually received according to actual volume purchased by
Site.
(b) FFE.
(i) INVOICE PAYMENT AND CONSOLIDATION. Provisions shall review all
FFE invoices for accuracy prior to processing them through CRW
for payment. Upon approval of an invoice, Provisions shall
forward the invoice to CRW for payment. CRW shall be responsible
for payment of all invoices for CRW owned sites and shall
advance payment to Provisions the FFE Vendors on behalf of
Franchisee Sites ("Advance Payment").
(ii) FEE. CRW shall invoice the Franchisee Site for the price of FFE
plus a fee equal to eight (8%) percent of the total FFE invoice
(exclusive of shipping and taxes) for the Site (the "Equipment
Purchasing Fee").
7
<PAGE>
At the time CRW issues an invoice to a Franchisee Site, CRW
shall pay to Provisions a sum equal to the Equipment Purchasing
Fee.
(iii) OFFSET. CRW shall have the right to offset from any monies due
to Provisions an amount equal to or less than any Advance
Payment or Equipment Purchasing Fee which remains uncollected by
CRW from a Franchisee for more than 30 days following invoice
date as a result of: (A) the FFE is claimed by the Franchisee
Site to be defective (or as having other quality related issues)
or being out of specification for the Franchisee Site, and/or;
(B) the FFE was ordered for a Franchisee that CRW had previously
put on a C.O.D. basis and Provision had been notified of that
status.
(iv) At the start of each fiscal year of this Agreement, commencing
fiscal 2000, CRW shall notify Provisions of the number of CRW
Sites to be developed for the upcoming fiscal year. CRW shall
commit to pay to Provisions an annual lump sum of $408,152.00
(for 2000, equal to $12,368.00 per Site) ("CRW Purchasing Fee").
The CRW Purchasing Fee shall be payable in 12 equal monthly
installments of $34,012.66, commencing with January 30 of each
year and shall be payable regardless of the number of actual
openings. The CRW Purchasing Fee shall be adjusted each year in
an amount not to exceed the change in the Consumer Price Index.
No such adjustment shall reduce the per-Site CRW Purchasing Fee
below the per-Site fee for the prior year unless there is a
substantial reduction in services. As additional consideration,
CRW shall perform the accounting and invoice consolidation
procedures and make the Advance Payments for the Franchisee
Sites as set forth above.
6. CONFLICT RESOLUTION. CRW, on behalf of itself and its franchisees, and
Provisions shall each appoint two (2) individuals who shall meet as needed
or on any basis they deem beneficial to address and suggest solutions
pertaining to issues arising under this Agreement. If a dispute becomes
irreconcilable, the disputed issue shall be referred for
8
<PAGE>
resolution to the highest ranking officer of Provisions and the Chairman of
CRW. If following a meeting between those officers the issue cannot be
resolved, either party may compel non-binding mediation with the other, to
be presided over by the president of Carlson Hospitality Group, Inc. at a
time and place mutually convenient to the parties. The procedures for each
such mediation shall be mutually established by the parties.
7. TERM AND TERMINATION. The term of this Agreement shall be five (5) years
from the effective date of the Agreement. The Agreement shall
automatically renew for consecutive three (3) year terms, unless notice of
election to not renew is given in writing by either party at least ninety
(90) days prior to the end of the term. If such notice is given, it shall
specify a reason for the election to not renew and the other party shall
have thirty (30) days from the receipt of such notice to rectify the reason
for the election to not renew, as determined by the terminating party's
reasonable opinion. Notwithstanding the foregoing, this Agreement may be
terminated without liability to the terminating party if Carlson Companies
Inc. directly or indirectly ceases to own, directly or indirectly, 50% or
more of the voting control of CRW.
Either party may terminate this Agreement upon ten (10) business days
written notice if the other party fails to substantially and materially
perform this Agreement.
8. HOLD HARMLESS AND INDEMNIFICATION. Provisions will defend, indemnify and
hold harmless CRW, its parent and controlled affiliates and all officers,
directors and employees thereof from and against any and all costs,
damages, expenses, and claims arising out of or as a result of any alleged
negligent or willful failure or malfeasance in the performance of its
services hereunder, including, but not limited to all reasonable costs
including attorneys' fees incurred as a result of suits against CRW arising
therefrom.
CRW will defend, indemnify and hold harmless Provisions and its officers,
directors and employees from and against any and all costs, damages,
expenses, and claims
9
<PAGE>
arising out of or as a result of any alleged negligent or willful failure
or malfeasance in the performance of its obligation hereunder, including
but not limited to all reasonable costs, including attorneys' fees incurred
as a result of suits against Provisions arising therefrom.
The parties' obligations to defend, indemnify, and hold harmless shall
survive the termination of this Agreement.
9. CONFIDENTIALITY. All information provided to one party to the other under
this Agreement shall be deemed confidential information ("Confidential
Information"). Each party agrees that it shall use reasonable care to
maintain such Confidential Information in confidence and shall not discuss
or divulge it to any persons outside of that party without the prior
written consent of the other party. "Reasonable care" shall mean the same
degree of care exercised by a party with respect to its own information,
which is of the same nature as the Confidential Information. Upon
termination of this Agreement, each party shall immediately return all
Confidential Information to the other party or shall, upon request of the
party, destroy such Confidential Information and deliver an affidavit,
executed by an officer of that party confirming such destruction. Each
party agrees to keep the terms, conditions and subject matter of this
Agreement confidential and not disclose them to, or discuss them with, any
person other than its employees on a need-to-know basis or the other party.
This provision shall survive termination or expiration of this Agreement.
10. ENTIRE AGREEMENT/AMENDMENTS. This written Agreement and any amendments
made in accordance herewith, constitute the entire agreement of the
parties. All prior agreements or representations between the parties are
superseded and replaced, are of no continuing force or effect and are not
relied upon by either party. This Agreement may not be amended except by a
written instrument signed by the parties hereto.
11. ASSIGNMENT. This Agreement may not be assigned by either party without the
prior written consent of the other party, which consent shall not be
unreasonably withheld.
10
<PAGE>
12. SEVERABILITY. Any provision of this Agreement which is declared void or
unenforceable by any competent authority or court shall to the extent of
such invalidity or unenforceability be deemed severable and the other
provisions of this Agreement shall continue unaffected.
13. APPLICABLE LAW AND JURISDICTION. This Agreement and the legal relations
between the parties hereto shall be governed by and construed in accordance
with the laws of the State of Texas (without regard to the laws of conflict
of any jurisdiction) as to all matters, including, without limitation,
matters of validity, interpretation, construction, effect, performance and
remedies. Jurisdiction and venue shall be exclusively vested in the State
or Federal courts in Dallas, Texas.
14. COUNTERPARTS. This Agreement may be executed in two (2) counterpart copies
and all such counterparts when taken together shall constitute one and the
same instrument.
15. NO THIRD PARTY BENEFICIARIES. Nothing expressed or implied in this
Agreement shall be construed to give any person or entity other than the
parties hereto any legal or equitable rights hereunder.
CARLSON RESTAURANTS WORLDWIDE, INC.
By:
-----------------------------------------
11
<PAGE>
Its:
----------------------------------------
CARLSON HOSPITALITY WORLDWIDE PROCUREMENT GROUP, INC.
By:
-----------------------------------------
Its:
----------------------------------------
12
<PAGE>
EXHIBIT A
(INTENTIONALLY LEFT BLANK AT TIME OF EXECUTION)
<PAGE>
EXHIBIT 10.8
T.G.I. FRIDAY'S-Registered Trademark- RESTAURANTS
DEVELOPMENT AGREEMENT
DATE: ________________, ______
<PAGE>
T.G.I. FRIDAY'S-Registered Trademark- RESTAURANTS
DEVELOPMENT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. DEFINITIONS..................................................................................................1
2. EXCLUSIVE RIGHTS; TERM.......................................................................................5
3. DEVELOPMENT SCHEDULE; SITE SELECTION; OCCUPANCY CONTRACT; DEVELOPMENT MANUALS................................6
4. FEES AND PAYMENTS............................................................................................7
5. REPRESENTATIVE; OPERATOR; RESTAURANT MANAGERS; TRAINING......................................................7
6. CONFIDENTIAL INFORMATION.....................................................................................7
7. DEVELOPER'S REPRESENTATIONS AND WARRANTIES; AFFIRMATIVE AND NEGATIVE COVENANTS...............................7
8. TRANSFER.....................................................................................................7
9. CONSENT AND WAIVER...........................................................................................7
10. DEFAULT AND REMEDIES.........................................................................................7
11. INSURANCE....................................................................................................7
12. INDEMNIFICATION..............................................................................................7
13. NOTICES......................................................................................................7
14. FORCE MAJEURE................................................................................................7
15. SEVERABILITY.................................................................................................7
16. INDEPENDENT CONTRACTOR.......................................................................................7
17. DUE DILIGENCE AND ASSUMPTION OF RISK.........................................................................7
18. MISCELLANEOUS................................................................................................7
19. CHOICE OF LAW; JURISDICTION; VENUE...........................................................................7
20. ENTIRE AGREEMENT.............................................................................................7
</TABLE>
<PAGE>
ADDENDUM A........ COVENANT AND AGREEMENT FOR CONFIDENTIALITY (PRINCIPAL)
ADDENDUM B........ COVENANT AND AGREEMENT FOR CONFIDENTIALITY (OTHERS)
EXHIBIT A......... FRANCHISE AGREEMENT
EXHIBIT B......... GUARANTY AGREEMENT
EXHIBIT C......... TERRITORY
<PAGE>
DEVELOPMENT AGREEMENT
This Development Agreement is entered into as of the _____ day of
_____________, ______ by and between TGI Friday's Inc., a New York corporation,
with its principal place of business located at 7540 LBJ Freeway, Suite 100,
Dallas, Texas, 75251, and ________________________________, with its principal
place of business located at__________________________ and its Principals (as
defined herein below).
RECITALS
WHEREAS, Friday's has developed and owns the System;
WHEREAS, Friday's intends to identify the System in the Territory
with the Proprietary Marks; and
WHEREAS, Developer wishes to obtain certain rights to develop
Restaurants under the System in the Territory.
NOW, THEREFORE, the parties, in consideration of the undertakings
and commitments set forth herein, agree as follows:
1. DEFINITIONS
As used in this Agreement the following words and phrases shall have the
meanings attributed to them in this Section:
ACTION - any cause of action, suit, proceeding, claim, demand, investigation or
inquiry (whether a formal proceeding or otherwise) asserted or instituted by a
third party with respect to which the indemnity described in Section 12
applies.
AFFILIATE - Carlson Restaurants Worldwide Inc., or any subsidiary thereof or any
subsidiary of TGI Friday's Inc.
AGREEMENT - this Development Agreement.
APPRAISER(S) - one or more independent third parties selected by the parties to
this Agreement in accordance with the terms and conditions hereof.
BUSINESS DAYS - Each day except Saturday, Sunday and national legal holidays.
COMMENCEMENT DATE - _________________, _____.
COMPETING BUSINESS - a restaurant business offering the same or similar
products and services as offered by restaurants in the System or restaurants
in any other concept or system owned, operated or franchised by Friday's or
any Affiliate, including, without limitation, waiter/waitress service,
sit-down dining and bar services.
<PAGE>
CONFIDENTIAL INFORMATION - the System, the Development Manual, the Manuals
(as defined in the Franchise Agreement), other manuals, the Standards,
written directives and all drawings, equipment, recipes, computer and point
of sale programs (and output from such programs), and any other information,
know-how, techniques, materials and data imparted or made available by
Friday's which is (i) designated as confidential, (ii) known by Developer to
be considered confidential by Friday's, or (iii) by its nature inherently or
reasonably considered confidential.
DEVELOPER - ____________________________.
DEVELOPER INDEMNITEES - Developer, Principals, and their respective
directors, officers, employees, agents, shareholders, affiliates, successors
and assigns and the respective directors, officers, employees, agents,
shareholders, affiliates, successors and assigns of each.
DEVELOPMENT FEE - a fee equal to the sum of one hundred percent (100%) of the
Franchise Fee for the first Restaurant to be developed under the Development
Schedule, plus twenty percent (20%) of the Franchise Fee for each of the
second through fifth Restaurants to be developed pursuant to the Development
Schedule, and ten percent (10%) of the Franchise Fee for each additional
Restaurant to be developed thereafter pursuant to the Development Schedule.
DEVELOPMENT MANUAL - Friday's manual, as amended from time to time,
describing (generally) the procedures and parameters for the development of
T.G.I. Friday's-Registered Trademark- Restaurants.
DEVELOPMENT MATERIALS - a description of the Site, a feasibility study
(including, without limitation, demographic data, photographs, maps, artists'
renderings, site plans, a copy of the Occupancy Contract, and documentation
indicating Developer's prospects to acquire the Site) and such other
information related to the development of the Site as Friday's reasonably
requests.
DEVELOPMENT SCHEDULE - the schedule pursuant to which Developer shall develop
Restaurants in the Territory (see Section 3.A).
ENTERTAINMENT PARK - includes, but is not limited to any amusement park,
theme park, or any other entertainment venue which has a national presence of
at least two (2) or more such parks in existence, and which has averaged at
least 1.5 million persons in annual attendance for the preceding three (3)
calendar years at any one (1) park location.
EVENT OF DEFAULT - as defined in Section 10.
FRANCHISE AGREEMENT - an agreement pursuant to which Developer constructs and
operates a Restaurant during the Development Schedule, which shall be
substantially in the form attached as EXHIBIT A.
FRANCHISEE - as defined in the Franchise Agreement.
FRANCHISE FEE - an initial per Restaurant fee (more fully defined in the
Franchise Agreement) paid by Developer to Friday's, which fee varies in
accordance with the number of Restaurants previously developed under each
Development Schedule.
FRIDAY'S - TGI Friday's Inc., a New York corporation.
FRIDAY'S INDEMNITEES - Friday's, its directors, officers, employees, agents,
shareholders, affiliates,
<PAGE>
successors and assigns and the respective directors, officers, employees,
agents, shareholders and affiliates of each.
HEADQUARTERS - the location(s) designated from time to time by Friday's as
its principal place of business.
INDEMNITEES - Friday's Indemnitees and Developer Indemnitees.
LOSSES AND EXPENSES - all compensatory, exemplary or punitive damages, fines,
charges, costs, expenses, lost profits, reasonable fees of attorneys and
other engaged professionals, court costs, settlement amounts, judgments,
costs of or resulting from delays, financing, costs of advertising material
and media time/space, and costs of changing, substituting or replacing the
same, and any and all expenses of recall, refunds, compensation, public
notices and other such amounts incurred in connection with the matters
described in Section 12.
MATERIAL EVENT OF DEFAULT - an Event of Default which constitutes a
substantial deviation from the performance required.
MULTI-UNIT MANAGER(S) - the individual(s) designated as described in
Section 5.E who shall be solely dedicated to the management and
supervision of the Restaurants.
NSO-TEAM - a "new store opening team" consisting of Friday's employees and
certain of Franchisee's employees to whom Friday's has consented which shall
perform the functions described in Section 5.I.
OCCUPANCY CONTRACT - the proposed agreement or document (including, without
limitation, any lease, deed, contract for sale, contract for deed, land
contract, management contract, license, or other agreement purporting to
grant any right, title, or interest in or to the Site) pursuant to which
Developer shall occupy or acquire rights in any Site.
OPERATOR - an individual designated as described in Section 5.B. who shall
devote his full time and best efforts to the management and supervision of
(i) Developer's duties and obligations hereunder; and (ii) the operation of
the Restaurants.
OTHER CONCEPTS - Retail, wholesale, restaurant, bar, tavern, take-out or any
other type of business involving the production, distribution or sale of food
products, beverages, services, merchandise or other items in connection with
the use of one, some or all of the Proprietary Marks or other names or marks,
but utilizing a system other than the System pursuant to which a T.G.I.
Friday's Restaurant is operated.
OWNER - the party (if other than the Developer) owning or controlling the
Site and being a party (with Developer) to the Occupancy Contract.
PAYMENTS - all transfers of funds from Developer to Friday's including,
without limitation, the Development Fee and reimbursement of expenses.
PERMANENT DISABILITY - any physical, emotional or mental injury, illness or
incapacity which would prevent the afflicted person from performing his
obligations hereunder for more then ninety (90) consecutive days as
determined by a licensed physician selected by Friday's.
PRELIMINARY SITE CONSENT - written communication from Friday's to Developer
notifying Developer that a proposed site has received the consent of the
Friday's Site Review Committee.
<PAGE>
PRINCIPAL(S) - ___________________, ___________________, __________________
and __________________ who are (and such other persons or entities to whom
Friday's shall consent from time to time) the record and beneficial owners
of, and have the right to vote their respective interests (collectively 100%)
in the Securities of Developer or the securities or partnership interest of
any person or entity designated by Friday's which owns or controls a direct
or indirect interest in the Securities of the Developer.
PROJECT MANAGER - an individual designated as described in Section 5.C who
shall devote his full-time and best efforts to the coordination and
completion of Restaurant construction.
PROPRIETARY MARKS - certain trademarks, trade names, trade dress, service
marks, emblems and indicia of origin designated by Friday's from time to time
for use in connection with the operation of Restaurants pursuant to the
System in the Territory, including, without limitation, "TGI
FRIDAY'S-Registered Trademark-", "FRIDAY's-Registered Trademark-" and "THE
AMERICAN BISTRO-Registered Trademark-".
PUBLICLY - HELD ENTITY - a corporation or other entity whose equity
securities are (i) registered pursuant to applicable law; (ii) widely held by
the public; and (iii) traded on a public securities exchange or over the
counter pursuant to applicable law.
REPRESENTATIVE - an individual, designated as described in Section 5.A. who
(i) owns an equity interest in the Developer and (ii) is authorized to act on
behalf of, and bind, Developer with respect to this Agreement.
RESTAURANT(S) - T.G.I. Friday's-Registered Trademark- Restaurant(s) developed
pursuant to this Agreement.
RESTAURANT MANAGER(S) - general manager, assistant general manager, kitchen
manager and other managers required for the management, operation,
supervision and promotion of the Restaurant pursuant to the terms hereof.
SECURITY - the capital stock of, partner's interest in, or other equity or
voting interest in Developer including such interests issued or created
subsequent to the date hereof.
SITE - the proposed location of any Restaurant.
STANDARDS - Friday's standards and specifications, as amended from time to
time by Friday's, in its sole discretion, contained in, and being a part of,
the Confidential Information pursuant to which Developer shall develop and
operate Restaurants in the Territory.
SYSTEM - a unique, proprietary system developed and owned by Friday's (which
may be modified or further developed from time to time in Friday's sole
discretion) for the establishment and operation of full-service restaurants
and restaurant/bars under the Proprietary Marks, which includes, without
limitation, a distinctive image consisting of exterior and interior design,
decor, color scheme and furnishings; special recipes, menu items and full
service bar; uniform standards, products, services and specifications;
procedures with respect to operations, inventory and management control
(including accounting procedures and policies); training and assistance; and
advertising and promotional programs.
TERM - the duration of this Agreement commencing on the Commencement Date and
continuing until the date specified on the Development Schedule for the last
restaurant to be opened.
<PAGE>
TERRITORIAL EXPENSES - such costs and expenses incurred by or assessed with
respect to Friday's (or other described party's) employees, agents and/or
representatives in connection with activities in the Territory which
Developer is obligated to pay pursuant to this Agreement, including, without
limitation, hotel/lodging, transportation and meals, and other related or
incidental expenses.
TERRITORY - the geographical area described in EXHIBIT C; provided, however,
the Territory shall not include any airport properties, professional sports
stadiums, military bases, Entertainment Parks or casinos otherwise located
within the Territory, nor a specifically identified restricted area
surrounding any Restaurant located within the Territory as of the date of
this Agreement nor shall it be deemed to convey any exclusivity with respect
to the use of the Proprietary Marks.
TGIFM - TGI Friday's of Minnesota Inc., a Minnesota corporation and a
subsidiary of Friday's.
T.G.I. FRIDAY'S-Registered Trademark- RESTAURANTS - restaurants operated in
accordance with the System under the registered service marks
"FRIDAY'S-Registered Trademark-" OR "T.G.I. FRIDAY'S-Registered Trademark-".
TRAINING CENTER - the location(s) specified from time to time by Friday's as
the training center.
TRANSFER - the sale, assignment, conveyance, license, devise, bequest,
pledge, mortgage or other encumbrance, whether direct or indirect, of (i)
this Agreement; (ii) any or all rights or obligations of Developer herein; or
(iii) any interest in any Security, including the issuance of any new
Securities.
TRANSFEREE OWNER(S) - the owner of any and all record or beneficial interest
in the capital stock of, partner's interest in, or other equity or voting
interest in any transferee of a Transfer occurring pursuant to the terms of
Section 8.
WAGE EXPENSES - such wages and/or salaries (including a reasonable allocation
of the cost of benefits) of, or with respect to, Friday's (or other described
party's) employees, agents and/or representatives to be reimbursed to
Friday's or such party as described herein.
2. EXCLUSIVE RIGHTS; TERM
A. Friday's grants to Developer the right, and Developer accepts the
obligation, subject to the terms and conditions herein, to develop and
operate the number of Restaurants set forth in the Development Schedule (set
forth in Section 3.A) as may be approved by Friday's in accordance with its
then current site consent procedures. The Restaurants shall be developed and
operated in the Territory pursuant to the System. For so long as no Event of
Default has occurred and is continuing and no event has occurred which, with
the giving of notice or lapse of time, or both, would constitute an Event of
Default, Friday's will neither develop, nor authorize any other person to
develop, T.G.I. Friday's Restaurants in the Territory during the Term.
B. Friday's reserves the right to use the Proprietary Marks in
connection with other concepts.
C. Friday's expressly reserves the right, and Developer acknowledges
that Friday's has the exclusive unrestricted right, to engage, directly and
indirectly, through its employees, developers, franchisees, licensees, agents
and others within the Territory, in Other Concepts and Front Row Sports
<PAGE>
Grill restaurants. Such Other Concepts may compete with Developer directly or
indirectly.
D. Subject to Sections 3 and 4 hereof, Developer shall exercise the
rights granted herein for each Restaurant by executing, delivering and
otherwise performing pursuant to a Franchise Agreement.
E. Unless sooner terminated as provided herein, this Agreement shall
commence on the Commencement Date and continue until the expiration of the
Term. This Agreement shall automatically expire at 11:59 p.m. on the date
specified in Section 3.A. as the opening date for the last restaurant to be
opened.
F. Upon any termination or expiration of this Agreement, (i)
Developer shall not develop additional Restaurants in the Territory pursuant
to this Agreement; PROVIDED, HOWEVER, that Developer may complete development
of and/or operate Restaurants under then existing Franchise Agreements
subject to the terms and conditions thereof; and (ii) Friday's may develop,
or authorize others to develop, Restaurants in the Territory.
3. DEVELOPMENT SCHEDULE; SITE SELECTION; OCCUPANCY CONTRACT;
DEVELOPMENT MANUALS
A. Developer shall develop, open, commence operation of and
continuously operate pursuant to the respective Franchise Agreements
__________ (__) Restaurants in the Territory, pursuant to the Development
Schedule as follows:
<TABLE>
<CAPTION>
------------------------ -------------------------- ------------------------- --------------------------
RESTAURANT NO. DATE OF PRELIMINARY SITE DATE FRANCHISE DATE OPEN & OPERATING
CONSENT AGREEMENT SIGNED & FEES
PAID
<S> <C> <C> <C>
------------------------ -------------------------- ------------------------- --------------------------
------------------------ -------------------------- ------------------------- --------------------------
------------------------ -------------------------- ------------------------- --------------------------
------------------------ -------------------------- ------------------------- --------------------------
------------------------ -------------------------- ------------------------- --------------------------
------------------------ -------------------------- ------------------------- --------------------------
------------------------ -------------------------- ------------------------- --------------------------
</TABLE>
(i). The Franchise Agreement for each restaurant location must be
fully executed and all franchise fees paid within the time frames set forth
in the foregoing Development Schedule.
(ii). Time is of the essence, with respect to each of the
development obligations specified in this Section 3.
B. The number of Restaurants indicated in the Development
Schedule shall be OPEN AND OPERATING by the date(s) specified therein.
Friday's consent to any Site or execution of a Franchise Agreement shall not
waive, extend or modify the Development Schedule. Unless otherwise agreed and
approved by Friday's, the Restaurants shall refer to traditional T.G.I.
Friday's Restaurants.
C. Developer assumes all cost, liability, expense, risk and
responsibility for locating, obtaining and developing Sites for Restaurants,
and for constructing and equipping Restaurants at such Sites. Prior to
execution of each Franchise Agreement, Developer shall obtain Friday's
consent to each Site (including, without limitation, the Proprietary Mark
which shall be used to identify the Restaurant at
<PAGE>
the Site to the public) pursuant to the time frames set forth in Section 3.A.
above in accordance with Friday's then existing Site selection criteria and
procedures including:
(1) submission of all Development Materials to Friday's;
and
(2) with respect to each Restaurant to be developed
hereunder, completion of one (1) Site visit by Friday's at Friday's sole
cost and expense, if required by Friday's.
D. Within thirty (30) days following receipt of all
Development Materials and completion of any such visit, Friday's shall
consent to or reject such Site. Friday's failure to consent shall constitute
rejection of such Site. Promptly after Friday's consent is obtained, but
prior to commencing construction at such Site, Developer shall execute a
Franchise Agreement and pay the Franchise Fee.
E. Neither Friday's (i) consent to nor (ii) assistance in the
selection of, any Site shall constitute Friday's representation or warranty
that a Restaurant operated at such Site will be profitable or meet any
financial projection.
F. Friday's shall have the right to review and consent to the
Occupancy Contract prior to the execution thereof. A copy of the proposed
Occupancy Contract shall be provided to Friday's within sixty (60) days of
the date of Preliminary Site Consent. The Occupancy Contract shall be
executed by all necessary parties within thirty (30) days following Friday's
consent thereto. Developer shall furnish Friday's a complete copy of the
executed Occupancy Contract within ten (10) days after execution. Unless it
conveys to Developer fee simple title to the Site, the Occupancy Contract
shall include the following covenants:
(1) Owner shall deliver to Friday's, simultaneously
with delivery to Developer, any notice alleging Developer's default under the
Occupancy Contract which threatens or purports to terminate the Occupancy
Contract;
(2) Friday's may enter the Restaurant premises to
protect the Proprietary Marks or the System or to cure any Event of Default
or default under the Occupancy Contract or the applicable Franchise Agreement;
(3) Developer may assign the Occupancy Contract to
Friday's without any fee or modification thereof and Friday's may assign or
sublease the Occupancy Contract or license the Restaurant premises for any
part of the remaining term of the Occupancy Contract, each without Owner's
consent; and
(4) Owner and Developer shall not amend the Occupancy
Contract in any way which is inconsistent with the provisions of Sections
3.F(1) through (4), inclusive.
G. Notwithstanding the terms of Section 3.F, Developer shall:
(1) deliver to Friday's, immediately after delivery to
or by Developer, any notice of default under the Occupancy Contract which
threatens or purports to terminate the Occupancy Contract or result in a
foreclosure thereof;
(2) permit Friday's to enter the Restaurant premises
to protect the Proprietary Marks or the System or to cure any Event of
Default or default under the Occupancy Contract or the applicable
<PAGE>
Franchise Agreement, all at Developer's expense; and
(3) not amend the Occupancy Contract in any way which
is inconsistent with the provisions of Sections 3.G.(1) through (4),
inclusive.
H. Friday's shall provide Developer with one (1) Development Manual
"on loan" and two (2) sets of Friday's standard plans and specifications as
of the date hereof for the construction of a typical Restaurant. Developer
acknowledges Friday's ownership of the Development Manual and any such plans
and specifications, together with any copyright rights in or to such
materials. Developer shall observe Friday's reasonable requests concerning
copyright notices. The Development Manual and such plans shall be returned to
Friday's immediately upon termination or expiration of this Agreement.
I. Friday's shall provide such consultation as it reasonably deems
necessary to consent to vendors and products proposed to be used in
Restaurant development and operation.
4. FEES AND PAYMENTS
A. In consideration of the development rights granted herein,
Developer shall pay to Friday's upon execution of this Agreement the
Development Fee. Under no circumstances shall Developer be entitled to any
refund of any portion of the Development Fee.
B. The Franchise Fee to be paid by Developer for each new Restaurant
to be developed under the Development Schedule set forth in Section 3.A
hereof shall be Seventy-Five Thousand Dollars ($75,000.00) for the first
Restaurant to be developed, Sixty-Five Thousand Dollars ($65,000.00) for the
second Restaurant to be developed, and Fifty Thousand Dollars ($50,000.00)
for each additional Restaurant, payable upon execution of the Franchise
Agreement for each Restaurant in accordance with the Development Schedule.
Developer shall receive a credit against the payment of the Franchise Fee due
for each Restaurant developed pursuant to the Development Schedule as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RESTAURANT NO. AMOUNT OF CREDIT
--------------------------------------------------------------------------------
<C> <S>
1 Seventy-Five Thousand Dollars ($75,000.00)
--------------------------------------------------------------------------------
2 Thirteen Thousand Dollars ($13,000.00)
--------------------------------------------------------------------------------
3 Ten Thousand Dollars ($10,000.00)
--------------------------------------------------------------------------------
4 Ten Thousand Dollars ($10,000.00)
--------------------------------------------------------------------------------
5 Ten Thousand Dollars ($10,000.00)
--------------------------------------------------------------------------------
6 or more Five Thousand Dollars ($5,000.00)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
C. (1) All Payments shall be submitted to Friday's at
the address provided in Section 13 hereof, in care of the "Treasurer", or
such other address as Friday's shall designate in writing.
(2) Payments shall be received by Friday's (i) upon
execution hereof in the case of the Development Fee; (ii) upon execution of
each Franchise Agreement; and (iii) not more than thirty (30) days after date
of invoice for all other Payments. Delinquent Payments shall bear interest
from the due date until received by Friday's at eighteen percent (18%) per
annum or the maximum rate permitted by law, whichever is less.
D. Developer shall not withhold or off-set any portion of any
Payment due to Friday's alleged non-performance under this Agreement or any
other agreement by and between Friday's and
<PAGE>
Developer or their respective parent corporations, subsidiaries or affiliates.
5. REPRESENTATIVE; OPERATOR; RESTAURANT MANAGERS; TRAINING
A. Developer hereby designates _______________ as the
Representative. Any replacement Representative shall be designated within ten
(10) days of the prior Representatives' resignation or termination. Each
Representative shall attend and successfully complete at the Training Center
Friday's "Owner's Orientation Program" (currently approximately four (4)
weeks). The Representative hereunder and under each Franchise Agreement shall
be the same individual.
B. Developer hereby designates _______________ as the Operator. Any
replacement Operator shall be designated within ten (10) days of the prior
Operator's resignation or termination. Each Operator shall attend and
successfully complete at the Training Center within six (6) months of
appointment Friday's training program required for Restaurant Managers (SEE
Section 5.D.). The Operator hereunder and under each Franchise Agreement
shall be the same individual.
C. Not less than sixty (60) days prior to the commencement of
Restaurant construction, Developer shall designate the Project Manager. Any
replacement Project Manager shall be designated within ten (10) days of the
prior Project Manager's resignation/termination.
D. The requisite number of Restaurant Managers, as determined by
Friday's, shall be employed by Franchisee for each Restaurant developed
hereunder. All Restaurant Managers shall attend and successfully complete at
the Training Center Friday's training program for Restaurant Managers of
T.G.I. Friday's-Registered Trademark- Restaurants (currently, one (1) week).
Additionally, the Restaurant Managers shall attend and successfully complete
additional training (currently, approximately twenty (20) weeks) at such then
existing T.G.I. Friday's Restaurants as shall be designated by Friday's. Any
previously trained Restaurant Manager who is not a general manager, but has
been selected to become a general manager shall attend and successfully
complete such additional training as Friday's may require. Friday's may
require general and kitchen managers, at Developer's expense, to attend and
successfully complete additional training at the Training Center.
E. When the Franchise Agreement for the third Restaurant is
executed, Developer shall designate a Multi-Unit Manager. Additional
Multi-Unit Managers shall be designated from time to time as reasonably
required by Friday's. Prior to assuming his duties, each Multi-Unit Manager
shall have successfully completed Restaurant Manager training and shall
attend at the Training Center and successfully complete Friday's training
program for Multi-Unit Managers (currently, two (2) days at the Training
Center and approximately four (4) weeks at such then existing T.G.I.
Friday's(R) Restaurant locations as shall be designated by Friday's).
F. Friday's shall have the right to interview and consent to each
Operator, each Multi-Unit Manager, Project Manager and all Restaurant
Managers. Friday's shall endeavor to conduct such interviews in the
Territory, but may require that such interviews occur at Headquarters.
Developer shall bear all costs and expenses related to making the Restaurant
Managers available for such interviews.
G. Friday's shall provide instructors, facilities and materials for
training at the Training Center, and shall provide, at its option, other
training programs at non-Training Center locations as may be designated by
Friday's from time to time in the Manuals or otherwise in writing. Developer
shall reimburse Friday's for any Territorial Expenses or other direct
expenses incurred by Friday's for such
<PAGE>
other training programs.
H. Except as provided herein, Developer shall bear all costs and
expenses relating to any Representative, Operator, Multi-Unit Manager,
Project Manager and Restaurant Manager training.
I. The NSO Team shall assist in (i) training Franchisee's employees
at each Restaurant; and (ii) the opening of each Restaurant. The NSO Team for
a Restaurant typically consists of a combined total of approximately twelve
(12) employees of Friday's and Franchisee (the actual number of members shall
be determined by Friday's in its sole discretion, depending upon the number
of Restaurant locations already open and operating by Developer and such
other criteria as Friday's deems reasonable). The members of the NSO Team
shall be subject to Friday's consent. The number of Friday's employees
selected to serve on the NSO Team for a Restaurant is determined according to
the following schedule, provided however, Friday's may elect to modify this
schedule in the event the total number of people on the NSO Team is greater
or less than twelve (12):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
RESTAURANT NO. OPERATED NO. OF FRIDAY'S EMPLOYEES NO. OF TEAM MEMBERS TEAM MEMBERS PAID FOR
BY DEVELOPER ON THE NSO TEAM PAID FOR BY FRIDAY'S BY DEVELOPER
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 & 2 12 12 0
------------------------------------------------------------------------------------------------------------
3 & 4 9 9 3
------------------------------------------------------------------------------------------------------------
5 & 6 6 6 6
------------------------------------------------------------------------------------------------------------
7 or more 2 2 10
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
</TABLE>
In the event Friday's determines that more than 12 NSO team members are
necessary for an opening, Developers with five or more restaurants open
(inclusive of the new restaurant) shall be responsible for the costs
associated with the team members in excess of 12. For Developers with less
than five restaurants open, Friday's will bear the costs of the additional
team members.
If Franchisee fails or is unable to timely provide such employees, Friday's
may, but shall not be obligated to, staff the NSO-Team with Friday's
employees. Friday's and Franchisee shall each be responsible for: (a) making
all travel, food and lodging arrangements, and (b) the wage and other
expenses of the NSO-Team members provided by each; provided, however, that
Franchisee shall reimburse Friday's for the Territorial Expenses and the Wage
Expenses of Friday's employees who are provided as a result of Franchisee's
failure or inability to provide Franchisee employees for participation on the
NSO-Team.
6. CONFIDENTIAL INFORMATION
A. (1) Neither Developer nor any Principal shall communicate,
disclose or use any Confidential Information except as (i) permitted herein
or (ii) required by law, and shall use all reasonable efforts to maintain
such information as secret and confidential. Neither Developer nor any
Principal shall, without Friday's prior consent, copy, duplicate, record or
otherwise reproduce any Confidential Information. Confidential Information
may be provided to employees, agents, consultants and contractors only to the
extent necessary for such parties to provide services to Developer. Prior to
such disclosure of any Confidential Information, each of such employees,
agents, consultants and contractors shall (a) be advised by Developer of the
confidential and proprietary nature of the Confidential Information, and (b)
agree to be bound by the terms and conditions of Section 6 of this Agreement.
Notwithstanding such agreement, Developer shall indemnify the Friday's
Indemnitees from any damages, costs or expenses resulting from or related to
any disclosure or use of Confidential
<PAGE>
Information by its agents, employees, consultants and contractors.
(2) In the event Developer or Developer's employees,
agents, consultants, or contractors receive notice of any request, demand, or
order to transfer or disclose all or any portion of the Confidential
Information, Developer shall immediately notify Friday's thereof, and shall
fully cooperate with and assist Friday's in prohibiting or denying any such
transfer or disclosure. Should such transfer or disclosure be required by a
valid, final, non-appealable court order, Developer shall fully cooperate
with and assist Friday's in protecting the confidentiality of the
Confidential Information to the maximum extent permitted by law.
(3) Developer and each Principal acknowledge Friday's
exclusive ownership of the Confidential Information and the System, and
TGIFM's exclusive ownership of, and Friday's license with respect to, the
Proprietary Marks. Neither Developer nor any Principal shall, directly or
indirectly, contest or impair Friday's or TGIFM's exclusive ownership of,
and/or license with respect to, the Confidential Information, the System or
the Proprietary Marks.
B. If Developer develops improvements (as determined by Friday's) to
the Confidential Information, Developer and the Principals shall each,
without additional consideration, execute such agreements and other
documentation as shall be deemed necessary by Friday's, granting exclusive
ownership thereof to Friday's. All such improvements shall be Confidential
Information.
C. Each Principal shall execute and deliver to Friday's a covenant
in the form attached as ADDENDUM A. Developer shall cause each Operator,
Representative, Multi-Unit Manager, Project Manager, and Restaurant Manager
and such other employees of Developer whom Friday's shall designate to
execute and (if requested) deliver to Friday's a covenant in the form
attached as ADDENDUM B. Notwithstanding the execution of such covenant,
Developer shall indemnify the Friday's Indemnitees from any damages, costs or
expenses resulting from or related to any disclosure or use of Confidential
Information by any Principal, Operator, Representative, Multi-Unit Manager,
Project Manager or Restaurant Manager.
D. Immediately upon any termination or expiration hereof, Developer
and each Principal shall return the Confidential Information including,
without limitation, that portion of the Confidential Information which
consists of analyses, compilations, studies or other documents containing or
referring to any part of the Confidential Information, prepared by Developer
or such Principal, their agents, representatives or employees, and all copies
thereof.
7. DEVELOPER'S REPRESENTATIONS AND WARRANTIES; AFFIRMATIVE AND NEGATIVE
COVENANTS
A. In the event Developer is a corporation, limited liability
company or partnership, Developer represents and warrants to Friday's as
follows:
(1) Developer is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization with all
requisite power and authority to own, operate and lease its assets (real or
personal), to carry on its business, to enter into this Agreement and perform
its obligations hereunder. Developer is duly qualified to do business and is
in good standing in each jurisdiction in which its business or the ownership
of its assets requires.
<PAGE>
(2) The execution, delivery and performance by Developer of
this Agreement, any Franchise Agreement and all other agreements contemplated
herein has been duly authorized by all requisite action and no further action
is necessary to make this Agreement, any Franchise Agreement or such other
agreements valid and binding upon it and enforceable against it in accordance
with their respective terms. Neither the execution, delivery nor performance
by Developer of this Agreement, any Franchise Agreement or any other
agreements contemplated hereby will conflict with, or result in a breach of
any term or provision of Developer's articles of incorporation, by-laws,
partnership agreement or other governing documents or under any mortgage,
deed of trust or other contract or agreement to which Developer is a party or
by which it or any of its assets are bound, or breach any order, writ,
injunction or decree of any court, administrative agency or governmental body.
(3) Developer's articles of incorporation, by-laws,
partnership agreement and other governing documents expressly limit
Developer's business activities solely to the development and operation
(pursuant to this Agreement and the Franchise Agreements) of the Restaurants.
(4) Certified copies of Developer's articles of
incorporation, by-laws, partnership agreement, other governing documents and
any amendments thereto, including board of director's or partner's
resolutions authorizing this Agreement, have been delivered to Friday's.
(5) A certified current list of all Principals has been
delivered to Friday's.
(6) Developer's articles of incorporation or other
governing documents, or partnership agreement limit Transfers as described in
Sections 8.B.(2) and 8.C.
(7) Each Security shall bear a legend (in a form to
which Friday's shall consent) indicating that any Transfer is subject to
Sections 8.B and 8.C.
B. Developer affirmatively covenants with Friday's as follows:
(1) Developer shall perform its duties and obligations
hereunder and under any Franchise Agreement and shall require each Operator,
Multi-Unit Manager, Project Manager and Restaurant Manager to dedicate their
respective full time and best efforts to the development, construction,
management, operation, supervision and promotion of the Restaurants in
accordance with the terms and conditions hereof.
(2) Developer shall promptly provide Friday's with all
information concerning any new process or improvements in the development,
construction, management, operation, supervision or promotion of the
Restaurants developed by Developer or any Principal without compensation.
Developer and the Principals shall each execute such agreements and other
documentation as shall be deemed necessary by Friday's, granting Friday's
exclusive ownership thereof.
(3) Developer shall comply with all requirements of
applicable rules, regulations, statutes, laws and ordinances.
(4) Developer shall maintain a current list of all
Principals and deliver a certified copy thereof to Friday's upon (i) any
Transfer; or (ii) request.
(5) Each Security issued subsequent to the date hereof
shall be in compliance with Section 7.A.(7).
<PAGE>
C. Developer acknowledges and/or negatively covenants with Friday's
as follows:
(1) Developer shall not amend its articles of
incorporation, by-laws, partnership agreement or other governing documents in
a manner which is inconsistent with Sections 7.A.(3), 8.B.(2) and 8.C.
(2) Developer shall not remove or permit removal from any
Security or its partnership agreement, or issue any Security that does not
have endorsed upon it, the legend described in Section 7.A.(7).
(3) Developer and each Principal shall receive valuable,
unique training, trade secrets and the Confidential Information which are
beyond the present skills, experience and knowledge of Developer, any
Principal and Developer's employees. Developer and each Principal acknowledge
that (i) such training, trade secrets and the Confidential Information (a)
are essential to the development of the Restaurant and (b) provide a
competitive advantage to Developer; and (ii) access to such training, trade
secrets and the Confidential Information is a primary reason for their
execution of this Agreement. In consideration thereof, Developer and each
Principal covenant that, during the Term and for a period of one (1) year
after the expiration or termination hereof, neither Developer nor any
Principal shall, directly or indirectly:
(a) employ or seek to employ any person (or
induce such person to leave his or her employment) who is, or has within
one (1) year been, employed (i) by Friday's, (ii) by any developer or
franchisee of Friday's, or (iii) in any other concept or system owned,
operated or franchised by an Affiliate , as a director, officer or in any
managerial capacity;
(b) own, maintain, operate or have any
interest in any Competing Business;
(c) own, maintain, operate or have any interest in
any Competing Business which business is, or is intended to be, located in
the Territory; or
(d) own, maintain, operate or have any interest in
any Competing Business which business is, or is intended to be, located
within a three (3) mile radius of any restaurant which is a part of a concept
or system owned, operated, or franchised by Friday's or any Affiliate.
(4) Sections 7.C.(3)(b), (c) and (d) shall not apply to an
interest for investment only of five percent (5%) or less of the capital
stock of a Publicly-Held Entity if such owner is not a director, officer or
manager therefor or consultant thereto.
D. Each of the foregoing covenants is independent of each other
covenant or agreement contained in this Agreement.
E. Friday's may, in its sole discretion, reduce the area, duration
or scope of any covenant contained in Section 7.C. without Developer's or any
Principal's consent, effective upon notice to Developer. Developer and each
Principal shall comply with any covenant as so modified.
F. Developer's representations, warranties, covenants and agreements
herein are continuing representations, warranties, covenants and agreements
each of which shall survive the expiration or termination hereof.
<PAGE>
8. TRANSFER
A. Friday's may assign this Agreement, or any of its rights or
obligations herein, to any person or entity without Developer's or any
Principal's consent; provided, however, that Friday's obligations which are
assigned shall be fully assumed by the party to whom Friday's assigns such
obligations.
B. (1) Developer and each Principal acknowledge that
Developer's rights and obligations herein and in each Franchise Agreement are
personal to Developer and that Friday's has entered into this Agreement and
will enter into each Franchise Agreement relying upon the business skill,
experience and aptitude, financial resources and reputation of Developer and
each Principal. Therefore, neither Developer nor any Principal, their
respective successors or permitted assigns, shall complete, or allow to be
completed, any Transfer without Friday's consent. Any purported Transfer, by
operation of law or otherwise, without Friday's consent shall be null and
void and constitute an Event of Default.
(2) Friday's may require satisfaction of any of the
following conditions and such other conditions as Friday's may reasonably
require prior to consenting to any Transfer, each of which Developer
acknowledges and agrees is reasonable and necessary:
(a) no Event of Default shall have occurred and be
continuing and no event shall have occurred which, with the giving of notice
or lapse of time, or both, would constitute an Event of Default;
(b) Developer and/or any affected Principal shall
deliver a general release of any and all claims against the Friday's
Indemnitees including, without limitation, claims arising under this
Agreement and any Franchise Agreement, in a form acceptable to Friday's;
(c) Developer and/or any affected Principal shall
remain liable for the performance of its obligations, covenants and
agreements herein through the date of transfer and shall execute all
instruments reasonably requested by Friday's to evidence such liability;
(d) the transferee and all Transferee Owners, as
applicable, shall (i) make each of Developer's and Principal's
representations and warranties; (ii) assume full, unconditional, joint and
several liability for, and agree to perform from the date of Transfer, each
of Developer's and Principal's obligations, covenants and agreements herein;
and (iii) execute all instruments (in a form acceptable to Friday's)
reasonably requested by Friday's to evidence the foregoing;
(e) the transferee and all Transferee Owners shall
satisfy, in Friday's reasonable judgment, Friday's then existing criteria for
T.G.I. Friday's-Registered Trademark- developers or principals, as
applicable, including, without limitation: (i) education; (ii) business
skill, experience and aptitude; (iii) character and reputation; and (iv)
financial resources;
(f) the transferee and all Transferee Owners shall
execute (without extending the Term) the standard form of development
agreement then being offered to new System developers or other form of this
Agreement as Friday's requests and such other ancillary agreements as
Friday's may request for the development of the Restaurants, which shall
supersede this Agreement and its ancillary documents and the terms of which
may differ from the terms hereof; provided, however, that
<PAGE>
the transferee shall not be required to pay the Development Fee (transferee
shall pay all Franchise Fees and other fees described in each Franchise
Agreement which have not already been paid in full by Developer); and
(g) at the transferee's expense, the transferee's
Representative, any Multi-Unit Manager(s), Operator, and Restaurant Managers
shall complete such training as then required (if not previously trained
pursuant to the terms hereof), upon such terms and conditions as Friday's may
reasonably require.
C. Developer and each Principal agree that:
(1) (i) Friday's shall have and is hereby granted a right
of first refusal with respect to any Transfer; (ii) should Developer and/or
any Principal desire to accept a bona fide offer to make a Transfer, such
party shall promptly notify Friday's thereof and shall provide such
information and documents relating thereto as Friday's may require; (iii)
within thirty (30) days after receipt of such notice, information and
documents, Friday's may notify such party that it intends to exercise its
right of first refusal with regard to such Transfer upon such terms and
conditions; provided, however, that such transaction shall be consummated
within a reasonable period of time after Friday's has given such notice; (iv)
any material change in the terms of any offer or any change in the identity
of the proposed transferee shall constitute a new offer subject to Friday's
right of first refusal; and (v) Friday's failure to exercise such right shall
not constitute a waiver of any other provision of this Agreement, including
such right with respect to future offers; and
(2) in the event such offer provides for payment of
consideration other than cash, Friday's may elect to purchase the interest
for the reasonable equivalent in cash. If the parties cannot agree within
thirty (30) days of the receipt of notice of Friday's election to exercise
such right of first refusal on such reasonable equivalent in cash, an
Appraiser designated by Friday's shall determine such amount, and his
determination shall be final and binding. If Friday's elects to exercise the
right of first refusal described above, the cost of the appraisal, if any,
shall be set off against any payment made by Friday's hereunder.
D. In the event Developer requests Friday's consent to any proposed
Transfer, there shall be paid to Friday's a non-refundable fee of Five
Thousand Dollars ($5,000.00), or such greater amount as is necessary to
reimburse Friday's for its costs and expenses associated with reviewing the
proposed Transfer including, without limitation, Territorial Expenses, legal
and accounting fees and Wage Expenses. No such fee shall be payable with
respect to a transaction with Friday's described in Section 8.C.
E. In the event Developer or any Principal is a natural person,
Developer or his administrator, executor, guardian or personal representative
shall promptly notify Friday's of the death or Permanent Disability of such
Developer or such Principal. Any Transfer upon death or Permanent Disability
shall be subject to the terms and conditions described in Sections 8.B.(2)
and 8.C. and shall be completed prior to a date which is (i) one (1) year
after the date of death; or (ii) ninety (90) days after the date Developer or
such Principal becomes, or is deemed to be, Permanently Disabled. Developer
or any Principal refusing to submit to examination with respect to Permanent
Disability shall be deemed Permanently Disabled.
F. Friday's consent to any Transfer shall not constitute a waiver of
(i) any claims it may have against the transferor; or (ii) the transferee's
compliance with the terms hereof.
<PAGE>
9. CONSENT AND WAIVER
A. When required, Developer or any Principal shall make a written
request for Friday's consent in advance and such consent shall be obtained in
writing. Friday's consent shall not be unreasonably withheld. The foregoing
not withstanding, where either party's consent is expressly reserved to such
party's sole discretion, the exercise of such discretion shall not be subject
to contest.
B. FRIDAY'S MAKES NO REPRESENTATIONS OR WARRANTIES UPON WHICH
DEVELOPER OR ANY PRINCIPAL MAY RELY AND ASSUMES NO LIABILITY OR OBLIGATION TO
DEVELOPER, ANY PRINCIPAL OR ANY THIRD PARTY BY PROVIDING ANY WAIVER, ADVICE,
CONSENT OR SERVICES TO DEVELOPER OR DUE TO ANY DELAY OR DENIAL THEREOF.
10. DEFAULT AND REMEDIES
10.01 A. The following shall constitute Events of Default by
Developer or any Principal: (i) failure to comply with the Development
Schedule; (ii) the breach or falsity of any representation or warranty
herein; (iii) failure to deliver executed covenants as required in Section
6.C; (iv) failure to comply with or perform its covenants, obligations and
agreements herein; (v) any Transfer that (a) occurs other than as provided in
Section 8 or (b) fails to occur within the time periods described in Section
8 (notwithstanding any lack of, or limits upon, the enforceability of any
term or provision of Sections 7 or 8); (vi) failure to make any Payment on or
before the date payable; (vii) failure to meet and/or maintain the Standards;
(viii) Developer (a) is adjudicated, or is, bankrupt or insolvent, (b) makes
an assignment for the benefit of creditors, or (c) seeks protection from
creditors by petition in bankruptcy or otherwise or there is filed against
Developer a similar petition which is not dismissed within thirty (30) days;
(ix) the appointment of a liquidator or receiver for (a) all or substantially
all of Developer's assets or (b) any Restaurant is sought which is not
dismissed within thirty (30) days; (x) breach or failure to perform any other
term or condition of this Agreement; (xi) an event of default shall arise
under any Franchise Agreement; (xii) Developer or any Principal pleads guilty
or no contest to or is convicted of a felony or a crime involving moral
turpitude or any other crime or offense that Friday's reasonably believes is
likely to adversely affect the Proprietary Marks, the System or the goodwill
associated therewith (whether in the Territory or elsewhere) or Friday's
interest therein; or (xiii) any (a) two (2) or more Events of Default shall
arise under any single subsection of this Section 10.01.A or (b) three (3) or
more Events of Default shall arise under this Section 10.01.A in any
continuous twelve (12) month period notwithstanding the previous cure of such
Events of Default.
B. The parties agree that an Event of Default arising under Section
10.01.A.(i), (iii), (iv) [with respect to Events of Default arising, without
limitation, under Section 7.C.(3)], (v), (vi), (viii), (ix), (xi), (xii) or
(xiii) shall constitute a Material Event of Default. The parties further
agree that Events of Default committed by Developer or any Principal arising
under other Sections of this Agreement may also be deemed to be Material
Events of Default.
C. Upon the occurrence of an Event of Default by Developer or any
Principal, Friday's may exercise one or more of the following remedies or
such other remedies as may be available at law or in equity:
(1) cure such Event of Default at Developer's expense and
in connection therewith
<PAGE>
Developer (i) hereby grants to Friday's all rights and powers necessary or
appropriate to accomplish such cure; (ii) shall indemnify and hold the
Friday's Indemnitees harmless from and against all costs, expenses (including
reasonable fees of attorneys and other engaged professionals), liabilities,
claims, demands and causes of action (including actions of third parties)
incurred by or alleged against any Friday's Indemnitee in connection with
Friday's cure; and (iii) shall reimburse or pay such costs or damages within
ten (10) days of receipt of Friday's invoice therefor;
(2) in the event of a Material Event of Default, upon
notice to Developer, terminate this Agreement and all rights granted
hereunder without waiving any (i) claim for damages suffered by Friday's; or
(ii) other rights, remedies or claims (no notice of termination shall be
required with regard to a Material Event of Default under Section
10.01.A.(viii) or (ix)); or
(3) with respect to an Event of Default arising from a
breach of covenant contained in Section 7.C.(3)(a), the affected former
employer shall be compensated by the breaching party (and Developer shall be
additionally liable for breaches by any Principal) for the reasonable costs
and expenses incurred by such employer in connection with training such
employee. Developer and each Principal acknowledge that such expenses are
impossible to accurately quantify and agree that, as liquidated damages and
not as a penalty, an amount equal to such employee's annual rate of
compensation in the final twelve (12) months of employment (or an annualized
rate if employed for a shorter period) by such former employer shall be paid
by the breaching party to the former employer at such time as such employee
commences employment.
D. Friday's shall not exercise any remedies available hereunder with
respect to the following described Events of Default unless such Events of
Default remain uncured after notice from Friday's thereof and the expiration
of the following cure periods:
(1) with respect to any Event of Default arising under
Section 10.01.A.(vi) - ten (10) days; or
(2) with respect to any Event of Default arising under
Sections 10.01.A.(i)-(v) inclusive, (vii) and (x) - thirty (30) days.
E. If any Events of Default arising under Sections 10.01.A.(i) - (v)
inclusive, (vii) or (x) cannot reasonably be cured within thirty (30) days,
Developer shall provide Friday's notice thereof (together with Developer's
best estimate of the time period required to complete such cure) and
immediately undertake efforts to cure such default within the cure period,
and continue such efforts with diligence to completion. In no event, however,
shall such cure period be extended without the prior written consent of
Friday's.
F. Developer and each Principal agree that Friday's exercise of the
rights and remedies set forth herein are reasonable. Friday's may, in
addition to pursuing any other remedies, specifically enforce such
obligations, covenants and agreements or obtain injunctive or other equitable
relief in connection with the violation or anticipated violation of such
obligations, covenants and agreements.
10.02 A. The following shall constitute Events of Default by
Friday's: (i) failure to comply with or perform its obligations and
agreements herein, or (ii) Friday's (a) is adjudicated, or is, bankrupt or
insolvent, (b) makes an assignment for the benefit of creditors, or (c) seeks
protection from creditors by petition in bankruptcy or otherwise or there is
filed against Friday's a similar petition which is not dismissed within
thirty (30) days.
<PAGE>
B. Upon the occurrence of a Material Event of Default by Friday's,
Developer may, upon notice to Friday's, terminate this Agreement and all
rights granted hereunder without waiving any (i) claim for damages suffered
by Developer; or (ii) other rights, remedies or claims. Any termination of
this Agreement by Developer other than as provided in this Section 10.02
shall be deemed a termination by Developer without cause.
C. Developer shall not exercise any remedies available hereunder
with respect to any Events of Default unless such Events of Default remain
uncured after (i) notice from Developer thereof and (ii) the expiration of
thirty (30) days following such notice.
D. If any Events of Default cannot reasonably be cured within thirty
(30) days, Friday's shall provide Developer notice thereof (together with
Friday's best estimate of the time period required to complete such cure) and
immediately undertake efforts to cure such default within the cure period,
and continue such efforts with diligence to completion. In no event, however,
shall such cure period be extended without the prior written consent of
Developer.
10.03 Subject to the provisions of Section 10.06, all rights and
remedies of either party shall be cumulative, and not exclusive, of any other
right or remedy described herein or available at law or in equity. The
expiration or termination of this Agreement shall not release any party from
any liability or obligation then accrued or any liability or obligation
continuing beyond, or arising from, such expiration or termination. Nothing
in this Agreement shall impair either party's right to obtain injunctive or
other equitable relief.
10.04 The failure of any party to exercise any right or remedy or to
enforce any obligation, covenant or agreement herein shall not constitute a
waiver by, or estoppel of, that party's right to any of the remedies
described herein including, without limitation, to enforce strict compliance
with any such obligation, covenant or agreement. No custom or practice shall
modify or amend this Agreement. The waiver of, or failure or inability of any
party to enforce, any right or remedy shall not impair that party's rights or
remedies with respect to subsequent Events of Default of the same, similar or
different nature. The delay, forbearance or failure of any party to exercise
any right or remedy in connection with any Event of Default or default by any
other developers shall not affect, impair or constitute a waiver of such
party's rights or remedies herein. Acceptance of any Payment shall not waive
any Event of Default.
10.05 Developer and each Principal shall, jointly and severally, pay
all costs and expenses (including reasonable fees of attorneys and other
engaged professionals) incurred by Friday's in successfully enforcing, or
obtaining any remedy arising from the breach of this Agreement. The existence
of any claims, demands or actions which Developer or any Principal may have
against Friday's, whether arising from this Agreement or otherwise, shall not
constitute a defense to Friday's enforcement of Developer's or any
Principal's representations, warranties, covenants, obligations or agreements
herein.
10.06 IN THE EVENT OF A DISPUTE BETWEEN THEM WHICH IS NOT SUBJECT
TO, NOR ARISES UNDER, SECTION 12, FRIDAY'S, DEVELOPER AND PRINCIPALS HEREBY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO OR CLAIM FOR ANY
PUNITIVE, EXEMPLARY, INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES
(INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS, BUT SPECIFICALLY EXCLUDING,
HOWEVER, DAMAGES TO THE REPUTATION AND GOODWILL ASSOCIATED WITH AND/OR
SYMBOLIZED BY THE PROPRIETARY
<PAGE>
MARKS) AGAINST THE OTHER ARISING OUT OF ANY CAUSE WHATSOEVER (WHETHER SUCH
CAUSE BE BASED IN CONTRACT, NEGLIGENCE, STRICT LIABILITY, OTHER TORT OR
OTHERWISE) AND AGREE THAT EACH SHALL BE LIMITED TO THE RECOVERY OF ANY ACTUAL
DAMAGES SUSTAINED BY IT. IF ANY OTHER TERM OF THIS AGREEMENT IS FOUND OR
DETERMINED TO BE UNCONSCIONABLE OR UNENFORCEABLE FOR ANY REASON, THE
FOREGOING PROVISION SHALL CONTINUE IN FULL FORCE AND EFFECT.
11. INSURANCE
A. Developer shall obtain within thirty (30) days from the date
hereof and maintain throughout the Term, such insurance coverage (including,
without limitation, auto liability coverage and workers compensation
insurance) as may be (i) required by law; or (ii) reasonably designed to
protect Developer from the risks inherent in the development activities to be
engaged in by Developer pursuant to this Agreement. Friday's shall have the
right to reasonably consent to the types and amounts of coverage and the
issuing companies. Such insurance shall:
(1) name the Friday's Indemnitees as additional insured
parties and provide that coverage applies separately to each insured and
additional insured party against whom a claim is brought as though a separate
policy had been issued to each Friday's Indemnitee;
(2) contain no provision which limits or reduces coverage
in the event of a claim by any one (1) or more of the insured or additional
insured parties;
(3) provide that policy limits shall not be reduced,
coverage restricted, canceled, allowed to lapse or otherwise altered or such
policy(ies) amended without Friday's consent, but in no event upon less than
thirty (30) days prior written notice to Friday's;
(4) be obtained from reputable insurance companies with an
A.M. Best Rating of "A" and an A.M. Best Class Rating of XIV (or comparable
ratings from a reputable insurance rating service, in the event such A.M.
Best ratings are discontinued or materially altered), authorized to do
business in the jurisdiction in which the Restaurant is located; and
(5) be in an amount and form satisfactory to Friday's; but
in no event in amounts less than the following:
(a) auto liability insurance, including coverage
of owned, non-owned and hired vehicles, with a combination of primary and
excess limits of not less than Five Hundred Thousand Dollars ($500,000.00)
for bodily injury for each person, One Million Dollars ($1,000,000.00) for
bodily injury for each occurrence and Two Hundred Fifty Thousand Dollars
($250,000.00) for each occurrence of property damage;
(b) employer's liability insurance with a limit of
not less than Five Hundred Thousand Dollars ($500,000.00); and
(c) workers compensation insurance in such amount
as may be required by applicable statute or rule.
<PAGE>
B. Such insurance may provide for reasonable deductible amounts with
Friday's consent.
C. A certificate of insurance shall be submitted for Friday's
consent within ten (10) days following commencement of such coverage, and
additional certificates of insurance shall be submitted to Friday's
thereafter, evidencing uninterrupted coverage. Developer shall deliver a
complete copy of such policy(ies) within ten (10) days of request.
D. In the event of a claim of any one or more of the Friday's
Indemnitees against Developer, Developer shall, on request of Friday's,
assign to Friday's any and all rights which Developer then has or thereafter
may have with respect to such claim against the insurer(s) providing the
coverage described in this Section.
E. Developer's obligation to obtain and maintain insurance or to
indemnify any Friday's Indemnitee shall not be limited by reason of any
insurance which may be maintained by any Friday's Indemnitee, nor shall such
insurance relieve Developer of any liability under this Agreement.
Developer's insurance shall be primary to any policies maintained by any
Friday's Indemnitee.
F. If Developer fails to obtain or maintain the insurance required
by this Agreement, as such requirements may be revised from time to time,
Friday's may acquire such insurance, and the cost thereof, together with a
reasonable fee for Friday's expenses in so acting and interest at eighteen
percent (18%) per annum from the date acquired, shall be payable by Developer
upon notice.
12. INDEMNIFICATION
A. Developer and each Principal will, at all times, indemnify and
hold harmless, to the fullest extent permitted by law, Friday's Indemnitees
from all "losses and expenses" (as defined below) incurred in connection with
any action, suit, proceeding, claim, demand, investigation or inquiry (formal
or informal), or any settlement thereof (whether or not a formal proceeding
or action has been instituted) which arises out of or is based upon any of
the following:
(1) The infringement, alleged infringement, or any other
violation or alleged violation by Franchisee or any Principal of any patent,
mark or copyright or other proprietary right owned or controlled by third
parties.
(2) The violation, breach or asserted violation or breach
by Developer or any Principal of any contract, federal, state or local law,
regulation, ruling, standard or directive or any industry standard.
(3) Libel, slander or any other form of defamation of
Friday's or the System, by Developer or any Principal.
(4) The violation or breach by Developer or any Principal
of any warranty, representation, agreement or obligation in this Agreement.
(5) Acts, errors or omissions of Developer or any of
its agents, servants, employees, contractors, partners, affiliates or
representatives.
B. Developer and each Principal agree to give Friday's immediate
notice of any such
<PAGE>
action, suit, proceeding, claim, demand, inquiry or investigation.
C. Friday's shall at all times have the absolute right to retain
counsel of its own choosing in connection with any action, suit, proceeding,
claim, demand, inquiry or investigation. Friday's shall at all times have the
absolute right to investigate any action, suit proceeding, claim or demand
itself.
D. Developer and each Principal shall indemnify Friday's Indemnitees
for attorneys' fees, expenses, and costs incurred in connection with the
exercise of Friday's rights under Section 12. This provision shall not be
construed so as to limit or in any way affect Developer's indemnity
obligations pursuant to the other provisions of Section 12.
E. In the event that Friday's exercise of its rights under Section
12 actually results in Developer's insurer with respect to insurance required
to be maintained by Developer pursuant to Section 11 (hereinafter, the
"Insurer") refusing to pay on a third party claim, all causes of action and
legal remedies which Developer might have against the Insurer shall be
automatically assigned to Franchisor without the need for any further action
on Friday's or Developer's part. For the purposes of Section 12, "actually
results" means that, but for Friday's exercise of its rights under Section
12, the Insurer would not have refused to pay on said third-party claim.
F. In the event that Friday's exercise of its rights under Section
12 actually results in the Insurer refusing to pay on a third-party claim,
Developer shall not be required to indemnify Friday's for the latter's
attorneys' fees, expenses and costs incurred in connection with that claim.
G. In the event that the Insurer subsequently reverses its previous
decision to not pay a claim, by in fact paying that claim, Developer shall be
required to indemnify Friday's for the latter's attorneys' fees, expenses and
costs incurred in connection with that claim, just as if the Insurer had
never denied the claim.
H. In the event that Developer encourages, requests, or suggests
that the Insurer deny a claim, Developer shall indemnify Friday's for its
attorneys' fees, expenses and costs in connection with that claim.
I. Subject to the provisions of Section 12.B. above, in order to
protect persons or property, or its reputation or goodwill, or the reputation
or goodwill of others, Friday's may, at any time and without notice, as it,
in its judgment deems appropriate, consent or agree to settlements or take
such other remedial or corrective action as it deems expedient with respect
to the action, suit, proceeding, claim, demand, inquiry or investigation if,
in Friday's sole judgment, there are reasonable grounds to believe that:
(1) any of the acts or circumstances enumerated in Section
12.A. above have occurred; or
(2) any act, error, or omission of Developer or any
Principal may result directly or indirectly in damage, injury or harm to any
person or any property.
J. In addition to their indemnity obligations under Section 12.D.,
Developer and each Principal shall indemnify Friday's for any and all losses,
compensatory damages, exemplary or punitive damages, fines, charges, costs,
expenses, lost profits, settlement amounts, judgments, compensation for
damages to Friday's reputation and goodwill, costs of or resulting from
delays, financing, costs of
<PAGE>
advertising material and media time/space, and costs of changing,
substituting or replacing the same, and any and all expenses of recall,
refunds, compensation, public notices and other such amounts incurred in
connection with the matters described, which result from any of the items set
forth in Section 12.
K. Friday's does not assume any liability whatsoever for acts,
errors, or omissions of those with whom Developer or any Principal may
contract, regardless of the purpose. Developer and each Principal shall hold
harmless and indemnify Friday's for all losses and expenses which may arise
out of any acts, errors or omissions of these third parties.
L. Under no circumstances shall Friday's be required or obligated to
seek recovery from third parties or otherwise mitigate its losses in order to
maintain a claim against Developer or any Principal. Developer and each
Principal agree that the failure to pursue such recovery or mitigate loss
will in no way reduce the amounts recoverable by Friday's from Developer or
any Principal.
M. Notwithstanding anything to the contrary contained in this
Agreement, Developer is not required to indemnify Friday's with regard to any
infringement, alleged infringement or other violation or alleged violation by
Developer or any Principal of any patent, mark, or copyright or other
proprietary right owned or controlled by a third party, arising in connection
with the use of the Proprietary Marks and System franchised to Developer when
used in the manner authorized and required by Friday's pursuant to this
Agreement. In the event Developer is involved in such an action, Friday's
agrees to indemnify Developer Indemnitees in connection with the defense
thereof, and to indemnify and hold Developer Indemnitees harmless from any
and all losses, damages, claims, liabilities, expenses, including attorney's
fees (prior to litigation, during litigation, and on appeal) and all costs
(whether taxed or not taxed) in connection with proceedings regarding the
same. Developer shall give notice to Friday's of any such claim no later than
fifteen (15) days after Developer becomes aware of same or is given notice
thereof. This indemnity shall be inoperative to the extent that failure to
have timely provided such notice to Friday's materially impairs Friday's
ability to defend any such claim, in whole or in part, or to minimize the
costs of this indemnity. Developer shall not be required to defend Friday's
with regard to Developer's utilization pursuant to this Agreement of the
Proprietary Marks and System provided such utilization is in strict
compliance with that authorized and required by Friday's pursuant to this
Agreement.
13. NOTICES
All notices required or desired to be given hereunder shall be in
writing and shall be sent by personal delivery, expedited delivery service,
facsimile or certified mail, return receipt requested to the following
addresses (or such other addresses as designated pursuant to this Section 13):
if to Friday's: TGI Friday's Inc.
Attention: General Counsel
7540 LBJ Freeway, Suite 100
Dallas, Texas 75251
Facsimile No.: (972) 450-5636
if to Developer or any Principal: __________________________
__________________________
__________________________
__________________________
<PAGE>
__________________________
Facsimile No._____________
Notices posted by personal delivery, expedited service or given by
facsimile shall be deemed given the next business day after transmission.
Notices posted by certified mail shall be deemed received three (3) Business
Days after the date of posting. Any change in the foregoing addresses shall
be effected by giving fifteen (15) days written notice of such change to the
other party.
14. FORCE MAJEURE
No party shall be liable for any inability to perform resulting from
acts of God or other causes (other than financial inability or insolvency)
beyond their reasonable control; provided, however, that nothing herein shall
excuse or permit any delay or failure (i) to remit any Payment on the date
due; or (ii) for more than one-hundred eighty (180) days. The party whose
performance is affected by an event of force majeure shall, within three (3)
days of the occurrence of such event, give notice thereof to the other party
setting forth the nature thereof and an estimate of its duration.
15. SEVERABILITY
A. Should any term, covenant or provision hereof, or the application
thereof, be determined by a valid, final, non-appealable order to be invalid
or unenforceable, the remaining terms, covenants or provisions hereof shall
continue in full force and effect without regard to the invalid or
unenforceable provision. In such event, such term, covenant or provision
shall be deemed modified to impose the maximum duty permitted by law and such
term, covenant or provision shall be valid and enforceable in such modified
form as if separately stated in and made a part of this Agreement.
Notwithstanding the foregoing, if any term hereof is so determined to be
invalid or unenforceable and such determination adversely affects, in
Friday's reasonable judgment, Friday's ability to realize the principal
purpose of the Agreement or preserve its or TGIFM's rights in, or the
goodwill underlying, the Proprietary Marks, the System, or the Confidential
Information, Friday's may terminate this Agreement upon notice to Developer.
B. Captions in this Agreement are for convenience only and shall not
affect the meaning or construction of any provision hereof.
16. INDEPENDENT CONTRACTOR
A. Developer is an independent contractor. Friday's does not operate
the Developer's business. Nothing herein shall create the relationship of
principal and agent, legal representative, joint ventures, partners, employee
and employer or master and servant between the parties. No fiduciary duty is
owed by, or exists between, the parties.
B. Nothing herein authorizes Developer or any Principal to make any
contract, agreement, warranty or representation or to incur any debt or
obligation in Friday's name.
17. DUE DILIGENCE AND ASSUMPTION OF RISK
A. Developer and each Principal (i) have conducted such due
diligence and investigation as each desires; (ii) recognize that the business
venture described herein involves risks; and (iii)
<PAGE>
acknowledge that the success of such business venture is dependent upon the
abilities of Developer and Principals. FRIDAY'S EXPRESSLY DISCLAIMS THE
MAKING OF, AND DEVELOPER AND EACH PRINCIPAL ACKNOWLEDGE THAT THEY HAVE NOT
RECEIVED OR RELIED UPON, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
AS TO THE POTENTIAL PERFORMANCE OR VIABILITY OF THE BUSINESS VENTURE
CONTEMPLATED BY THIS AGREEMENT.
B. Developer and each Principal have received, read and understand
this Agreement, the documents referred to herein and the Exhibits and
Schedules hereto. Developer and each Principal have had ample time and
opportunity to consult with their advisors concerning the potential benefits
and risks of entering into this Agreement.
18. MISCELLANEOUS
A. Time is of the essence to this Agreement.
B. There are no third party beneficiaries to this Agreement except
for the remedy provided for breach of Developer's or any Principal's covenant
contained in Section 7.C.(3)(a), the provision for liquidated damages
contained in Section 10.01.C.(3), and the rights and remedies provided for in
EXHIBIT B.
C. This Agreement may be executed in any number of counterparts each
of which when so executed shall be an original, but all of which together
shall constitute one (1) and the same instrument.
D. All references herein to the masculine, neuter or singular shall
be construed to include the masculine, feminine, neuter or plural, unless
otherwise suggested by the text.
E. This Agreement will become effective only upon execution hereof
by the President or a vice president of Friday's.
F. This Agreement is not a franchise agreement and does not grant
Developer or any Principal any rights in or to the (i) System (except as
expressly provided herein); or (ii) Proprietary Marks.
G. Developer shall not use the words "FRIDAY'S-Registered
Trademark-", "T.G.I. FRIDAY's-Registered Trademark-", "TGIF(R)" OR "THE
AMERICAN BISTRO-Registered Trademark-", or any part thereof, as part of its
corporate or other name.
H. Developer and each Principal acknowledge that each has received a
complete copy of this Agreement, the documents referred to herein and the
Exhibits and Addenda hereto at least five (5) business days prior to the date
on which this Agreement was executed. Developer and each Principal further
acknowledge that each has received the disclosure document required by the
Trade Regulation Rule of the Federal Trade Commission entitled "Disclosure
Requirements and Prohibitions Concerning Franchising and Business Opportunity
Ventures" at least ten (10) business days prior to the date on which this
Agreement was executed.
19. CHOICE OF LAW; JURISDICTION; VENUE
A. DEVELOPER AND EACH PRINCIPAL ACKNOWLEDGE THAT FRIDAY'S
<PAGE>
MAY GRANT DEVELOPMENT RIGHTS THROUGHOUT THE UNITED STATES ON TERMS AND
CONDITIONS SIMILAR IN CERTAIN MATERIAL RESPECTS TO THOSE SET FORTH IN THIS
AGREEMENT, AND THAT IT IS OF MUTUAL BENEFIT TO DEVELOPER AND EACH PRINCIPAL
AND TO FRIDAY'S THAT THESE TERMS AND CONDITIONS BE UNIFORMLY INTERPRETED.
THEREFORE, THE PARTIES AGREE THAT TO THE EXTENT THE LAW OF THE STATE OF TEXAS
IS HELD ENFORCEABLE, TEXAS LAW SHALL APPLY TO THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT (EXCEPT FOR TEXAS CHOICE OF LAW RULES) AND
SHALL GOVERN ALL QUESTIONS WHICH ARISE WITH REFERENCE HERETO.
B. THE PARTIES ACKNOWLEDGE THAT THIS AGREEMENT SHALL BE PERFORMED IN
SUBSTANTIAL PART IN DALLAS COUNTY, TEXAS. THE PARTIES THEREFORE AGREE THAT
ANY CLAIM, CONTROVERSY OR DISPUTE ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE PERFORMANCE THEREOF WHICH CANNOT BE AMICABLY SETTLED, EXCEPT
AS OTHERWISE PROVIDED HEREIN, SHALL BE RESOLVED BY A PROCEEDING IN A COURT IN
DALLAS COUNTY, TEXAS, AND DEVELOPER AND PRINCIPALS EACH IRREVOCABLY ACCEPT
AND SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND THE
FEDERAL COURTS LOCATED IN DALLAS COUNTY, TEXAS FOR SUCH CLAIMS, CONTROVERSIES
OR DISPUTES; PROVIDED, HOWEVER, WITH RESPECT TO ANY ACTION WHICH INCLUDES
INJUNCTIVE RELIEF, OR ANY ACTION FOR THE RECOVERY OF ANY PROPERTY, REAL OR
PERSONAL, FRIDAY'S MAY BRING SUCH ACTION IN ANY STATE WHICH HAS JURISDICTION.
20. ENTIRE AGREEMENT
This Agreement and the Exhibits, Addenda and Schedules
hereto constitute the entire agreement between Friday's, Developer and the
Principals concerning the subject matter hereof. All prior agreements,
discussions, representations, warranties and covenants are merged herein.
THERE ARE NO WARRANTIES, REPRESENTATIONS, COVENANTS OR AGREEMENTS, EXPRESS OR
IMPLIED, BETWEEN THE PARTIES CONCERNING THE SUBJECT MATTER HEREOF, INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING,
EXCEPT THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT. EXCEPT THOSE PERMITTED TO
BE MADE UNILATERALLY BY FRIDAY'S HEREUNDER, NO AMENDMENT, CHANGE OR VARIANCE
FROM THIS AGREEMENT SHALL BE BINDING ON EITHER PARTY UNLESS MUTUALLY AGREED
TO BY FRIDAY'S AND DEVELOPER AND EXECUTED IN WRITING.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement on the day and year first above written.
TGI FRIDAY'S INC. DEVELOPER
By: _____________________ By: ________________________
Name: _____________________ Name: ________________________
Title: _____________________ Title: ________________________
Date: _____________________ Date: ________________________
<PAGE>
Each Principal acknowledges, covenants and represents as follows:
(1) each has read the terms and conditions of this Agreement;
(2) each is a "Principal" as described in this Agreement;
(3) each is the owner of and has the right to vote the percent of
the Securities of Developer indicated next to the signature below of
each Principal;
(4) each makes all of the representations, warranties, covenants and
agreements of the Developer (including liability to make Payments) and a
Principal set forth in this Agreement (including, without limitation, the
covenants and agreements concerning Transfer, non-compete and maintenance of
Confidential Information) and is obligated to perform thereunder;
(5) each individually, jointly and severally, irrevocably and
unconditionally guarantees that all of Developer's obligations under the
terms and conditions of this Agreement will be timely paid and performed;
(6) each acknowledges that Friday's may, without notice to
Principals, waive, renew, extend, modify, amend or release any indebtedness
or obligation of Developer, or settle, adjust, or compromise any claims
against Developer;
(7) each waives all demands and notices of every kind with respect
to this guaranty including, without limitation, notice of presentment, demand
for payment or performance by Developer, any default by Developer or any
guarantor, and any release of any guarantor or other security for this
Agreement or the obligations of Developer. Friday's may pursue its rights
against Developer's Principals without first exhausting its remedies against
Developer and without joining any other guarantor hereto, and no delay on the
part of Friday's in the exercise of any right or remedy shall operate as a
waiver of such right or remedy;
(8) each has derived and expects to derive financial or other
benefit, directly or indirectly, from this Agreement and the transaction
described herein;
(9) each acknowledges that his/its execution of this Agreement, and
his/its undertakings and agreements herein, has induced Friday's to enter
into the transactions described in, and to execute, this Agreement;
(10) each consents to and shall be bound by any amendment of
this Agreement made by Friday's and Developer pursuant to the terms hereof;
and
(11) each has executed, concurrent herewith, the Guaranty Agreement
on EXHIBIT B.
<TABLE>
<CAPTION>
PRINCIPALS Securities
Voting %
<S> <C>
- --------------------------- --------
Name:
-----------------
- --------------------------- --------
Name:
-----------------
</TABLE>
<PAGE>
EXHIBIT 10.8
ADDENDUM A TO DEVELOPMENT AGREEMENT
COVENANT AND AGREEMENT FOR CONFIDENTIALITY
This agreement ("Agreement") is made by [PRINCIPAL'S NAME] [an
individual residing in the state of _______________ OR a corporation/partnership
organized under the laws of the state of _________________] ("Principal"), and
TGI Friday's Inc., a corporation organized under the laws of the state of New
York ("Friday's"), in connection with that certain Development Agreement dated
________________, _____ (the "Development Agreement"), by and between Friday's
and ("Developer").
WHEREAS, Friday's and Developer have entered into the Development
Agreement; and
WHEREAS, the Confidential Information provides economic advantages
to Friday's and is not generally known to, and not legally available to,
third parties; and
WHEREAS, Friday's has taken and intends to take all steps necessary
to maintain the confidentiality of the Confidential Information; and
WHEREAS, Principal will receive, and desires to receive, the
Confidential Information in his capacity as a Principal of Developer; and
WHEREAS, this Agreement is executed and delivered pursuant to
Section 6.C. of the Development Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, Principal and Friday's agree as follows:
1. Capitalized terms used herein and not otherwise defined shall
have the meanings attributed to them in the Development Agreement.
2. Friday's shall disclose to Principal some or all of the
Confidential Information which may be utilized by Principal solely (a) in his
capacity as a Principal of Developer and (b) in connection with Developer's
performance of its duties and obligations pursuant to the Development
Agreement. No other use or disclosure of any of the Confidential Information
shall be made by Principal. Principal acknowledges and agrees that Friday's
or TGIFM is the exclusive owner of the Confidential Information, the System
and the Proprietary Marks. Principal shall not, directly or indirectly,
contest or impair Friday's or TGIFM's ownership of, or interest in, the
Confidential Information, the System or the Proprietary Marks.
3. Principal shall receive the Confidential Information in strict
confidence. The Confidential Information may be utilized by Principal only
(a) so long as Principal remains a Principal of Developer and (b) during the
Term. The Confidential Information shall not be used in any manner that is
adverse or detrimental to, or competitive with, Friday's, TGIFM or Developer.
Except as permitted pursuant to the Development Agreement or this Agreement,
the Confidential Information shall not, without the prior written consent of
Friday's, be (i) copied, (ii) compiled (in total or in part) with other
information, or (iii) disclosed to any third party.
<PAGE>
4. Principal shall not communicate, disclose or use the Confidential
Information, or any part thereof, except as (a) permitted herein or (b)
required by law. The Confidential Information may be disclosed to Principal's
agents, consultants, contractors and employees who need to know the
Confidential Information for the sole purpose of providing services to
Principal in his capacity as a Principal of Developer. Prior to such
disclosure of any Confidential Information, each of such agents, consultants,
contractors and employees shall (a) be advised by Principal of the
confidential and proprietary nature of the Confidential Information and (b)
agree to be bound by the terms and conditions of this Agreement.
Notwithstanding such agreement, Principal shall indemnify the Friday's
Indemnitees from and against any damages, costs (including reasonable fees of
attorneys and other engaged professionals) and expenses resulting from any
disclosure or use of the Confidential Information, or any part thereof, by
such agents, representatives or employees contrary to the terms hereof.
5. In the event Principal or Principal's agents, representatives, or
employees receive notice of any request, demand or order to transfer or
disclose all or any portion of the Confidential Information, Principal shall
immediately notify Friday's thereof, and shall fully cooperate with and
assist Friday's in prohibiting or denying any such transfer or disclosure.
Should such transfer or disclosure be required by a valid, final,
non-appealable court order, Principal shall fully cooperate with and assist
Friday's in protecting the confidentiality of the Confidential Information to
the maximum extent permitted by law.
6. Immediately upon Friday's request or upon any termination or
expiration of the Term, Principal shall return the Confidential Information
including, without limitation, that portion of the Confidential Information
which consists of analyses, compilations, studies or other documents
containing or referring to any part of the Confidential Information, prepared
by Principal, its agents, representatives or employees, and any copies
thereof.
7. Each of the representations, warranties, covenants,
acknowledgments and agreements of Principal, and the rights and remedies of
Friday's in connection therewith, contained in the Development Agreement
including, without limitation, those contained in Sections 6, 7.C.(3), 8.B,
8.C, 8.E and 10 of the Development Agreement, are incorporated in this
Agreement by reference as if fully set forth. In connection with Friday's
enforcement of such rights and remedies (or other rights and remedies of
Friday's under this Agreement), any court of competent jurisdiction selected
by Friday's shall have personal jurisdiction over Principal, to which
jurisdiction Principal irrevocably consents. The parties agree that to the
extent the law of the State of Texas is held enforceable, Texas law shall
apply to the interpretation and construction of this Agreement (except for
Texas choice of law rules) and shall govern all questions which arise with
reference hereto.
8. Friday's may, in addition to pursuing any other remedies,
specifically enforce such obligations, covenants and agreements or obtain
injunctive or other equitable relief in connection with the violation or
anticipated violation of such obligations, covenants and agreements without
the necessity of showing (i) actual or threatened harm; (ii) the inadequacy
of damages as a remedy; or (iii) likelihood of success on the merits, and
without being required to furnish bond or other security. Nothing in this
Agreement shall impair Friday's right to obtain equitable relief.
9. Should any term, covenant or provision hereof, or the application
thereof, be determined by a valid, final, non-appealable order to be invalid
or unenforceable, the remaining terms, covenants or provisions hereof shall
continue in full force and effect without regard to the invalid or
unenforceable provision. In such event such term, covenant or provision shall
be deemed modified to impose the maximum duty permitted by law and such term,
covenant or provision shall be valid and enforceable in such modified form as
if separately stated in and made a part of this Agreement.
<PAGE>
10. Any of Principal's agreements, obligations or covenants which
contemplate performance thereof after the termination or expiration of this
Agreement shall survive such termination or expiration.
11. Principal acknowledges and warrants that he has derived and
expects to derive financial or other advantage and benefit, directly or
indirectly, from the Development Agreement, this Agreement and/or the
provision of the Confidential Information to Developer and/or Principal.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
on the dates indicated below.
TGI FRIDAY'S INC. PRINCIPAL
By: _______________________ ____________________________
Name: _______________________ Name: ______________________
Title: _______________________ Date: ______________________
Date: _______________________
<PAGE>
EXHIBIT 10.8
ADDENDUM B TO DEVELOPMENT AGREEMENT
COVENANT AND AGREEMENT FOR CONFIDENTIALITY
This agreement ("Agreement") is made by [EMPLOYEE'S NAME], an
individual residing in the state of _______________ ("Employee"), ["DEVELOPER'S
NAME"], [an individual residing in the state of _______________ OR a
corporation/partnership organized under the laws of the State of
_________________] ("Developer"), in connection with that certain Development
Agreement dated ________________, _____ (the "Development Agreement"), by and
between TGI Friday's Inc. ("Friday's") and Developer.
WHEREAS, Friday's and Developer have entered into the Development
Agreement; and
WHEREAS, the Confidential Information provides economic advantages
to Friday's, and is not generally known to, and is not legally available to,
third parties; and
WHEREAS, Friday's has taken and intends to take all steps necessary
to maintain the confidentiality of the Confidential Information; and
WHEREAS, it will be necessary for certain employees of Developer to
have access to and to use some or all of the Confidential Information in
connection with the performance of their job functions related to the
development, construction and operation of Restaurants under the System; and
WHEREAS, Employee is the [INSERT TITLE] of Developer; and
WHEREAS, Employee needs to receive, and desires to receive and use,
the Confidential Information in the course of his employment by Developer in
order to effectively perform his job function; and
WHEREAS, the Agreement is executed and delivered pursuant to Section
6.C. of the Development Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, Employee and Developer agree as follows:
1. Capitalized terms used herein and not otherwise defined shall
have the meanings attributed to them on ANNEX A hereto.
2. Developer or Friday's, acting on behalf of Developer, shall
disclose to Employee some or all of the Confidential Information which may be
utilized by Employee solely (a) in his capacity as the [TITLE] of Developer
and (b) in connection with Employee's performance of his job functions. No
other use or disclosure of any of the Confidential Information shall be made
by Employee. Employee acknowledges and agrees that Friday's or TGIFM is the
exclusive owner of the Confidential Information, the System and the
Proprietary Marks. Employee shall not, directly or indirectly, contest of
impair Friday's or TGIFM's ownership of, or interest in, the Confidential
Information, the System or the Proprietary Marks.
3. Employee shall receive the Confidential Information in strict
confidence. The Confidential Information may be utilized by Employee only (a)
so long as Employee is employed by
<PAGE>
Developer and (b) during the Term. The Confidential Information shall not be
used in any manner that is adverse or detrimental to, or competitive with,
Friday's, TGIFM or Developer. Except as permitted pursuant to this Agreement,
the Confidential Information shall not, without the prior written consent of
Friday's, be (i) copied, (ii) compiled (in total or in part) with other
information, or (iii) disclosed to any third party.
4. Employee shall not communicate, disclose or use the Confidential
Information, or any part thereof, except as (a) permitted herein or (b)
required by law. The Confidential Information may be disclosed to fellow
employees as necessary to train or assist such other employees of Developer
in the performance of their job functions with respect to the development,
construction or operation of a Restaurant. Prior to such disclosure of any
Confidential Information, each such employee shall (i) be advised by Employee
of the confidential and proprietary nature of the Confidential Information
and (ii) agree to be bound by the terms and conditions of this Agreement.
5. In the event Employee receives notice of any request, demand, or
order to transfer or disclose all or any portion of the Confidential
Information, Employee shall immediately notify Developer thereof, and shall
fully cooperate with and assist Friday's in prohibiting or denying any such
transfer or disclosure. Should such transfer or disclosure be required by a
valid, final, non-appealable court order, Employee shall fully cooperate with
and assist Friday's in protecting the confidentiality of the Confidential
Information to the maximum extent permitted by law.
6. Immediately upon Friday's request, upon Employee's termination of
employment with Developer, or upon the conclusion of the use for which any
Confidential Information was furnished, Employee shall return the
Confidential Information including, without limitation, that portion of the
Confidential Information which consists of analyses, compilations, studies or
other documents containing or referring to any part of the Confidential
Information, and any copies thereof, to Developer or Friday's.
7. In order to protect the goodwill and unique qualities of the
System and the confidentiality and value of the Confidential Information, and
in consideration of the disclosure to Employee of the Confidential
Information, Employee covenants that, during the period of his employment by
Developer and for a period of one (1) year following termination of such
employment, Employee shall not, directly or indirectly:
A. employ or seek to employ any person (or induce such
person to leave his or her employment) who is, or has within one (1) year
been, employed (i) by Friday's or Developer, (ii) by any developer or
franchisee of Friday's, or (iii) in any other concept or system owned,
operated or franchised by an Affiliate, as a director, officer or in any
managerial capacity;
B. own, maintain, operate or have any interest in any
Competing Business;
C. own, maintain, operate or have any interest in
any Competing Business which business is, or is intended to be, located
in the Territory; or
D. own, maintain, operate or have any interest in any
Competing Business which business is, or is intended to be, located within a
radius of three (3) miles of any restaurant which is a part of any concept or
system owned, operated or franchised by Friday's or any Affiliate.
8. In connection with the enforcement of rights and remedies under
this Agreement, any court of competent jurisdiction selected by Developer or
Friday's shall have personal jurisdiction over
<PAGE>
Employee, to which jurisdiction Employee irrevocably consents. THE PARTIES
AGREE THAT TO THE EXTENT THE LAW OF THE STATE OF TEXAS IS HELD ENFORCEABLE,
TEXAS LAW SHALL APPLY TO THE INTERPRETATION AND CONSTRUCTION OF THIS
AGREEMENT (EXCEPT FOR TEXAS CHOICE OF LAW RULES) AND SHALL GOVERN ALL
QUESTIONS WHICH ARISE WITH REFERENCE HERETO.
9. A. Employee acknowledges and agrees that (i) Friday's is a third
party beneficiary to this Agreement and (ii) Friday's exercise of the rights
and remedies set forth herein is reasonable.
B. Developer or Friday's may, in addition to pursuing any other
remedies, specifically enforce such obligations and covenants or obtain
injunctive or other equitable relief in connection with the violation or
anticipated violation of such obligations and covenants without the necessity
of showing (i) actual or threatened harm; (ii) the inadequacy of damages as a
remedy; or (iii) likelihood of success on the merits, and without being
required to furnish bond or other security. Nothing in this Agreement shall
impair Developer's or Friday's right to obtain equitable relief.
C. With respect to Employee's breach of the covenants contained
in Section 7.A hereof, the affected former employer shall be compensated by
Employee for the reasonable costs and expenses incurred by such employer in
connection with training such employee. Developer and Employee acknowledge
that such expenses are impossible to accurately quantify and agree that, as
liquidated damages and not as a penalty, an amount equal to such employee's
annual rate of compensation in the final twelve (12) months of employment (or
an annualized rate if employed for a shorter period) by such former employer
shall be paid by Employee to the former employer at such time as such
employee commences employment.
10. Should any term, covenant or provision hereof, or the application
thereof, be determined by a valid, final, non-appealable order to be invalid
or unenforceable, the remaining terms, covenants or provisions hereof shall
continue in full force and effect without regard to the invalid or
unenforceable provision. In such event, such term, covenant or provision
shall be deemed modified to impose the maximum duty permitted by law and such
term, covenant or provision shall be valid and enforceable in such modified
form as if separately stated in and made a part of this Agreement.
11. Any of Employee's agreements, obligations or covenants which
contemplate performance thereof after the termination or expiration of this
Agreement shall survive such termination or expiration.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
on the dates indicated below.
[EMPLOYEE] DEVELOPER
Name: By: ________________________
Date: Name: ______________________
Title: ______________________
Date: ______________________
<PAGE>
EXHIBIT 10.8
ANNEX A TO COVENANT AND AGREEMENT FOR CONFIDENTIALITY
AFFILIATE - Carlson Restaurants Worldwide Inc., or any subsidiary thereof or
any subsidiary of TGI Friday's Inc.
COMMENCEMENT DATE - ___________________, _____.
COMPETING BUSINESS - a restaurant or bar/restaurant business offering the
same or similar products and services as offered by restaurants in the System
or restaurants in any other concept or system owned, operated or franchised
by Friday's or any Affiliate, including, without limitation, waiter/waitress
service, sit-down dining and bar services.
CONFIDENTIAL INFORMATION - the System, the Development Manual, the Manuals,
other manuals, the Standards, written directives and all drawings, equipment,
recipes, computer and point of sale programs (and output from such programs);
and any other information, know-how, techniques, materials and data imparted
or made available by Friday's which is (i) designated as confidential, (ii)
known by Developer or Employee to be considered confidential by Friday's, or
(iii) by its nature inherently or reasonably considered confidential.
DEVELOPMENT MANUAL - Friday's manual, as amended from time to time,
describing (generally) the procedures and parameters required for the
development of T.G.I. Friday's-Registered Trademark- Restaurants in the
United States.
INDEMNITEES - Friday's, its directors, officers, employees, agents,
shareholders, affiliates, successors and assigns and the respective
directors, officers, employees, agents, shareholders and affiliates of each.
MANUALS - Friday's confidential operating manuals, as amended from time to
time in Friday's sole discretion, which contain the instructions,
requirements, Standards, specifications, methods and procedures for the
operation of the Restaurants including (i) those relating to the selection,
purchase, service and sale of all products being sold at the Restaurants,
(ii) those relating to the maintenance and repair of the Restaurants,
buildings, grounds, equipment, signs, interior and exterior decor items,
fixtures and furnishings and (iii) those relating to employee apparel and
dress, accounting, bookkeeping, record retention and other business systems,
procedures and operations.
PROPRIETARY MARKS - certain trademarks, trade names, service marks, emblems
and indicia of origin designated by Friday's from time to time in connection
with the operation of Restaurants pursuant to the System in the Territory,
including, without limitation, "TGI FRIDAY'S-Registered Trademark-",
"FRIDAY'S-Registered Trademark-" and "THE AMERICAN BISTRO-Registered
Trademark-".
RESTAURANT(S) - a T.G.I. Friday's-Registered Trademark- Restaurant(s)
developed pursuant to the Development Agreement.
STANDARDS - the standards and specifications, as amended from time to time by
Friday's in its sole discretion, contained in, and being a part of, the
Confidential Information pursuant to which Developer shall develop and
operate Restaurants in the Territory.
SYSTEM - a unique, proprietary system developed and owned by Friday's (which
may be modified or further developed from time to time in Friday's sole
discretion) for the establishment and operation of full-service restaurants
under the Proprietary Marks, which includes, without limitation, a
distinctive image consisting of exterior and interior design, decor, color
scheme and furnishings; special recipes,
<PAGE>
menu items and full service bar; employee uniform standards, products,
services and specifications; procedures with respect to operations and
inventory and management control; training and assistance; and advertising
and promotional programs.
TERM - the duration of the Development Agreement, commencing on the
Commencement Date and continuing until _________________, 20___, unless
sooner terminated.
TERRITORY - the geographical area described and set forth in EXHIBIT C.
TGIFM - TGI Friday's of Minnesota Inc., a Minnesota corporation and a
subsidiary of Friday's.
T.G.I. FRIDAY'S-Registered Trademark- RESTAURANTS - restaurants operated in
accordance with the System under the Proprietary Marks.
<PAGE>
EXHIBIT 10.8
EXHIBIT B TO DEVELOPMENT AGREEMENT
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (the "Guaranty") is made as of the ____ day
of ________________________, _____, by the undersigned (hereinafter referred
to individually and collectively as "Guarantors" whether one or more) in
favor of TGI Friday's Inc., a New York Corporation ("Friday's").
WHEREAS, Friday's, [Developer's name], and certain other individuals
and/or entities entered into that certain Development Agreement
dated __________________, _____ (the "Development Agreement") regarding the
development of T.G.I. Friday's-Registered Trademark- restaurants located in
certain territory stated therein (the "Restaurant");
WHEREAS, as an inducement to Friday's to enter into the Development
Agreement, the undersigned Guarantors have agreed to make and deliver this
Guaranty to Friday's.
NOW THEREFORE, FOR VALUE RECEIVED, Guarantors, jointly and
severally, if more than one, hereby acknowledge and agree as follows:
1. Each has read the terms and conditions of this Guaranty and of the
Development Agreement.
2. Each is a "Principal" as defined in the Development Agreement.
3. Each makes all of the representations, warranties, covenants and
agreements of the Developer (including liability to make Payments) and a
Principal set forth in the Development Agreement (including, without
limitation, the covenants and agreements concerning Transfer, non-compete and
maintenance of Confidential Information) and is obligated to perform
thereunder.
4. Each acknowledges that Friday's may, without notice to Guarantors and
without affecting the obligations of any of the Guarantors under this
Guaranty, waive, renew, extend, modify, amend or release any indebtedness or
obligation of Developer, or settle, adjust, or compromise any claims against
Developer;
5. Each waives all demands and notices of every kind with respect to this
Guaranty including, without limitation, notice of presentment, demand for
payment or performance by Developer, notice of any default by Developer or
any Guarantor, and any release of any Guarantor or other security for the
Development Agreement or the obligations of Developer. Friday's may pursue
its rights against Guarantors without first exhausting its remedies against
Developer and without joining any other Guarantor hereto, and no delay on the
part of Friday's in the exercise of any right or remedy shall operate as a
waiver of such right or remedy;
6. Each individually, jointly and severally, irrevocably and unconditionally
guarantees that all of Developer's obligations under the terms and conditions
of the Development Agreement will be timely paid and performed;
7. Each has derived and expects to derive financial or other benefit,
directly or indirectly, from the Development Agreement and the transaction
described therein;
<PAGE>
8. Each acknowledges that his/its execution of the Development Agreement, and
his/its undertakings and agreements herein, have induced Friday's to enter
into the transactions described in, and to execute, the Development Agreement.
9. Each consents to and shall be bound by any amendment of the Development
Agreement made by Friday's and Developer pursuant to the terms thereof.
GUARANTORS
- ------------------------------------
Name:
---------------------------
- ------------------------------------
Name:
---------------------------
- ------------------------------------
Name:
---------------------------
- ------------------------------------
Name:
---------------------------
- ------------------------------------
Name:
---------------------------
<PAGE>
EXHIBIT 10.8
EXHIBIT C TO DEVELOPMENT AGREEMENT
THE TERRITORY
<PAGE>
EXHIBIT 10.9
EXHIBIT A
TO THE DEVELOPMENT AGREEMENT
T.G.I. FRIDAY'S-Registered Trademark- RESTAURANT
FRANCHISE AGREEMENT
DATED: ___________________, _______
<PAGE>
T.G.I. FRIDAY'S-Registered Trademark- RESTAURANT
FRANCHISE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
1. DEFINITIONS.................................................................................................1
2. EXCLUSIVE RIGHTS; TERM......................................................................................7
3. FEES AND PAYMENTS...........................................................................................7
4. REPRESENTATIVE; OPERATOR; RESTAURANT MANAGERS; TRAINING.....................................................8
5. RESTAURANT LOCATION; OCCUPANCY CONTRACT.....................................................................9
6. RESTAURANT CONSTRUCTION....................................................................................10
7. RESTAURANT OPERATIONS; MANUALS.............................................................................11
8. CONFIDENTIAL INFORMATION...................................................................................14
9. PROPRIETARY MARKS..........................................................................................15
10. ADVERTISING................................................................................................17
11. INSURANCE..................................................................................................18
12. ACCOUNTING AND RECORDS.....................................................................................19
13. FRANCHISEE'S REPRESENTATIONS AND WARRANTIES; AFFIRMATIVE AND NEGATIVE COVENANTS............................20
14. TRANSFER...................................................................................................22
15. CONSENT AND WAIVER.........................................................................................24
16. DEFAULT AND REMEDIES.......................................................................................25
17. OBLIGATIONS UPON TERMINATION OR EXPIRATION; RENEWAL OPTION.................................................27
18. INDEMNIFICATION............................................................................................31
19. NOTICES....................................................................................................33
20. FORCE MAJEURE..............................................................................................33
21. SEVERABILITY...............................................................................................34
<PAGE>
22. INDEPENDENT CONTRACTOR.....................................................................................34
23. DUE DILIGENCE AND ASSUMPTION OF RISK.......................................................................34
24. MISCELLANEOUS..............................................................................................35
25. CHOICE OF LAW; JURISDICTION; VENUE.........................................................................35
26. ENTIRE AGREEMENT...........................................................................................36
</TABLE>
<TABLE>
<C> <S>
ADDENDUM A COVENANT AND AGREEMENT FOR CONFIDENTIALITY (PRINCIPALS)
ADDENDUM B COVENANT AND AGREEMENT FOR CONFIDENTIALITY (OTHERS)
EXHIBIT A COMMENCEMENT DATE AGREEMENT
EXHIBIT B GUARANTY AGREEMENT
EXHIBIT C DESCRIPTION OF THE RESTRICTED AREA
</TABLE>
<PAGE>
FRANCHISE AGREEMENT
This Franchise Agreement is entered into as of the ____ day of
______________, _______, by and between TGI Friday's Inc., a New York
corporation, with its principal place of business located at 7540 LBJ
Freeway, Suite 100, Dallas, Texas 75251, and ___________________________, a
________ corporation, with its principal place of business located at
_________________________, and its Principals (as defined herein below).
RECITALS
WHEREAS, Friday's has developed and owns the System;
WHEREAS, Friday's intends to identify the System with the
Proprietary Marks;
WHEREAS, Friday's continues to develop, use and control the use of
the Proprietary Marks to identify the source of services and products
marketed under the System and to represent the System's high standards;
WHEREAS, Friday's and Franchisee (or Developer, as defined therein)
have entered into the Development Agreement; and
WHEREAS, Franchisee wishes to obtain certain rights to use the
System in connection with the operation of the Restaurant and to receive
training and other assistance provided by Friday's in connection therewith as
described herein.
NOW, THEREFORE, the parties, in consideration of the undertakings
and commitments set forth herein, agree as follows:
1. DEFINITIONS
As used in this Agreement the following words and phrases shall have
the meanings attributed to them in this Section:
ACTION - any cause of action, suit, proceeding, claim, demand, investigation
or inquiry (whether a formal proceeding or otherwise) asserted or instituted
by a third party with respect to which the indemnity described in Section 18
applies.
AFFILIATE - Carlson Restaurants Worldwide Inc., or any subsidiary thereof or
any subsidiary of TGI Friday's Inc.
AGREEMENT - this Franchise Agreement.
BUSINESS DAYS - each calendar day except Saturday, Sunday and national legal
holidays.
COMMENCEMENT DATE - the first to occur of the date the Restaurant opens for
business to the public or the date Franchisee is required to open the
Restaurant for business pursuant to the terms hereof.
COMMENCEMENT DATE AGREEMENT - an agreement memorializing the Commencement
Date in the form of
<PAGE>
EXHIBIT A hereto.
COMPETING BUSINESS - a restaurant business offering the same or similar
products and services as offered by restaurants in the System or restaurants
in any other concept or system owned, operated, managed or franchised by
Friday's or any Affiliate, including, without limitation, waiter/waitress
service, sit-down dining and bar services.
CONFIDENTIAL INFORMATION - the System, the Development Manual, the Manuals,
other manuals, the Standards, written directives and all drawings, equipment,
recipes, computer and point of sale programs (and output from such programs),
and any other information, know-how, techniques, material and data imparted or
made available by Friday's which is (i) designated as confidential; (ii) known
by Franchisee to be considered confidential by Friday's; or (iii) by its nature
inherently or reasonably considered confidential.
CONTROL OF THE REAL ESTATE - a fully executed deed, lease, sublease or other
occupancy agreement, in form and substance satisfactory to Friday's, evidencing
the control by Franchisee of the property upon which the Restaurant is situated.
DESIGN CONCEPT DRAWINGS - Franchisee's site plans showing parking layout,
landscaping and Site signage, floor plan with seating layout and food service
layout with legend, exterior elevations with signage, transverse and
longitudinal building cross sections, typical wall sections, interior
elevations of all walls in the front of the Restaurant, and a reflected
ceiling plan showing the location of all front-of-the-Restaurant lighting,
ceiling stained glass and ceiling fans.
DEVELOPER - as defined in the Development Agreement.
DEVELOPMENT AGREEMENT - that certain agreement dated ____________________,
_____, between Friday's and Franchisee (or Developer, as therein defined)
relating to the development of T.G.I. Friday's-Registered Trademark-
Restaurants.
DEVELOPMENT MANUAL - Friday's manual, as amended from time to time in Friday's
sole discretion, describing (generally) the procedures and parameters for the
development of T.G.I. Friday's-Registered Trademark- Restaurants.
ENTERTAINMENT PARK - includes, but is not limited to any amusement park,
theme park, or any other entertainment venue which has a national presence of
at least two (2) or more such parks in existence, and which has averaged at
least 1.5 million persons in annual attendance for the preceding three (3)
calendar years at any one (1) park location.
EVENT OF DEFAULT - as defined in Sections 16.01 and 16.02.
FRANCHISE FEE - a non-refundable initial franchise fee of _____________ Dollars
($___________) paid by Franchisee to Friday's upon the execution of this
Agreement, which amount shall be deemed fully earned by Friday's upon payment.
FRANCHISEE - ____________________________, a ___________ corporation.
FRANCHISEE INDEMNITEES - Franchisee, the Principals, and their respective
directors, officers, employees, agents, shareholders, affiliates, successors
and assigns and the respective directors, officers, employees,
<PAGE>
agents, shareholders, affiliates, successors and assigns of each.
FRIDAY'S - TGI Friday's Inc., a New York corporation.
FRIDAY'S INDEMNITEES - Friday's, its directors, officers, employees, agents,
shareholders, affiliates, successors and assigns and the respective directors,
officers, employees, agents, shareholders and affiliates of each.
FURNISHINGS - all of the decorative memorabilia, furnishings, signs, equipment,
advertising materials, inventory, trade dress, menus, items bearing any of the
Proprietary Marks and other tangible assets used in connection with Restaurant
operation.
GROSS SALES - A. For the purposes of this Agreement, "Gross Sales"
shall mean:
(1) the entire amount of the actual sales
price, whether for cash or other consideration, of all sales of food,
beverages, merchandise and services in, on, or from the Restaurant, including
receipts from mail, facsimile or telephone orders received or filled from the
Restaurant and telephone and vending machine receipts;
(2) all deposits not refunded to purchasers;
(3) orders taken, although such orders may be
filled elsewhere;
(4) payments to Franchisee by any
concessionaire, franchisee or person otherwise in the Restaurant with
Friday's consent; and
(5) promotional allowances to customers
whether negative or positive in an amount equal to Franchisee's retail price
for food and/or beverages prepared and served by Franchisee to the extent of
the discount (in whole or in part) provided to the customers, but only to the
extent that said amount for promotional allowances exceeds two and one-half
percent (2 1/2%) of Gross Sales as calculated without inclusion of said
amount. Such promotional allowances shall include the retail price of food
and beverages covered by appetizer and dinner cards and the customer comp
cards to which Friday's gives consent. Promotional allowances provided in
exchange for goods or services shall be includable in Gross Sales without
benefit of the two and one-half percent (2 1/2%) discount (funds expended by
Franchisee to comply with its local advertising requirement pursuant to
Section 10.01.A shall not be included as promotional allowances under this
section).
B. Gross Sales shall not include:
(1) the amount of returns to shippers or
manufacturers;
(2) the amount of any cash or credit refunds
made upon any sale where the food, beverages, merchandise or service
sold or some part thereof is thereafter returned by the customer and accepted
by Franchisee;
(3) receipts from sales of furniture, trade
fixtures or other extraordinary sales (unless bearing any Proprietary
Mark) not made in the ordinary course of business;
(4) any sales or value added tax required by
any duly constituted taxing
<PAGE>
authority to be separately accounted for and collected on its behalf by
Franchisee directly from Franchisee's customers and paid by Franchisee to the
taxing authority; and
(5) meals served to an employee at no cost
while the employee is on duty, or the discounted portion of meals served
to an employee.
C. 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 made, irrespective of whether, or of the time when, Franchisee
shall receive payment (whether full or partial) thereof.
HEADQUARTERS - the location(s) designated from time to time by Friday's as
its principal place of business.
INDEMNITEES - Friday's Indemnitees and/or Franchisee Indemnitees.
LOSSES AND EXPENSES - compensatory, exemplary or punitive damages, fines,
charges, costs, expenses, lost profits, reasonable fees of attorneys and
other engaged professionals, court costs, settlement amounts, judgments,
costs of or resulting from delays, financing, costs of advertising material
and media time/space, and costs of changing, substituting or replacing the
same, and any and all expenses of recall, refunds, compensation, public
notices and other such amounts incurred in connection with the matters
described in Section 18.
MANUALS - Friday's confidential operating manuals, as amended from time to
time in Friday's sole discretion, which contain the instructions,
requirements, Standards, specifications, methods and procedures for the
operation of the Restaurant including (i) those relating to the selection,
purchase, service and sale of all products being sold at the Restaurant; (ii)
those relating to the maintenance and repair of the Restaurant, buildings,
grounds, equipment, signs, interior and exterior decor items, fixtures and
furnishings; and (iii) those relating to employee apparel and dress,
accounting, bookkeeping, record retention and other business systems,
procedures and operations.
MATERIAL EVENT OF DEFAULT - an Event of Default which constitutes a
substantial deviation from the performance required.
MULTI-UNIT MANAGER(S) - the individual(s) designated as described in Section
4.05 who shall be solely dedicated to the management and supervision of the
Restaurant and certain other restaurants developed pursuant to the
Development Agreement.
NSO TEAM - a "new store opening team" consisting of Friday's employees and
certain of Franchisee's employees to whom Friday's has consented which shall
perform the functions described in Section 4.09.
OCCUPANCY CONTRACT - the agreement (including, without limitation, any lease,
deed, contract for sale, contract for deed, land contract, management
contract, license or other agreement purporting to grant any right, title or
interest in or to the Site) pursuant to which Franchisee shall occupy or
acquire rights in the Site.
OPERATOR - an individual designated as described in Section 4.02 who shall
devote his full time and best efforts to the management and supervision of
(i) Franchisee's duties and obligations hereunder and (ii) the operation of
(a) the Restaurant and (b) all T.G.I. Friday's-Registered Trademark-
Restaurants developed pursuant to rights granted by Friday's.
<PAGE>
OTHER CONCEPTS - Retail, wholesale, restaurant, bar, tavern, take-out or any
other type of business involving the production, distribution or sale of food
products, beverages, services, merchandise or other items in connection with
the use of one, some or all of the Proprietary Marks or other names or marks,
but utilizing a system other than the System pursuant to which a T.G.I.
Friday's-Registered Trademark- Restaurant is operated.
OWNER - the party (if other than the Franchisee) owning or controlling the
Site and being a party (with Franchisee) to the Occupancy Contract.
PAYMENTS - all transfers of funds from Franchisee to Friday's including,
without limitation, the Franchise Fee, the Royalty Fee and reimbursement of
expenses.
PERMANENT DISABILITY - any physical, emotional or mental injury, illness or
incapacity which would prevent the afflicted person from performing his
obligations hereunder for more than ninety (90) consecutive days as
determined by a licensed physician selected by Friday's.
PRELIMINARY SITE CONSENT - written communication from Friday's to Developer
notifying Developer that a proposed site has received the consent of the
Friday's Site Review Committee.
PRINCIPAL(S) - ______________________, _____________________,
_____________________ and __________________________, (if any) who are (and
such other persons or entities to which Friday's gives consent and which are
from time to time) the record and beneficial owner of, and has the right to
vote its respective interest (collectively 100%) in the Securities of
Franchisee or the securities or partnership interest of any person or entity
designated by Friday's which owns or controls a direct or indirect interest
in the Securities of the Franchisee.
PROJECT MANAGER - an individual designated as described in Section 4.04 who
shall devote his full-time and best efforts to the coordination and
completion of Restaurant construction.
PROPRIETARY MARKS - certain trademarks, trade names, service marks, trade
dress, emblems and indicia of origin designated by Friday's from time to time
for use in connection with the operation of T.G.I. Friday's-Registered
Trademark- Restaurants pursuant to the System, including, without limitation,
"T.G.I. FRIDAY's-Registered Trademark-", "FRIDAY's-Registered Trademark-" and
"THE AMERICAN BISTRO-Registered Trademark-".
PUBLICLY-HELD ENTITY - a corporation or other entity whose equity securities
are (i) registered pursuant to applicable law; (ii) widely held by the
public; and (iii) traded on a public securities exchange or over the counter
pursuant to applicable law.
RENEWAL ELECTION DATE - the date on which Franchisee notifies Friday's in
writing of its election to renew this Agreement.
RENEWAL FRANCHISE AGREEMENT - the franchise agreement as defined in Section
17.09.
RENEWAL TERM - twenty years from the expiration of the Term of this Agreement.
REPRESENTATIVE - an individual, designated as described in Section 4.01
who (i) owns an equity interest in the Franchisee and (ii) is authorized to
act on behalf of, and bind, Franchisee with respect to this Agreement.
<PAGE>
RESTAURANT - the T.G.I. Friday's-Registered Trademark- Restaurant to be
developed and operated pursuant to this Agreement.
RESTAURANT MANAGER(S) - general manager, assistant general manager, kitchen
manager and other managers required for the management, operation,
supervision and promotion of the Restaurant pursuant to the terms hereof.
RESTRICTED AREA - the geographical area described in EXHIBIT C; provided,
however, the Restricted Area (a) shall in no event exceed a three (3) mile
radius surrounding the Site, (b) not include any airport properties,
professional sports stadiums, military bases, Entertainment Parks or casinos
located within the geographical area described in EXHIBIT C, and (c) not
include the area contained within a _______ (__) mile radius of any other
T.G.I. Friday's-Registered Trademark- Restaurant located within such
Restricted Area as of the date of this Agreement.
ROYALTY FEE - a continuing monthly fee in the amount of four percent (4%) of
Gross Sales at the Restaurant in each accounting month payable by
Franchisee to Friday's.
SECURITY - the capital stock of, partner's interest in, or other equity or
voting interest in Franchisee, including such interests issued or created
subsequent to the date hereof.
SITE - the location of the Restaurant, being
__________________________________.
STANDARDS - Friday's standards and specifications, as amended from time to
time by Friday's, in its sole discretion, contained in, and being a part of,
the Confidential Information pursuant to which Franchisee shall develop and
operate the Restaurant at the Site.
SYSTEM - a unique, proprietary system developed and owned by Friday's (which
may be modified or further developed from time to time, in Friday's sole
discretion) for the establishment and operation of full-service restaurants
and bars/restaurants under the Proprietary Marks, which includes, without
limitation, a distinctive image consisting of exterior and interior design,
decor, color scheme and furnishings; special recipes, menu items and full
service bar; uniform standards, products, services and specifications;
procedures with respect to operations, inventory and management control
(including accounting procedures and policies); training and assistance; and
advertising and promotional programs.
TERM - a period commencing as of the date hereof and continuing until the
twentieth (20th) anniversary of the Commencement Date.
TERRITORIAL EXPENSES - such costs and expenses incurred by or assessed with
respect to Friday's (or other described party's) employees, agents and/or
representatives in connection with activities in the Territory which
Franchisee is obligated to pay pursuant to this Agreement, including, without
limitation, hotel/lodging, transportation and meals, and other related or
incidental expenses.
TGIFM - TGI Friday's of Minnesota, Inc., a Minnesota corporation and a
subsidiary of Friday's.
T.G.I. FRIDAY'S-Registered Trademark- RESTAURANTS - restaurants operated in
accordance with the System under the registered service marks
"FRIDAY'S-Registered Trademark-" OR "T.G.I. FRIDAY'S-Registered Trademark-".
TRAINING CENTER - the location(s) specified from time to time by Friday's as
the training center.
TRANSFER - the sale, assignment, conveyance, license, devise, bequest,
pledge, mortgage or other
<PAGE>
encumbrance, whether direct or indirect, of (i) this Agreement or the
Development Agreement; (ii) any or all rights or obligations of Franchisee
herein; or (iii) any interest in any Security, including the issuance of any
new Securities.
TRANSFEREE OWNER(S) - the owner of any and all record or beneficial interest
in the capital stock of, partner's interest in, or other equity or voting
interest in any transferee of a Transfer occurring pursuant to the terms of
Section 14.
WAGE EXPENSES - such wages and/or salaries (including a reasonable allocation
of the cost of benefits) of, or with respect to, Friday's (or other described
party's) employees, agents and or representatives to be reimbursed to
Friday's or such party as described herein.
2. EXCLUSIVE RIGHTS; TERM
2.01 Friday's grants to Franchisee the right, and Franchisee accepts
the obligation, subject to the terms and conditions herein, to develop and
operate the Restaurant pursuant to the System at the Site and to use solely
in connection therewith the Proprietary Marks. During the Term and for so
long as no Event of Default has occurred and is continuing and no event has
occurred which, with the giving of notice or lapse of time, or both, would
constitute an Event of Default, Friday's will not establish, nor authorize
any other person to establish, a T.G.I. Friday's-Registered Trademark-
Restaurant within the Restricted Area.
2.02 Friday's expressly reserves the right, and Franchisee
acknowledges that Friday's has the exclusive unrestricted right, to engage,
directly and indirectly, through its employees, developers, franchisees,
licensees, agents and others within the Restricted Area, in Other Concepts,
including a Front Row-Registered Trademark- Sports Grill. Such Other Concepts
may compete with Franchisee directly or indirectly. Friday's reserves the
right to use the Proprietary Marks in connection with Other Concepts.
2.03 Unless sooner terminated as provided herein, this Agreement
shall be effective on the date hereof, and continue until the expiration of
the Term. Within thirty (30) days after the Commencement Date, the parties
shall execute the Commencement Date Agreement.
3. FEES AND PAYMENTS
3.01 A. Upon execution of this Agreement, Franchisee shall
pay to Friday's the Franchise Fee. A credit shall be applied to the Franchise
Fee in an amount equal to the portion of the Development Fee (as defined in
the Development Agreement) applicable to the Restaurant which was paid by the
Developer pursuant to the Development Agreement.
B. Franchisee shall pay the Royalty Fee on or
before the fifteenth (15th) day of each month with respect to Gross
Sales at the Restaurant in the preceding accounting month.
3.02 A. All Payments shall be submitted to Friday's at
the address provided in Section 19 hereof, in care of the "Treasurer", or
such other address as Friday's shall designate in writing.
B. Payments shall be received by Friday's (i) upon
execution hereof in the case of the Franchise Fee; (ii) as described in
Section 3.01.B in the case of the Royalty Fee; and (iii) not more than thirty
(30) days after date of invoice for all other Payments. Delinquent Payments
shall bear interest from the due date until received by Friday's at eighteen
percent (18%) per annum or the maximum rate permitted by law, whichever is
less.
<PAGE>
3.03 Any taxes or duties imposed upon or with respect to this
Agreement or any materials, supplies or specifications acquired by or
provided to Franchisee pursuant to or in connection with this Agreement shall
be paid by Franchisee. Franchisee shall pay to Friday's an amount equal to
any sales tax, gross receipts tax, excise tax or any license or tax similar
thereto which is imposed, directly or indirectly, on Friday's with respect to
any Payments to Friday's required under this Agreement. The preceding
sentence shall not apply to any franchise tax or income, war profits or
excess profits tax (or any tax in lieu thereof) imposed on Friday's with
respect to the aforesaid payments.
3.04 Franchisee shall not withhold or off-set any portion of any
Payment due to Friday's alleged non-performance under this Agreement or any
other agreement by and between Friday's and Franchisee or their respective
parent corporations, subsidiaries or affiliates.
4. REPRESENTATIVE; OPERATOR; RESTAURANT MANAGERS; TRAINING
4.01 Franchisee hereby designates __________________ as the
Representative. Any replacement Representative shall be designated within ten
(10) days of the prior Representative's resignation or termination. Each
Representative shall attend and successfully complete at the Training Center,
Friday's "Owner's Orientation Program" (currently, approximately four (4)
weeks). The Representative hereunder and under the Development Agreement
shall be the same individual.
4.02 Franchisee hereby designates ______________________ as the
Operator. Any replacement Operator shall be designated within ten (10) days
of the prior Operator's resignation or termination. Each Operator shall
attend and successfully complete at the Training Center, within six (6)
months of appointment, Friday's training program required for Restaurant
Managers (SEE Section 4.03). The Operator hereunder and under the Development
Agreement shall be the same individual.
4.03 The requisite number of Restaurant Managers, as determined by
Friday's, shall be employed by Franchisee for the Restaurant. All Restaurant
Managers shall attend and successfully complete at the Training Center,
Friday's training program for Restaurant Managers of T.G.I.
Friday's-Registered Trademark- Restaurants (currently, one (1) week).
Additionally, the Restaurant Managers shall attend and successfully complete
additional training (currently, approximately twenty (20) weeks) at such then
existing T.G.I. Friday's-Registered Trademark- Restaurants as shall be
designated by Friday's. Any previously trained Restaurant Manager who is not
a general manager, but has been selected to become a general manager, shall
attend and successfully complete such additional training as Friday's may
require. Friday's may require general and kitchen managers, at Franchisee's
expense, to attend and successfully complete additional training at the
Training Center.
4.04 Not less than sixty (60) days prior to the commencement of
Restaurant construction, Franchisee shall designate the Project Manager. Any
replacement Project Manager shall be designated within ten (10) days of the
prior Project Manager's resignation or termination.
4.05 In the event this Agreement is for the third T.G.I.
Friday's-Registered Trademark- Restaurant to be developed under the
Development Agreement, Franchisee shall designate a Multi-Unit Manager.
Additional Multi-Unit Managers shall be designated from time to time as
reasonably required by Friday's. Prior to assuming his duties, each
Multi-Unit Manager shall have successfully completed training as a Restaurant
Manager and shall attend at the Training Center, and successfully complete,
Friday's training program for Multi-Unit Managers (currently, two (2) days at
the Training Center and approximately four (4) weeks at such then existing
T.G.I. Friday's-Registered Trademark- Restaurants as shall be designated by
Friday's).
<PAGE>
4.06 Friday's shall have the right to interview and consent to each
Operator, each Multi-Unit Manager, each Project Manager and all Restaurant
Managers. Friday's shall endeavor to conduct such interviews at the Restaurant,
but may require that such interviews occur at Headquarters. Franchisee shall
bear all costs and expenses related to making the Restaurant Managers available
for such interviews.
4.07 Friday's shall provide instructors, facilities and materials
for training at the Training Center, and shall provide, at its option, other
training programs (at non-Training Center locations) as may be designated by
Friday's from time to time in the Manuals or otherwise in writing. Franchisee
shall reimburse Friday's for any Territorial Expenses or other direct
expenses incurred by Friday's for such other training programs.
4.08 Except as provided herein, Franchisee shall bear all costs and
expenses relating to any Representative, Operator, Multi-Unit Manager,
Project Manager and Restaurant Manager training.
4.09 The NSO Team shall assist in (i) training Franchisee's
employees at the Site and (ii) the opening of the Restaurant. The NSO Team
typically consists of a combined total of approximately twelve (12) employees
of Friday's and Franchisee (the actual number of members shall be determined
by Friday's in its sole discretion, depending upon the number of T.G.I.
Friday's-Registered Trademark- Restaurants already being operated by
Franchisee and such other criteria as Friday's deems reasonable). The members
of the NSO Team shall be subject to Friday's consent. The number of Friday's
employees selected to serve on the NSO Team for the Restaurant is determined
according to the following schedule, provided however, Friday's may elect to
modify this schedule in the event the total number of people on the NSO Team
is greater or less than twelve (12):
<TABLE>
<CAPTION>
-------------------------- -------------------------------- ----------------------- ------------------------
RESTAURANT NO. OPERATED NO. OF FRIDAY'S EMPLOYEES NO. OF TEAM MEMBERS TEAM MEMBERS PAID FOR
BY DEVELOPER ON THE NSO TEAM PAID FOR BY FRIDAY'S BY DEVELOPER
-------------------------- -------------------------------- ----------------------- ------------------------
-------------------------- -------------------------------- ----------------------- ------------------------
<S> <C> <C> <C>
1 & 2 12 12 0
-------------------------- -------------------------------- ----------------------- ------------------------
-------------------------- -------------------------------- ----------------------- ------------------------
3 & 4 9 9 3
-------------------------- -------------------------------- ----------------------- ------------------------
-------------------------- -------------------------------- ----------------------- ------------------------
5 & 6 6 6 6
-------------------------- -------------------------------- ----------------------- ------------------------
-------------------------- -------------------------------- ----------------------- ------------------------
7 or more 2 2 10
-------------------------- -------------------------------- ----------------------- ------------------------
</TABLE>
In the event Friday's determines that more than 12 NSO team members are
necessary for an opening, Developers with five or more restaurants open
(inclusive of the new restaurant) shall be responsible for the costs
associated with the team members in excess of 12. For Developers with less
than five restaurants open, Friday's will bear the costs of the additional
team members.
If Franchisee fails or is unable to timely provide such employees,
Friday's may, but shall not be obligated to, staff the NSO Team with Friday's
employees. Friday's and Franchisee shall each be responsible for (a) making
all travel, food and lodging arrangements and (b) the wages and other
expenses of the NSO Team members provided by each; provided, however, that
Franchisee shall reimburse Friday's for the Territorial Expenses and the Wage
Expenses of Friday's employees who are provided as a result of Franchisee's
failure or inability to provide Franchisee's employees for participation on
the NSO Team.
4.10 Franchisee shall comply with such employee training and testing
procedures and requirements reasonably prescribed in the Manuals or otherwise
in writing.
<PAGE>
4.11 Friday's may create an audio and/or video recording of any
training programs at Friday's expense.
5. RESTAURANT LOCATION; OCCUPANCY CONTRACT
5.01 Franchisee shall not relocate the Restaurant from the Site
without Friday's consent.
5.02 Friday's shall have the right to review and consent to the
Occupancy Contract prior to the execution thereof. Franchisee represents that
the Occupancy Contract as consented to by Friday's shall be executed by all
necessary parties within ten (10) days following Friday's consent thereto.
Franchisee shall furnish Friday's a complete copy of the fully executed
Occupancy Contract within ten (10) days after execution. Unless it conveys to
Franchisee fee simple title to the Site, the Occupancy Contract shall include
the following covenants:
A. Owner shall deliver to Friday's, simultaneously with
delivery to Franchisee, any notice alleging Franchisee's default under the
Occupancy Contract which threatens or purports to terminate the Occupancy
Contract or result in a foreclosure thereof;
B. Friday's may enter the Restaurant premises to protect
the Proprietary Marks or the System or to cure any Event of Default or
default under the Occupancy Contract;
C. Franchisee may assign the Occupancy Contract to Friday's
without any fee or modification thereof and Friday's may assign the Occupancy
Contract or license or sublease the Restaurant premises for any part of the
remaining term of the Occupancy Contract, each without Owner's consent; and
D. Owner and Franchisee shall not amend the Occupancy
Contract in any way which is inconsistent with the provisions of Sections
5.02.A through D, inclusive.
5.03 Notwithstanding the terms of Section 5.02, Franchisee shall:
A. deliver to Friday's, immediately after delivery
to or by Franchisee, any notice of default under the Occupancy Contract
which threatens or purports to terminate the Occupancy Contract or result in
a foreclosure thereof;
B. permit Friday's to enter the Restaurant premises to
protect the Proprietary Marks or the System or to cure any Event of Default
or default under the Occupancy Contract, all at Franchisee's expense; and
C. not amend the Occupancy Contract in any way
which is inconsistent with the provisions described in Sections 5.02.A
through D, inclusive.
6. RESTAURANT CONSTRUCTION
6.01 Franchisee shall ensure that (i) materials satisfying the
Standards are utilized in construction and (ii) such materials are purchased
from suppliers as described in Sections 6.06 and 6.07.
6.02 Franchisee shall (a) employ a qualified architect and licensed
general contractor to whom
<PAGE>
Friday's shall have the right to consent, and (b) provide copies to Friday's,
upon request, of architectural or construction contracts applicable to the
Restaurant. Upon request by Franchisee, Friday's will make available to
Franchisee, at Franchisee's expense, (i) architectural consultation and
advice; (ii) preparation of Design Concept Drawings; and (iii) consultation
and advice on the purchase, display and installation of typical decorative
memorabilia.
6.03 Franchisee shall (i) submit Design Concept Drawings,
incorporating proposed adaptations to the local market for Friday's consent;
(ii) modify the Design Concept Drawings as reasonably required by Friday's;
and (iii) submit the modified Design Concept Drawings to Friday's for final
consent. Following Friday's consent to the Design Concept Drawings,
Franchisee shall, pursuant to the Manuals, (a) submit for Friday's review,
construction plans and specifications based upon the standard construction
plans provided to Franchisee, adapted by Franchisee to the Design Concept
Drawings for the Restaurant to which Friday's has consented; (b) modify such
plans and specifications as reasonably required by Friday's; (c) submit such
modified plans and specifications to Friday's for final consent; and (d)
construct the Restaurant pursuant to the plans and specifications to which
Friday's has consented. Design Concept Drawings and construction plans and
specifications to which Friday's has consented shall not be modified without
Friday's consent. Prior to the commencement of construction, Franchisee shall
deliver a construction schedule and thereafter shall deliver monthly
revisions thereof indicating construction progress.
6.04 Franchisee shall obtain all zoning classifications, clearances,
consents, permits and licenses required in connection with the construction
of the Restaurant. Upon request, copies of such permits and licenses shall be
provided to Friday's.
6.05 Franchisee shall commence construction within six (6) months
from the date of Preliminary Site Consent and shall complete construction no
later than eleven (11) months thereafter and sooner if so required by the
opening dates set forth in the Development Agreement. Construction shall be
deemed to have been commenced upon the commencement of site work by heavy
equipment or, in the event the Restaurant is to be located in existing shell
space, commencement of construction-related work at the Site. Franchisee
shall, within ten (10) days after commencement of construction, advise
Friday's of such commencement date. Friday's may inspect construction at the
Site. Franchisee shall make all necessary arrangements to insure Friday's
access to the Site.
6.06 Franchisee shall acquire from Friday's or a supplier satisfying
the requirements of Section 6.07 all (i) fixtures, (ii) furnishings, (iii)
other products and materials required for the development of the Restaurant,
and (iv) millwork for the Restaurant. Franchisee acknowledges that Friday's
may (i) profit from its sale of such items to Franchisee or (ii) receive
consideration from the third party supplier with respect to Franchisee's
purchases of such items.
6.07 Franchisee's suppliers of the items referred to in Section 6.06
shall (i) demonstrate the ability to meet the Standards; (ii) possess quality
controls and capacity to supply Franchisee's needs promptly, reliably and
consistent with the Standards and the System; and (iii) not have been
rejected in writing by Friday's. Franchisee shall provide Friday's with a
current list of suppliers prior to commencement of construction of the
Restaurant (current supplier lists shall thereafter be provided upon
request). Franchisee shall bear or reimburse Friday's direct expenses
incurred in connection with the consent to suppliers. Friday's may provide a
list of suppliers to which Friday's has given consent for such items.
6.08 Friday's reserves the right to consent to, or require, limited
variations from the Standards
<PAGE>
with respect to the development of other T.G.I. Friday's-Registered
Trademark- Restaurants in the System.
7. RESTAURANT OPERATIONS; MANUALS
7.01 The Restaurant shall open for business (i) only with Friday's
consent and (ii) promptly after completion of appropriate training pursuant
to the System (as reasonably determined by Friday's).
7.02 Franchisee acknowledges that (i) every component of the System
is material to (a) Friday's, (b) other franchisees in the System and (c) the
operation of the Restaurant; and (ii) compliance by all System franchisees
with the Standards and the System is (a) fundamental to the value of the
System and to this Agreement and (b) the basis for the broad public
acceptance of the System and the goodwill associated therewith.
7.03 Franchisee shall employ continuously during the Term the
requisite number of Restaurant Managers, as determined by Friday's, each of
whom shall have successfully completed appropriate training as described
herein.
7.04 Except as otherwise provided herein, Franchisee shall:
A. use the Restaurant premises solely for the
operation of the Restaurant pursuant to the terms hereof;
B. keep the Restaurant operating pursuant to the terms
hereof for such minimum hours and days as from time to time prescribed in the
Manuals or otherwise in writing except as restricted by local law;
C. obtain and maintain all permits and licenses
required for Restaurant operation and comply with all applicable laws and
regulations;
D. refrain from using any juke box, video machine
or other coin or token operated machine, or any film or video device to
which Friday's has not given consent;
E. refrain from (i) offering for sale any tickets,
subscriptions or chances; (ii) conducting any pools, raffles or related
activities; (iii) using or allowing any gaming, dancing or live
entertainment; or (iv) using or providing any form of delivery service at,
from or on the Restaurant premises without Friday's consent;
F. permit Friday's to enter upon the Restaurant premises at
any time to inspect the Restaurant and the products and materials used by
Franchisee, cooperate with such inspection and take such steps as may be
necessary to correct any deficiencies discovered during such inspection
(Franchisee acknowledges that Friday's may re-inspect the Restaurant and such
products or materials and revoke its consent to any product or material (or
the supplier thereof) or the condition of the Restaurant should the
Restaurant, products or materials fail to meet the Standards); and
G. permit Friday's to remove from the Restaurant samples of
any inventory items (without payment) in amounts reasonably necessary for
testing to determine if such samples meet the Standards. Friday's may require
Franchisee to bear the cost of such testing if Friday's has not given consent
to the supplier or if the sample fails to conform to Friday's specifications.
<PAGE>
7.05 Franchisee shall forward to Friday's within five (5) days of
Franchisee's receipt thereof copies of all inspection reports, warnings,
certificates and ratings issued by any governmental entity during the Term of
this Agreement in connection with the conduct of the franchised business
which indicate less than full compliance by Franchisee with any applicable
law, rule or regulation.
7.06 Franchisee acknowledges that a material aspect of the System is
the (i) breadth of palate range and (ii) quality of, and Standards relating
to, food and beverage. Therefore, Franchisee shall (a) sell or offer only
such products and services to which Friday's has consented (which products
and services shall be prepared, offered and served or delivered in accordance
with the Standards); (b) sell or offer for sale all products and services
required by Friday's; (c) refrain from any deviation from the Standards
without Friday's consent; and (d) discontinue selling or offering any
products and services to which Friday's may, in its sole discretion, fail to
consent, or revoke its consent, in writing.
7.07 Franchisee shall purchase Friday's proprietary spice packs from
Friday's or its designated supplier at a reasonable price established by
Friday's or such supplier. Franchisee acknowledges that Friday's may (i)
profit from its sale of spice packs to Franchisee or (ii) receive
consideration from such supplier with respect to Franchisee's purchases of
spice packs.
7.08 Franchisee shall (i) repair, maintain and keep the Restaurant
(and all fixtures, Furnishings, signs and equipment) in good order and
condition and in compliance with the System and the Standards and (ii) as
reasonably required by Friday's, upgrade the Restaurant to the then current
System and Standards. Such upgrade shall not be required more than once every
three (3) years and the cost thereof shall not exceed Fifty Thousand dollars
($50,000.00) per upgrade unless at least twenty-five percent (25%) of the
restaurants operated by Friday's under the Proprietary Marks in the United
States have been so upgraded in which event such cost shall not be limited.
Franchisee shall undertake and complete such upgrading within a reasonable
time specified by Friday's.
7.09 Franchisee shall (i) acquire all inventory, supplies and other
products and materials required for the operation and maintenance of the
Restaurant solely from suppliers who (a) demonstrate the ability to meet the
Standards; (b) possess quality controls and capacity to supply Franchisee's
needs promptly, reliably and consistent with the Standards and the System;
and (c) Friday's has given consent to, which consent has not been withdrawn
and (ii) provide Friday's with a current list of suppliers at least ten (10)
business days prior to the Commencement Date (current supplier lists shall
thereafter be provided upon request). Friday's may provide a list of
suppliers to whom Friday's consents. Franchisee may submit to Friday's a
written request for consent to use other suppliers, or shall request the
supplier itself to do so. As a condition of its consent, Friday's shall be
permitted to inspect the supplier's facilities and take samples of the items
proposed to be acquired, which shall be delivered, at Friday's option, to
Friday's or to an independent laboratory designated by Friday's for testing.
Consent to a Supplier shall be within the sole discretion of Friday's.
Franchisee shall bear or reimburse the Territorial Expenses incurred in
connection with such inspection and the expense of any laboratory testing. In
addition, a charge not to exceed the actual cost of the test shall be paid by
Franchisee. Friday's reserves the right, at its option, to re-inspect the
facilities and products of any such supplier and to revoke its consent upon
such supplier's failure to continue to meet any of the foregoing criteria.
Franchisee shall bear or reimburse the Territorial Expenses and the cost of
any tests incurred in connection with such re-inspection. Franchisee shall
maintain sufficient amounts of, and shall utilize at all times, such
inventory, supplies and other products or materials.
7.10 Friday's shall provide Franchisee with one (1) set of the
Manuals "on loan". Franchisee acknowledges Friday's ownership of the Manuals
and any copyright rights in or to the Manuals.
<PAGE>
Franchisee shall observe such reasonable requirements concerning copyright
notices as Friday's requests. Replacement Manuals will be made available to
Franchisee at an additional cost.
7.11 Franchisee shall operate the Restaurant in accordance with the
System, the Manuals, the Standards, this Agreement, written directives
(whether or not such directives are made part of the Manuals or the
Standards) and other manuals prepared for use in Restaurant operations. The
Manuals, the Standards, other manuals and such written directives may be
revised from time to time by Friday's in its sole discretion.
7.12 The Manuals, other manuals, such written directives and any
other Confidential Information shall be kept in a secure location in the
Restaurant and returned to Friday's immediately upon request or upon
termination or expiration of this Agreement.
7.13 Franchisee shall keep the Manuals, the Standards, other manuals
and such written directives up to date. In the event of any dispute as to the
contents of the Manuals, the Standards, other manuals or written directives,
the copy thereof maintained by Friday's shall control.
7.14 Franchisee shall establish prices charged for products or
services sold in the Restaurant.
7.15 Franchisee shall obtain such copyright licenses as may be
necessary to authorize the playing of recorded music in the Restaurant.
Franchisee shall change such recorded music as required from time to time in
the Manuals or otherwise in writing.
7.16 Friday's shall provide to Franchisee:
A. access, together with other System franchisees,
to new System developments. Franchisee may be required to attend meetings
at its expense to discuss such developments;
B. access to and written materials concerning improvements
to the System which may include, without limitation, new products, recipes,
equipment, specifications and menu formats. At Franchisee's request, Friday's
shall provide training or demonstrations at the Restaurant of new products or
other changes to the System. Franchisee shall bear or reimburse the
Territorial Expenses and Wage Expenses in connection with such
demonstrations; and
C. periodic inspection and evaluation of the
Restaurant as reasonably required by Friday's.
7.17 Friday's reserves the right to consent to, or require, limited
variation from the Standards with respect to the operation of the Restaurant
and other T.G.I. Friday's-Registered Trademark- Restaurants in the System.
8. CONFIDENTIAL INFORMATION
8.01 Neither Franchisee nor any Principal shall communicate,
disclose or use any Confidential Information except as (i) permitted herein
or (ii) required by law, and shall use all reasonable efforts to maintain
such information as secret and confidential. Neither Franchisee nor any
Principal shall, without Friday's prior consent, copy, duplicate, record or
otherwise reproduce any Confidential Information. Confidential Information
may be provided to employees, agents, consultants and contractors only to the
extent necessary for such parties to provide services to Franchisee. Prior to
such disclosure of any Confidential Information each of such employees,
agents, consultants and contractors shall (a) be advised
<PAGE>
by Franchisee of the confidential and proprietary nature of the Confidential
Information and (b) agree to be bound by the terms and conditions of Section
8 of this Agreement. Notwithstanding such agreement, Franchisee shall
indemnify the Friday's Indemnitees from any damages, costs or expenses
resulting from or related to any disclosure or use of Confidential
Information by its agents, employees, consultants and contractors.
8.02 In the event Franchisee or Franchisee's employees, agents,
consultants, or contractors receive notice of any request, demand, or order
to transfer or disclose all or any portion of the Confidential Information,
Franchisee shall immediately notify Friday's thereof, and shall fully
cooperate with and assist Friday's in prohibiting or denying any such
transfer or disclosure. Should such transfer or disclosure be required by a
valid, final, non-appealable court order, Franchisee shall fully cooperate
with and assist Friday's in protecting the confidentiality of the
Confidential Information to the maximum extent permitted by law.
8.03 Franchisee and each Principal acknowledge Friday's exclusive
ownership of the Confidential Information and the System, and TGIFM's
exclusive ownership of, and Friday's license with respect to, the Proprietary
Marks. Neither Franchisee nor any Principal shall, directly or indirectly,
contest or impair Friday's or TGIFM's exclusive ownership of, and/or license
with respect to, the Confidential Information, the System or the Proprietary
Marks.
8.04 If Franchisee develops improvements (as determined by Friday's)
to the Confidential Information, Franchisee and the Principals shall each,
without additional consideration, execute such agreements and other
documentation as shall be deemed necessary by Friday's, granting exclusive
ownership thereof to Friday's. All such improvements shall be Confidential
Information.
8.05 Each Principal shall execute and deliver to Friday's a covenant
in the form attached as ADDENDUM A. Franchisee shall cause each Operator,
Representative, Multi-Unit Manager, Project Manager, and Restaurant Manager
and such other employees of Franchisee whom Friday's shall designate to
execute and (if requested) deliver to Friday's a covenant in the form
attached as ADDENDUM B. Notwithstanding the execution of such covenants,
Franchisee shall indemnify the Friday's Indemnitees from any damages, costs
or expenses resulting from or related to any disclosure or use of
Confidential Information by any Principal, Operator, Representative,
Multi-Unit Manager, Project Manager or Restaurant Manager.
8.06 Immediately upon any termination or expiration hereof,
Franchisee and each Principal shall return the Confidential Information
including, without limitation, that portion of the Confidential Information
which consists of analyses, compilations, studies or other documents
containing or referring to any part of the Confidential Information, prepared
by Franchisee or such Principal, their agents, representatives or employees,
and all copies thereof.
9. PROPRIETARY MARKS
9.01 Friday's grants to Franchisee the non-exclusive right and
license to use the Proprietary Marks (subject to the terms hereof) during the
Term in accordance with the System, the Standards and as prescribed by
Friday's from time to time. In connection therewith, Franchisee agrees that:
A. Franchisee shall use (i) only such of the Proprietary
Marks designated by Friday's and (ii) such marks only in the manner specified
by Friday's in writing. Any other use of any Proprietary Mark shall
constitute an infringement of Friday's and TGIFM's rights therein.
<PAGE>
B. Franchisee shall use the Proprietary Marks only (i) for
the operation of the Restaurant; (ii) at the Site or in advertising related
to the Restaurant; and (iii) during the Term. Franchisee shall cease (a) any
unauthorized use of any Proprietary Mark upon demand and (b) all use upon the
termination or expiration hereof.
C. Friday's reserves the right to substitute different
trade names, service marks, trademarks, logos, trade dress, emblems, symbols
and indicia of origin for the Proprietary Marks for use in identifying the
System and the business operated thereunder, as deemed reasonable and
necessary in Friday's sole discretion.
D. During the Term, Franchisee shall identify itself as a
"licensed franchisee" of Friday's (i) in conjunction with any use of the
Proprietary Marks including, without limitation, invoices, order forms,
receipts, contracts, stationary and business cards; (ii) in a notice of such
content and form and at conspicuous locations in the Restaurant as Friday's
may designate in writing; and (iii) on any authorized delivery vehicles.
E. Franchisee shall not assign, pledge, mortgage or
otherwise encumber its rights to use any of the Proprietary Marks.
F. Franchisee shall not use any of the Proprietary Marks as
part of its corporate or other name. Franchisee shall comply with Friday's
instructions, and shall execute any documents deemed necessary by Friday's or
its counsel, in filing and maintaining any requisite trade name or fictitious
name registrations in connection with the Proprietary Marks.
G. Franchisee shall immediately notify Friday's of any (i)
infringement of the Proprietary Marks or challenge to the use of any thereof
or (ii) claim by any person of any rights in or to any of the Proprietary
Marks. Franchisee and each Principal shall not communicate with any person
except Friday's and Friday's counsel in connection with any such
infringement, challenge or claim. Friday's, in its sole discretion, may take
such action as it deems appropriate, and shall exclusively control any
litigation or proceeding arising from any infringement, challenge, claim or
otherwise relating to any of the Proprietary Marks. Franchisee shall execute
any and all instruments and documents, render such assistance and do such
acts and things as may, in the opinion of Friday's or its counsel, be
necessary or advisable in any such litigation or proceeding or to otherwise
protect or maintain Friday's or TGIFM's rights and interest in the
Proprietary Marks.
H. Neither Franchisee nor any Principal shall, directly or
indirectly, apply for, register, attempt to obtain or obtain control of the
Proprietary Marks or any marks or other indicia of ownership or origin which
resemble, or are deceptively or confusingly similar to, the Proprietary
Marks, in any country or political sub-division thereof. Neither Franchisee
nor any Principal shall interfere with Friday's or TGIFM's efforts to obtain
registration or ownership of any name, trademark, service mark or other
identifying name anywhere in the world.
I. Franchisee shall cooperate with Friday's to prove the
continuous and effective use of the Proprietary Marks, including, without
limitation, in connection with any registration or any renewal thereof.
9.02 Franchisee and each Principal agree and acknowledge that:
<PAGE>
A. Friday's or TGIFM is the exclusive owner of all
right, title and interest in and to the Proprietary Marks and the
goodwill associated therewith;
B. the Proprietary Marks identify Friday's and TGIFM as
the source of origin of goods and services provided under such marks and the
System;
C. neither Franchisee nor any Principal shall
directly or indirectly contest Friday's or TGIFM's ownership, or the
validity, of the Proprietary Marks;
D. Franchisee does not have, and shall not acquire by use
pursuant to this Agreement, any ownership or other interest in or to the
Proprietary Marks, except the right and license granted herein, subject in
all respects to the terms hereof;
E. any and all goodwill arising from Franchisee's
use of the Proprietary Marks shall inure exclusively to Friday's or TGIFM
without compensation; and
F. Franchisee's right and license to use the Proprietary
Marks is non-exclusive and, subject to Section 2 hereof, Friday's or TGIFM
has and retains all rights relating to the Proprietary Marks and the use
thereof including, without limitation, the right to:
(1) grant other licenses to use the
Proprietary Marks;
(2) develop and establish Other Concepts
using the Proprietary Marks or other names or marks and to grant licenses
thereto without providing any rights therein to Franchisee; and
(3) engage, directly or indirectly, at
wholesale, retail or otherwise, in (i) the production, distribution,
license and/or sale of products and services under the Proprietary Marks or
other names or marks and (ii) the use, in connection with such production,
distribution and sale, of any and all trademarks, trade names, service marks,
logos, insignia, trade dress, slogans, emblems, symbols, designs and other
identifying characteristics as may be developed or used from time to time by
Friday's.
10. ADVERTISING
10.01 Franchisee recognizes (i) the value of advertising and (ii)
that standardized advertising programs enhance the goodwill and public image
of the System.
A. Franchisee shall expend not less than two percent (2%)
of Gross Sales, measured over continuing six (6) month periods, for local
advertising. Franchisee's local advertising may utilize media to which
Friday's has granted consent including:
(1) newspapers, magazines and other
periodicals;
(2) radio/ television;
(3) outdoor advertising (E.G., billboards or
signs);
(4) transit advertising and direct mail; and
(5) such other media to which Friday's consents.
<PAGE>
B. Franchisee, at its expense, shall obtain listings in
bold type in the white pages directory of the local public telephone company
under the names "Friday's-Registered Trademark-" and "T.G.I.
Friday's-Registered Trademark-". Franchisee shall also participate in and pay
its PRO RATA share of the cost of yellow pages advertising placed by Friday's
on behalf of all other local System franchisees and T.G.I.
Friday's-Registered Trademark- Restaurants. If no other T.G.I.
Friday's-Registered Trademark- Restaurants are located within Franchisee's
local area, Franchisee, at its expense, shall obtain display type
advertisements in the yellow pages directory of the local public telephone
company.
C. Franchisee's expenditures made for participation in
(i) advertising and promotional programs described in Section 10.01.B and
10.03; (ii) Friday's national and/or regional advertising funds described in
Section 10.02.A (to the extent in excess of two percent (2%) of monthly Gross
Sales); and (iii) the cost of promotional food and beverages given to
customers (in an amount not to exceed thirty percent (30%) of the retail
price thereof), shall be credited to Franchisee's local advertising
obligations described in Section 10.01.A. Friday's may audit Franchisee's
books and records to confirm local advertising expenditures.
10.02 A. Friday's shall have the right to establish national
and/or regional advertising funds. If established, Franchisee agrees to pay
Friday's on a monthly basis, in addition to any payments required under
Section 10.01.A, a sum to be determined by Friday's, which sum for any
national or regional fund shall not exceed four percent (4%) of monthly Gross
Sales. If both regional and national advertising funds are established,
Franchisee's total contribution shall not exceed four percent (4%) of monthly
Gross Sales. All contributions to national or regional advertising funds in
excess of two percent (2%) of Gross Sales shall be credited to Franchisee's
local advertising obligations described in Section 10.01.A.
B. Friday's or its designee shall (i) administer such
funds and (ii) direct all national and regional advertising programs and
shall have sole discretion to consent to or reject all creative concepts,
materials and media and the placement and allocation thereof. Friday's shall
not be a fiduciary to Franchisee with respect to the management of such
funds. Friday's and its designees undertake no obligation to (a) make
expenditures in the area where the Restaurant is located which are equivalent
or proportionate to Franchisee's contribution or (b) insure that any
particular franchisee benefits directly or PRO RATA from the placement of
such advertising. Such funds may be applied to Friday's costs of maintaining,
administering, directing and preparing national or regional advertising
(including, without limitation, marketing research, public relations
activities, marketing programs and initiatives including but not limited to
guest membership programs, and employing advertising agencies to assist
therein); provided, however, that such funds shall not be used to defray
Friday's general operating expenses (except reasonable administrative costs
and overhead related to the administration or direction of such funds and
programs). Such funds shall be maintained in a separate account and an annual
statement of fund expenditures shall be delivered to Franchisee upon request.
10.03 In addition to the national and regional advertising
described in Section 10.02, Friday's may from time to time develop and
administer advertising, marketing and sales promotion programs in which
Franchisee shall participate upon such terms and conditions as established by
Friday's. Such programs may include, but not be limited to, guest membership
programs. All phases of such advertising and promotion, including, without
limitation, type, quantity, timing, placement, and choice of media, market
areas, promotional programs and advertising agencies, shall be determined by
Friday's.
10.04 All advertising and promotion by Franchisee shall conform to
the Standards. Franchisee
<PAGE>
shall submit all advertising and promotional plans and materials to Friday's
for consent prior to use if such plans and materials were not prepared by
Friday's or previously consented to during the prior twelve (12) months.
Friday's shall consent to or reject such plans and materials within twenty
(20) days of receipt. Franchisee shall not use such plans or materials until
Friday's consent is received. Franchisee shall promptly discontinue any
advertising or promotional plans or materials, whether or not previously
consented to, upon notice from Friday's.
11. INSURANCE
11.01 Franchisee shall obtain, at least thirty (30) days prior to
commencement of Restaurant construction and maintain throughout the Term,
such insurance coverage (including, without limitation, broad form
comprehensive general liability coverage, products liability coverage, broad
form contractual liability coverage, liquor liability coverage, auto
liability coverage, business interruption coverage, workers compensation and
employers liability insurance) as may be (i) required by law or (ii) reasonably
designed to protect Franchisee from the risks inherent in Restaurant
construction and operation. Friday's shall have the right to reasonably
consent to the types and amounts of coverage and the issuing companies. Such
insurance shall:
A. name the Friday's Indemnitees as additional insured
parties and provide that coverage applies separately to each insured and
additional insured party against whom a claim is brought as though a separate
policy had been issued to each Friday's Indemnitee;
B. contain no provision which limits or reduces coverage
in the event of a claim by any one (1) or more of the insured or additional
insured parties;
C. provide that policy limits shall not be reduced, coverage
restricted, canceled, allowed to lapse or otherwise altered or such
policy(ies) amended without Friday's consent, but in no event upon less than
thirty (30) days prior written notice to Friday's;
D. be obtained from reputable insurance companies with an
A.M. Best Rating of "A" and an A.M. Best Class Rating of XIV (or comparable
ratings from a reputable insurance rating service, in the event such
A.M. Best ratings are discontinued or materially altered), authorized to do
business in the jurisdiction in which the Restaurant is located; and
E. be in an amount and form satisfactory to Friday's; but in
no event in amounts less than the following:
(1) comprehensive general liability insurance,
including product and liquor liability coverage, with a combination of
primary and excess limits of not less than Ten Million Dollars
($10,000,000.00), bodily injury and property damage combined;
(2) auto liability insurance, including coverage of
owned, non-owned and hired vehicles, with a combination of primary and excess
limits of not less than One Million Dollars ($1,000,000) for bodily injury
for each person, One Million Dollars ($1,000,000) for bodily injury for each
occurrence and Two Hundred Fifty Thousand Dollars ($250,000.00) for each
occurrence of property damage;
(3) employer's liability insurance with a limit of not
less than One Million Dollars ($1,000,000.00); and
<PAGE>
(4) workers compensation insurance in such amount as may
be required by applicable statute or rule.
11.02 Such insurance may provide for reasonable deductible amounts
with Friday's consent.
11.03 A certificate of insurance shall be submitted for Friday's
consent prior to the commencement of construction of the Restaurant, and
additional certificates of insurance shall be submitted to Friday's
thereafter, evidencing uninterrupted coverage. Franchisee shall deliver a
complete copy of such policy(ies) within ten (10) days of request.
11.04 In the event of a claim of any one or more of the Friday's
Indemnitees against Franchisee, Franchisee shall, on request of Friday's,
assign to Friday's any and all rights which Franchisee then has or thereafter
may have with respect to such claim against the insurer(s) providing the
coverages described in this Section.
11.05 Franchisee's obligation to obtain and maintain insurance or
to indemnify any Friday's Indemnitee shall not be limited by reason of any
insurance which may be maintained by any Friday's Indemnitee, nor shall such
insurance relieve Franchisee of any liability under this Agreement.
Franchisee's insurance shall be primary to any policies maintained by any
Friday's Indemnitee.
11.06 If Franchisee fails to obtain or maintain the insurance
required by this Agreement, as such requirements may be revised from time to
time, Friday's may acquire such insurance, and the cost thereof, together
with a reasonable fee for Friday's expenses in so acting and interest at
eighteen percent (18%) per annum from the date acquired, shall be payable by
Franchisee upon notice.
12. ACCOUNTING AND RECORDS
12.01 Franchisee shall prepare in accordance with the System and
generally accepted accounting principles, and preserve for the periods
specified in the Manuals, complete and accurate books, records and accounts
with respect to the Restaurant and all other reports or disclosures required
or permitted herein and in the Manuals including, without limitation, sales
slips, coupons, purchase orders, invoices, payroll records, check stubs, bank
statements, sales tax records and returns, cash receipts and disbursements,
journals and ledgers, in a form and manner prescribed in the Manuals or
otherwise in writing. Franchisee shall adopt such accounting periods as
Friday's shall prescribe.
12.02 Franchisee shall submit to Friday's (i) a monthly accounting
of Gross Sales simultaneously with the Payment of the Royalty Fee therefor
and (ii) an annual accounting of Gross Sales within thirty (30) days after
the end of each accounting year.
12.03 Franchisee shall submit to Friday's such additional reports,
records, data, information, financial statements (including, without
limitation, periodic guest counts, weekly and monthly sales reports and
quarterly and annual statements of profit and loss for the Restaurant and
quarterly and annual financial statements and statements of Franchisee's
Gross Sales, showing itemized deductions and exclusions from Gross Sales for
the Restaurant) as Friday's may reasonably require or as specified from time
to time in the Manuals in a form reasonably required. Friday's may inspect,
copy and audit all of the documents and information specified in
Sections 12.01, 12.02 and 12.03 and the books, records and tax returns of
Franchisee at any time during normal business hours upon five (5) days prior
notice.
<PAGE>
12.04 If any audit discloses an (i) understatement of Gross Sales
for the period subject to audit of one percent (1%) or more or
(ii) underpayment of the Royalty Fee for the period subject to audit of five
percent (5%) or more, Franchisee shall reimburse (in addition to payment of
such Royalty Fee and interest, as provided for in Section 3.02.B) any and all
costs and expenses incurred in connection with such audit including, without
limitation, reasonable attorney's fees, Territorial Expenses and Wage
Expenses.
12.05 The annual accounting of Gross Sales required in
Section 12.02.(ii) and other annual financial statements requested by
Friday's shall be audited and certified no less than every third year by a
reputable, independent, certified public accountant. All financial statements
or reports shall be accompanied by a certificate of Franchisee or
Franchisee's chief financial officer to the effect that such statements or
reports fairly and accurately reflect the matters reported therein and are
complete and correct.
13. FRANCHISEE'S REPRESENTATIONS AND WARRANTIES; AFFIRMATIVE AND NEGATIVE
COVENANTS
13.01 In the event Franchisee is a corporation, limited liability
company or partnership, Franchisee represents and warrants to Friday's as
follows:
A. Franchisee is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization with all
requisite power and authority to own, operate and lease its assets (real or
personal), to carry on its business, and to enter into this Agreement and
perform its obligations hereunder. Franchisee is duly qualified to do
business and is in good standing in each jurisdiction in which its business
or the ownership of its assets requires.
B. The execution, delivery and performance by Franchisee of
this Agreement and all other agreements contemplated herein has been duly
authorized by all requisite action and no further action is necessary to make
this Agreement or such other agreements valid and binding upon it and
enforceable against it in accordance with their respective terms. Neither the
execution, delivery nor performance by Franchisee of this Agreement or any
other agreements contemplated hereby will conflict with, or result in a
breach of any term or provision of Franchisee's articles of incorporation,
by-laws, partnership agreement or other governing documents or under any
mortgage, deed of trust or other contract or agreement to which Franchisee is
a party or by which it or any of its assets are bound, or breach any order,
writ, injunction or decree of any court, administrative agency or
governmental body.
C. Franchisee's articles of incorporation, by-laws,
partnership agreement and other governing documents expressly limit
Franchisee's business activities solely to the development and operation
(pursuant to the Development Agreement and this Agreement or other franchise
agreements with Friday's) of "Restaurants" (as defined in the Development
Agreement).
D. Certified copies of Franchisee's articles of
incorporation, by-laws, partnership agreement, other governing documents and
any amendments thereto, including board of director's or partner's
resolutions authorizing this Agreement, have been delivered to Friday's.
E. A certified current list of all Principals has been
delivered to Friday's.
F. Franchisee's articles of incorporation or other governing
documents, or partnership agreement limit Transfers as described in Sections
14.02 and 14.03.
<PAGE>
G. Each Security shall bear a legend (in a form to which
Friday's has granted consent) indicating that any Transfer is subject to
Sections 14.02 and 14.03.
13.02 Franchisee affirmatively covenants with Friday's as follows:
A. Franchisee shall perform its duties and obligations
hereunder and shall require each Operator, Multi-Unit Manager, Project
Manager and Restaurant Manager to dedicate their respective full time and
best efforts to the development, construction, management, operation,
supervision and promotion of the Restaurant in accordance with the terms and
conditions hereof.
B. Franchisee shall promptly provide Friday's with all
information concerning any new process or improvements in the development,
construction, management, operation, supervision or promotion of the
Restaurant developed by Franchisee or any Principal without compensation.
Franchisee and the Principals shall each execute such agreements and other
documentation as shall be deemed necessary by Friday's, granting Friday's
exclusive ownership thereof.
C. Franchisee shall comply with all requirements of
applicable rules, regulations, statutes, laws, and ordinances.
D. Franchisee shall maintain a current list of all
Principals and deliver a certified copy thereof to Friday's upon (i) any
Transfer or (ii) request.
E. Each Security issued subsequent to the date hereof shall
be in compliance with Section 13.01.G.
13.03 Franchisee acknowledges to and/or negatively covenants with
Friday's as follows:
A. Franchisee shall not amend its articles of incorporation,
by-laws, partnership agreement or other governing documents in a manner which
is inconsistent with Sections 13.01.C, 14.02 and 14.03.
B. Franchisee shall not remove or permit removal from any
Security or its partnership agreement, or issue any Security that does not
have endorsed upon it, the legend described in Section 13.01.G.
C. Franchisee and each Principal shall receive valuable,
unique training, trade secrets and the Confidential Information which are
beyond the present skills, experience and knowledge of Franchisee, any
Principal and Franchisee's employees. Franchisee and each Principal
acknowledge (i) that such training, trade secrets and the Confidential
Information (a) are essential to the development of the Restaurant and
(b) provides a competitive advantage to Franchisee and (ii) access to such
training, trade secrets and the Confidential Information is a primary reason
for their execution of this Agreement. In consideration thereof, Franchisee
and each Principal covenant that, during the Term and for a period of one (1)
year after the expiration or termination hereof, neither Franchisee nor any
Principal shall, directly or indirectly:
(1) employ or seek to employ any person (or induce such
person to leave his or her employment) who is, or has within one (1) year
been, employed (i) by Friday's; (ii) by any developer or franchisee of
Friday's; or (iii) in any other concept or system owned, operated or
franchised
<PAGE>
by an Affiliate, as a director, officer or in any managerial capacity;
(2) own, maintain, operate or have any interest in any
Competing Business;
(3) own, maintain, operate or have any interest in any
Competing Business which business is, or is intended to be, located in the
county in which the Restaurant is located; or
(4) own, maintain, operate or have any interest in any
Competing Business which business is, or is intended to be, located within
a three (3) mile radius of any restaurant which is a part of any concept or
system owned, operated, or franchised by Friday's or any Affiliate.
D. Sections 13.03 C.(2), (3) and (4) shall not apply to an
interest for investment only of five percent (5%) or less of the capital
stock of a Publicly-Held Entity if such owner is not a director, officer or
manager therefor or consultant thereto.
13.04 Each of the foregoing covenants is independent of each other
covenant or agreement contained in this Agreement.
13.05 Friday's may, in its sole discretion, reduce the area,
duration or scope of any covenant contained in Section 13.03.C without
Franchisee's or any Principal's consent, effective upon notice to Franchisee.
Franchisee and each Principal shall comply with any covenant as so modified.
13.06 Franchisee's representations, warranties, covenants and
agreements herein are continuing representations, warranties, covenants and
agreements, each of which shall survive the expiration or termination hereof.
14. TRANSFER
14.01 Friday's may assign this Agreement, or any of its rights or
obligations herein, to any person or entity without Franchisee's or any
Principal's consent; provided, however, that Friday's obligations which are
assigned shall be fully assumed by the party to whom Friday's assigns such
obligations.
14.02 A. Franchisee and each Principal acknowledge that
Franchisee's rights and obligations herein are personal to Franchisee and
that Friday's has entered into this Agreement relying upon the business
skill, experience and aptitude, financial resources and reputation of
Franchisee and each Principal. Therefore, neither Franchisee nor any
Principal, their respective successors or permitted assigns, shall complete,
or allow to be completed, any Transfer without Friday's consent. Any
purported Transfer, by operation of law or otherwise, without Friday's
consent shall be null and void and constitute an Event of Default.
B. Friday's may require satisfaction of any of the following
conditions and such other conditions as Friday's may reasonably require prior
to consenting to any Transfer, each of which Franchisee acknowledges and
agrees is reasonable and necessary:
(1) no Event of Default shall have occurred and be
continuing and no event shall have occurred which, with the giving of
notice or lapse of time, or both, would constitute an Event of Default;
<PAGE>
(2) Franchisee and/or any affected Principal shall
deliver a general release of any and all claims against the Friday's
Indemnitees including, without limitation, claims arising under this
Agreement, in a form acceptable to Friday's;
(3) Franchisee and/or any affected Principal shall
remain liable for the performance of its obligations, covenants and
agreements herein through the date of Transfer and shall execute all
instruments reasonably requested by Friday's to evidence such liability;
(4) the transferee and all Transferee Owners, as
applicable, shall (i) make each of Franchisee's and Principal's
representations and warranties; (ii) assume full, unconditional, joint and
several liability for, and agree to perform from the date of Transfer, each
of Franchisee's and Principal's obligations, covenants and agreements herein;
and (iii) execute all instruments (in a form acceptable to Friday's)
reasonably requested by Friday's to evidence the foregoing;
(5) the transferee and all Transferee Owners shall
satisfy, in Friday's reasonable judgment, Friday's then existing criteria for
T.G.I. Friday's-Registered Trademark- franchisees or principals, as
applicable including, without limitation: (i) education; (ii) business skill,
experience and aptitude; (iii) character and reputation; and (iv) financial
resources;
(6) the transferee and all Transferee Owners shall
execute (without extending the Term) the standard form of franchise
agreement then being offered to new System franchisees or other form of this
Agreement as Friday's requests and such other ancillary agreements as
Friday's may request for the operation of the Restaurant, which shall
supersede this Agreement and its ancillary documents and the terms of which
may differ from the terms hereof including, without limitation, higher
Franchise and Royalty Fees and advertising contributions; provided, however,
that the transferee shall not be required to pay an initial Franchise Fee;
(7) the transferee at its expense shall repair or
replace Restaurant equipment, signs, interior and exterior decor items,
fixtures and furnishings and shall offer such products and services such that
Restaurant appearance and operations reflect the current Standards and image
of the System; and
(8) at the transferee's expense, the transferee's
Representative, any Multi-Unit Manager(s), Operator, Project Manager and
Restaurant Managers shall complete such training as then required (if not
previously trained pursuant to the terms hereof), upon such terms and
conditions as Friday's may reasonably require.
C. In the event Franchisee requests Friday's consent to any
proposed Transfer, there shall be paid to Friday's a non-refundable fee of
Five Thousand Dollars ($5,000.00), or such greater amount as is necessary to
reimburse Friday's for its costs and expenses associated with reviewing the
proposed Transfer including, without limitation, Territorial Expenses, legal
and accounting fees and diversion of employee resources. No such fee shall be
payable with respect to a transaction with Friday's described in Section
14.03.
14.03 Franchisee and each Principal agree that:
A. (i) Friday's shall have and is hereby granted a right of
first refusal with respect to any Transfer; (ii) should Franchisee and/or any
Principal desire to accept a BONA FIDE offer to make a Transfer, such party
shall promptly notify Friday's thereof and shall provide such information and
<PAGE>
documents relating thereto as Friday's may require; (iii) within thirty (30)
days after receipt of such notice, information and documents, Friday's may
notify such party that it intends to exercise its right of first refusal with
regard to such Transfer upon such terms and conditions; provided, however,
that such transaction shall be consummated within a reasonable period of time
after Friday's has given such notice; (iv) any material change in the terms
of any offer or any change in the identity of the proposed transferee shall
constitute a new offer subject to Friday's right of first refusal; and
(v) Friday's failure to exercise such right shall not constitute a waiver of
any other provision of this Agreement, including such right with respect to
future offers; and
B. in the event such offer provides for payment of
consideration other than cash, Friday's may elect to purchase the interest
for the reasonable equivalent in cash. If the parties cannot agree within
thirty (30) days of the receipt of notice of Friday's election to exercise
such right of first refusal on such reasonable equivalent in cash, an
independent appraiser designated by Friday's shall determine such amount, and
his determination shall be final and binding. If Friday's elects to exercise
the right of first refusal described above, the cost of the appraisal, if
any, shall be set off against any payment made by Friday's hereunder.
14.04 In the event Franchisee or any Principal is a natural person,
Franchisee or his administrator, executor, guardian or personal
representative shall promptly notify Friday's of the death or Permanent
Disability of Franchisee or such Principal. Any Transfer upon death or
Permanent Disability shall be subject to the terms and conditions described
in Sections 14.02 and 14.03 and shall be completed prior to a date which is
(i) one (1) year after the date of death or (ii) ninety (90) days after the
date Franchisee or such Principal becomes, or is deemed to be, Permanently
Disabled. Franchisee or any Principal refusing to submit to examination with
respect to Permanent Disability shall be deemed Permanently Disabled.
14.05 Friday's consent to any Transfer shall not constitute a
waiver of (i) any claims it may have against the transferor or (ii) the
transferee's compliance with the terms and conditions hereof.
15. CONSENT AND WAIVER
15.01 When required, Franchisee or any Principal shall make written
request for Friday's consent in advance and such consent shall be obtained in
writing. Neither Friday's nor Franchisee's consent shall be unreasonably
withheld. The foregoing not withstanding, where either party's consent is
expressly reserved to such party's sole discretion, the exercise of such
discretion shall not be subject to contest.
15.02 FRIDAY'S MAKES NO REPRESENTATIONS OR WARRANTIES UPON WHICH
FRANCHISEE OR ANY PRINCIPAL MAY RELY AND ASSUMES NO LIABILITY OR OBLIGATION
TO FRANCHISEE, ANY PRINCIPAL OR ANY THIRD PARTY BY PROVIDING ANY WAIVER,
ADVICE, CONSENT OR SERVICES TO FRANCHISEE OR DUE TO ANY DELAY OR DENIAL
THEREOF.
16. DEFAULT AND REMEDIES
16.01 A. The following shall constitute Events of Default by
Franchisee and the Principals: (i) failure to (a) commence or complete
construction of the Restaurant or (b) open and thereafter continually operate
the Restaurant, as described herein; (ii) the breach or falsity of any
representation or warranty herein; (iii) failure to deliver executed
covenants as required in Section 8.05;
<PAGE>
(iv) failure to comply with or perform its covenants, obligations and
agreements herein; (v) any Transfer that (a) occurs other than as provided in
Section 14 or (b) fails to occur within the time periods described in
Section 14 (notwithstanding any lack of, or limits upon, the enforceability
of any term or provision of Sections 13 or 14); (vi) failure to make any
Payment on or before the date payable; (vii) failure to meet and/or maintain
the Standards; (viii) Franchisee (a) is adjudicated, or is, bankrupt or
insolvent; (b) makes an assignment for the benefit of creditors; or (c) seeks
protection from creditors by petition in bankruptcy or otherwise or there is
filed against Franchisee a similar petition which is not dismissed within
thirty (30) days; (ix) the appointment of a liquidator or receiver for
(a) all or substantially all of Franchisee's assets or (b) the Restaurant is
sought which is not dismissed within thirty (30) days; (x) breach or failure
to perform any other term or condition of this Agreement; (xi) Franchisee or
any Principal pleads guilty or no contest to or is convicted of a felony or a
crime involving moral turpitude or any other crime or offense that Friday's
reasonably believes is likely to adversely affect the Proprietary Marks, the
System or the goodwill associated therewith or Friday's interest therein; or
(xii) any (a) two (2) or more Events of Default shall arise under any single
subsection of this Section 16.01 or (b) three (3) or more Events of Default
shall arise under this Section 16.01 in any continuous twelve (12) month
period notwithstanding the previous cure of such Events of Default.
B. The parties agree that an Event of Default arising under
Section 16.01.A.(i), (iii), (iv) [with respect to Events of Default arising,
without limitation, under Sections 9.01 through 9.03, inclusive, and 13.03.C],
(v), (vi), (viii), (ix), (xi), or (xii) shall constitute a Material Event of
Default. The parties further agree that Events of Default committed by
Franchisee or any Principal arising under other Sections of this Agreement
may also be deemed to be Material Events of Default.
C. Upon the occurrence of an Event of Default by Franchisee
or any Principal, Friday's may exercise one or more of the following remedies
or such other remedies as may be available at law or in equity:
(1) cure such Event of Default at Franchisee's expense
and, in connection therewith, Franchisee (i) hereby grants to Friday's all
rights and powers necessary or appropriate to accomplish such cure; (ii) shall
indemnify and hold the Friday's Indemnitees harmless from and against all
costs, expenses (including reasonable fees of attorneys and other engaged
professionals), liabilities, claims, demands and causes of action (including
actions of third parties) incurred by or alleged against any Friday's
Indemnitee in connection with Friday's cure; and (iii) shall reimburse or pay
such costs or damages within ten (10) days of receipt of Friday's invoice
therefor;
(2) in the event of a Material Event of Default, upon
notice to Franchisee, terminate this Agreement and all rights granted
hereunder without waiving any (i) claim for damages suffered by Friday's or
(ii) other rights, remedies or claims (no notice of termination shall be
required with regard to a Material Event of Default under Sections
16.01.A.(viii) or (ix)); or
(3) with respect to an Event of Default arising from a
breach of the covenant contained in Section 13.03.C.(1), the affected
former employer shall be compensated by the breaching party (and Franchisee
shall be additionally liable for breaches by any Principal) for the
reasonable costs and expenses incurred by such employer in connection with
training such employee. Franchisee and each Principal acknowledge that such
expenses are impossible to accurately quantify and agree that, as liquidated
damages and not as a penalty, an amount equal to such employee's annual rate
of compensation in the final twelve (12) months of employment (or an
annualized rate if employed for a shorter period) by such former employer
shall be paid by the breaching party to the former employer at such time as
such employee commences employment.
<PAGE>
D. Friday's shall not exercise any remedies available
hereunder with respect to the following described Events of Default unless
such Events of Default remain uncured after (i) notice from Friday's thereof
and (ii) the expiration of the following cure periods:
(1) with respect to any Event of Default arising under
Section 16.01.A.(vi) - ten (10) days; or
(2) with respect to any Event of Default arising under
Sections 16.01.A.(i) - (v) inclusive, (vii) and (x) - thirty (30) days.
E. If any Events of Default arising under
Sections 16.01.A.(i) - (v) inclusive, (vii) or (x) cannot reasonably be cured
within thirty (30) days, Franchisee shall provide Friday's notice thereof
(together with Franchisee's best estimate of the time period required to
complete such cure) and immediately undertake efforts to cure such default
within the cure period, and continue such efforts with diligence to
completion. In no event, however, shall such cure period be extended without
the prior written consent of Friday's.
F. Franchisee and each Principal agree that Friday's
exercise of the rights and remedies set forth herein is reasonable. Friday's
may, in addition to pursuing any other remedies, specifically enforce such
obligations, covenants and agreements or obtain injunctive or other equitable
relief in connection with the violation or anticipated violation of such
obligations, covenants and agreements.
16.02 A. The following shall constitute Events of Default by
Friday's: (i) failure to comply with or perform Friday's obligations and
agreements herein or (ii) Friday's (a) is adjudicated, or is, bankrupt or
insolvent; (b) makes an assignment for the benefit of creditors; or (c) seeks
protection from creditors by petition in bankruptcy or otherwise or there is
filed against Friday's a similar petition which is not dismissed within
thirty (30) days.
B. Upon the occurrence of a Material Event of Default by
Friday's, Franchisee may, upon notice to Friday's, terminate this Agreement
and all rights granted hereunder without waiving any (i) claim for damages
suffered by Franchisee or (ii) other rights, remedies or claims. Any
termination of this Agreement by Franchisee other than as provided in this
Section 16.02 shall be deemed a termination by Franchisee without cause.
C. Franchisee shall not exercise any remedies available
hereunder with respect to any Events of Default unless such Events of Default
remain uncured after (i) notice from Franchisee thereof and (ii) the
expiration of thirty (30) days following such notice.
D. If any Events of Default cannot reasonably be cured
within thirty (30) days, Friday's shall provide Franchisee notice thereof
(together with Friday's best estimate of the time period required to complete
such cure) and immediately undertake efforts to cure such default within the
cure period, and continue such efforts with diligence to completion. In no
event, however, shall such cure period be extended without the prior written
consent of Franchisee.
16.03 Subject to the provisions of Section 16.06, all rights and
remedies of either party shall be cumulative, and not exclusive, of any other
right or remedy described herein or available at law or in equity. The
expiration or termination of this Agreement shall not release any party from
any liability or
<PAGE>
obligation then accrued or any liability or obligation continuing beyond, or
arising from, such expiration or termination. Nothing in this Agreement shall
impair either party's right to obtain injunctive or other equitable relief.
16.04 The failure of any party to exercise any right or remedy or to
enforce any obligation, covenant or agreement herein shall not constitute a
waiver by, or estoppel of, that party's right to any of the remedies
described herein including, without limitation, to enforce strict compliance
with any such obligation, covenant or agreement. No custom or practice shall
modify or amend this Agreement. The waiver of, or failure or inability of any
party to enforce, any right or remedy shall not impair that party's rights or
remedies with respect to subsequent Events of Default of the same, similar or
different nature. The delay, forbearance or failure of any party to exercise
any right or remedy in connection with any Event of Default or default by
other franchisees shall not affect, impair or constitute a waiver of such
party's rights or remedies herein. Acceptance of any Payment shall not waive
any Event of Default.
16.05 Franchisee and each Principal shall, jointly and severally,
pay all costs and expenses (including reasonable fees of attorneys and other
engaged professionals) incurred by Friday's in successfully enforcing, or
obtaining any remedy arising from the breach of, this Agreement. The
existence of any claims, demands or actions which Franchisee or any Principal
may have against Friday's, whether arising from this Agreement or otherwise,
shall not constitute a defense to Friday's enforcement of Franchisee's or any
Principal's representations, warranties, covenants, agreements or obligations
herein.
16.06 IN THE EVENT OF A DISPUTE BETWEEN THEM WHICH IS NOT SUBJECT
TO, NOR ARISES UNDER, SECTION 18, FRIDAY'S, FRANCHISEE AND PRINCIPALS HEREBY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO OR CLAIM FOR ANY
PUNITIVE, EXEMPLARY, INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES
(INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS, BUT SPECIFICALLY EXCLUDING,
HOWEVER, DAMAGES TO THE REPUTATION AND GOODWILL ASSOCIATED WITH AND/OR
SYMBOLIZED BY THE PROPRIETARY MARKS) AGAINST THE OTHER ARISING OUT OF ANY
CAUSE WHATSOEVER (WHETHER SUCH CAUSE BE BASED IN CONTRACT, NEGLIGENCE, STRICT
LIABILITY, OTHER TORT OR OTHERWISE) AND AGREE THAT EACH SHALL BE LIMITED TO
THE RECOVERY OF ANY ACTUAL DAMAGES SUSTAINED BY IT. IF ANY OTHER TERM OF THIS
AGREEMENT IS FOUND OR DETERMINED TO BE UNCONSCIONABLE OR UNENFORCEABLE FOR
ANY REASON, THE FOREGOING PROVISION SHALL CONTINUE IN FULL FORCE AND EFFECT.
17. OBLIGATIONS UPON TERMINATION OR EXPIRATION; RENEWAL OPTION
17.01 Upon any termination or expiration of this Agreement, (or any
Renewal Franchise Agreement if the renewal option described in Section 17.09
has been exercised), and subject to Section 2.A of the Development Agreement
(if then in effect), Friday's may establish, or authorize others to
establish, T.G.I. Friday's-Registered Trademark- Restaurants in the
Restricted Area.
17.02 Upon any termination or expiration of this Agreement, (or any
Renewal Franchise Agreement if the renewal option described in Section 17.09
has been exercised), all rights granted to Franchisee herein shall terminate
and Franchisee shall:
A. immediately cease to operate the Restaurant under the
System;
<PAGE>
B. immediately cease to use (subject to Franchisee's rights
under other franchise agreements executed pursuant to the Development
Agreement, if then in effect) (i) any Confidential Information; (ii) the
System and the Standards; and (iii) the Proprietary Marks and other
distinctive signs, symbols and devices associated with the System;
C. immediately deliver to Friday's all Confidential
Information and all copies thereof (without regard to form or format), and
all records, files, instructions, correspondence, and all other materials
related to operating the Restaurant, retaining copies thereof only as
reasonably required to comply with law; and
D. cancel any assumed name or equivalent registration
which contains any of the Proprietary Marks or any other name, service mark
or trademark of Friday's or TGIFM.
Franchisee shall furnish evidence of compliance with these
obligations within five (5) days after any termination or expiration hereof.
17.03 A. Franchisee grants to Friday's the option, exercisable by
giving written notice within thirty (30) days after any termination or
expiration of this Agreement, (or any Renewal Franchise Agreement if the
renewal option described in Section 17.09 has been exercised), to acquire (i)
Franchisee's rights and obligations under the Occupancy Contract, or (ii)
Franchisee's right, title, and interest in or to the Site (if Franchisee owns
or possesses such right, title or interest other than rights as a tenant),
together (in each instance) with the Furnishings, at fair market value (based
on the going-concern value as a T.G.I. Friday's-Registered Trademark-
Restaurant), free and clear of all liens, encumbrances or claims, and subject
to such other terms and conditions as are usual and customary for such
acquisitions.
B. Without regard to whether Friday's exercises the option
set forth in Section 17.03.A., Franchisee grants to Friday's the further
option, to be exercised by giving written within thirty (30) days after
termination or expiration of this Agreement, (or any Renewal Franchise
Agreement if the renewal option described in Section 17.09 has been
exercised), to purchase all or any portion of the items described in Section
17.04.A (1)-(4) and (5), at fair market value, free and clear of all liens,
encumbrances or claims, and subject to such other terms and conditions as are
usual and customary for such acquisitions.
C. If Friday's does not exercise its option under Section
17.03.A, Friday's shall have and is hereby granted a right of first refusal
with respect to the sale by Franchisee of all or any portion of the
Furnishings, Franchisee shall promptly notify Friday's of any proposed sale
of the Furnishings and shall provide such information and documents relating
thereto as Friday's may require. Within thirty (30) days after receipt of
such notice, information and documents, Friday's may notify Franchisee that
it intends to exercise its right of first refusal with regard to the
Furnishings upon the same terms and conditions. If such transaction shall not
be consummated within a reasonable period of time after Friday's has given
such notice, then Friday's right of first refusal under this Section shall be
a continuing right and failure to exercise such right shall not constitute a
waiver of any other provision of this Agreement, including such right of
first refusal with respect to future offers.
D. If Friday's exercises its option under Section 17.03.A
but the parties cannot agree on the fair market value of Franchisee's right,
title, or interest in and to the Site and the Furnishings within fifteen (15)
days of the exercise of such option(s), Friday's shall notify Franchisee of
its designation of an appraiser to determine such fair market value. Within
fifteen (15) days of such notice,
<PAGE>
Franchisee shall designate, by written notice to Friday's, an appraiser and
such appraisers shall select a third appraiser. If either party fails to so
designate an appraiser, the appraiser designated by the other party within
such period shall be the sole appraiser. The appraisers shall agree upon the
fair market value of the Site and the Furnishings or both, whichever shall
apply, within fifteen (15) days after the appointment of the last of the
appraisers to be so appointed. A decision by a majority of the appraisers
shall control. Appraisal costs shall be borne equally by Friday's and
Franchisee. In the event Friday's elects, in its sole discretion, to proceed
with all or any part of such acquisition, said acquisition shall be completed
not later than thirty (30) days after the fair market value is established by
agreement or by decision of the appraisers. The purchase price, less any sums
otherwise due Friday's from Franchisee, shall be paid to Franchisee at a
closing which shall take place at Friday's offices, or such other location as
shall be mutually agreed to by the parties. At such closing, the parties
shall execute such instruments of conveyance and/or transfer as reasonably
required by Friday's. If Friday's exercises its option under Section 17.03.A,
possession of the Site shall transfer immediately upon closing.
17.04 A. If Friday's does not exercise its option to acquire the
Occupancy Contract or Franchisee's right, title and interest in and to the
Site, Franchisee shall within thirty (30) days after the expiration of
Friday's option make such alterations to the Restaurant as may be necessary,
in Friday's reasonable judgment, to distinguish the appearance of the Site
from that of other T.G.I. Friday's-Registered Trademark- Restaurants in the
System including, but not be limited to:
(1) removal of decorative memorabilia,
including wall hangings, the racing scull, gas pumps or street lamps
and brass railings;
(2) removal of stained glass and Tiffany
lamps and chandeliers;
(3) removal of proprietary phone booth;
(4) removal of red and white striped outside
awnings;
(5) removal or painting of interior awnings
and exterior and interior walls to a solid color other than a color
specified in the Standards; and
(6) removal of signage.
B. If Friday's does not elect to purchase all or any
portion of the Furnishings which bear any Proprietary Mark or are otherwise
proprietary in nature, Franchisee shall dispose of such Furnishings only in a
manner to which Friday's has given consent within the same period of time as
required under this Section for the removal of all other Furnishings.
17.05 Subsequent to any termination or expiration of this Agreement
(or any Renewal Franchise Agreement, if the renewal option described in
Section 17.09 has been exercised), Franchisee shall not (i) use of the
Proprietary Marks or any reproduction, counterfeit, copy or colorable
imitation of any of the Proprietary Marks which could cause confusion,
mistake or deception as to source of origin or which could dilute Friday's or
TGIFM's rights in and to any of the Proprietary Marks; (ii) utilize any
designation of origin, description or representation which suggests an
association or connection with Friday's; or (iii) utilize the System or any
part thereof.
17.06 Until all Payments are made and any damages, costs or expenses
incurred or suffered by Friday's have been paid, Friday's shall have, and
Franchisee shall be deemed to have granted, a lien
<PAGE>
against any and all of the Furnishings and Franchisee's interest in the
Occupancy Contract and Site.
17.07 Franchisee and each Principal shall, jointly and severally,
pay all costs and expenses (including reasonable fees of attorneys and other
engaged professionals) incurred by Friday's in connection with the successful
enforcement of this Section 17. In the event Franchisee fails to comply with
this Section 17, Friday's may enter upon the Site, without being guilty of
trespass or otherwise liable, for the purpose of carrying out Franchisee's
obligations in this Section 17 at Franchisee's expense.
17.08 Franchisee, at the option of Friday's, shall assign to
Friday's all rights to the telephone numbers of the Restaurant and execute
all forms required by any telephone company to transfer such service and
numbers to Friday's, and Franchisee shall thereafter use different telephone
numbers at or in connection with any subsequent business conducted by
Franchisee.
17.09 This Agreement shall not automatically renew upon the
expiration of the Term. Franchise shall have an option to renew the Term of
this Agreement for a Renewal Term, if, and only if, each of the following
terms and conditions has been fully met to the reasonable satisfaction of
Friday's ("Renewal Compliance). If Renewal Compliance is not achieved prior
to the expiration of the Term, Franchisee shall not be entitled to continue
the operation of the Restaurant beyond the expiration of the Term, it being
understood that Renewal Compliance is a condition to the effectiveness of any
Renewal Franchise Agreement and the Renewal Term.
A. Franchisee must give Friday's written notice of
its election to renew the term of this Agreement no later than one (1) year,
but no earlier than three (3) years, prior to the expiration of the Term of
this Agreement.
B. Franchisee must deliver evidence of Control of the Real
Estate for the Renewal Term.
C. Franchisee must satisfy all of Friday's then-current
financial requirements (including the analysis of net worth, debt-to-equity
ratios and capitalization) for a new franchisee. Franchisee must submit
certified financial statements for the fiscal year preceding the Renewal
Election Date prepared by a Certified Public Accountant, supported by income
tax returns and such other documentation as is reasonably requested by
Friday's. If a Principal's individual net worth is used to satisfy all or a
portion of the financial requirements for the Franchisee, the Principal must
submit a current certified financial statement.
D. Franchisee must have satisfied all monetary obligations
owed to Friday's and its Affiliates, have timely met those obligations for
the two year period prior to the Renewal Election Date and continue to timely
meet those obligations throughout the balance of the Term.
E. Franchisee, during the Term of this Agreement, at the
Renewal Election Date and throughout the balance of the Term, must not be in
default of and must have operated the Restaurant substantially in accordance
with the terms of this Agreement and the standards, specifications and
procedures of the System as set forth and described in each of the Operating
Manuals otherwise.
F. The entire Restaurant facility, interior and exterior,
must be brought up to then-current System standards (the "Facility and
Equipment Upgrades") and reflect an acceptable System image. As part of the
Facility and Equipment Upgrades, Franchisee must (i) repair, upgrade or
replace, at Franchisee's expense, such equipment, signage, interior and
exterior decor items, fixtures, furnishings,
<PAGE>
supplies, computers and other technology-driven systems, including hardware
and software, products and materials (collectively, "Equipment"), required
for the operation of the Restaurant as Friday's may reasonably require, (ii)
obtain any new or additional Equipment reasonably required by Friday's in
order for Franchisee to meet then-current System standards or to provide the
Restaurant's services by alternative means such as through carry-out or
delivery, and (iii) otherwise modernize the Restaurant to reflect the
then-current System standards and image.
G. Franchisee must submit to Friday's all standard form
information and documentation reasonably requested by Friday's as a basis for
the issuance and consummation of a franchise. Franchisee, each of
Franchisee's Principals and Friday's must execute a Mutual General Release
relating to this Agreement and the Restaurant.
H. Franchisee must pay a franchise fee for the Renewal Term
equal to fifty percent (50%) of the franchise fee being charged by Friday's,
at the time the Renewal Franchise Agreement is issued, for a new franchise to
a multi-unit developer having opened more than two restaurants.
I. Franchisee must execute and deliver to Friday's, prior
to the expiration of the Term, the then-current form of franchise agreement
for the Renewal Term. The renewal franchise agreement (the "Renewal Franchise
Agreement") shall be on the standard form of franchise agreement being issued
to new franchisees entering the System at the time such Renewal Franchise
Agreement is issued. The royalties payable under the Renewal Franchise
Agreement shall be calculated at the same royalty rate and under the same
terms as set forth in this Agreement.
18. INDEMNIFICATION
A. Franchisee and each Principal will, at all times,
indemnify and hold harmless, to the fullest extent permitted by law, from all
"losses and expenses" (as defined below) incurred in connection with any
action, suit, proceeding, claim, demand, investigation or inquiry (formal or
informal), or any settlement thereof (whether or not a formal proceeding or
action has been instituted) which arises out of or is based upon any of the
following:
(1) The infringement, alleged infringement,
or any other violation or alleged violation by Franchisee or any Principal of
any patent, mark or copyright or other proprietary right owned or controlled
by third parties.
(2) The violation, breach or asserted
violation or breach by Franchisee or any Principal of any contract, federal,
state or local law, regulation, ruling, standard or directive or any
industry standard.
(3) Libel, slander or any other form of
defamation of Friday's or the System, by Franchisee or any Principal.
(4) The violation or breach by Franchisee or
any Principal of any warranty, representation, agreement or obligation in
this Agreement.
(5) Acts, errors or omissions of Franchisee
or any of its agents, servants, employees, contractors, partners, affiliates
or representatives.
B. Franchisee and each Principal agree to give Friday's
immediate notice of any
<PAGE>
such action, suit, proceeding, claim, demand, inquiry or investigation.
C. Friday's shall at all times have the absolute right to
retain counsel of its own choosing in connection with any action, suit,
proceeding, claim, demand, inquiry or investigation. Friday's shall at all
times have the absolute right to investigate any action, suit proceeding,
claim or demand itself.
D. Franchisee and each Principal shall indemnify Friday's
for its attorneys' fees, expenses, and costs incurred in connection with the
exercise of Friday's rights under Section 18.C. This provision shall not be
construed so as to limit or in any way affect Franchisee's indemnity
obligations pursuant to the other provisions of Section 18.
E. In the event that Friday's exercise of its rights under
Section 18.C. actually results in Franchisee's insurer with respect to
insurance required to be maintained by Franchisee pursuant to Section 11
(hereinafter, the "Insurer") refusing to pay on a third party claim, all
causes of action and legal remedies which Franchisee might have against the
Insurer shall be automatically assigned to Friday's without the need for any
further action on Friday's or Franchisee's part. For the purposes of Section
18.01, "actually results" means that, but for Friday's exercise of its rights
under Section 18.C. the Insurer would not have refused to pay on said
third-party claim.
F. In the event that Friday's exercise of its rights under
Section 18.C. actually results in the Insurer refusing to pay on a
third-party claim, Franchisee shall not be required to indemnify Friday's for
the latter's attorneys' fees, expenses and costs incurred in connection with
that claim.
G. In the event that the Insurer subsequently reverses its
previous decision to not pay a claim, by in fact paying that claim,
Franchisee shall be required to indemnify Friday's for the latter's
attorneys' fees, expenses and costs incurred in connection with that claim,
just as if the Insurer had never denied the claim.
H. In the event that Franchisee encourages, requests, or
suggests that the Insurer deny a claim, Franchisee shall indemnify Friday's
for its attorneys' fees, expenses and costs in connection with that claim.
I. Subject to the provisions of Section 18.B. above, in
order to protect persons or property, or its reputation or goodwill, or the
reputation or goodwill of others, Friday's may, at any time and without
notice, as it, in its judgment deems appropriate, consent or agree to
settlements or take such other remedial or corrective action as it deems
expedient with respect to the action, suit, proceeding, claim, demand,
inquiry or investigation if, in Friday's sole judgment, there are reasonable
grounds to believe that:
(1) any of the acts or circumstances
enumerated in Section 18.A. above have occurred; or
(2) any act, error, or omission of
Franchisee or any Principal may result directly or indirectly in damage,
injury or harm to any person or any property.
J. In addition to their indemnity obligations under Section
18.D. Franchisee and each Principal shall indemnify Friday's for any and all
losses, compensatory damages, exemplary or punitive damages, fines, charges,
costs, expenses, lost profits, settlement amounts, judgments,
<PAGE>
compensation for damages to the Friday's reputation and goodwill, costs of or
resulting from delays, financing, costs of advertising material and media
time/space, and costs of changing, substituting or replacing the same, and
any and all expenses of recall, refunds, compensation, public notices and
other such amounts incurred in connection with the matters described, which
result from any of the items set forth in Section 18.A.
K. Friday's does not assume any liability whatsoever for
acts, errors, or omissions of those with whom Franchisee or any Principal may
contract, regardless of the purpose. Franchisee and each Principal shall hold
harmless and indemnify Friday's for all losses and expenses which may arise
out of any acts, errors or omissions of these third parties.
L. Under no circumstances shall Friday's be required or
obligated to seek recovery from third parties or otherwise mitigate its
losses in order to maintain a claim against Franchisee or any Principal.
Franchisee and each Principal agree that the failure to pursue such recovery
or mitigate loss will in no way reduce the amounts recoverable by Friday's
from Franchisee or any Principal.
M. Notwithstanding anything to the contrary contained in
this Agreement, Franchisee is not required to indemnify Friday's with regard
to any infringement, alleged infringement or other violation or alleged
violation by Franchisee or any Principal of any patent, mark, or copyright or
other proprietary right owned or controlled by a third party, arising in
connection with the use of the Proprietary Marks and System franchised to
Franchisee when used in the manner authorized and required by Friday's
pursuant to this Agreement. In the event Franchisee is involved in such an
action, Friday's agrees to indemnify Franchisee and Principals in connection
with the defense thereof, and to indemnify and hold Franchisee and Principals
harmless from any and all losses, damages, claims, liabilities, expenses,
including attorney's fees (prior to litigation, during litigation, and on
appeal) and all costs (whether taxed or not taxed) in connection with
proceedings regarding the same. Franchisee shall give notice to Friday's of
any such claim no later than fifteen (15) days after Franchisee becomes aware
of same or is given notice thereof. This indemnity shall be inoperative to
the extent that failure to have timely provided such notice to Friday's
materially impairs Friday's ability to defend any such claim, in whole or in
part, or to minimize the costs of this indemnity. Franchisee shall not be
required to defend Friday's with regard to Franchisee's utilization pursuant
to this Agreement of the Proprietary Marks and System provided such
utilization is in strict compliance with that authorized and required by
Friday's pursuant to this Agreement.
19. NOTICES
All notices required or desired to be given hereunder shall be in
writing and shall be sent by personal delivery, expedited delivery service,
facsimile or certified mail, return receipt requested to the following
addresses (or such other addresses as designated pursuant to this Section 19):
if to Friday's: TGI Friday's Inc.
Attention: General Counsel
7540 LBJ Freeway, Suite 100
Dallas, Texas 75251
Facsimile No.: (972) 450-5636
if to Franchisee or any Principal: _____________________________
_____________________________
_____________________________
<PAGE>
_____________________________
_____________________________
Facsimile No.: (___) ________
Notices posted by personal delivery, expedited service or given by
facsimile shall be deemed given the next business day after transmission.
Notices posted by certified mail shall be deemed received three (3) Business
Days after the date of posting. Any change in the foregoing addresses shall
bev effected by giving fifteen (15) days written notice of such change to the
other party.
20. FORCE MAJEURE
No party shall be liable for any inability to perform resulting from
acts of God or other causes (other than financial inability or insolvency)
beyond their reasonable control; provided, however, that nothing herein shall
excuse or permit any delay or failure (i) to remit any Payment on the date
due or (ii) for more than one-hundred eighty (180) days. The party whose
performance is affected by an event of force majeure shall, within three (3)
days of the occurrence of such event, give notice thereof to the other party
setting forth the nature thereof and an estimate of its duration. The
foregoing not withstanding, if, through no fault of Franchisee, the
Restaurant is damaged or destroyed by an event such that it cannot, in
Friday's judgment, reasonably be restored within ninety (90) days thereafter,
then Franchisee may, within sixty (60) days after such event, apply for
Friday's consent to relocate and/or reconstruct the Restaurant, which consent
shall not be unreasonably withheld. If franchisee fails to make such
application, this Agreement shall be deemed terminated for cause.
21. SEVERABILITY
21.01 Should any term, covenant or provision hereof, or the
application thereof, be determined by a valid, final, non-appealable order to
be invalid or unenforceable, the remaining terms, covenants or provisions
hereof shall continue in full force and effect without regard to the invalid
or unenforceable provision. In such event such term, covenant or provision
shall be deemed modified to impose the maximum duty permitted by law and such
term, covenant on provision shall be valid and enforceable in such modified
form as if separately stated in and made a part of this Agreement.
Notwithstanding the foregoing, if any term hereof is so determined to be
invalid or unenforceable and such determination adversely affects, in
Friday's reasonable judgment, Friday's ability to realize the principal
purpose of the Agreement or preserve its or TGIFM's rights in, or the
goodwill underlying, the Proprietary Marks, the System, or the Confidential
Information, Friday's may terminate this Agreement upon notice to Franchisee.
21.02 Captions in this Agreement are for convenience only and
shall not affect the meaning or construction of any provision hereof.
22. INDEPENDENT CONTRACTOR
22.01 Franchisee is an independent contractor. Friday's does not
operate the Franchisee's business. Nothing herein shall create the
relationship of principal and agent, legal representative, joint ventures,
partners, employee and employer or master and servant between the parties. No
fiduciary duty is owed by, or exists between, the parties. Franchisee shall
hold itself out to the public to be an independent contractor operating the
business pursuant to a franchise from Friday's.
22.02 Nothing herein authorizes Franchisee or any Principal to make any
contract, agreement,
<PAGE>
warranty or representation or to incur any debt or obligation in Friday's
name.
23. DUE DILIGENCE AND ASSUMPTION OF RISK
23.01 Franchisee and each Principal (i) have conducted such due
diligence and investigation as each desires; (ii) recognize that the business
venture described herein involves risks; and (iii) acknowledge that the
success of such business venture is dependent upon the abilities of
Franchisee and Principals. EXCEPT AS PROVIDED IN ITEM 19 OF FRIDAY'S UNIFORM
FRANCHISE OFFERING CIRCULAR FOR THE SALE OF T.G.I. FRIDAY'S(R) RESTAURANTS IN
EFFECT ON THE DATE OF THIS AGREEMENT, FRIDAY'S EXPRESSLY DISCLAIMS THE MAKING
OF, AND FRANCHISEE AND EACH PRINCIPAL ACKNOWLEDGE THAT THEY HAVE NOT RECEIVED
OR RELIED UPON, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
POTENTIAL PERFORMANCE OR VIABILITY OF THE BUSINESS VENTURE CONTEMPLATED BY
THIS AGREEMENT.
23.02 Franchisee and each Principal have received, read and
understand this Agreement, the documents referred to herein and the
Attachments and Schedules hereto. Franchisee and each Principal have had
ample time and opportunity to consult with their advisors concerning the
potential benefits and risks of entering into this Agreement.
24. MISCELLANEOUS
24.01 Time is of the essence to this Agreement.
24.02 There are no third party beneficiaries to this Agreement
except for the acknowledgments and agreements contained in Section 9, the
remedy provided for breach of Franchisee's or any Principal's covenant
contained in Section 13.03.C.(1), the provision for liquidated damages
contained in Section 16.01.C.(3) and the rights and remedies provided for in
EXHIBIT B.
24.03 This Agreement may be executed in any number of counterparts
each of which when so executed shall be an original, but all of which
together shall constitute one (1) and the same instrument.
24.04 Franchisee and each Principal acknowledge that each has been
offered certain products and services in connection herewith and understands
that System franchisees are free to obtain these and any other products or
services used in the operation of the Restaurant from sources of their own
choosing, subject only to compliance with the Standards and the requirements
of Sections 6.06, 6.07, 7.07 and 7.09.
24.05 All references herein to the masculine, neuter or singular
shall be construed to include the masculine, feminine, neuter or plural,
unless otherwise suggested by the text.
24.06 This Agreement will become effective only upon execution
hereof by the President or a Vice President of Friday's.
24.07 Franchisee and each Principal acknowledge that each has
received a complete copy of this Agreement, the documents referred to herein
and the Attachments hereto at least five (5) business days prior to the date
on which this Agreement was executed. Franchisee and each Principal further
acknowledge that each has received the disclosure document required by the
Trade Regulation Rule of the Federal Trade Commission entitled "Disclosure
Requirements and Prohibitions Concerning Franchising and Business Opportunity
Ventures" at least ten (10) business days prior to the date on which
<PAGE>
this Agreement was executed.
25. CHOICE OF LAW; JURISDICTION; VENUE
25.01 FRANCHISEE AND ITS PRINCIPALS ACKNOWLEDGE THAT FRIDAY'S MAY
GRANT NUMEROUS FRANCHISES THROUGHOUT THE UNITED STATES ON TERMS AND
CONDITIONS SIMILAR IN CERTAIN MATERIAL RESPECTS TO THOSE SET FORTH IN THIS
AGREEMENT, AND THAT IT IS OF MUTUAL BENEFIT TO FRANCHISEE AND ITS PRINCIPALS
AND TO FRIDAY'S THAT THESE TERMS AND CONDITIONS BE UNIFORMLY INTERPRETED.
THEREFORE, THE PARTIES AGREE THAT TO THE EXTENT THE LAW OF THE STATE OF TEXAS
IS HELD ENFORCEABLE, TEXAS LAW SHALL APPLY TO THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT (EXCEPT FOR TEXAS CHOICE OF LAW RULES) AND
SHALL GOVERN ALL QUESTIONS WHICH ARISE WITH REFERENCE HERETO.
25.02 THE PARTIES ACKNOWLEDGE THAT THIS AGREEMENT SHALL BE PERFORMED
IN SUBSTANTIAL PART IN DALLAS COUNTY, TEXAS. THE PARTIES THEREFORE AGREE THAT
ANY CLAIM, CONTROVERSY OR DISPUTE ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE PERFORMANCE THEREOF WHICH CANNOT BE AMICABLY SETTLED, EXCEPT
AS OTHERWISE PROVIDED HEREIN, SHALL BE RESOLVED BY A PROCEEDING IN A COURT IN
DALLAS COUNTY, TEXAS, AND FRANCHISEE AND PRINCIPALS EACH IRREVOCABLY ACCEPT
AND SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND THE
FEDERAL COURTS LOCATED IN DALLAS COUNTY, TEXAS FOR SUCH CLAIMS, CONTROVERSIES
OR DISPUTES; PROVIDED, HOWEVER, WITH RESPECT TO ANY ACTION WHICH INCLUDES
INJUNCTIVE RELIEF, OR ANY ACTION FOR THE RECOVERY OF ANY PROPERTY, REAL OR
PERSONAL, FRIDAY'S MAY BRING SUCH ACTION IN ANY STATE WHICH HAS JURISDICTION.
26. ENTIRE AGREEMENT
This Agreement and the Addenda, Exhibits and Schedules hereto
constitute the entire agreement between Friday's, Franchisee and the
Principals concerning the subject matter hereof. All prior agreements,
discussions, representations, warranties and covenants are merged herein.
THERE ARE NO WARRANTIES, REPRESENTATIONS, COVENANTS OR AGREEMENTS, EXPRESS OR
IMPLIED, BETWEEN THE PARTIES CONCERNING THE SUBJECT MATTER HEREOF, INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING,
EXCEPT THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT. EXCEPT THOSE PERMITTED TO
BE MADE UNILATERALLY BY FRIDAY'S HEREUNDER, NO AMENDMENT, CHANGE OR VARIANCE
FROM THIS AGREEMENT SHALL BE BINDING ON EITHER PARTY UNLESS MUTUALLY AGREED
TO BY FRIDAY'S AND FRANCHISEE AND EXECUTED IN WRITING.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement on the day and year first above written.
TGI FRIDAY'S INC. FRANCHISEE
By: ______________________ By: _______________________
<PAGE>
Name: ______________________ Name: _______________________
Title: ______________________ Title: _______________________
Date: ______________________ Date: _______________________
<PAGE>
Each Principal acknowledges, covenants and represents as follows:
(1) each has read the terms and conditions of this Agreement;
(2) each is a "Principal" as described in this Agreement;
(3) each is the owner of and has the right to vote the percent of
the Securities of Franchisee indicated next to the signature below of each
Principal;
(4) each makes all of the representations, warranties, covenants and
agreements of the Franchisee (including liability to make Payments) and a
Principal set forth in this Agreement (including, without limitation, the
covenants and agreements concerning Transfer, non-competition and maintenance of
Confidential Information) and is obligated to perform thereunder;
(5) each individually, jointly and severally, irrevocably and
unconditionally guarantees that all of Franchisee's obligations under the terms
and conditions of this Agreement will be timely paid and performed;
(6) each acknowledges that Friday's may, without notice to Principals,
waive, renew, extend, modify, amend or release any indebtedness or obligation of
Franchisee, or settle, adjust, or compromise any claims against Franchisee;
(7) each waives all demands and notices of every kind with respect to
this guaranty including, without limitation, notice of presentment, demand for
payment or performance by Franchisee, notice of any default by Franchisee or any
guarantor, and notice of any release of any guarantor or other security for this
Agreement or the obligations of Franchisee, and each acknowledges that Friday's
may pursue its rights against Principals without first exhausting its remedies
against Franchisee and without joining any other guarantor hereto, and no delay
on the part of Friday's in the exercise of any right or remedy shall operate as
a waiver of such right or remedy;
(8) each has derived and expects to derive financial or other benefit,
directly or indirectly, from this Agreement and the transaction described
herein;
(9) each acknowledges that his/its execution of this Agreement, and
his/its undertakings and agreements herein, have induced Friday's to enter into
the transactions described herein, and to execute, this Agreement;
(10) each consents to and shall be bound by any amendment of this
Agreement made by Friday's and Franchisee pursuant to the terms hereof; and
(11) each has executed, concurrent herewith, the Guaranty Agreement in
EXHIBIT B.
<TABLE>
<CAPTION>
PRINCIPALS Securities
Voting %
<S> <C>
____________________________ __________
Name:
<PAGE>
Name: __________
Name: __________
Name: __________
</TABLE>
<PAGE>
EXHIBIT 10.9
ADDENDUM A TO FRANCHISE AGREEMENT
COVENANT AND AGREEMENT FOR CONFIDENTIALITY
This agreement ("Agreement") is made by [PRINCIPAL'S NAME], [an
individual residing in the state of _______________ OR a corporation/partnership
organized under the laws of the State of _________________] ("Principal"), and
TGI Friday's Inc., a corporation organized under the laws of the State of New
York ("Friday's"), in connection with that certain Franchise Agreement dated
_________________, _____ (the "Franchise Agreement"), by and between Friday's
and _____________________ ("Franchisee").
WHEREAS, Friday's and Franchisee have entered into the Franchise
Agreement; and
WHEREAS, the Confidential Information provides economic advantages
to Friday's and is not generally known to, and not legally available to,
third parties; and
WHEREAS, Friday's has taken and intends to take all steps necessary
to maintain the confidentiality of the Confidential Information; and
WHEREAS, Principal will receive, and desires to receive, the
Confidential Information in his capacity as a Principal of Franchisee; and
WHEREAS, this Agreement is executed and delivered pursuant to
Section 8.05 of the Franchise Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, Principal and Friday's agree as follows:
1. Capitalized terms used herein and not otherwise defined shall
have the meanings attributed to them in the Franchise Agreement.
2. Friday's shall disclose to Principal some or all of the
Confidential Information which may be utilized by Principal solely (a) in his
capacity as a Principal of Franchisee and (b) in connection with Franchisee's
performance of its duties and obligations pursuant to the Franchise
Agreement. No other use or disclosure of any of the Confidential Information
shall be made by Principal. Principal acknowledges and agrees that Friday's
or TGIFM is the exclusive owner of the Confidential Information, the System
and the Proprietary Marks. Principal shall not, directly or indirectly,
contest or impair Friday's or TGIFM's ownership of, or interest in, the
Confidential Information, the System or the Proprietary Marks.
3. Principal shall receive the Confidential Information in strict
confidence. The Confidential Information may be utilized by Principal only (a)
so long as Principal remains a Principal of Franchisee and (b) during the Term.
The Confidential Information shall not be used in any manner that is adverse or
detrimental to, or competitive with, Friday's, TGIFM or Franchisee. Except as
permitted pursuant to the Franchise Agreement or this Agreement, the
Confidential Information shall not, without the prior written consent of
Friday's, be (i) copied, (ii) compiled (in total or in part) with other
information, or (iii) disclosed to any third party.
4. Principal shall not communicate, disclose or use the Confidential
Information, or any part
<PAGE>
thereof, except as (a) permitted herein, or (b) required by law. The
Confidential Information may be disclosed to Principal's agents, consultants,
contractors and employees who need to know the Confidential Information for
the sole purpose of providing services to Principal in his capacity as a
Principal of Franchisee. Prior to such disclosure of any Confidential
Information, each of such agents, consultants, contractors and employees
shall (a) be advised by Principal of the confidential and proprietary nature
of the Confidential Information and (b) agree to be bound by the terms and
conditions of this Agreement. Notwithstanding such agreement, Principal shall
indemnify the Friday's Indemnitees from and against any damages, costs
(including reasonable fees of attorneys and other engaged professionals) and
expenses resulting from any disclosure or use of the Confidential
Information, or any part thereof, by such agents, representatives or
employees contrary to the terms hereof.
5. In the event Principal or Principal's agents, representatives, or
employees receive notice of any request, demand or order to transfer or disclose
all or any portion of the Confidential Information, Principal shall immediately
notify Friday's thereof, and shall fully cooperate with and assist Friday's in
prohibiting or denying any such transfer or disclosure. Should such transfer or
disclosure be required by a valid, final, non-appealable court order, Principal
shall fully cooperate with and assist Friday's in protecting the confidentiality
of the Confidential Information to the maximum extent permitted by law.
6. Immediately upon Friday's request or upon any termination or
expiration of the Term, Principal shall return the Confidential Information
including, without limitation, that portion of the Confidential Information
which consists of analyses, compilations, studies or other documents containing
or referring to any part of the Confidential Information, prepared by Principal,
its agents, representatives or employees, and any copies thereof.
7. Each of the representations, warranties, covenants, acknowledgments
and agreements of Principal, and the rights and remedies of Friday's in
connection therewith, contained in the Franchise Agreement including, without
limitation, those contained in Sections 8, 9, 13.03.C, 14.02, 14.03, 14.04 and
16 of the Franchise Agreement, are incorporated in this Agreement by reference
as if fully set forth. In connection with Friday's enforcement of such rights
and remedies (or other rights and remedies of Friday's under this Agreement),
any court of competent jurisdiction selected by Friday's shall have personal
jurisdiction over Principal, to which jurisdiction Principal irrevocably
consents. The parties agree that to the extent the law of the State of Texas is
held enforceable, Texas law shall apply to the interpretation and construction
of this Agreement (except for Texas choice of law rules) and shall govern all
questions which arise with reference hereto.
8. Friday's may, in addition to pursuing any other remedies,
specifically enforce such obligations, covenants and agreements or obtain
injunctive or other equitable relief in connection with the violation or
anticipated violation of such obligations, covenants and agreements without the
necessity of showing (i) actual or threatened harm; (ii) the inadequacy of
damages as a remedy; or (iii) likelihood of success on the merits, and without
being required to furnish bond or other security. Nothing in this Agreement
shall impair Friday's right to obtain equitable relief.
9. Should any term, covenant or provision hereof, or the
application thereof, be determined by a valid, final, non-appealable order to
be invalid or unenforceable, the remaining terms, covenants or provisions
hereof shall continue in full force and effect without regard to the invalid
or unenforceable provision. In such event such term, covenant or provision
shall be deemed modified to impose the maximum duty permitted by law and such
term, covenant or provision shall be valid and enforceable in such modified
form as if separately stated in and made a part of this Agreement.
<PAGE>
10. Any of Principal's agreements, obligations or covenants which
contemplate performance thereof after the termination or expiration of this
Agreement shall survive such termination or expiration.
11. Principal acknowledges and warrants that he has derived and
expects to derive financial or other advantage and benefit, directly or
indirectly, from the Franchise Agreement, this Agreement and/or the provision
of the Confidential Information to Franchisee and/or Principal.
IN WITNESS WHEREOF, this Agreement has been executed by the parties on the dates
indicated below.
PRINCIPAL TGI FRIDAY'S INC.
___________________________ By: ____________________
Name: _____________________ Name: ____________________
Date: _____________________ Title: ____________________
Date: ____________________
<PAGE>
EXHIBIT 10.9
ADDENDUM B TO FRANCHISE AGREEMENT
COVENANT AND AGREEMENT FOR CONFIDENTIALITY
This agreement ("Agreement") is made by [EMPLOYEE'S NAME], an
individual residing in the state of _______________ ("Employee"), and
["FRANCHISEE'S NAME"], [an individual residing in the state of _______________
OR a corporation/partnership organized under the laws of the State of
_________________] ("Franchisee"), in connection with that certain Franchise
Agreement dated ________________, _____, (the "Franchise Agreement") by and
between TGI Friday's Inc. ("Friday's") and Franchisee.
WHEREAS, Friday's and Franchisee have entered into the Franchise
Agreement;
WHEREAS, the Confidential Information provides economic advantages
to Friday's, and is not generally known to, and is not legally available to,
third parties;
WHEREAS, Friday's has taken and intends to take all steps necessary
to maintain the confidentiality of the Confidential Information;
WHEREAS, it will be necessary for certain employees of Franchisee to
have access to and to use some or all of the Confidential Information in
connection with the performance of their job functions related to the
development, construction and operation of Restaurants under the System;
WHEREAS, Employee is the [INSERT TITLE] of Franchisee;
WHEREAS, Employee needs to receive, and desires to receive and use, the
Confidential Information in the course of his employment by Franchisee in order
to effectively perform his job function;
WHEREAS, the Agreement is executed and delivered pursuant to Section
8.05 of the Franchise Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, Employee and Franchisee agree as follows:
1. Capitalized terms used herein and not otherwise defined shall have
the meanings attributed to them on ANNEX A hereto.
2. Franchisee, or Friday's, acting on behalf of Franchisee, shall
disclose to Employee some or all of the Confidential Information which may be
utilized by Employee solely (a) in his capacity as the [TITLE] of Franchisee and
(b) in connection with Employee's performance of his job functions. No other use
or disclosure of any of the Confidential Information shall be made by Employee.
Employee acknowledges and agrees that Friday's or TGIFM is the exclusive owner
of the Confidential Information, the System and the Proprietary Marks. Employee
shall not, directly or indirectly, contest or impair Friday's or TGIFM's
ownership of, or interest in, the Confidential Information, the System or the
Proprietary Marks.
3. Employee shall receive the Confidential Information in strict
confidence. The
<PAGE>
Confidential Information may be utilized by Employee only (a) so
long as Employee is employed by Franchisee and (b) during the Term. The
Confidential Information shall not be used in any manner that is adverse or
detrimental to, or competitive with, Friday's, TGIFM or Franchisee. Except as
permitted pursuant to this Agreement, the Confidential Information shall not,
without the prior written consent of Friday's, be (i) copied, (ii) compiled (in
total or in part) with other information, or (iii) disclosed to any third party.
4. Employee shall not communicate, disclose or use the Confidential
Information, or any part thereof, except as (a) permitted herein, or (b)
required by law. The Confidential Information may be disclosed to fellow
employees as necessary to train or assist such other employees of Franchisee in
the performance of their job functions with respect to the development,
construction or operation of a Restaurant. Prior to such disclosure of any
Confidential Information, each such employee shall (i) be advised by Employee of
the confidential and proprietary nature of the Confidential Information and (ii)
agree to be bound by the terms and conditions of this Agreement.
5. In the event Employee receives notice of any request, demand, or
order to transfer or disclose all or any portion of the Confidential
Information, Employee shall immediately notify Franchisee thereof, and shall
fully cooperate with and assist Friday's in prohibiting or denying any such
transfer or disclosure. Should such transfer or disclosure be required by a
valid, final, non-appealable court order, Employee shall fully cooperate with
and assist Friday's in protecting the confidentiality of the Confidential
Information to the maximum extent permitted by law.
6. Immediately upon Friday's request, upon Employee's termination of
employment with Franchisee, or upon the conclusion of the use for which any
Confidential Information was furnished, Employee shall return the Confidential
Information including, without limitation, that portion of the Confidential
Information which consists of analyses, compilations, studies or other documents
containing or referring to any part of the Confidential Information, and any
copies thereof, to Franchisee or Friday's.
7. In order to protect the goodwill and unique qualities of the System
and the confidentiality and value of the Confidential Information, and in
consideration of the disclosure to Employee of the Confidential Information,
Employee covenants that, during the period of his employment by Franchisee and
for a period of one (1) year following termination of such employment, Employee
shall not, directly or indirectly:
A. employ or seek to employ any person (or induce such person
to leave his or her employment) who is, or has within one (1) year been,
employed (i) by Friday's or Franchisee; (ii) by any developer or franchisee
of Friday's; or (iii) in any other concept or system owned, operated or
franchised by an Affiliate, as a director, officer or in any managerial
capacity;
B. own, maintain, operate or have any interest in any Competing
Business;
C. own, maintain, operate or have any interest in any
Competing Business which business is, or is intended to be, located in the
county in which the Restaurant is located; or
D. own, maintain, operate or have any interest in any
Competing Business which business is, or is intended to be, located within a
radius of three (3) miles of any restaurant which is a part of any concept or
system owned, operated or franchised by Friday's or any Affiliate.
8. In connection with the enforcement of rights and remedies under
this Agreement, any
<PAGE>
court of competent jurisdiction selected by Franchisee or Friday's shall have
personal jurisdiction over Employee, to which jurisdiction Employee
irrevocably consents. THE PARTIES AGREE THAT TO THE EXTENT THE LAW OF THE
STATE OF TEXAS IS HELD ENFORCEABLE, TEXAS LAW SHALL APPLY TO THE
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT (EXCEPT FOR TEXAS CHOICE OF
LAW RULES) AND SHALL GOVERN ALL QUESTIONS WHICH ARISE WITH REFERENCE HERETO.
9. A. Employee acknowledges and agrees that (i) Friday's is a third
party beneficiary to this Agreement and (ii) Friday's exercise of the rights and
remedies set forth herein is reasonable.
B. Franchisee or Friday's may, in addition to pursuing any
other remedies, specifically enforce such obligations and covenants or obtain
injunctive or other equitable relief in connection with the violation or
anticipated violation of such obligations and covenants without the necessity of
showing (i) actual or threatened harm; (ii) the inadequacy of damages as a
remedy; or (iii) likelihood of success on the merits, and without being required
to furnish bond or other security. Nothing in this Agreement shall impair
Franchisee's or Friday's right to obtain equitable relief.
C. With respect to Employee's breach of the covenants
contained in Section 7.A hereof, the affected former employer shall be
compensated by Employee for the reasonable costs and expenses incurred by such
employer in connection with training such employee. Franchisee and Employee
acknowledge that such expenses are impossible to accurately quantify and agree
that, as liquidated damages and not as a penalty, an amount equal to such
employee's annual rate of compensation in the final twelve (12) months of
employment (or an annualized rate if employed for a shorter period) by such
former employer shall be paid by Employee to the former employer at such time as
such employee commences employment.
10. Should any term, covenant or provision hereof, or the application
thereof, be determined by a valid, final, non-appealable order to be invalid or
unenforceable, the remaining terms, covenants or provisions hereof shall
continue in full force and effect without regard to the invalid or unenforceable
provision. In such event, such term, covenant or provision shall be deemed
modified to impose the maximum duty permitted by law and such term, covenant or
provision shall be valid and enforceable in such modified form as if separately
stated in and made a part of this Agreement.
11. Any of Employee's agreements, obligations or covenants which
contemplate performance thereof after the termination or expiration of this
Agreement shall survive such termination or expiration.
IN WITNESS WHEREOF, this Agreement has been executed by the parties on the dates
indicated below.
EMPLOYEE FRANCHISEE
______________________ By: ___________________
Name: ________________ Name: ___________________
Date: ________________ Title: ___________________
Date: ___________________
<PAGE>
EXHIBIT 10.9
ANNEX A TO COVENANT AND AGREEMENT FOR CONFIDENTIALITY
AFFILIATE - Carlson Restaurants Worldwide Inc., or any subsidiary thereof or any
subsidiary of TGI Friday's Inc.
COMMENCEMENT DATE - _____________, _____.
COMPETING BUSINESS - a restaurant business or bar/restaurant offering the same
or similar products and services as offered by restaurants in the System or
restaurants in any other concept or system owned, operated or franchised by
Friday's or any Affiliate, including, without limitation, waiter/waitress
service, sit-down dining and bar services.
CONFIDENTIAL INFORMATION - the System, the Development Manual, the Manuals,
other manuals, the Standards, written directives and all drawings, equipment,
recipes, computer and point of sale programs (and output from such programs);
and any other information, know-how, techniques, material and data imparted or
made available by Friday's which is (i) designated as confidential; (ii) known
by Franchisee or Employee to be considered confidential by Friday's; or (iii) by
its nature herein or reasonably considered confidential.
DEVELOPMENT MANUAL - Friday's manual, as amended from time to time, describing
(generally) the procedures and parameters required for the development of T.G.I.
Friday's-Registered Trademark- Restaurants.
INDEMNITEES - Friday's, its directors, officers, employees, agents,
shareholders, affiliates, successors and assigns and the respective directors,
officers, employees, agents, shareholders and affiliates of each.
MANUALS - Friday's confidential operating manuals, as amended from time to time
in Friday's sole discretion, which contain the instructions, requirements,
Standards, specifications, methods and procedures for the operation of the
Restaurant including (i) those relating to the selection, purchase, service and
sale of all products being sold at the Restaurant; (ii) those relating to the
maintenance and repair of the Restaurant, buildings, grounds, equipment, signs,
interior and exterior decor items, fixtures and furnishings; and (iii) those
relating to employee apparel and dress, accounting, bookkeeping, record
retention and other business systems, procedures and operations.
PROPRIETARY MARKS - certain trademarks, trade names, service marks, emblems
and indicia of origin designated by Friday's from time to time in connection
with the operation of Restaurants pursuant to the System in the Territory,
including, without limitation, "T.G.I. FRIDAY'S-Registered Trademark-",
"FRIDAY'S-Registered Trademark-" and "THE AMERICAN BISTRO-Registered
Trademark-".
RESTAURANT - a T.G.I. Friday's-Registered Trademark- Restaurant developed and
operated pursuant to the Franchise Agreement.
STANDARDS - the standards and specifications, as amended from time to time by
Friday's, in its sole discretion, contained in, and being a part of, the
Confidential Information pursuant to which Franchisee shall develop and operate
Restaurants in the Territory.
SYSTEM - a unique, proprietary system developed and owned by Friday's (which may
be modified or further developed from time to time in Friday's sole discretion)
for the establishment and operation of full-service restaurants under the
Proprietary Marks, which includes, without limitation, a distinctive image
consisting of exterior and interior design, decor, color scheme and furnishings;
special recipes,
<PAGE>
menu items and full service bar; employee uniform standards,
products, services and specifications; procedures with respect to operations and
inventory and management control; training and assistance; and advertising and
promotional programs.
TERM - the duration of the Franchise Agreement commencing on the Commencement
Date and continuing until _______________, 20___, unless sooner terminated.
TGIFM - TGI Friday's of Minnesota, Inc., a Minnesota corporation and a
subsidiary of Friday's.
T.G.I. FRIDAY'S-Registered Trademark- RESTAURANTS - restaurants operated in
accordance with the System under the Proprietary Marks.
<PAGE>
EXHIBIT 10.9
EXHIBIT A TO FRANCHISE AGREEMENT
COMMENCEMENT DATE AGREEMENT
This Commencement Date Agreement ("Agreement") is entered into this
____ day of _______________, _____, by and between TGI Friday's Inc.
("Friday's") and __________________ ("Franchisee").
Whereas, Friday's and Franchisee have entered into a Franchise
Agreement dated ________________, _____ ("Franchise Agreement") relating to the
operation of a T.G.I. Friday's-Registered Trademark- Restaurant; and
Whereas, Friday's and Franchisee desire to supplement the Franchise
Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Friday's and Franchisee agree as follows:
1. The Commencement Date of the term of the Franchise
Agreement is _____________________.
2. The term of the Franchise Agreement shall expire on
_________________________, unless sooner terminated as therein provided.
3. The street address of the Restaurant is _______________________.
4. This Agreement shall not amend or otherwise modify the terms and
conditions of the Franchise Agreement or the interpretation of the rights and
duties of Friday's and Franchisee thereunder. Except as otherwise defined
herein, the words and phrases used in this agreement as defined terms shall have
the meanings attributed to them in the Franchise Agreement.
IN WITNESS WHEREOF, Friday's and Franchisee have caused this
Commencement Date Agreement to be executed as of the day and year first above
written.
TGI FRIDAY'S INC.
(NAME OF FRANCHISEE)
By: By:
------------------------- --------------------------
Name: Name:
------------------------- --------------------------
Title: Title:
------------------------- --------------------------
<PAGE>
EXHIBIT 10.9
EXHIBIT B TO FRANCHISE AGREEMENT
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (the "Guaranty") is made as of the ____ day of
________________________, _____, by the undersigned (hereinafter referred to
individually and collectively as "Guarantors" whether one or more) in favor of
TGI Friday's Inc., a New York corporation ("Friday's").
WHEREAS, Friday's, [Franchisee's name], and certain other individuals
and/or entities entered into that certain Franchise Agreement dated
__________________, _____ (the "Franchise Agreement") regarding the construction
and operation of a T.G.I. Friday's-Registered Trademark- Restaurant
at ________________________ (the "Restaurant");
WHEREAS, as an inducement to Friday's to enter into the Franchise
Agreement, the undersigned Guarantor has agreed to make and deliver this
Guaranty to Friday's.
NOW THEREFORE, FOR VALUE RECEIVED, Guarantors, jointly and severally,
if more than one, hereby acknowledge and agree as follows:
1. Each has read the terms and conditions of this Guaranty and of the
Franchise Agreement.
2. Each is a "Principal" as defined in the Franchise Agreement.
3. Each reaffirms all of the representations, warranties, covenants and
agreements of the Franchisee (including liability to make Payments) and
Principals set forth in the Franchise Agreement (including, without limitation,
the covenants and agreements concerning Transfer, non-competition and
maintenance of Confidential Information) and is obligated to perform thereunder.
4. Each acknowledges that Friday's may, without notice to Guarantors
and without affecting the obligations of any of the Guarantors under this
Guaranty, waive, renew, extend, modify, amend or release any indebtedness or
obligation of Franchisee, or settle, adjust, or compromise any claims against
Franchisee;
5. Each waives all demands and notices of every kind with respect to
this Guaranty, including, without limitation, notice of presentment, demand for
payment or performance by Franchisee, notice of any default by Franchisee or any
Guarantor, and any release of any Guarantor or other security for the Franchise
Agreement or the obligations of Franchisee. Friday's may pursue its rights
against Guarantors without first exhausting its remedies against Franchisee and
without joining any other Guarantor hereto, and no delay on the part of Friday's
in the exercise of any right or remedy shall operate as a waiver of such right
or remedy;
6. Each individually, jointly and severally, irrevocably and
unconditionally guarantees that all of Franchisee's obligations under the terms
and conditions of the Franchise Agreement will be timely paid and performed;
7. Each has derived and expects to derive financial or other benefit,
directly or indirectly, from the Franchise Agreement and the transaction
described therein;
<PAGE>
8. Each acknowledges that his/its execution of the Franchise Agreement,
and his/its undertakings and agreements herein, have induced Friday's to enter
into the transactions described in, and to execute, the Franchise Agreement.
9. Each consents to and shall be bound by any amendment of
the Franchise Agreement made by Friday's and Franchisee pursuant to the
terms thereof.
GUARANTORS
Name:
Name:
Name:
Name:
Name:
Name:
<PAGE>
EXHIBIT 10.9
EXHIBIT C TO FRANCHISE AGREEMENT
DESCRIPTION OF RESTRICTED AREA
A three (3) mile radius surrounding the T.G.I. Friday's restaurant located at
_______________________.
<PAGE>
EXHIBIT 10.10
DEVELOPMENT AGREEMENT
T.G.I. FRIDAY'S RESTAURANTS
[COUNTRY]
DATED AS OF [DEV AGMT DATE]
<PAGE>
T.G.I. FRIDAY'S RESTAURANTS
DEVELOPMENT AGREEMENT
[COUNTRY]
TABLE OF CONTENTS
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1. DEFINITIONS....................................................................................................1
2. EXCLUSIVE RIGHTS; TERM.........................................................................................4
3. DEVELOPMENT SCHEDULE; SITE SELECTION...........................................................................5
4. FEES AND PAYMENTS..............................................................................................7
5. REPRESENTATIVE; DIRECTOR OF OPERATIONS; MANAGERS; TRAINING.....................................................8
6. CONFIDENTIAL INFORMATION.......................................................................................9
7. DEVELOPER'S REPRESENTATIONS AND WARRANTIES; AFFIRMATIVE AND NEGATIVE COVENANTS.................................9
8. TRANSFER......................................................................................................12
9. CONSENT AND WAIVER............................................................................................13
10. DEFAULT AND REMEDIES.........................................................................................13
11. ARBITRATION..................................................................................................13
12. INDEMNIFICATION..............................................................................................17
13. NOTICES......................................................................................................19
14. FORCE MAJEURE................................................................................................20
15. SEVERABILITY.................................................................................................20
16. INDEPENDENT CONTRACTOR.......................................................................................20
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17. DUE DILIGENCE AND ASSUMPTION OF RISK.........................................................................21
18. MISCELLANEOUS................................................................................................21
19. ENTIRE AGREEMENT.............................................................................................22
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EXHIBIT A - FRANCHISE AGREEMENT
EXHIBIT B - COVENANT AND AGREEMENT FOR CONFIDENTIALITY (PRINCIPAL)
EXHIBIT C - COVENANT AND AGREEMENT FOR CONFIDENTIALITY (EMPLOYEES)
SCHEDULE 4.A. - CONCEPT FEE AND PRE-PAID FRANCHISE FEE
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DEVELOPMENT AGREEMENT
[COUNTRY]
This DEVELOPMENT AGREEMENT is entered into as [Dev Agmt Date] by and
among TGI FRIDAY'S INC., a New York corporation, with its principal place of
business in Dallas, Texas, United States of America, [DEVELOPER NAME], with
its principal place of business in [Place of Business] and [Principals?].
RECITALS
WHEREAS, Grantor has developed in the United States and owns the
System;
WHEREAS, Grantor intends to identify the System in the Territory
with the Proprietary Marks;
WHEREAS, Developer wishes to obtain certain rights to develop
Restaurants under the System in the Territory; and
WHEREAS, _________ and __________ own and have the right to vote
___% and ___%, respectively (collectively 100%), of the Securities of
Developer
NOW, THEREFORE, the parties, in consideration of the undertakings
and commitments set forth herein, agree as follows:
1. DEFINITIONS
As used in this Agreement the following words and phrases shall have the
meanings attributed to them in this Section:
ACCOUNT - an account designated by Grantor to receive Payments
ACTION - any cause of action, suit, proceeding, claim, demand, investigation
or inquiry (whether a formal proceeding or otherwise) with respect to which
Developer's indemnity described in Section 12 applies
AFFILIATE - Carlson Restaurants Worldwide Inc. or any subsidiary thereof or
of Grantor
AGREEMENT - this Development Agreement
BUSINESS DAYS - Each day except Saturday, Sunday and national legal holidays
under the laws of the country of the recipient of the notice
COMMENCEMENT DATE - [Dev Agmt Date]
COMPETING BUSINESS - a restaurant business offering the same or similar
products and services as offered by restaurants in the System, including,
without limitation, waiter/waitress service, sit-down dining and bar services
CONFIDENTIAL INFORMATION - the terms of the Development Agreement and
Franchise Agreement and any amendments thereto, the System, the Development
Manual, the Manuals (as defined in the Franchise Agreement), other manuals,
the Standards, written directives and all drawings, equipment, recipes,
computer and point of sale programs (and output from such programs); and all
other information know-how, techniques, materials and data imparted or made
available by Grantor which is (i) designated as
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confidential, (ii) known by Developer to be considered confidential by
Grantor, or (iii) by its nature inherently or reasonably considered
confidential
CONCEPT FEE - a fee in United States dollars calculated as described on
Schedule 4.A. paid to Grantor by Developer in consideration of (a) certain
administrative and other expenses previously incurred by Grantor in
connection with this Agreement and with respect to the Proprietary Marks and
(b) Grantor's prior development in the United States of the System, the
Standards and the Confidential Information
DEVELOPER - [Developer Name]
DEVELOPMENT MANUAL - Grantor's manual, as amended from time to time in
Grantor's reasonable discretion, describing (generally) the procedures and
parameters for the development of T.G.I. Friday's restaurants
DEVELOPMENT MATERIALS - a description of the Site, a feasibility study
(including, without limitation, demographic data, photographs, maps, artists'
renderings, site plans, a summary (in English) of the Occupancy Contract, and
documentation indicating Developer's prospects to acquire the Site) and such
other information as Grantor reasonably requests
DEVELOPMENT SCHEDULE - the schedule pursuant to which Developer shall develop
Restaurants in the Territory (SEE Section 3.A.)
DIRECTOR OF OPERATIONS - an individual designated as described in Section
5.B. who shall devote his full time and best efforts to the management and
supervision of (i) Developer's duties and obligations hereunder; and (ii) the
operation of the Restaurants
EVENT OF DEFAULT - as defined in Section 10.A.
FRANCHISE AGREEMENT - an agreement pursuant to which Developer shall
construct and operate a Restaurant, substantially in the form attached as
EXHIBIT A; which agreement may be modified at the time of signing only in the
event of the following: (i) changes in local law which affect the
enforceability of said agreement; (ii) changes in the System which require
clarification in the agreement; or (iii) identification of typographical
errors in the form
FRANCHISE FEE - a per Restaurant fee in United States dollars paid by
Franchisee to Franchisor, each as defined in the Franchise Agreement (SEE
Section 3.01 of Exhibit A)
GRANTOR - TGI FRIDAY'S INC., a New York (U.S.) corporation
HEADQUARTERS - the location(s) in the United States designated from time to
time by Grantor where Developer personnel shall complete training
IN-COUNTRY EXPENSES - such costs and expenses incurred by or assessed with
respect to Grantor's (or other described party's) employees, agents and/or
representatives in connection with activities traveling to or in the
Territory pursuant to this Agreement, including, without limitation,
hotel/lodging, transportation and meals
INDEMNITEES - Grantor and its directors, officers, employees, agents,
shareholders, affiliates, successors and assigns and the respective
directors, officers, employees, agents, shareholders and affiliates of each
LESSOR - the party owning or controlling the Site and being a party (with
Developer) to the Occupancy Contract
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LOSSES AND EXPENSES - compensatory, exemplary or punitive damages; fines,
penalties, charges and fees (including reasonable attorney's, accounting and
consultant fees); interest, court costs, settlement or judgment amounts and
other similar amounts incurred or suffered by the Indemnitees in connection
with any Action; PROVIDED, HOWEVER, that Losses and Expenses shall not
include loss of reputation, goodwill or other losses of a similar nature
MULTI-UNIT MANAGER(S) - an/the individual(s) designated as described in
Section 5.D. who shall be solely dedicated to the management and supervision
of the Restaurants
OCCUPANCY CONTRACT - the agreement pursuant to which Developer shall occupy
any Site
OTHER CONCEPTS - Retail, wholesale, restaurant, bar, tavern, take-out or any
other type of business involving the production, distribution or sale of food
products, beverages, services, merchandise or other items in connection with
the use of the word "Friday's" or letters "T.G.I.", utilizing a system other
than the System pursuant to which a T.G.I. Friday's Restaurant is operated.
PAYMENTS - all transfers of funds from Developer to Grantor, including,
without limitation, the Concept Fee, the Pre-Paid Franchise Fee and
reimbursement of expenses
PERMANENT DISABILITY - any physical, emotional or mental injury, illness or
incapacity which would prevent the afflicted person from performing his
obligations hereunder for more then ninety (90) consecutive days as
determined by a licensed physician selected by Grantor
PRELIMINARY SITE CONSENT - written communication from Grantor to Developer
notifying Developer that a proposed site has received the consent of the
Grantor's Site Review Committee
PRE-PAID FRANCHISE FEE - a fee in United States dollars calculated as
described on Schedule 4.A. paid to Grantor by Developer which will be
credited as described in Section 4.A.
PRINCIPAL(S) - _____ and _____ who are (and such other persons or entities
which are from time to time) the record and beneficial owners of, and have
the right to vote, ____% and _____% (collectively 100%), of the Securities
of Developer
PROPRIETARY MARKS - certain trademarks, trade names, service marks, emblems
and indicia of origin designated by Grantor from time to time in connection
with the operation of T.G.I. Friday's restaurants pursuant to the System in
the Territory
PUBLICLY-HELD ENTITY - a corporation or other entity whose equity securities
are (i) registered pursuant to applicable law; (ii) widely held by the
public; and (iii) traded on a public securities exchange pursuant to
applicable law
REPRESENTATIVE - an individual, designated as described in Section 5.A.,
authorized to act on behalf of, and bind, Developer with respect to this
Agreement
RESTAURANT(S) - T.G.I. Friday's restaurant(s) developed pursuant to this
Agreement.
SECURITY - the capital stock of, partner's interest in, or other equity
interest (including the right to vote) in Developer, including such interests
issued or created subsequent to the date hereof
SITE - the proposed location of any Restaurant
STANDARDS - the standards and specifications, as amended from time to time,
contained in, and being a part of, the Confidential Information pursuant to
which Developer shall develop and operate Restaurants in the Territory
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SYSTEM - a unique, proprietary system developed and owned by Grantor for the
establishment and operation of T.G.I. Friday's restaurants, including,
without limitation, distinctive exterior and interior design, decor, color
scheme and furnishings; special recipes, menu items and full service bar;
uniform standards, products, services and specifications; procedures with
respect to operations and inventory and management control (including
accounting procedures and policies); training and assistance; and advertising
and promotional programs (as further developed by Grantor from time to time)
TERM - the duration of this Agreement commencing on the Commencement Date and
continuing until ___________, 19__, unless sooner terminated as provided
herein
TERRITORY - [Country], as geographically constituted on the date hereof
[NOTE: Are there any territorial issues disputes that need to be addressed?]
TRANSFER - the sale, assignment, conveyance, pledge, mortgage or other
encumbrance, whether direct or indirect, of (i) this Agreement; (ii) any or
all rights or obligations of Developer herein; or (iii) any interest in any
Security, including the issuance of any new Securities
TGIFM - TGI Friday's of Minnesota Inc., a Minnesota (U.S.) corporation and a
subsidiary of Grantor
UNCITRAL ARBITRATION RULES - the arbitration rules of the United Nations
Commission on International Trade Law
WAGE EXPENSES - such wages and/or salaries (including a reasonable allocation
of the cost of benefits) of, or with respect to, Grantor's (or other
described party's) employees, agents and/or representatives to be reimbursed
to Grantor or such party as described herein
2. EXCLUSIVE RIGHTS; TERM
A. Grantor grants to Developer the right, and Developer
accepts the obligation, subject to the terms and conditions herein, to
develop and operate [# of Rest] Restaurants pursuant to the System in the
Territory (excluding, however, airport properties and rail depots). For so
long as no Event of Default has occurred under this Agreement and is
continuing and no event has occurred under this Agreement which, with the
giving of notice or lapse of time, or both, would constitute an Event of
Default, Grantor will neither develop, nor authorize any other person to
develop, T.G.I. Friday's restaurants under the System in the Territory
(except as may be located within airport properties or rail depots) during
the Term.
B. Grantor expressly reserves the right, and Developer
acknowledges that Grantor has the exclusive, unrestricted right, to develop
and operate, directly and indirectly, through its employees, developers,
franchisees, licensees, agents and others within the Territory, Other
Concepts. Such Other Concepts may compete with Developer directly or
indirectly.
C. Subject to Sections 3 and 4 hereof, Developer shall
exercise the rights granted herein for each Restaurant by executing,
delivering and otherwise performing pursuant to a Franchise Agreement.
D. Unless sooner terminated as provided herein, this Agreement
shall commence on the Commencement Date and continue until the expiration of
the Term.
E. Upon any termination of this Agreement, (i) Developer shall
not develop additional Restaurants in the Territory (PROVIDED, HOWEVER, that
Developer may complete development of and/or operate Restaurants under then
existing Franchise Agreements subject to the terms and conditions thereof);
and (ii) Grantor may develop, or authorize others to develop, T.G.I. Friday's
restaurants in the
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Territory.
3. DEVELOPMENT SCHEDULE; SITE SELECTION
A. Developer shall develop Restaurants in the Territory
pursuant to the Development Schedule as follows:
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RESTAURANT NO. DATE OPEN & DATE OF FINAL SITE DATE FRANCHISE DATE CONSTRUCTION DATE ALL
OPERATING CONSENT AGREEMENT SIGNED & BEGINS MANAGERS MUST BE
FRANCHISE FEE PAID TRAINED
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9 mos prior to open 6 mos prior to open 6 mos prior to 2 mos prior to
open open
- ---------------- ----------------- ---------------------- ------------------------ ------------------- ------------------
- ---------------- ----------------- ---------------------- ------------------------ ------------------- ------------------
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(i) The Franchise Agreement for each restaurant location
must be fully-executed and all franchise fees paid within the time frames set
forth in the foregoing Development Schedule.
(ii) Time is of the essence with respect to each of the
development obligations specified in this Section 3.
(iii) The Development Schedule requires that the cumulative
number of Restaurants described above be OPEN AND OPERATING by the date(s)
specified. Grantor's consent to any Site or execution of a Franchise
Agreement SHALL NOT waive, extend or modify the Development Schedule.
B. Prior to execution of each Franchise Agreement, Developer
shall obtain Grantor's consent to each Site pursuant to the time frames set
forth in Section 3.A. above in accordance with Grantor's then existing Site
selection criteria and procedures including:
(1) submission of all Development Materials to
Grantor; and
(2) with respect to each Restaurant to be developed
hereunder, completion of one (1) Site visit by Grantor if required by
Grantor. Developer shall bear the In-Country Expenses in connection with each
such visit.
In addition, Grantor may make a minimum of two (2) visits to the
Territory per year for purposes of conducting a more general review of
available Sites in the Territory. Such visits shall be scheduled in
coordination with Developer. Developer shall bear the In-Country Expenses in
connection with any such visit.
C. Within thirty (30) days following receipt of all
Development Materials and completion of any such visit, Grantor shall consent
to or reject such Site. Grantor's failure to consent shall constitute
rejection of such Site. Promptly after Grantor's consent is obtained and
prior to commencing construction, Developer shall execute a Franchise
Agreement and pay the Franchise Fee.
D. Neither Grantor's (i) consent to nor (ii) assistance in the
selection of, any Site shall constitute Grantor's representation or warranty
that a Restaurant operated at such Site will be profitable or meet any
financial projection.
E. Developer shall furnish Grantor a complete copy of the
Occupancy Contract within ten (10) days after execution. Such copy may be in
[native language] if accompanied by Developer's certificate to the effect
that (i) the terms and conditions of the Occupancy Contract are not
inconsistent
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with the summary delivered as part of the Development Materials; and (ii) the
following covenants are included therein and directing Grantor to such
covenants:
(1) Lessor shall deliver to Grantor, simultaneously with
delivery to Developer, any notice alleging Developer's default under the
Occupancy Contract which threatens or purports to terminate the Occupancy
Contract;
(2) Grantor may enter the Restaurant premises to protect
the Proprietary Marks or the System or to cure any Event of Default or
default under the Occupancy Contract or the applicable Franchise Agreement;
(3) Developer may assign the Occupancy Contract to Grantor
without any fee or modification thereof and Grantor may assign or sublease
the Occupancy Contract or license the Restaurant premises for any part of the
remaining term of the Occupancy Contract, each without Lessor's consent; and
(4) Lessor and Developer shall not amend the Occupancy
Contract in any way which is inconsistent with the provisions of Sections
3.E.(1) through (4), inclusive.
F. Notwithstanding the terms of Section 3.E., Developer shall:
(1) deliver to Grantor, immediately after delivery to or by
Developer, any notice of default under the Occupancy Contract which threatens
or purports to terminate the Occupancy Contract;
(2) permit Grantor to enter the Restaurant premises to
protect the Proprietary Marks or the System or to cure any Event of Default
or default under the Occupancy Contract or the applicable Franchise
Agreement; and
(3) not amend the Occupancy Contract in any way which
is inconsistent with the provisions of Sections 3.E.(1) through (4),
inclusive.
G. Grantor shall provide Developer with one (1) Development
Manual "on loan" and two (2) sets of Grantor's standard plans and
specifications in existence as of the date hereof for the construction of a
typical T.G.I. Friday's restaurant in the United States. Developer
acknowledges that the Development Manual and all other materials to be
provided hereunder shall be in the English language. Developer acknowledges
Grantor's ownership of any copyright rights in or to such materials.
Developer shall observe Grantor's reasonable requests concerning copyright
notices. The Development Manual and such plans shall be returned to Grantor
immediately upon termination or expiration of this Agreement.
H. Grantor shall provide such consultation as it reasonably
deems necessary to consent to vendors and products proposed to be used in
Restaurant development and operation. Should consultation require, in
Grantor's reasonable judgment, that Grantor's personnel visit the Territory,
the In-Country Expenses of such personnel in connection with such
consultation shall be borne or reimbursed by Developer.
4. FEES AND PAYMENTS
A. Developer shall pay the Concept Fee and the Pre-Paid
Franchise Fee to Grantor upon execution of this Agreement. The Pre-Paid
Franchise Fee shall be credited toward the Franchise Fee as shown on Schedule
4.A. Developer acknowledges (i) that the Concept Fee reflects and is in
consideration of (a) certain administrative and other expenses previously
incurred by Grantor in connection with this Agreement and with respect to the
Proprietary Marks and (b) Grantor's prior development of the System,
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the Standards and the Confidential Information; (ii) that the Pre-Paid
Franchise Fee reflects and is in consideration of, in part, Grantor's lost
opportunity to develop Restaurants in the Territory; (iii) that the Concept
Fee and the Pre-Paid Franchise Fee are reasonable in amount; and (iv) that
the Concept Fee and the Pre-Paid Franchise Fee are non-refundable.
B. (1) All Payments shall be made in United States dollars
by deposit in the Account in immediately available funds. If United States
dollars are not available in the local currency market, Payments shall be
made in a currency and/or jurisdiction designated by Grantor. Acceptance of
any Payment in a currency other than United States dollars shall not release
Developer's obligation to make future Payments in United States dollars.
(2) To the extent any Payment requires conversion, such
amount shall be converted using the "interbank" exchange rate (or other rate
Grantor reasonably designates) using the "buy rate" United States dollar
purchase price (or at the purchase price for such other currency Grantor
designates pursuant to Section 4.B.(1)) as published at the end of the day by
such financial institution Grantor designates on (i) the date of Grantor's
invoice therefor; or (ii) the date hereof in the case of the Concept Fee and
the Pre-Paid Franchise Fee. All costs of currency exchange and all currency
risk shall be borne by Developer.
(3) Payments shall be deposited (i) upon execution hereof
in the case of the Concept Fee and the Pre-Paid Franchise Fee; or (ii) not
more than thirty (30) days after date of invoice. Delinquent Payments shall
bear interest from the due date until deposited at eighteen percent (18%) per
annum or the maximum rate permitted by law, whichever is less. Conversion of
any interest amounts into United States dollars shall occur on the due date
or the date of the applicable invoice.
C. (1) Subject to Section 4.C.(2), all Payments shall be
made net of, and Developer shall pay from its own funds to the appropriate
taxing authority, any and all applicable withholding tax, value added tax or
similar tax or fee, it being the parties' intention that all Payments to
Grantor hereunder shall be absolutely net. Developer shall deliver to Grantor
receipts certifying that such taxes or fees have been paid. Any taxes or
duties imposed upon or with respect to this Agreement or any materials,
supplies or specifications acquired by or provided to Developer pursuant to
or in connection with this Agreement shall be paid by Developer.
(2) Notwithstanding Section 4.C.(1), Developer shall (i)
withhold from Payments of the Concept Fee and Pre-Paid Franchise Fee any
applicable withholding tax, value added tax or similar tax or fee; (ii) pay
such tax to the appropriate authority; and (iii) deliver to Grantor receipts
therefor as described in Section 4.C.(1).
D. Developer shall not withhold or off-set any portion of any
Payment due to Grantor's alleged non-performance hereunder.
E. All In-Country Expenses shall be incurred for the account of,
and directly billed to, Developer. When such direct billing is not feasible,
Developer shall reimburse such expenses to Grantor upon receipt of invoice.
5. REPRESENTATIVE; DIRECTOR OF OPERATIONS; MANAGERS; TRAINING
A. Developer hereby designates [Rep Name] as the Representative.
Any replacement Representative shall be designated within ten (10) days of
the prior Representative's resignation or termination. Each Representative
shall attend and successfully complete at Headquarters Grantor's "Owner's
Orientation Program" (currently approximately four (4) weeks). The
Representative hereunder and under each Franchise Agreement shall be the same
individual.
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B. Developer shall designate the Director of Operations within
thirty (30) days of the date hereof. Any replacement Director of Operations
shall be designated within ten (10) days of the prior Director of Operations'
resignation or termination. Each Director of Operations shall attend and
successfully complete at Headquarters within six (6) months of appointment
Grantor's training program required for general managers (SEE Section 5.C.).
The Director of Operations hereunder and under each Franchise Agreement shall
be the same individual.
C. At least six (6) managers (general manager, assistant general
manager, kitchen manager and other managers) are required with respect to the
initial Restaurant developed hereunder. Such managers shall attend and
successfully complete at Headquarters Grantor's training program for managers
of T.G.I. Friday's restaurants in the United States (currently approximately
twenty-one (21) weeks). Subject to Grantor's approval, subsequent managers
(except general managers) may be trained by Headquarters-trained general
managers in training Restaurants to which Grantor has consented. Any
previously trained manager who is to become a general manager shall attend
and successfully complete at Headquarters Grantor's training program for
general managers of T.G.I. Friday's restaurants in the United States
(currently approximately four (4) weeks).
D. When the Franchise Agreement for the third Restaurant is
executed, Developer shall designate the Multi-Unit Manager. Additional
Multi-Unit Managers shall be designated from time to time as reasonably
required by Grantor. Prior to assuming his duties, each Multi-Unit Manager
shall have successfully completed general manager training and shall attend
at Headquarters and successfully complete Grantor's training program for
multi-unit managers (currently approximately four (4) weeks).
E. Grantor shall have the right to interview and consent to each
Director of Operations, each Multi-Unit Manager and all Restaurant managers.
Grantor shall endeavor to conduct such interviews in the Territory, but
Grantor may require that such interviews occur at Headquarters at Developer's
expense.
F. Developer shall bear all costs and expenses relating to the
training of any Representative, Director of Operations, Multi-Unit Manager
and general, assistant, kitchen and other manager.
G. Grantor shall provide instructors, facilities and materials
for Headquarters training. All personnel trained at Headquarters and all
management employees at each Restaurant shall be fluent in [native language]
and in the English Language. All training shall be in the English language.
In the event a translator is required for training of Developer's employees
at any Site, Developer shall provide, at its expense, such translator (to
whom Grantor must consent).
H. Developer shall designate an individual who will be
responsible for sourcing food and beverage products ("F&B Director") within
sixty (60) days of the date hereof. Any replacement F&B Director shall be
designated within ten (10) days of the prior F&B Director's resignation or
termination. Each F&B Director shall dedicate sufficient time to this work to
enable the timely development of menus and sourcing and procurement of food
and beverage items which will be required to operate each Restaurant. The F&B
Director hereunder and under each Franchise Agreement shall be the same
individual. Within ninety (90) days of the date hereof and from time to time
thereafter, as Grantor deems necessary, Grantor's representative may visit,
at Developer's expense, the Developer in the Territory to ascertain the
availability of locally-sourced material, food and beverages.
6. CONFIDENTIAL INFORMATION
A. (1) Neither Developer nor any Principal shall
communicate, disclose or use any Confidential Information except as (i)
permitted herein or (ii) required by law. Confidential Information
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shall be disclosed only to such employees of Developer as is required in
connection with performance of job functions. Neither Developer nor any
Principal shall, without Grantor's prior consent, copy, duplicate, record or
otherwise reproduce any Confidential Information. Confidential Information
may be provided to consultants and contractors only to the extent necessary
for such parties to provide services to Developer. Developer shall indemnify
the Indemnitees from any damages, costs or expenses resulting from or related
to any disclosure or use of Confidential Information by its agents,
employees, consultants and contractors.
(2) Developer and each Principal acknowledge Grantor's
exclusive ownership of the Confidential Information and the System, and
TGIFM's exclusive ownership of, and Grantor's license with respect to, the
Proprietary Marks. Neither Developer nor any Principal shall, directly or
indirectly, contest or impair Grantor's or TGIFM's exclusive ownership of,
and/or license with respect to, the Confidential Information, the System or
the Proprietary Marks.
B. If Developer develops improvements (as determined by Grantor)
to the Confidential Information, Developer and the Principals shall each
execute an amendment to this Agreement reflecting such improvements and
Grantor's or TGIFM's exclusive ownership thereof. All such improvements shall
be Confidential Information.
C. Each Principal shall execute and deliver to Grantor a
covenant in the form attached as EXHIBIT B. Developer shall cause each
Director of Operations, Representative, Multi-Unit Manager, general, kitchen
and other managers and such other employees of Developer whom Grantor shall
designate to execute and deliver to Grantor a covenant in the form attached
as EXHIBIT C. Notwithstanding the execution of such covenant, Developer shall
indemnify the Indemnitees from any damages, costs or expenses resulting from
or related to any disclosure or use of Confidential Information by any
Principal, Director of Operations, Representative, Multi-Unit Manager,
general, kitchen and other managers and other employees of Developer.
D. Immediately upon any termination or expiration of this
Agreement, Developer and each Principal shall return to Grantor the
Confidential Information (and any copies thereof), including that portion of
the Confidential Information which consists of analyses, compilations,
studies or other documents containing or referring to any part of the
Confidential Information prepared by Developer or such Principal, their
agents, representatives or employees.
7. DEVELOPER'S REPRESENTATIONS AND WARRANTIES; AFFIRMATIVE AND NEGATIVE
COVENANTS
A. Developer represents and warrants to Grantor as follows:
(1) Developer is a corporation or partnership, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with all requisite power and authority to
own, operate and lease its assets (real or personal), to carry on its
business, to enter into this Agreement and perform its obligations hereunder.
Developer is duly qualified to do business and is in good standing in each
jurisdiction in which its business or the ownership of its assets requires.
(2) The execution, delivery and performance by Developer
of this Agreement, any Franchise Agreement and all other agreements
contemplated herein has been duly authorized by all requisite corporate or
partnership action and no further action is necessary to make this Agreement,
any Franchise Agreement or such other agreements valid and binding upon it
and enforceable against it in accordance with their respective terms. Neither
the execution, delivery nor performance by Developer of this Agreement, any
Franchise Agreement or any other agreements contemplated hereby will conflict
with, or result in a breach of any term or provision of Developer's
certificate or articles of incorporation,
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corporate charter, by-laws or partnership agreement or under any indenture,
mortgage, deed of trust or other contract or agreement to which Developer is
a party or by which it or any of its assets are bound, or breach any order,
writ, injunction or decree of any court, administrative agency or
governmental body.
(3) Developer's certificate or articles of incorporation,
corporate charter, by-laws, partnership agreement and other governing
documents expressly limit Developer's business activities solely to the
development and operation (pursuant to this Agreement and the Franchise
Agreements) of the Restaurants.
(4) Certified copies of Developer's certificate or
articles of incorporation, corporate charter, by-laws, partnership agreement,
other governing documents and any amendments thereto, including board of
director's or partner's resolutions authorizing this Agreement, each
translated into the English language, have been delivered to Grantor.
(5) Certified list of the shareholders of Developer,
including the number and type of shares owned by each shareholder.
(6) Developer's certificate or articles of incorporation,
corporate charter or partnership agreement limit Transfers as described in
Sections 8.B. and 8.C.
(7) If Developer is (i) a corporation, each Security
shall bear a legend (in a form to which Grantor consents) indicating that; or
(ii) a partnership, its partnership agreement shall provide (in a form to
which Grantor consents) that, any Transfer is subject to Sections 8.B. and
8.C.
B. Developer affirmatively covenants with Grantor as follows:
(1) Developer shall perform its duties and obligations
hereunder and under any Franchise Agreement and shall require each Director
of Operations, Multi-Unit Manager and general, assistant general, kitchen and
other managers to dedicate their respective full time and best efforts to the
development, construction, management, operation, supervision and promotion
of the Restaurants.
(2) Developer shall promptly provide to Grantor, without
charge, any information concerning any new process or improvements in the
development, construction, management, operation, supervision or promotion of
the Restaurants developed by Developer or any Principal. Any such process or
improvement shall be Grantor's exclusive property.
(3) Developer shall comply with all requirements of
applicable laws, rules, regulations and ordinances.
(4) Developer shall maintain a current list of all
Principals and deliver a certified copy thereof to Grantor upon (i) any
Transfer; or (ii) request.
(5) Each Security issued subsequent to the date hereof
shall bear a legend (in a form acceptable to Grantor) indicating that any
Transfer is subject to Sections 8.B. and 8.C.
C. Developer acknowledges to and/or negatively covenants with
Grantor as follows:
(1) Developer shall not amend its certificate or articles
of incorporation, corporate charter, by-laws, partnership agreement or other
governing documents in a manner which is inconsistent with Sections 7.A.(3),
8.B. and 8.C.
(2) Developer shall not remove or permit removal from any
Security or its partnership
<PAGE>
agreement, or issue any Security that does not have endorsed upon it, the
legend described in Section 7.A.(7).
(3) Developer and each Principal shall receive valuable,
unique training, trade secrets and the Confidential Information which are
beyond the present skills, experience and knowledge of Developer, any
Principal and Developer's employees. Developer and each Principal acknowledge
that (i) such training, trade secrets and the Confidential Information (a)
are essential to the development of the Restaurants and (b) provide a
competitive advantage to Developer; and (ii) access to such training, trade
secrets and the Confidential Information is a primary reason for their
execution of this Agreement. In consideration thereof, Developer and each
Principal covenant that, during the Term and for a period of two (2) years
after the expiration or termination of this Agreement, neither Developer nor
any Principal shall, directly or indirectly:
(a) employ or seek to employ any person (or
induce such person to leave his or her employment) who is, or has within
one (1) year been, employed as a director, officer or in any managerial
capacity (i) by Grantor; (ii) by any developer or franchisee of Grantor; or
(iii) in any other concept or system owned, operated or franchised by an
Affiliate;
(b) own, maintain, operate or have any interest
in any Competing Business;
(c) own, maintain, operate or have any interest
in any Competing Business which business is, or is intended to be, located in
the Territory; or
(d) own, maintain, operate or have any interest
in any Competing Business which business is, or is intended to be, located
within a twenty (20) kilometer radius of any restaurant in the System (for
purposes of enforcement of this Section 7.C.(3)(d) the law of the
jurisdiction where such restaurant is located shall control).
(4) Sections 7.C.(3)(b), (c) and (d) shall not apply to
the acquisition by Developer of an interest for investment only of five
percent (5%) or less of the capital stock of a Publicly-Held Entity if such
owner is not a director, officer or manager therefor or consultant thereto.
D. Each of the foregoing covenants is independent of each other
covenant or agreement contained in this Agreement.
E. Grantor may, in its sole discretion, reduce the area,
duration or scope of any covenant contained in Section 7.C. without
Developer's or any Principal's consent, effective upon notice to Developer.
Developer and each Principal shall comply with any covenant as so modified.
F. Developer's representations, warranties, covenants and
agreements herein are continuing representations, warranties, covenants and
agreements, each of which shall survive the expiration or termination hereof.
8. TRANSFER
A. Grantor may assign this Agreement, or any of its rights or
obligations herein, to any person or entity without Developer's or any
Principal's consent; PROVIDED, HOWEVER, that any such assignment shall not
affect Developer's rights hereunder.
B. (1) Developer and each Principal acknowledge that
Developer's rights and obligations herein and in each Franchise Agreement are
personal to Developer and that Grantor has entered into this Agreement and
will enter into each Franchise Agreement relying upon the business skill,
<PAGE>
experience and aptitude, financial resources and reputation of Developer and
each Principal. Therefore, neither Developer nor any Principal, or their
respective successors or permitted assigns, shall complete, or allow to be
completed, any Transfer without Grantor's consent. Any purported Transfer, by
operation of law or otherwise, without Grantor's consent shall be null and
void and constitute an Event of Default.
(2) Grantor may require satisfaction of any of the
following conditions, and such other conditions as Grantor may reasonably
require, prior to consenting to any Transfer:
(a) (i) no Event of Default shall have occurred
under this Agreement and be continuing, and (ii) no event shall have occurred
under this Agreement which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default;
(b) Developer and/or any affected Principal shall
deliver a general release of any and all claims against the Indemnitees,
including, without limitation, claims arising under this Agreement and any
Franchise Agreement, in a form acceptable to Grantor;
(c) Developer and/or any affected Principal shall
remain liable for the performance of its obligations, covenants and
agreements herein through the date of transfer and shall execute all
instruments reasonably requested by Grantor to evidence such liability;
(d) the transferee and all owners of any record
or beneficial interest in the capital stock (or other interest) thereof shall
(i) make each of Developer's and Principal's representations and warranties;
(ii) assume full, unconditional, joint and several liability for, and agree
to perform from the date of Transfer, each of Developer's and Principal's
obligations, covenants and agreements herein; and (iii) execute all
instruments (in a form acceptable to Grantor) reasonably requested by Grantor
to evidence the foregoing;
(e) the transferee shall satisfy, in Grantor's
reasonable judgment, Grantor's then existing criteria for international
developers or principals, including, without limitation: (i) education; (ii)
business skill, experience and aptitude; (iii) character and reputation; and
(iv) financial resources;
(f) the transferee and its owners shall execute
(without extending the Term) the standard form of development agreement then
being offered to new System developers in international markets or other form
of this Agreement and such other ancillary agreements as Grantor may request,
all of which shall supersede this Agreement and its ancillary documents and
the terms of which may differ from the terms hereof; PROVIDED, HOWEVER, that
the transferee shall not be required to pay the Pre-Paid Franchise Fee
(transferee shall pay all Franchise Fees and other fees described in each
Franchise Agreement); and
(g) at the transferee's expense, the transferee's
Representative, any Multi-Unit Manager(s), Director of Operations, general
manager(s) and other managers shall complete such training as then required
(if not previously trained pursuant to the terms hereof), upon such terms and
conditions as Grantor may reasonably require.
C. Developer and each Principal agree that (i) no Transfer
(including the issuance of any new Securities) shall occur without Grantor's
prior written consent; (ii) Grantor shall have and is hereby granted a right
of first refusal and option with respect to any Transfer; (iii) should any
Principal desire to accept a BONA FIDE offer to so Transfer or should
Developer desire to issue or sell any new Securities, such party shall
promptly notify Grantor thereof and shall provide such information and
documents relating thereto as Grantor may require; (iv) within thirty (30)
days after receipt of such notice and documents, Grantor may notify such
party that it intends to complete such Transfer upon such terms and
conditions (PROVIDED, HOWEVER, that (a) Grantor may elect to make payment in
United States dollars or such other
<PAGE>
currency Grantor designates and (b) such transaction shall be consummated
within a reasonable period of time after Grantor has given such notice); (v)
any material change in the terms of any offer or any change in the identity
of the proposed transferee shall constitute a new offer subject to Grantor's
right and option; and (vi) Grantor's failure to exercise such right and
option shall not constitute a waiver of such right and option with respect to
future offers.
D. In the event Developer requests Grantor's consent to any
proposed Transfer, there shall be paid to Grantor a non-refundable fee to
compensate Grantor for its costs and expenses associated with reviewing the
proposed Transfer, including, without limitation, travel costs and expenses,
legal and accounting fees and diversion of employee resources. No such fee
shall be payable with respect to a transaction with Grantor described in
Section 8.C.
E. In the event any Principal is a natural person, Developer
shall promptly notify Grantor of the death or Permanent Disability of such
Principal. Any Transfer upon death or Permanent Disability shall be subject
to the terms and conditions described in Sections 8.B.(2) and 8.C. and shall
be completed prior to a date which is (i) one (1) year after date of death;
or (ii) ninety (90) days after the date such Principal becomes, or is deemed
to be, Permanently Disabled. Any Principal refusing to submit to examination
with respect to Permanent Disability shall be deemed Permanently Disabled.
F. Grantor's consent to any Transfer shall not constitute a
waiver of (i) any claims it may have against the transferor; or (ii) the
transferee's compliance with the terms hereof.
9. CONSENT AND WAIVER
A. When required, Developer or any Principal shall make written
request for Grantor's consent in advance and such consent shall not be deemed
given by Grantor unless it is set forth in writing. Grantor's consent shall
not be unreasonably withheld, except as expressly provided herein.
B. Grantor makes no representations or warranties upon which
Developer or any Principal may rely and assumes no liability or obligation to
Developer, any Principal or any third party by providing any waiver,
approval, advice, consent or services to Developer or due to any delay or
denial thereof.
10. DEFAULT AND REMEDIES
A. The following shall constitute Events of Default by
Developer: (i) failure to comply with the Development Schedule; (ii) the
breach or falsity of any representation or warranty herein; (iii) failure to
deliver executed covenants as required in to Section 6.C.; (iv) failure to
comply with or perform its covenants, obligations and agreements herein; (v)
any Transfer that (a) occurs other than as provided in Section 8 or (b) fails
to occur within the time periods described in Section 8 (notwithstanding any
lack of, or limits upon, the enforceability of any term or provision of
Sections 7.A.(6) or 8.B.); (vi) failure to make any Payment on or before the
date payable; (vii) failure to meet and/or maintain the Standards; (viii)
Developer (a) is adjudicated, or is, bankrupt or insolvent, (b) makes an
assignment for the benefit of creditors, or (c) seeks protection from
creditors by petition in bankruptcy or otherwise or there is filed against
Developer a similar petition which is not dismissed within thirty (30) days;
(ix) the appointment of a liquidator or receiver that is not dismissed within
thirty (30) days of appointment for (a) all or substantially all of
Developer's assets or (b) any Restaurant; (x) breach or failure to perform
any other term or condition of this Agreement; (xi) an event of default shall
arise under any Franchise Agreement; (xii) Developer or any Principal pleads
guilty to or is convicted of a felony or a crime involving moral turpitude or
any other crime or offense that Grantor reasonably believes is likely to
adversely affect the System or the goodwill associated therewith (whether in
the United States, the Territory or elsewhere) or Grantor's interest
<PAGE>
therein; or (xiii) any (a) two (2) or more Events of Default shall arise
under any single Section of this Section 10.A. or (b) three (3) or more
Events of Default shall arise under this Section 10.A., in any continuous
twelve (12) month period, notwithstanding the previous cure of such Events of
Default.
Grantor shall not exercise any remedies available hereunder
with respect to the following described Events of Default unless such Events
of Default remain uncured after notice from Grantor thereof and the
expiration of the following cure periods:
(a) with respect to any Event of Default arising under
Section 10.A.(vi) - ten (10) days; or
(b) with respect to any Event of Default arising under
Sections 10.A.(i)-(v) inclusive, (vii) and (x) - thirty (30) days.
No such limitation upon Grantor's right to exercise remedies
shall exist with respect to Events of Default arising under Sections
10.A.(viii), (ix) or (xi) through (xiii), inclusive.
B. Upon the occurrence of an Event of Default, Grantor may
exercise one or more of the following remedies or such other remedies as
may be available at law or in equity:
(1) cure such Event of Default at Developer's expense
and, in connection therewith Developer (i) hereby grants to Grantor all
rights and powers necessary or appropriate to accomplish such cure; (ii)
shall indemnify and hold the Indemnitees harmless from and against all costs,
expenses (including reasonable fees of counsel and other engaged
professionals), liabilities, claims, demands and causes of action (including
actions of third parties) incurred by or alleged against any Indemnitee in
connection with Grantor's cure; and (iii) shall reimburse or pay such costs
or damages within ten (10) days of receipt of Grantor's invoice therefor;
(2) in the event of a material Event of Default,
terminate this Agreement and all rights granted hereunder, upon notice to
Developer, without waiving any (i) claim for damages suffered by Grantor; or
(ii) other rights, remedies or claims; or
(3) with respect to an Event of Default arising from a
breach of covenant contained in Section 7.C.(3)(a), the affected former
employer shall be compensated by the breaching party (and Developer shall be
additionally liable for breaches by any Principal) for the reasonable costs
and expenses incurred by such employer in connection with training such
employee. Developer and each Principal acknowledge that such expenses are
impossible to accurately quantify and agree that, as liquidated damages and
not as a penalty, an amount equal to such employee's annual rate of
compensation in the final twelve (12) months of employment (or an annualized
rate if employed for a shorter period) by such former employer shall be paid
by the breaching party to the former employer at such time as such employee
commences employment ; or
(4) with respect to an Event of Default for failure to
comply with the Development Schedule, Grantor may, at its discretion,
exercise any one or more of the following remedies:
(i) cause any Pre-Paid Franchise Fees then being
held by Grantor to be forfeited, in which case Developer (or Franchisee, as
the case may be) will be required to pay the full Franchise Fee (without
deduction of a Pre-Paid Franchise Fee) with respect to any Restaurants
developed after the date such Pre-Paid Franchise Fees are forfeited;
(ii) provided Grantor has not elected to terminate
this Agreement pursuant to Section 10.B.(2) above, require Developer to pay
to Grantor additional Pre-Paid Franchise Fees equal to
<PAGE>
fifteen percent (15%) of the Franchise Fee, multiplied by the number of
Restaurants remaining to be developed under the Development Schedule;
(iii) provided Grantor has not elected to terminate
this Agreement pursuant to Section 10.B.(2) above, require the Developer to
pay to Grantor the Franchise Fee for the next Restaurant coming due under the
Development Schedule in full on a date certain, even if such date certain is
prior to the date such Franchise Fee would have otherwise been due under this
Agreement;
(iv) provided Grantor has not elected to terminate
this Agreement pursuant to Section 10.B.(2) above, cause the Development
Schedule to be modified by (a) reducing the number of Restaurants the
Developer has a right to develop under this Agreement by the number of
Restaurants that have not been developed on a timely basis; or (b)
accelerating the schedule for future Restaurant development;
(v) provided Grantor has not elected to terminate
this Agreement pursuant to Section 10.B.(2) above, require the Developer to
pay to Grantor a sum equal to the amount of royalties that would have been
paid to Grantor had Developer opened, in accordance with Developer's
obligations under the Development Schedule, the Restaurant for which an Event
of Default has been declared, such amount to be calculated based on the
greater of: (a) the "pro forma" Gross Sales figures developed by Developer in
connection with the site consent process; or (b) the average unit gross sales
volume for all T.G.I. Friday's international restaurants for the year ended
prior to the first day of the year in which the default has been declared;
and/or
(vi) provided Grantor has not elected to
terminate this Agreement pursuant to Section 10.B.(2) above, in the event
that the Territory may, in the reasonable judgment of Grantor, be divided
into two or more territories for the development of T.G.I. Friday's
restaurants, Grantor may terminate Developer's rights to develop certain
portions of the Territory (thus terminating Developer's claims under this
Agreement with respect to such portions of the Territory) without terminating
Developer's rights to develop certain other portions of the Territory.
For purposes of this Section 10., "material" shall mean a
substantial deviation from the performance required. The parties agree that
Events of Default arising under Sections 10.A.(i), (v), (vi), (viii), (ix),
(xi), (xii) or (xiii) (without limitation) shall constitute material Events
of Default.
C. Developer and each Principal agree that Grantor's exercise of
the rights and remedies set forth herein are reasonable. Grantor may, in
addition to pursuing any other remedies, specifically enforce such
obligations, covenants and agreements or obtain injunctive or other equitable
relief in connection with the violation or anticipated violation of such
obligations, covenants and agreements without the necessity of showing (i)
actual or threatened harm; (ii) the inadequacy of damages as a remedy; or
(iii) likelihood of success on the merits, and without being required to
furnish bond or other security. Nothing in this Agreement shall impair
Grantor's right to obtain equitable relief.
D. Grantor's rights and remedies shall be cumulative, and not
exclusive, of any other right or remedy described herein or available at law
or in equity. The expiration or termination of this Agreement shall not
release Developer or any Principal from any liability or obligation then
accrued or any liability or obligation continuing beyond, or arising from,
such expiration or termination.
E. Grantor's failure to exercise any right or remedy or to
enforce any obligation, covenant or agreement herein shall not constitute a
waiver by, or estoppel of, Grantor's right to enforce strict compliance with
any such obligation, covenant or agreement. No custom or practice shall
modify or amend this Agreement. Grantor's waiver of, or failure or inability
to enforce, any right or remedy shall not impair Grantor's rights or remedies
with respect to subsequent Events of Default of the same, similar or
different nature. Grantor's delay, forbearance or failure to exercise any
right or remedy in connection with
<PAGE>
any Event of Default or default by other developers shall not affect, impair
or constitute a waiver of such rights or remedies. Acceptance of any Payment
shall not waive any Event of Default.
F. Developer and each Principal shall, jointly and severally,
pay all costs and expenses (including reasonable fees of counsel and other
engaged professionals) incurred by Grantor in successfully enforcing this
Agreement. The existence of any claims, demands or actions which either
Developer or any Principal may have against Grantor, whether arising from
this Agreement or otherwise, shall not constitute a defense to Grantor's
enforcement of Developer's or any Principal's representations, warranties,
covenants, obligations or agreements herein.
G. During the Term, the parties acknowledge that:
(1) if any governmental authority expropriates or
threatens to expropriate any of the assets of Developer;
(2) if any governmental authority expropriates or
threatens to expropriate any assets (including, but not limited to, the
intellectual property rights) of Grantor; or
(3) if Developer is prevented by any governmental
authority whether due to foreign exchange restrictions or for any other
reason from paying any Royalty Fee (as defined in the applicable Franchise
Agreement) or making any other payment to Grantor in United States Dollars
for a period of twelve (12) months, Grantor or Developer may, at either
party's option, terminate this Agreement on the giving of thirty (30) days
notice in writing to the other party.
H. In addition to all other rights and remedies set forth in
this Section 10, in the event that Developer shall fail, for any reason, to
comply with the Development Schedule, Grantor shall have the right to notify
Developer of such failure and to require Developer to immediately pay to
Grantor the total amount of unpaid Franchise Fees that would have been
payable to Grantor if Developer had complied with the Development Schedule.
In the event that Developer fails to pay such amount within thirty (30) days
of receipt of written request therefor by Grantor, such failure shall be
deemed an Event of Default by Developer under this Agreement and a default or
Event of Default under each Franchise Agreement executed pursuant to this
Agreement, without the passage of any additional grace or cure period. In
such event, Grantor shall be entitled to exercise any or all of its rights
and remedies as Grantor under this Agreement and as Franchisor under each
Franchise Agreement.
11. ARBITRATION
A. EXCEPT AS IS OTHERWISE EXPRESSLY PROVIDED HEREIN, ANY DISPUTE
UNDER THIS AGREEMENT NOT SETTLED BY AGREEMENT SHALL BE REFERRED TO
ARBITRATION. ARBITRATION MAY BE INITIATED AND ARBITRATORS CHOSEN AS PROVIDED
IN THE UNCITRAL ARBITRATION RULES.
B. NO ARBITRATOR CHOSEN PURSUANT TO SECTION 11.A. SHALL BE
RELATED TO OR AFFILIATED WITH GRANTOR, DEVELOPER, EITHER PARTY'S AFFILIATES,
ANY PRINCIPAL, THE REPRESENTATIVE OR THE DIRECTOR OF OPERATIONS. ALL
ARBITRATORS SHALL BE FLUENT IN THE ENGLISH LANGUAGE.
C. THE ARBITRAL PROCEEDINGS SHALL BE CONDUCTED IN (i) ACCORDANCE
WITH AND SHALL BE SUBJECT TO THE UNCITRAL ARBITRATION RULES IN EFFECT FROM
TIME TO TIME; AND (ii) THE ENGLISH LANGUAGE. THE ARBITRATION PROCEEDINGS
SHALL BE CONDUCTED IN THE CITY IN WHICH THE RESPONDENT PARTY'S CORPORATE
HEADQUARTERS
<PAGE>
IS LOCATED.
D. THE DECISION IN WRITING OF THE ARBITRATOR(S) SHALL BE (i) IN THE
ENGLISH LANGUAGE AND (ii) FINAL AND BINDING. THE COSTS AND EXPENSES OF
ARBITRATION SHALL BE BORNE 50% BY GRANTOR AND 50% BY DEVELOPER. EACH PARTY SHALL
BEAR THE COSTS AND EXPENSES OF THE ARBITRATOR IT HAS CHOSEN AND THE COSTS AND
EXPENSES OF ANY ADDITIONAL ARBITRATORS SHALL BE SHARED 50% BY GRANTOR AND 50% BY
DEVELOPER. EITHER PARTY MAY APPLY TO ANY COURT HAVING JURISDICTION FOR AN ORDER
CONFIRMING, OR TO ENFORCE, THE AWARD. ANY RIGHT OF EITHER PARTY TO JUDICIAL
ACTION ON ANY MATTER SUBJECT TO ARBITRATION HEREUNDER IS HEREBY WAIVED, EXCEPT
SUIT TO ENFORCE THE ARBITRATION AWARD.
E. THE ARBITRATOR(S) SHALL NOT EXTEND, MODIFY OR SUSPEND ANY OF THE
TERMS OF THIS AGREEMENT OR THE REASONABLE STANDARDS OF BUSINESS PERFORMANCE AND
OPERATION ESTABLISHED BY GRANTOR IN GOOD FAITH. A NOTICE OF, OR REQUEST FOR,
ARBITRATION WILL NOT OPERATE TO STAY, POSTPONE OR RESCIND THE EFFECTIVENESS OF
ANY DEMAND FOR PERFORMANCE OR NOTICE OF TERMINATION.
F. NOTWITHSTANDING THE FOREGOING, ACTIONS INITIATED OR MAINTAINED BY
GRANTOR FOR INJUNCTIVE OR OTHER EQUITABLE RELIEF ARE NOT LIMITED TO ARBITRATION
AND MAY BE BROUGHT IN ANY COURT HAVING JURISDICTION.
12. INDEMNIFICATION
A. Subject to Section 9.01.C of each Franchise Agreement, Developer and
each Principal shall, at all times, indemnify and hold harmless, to the fullest
extent permitted by law, the Indemnitees, from all "losses and expenses" (as
defined below) incurred in connection with any action, suit, proceeding, claim,
demand, investigation or inquiry (formal or informal), or any settlement thereof
(whether or not a formal proceeding or action has been instituted) which arises
out of or is based upon any of the following:
(1) The infringement, alleged infringement, or any other
violation or alleged violation by Developer or any Principal of any patent, mark
or copyright or other proprietary right owned or controlled by third parties.
(2) The violation, breach or asserted violation or breach by
Developer or any Principal of any contract, federal, state or local law,
regulation, ruling, standard or directive or any industry standard.
(3) Libel, slander or any other form of defamation of
Grantor or the System, by Developer or any Principal.
(4) The violation or breach by Developer or any Principal
of any warranty, representation, agreement or obligation in this Agreement.
(5) Acts, errors or omissions of Developer or any of its
agents, servants, employees, contractors, partners, affiliates or
representatives.
B. Developer and each Principal agree to give Grantor immediate notice
of any such action, suit, proceeding, claim, demand, inquiry or investigation.
C. Grantor shall at all times have the absolute right to retain counsel
of its own choosing in connection with any action, suit, proceeding, claim,
demand, inquiry or investigation. Grantor shall at all
<PAGE>
times have the absolute right to investigate any action, suit proceeding,
claim or demand itself.
D. Developer and each Principal shall indemnify Grantor for its
attorneys' fees, expenses, and costs incurred in connection with the exercise of
Grantor's rights under Section 12. This provision shall not be construed so as
to limit or in any way affect Developer's indemnity obligations pursuant to the
other provisions of Section 12.
E. In the event that Grantor's exercise of its rights under Section
12.C. actually results in Developer's insurer (with respect to insurance
required to be maintained by Developer pursuant to Section 11 of the Franchise
Agreement) (hereinafter, the "Insurer") refusing to pay on a third-party claim,
all causes of action and legal remedies which Developer might have against the
Insurer shall be automatically assigned to Grantor without the need for any
further action on Grantor's or Developer's part. For the purposes of Section 12,
"actually results" means that, but for Grantor's exercise of its rights under
Section 12.C., the Insurer would not have refused to pay on said third-party
claim.
F. In the event that Grantor's exercise of its rights under Section 12
actually results in the Insurer refusing to pay on a third-party claim,
Developer shall not be required to indemnify Grantor for the Grantor's
attorneys' fees, expenses and costs incurred in connection with that claim.
G. In the event that the Insurer subsequently reverses its previous
decision to not pay a claim, by, in fact, paying that claim, Developer shall be
required to indemnify Grantor for the Grantor's attorneys' fees, expenses and
costs incurred in connection with that claim, just as if the Insurer had never
denied the claim.
H. In the event that Developer encourages, requests, or suggests that
the Insurer deny a claim, Developer shall indemnify Grantor for its attorneys'
fees, expenses and costs in connection with that claim.
I. Subject to the provisions of Section 12.B. above, in order to
protect persons or property, or its reputation or goodwill, or the reputation or
goodwill of others, Grantor may, at any time and without notice, as it, in its
judgment, deems appropriate, consent or agree to settlements or take such other
remedial or corrective action as it deems expedient with respect to the action,
suit, proceeding, claim, demand, inquiry or investigation if, in Grantor's sole
judgment, there are reasonable grounds to believe that:
(1) any of the acts or circumstances enumerated in
Section 12.A. above have occurred; or
(2) any act, error, or omission of Developer or any
Principal may result directly or indirectly in damage, injury or harm to
any person or any property.
J. In addition to its indemnity obligations under Section 12.D.,
Developer and each Principal shall indemnify Grantor for any and all losses,
compensatory damages, exemplary or punitive damages, fines, charges, costs,
expenses, lost profits, settlement amounts, judgments, compensation for damages
to the Grantor's reputation and goodwill, costs of or resulting from delays,
financing, costs of advertising material and media time/space, and costs of
changing, substituting or replacing the same, and any and all expenses of
recall, refunds, compensation, public notices and other such amounts incurred in
connection with the matters described, which result from any of the items set
forth in Section 12.
K. Grantor does not assume any liability whatsoever for acts, errors,
or omissions of those with whom Developer or any Principal may contract,
regardless of the purpose. Developer and each Principal shall hold harmless and
indemnify Grantor for all losses and expenses which may arise out of
<PAGE>
any acts, errors or omissions of these third parties.
L. Under no circumstances shall Grantor be required or obligated to
seek recovery from third parties or otherwise mitigate its losses in order to
maintain a claim against Developer or any Principal. Developer and each
Principal agree that the failure to pursue such recovery or mitigate losses will
in no way reduce the amounts recoverable by Grantor from Developer or any
Principal.
M. Notwithstanding anything to the contrary contained in this
Agreement, Developer is not required to indemnify Grantor with regard to any
infringement, alleged infringement or other violation or alleged violation by
Developer or any Principal of any patent, mark, or copyright or other
proprietary right owned or controlled by a third party, arising in connection
with the use of the Proprietary Marks and System franchised to Developer when
used in the manner authorized and required by Grantor pursuant to this
Agreement. In the event Developer is involved in such an action, Grantor agrees
to indemnify Developer and each Principal in connection with the defense
thereof, and to indemnify and hold Developer and each Principal harmless from
any and all losses, damages, claims, liabilities, expenses, including attorney's
fees (prior to litigation, during litigation, and on appeal) and all costs
(whether taxed or not taxed) in connection with proceedings regarding the same.
Developer shall give notice to Grantor of any such claim no later than fifteen
(15) days after Developer becomes aware of same or is given notice thereof. This
indemnity shall be inoperative to the extend that failure to have timely
provided such notice to Grantor materially impairs Grantor's ability to defend
any such claim, in whole or in part, or to minimize the costs of this indemnity.
Developer shall not be required to defend Grantor with regard to Developer's
utilization pursuant to this Agreement of the Proprietary Marks and System
provided such utilization is in strict compliance with that authorized and
required by Grantor pursuant to this Agreement.
13. NOTICES
All notices required or desired to be given hereunder shall be in
writing and shall be sent by personal delivery, expedited delivery service or
facsimile to the following addresses (or such other addresses as designated
pursuant to this Section 13):
if to Grantor: TGI FRIDAY'S INC.
Attention: General Counsel
7540 LBJ Freeway, Suite 100
Dallas, Texas USA 75251
Facsimile No. (1)(972) 450-5636
if to Developer or any Principal:
[Developer Name]
[Attention]
[Address1]
[Address2]
Facsimile No. (011) [Fax #]
Notices posted by personal delivery or given by facsimile shall be
deemed given upon receipt. Notices posted by expedited delivery service shall be
deemed received three (3) Business Days after the date of posting.
14. FORCE MAJEURE
<PAGE>
No party shall be liable for any inability to perform resulting from
acts of God or other causes beyond their reasonable control; PROVIDED, HOWEVER,
that (i) nothing herein shall excuse or permit any delay or failure to remit any
Payment on the date due; (ii) financial inability or insolvency shall never be
deemed an act of God or other cause beyond a party's control; and (iii) no such
cause shall excuse or permit any delay or failure to perform for more than
one-hundred eighty (180) days. The party whose performance is affected by an
event of force majeure shall, within three (3) days of the occurrence of such
event, give notice thereof to the other party setting forth the nature thereof
and an estimate of its duration.
15. SEVERABILITY
A. Should any term, covenant or provision hereof, or the application
thereof, be determined by a valid, final, non-appealable order to be invalid or
unenforceable, the remaining terms, covenants or provisions hereof shall
continue in full force and effect without regard to the invalid or unenforceable
provision. In such event, such term, covenant or provision shall be deemed
modified to impose the maximum duty permitted by law and such term, covenant or
provision shall be valid and enforceable in such modified form as if separately
stated in and made a part of this Agreement. Notwithstanding the foregoing, if
any term hereof is so determined to be invalid or unenforceable and such
determination adversely affects, in Grantor's reasonable judgment, Grantor's
ability to preserve its or TGIFM's rights (if any) in, or the goodwill (if any)
underlying, the Proprietary Marks, the System and/or the Confidential
Information, Grantor may terminate this Agreement upon notice to Developer.
B. Captions in this Agreement are for convenience only and shall not
affect the meaning or construction of any provision hereof.
16. INDEPENDENT CONTRACTOR
A. Developer is an independent contractor. Nothing herein shall create
the relationship of principal and agent, legal representative, joint venturers,
partners, employee and employer or master and servant between the parties. No
fiduciary duty is owed by, or exists between, the parties.
B. Nothing herein authorizes Developer or any Principal to make any
contract, agreement, warranty or representation or to incur any debt or
obligation in Grantor's name.
17. DUE DILIGENCE AND ASSUMPTION OF RISK
A. Developer and each Principal (i) have conducted such due diligence
and investigation as it desires; (ii) recognize that the business venture
described herein involves risks; and (iii) acknowledge that the success of such
business venture is dependent upon the abilities of Developer and each
Principal. GRANTOR EXPRESSLY DISCLAIMS THE MAKING OF, AND DEVELOPER AND EACH
PRINCIPAL ACKNOWLEDGES THAT IT HAS NOT RECEIVED OR RELIED UPON, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE POTENTIAL PERFORMANCE
OR VIABILITY OF THE BUSINESS VENTURE CONTEMPLATED BY THIS AGREEMENT.
B. Developer and each Principal have received, read and understands
this Agreement, the documents referred to herein and the Exhibits and Schedules
hereto. Developer and each Principal have had ample time and opportunity to
consult with their advisors concerning the potential benefits and risks of
entering into this Agreement.
<PAGE>
18. MISCELLANEOUS
A. Time is of the essence with respect to this Agreement.
B. Grantor shall not be considered to be engaged in or doing
business in [Country] or any political subdivision thereof by virtue of
being a party to this Agreement.
C. There are no third party beneficiaries to this Agreement, except for
the remedy provided for breach of Developer's or any Principal's covenant
contained in Section 7.C.(3)(a) and the requirement of liquidated damages
contained in Section 10.B.(3).
D. This Agreement may be executed in any number of counterparts, each
of which when so executed shall be an original, but all of which together shall
constitute one and the same instrument.
E. Except as otherwise provided in Section 7.C.(3)(d), this Agreement
shall be interpreted and construed under the laws of [Country Law].
F. All references herein to the masculine, neuter or singular shall be
construed to include the masculine, feminine, neuter or plural.
G. This Agreement shall be executed in English only. Developer may
translate this Agreement into [native language], but the English language
version of this Agreement shall define the rights, duties and remedies of the
parties and shall control in all respects. Developer shall prepare all
correspondence, reports, notices and other materials required or permitted
hereunder in English. If required and upon notice to Grantor, Developer may
translate, at its expense, any materials provided by Grantor. Developer's
translator must be consented to by Grantor. Any changes or improvements that
occur as a result of translation shall inure to the sole benefit of Grantor.
H. This Agreement is not a franchise agreement and does not grant
Developer or any Principal any rights in or to the (i) System (except as
expressly provided herein); or (ii) Proprietary Marks.
I. Developer shall not use the words "Friday's," "T.G.I. Friday's,"
"TGIF" or "the American Bistro," or any part thereof, as part of its corporate
or other name.
19. ENTIRE AGREEMENT
This Agreement and the Exhibits and Schedules hereto
constitute the entire agreement between Grantor, Developer and the Principals
concerning the subject matter hereof. All prior agreements, discussions,
representations, warranties and covenants are merged herein. THERE ARE NO
WARRANTIES, REPRESENTATIONS, COVENANTS OR AGREEMENTS, EXPRESS OR IMPLIED,
BETWEEN THE PARTIES EXCEPT THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT. Except
those permitted to be made unilaterally by Grantor, any amendments or
modifications of this Agreement shall be in writing and executed by Developer
and Grantor.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
Grantor: TGI FRIDAY'S INC. Developer: [DEVELOPER NAME]
By: By:
----------------------- ------------------------
<PAGE>
Name: Name:
--------------------- ----------------------
Title: Title:
--------------------- ---------------------
<PAGE>
(PRINCIPAL'S NAME) acknowledges, covenants and represents as follows:
------------------------
(1) he/it has read the terms and conditions of this Agreement;
(2) he/it is a "Principal" as described in this Agreement;
(3) he/it is the owner of and has the right to vote ____ percent (____%) of
the Securities of Developer;
(4) he/it makes all of the representations, warranties, covenants and
agreements of the Developer (including liability to make Payments) and
a Principal set forth in this Agreement (including, without limitation,
the covenants and agreements concerning Transfer and maintenance of
Confidential Information) and is obligated to perform thereunder;
(5) he/it has derived and expects to derive financial or other benefit,
directly or indirectly, from this Agreement and the transaction described
herein;
(6) he/it acknowledges that his/its execution of this Agreement, and his/its
undertakings and agreements herein, has induced Grantor to enter into the
transactions described in, and to execute, this Agreement; and
(7) he/it consents to and shall be bound by any amendment of this Agreement
made by Grantor and Developer pursuant to the terms hereof.
Signed, sealed and delivered
in the presence of
Name:
Name
Date:
<PAGE>
EXHIBIT 10.10
EXHIBIT B TO DEVELOPMENT AGREEMENT
COVENANT AND AGREEMENT FOR CONFIDENTIALITY
This agreement ("Agreement") is made by [PRINCIPAL'S NAME]
("Principal") and TGI FRIDAY'S INC. ("Grantor"), a corporation organized
under the laws of the State of New York, United States of America, in
connection with that certain Development Agreement dated [Dev Agmt Date] (the
"Development Agreement"), by and between Grantor and [Developer Name]
("Developer").
WHEREAS, Grantor and Developer have entered into the Development
Agreement; and
WHEREAS, the Confidential Information provides economic advantages
to Grantor that are not generally known to, and are not legally available to,
third parties; and
WHEREAS, Grantor has taken and intends to take all steps necessary
to maintain the confidentiality of the Confidential Information; and
WHEREAS, Principal will receive, and desires to receive, the
Confidential Information in his capacity as a Principal of Developer; and
WHEREAS, this Agreement is executed and delivered pursuant to
Section 6.C. of the Development Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, Principal and Grantor agree as follows:
1. Grantor or Developer may disclose to Principal certain Confidential
Information which may be utilized by Principal solely (a) in [his/its] capacity
as a Principal of Developer and (b) in connection with Developer's performance
of its duties and obligations pursuant to the Development Agreement. No other
use or disclosure of any of the Confidential Information shall be made by
Principal. Principal acknowledges and agrees that Grantor or TGIFM is the
exclusive owner of the Confidential Information, the System and the Proprietary
Marks. Principal shall not, directly or indirectly, contest or impair Grantor's
or TGIFM's ownership of, or interest in, the Confidential Information, the
System or the Proprietary Marks.
2. Principal shall receive the Confidential Information in strict
confidence. The Confidential Information may be utilized by Principal only (a)
so long as Principal remains a Principal of Developer and (b) during the Term.
The Confidential Information shall not be used in any manner that is adverse or
detrimental to, or competitive with, Grantor, TGIFM or Developer. Except as
permitted pursuant to the Development Agreement or this Agreement, the
Confidential Information shall not, without the prior written consent of
Grantor, be (x) copied, (y) compiled (in total or in part) with other
information, or (z) disclosed to any third party.
3. Principal shall not communicate, disclose or use the Confidential
Information, or any part thereof, except as (a) permitted herein or (b) required
by law. The Confidential Information may be disclosed to Principal's agents,
representatives and employees who need to know the Confidential Information for
the sole purpose of providing services to Principal in his capacity as a
Principal of Developer. Each of such agents, representatives and employees shall
have been advised by Principal, prior to disclosure of any Confidential
Information, of the confidential and proprietary nature of the Confidential
Information and each shall have agreed to be bound by the terms and conditions
of this Agreement. Notwithstanding such agreement, Principal shall indemnify the
Indemnitees from and against any damages, costs (including attorney's fees) and
expenses resulting from any disclosure or use of the Confidential Information,
or any part thereof, by such agents, representatives or employees contrary to
the terms hereof.
<PAGE>
4. Immediately upon Grantor's request or upon any termination of the
Term, Principal shall return to Grantor the Confidential Information (and any
copies thereof), including that portion of the Confidential Information which
consists of analyses, compilations, studies or other documents containing or
referring to any part of the Confidential Information prepared by Principal, its
agents, representatives or employees.
5. Each of the representations, warranties, covenants, acknowledgments
and agreements of Principal, and the rights and remedies of Grantor in
connection therewith, contained in the Development Agreement, including, without
limitation, those contained in Sections 6, 7.C.(3), 8.B., 8.C. 8.E. and 10.B.(3)
of the Development Agreement, are incorporated in this Agreement by reference as
if fully set forth herein. In connection with Grantor's enforcement of such
rights and remedies (or other rights and remedies of Grantor under this
Agreement), any court of competent jurisdiction selected by Grantor shall have
personal jurisdiction (to which Principal hereby irrevocably consents) over
Principal.
6. Grantor may, in addition to pursuing any other remedies,
specifically enforce such obligations, covenants and agreements or obtain
injunctive or other equitable relief in connection with the violation or
anticipated violation of such obligations, covenants and agreements without the
necessity of showing (i) actual or threatened harm; (ii) the inadequacy of
damages as a remedy; or (iii) likelihood of success on the merits, and without
being required to furnish bond or other security. Nothing in this Agreement
shall impair Grantor's right to obtain equitable relief.
7. Should any term, covenant or provision hereof, or the application
thereof, be determined by a valid, final non-appealable order to be invalid or
unenforceable, the remaining terms, covenants or provisions hereof shall
continue in full force and effect without regard to the invalid or unenforceable
provision. In such event such term, covenant or provision shall be deemed
modified to impose the maximum duty permitted by law and such term, covenant or
provision shall be valid and enforceable in such modified form as if separately
stated in and made a part of this Agreement.
8. Any of Principal's agreements, obligations or covenants which
contemplate performance thereof after the termination or expiration of this
Agreement shall survive such termination or expiration.
9. Principal acknowledges and warrants that [he/it] has derived and
expects to derive financial or other advantage and benefit, directly or
indirectly, from the Development Agreement, this Agreement and/or the provision
of the Confidential Information to Developer and/or Principal.
10. Capitalized terms used herein and not otherwise defined shall have
the meanings attributed to them in the Development Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the parties on
the dates indicated below.
TGI FRIDAY'S INC.
Name: By:
Date: Its:
Date:
WITNESS:
Date:
<PAGE>
EXHIBIT 10.10
EXHIBIT C TO DEVELOPMENT AGREEMENT
COVENANT AND AGREEMENT FOR CONFIDENTIALITY
This agreement ("Agreement") is made by [EMPLOYEE'S NAME]
("Employee"), [Developer Name] ("Developer") and TGI FRIDAY'S INC. ("Grantor"),
a corporation organized under the laws of the State of New York, United
States of America, in connection with that certain Development Agreement
dated [Dev Agmt Date] (the "Development Agreement"), by and between Grantor
and Developer.
WHEREAS, Grantor and Developer have entered into the Development
Agreement; and
WHEREAS, the Confidential Information provides economic advantages
to Grantor that are not generally known to, and are not legally available to,
third parties; and
WHEREAS, Grantor has taken and intends to take all steps necessary
to maintain the confidentiality of the Confidential Information; and
WHEREAS, it will be necessary for certain employees of Developer to
have access to and to use some or all of the Confidential Information in
connection with the performance of their job functions related to the
development, construction and operation of Restaurants under the System; and
WHEREAS, Employee is the [INSERT TITLE] of Developer; and
WHEREAS, Employee needs to receive, and desires to receive and use,
the Confidential Information in the course of his employment by Developer in
order to effectively perform his job function; and
WHEREAS, the Agreement is executed and delivered pursuant to
Section 6.C. of the Development Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, Employee, Developer and Grantor agree as
follows:
1. Grantor or Developer may disclose to Employee certain Confidential
Information which may be utilized by Employee solely (a) in his capacity as the
[TITLE] of Developer and (b) in connection with Employee's performance of his
job functions. No other use or disclosure of any of the Confidential Information
shall be made by Employee. Employee acknowledges and agrees that Grantor or
TGIFM is the exclusive owner of the Confidential Information, the System and the
Proprietary Marks. Employee shall not, directly or indirectly, contest or impair
Grantor's or TGIFM's ownership of, or interest in, the Confidential Information,
the System or the Proprietary Marks.
2. Employee shall receive the Confidential Information in strict
confidence. The Confidential Information may be utilized by Employee only (a) so
long as Employee is employed by Developer and (b) during the Term. The
Confidential Information shall not be used in any manner that is adverse or
detrimental to, or competitive with, Grantor, TGIFM or Developer. Except as
permitted pursuant to this Agreement, the Confidential Information shall not,
without the prior written consent of Grantor, be (x) copied, (y) compiled (in
total or in part) with other information, or (z) disclosed to any third party.
3. Employee shall not communicate, disclose or use the Confidential
Information, or any part thereof, except as (a) permitted herein or (b) required
by law. The Confidential Information may be disclosed to fellow employees as
necessary to train or assist such other employees of Developer in the
performance of their job functions with respect to the development, construction
or operation of a Restaurant.
<PAGE>
4. Immediately upon Grantor's request, upon Employee's termination of
employment with Developer, or upon the conclusion of the use for which any
Confidential Information was furnished, Employee shall return to Developer or
Grantor the Confidential Information (and any copies therof), including that
portion of the Confidential Information which consists of analyses,
compilations, studies or other documents containing or referring to any part of
the Confidential Information.
5. In order to protect the goodwill and unique qualities of the System
and the confidentiality and value of the Confidential Information, and in
consideration of the disclosure to Employee of the Confidential Information,
Employee covenants that, during the period of his employment by Developer and
for a period of two (2) years following termination of such employment, Employee
shall not, directly or indirectly:
(a) employ or seek to employ any person (or induce such
person to leave his or her employment) who is, or has
within one (1) year been, employed (i) by Grantor or
Developer; (ii) by any other developer or franchisee
of Grantor; or (iii) in any other concept or system
owned, operated or franchised by an Affiliate, as a
director, officer or in any managerial capacity;
(b) own, maintain, operate or have any interest in any
business offering the same or similar products and
services as offered by restaurants in the System;
(c) own, maintain, operate or have any interest in any
business offering the same or similar products and
services as offered by restaurants in the System
which business is, or is intended to be, located in
the Territory; or
(d) own, maintain, operate or have any interest in any
business offering the same or similar products and
services as offered by restaurants in the System,
which business is, or is intended to be, located
within a radius of twenty (20) kilometers of any
restaurant in the System (for purposes of enforcement
of this Section (d) the law of the jurisdiction where
such restaurant is located shall control).
6. A. Grantor may, in addition to pursuing any other remedies,
specifically enforce such obligations and covenants or obtain injunctive or
other equitable relief in connection with the violation or anticipated violation
of such obligations and covenants without the necessity of showing (i) actual or
threatened harm; (ii) the inadequacy of damages as a remedy; or (iii) likelihood
of success on the merits, and without being required to furnish bond or other
security. Nothing in this Agreement shall impair Grantor's right to obtain
equitable relief.
B. With respect to Employee's breach of the covenants
contained in Section 5(a) hereof, the affected former employer shall be
compensated by Employee (and Developer shall be additionally liable for such
breach) for the reasonable costs and expenses incurred by such employer in
connection with training such employee. Developer and Employee acknowledge that
such expenses are impossible to accurately quantify and agree that, as
liquidated damages and not as a penalty, an amount equal to such employee's
annual rate of compensation in the final twelve (12) months of employment (or an
annualized rate if employed for a shorter period) by such former employer shall
be paid by Employee and Developer (jointly and severally) to the former employer
at such time as such employee commences employment.
C. In connection with Grantor's enforcement of such rights and
remedies (or other rights and remedies of Grantor under this Agreement), any
court of competent jurisdiction selected by Grantor shall have personal
jurisdiction (to which Employee hereby irrevocably consents) over Employee.
<PAGE>
7. Should any term, covenant or provision hereof, or the application
thereof, be determined by a valid, final, non-appealable order to be invalid or
unenforceable, the remaining terms, covenants or provisions hereof shall
continue in full force and effect without regard to the invalid or unenforceable
provision. In such event, such term, covenant or provision shall be deemed
modified to impose the maximum duty permitted by law and such term, covenant or
provision shall be valid and enforceable in such modified form as if separately
stated in and made a part of this Agreement.
8. Any of Employee's agreements, obligations or covenants which
contemplate performance thereof after the termination or expiration of this
Agreement shall survive such termination or expiration.
9. Developer undertakes to cause Employee to comply with the terms and
conditions of this Agreement. Developer shall indemnify and hold the Indemnitees
harmless from and against any damages, costs or expenses (including attorney's
fees) resulting from any disclosure or use of Confidential Information, or any
part thereof, by Employee contrary to the terms hereof.
10. Capitalized terms used herein and not otherwise defined shall have
the meanings attributed to them on ANNEX A hereto.
IN WITNESS WHEREOF, this Agreement has been executed by the parties on
the dates indicated below.
[EMPLOYEE] TGI FRIDAY'S INC.
Name: By:
Date: Its:
Date:
WITNESS: [DEVELOPER NAME]
By:
Its:
Name: Date:
<PAGE>
EXHIBIT 10.10
Annex A to Covenant and Agreement for Confidentiality
AFFILIATE - Carlson Restaurants Worldwide Inc. or any subsidiary thereof or
of Grantor
COMMENCEMENT DATE - [Dev Agmt Date]
CONFIDENTIAL INFORMATION - the terms of the Development Agreement and Franchise
Agreement and any amendments thereto, the System, the Development Manual, the
Manuals (as defined in the Franchise Agreement), other manuals, the Standards,
written directives and all drawings, equipment, recipes, computer and point of
sale programs (and output from such programs); and all other information
know-how, techniques, materials and data imparted or made available by Grantor
which is (i) designated as confidential, (ii) known by Developer or Employee to
be considered confidential by Grantor, or (iii) by its nature inherently or
reasonably considered confidential
DEVELOPMENT MANUAL - Grantor's manual, as amended from time to time in Grantor's
reasonable discretion, describing (generally) the procedures and parameters
required for the development of T.G.I. Friday's restaurants
INDEMNITEES - Grantor, its directors, officers, employees, agents,
shareholders, affiliates, successors and assigns and the respective
directors, officers, employees, agents, shareholders and affiliates of each
MANUALS - Grantor's United States confidential operating manuals, as amended
from time to time
PROPRIETARY MARKS - certain trademarks, trade names, service marks, emblems
and indicia of origin designated by Grantor from time to time in connection
with the operation of T.G.I. Friday's restaurants pursuant to the System in
the Territory
RESTAURANT(S) - T.G.I. Friday's restaurant(s) developed pursuant to the
Development Agreement
STANDARDS - the standards and specifications, as amended from time to time,
contained in, and being a part of, the Confidential Information pursuant to
which Developer shall develop and operate Restaurants in the Territory
SYSTEM - a unique, proprietary system developed and owned by Grantor for the
establishment and operation of T.G.I. Friday's restaurants, including, without
limitation, distinctive exterior and interior design, decor, color scheme and
furnishings; special recipes, menu items and full service bar; employee uniform
standards, products, services and specifications; procedures with respect to
operations and inventory and management control (including accounting procedures
and policies); training and assistance; and advertising and promotional programs
(as further developed by Grantor from time to time);
TERM - the duration of the Development Agreement, commencing on the
Commencement Date and continuing until _________, 19__, unless sooner
terminated
TERRITORY - [Country], as geographically constituted on [Dev Agmt Date]
TGIFM - TGI Friday's of Minnesota Inc., a Minnesota (U.S.) corporation and a
subsidiary of Grantor
<PAGE>
EXHIBIT 10.10
SCHEDULE 4.A. TO DEVELOPMENT AGREEMENT
CALCULATION OF CONCEPT FEE
The Concept Fee shall be calculated by dividing U.S. $350,000.00 by a
number equal to 1.00 minus any applicable withholding, value added or
similar tax or fee (expressed as a percentage; rate of "X") or:
U.S. $350,000.00 = Concept Fee
-----------
1.00-X
Example: If the applicable withholding, value added or similar tax or fee
(expressed as a percentage) is 10%, the Concept Fee is calculated as follows:
U.S. $350,000.00 = $388,888.88
-----------
1.00-0.10
It is the intention of the parties that, after Developer's payment of
applicable taxes or fees as described in Section 4.C.(2), the net amount
received by Grantor shall be U.S. $350,000.00.
CALCULATION OF PRE-PAID FRANCHISE FEE
The Pre-Paid Franchise Fee shall be calculated as follows:
U.S. $(10,000 X # OF RESTAURANTS) = Pre-Paid Franchise Fee
----------------------------
1.00-X
It is the intention of the parties that, after Developer's payment of
applicable taxes or fees as described in Section 4.C.(2), the net amount
received by Grantor shall be (U.S. $10,000 x # of Restaurants).
PRE-PAID FRANCHISE FEE CREDIT
(after withholding, value added or similar tax or fee)
<TABLE>
<CAPTION>
NET AMOUNT PAYABLE
FRANCHISE FEE PRE-PAID FRANCHISE UPON EXECUTION OF
PER RESTAURANT FEE PER RESTAURANT FRANCHISE AGREEMENT
- -------------- ------------------ -------------------
<S> <C> <C>
U.S. $100,000 U.S. $10,000 U.S. $90,000
</TABLE>
<PAGE>
EXHIBIT 10.11
DRAFT #
DATE:
EXHIBIT A TO DEVELOPMENT AGREEMENT
DATE:____________ , 19__
(TO BE REVIEWED FOR CHANGES UNDER LOCAL LAW BEFORE SIGNING)
FRANCHISE AGREEMENT
T.G.I. FRIDAY'S RESTAURANT
[IDENTIFICATION OF SPECIFIC SITE]
[COUNTRY]
DATED AS OF _________________
<PAGE>
T.G.I. FRIDAY'S RESTAURANT
FRANCHISE AGREEMENT
[IDENTIFICATION OF SPECIFIC SITE]
[COUNTRY]
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS.................................................................1
2. EXCLUSIVE RIGHTS; TERM......................................................6
3. FEES AND PAYMENTS...........................................................6
4. REPRESENTATIVE; DIRECTOR OF OPERATIONS; MANAGERS; TRAINING..................7
5. RESTAURANT LOCATION; OCCUPANCY CONTRACT.....................................9
6. RESTAURANT CONSTRUCTION....................................................10
7. RESTAURANT OPERATIONS; MANUALS.............................................11
8. CONFIDENTIAL INFORMATION...................................................14
9. PROPRIETARY MARKS..........................................................15
10. ADVERTISING...............................................................17
11. INSURANCE.................................................................18
12. ACCOUNTING AND RECORDS....................................................19
13. FRANCHISEE'S REPRESENTATIONS AND WARRANTIES; AFFIRMATIVE AND
NEGATIVE COVENANTS........................................................20
14. TRANSFER..................................................................22
15. CONSENT AND WAIVER........................................................24
<PAGE>
16. DEFAULT AND REMEDIES......................................................24
17. OBLIGATIONS UPON TERMINATION OR EXPIRATION................................26
18. ARBITRATION...............................................................28
19. INDEMNIFICATION...........................................................29
20. NOTICES...................................................................31
21. FORCE MAJEURE.............................................................31
22. SEVERABILITY..............................................................31
23. INDEPENDENT CONTRACTOR....................................................32
24. DUE DILIGENCE AND ASSUMPTION OF RISK......................................32
25. MISCELLANEOUS.............................................................32
26. ENTIRE AGREEMENT..........................................................33
ATTACHMENT A- COMMENCEMENT DATE AGREEMENT
ATTACHMENT B- PROPRIETARY MARKS
ATTACHMENT C- COVENANT AND AGREEMENT FOR CONFIDENTIALITY (PRINCIPALS)
ATTACHMENT D- COVENANT AND AGREEMENT FOR CONFIDENTIALITY (EMPLOYEES)
SCHEDULE 3.01.A - CALCULATION OF FRANCHISE FEE
SCHEDULE 3.01.B - CALCULATION OF ROYALTY FEE
</TABLE>
<PAGE>
FRANCHISE AGREEMENT
This FRANCHISE AGREEMENT is entered into as of the ___ day of
_________________, ______, by and among TGI FRIDAY'S INC., a New York
corporation, with its principal place of business in Dallas, Texas, United
States of America, [FRANCHISEE NAME], with its principal place of business in
[Place of Business] and [Principals?].
RECITALS
WHEREAS, Franchisor has developed in the United States and owns the
System;
WHEREAS, Franchisor intends to identify the System in the Territory
with the Proprietary Marks;
WHEREAS, Franchisor continues to develop, use and control the use of
the Proprietary Marks to identify the source of services and products
marketed under the System and to represent the System's high standards;
WHEREAS, Franchisor and Franchisee have entered into the Development
Agreement;
WHEREAS, Franchisee wishes to obtain certain rights to use the
System in connection with the operation of the Restaurant and to receive
training and other assistance provided by Franchisor in connection therewith
as described herein; and
WHEREAS, ________ and ________ own and have the right to vote __%
and ___% respectively (collectively 100%), of the Securities of Franchisee.
NOW, THEREFORE, the parties, in consideration of the undertakings and
commitments set forth herein, agree as follows:
1. DEFINITIONS
As used in this Agreement the following words and phrases shall have the
meanings attributed to them in this Section:
ACCOUNT - an account designated by Franchisor to receive Payments
ACTION - any cause of action, suit, proceeding, claim, demand, investigation or
inquiry (whether a formal proceeding or otherwise) with respect to which
Franchisee's indemnity described in Section 19 applies
AFFILIATE - Carlson Restaurants Worldwide Inc. or any subsidiary thereof or
of Franchisor
AGREEMENT - this Franchise Agreement
BUSINESS DAYS - each calendar day except Saturday, Sunday and national legal
holidays under the laws of the country of the recipient of the notice
COMMENCEMENT DATE - the first to occur of the date the Restaurant opens for
business to the public or the date Franchisee is required to open the
Restaurant for business pursuant to the terms hereof
COMMENCEMENT DATE AGREEMENT - an agreement memorializing the Commencement
Date in the form of ATTACHMENT A hereto
<PAGE>
COMPETING BUSINESS - a restaurant business offering the same or similar products
and services as offered by restaurants in the System, including, without
limitation, waiter/waitress service, sit-down dining and bar services
CONFIDENTIAL INFORMATION - the terms of the Development Agreement and Franchise
Agreement and any amendments thereto, the System, the Development Manual, the
Manuals, other manuals, the Standards, written directives and all drawings,
equipment, recipes, computer and point of sale programs (and output from such
programs); and all other information, know-how, techniques, material and data
imparted or made available by Franchisor which is (i) designated as
confidential, (ii) known by Franchisee to be considered confidential by
Franchisor, or (iii) by its nature inherently or reasonably considered
confidential
DEVELOPER - [Developer Name]
DEVELOPMENT AGREEMENT - that certain Development Agreement dated [Dev Agmt
Date], between Franchisor and Developer, relating to the development of T.G.I.
Friday's restaurants in the Territory
DEVELOPMENT MANUAL - Franchisor's manual, as amended from time to time in
Friday's reasonable discretion, describing (generally) the procedures and
parameters for the development of T.G.I. Friday's restaurants
DEVELOPMENT MATERIALS - a description of the Site, a feasibility study
(including, without limitation, demographic data, photographs, maps, artists'
renderings, site plans, a summary (in English) of the Occupancy Contract, and
documentation indicating Franchisee's prospects to acquire the Site) and such
other information as Franchisor reasonably requests
DIRECTOR OF OPERATIONS - an individual designated as described in Section 4.02
who shall devote his full time and best efforts to the management and
supervision of (i) Franchisee's duties and obligations hereunder; and (ii) the
operation of (a) the Restaurant and (b) all T.G.I. Friday's restaurants
developed pursuant to the Development Agreement
EVENT OF DEFAULT - as defined in Section 16.02
FRANCHISE FEE - a fee in United States dollars calculated as described in
Schedule 3.01.A. paid by Franchisee to Franchisor reflecting, in part, certain
expenses incurred or to be incurred by Franchisor in providing services
hereunder and in consideration of, in part, the right to develop and operate the
Restaurant at the Site under the System
FRANCHISEE - [Franchisee Name]
FRANCHISOR - TGI FRIDAY'S INC., a New York (U.S.) corporation
FURNISHINGS - all of Franchisee's decorative memorabilia, furnishings, signs,
equipment, advertising materials, inventory and other assets used in connection
with Restaurant operations
GROSS SALES - The total of:
(1) the entire, actual sales price (whether for cash, credit
or other consideration) of all food, beverages, merchandise and services
(including service charges added to a customer's bill) occurring in, on or from
the Restaurant, including receipts from mail or telephone orders received or
filled from the Restaurant;
(2) all deposits not refunded to purchasers;
<PAGE>
(3) orders taken at the Restaurant, although filled
elsewhere;
(4) payments to Franchisee by any concessionaire,
licensee or third party in respect of use of the Restaurant; and
(5) promotional or other allowances to customers in an
amount equal to the retail price therefor, to the extent that said amount for
promotional allowances exceeds two and one-half percent (2.5%) of Gross Sales
calculated without inclusion of said amount (promotional allowances provided
in exchange for goods or services shall be included in Gross Sales without
exclusion).
Each charge or sale upon installment or credit shall be treated
as a sale for the full price in the accounting month during which such
charge or sale is made.
"Gross Sales" shall not include receipts from sales of furniture,
trade fixtures or other extraordinary items (unless bearing any Proprietary
Mark) made outside the ordinary course of business.
There shall be deducted from "Gross Sales" to the extent previously
included therein:
(A) the amount of any BONA FIDE cash or credit refunds made upon any
sale where the food, beverages, merchandise or services sold is returned by the
customer and accepted by Franchisee;
(B) sales tax or other taxes required to be separately accounted for
and collected by Franchisee directly from Franchisee's customers and paid by
Franchisee to a taxing authority; and
(C) shift meals served to employees while the employees are on duty.
HEADQUARTERS - the location(s) in the United States designated from time to time
by Franchisor where Franchisee's personnel shall complete training
IN-COUNTRY EXPENSES - costs and expenses incurred by or assessed with respect to
Franchisor's (or other described party's) employees, agents and/or
representatives in connection with travel to or activities in the Territory
pursuant to this Agreement, including, without limitation, hotel/lodging,
transportation and meals and, with respect to the NSO-Team only, a per diem
stipend (a daily charge determined by advance agreement for incidental expenses
incurred by such personnel, such as meals, laundry and/or telephone expenses)
INDEMNITEES - Franchisor and its directors, officers, employees, agents,
shareholders, affiliates, successors and assigns and the respective directors,
officers, employees, agents, shareholders and affiliates of each
INITIAL TERM - a period commencing as of the date hereof and continuing until
the fifteenth (15th) anniversary of the Commencement Date
LESSOR - the party owning or controlling the Site and being a party (with
Franchisee) to the Occupancy Contract
LOSSES AND EXPENSES - compensatory, exemplary or punitive damages; fines,
penalties, charges and fees (including reasonable attorney's, accounting and
consultant fees); interest, court costs, settlement or judgment amounts and
other similar amounts incurred or suffered by the Indemnitees in connection
with any Action; PROVIDED, HOWEVER, that Losses and Expenses shall not
include consequential damages or loss of reputation, goodwill or other losses
of a similar nature
MANUALS - Franchisor's United States confidential operating manuals, as amended
from time to time
<PAGE>
MULTI-UNIT MANAGER(S) - an/the individual(s) designated as described in Section
4.05 who shall be solely dedicated to the management and supervision of the
Restaurant and certain other T.G.I. Friday's restaurants developed pursuant to
the Development Agreement
NSO-TEAM - a "new store opening team" consisting of Franchisor's employees and
certain of Franchisee's employees to whom Franchisor has consented, which shall
perform the functions described in Section 4.09
OCCUPANCY CONTRACT - the agreement pursuant to which Franchisee shall occupy
the Site
PAYMENTS - all transfers of funds from Franchisee to Franchisor, including,
without limitation, the Franchise Fee, the Royalty Fee and reimbursement of
expenses
PERMANENT DISABILITY - any physical, emotional or mental injury, illness or
incapacity which would prevent the afflicted person from performing his
obligations hereunder for more then ninety (90) consecutive days as determined
by a licensed physician selected by Franchisor
PRE-PAID FRANCHISE FEE - a fee in United States dollars paid to Franchisor
pursuant to the Development Agreement which will be credited toward the
Franchise Fee as described in the Development Agreement
PRELIMINARY SITE CONSENT - written communication from Franchisor to
Franchisee notifying Franchisee that a proposed site has received the consent
of the Franchisor's Site Review Committee
PRINCIPAL(S) - ___________ and ___________ who are (and such other persons or
entities which are from time to time) the record and beneficial owners of,
- ------------and have the right to vote, __% and __% (collectively 100%), of
the Securities of Franchisee
PROJECT MANAGER - an individual designated as described in Section 4.04 who
shall devote his full time and best efforts to the coordination and
completion of Restaurant construction
PROPRIETARY MARKS - certain trademarks, trade names, service marks, emblems and
indicia of origin designated by Franchisor from time to time in connection with
the operation of T.G.I. Friday's restaurants pursuant to the System in the
Territory
PUBLICLY-HELD ENTITY - a corporation or other entity whose equity securities are
(i) registered pursuant to applicable law; (ii) widely held by the public; and
(iii) traded on a public securities exchange (or otherwise publicly traded)
pursuant to applicable law
RENEWAL TERM - a period commencing upon expiration of the Initial Term and
continuing for five (5) years
REPRESENTATIVE - an individual, designated as described in Section 4.01,
authorized to act on behalf of, and bind, Franchisee with respect to this
Agreement
RESTAURANT - the T.G.I. Friday's restaurant to be developed and operated
pursuant to this Agreement
ROYALTY FEE - a continuing monthly fee in United States dollars, calculated
as described on Schedule 3.01.B., payable by Franchisee to Franchisor based
upon Gross Sales at the Restaurant in consideration of, in part, certain
expenses to be incurred by Franchisor in providing on-going services
hereunder and the continued right to operate the Restaurant at the Site under
the System
SECURITY - the capital stock of, partner's interest in, or other equity interest
(including the right to vote) in Franchisee, including such interests issued or
created subsequent to the date hereof
<PAGE>
SITE - the location of the Restaurant, being ________________________________
STANDARDS - the standards and specifications, as amended from time to time,
contained in, and being a part of, the Confidential Information pursuant to
which Franchisee shall develop and operate the Restaurant at the Site
SYSTEM - a unique, proprietary system developed and owned by Franchisor for
the establishment and operation of T.G.I. Friday's restaurants, including,
without limitation, distinctive exterior and interior design, decor, color
scheme and furnishings; special recipes, menu items and full service bar;
uniform standards, products, services and specifications; procedures with
respect to operations and inventory and management control (including
accounting procedures and policies); training and assistance; and advertising
and promotional programs (as further developed by Franchisor from time to
time)
TERM - the period constituting the Initial Term and, if properly and
effectively exercised, the Renewal Term
TERRITORY - [Country], as geographically constituted on the date of the
Development Agreement
TGIFM - TGI Friday's of Minnesota Inc., a Minnesota (U.S.) corporation and a
subsidiary of Franchisor
TRADEMARK ACTION - an action, suit, proceeding, claim, demand, inquiry or
investigation alleging infringement or "passing-off" brought or made against
Franchisee or any Principal in connection with Franchisee's use (as directed
by the Franchisor) of any Proprietary Mark pursuant to this Agreement
TRADEMARK DAMAGES - all fines, expenses, reasonable attorneys' fees, court
costs, settlement amounts, judgments, reasonable costs of advertising
material and media time/space, and costs of changing, substituting or
replacing the same, and all expenses of recall, refunds, public notices and
other such amounts incurred by Franchisee and directly and proximately
attributable to a Trademark Action; PROVIDED, HOWEVER, that Trademark Damages
shall not include compensatory, consequential, exemplary or punitive damages,
lost sales or profits, damage to goodwill or reputation, costs or damages
resulting from delay or other costs, expenses or other damages not directly
or proximately attributable to the Trademark Action
TRADEMARK REPRESENTATIVE - Franchisor or such other person or firm designated
by Franchisor in writing
TRANSFER - the sale, assignment, conveyance, pledge, mortgage or other
encumbrance, whether direct or indirect, of (i) this Agreement or the
Development Agreement; (ii) any or all rights or obligations of Franchisee
herein; or (iii) any interest in any Security, including the issuance of any
new Securities
UNCITRAL ARBITRATION RULES - the arbitration rules of the United Nations
Commission on International Trade Law
WAGE EXPENSES - such wages and/or salaries (including a reasonable allocation
of the cost of benefits) of, or with respect to, Franchisor's (or other
described party's) employees, agents and/or representatives to be reimbursed
to Franchisor or such party as described herein
2. EXCLUSIVE RIGHTS; TERM
2.01 Franchisor grants to Franchisee the right, and Franchisee accepts
the obligation, subject to the terms and conditions herein, to develop and
operate the Restaurant pursuant to the System at the Site and to use, solely in
connection therewith, the Proprietary Marks. During the Term and for so long as
no Event of Default has occurred under this Agreement and is continuing and no
event has occurred under this Agreement which, with the giving of notice or
lapse of time, or both, would constitute an Event
<PAGE>
of Default, Franchisor will not establish, nor authorize any other person to
establish, a T.G.I. Friday's restaurant under the System within ( )
[TO BE ESTABLISHED IN GOOD FAITH BY MUTUAL AGREEMENT] of the Restaurant
(except that T.G.I. Friday's restaurants may be located within airport
properties or rail depots that are within such radius).
2.02 Unless sooner terminated as provided herein, this Agreement
shall commence on the date hereof and continue until the expiration of the
Term. Within thirty (30) days after the Commencement Date, the parties shall
execute the Commencement Date Agreement.
2.03 If no Event of Default has occurred under this Agreement and is
continuing and no event has occurred under this Agreement which, with the
giving of notice or lapse of time, or both, would constitute an Event of
Default, Franchisee may renew this Agreement for the Renewal Term, subject to
the satisfaction of the following conditions:
A. Franchisee shall give notice of such extension not
less than six (6) months nor more than twelve (12) months prior to the end
of the Initial Term;
B. Franchisee shall repair or replace Restaurant equipment,
signs, interior and exterior decor items, fixtures and furnishings and shall
offer such products and services such that Restaurant appearance and
operations reflect the current Standards and image of the System;
C. Franchisee and each Principal shall execute and deliver
a general release of any and all claims against the Indemnitees, including,
without limitation, claims arising under this Agreement, in a form acceptable
to Franchisor; and
D. Franchisee shall comply with Franchisor's current
qualification and training requirements.
3. FEES AND PAYMENTS
3.01 A. Upon execution of this Agreement, Franchisee shall pay
the Franchise Fee. The Pre-Paid Franchise Fee shall be credited toward the
Franchise Fee as described in Section 4.A. of the Development Agreement.
B. Franchisee shall pay the Royalty Fee on or before the
fifteenth (15th) day of each month with respect to Gross Sales at the
Restaurant in the preceding accounting month.
C. Franchisee acknowledges and agrees that (i) the
Franchise Fee reflects, in part, certain expenses incurred or to be incurred
by Franchisor in providing services hereunder and is in consideration of, in
part, the grant to Franchisee herein of the right to develop and operate the
Restaurant at the Site under the System; and (ii) the Royalty Fee is in
consideration of, in part, certain expenses to be incurred by Franchisor in
providing on-going services hereunder and the continued right to operate the
Restaurant at the Site under the System.
3.02 A. All Payments shall be made in United States dollars by
deposit in the Account in immediately available funds. If United States
dollars are not available in the local currency market, Payments shall be
made in a currency and/or other jurisdiction designated by Franchisor.
Acceptance of any Payment in a currency other than United States dollars
shall not release Franchisee's obligation to make future Payments in United
States dollars.
B. To the extent any Payment requires conversion, such
amount shall be converted using the "interbank" exchange rate (or other rate
Franchisor reasonably designates) using the "buy rate"
<PAGE>
United States dollar purchase price (or at the purchase price for such other
currency Franchisor designates pursuant to Section 3.02.A.) as published at
end of the day by such financial institution Franchisor designates on (i) the
date of Franchisor's invoice therefor; or (ii) the date due, in the case of
the Franchise Fee and the Royalty Fee. All costs of currency exchange and all
currency risk shall be borne by Franchisee.
C. Payments shall be deposited (i) upon (a) execution hereof
in the case of the Franchise Fee and (b) as described in Section 3.01.B., in the
case of the Royalty Fee; or (ii) not more than thirty (30) days after date of
invoice. Delinquent Payments shall bear interest from the due date until
deposited at eighteen percent (18%) per annum or the maximum rate permitted by
law, whichever is less. Conversion of any interest amounts into United States
dollars shall occur on the due date or the date of the applicable invoice.
3.03. A. Subject to Section 3.03.B, all Payments shall be made net
of, and Franchisee shall pay from its own funds to the appropriate taxing
authority, any and all applicable withholding tax, value added tax or similar
tax or fee, it being the parties' intention that all Payments to Franchisor
hereunder shall be absolutely net. Franchisee shall deliver to Franchisor
receipts certifying that such taxes or fees have been paid. Any taxes or
duties imposed upon or with respect to this Agreement or any materials,
supplies or specifications acquired by or provided to Franchisee pursuant to
or in connection with this Agreement shall be paid by Franchisee.
B. Notwithstanding Section 3.03.A., Franchisee shall (i)
withhold from Payments of the Franchise Fee and the Royalty Fee any applicable
withholding tax, value added tax or similar tax or fee; (ii) pay such tax to the
appropriate authority; and (iii) deliver to Franchisor receipts therefor as
described in Section 3.03.A. Such tax amounts shall be deducted only from the
Franchise Fee or the Royalty Fee.
3.04 Franchisee shall not withhold or offset any portion of any
Payment due to Franchisor's alleged non-performance hereunder.
3.05 All In-Country Expenses are incurred for the account of, and
directly billed to, Franchisee. When such direct billing is not feasible,
Franchisee shall reimburse such expenses to Franchisor upon receipt of invoice.
4. REPRESENTATIVE; DIRECTOR OF OPERATIONS; MANAGERS; TRAINING
4.01 Franchisee hereby designates [Rep Name] as the Representative.
Any replacement Representative shall be designated within ten (10) days of
the prior Representative's resignation or termination. Each Representative
shall attend and successfully complete at Headquarters Franchisor's "Owner's
Orientation Program" (currently approximately four (4) weeks). The
Representative hereunder and under the Development Agreement shall be the
same individual.
4.02 Franchisee hereby designates [Dir of Ops Name] as the Director of
Operations. Any replacement Director of Operations shall be designated within
ten (10) days of the prior Director of Operations' resignation or termination.
Each Director of Operations shall attend and successfully complete at
Headquarters within six (6) months of appointment Franchisor's training program
required for general managers (SEE Section 4.03). The Director of Operations
hereunder and under the Development Agreement shall be the same individual.
4.03 [FIRST RESTAURANT ONLY - At least six (6) managers (general
manager, assistant general manager, kitchen manager and other managers) are
initially required for the Restaurant. Such managers shall attend and
successfully complete at Headquarters Franchisor's training program for managers
of
<PAGE>
T.G.I. Friday's restaurants in the United States (currently approximately
twenty-one (21) weeks).] [SECOND AND SUBSEQUENT RESTAURANTS -Franchisee's
general manager(s) of the Restaurant shall attend and successfully complete at
Headquarters, if not previously trained at Headquarters, Franchisor's training
program for managers of T.G.I. Friday's restaurants in the United States
(currently approximately twenty-one (21) weeks).] Subject to Franchisor's
approval, subsequent managers (except general managers) may be trained by
Headquarters-trained general managers in training restaurants (developed
pursuant to the Development Agreement) to which Franchisor has consented. Any
previously trained manager who is to become a general manager shall attend and
successfully complete at Headquarters Franchisor's training program required for
general managers of T.G.I. Friday's restaurants in the United States (currently
approximately four (4) weeks). Franchisor may require general and kitchen
managers, at Franchisee's expense, to attend and successfully complete
additional training at Headquarters.
4.04 Not less than sixty (60) days prior to the commencement of
Restaurant construction, Franchisee shall designate the Project Manager. Any
replacement Project Manager shall be designated within ten (10) days of the
prior Project Manager's resignation or termination. Prior to commencement of
construction, the Project Manager shall attend and successfully complete
Franchisor's construction training program at Headquarters (currently
approximately two (2) weeks).
4.05 When a franchise agreement for the third Restaurant to be
developed under the Development Agreement is executed, Franchisee shall
designate the Multi-Unit Manager. Additional Multi-Unit Managers shall be
designated from time to time as reasonably required by Franchisor. Prior to
assuming his duties, each Multi-Unit Manager shall have successfully completed
training as a general manager and shall attend at Headquarters and successfully
complete Franchisor's training program for multi-unit managers (currently
approximately four (4) weeks).
4.06 Franchisor shall have the right to interview and consent to each
Director of Operations, each Multi-Unit Manager, each Project Manager and all
Restaurant managers. Franchisor shall endeavor to conduct such interviews in the
Territory, but Franchisor may require that such interviews occur at Headquarters
at Franchisee's expense.
4.07 Franchisee shall bear all costs and expenses relating to the
training of any Representative, Director of Operations, Multi-Unit Manager,
Project Manager, general, assistant, kitchen and other managers.
4.08 Franchisor shall provide instructors, facilities and materials
for Headquarters training. All personnel trained at Headquarters and all
management employees at each Restaurant shall be fluent in [native language]
and in the English language. All training shall be in the English language.
In the event a translator is required for training of Franchisee's employees,
at the Site, Franchisee shall provide, at its expense, such translator (to
whom Franchisor must consent).
4.09 The NSO-Team shall assist in (i) training Franchisee's employees
at the Site; and (ii) the opening of the Restaurant. The NSO-Team shall consist
of approximately twelve (12) people (actual number of members shall be
determined by Franchisor), depending upon the number of T.G.I. Friday's
restaurants already being operated by Franchisee and such other criteria as
Franchisor deems reasonable. Franchisor shall provide the following number of
employees as members of each NSO-Team:
- --------------------------------------- ----------------------------------
RESTAURANT NO. OPENED NO. OF FRANCHISOR'S EMPLOYEES
BY DEVELOPER ON THE NSO-TEAM
- --------------------------------------- ----------------------------------
- --------------------------------------- ----------------------------------
1 12
- --------------------------------------- ----------------------------------
<PAGE>
- --------------------------------------- ----------------------------------
2 6
- --------------------------------------- ----------------------------------
3 through 5 3
- --------------------------------------- ----------------------------------
6 and thereafter 1
- --------------------------------------- ----------------------------------
The Restaurant is the [NUMBER] restaurant developed pursuant to the Development
Agreement. The balance of each NSO-Team shall be comprised of Franchisee's
employees to whom Franchisor has consented; PROVIDED, HOWEVER, if Franchisee
fails or is unable to timely provide such employees, Franchisor may, but shall
not be obligated to, staff the NSO-Team with Franchisor's employees. The cost of
international travel and In-Country Expenses with respect to NSO-Team members
employed by Franchisor shall be borne or reimbursed by Franchisee. In addition,
with respect to any NSO-Team members employed by Franchisor supplied as a result
of Franchisee's failure or inability to provide Franchisee employees, Franchisee
shall additionally reimburse the Wage Expenses of such employees in connection
with their participation on the NSO-Team.
4.10 Franchisee shall comply with the employee training and testing
procedures and requirements reasonably prescribed in the Manuals or otherwise in
writing. In the event any such procedures or requirements contemplate the
performance of such training and testing by Franchisor in the Territory,
Franchisee shall bear or reimburse to Franchisor such employees' cost of
international travel and In-Country Expenses.
4.11 Franchisor may create an audio and/or video recording of any
training programs at Franchisor's expense.
4.12 Unless otherwise provided herein, any materials provided by
Franchisor at Franchisee's request shall be paid for by Franchisee at
Franchisor's cost, plus ten percent (10%), in consideration of Franchisor's
overhead and administrative expenses.
5. RESTAURANT LOCATION; OCCUPANCY CONTRACT
5.01 Franchisee shall not relocate the Restaurant from the Site
without Franchisor's written consent.
5.02 The Occupancy Contract shall be executed by all necessary parties
within ten (10) days of the date hereof. Franchisee shall furnish Franchisor a
complete copy of the Occupancy Contract within ten (10) days after execution.
Such copy may be in [native language] if accompanied by Franchisee's certificate
to the effect that (i) the terms and conditions of the Occupancy Contract are
not inconsistent with the summary delivered as part of the Development
Materials; and (ii) the following covenants are included therein and directing
Franchisor to such covenants:
(A) Lessor shall deliver to Franchisor, simultaneously with
delivery to Franchisee, any notice alleging Franchisee's default under the
Occupancy Contract which threatens or purports to terminate the Occupancy
Contract;
(B) Franchisor may enter the Restaurant premises to protect
the Proprietary Marks or the System or to cure any Event of Default or
default under the Occupancy Contract;
(C) Franchisee may assign the Occupancy Contract to
Franchisor without any fee or modification thereof and Franchisor may assign
or sublease the Occupancy Contract or license the Restaurant premises for any
part of the remaining term of the Occupancy Contract, each without Lessor's
consent; and
(D) Lessor and Franchisee shall not amend the Occupancy
Contract in any way
<PAGE>
which is inconsistent with the provisions of Sections 5.02(A) through (D),
inclusive.
5.03 Notwithstanding the terms of Section 5.02, Franchisee shall:
(A) deliver to Franchisor, immediately after delivery to or
by Franchisee, any notice of default under the Occupancy Contract which
threatens or purports to terminate the Occupancy Contract;
(B) permit Franchisor to enter the Restaurant premises to
protect the Proprietary Marks or the System or to cure any Event of Default or
default under the Occupancy Contract; and
(C) not amend the Occupancy Contract in any way which is
inconsistent with the provisions described in Sections 5.02(A) through (D),
inclusive.
6. RESTAURANT CONSTRUCTION
6.01 The Project Manager shall ensure that (i) materials satisfying
the Standards are utilized in construction; (ii) such materials are purchased
from approved suppliers as described in Sections 6.06 and 6.07; and (iii)
construction plans are implemented in accordance with the Standards.
Franchisee shall propose appropriate adaptations of site plans, building
plans and specifications, architectural guidelines, decor and construction
guidelines to the local market, but any such adaptations are subject to
Franchisor's prior written consent.
6.02 Franchisee shall employ a qualified architect and licensed
general contractor, but such appointment shall be subject to Franchisor's
consent. Franchisee shall provide to Franchisor (i) design concept drawings
for Franchisor's review and consent; and (ii) upon request of Franchisor, copies
of architectural or construction contracts applicable to the Restaurant.
6.03 Following Franchisor's consent to design concept drawings,
Franchisee shall, pursuant to the Manuals, (i) submit for Franchisor's review
construction plans and specifications based upon the standard construction plans
provided to Franchisee, adapted to Franchisee's design for the Restaurant, (ii)
modify such plans and specifications as reasonably required by Franchisor, (iii)
submit such modified plans and specifications to Franchisor, and (iv) construct
the Restaurant pursuant to the plans and specifications to which Franchisor has
consented. The construction plans and specifications to which Franchisor has
consented shall not be modified without Franchisor's consent. Prior to the
commencement of construction, Franchisee shall deliver a construction schedule
and thereafter shall deliver monthly revisions thereof indicating construction
progress.
6.04 Franchisee shall obtain all permits and licenses required in
connection with the construction of the Restaurant. Upon request of Franchisor,
copies of such permits and licenses shall be provided to Franchisor.
6.05 Franchisee shall commence construction within six (6) months
after the date of Preliminary Site Consent and shall complete construction no
later than _______ [TO BE AGREED PRIOR TO EXECUTION OF EACH FRANCHISE AGREEMENT]
(_________) months thereafter (and sooner, if so required by the opening
dates mandated by the Development Agreement). Construction shall be deemed to
have been commenced upon the commencement of site work by heavy equipment or,
in the event the Restaurant is to be located in existing shell space,
commencement of construction-related work. Franchisee shall, within ten (10)
days after commencement of construction, advise Franchisor of such
commencement date. Franchisor may inspect construction at the Restaurant
premises. Franchisee shall make all necessary arrangements to ensure
Franchisor's access to the Restaurant premises.
6.06 Franchisee shall acquire from Franchisor, or a supplier
satisfying the requirements of
<PAGE>
Section 6.07, all (i) fixtures, furnishings, signs, equipment and other
products and materials required for the development of the Restaurant; (ii)
decorative memorabilia; (iii) Restaurant equipment; and (iv) millwork for the
Restaurant. Such memorabilia, equipment and millwork shall be installed at
Franchisee's expense by Franchisor or such vendor. The purchase price and
charge for installation shall be reasonably established by Franchisor or such
vendor. If installed by Franchisor, installation costs shall include the cost
of international travel, In-Country Expenses and Wage Expenses. Franchisee
acknowledges that Franchisor may (a) profit from such sale and installation;
or (b) receive consideration from such vendor with respect to such sale and
installation.
6.07 Franchisee's suppliers shall (a) demonstrate the ability to meet
the Standards, (b) possess quality controls and capacity to supply Franchisee's
needs promptly, reliably and in a manner consistent with the Standards and the
System, (c) not have been rejected in writing by Franchisor, and (d) have
attended and successfully completed, at such supplier's expense, such training
as reasonably required by Franchisor in the United States. Franchisee shall
provide Franchisor with a current list of suppliers (current supplier lists
shall thereafter be provided upon request). Franchisee shall bear or reimburse
to Franchisor all In-Country Expenses incurred in connection with Franchisor's
review and consent to suppliers. Franchisor may provide a list of suppliers for
such items to whom Franchisor consents in the United States.
6.08 Franchisor reserves the right to consent to, or require, limited
variations from the Standards with respect to the development of other
restaurants in the System.
7. RESTAURANT OPERATIONS; MANUALS
7.01 The Restaurant shall open for business (i) only with Franchisor's
consent; and (ii) promptly after completion of appropriate training pursuant to
the System (as reasonably determined by Franchisor). Upon opening and
thereafter, the Restaurant shall be operated pursuant to the Standards, the
System and this Agreement.
7.02 Franchisee acknowledges that (i) every component of the System is
material to (a) Franchisor, (b) other franchisees in the System and (c) the
operation of the Restaurant; and (ii) compliance by all franchisees with the
Standards and the System is (a) fundamental to the value of the System and to
this Agreement, and (b) the basis for the broad public acceptance of the System
and the goodwill associated therewith.
7.03 Franchisee shall designate and maintain continuously during the
Term the requisite number of general, kitchen and other managers for the
Restaurant, each of whom shall have successfully completed appropriate training
as described herein.
7.04 Except as otherwise provided herein, Franchisee shall:
A. use the Restaurant premises solely for the operation of
the Restaurant pursuant to the terms hereof;
B. keep the Restaurant operating pursuant to the terms hereof
for such minimum hours and days as from time to time prescribed in the Manuals
or otherwise in writing, except as restricted by local law;
C. obtain and maintain all permits and licenses required for
Restaurant operation and comply with all applicable laws and regulations;
D. refrain from using any juke box, video machine or other
coin or token operated
<PAGE>
machine, or any film or video device to which Franchisor has not consented;
E. refrain from (i) offering for sale any tickets,
subscriptions or chances; (ii) conducting any pools, raffles or related
activities, (iii) using or allowing any gaming, dancing or live entertainment;
or (iv) using or providing any form of delivery service at, from or on the
Restaurant premises without Franchisor's consent;
F. permit Franchisor to enter upon the Restaurant premises at
any time to inspect the Restaurant and the products and materials used by
Franchisee, cooperate with such inspection and take such steps as may be
necessary to correct any deficiencies discovered during such inspection
(Franchisee acknowledges that Franchisor may re-inspect the Restaurant and such
products or materials or any supplier and revoke its approval should such
supplier fail to meet the Standards) (the cost of such inspection shall be paid
by Franchisee in accordance with Section 7.16.C.) (the cost of such inspection
shall be paid to Franchisee in accordance with Section 7.16.C.); and
G. permit Franchisor to remove from the Restaurant samples of
any inventory items (without payment) in amounts reasonably necessary for
testing to determine if such samples meet the Standards (without limiting
Franchisor's other rights hereunder, Franchisee shall bear or reimburse all
costs of international travel, In-Country Expenses and Wage Expenses incurred if
the sample does not conform to the Standards).
7.05 Franchisee acknowledges that a material aspect of the System is
the (i) breadth of palate range; and (ii) quality of, and Standards relating to,
food and beverage. Franchisee's obligation to adapt the menu and menu items
shall be limited as follows:
A. with Franchisor's consent, Franchisee may limit the total
number of menu items offered on the menu; PROVIDED, HOWEVER, that (i) such menu
shall include (a) a minimum of ninety percent (90%) of the menu items on
Franchisor's then current standard menu (as determined or designated by
Franchisor) for Franchisor-operated T.G.I. Friday's restaurants in the United
States or (b) substitutions or additions thereto to which Franchisor has
consented; and (ii) Franchisor may require that certain menu items offered on
Franchisor's then current standard menu be offered on Franchisee's menu; and
B. Franchisee may include other menu items to which
Franchisor consents; PROVIDED, HOWEVER, that the number of such items shall not
exceed ten percent (10%) of the total number of items offered on Franchisee's
menu.
Menu modifications within the System (which may require acquisition of
additional equipment) may be required by Franchisor once each calendar year.
7.06 Franchisee shall (i) sell or offer only such products and
services to which Franchisor has consented and which are prepared in
accordance with the Standards; (ii) sell or offer for sale all products and
services required by Franchisor; (iii) refrain from any deviation from the
Standards without Franchisor's consent; and (iv) discontinue selling or
offering any products and services to which Franchisor has not consented or
has withdrawn consent in writing.
7.07 Franchisee shall purchase Franchisor's proprietary spice packs
from Franchisor or its designated vendor at a reasonable price established by
Franchisor or such vendor. Franchisee acknowledges that Franchisor may (i)
profit from its sale of spice packs to Franchisee; or (ii) receive consideration
from such vendor with respect to Franchisee's purchases of spice packs.
7.08 Franchisee shall (i) maintain the Restaurant (and all fixtures,
furnishings, signs and equipment) in good order and condition and/or repair any
damage or destruction to the Restaurant, all in compliance with System image and
the Standards, and (ii) as reasonably required by Franchisor, upgrade
<PAGE>
the Restaurant to the System image and the Standards. Such upgrade shall not
be required by Franchisor more than once every three (3) years and the cost
thereof shall not exceed Fifty Thousand United States dollars
(U.S.$50,000.00), unless at least twenty-five percent (25%) of
Franchisor-operated T.G.I. Friday's restaurants in the United States have
been so modernized, in which event such cost shall not be so limited.
Franchisee shall undertake and complete such modernization within a
reasonable time specified by Franchisor.
7.09 Franchisee shall (i) acquire all inventory, supplies and other
products and materials required for the operation and maintenance of the
Restaurant solely from suppliers who (a) demonstrate the ability to meet the
Standards, (b) possess quality controls and capacity to supply Franchisee's
needs promptly, reliably and in a manner consistent with the Standards and the
System, and (c) have not been rejected in writing by Franchisor; and (ii)
provide Franchisor with a current list of suppliers (current supplier lists
shall thereafter be provided upon request). Consent to a supplier shall be
within the sole discretion of Franchisor. Franchisee shall bear or reimburse to
Franchisor all of the In-Country Expenses incurred in connection with consent to
suppliers. Franchisor may provide a list of suppliers for such items to whom
Franchisor consents in the United States. Franchisee shall maintain sufficient
amounts of, and shall utilize at all times, such inventory, supplies and other
products or materials.
7.10 Franchisor shall provide Franchisee with one (1) set of the
Manuals "on loan". The Manuals and all materials to be provided hereunder shall
be in the English language. Franchisee acknowledges Franchisor's ownership of
any copyright rights in or to the Manuals. Franchisee shall observe such
reasonable requirements concerning copyright notices as Franchisor requests. The
Manuals shall be returned to Franchisor immediately upon request or upon
termination or expiration of this Agreement. Replacement Manuals and updates to
the Manuals will be made available to Franchisee at an additional cost.
7.11 Franchisee shall operate the Restaurant in accordance with the
System, the Manuals, the Standards, written directives (whether or not such
directives are made part of the Manuals or the Standards) and other manuals
prepared for use in Restaurant operations. The Manuals, the Standards, other
manuals and such written directives may be revised from time to time.
7.12 The Manuals, other manuals, such written directives and any
Confidential Information shall be kept in a secure location in the Restaurant
and returned to Franchisor immediately upon request or upon termination or
expiration of this Agreement.
7.13 Franchisee shall keep the Manuals, the Standards, other manuals
and such written directives up-to-date. In the event of any dispute as to the
contents of the Manuals, the Standards, other manuals or written directives, the
copy thereof maintained by Franchisor shall control.
7.14 Franchisee shall establish prices charged for products or
services sold in the Restaurant.
7.15 Franchisee shall obtain such copyright licenses as may be
necessary to authorize the playing of recorded music in the Restaurant.
Franchisee shall change such recorded music as required from time to time in the
Manuals or otherwise in writing.
7.16 Franchisor shall provide to Franchisee:
A. access, together with other franchisees, to new System
developments and Franchisee may be required to attend meetings in the United
States at its expense to discuss such developments;
B. access to and written materials concerning improvements to
the System which may include, without limitation, new products, recipes,
equipment, specifications and menu formats. At
<PAGE>
Franchisee's request, Franchisor shall provide training or demonstrations at
the Restaurant of new products or other changes to the System. Franchisee
shall bear or reimburse to Franchisor all costs of international travel,
In-Country Expenses and Wage Expenses in connection with such demonstrations;
and
C. periodic inspection and evaluation of the Restaurant as
reasonably required by Franchisor. Franchisee shall bear or reimburse the
In-Country Expenses incurred in connection with the first two (2) inspections
each calendar year. If additional inspections are (i) requested by Franchisee;
or (ii) reasonably required by Franchisor, Franchisee shall additionally bear or
reimburse all costs of international travel in connection with such additional
inspections. If Franchisee operates other T.G.I. Friday's restaurants under the
System in the vicinity of the Restaurant, Franchisor shall endeavor to perform
multiple inspections and evaluations on a single inspection trip.
7.17 Franchisor reserves the right to consent to, or require, limited
variation from the Standards with respect to the operation of other T.G.I.
Friday's restaurants in the System.
8. CONFIDENTIAL INFORMATION
8.01 Neither Franchisee nor any Principal shall communicate, disclose
or use any Confidential Information except as (i) permitted herein, or (ii)
required by law. Confidential Information shall be disclosed only to such
employees of Franchisee as is required in connection with performance of job
functions. Neither Franchisee nor any Principal shall, without Franchisor's
prior consent, copy, duplicate, record or otherwise reproduce any Confidential
Information. Confidential Information may be provided to consultants and
contractors only to the extent necessary for such parties to provide services to
Franchisee. Franchisee shall indemnify the Indemnitees from any damages, costs
or expenses resulting from or related to any disclosure or use of Confidential
Information by its agents, employees, consultants and contractors.
8.02 Franchisee and each Principal acknowledge Franchisor's exclusive
ownership of the Confidential Information and the System, and TGIFM's exclusive
ownership of, and Franchisor's license with respect to, the Proprietary Marks.
Neither Franchisee nor any Principal shall, directly or indirectly, contest or
impair Franchisor's or TGIFM's exclusive ownership of, and/or license with
respect to, the Confidential Information, the System or the Proprietary Marks.
8.03 If Franchisee develops improvements (as determined by Franchisor)
to the Confidential Information, Franchisee and the Principals shall each
execute an amendment to this Agreement reflecting such improvements and
Franchisor's or TGIFM's exclusive ownership thereof. All such improvements shall
be Confidential Information.
8.04 Each Principal shall execute and deliver to Franchisor a covenant
in the form attached as ATTACHMENT C. Franchisee shall cause each Director of
Operations, Representative, Multi-Unit Manager, Project Manager, general,
kitchen and other Restaurant managers and such other employees of Franchisee
whom Franchisor shall designate to execute and deliver to Franchisor a covenant
in the form attached as ATTACHMENT D. Notwithstanding the execution of such
covenant, Franchisee shall indemnify the Indemnitees from any damages, costs or
expenses resulting from or related to any disclosure or use of Confidential
Information by any Principal, Director of Operations, Representative, Multi-Unit
Manager, Project Manager, general, kitchen and other Restaurant managers and
other employees of Franchisee.
8.05 Immediately upon any termination or expiration of this Agreement,
Franchisee and each Principal shall return to Franchisor the Confidential
Information (and any copies thereof), including that portion of the Confidential
Information which consists of analyses, compilations, studies or other documents
containing or referring to any part of the Confidential Information prepared by
Franchisee or
<PAGE>
such Principal, their agents, representatives or employees.
9. PROPRIETARY MARKS
9.01 Franchisor grants to Franchisee the non-exclusive right and
license to use the Proprietary Marks listed on ATTACHMENT B (subject to the
terms thereof and hereof) during the Term in accordance with the System, the
Standards and as prescribed by Franchisor from time to time. In connection
therewith, Franchisee agrees that:
A. Franchisee shall use (i) only such of the Proprietary
Marks as are designated by Franchisor for Franchisee's use; and (ii) such marks
only in the manner specified by Franchisor in writing. Any other use of any
Proprietary Mark shall constitute an infringement of Franchisor's and TGIFM's
rights therein.
B. Franchisee shall use the Proprietary Marks only (i) for
the operation of the Restaurant; (ii) at the Site or in advertising related to
the Restaurant; and (iii) during the Term. Franchisee shall cease (a) any
unauthorized use of any Proprietary Mark upon demand; and (b) all use upon the
termination or expiration of this Agreement.
C. (1) Franchisor shall indemnify and defend Franchisee
and each Principal from all Trademark Damages incurred in connection with a
Trademark Action; PROVIDED, HOWEVER, that, as express conditions precedent to
such indemnity, Franchisee and the Principals shall (i) immediately advise
Franchisor of such Trademark Action; and (ii) fully cooperate with Franchisor
and its representatives in the defense or settlement of the Trademark Action.
Franchisor shall have the right (to the exclusion of Franchisee and each
Principal) to (a) select such counsel and other representatives to represent
Franchisor, Franchisee and Principals in connection with the Trademark Action;
(b) make all decisions, judgments and elections in connection with the Trademark
Action; and (c) settle or compromise the Trademark Action in its sole
discretion.
(2) Franchisee and each Principal recognize that others
may have acquired or attempted to acquire rights in or to colorable variations
or copies of the Proprietary Marks in [Country]. Franchisor does not represent,
warrant or covenant that it or TGIFM has any right to use the Proprietary Marks
in [Country] or that the use of any of the Proprietary Marks does not violate
the rights of any other person.
(3) Subject only to the provisions of Section
9.01.C.(1), Franchisor reserves the right to substitute, at Franchisor's
expense, different trade names, service marks, trademarks, logos, emblems,
symbols and indicia of origin for the Proprietary Marks for use in
identifying the System and the business operated thereunder.
D. During the Term, Franchisee shall identify itself as a
"licensed franchisee" of Franchisor (i) in conjunction with any use of the
Proprietary Marks, including, but not limited to, on invoices, order forms,
receipts, contracts and business cards; (ii) in a notice posted at conspicuous
locations in the Restaurant; (iii) on any authorized delivery vehicles; and (iv)
in any other manner as Franchisor may designate in writing.
E. Franchisee shall not pledge, mortgage or otherwise
encumber its rights to use any of the Proprietary Marks.
F. Franchisee shall not use any of the Proprietary Marks as
part of its corporate or other name. Franchisee shall comply with Franchisor's
instructions, and shall execute any documents deemed necessary by Franchisor or
its counsel, in filing and maintaining any requisite trade name or
<PAGE>
fictitious name registrations in connection with the Proprietary Marks.
G. (1) Subject to Section 9.01.C., Franchisee and each
Principal hereby waives any claim with respect to, and releases Franchisor and
TGIFM from, any liability or obligation with respect to (i) its use of any of
the Proprietary Marks; or (ii) any Trademark Action.
(2) Franchisee shall immediately notify Franchisor of
any (i) infringement of the Proprietary Marks or challenge to the use of any
thereof; or (ii) claim by any person of any rights in or to any of the
Proprietary Marks. Franchisee and each Principal shall not communicate with any
person except Franchisor and Franchisor's counsel in connection with any such
infringement, challenge or claim. Franchisor in its sole discretion may take
such action as it deems appropriate, and shall exclusively control, any
litigation or proceeding arising from any infringement, challenge, claim or
otherwise relating to any of the Proprietary Marks. Franchisee shall execute any
and all instruments and documents, render such assistance and do such acts and
things as may, in the opinion of Franchisor or its counsel, be necessary or
advisable in any such litigation or proceeding or to otherwise protect or
maintain Franchisor's or TGIFM's rights and interest in the Proprietary Marks.
H. Neither Franchisee nor any Principal shall, directly or
indirectly, apply for, register, attempt to or obtain control of, or interfere
with Franchisor's or TGIFM's efforts to obtain registration or ownership of any
name, trademark, service mark or other identifying name anywhere in the world.
I. Franchisee shall cooperate with Franchisor to prove the
continuous and effective use of the Proprietary Marks, including in connection
with any registration (if obtained) or any renewal thereof.
9.02 Franchisee and each Principal agree and acknowledge that:
A. Franchisor or TGIFM is the exclusive owner of all right,
title and interest in and to the Proprietary Marks and the goodwill associated
therewith;
B. the Proprietary Marks identify Franchisor and TGIFM as the
source of origin of goods and services provided under such marks and the System;
C. Franchisee shall not directly or indirectly contest
Franchisor's or TGIFM's ownership or the validity of, or interest in, the
Proprietary Marks;
D. Franchisee does not have, and shall not acquire by use
pursuant to this Agreement, any ownership or other interest in or to the
Proprietary Marks, except the right and license granted herein, subject in all
respects to the terms hereof;
E. any and all goodwill arising from Franchisee's use of the
Proprietary Marks shall inure exclusively to Franchisor or TGIFM without
compensation; and
F. Franchisee's right and license to use the Proprietary
Marks is non-exclusive and, subject to Section 2.01 hereof, Franchisor or
TGIFM has and retains all rights relating to the Proprietary Marks and the
use thereof, including, without limitation, the right to:
(1) grant other licenses to use the Proprietary Marks;
(2) develop and establish other systems using the
Proprietary Marks or other names or marks and to grant licenses thereto without
providing any rights therein to Franchisee; and
<PAGE>
(3) engage, directly or indirectly, at
wholesale, retail or otherwise, in (a) the production, distribution,
license and/or sale of products and services under the Proprietary Marks or
other names or marks, and (b) the use, in connection with such production,
distribution and sale, of any and all trademarks, trade names, service marks,
logos, insignia, slogans, emblems, symbols, designs and other identifying
characteristics as may be developed or used from time to time by Franchisor.
9.03 If required by applicable law, Franchisee shall cooperate with
Franchisor in (i) registering Franchisee as an authorized user of the
Proprietary Marks; and (ii) canceling such registration at Franchisor's
request or upon any termination or expiration of this Agreement. Franchisor
shall appoint the Trademark Representative to obtain registration, or to
terminate the registration, of Franchisee as an authorized user of the
Proprietary Marks. Franchisee shall execute an irrevocable power of attorney
contemporaneously herewith in a form acceptable to Franchisor pursuant to
which Franchisee shall authorize the Trademark Representative to register
Franchisee as an authorized user of the Proprietary Marks and to cancel such
registration as described above. Such power of attorney shall continue in
effect notwithstanding the termination or expiration of this Agreement. Any
costs or expenses incurred in connection with any such registration or
termination will be paid by Franchisee.
10. ADVERTISING
10.01 Franchisee recognizes (i) the value of advertising; and (ii)
that standardized advertising programs enhance the goodwill and public image
of the System.
A. Franchisee shall expend not less than two percent (2%)
of Gross Sales, measured over continuing six (6) month periods, for local
advertising. Franchisee's local advertising may utilize media to which
Franchisor has consented, including:
(1) newspapers, magazines and other
periodicals;
(2) radio/ television;
(3) outdoor advertising (E.G., billboards or
signs);
(4) transit advertising;
(5) direct mail; and
(6) such other media to which Franchisor consents.
Expenditures made for participation in (i) advertising and
promotional programs described in Section 10.01.B.; and (ii) Franchisor's
international or regional advertising funds described in Section 10.02.A.
shall be credited to Franchisee's local advertising obligation. Franchisor
may audit Franchisee's books and records to confirm local advertising
expenditures.
B. Franchisor may, from time to time, develop and
administer advertising and sales promotion programs in which Franchisee may
participate, upon terms and conditions established by Franchisor.
10.02 A. Franchisor shall have the right to establish international
or regional advertising funds. If such fund(s) are established and if
advertising to be purchased therewith shall reach local media in the
Territory, Franchisor shall provide notice to Franchisee and Franchisee shall
contribute to such fund(s) on a monthly basis in an amount determined by
Franchisor, such amount not to exceed two percent (2%) of Gross Sales per
month.
<PAGE>
B. Franchisor or its designee shall (i) administer such
funds, (ii) direct all advertising programs, and (iii) shall have sole
discretion to consent to or reject all creative concepts, materials and media
and the placement and allocation thereof. Franchisor and its designees
undertake no obligation to (a) make expenditures in the Territory which are
equivalent or proportionate to Franchisee's contribution, or (b) ensure that
any particular franchisee benefits directly or PRO RATA from the placement of
such advertising. Such funds may be applied to Franchisor's costs of
maintaining, administering, directing and preparing advertising; PROVIDED,
HOWEVER, that such funds shall not be used to defray Franchisor's general
operating expenses (except reasonable administrative costs and overhead
related to the administration or direction of such funds and programs). Such
funds shall be maintained in a separate account and an annual statement of
fund expenditures shall be delivered to Franchisee upon request.
10.03 All advertising and promotion by Franchisee shall conform to
the Standards. Prior to use Franchisee shall submit all advertising and
promotional plans and materials not prepared by Franchisor or not previously
consented to by Franchisor during the prior twelve (12) months. Franchisor
shall consent to or reject such plans and materials within thirty (30) days
of receipt. Franchisee shall not use such plans or materials until
Franchisor's consent is received. Franchisee shall promptly discontinue any
advertising or promotional plans or materials, whether or not previously
consented to, upon notice from Franchisor.
11. INSURANCE
11.01 Franchisee shall obtain, at least thirty (30) days prior to
commencement of Restaurant construction, and maintain throughout the Term,
such property, casualty and general liability insurance as may be (i)
required by law; or (ii) reasonably designed to protect Franchisee from the
risks inherent in construction and Restaurant operation. The types and
amounts of coverage and the issuing companies are subject to Franchisor's
consent, which consent will not be unreasonably withheld. Such insurance
shall:
(a) name the Indemnitees as additional insured parties;
(b) contain no provision which limits or reduces
coverage in the event of a claim by any one (1) or more of the Indemnitees;
(c) provide that policy limits shall not be reduced,
coverage restricted, canceled, allowed to lapse or otherwise altered or such
policy(ies) amended without Franchisor's consent; and
(d) be obtained from reputable insurance companies
authorized to do business in all jurisdictions in which the Restaurant is
located.
11.02 Such insurance may provide for reasonable deductible
amounts, but the deductible amounts shall be subject to Franchisor's
review and consent.
11.03 A certificate of insurance shall be submitted for Franchisor's
consent prior to the commencement of construction and thereafter to evidence
uninterrupted coverage. Franchisee shall deliver a complete copy of such
policy(ies) within ten (10) days of request by Franchisor.
11.04 Franchisee shall hold the Indemnitees harmless from any and
all liability or expense arising from any claim, demand, action, suit or
other proceeding resulting from or connected with the operation of the
franchised business by Franchisee and Franchisee's employees or agents, and
Franchisee shall fully indemnify the Indemnitees for any loss sustained in
connection therewith.
11.05 Franchisee's obligation to obtain and maintain insurance or to
indemnify any Indemnitee
<PAGE>
shall not be limited by reason of any insurance which may be maintained by
any Indemnitee, nor shall such insurance relieve Franchisee of any liability
under this Agreement. Franchisee's insurance shall be primary to any policies
maintained by any Indemnitee.
11.06 If Franchisee fails to obtain or maintain such insurance,
Franchisor may acquire such insurance at Franchisee's expense. The cost
thereof, together with a reasonable fee for Franchisor's expenses in so
acting and interest at eighteen percent (18%) per annum from the date
acquired, shall be payable by Franchisee upon notice.
12. ACCOUNTING AND RECORDS
12.01 Franchisee shall prepare and preserve, in accordance with the
System and the Manuals, complete and accurate books, records and accounts
with respect to the Restaurant. Franchisee shall prepare reports or
disclosures required or permitted herein and in the Manuals and shall
maintain and preserve the underlying records, including, without limitation,
sales slips, coupons, purchase orders, invoices, payroll records, check
stubs, bank statements, sales tax records and returns, cash receipts and
disbursements, journals and ledgers, in a form and manner prescribed in the
Manuals or otherwise prescribed by Franchisor in writing. Franchisee shall
adopt such accounting periods as Franchisor shall prescribe.
12.02 Franchisee shall submit to Franchisor (i) a monthly accounting
of Gross Sales simultaneously with the Payment of the Royalty Fee therefor;
and (ii) an annual accounting of Gross Sales within thirty (30) days after
the end of each accounting year. Each such report shall reflect Gross Sales
in [Currency].
12.03 Franchisee shall submit to Franchisor such additional reports,
records, data, information, financial statements (including guest counts) as
Franchisor may reasonably require or as specified from time to time in the
Manuals in the form reasonably required by Franchisor. Franchisor may
inspect, copy and audit all such information (Sections 12.01, 12.02 and
12.03) and the books, records and tax returns of Franchisee upon five (5)
days' prior notice.
12.04 If any audit discloses an (i) understatement of Gross Sales
for the period subject to audit of one percent (1%) or more; or (ii)
underpayment of the Royalty Fee for the period subject to audit of five
percent (5%) or more, Franchisee shall reimburse (in addition to payment of
such Royalty Fee) any and all costs and expenses incurred connected with such
audit, including, without limitation, the costs of international travel,
In-Country Expenses and Wage Expenses of the auditors.
12.05 The annual accounting of Gross Sales required in Section 12.02
and other financial statements requested by Franchisor shall be audited by an
independent certified public accountant or its equivalent to whom Franchisor
has consented. All financial statements or reports shall be accompanied by a
certificate of Franchisee's treasurer or chief financial officer to the
effect that such statements or reports fairly and accurately reflect the
matters reported therein and are complete and correct.
13. FRANCHISEE'S REPRESENTATIONS AND WARRANTIES; AFFIRMATIVE AND
NEGATIVE COVENANTS
13.01 Franchisee represents and warrants to Franchisor as follows:
A. Franchisee is a corporation or partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with all requisite power and authority to
<PAGE>
own, operate and lease its assets (real or personal), to carry on its
business, to enter into this Agreement and perform its obligations hereunder.
Franchisee is duly qualified to do business and is in good standing in each
jurisdiction in which its business or the ownership of its assets requires.
B. The execution, delivery and performance by Franchisee of
this Agreement and all other agreements contemplated herein has been duly
authorized by all requisite corporate or partnership action and no further
action is necessary to make this Agreement or such other agreements valid and
binding upon it and enforceable against it in accordance with their
respective terms. Neither the execution, delivery nor performance by
Franchisee of this Agreement or any other agreements contemplated hereby will
conflict with, or result in a breach of any term or provision of Franchisee's
certificate or articles of incorporation, corporate charter, by-laws or
partnership agreement or under any indenture, mortgage, deed of trust or
other contract or agreement to which Franchisee is a party or by which it or
any of its assets are bound, or breach any order, writ, injunction or decree
of any court, administrative agency or governmental body.
C. Franchisee's certificates or articles of incorporation,
corporate charter, by-laws, partnership agreement and other governing
documents expressly limit Franchisee's business activities solely to the
development and operation (pursuant to the Development Agreement and this
Agreement or other franchise agreements with Franchisor) of "Restaurants" (as
defined in the Development Agreement).
D. Certified copies of Franchisee's certificate or articles
of incorporation, corporate charter, by-laws, partnership agreement, other
governing documents and any amendments thereto, including board of director's
or partner's resolutions authorizing this Agreement, each translated into the
English language, have been delivered to Franchisor.
E. Certified list of the shareholders of Franchisee,
including the number and type of shares owned by each shareholder.
F. Franchisee's certificate or articles of
incorporation, corporate charter or partnership agreement limit Transfers
as described in Sections 14.02 and 14.03.
G. If Franchisee is (i) a corporation, each Security shall
bear a legend (in a form to which Franchisor consents) indicating that; or
(ii) a partnership, its partnership agreement shall provide (in a form to
which Franchisor consents) that, any Transfer is subject to Sections 14.02
and 14.03.
13.02 Franchisee affirmatively covenants with Franchisor as follows:
A. Franchisee shall perform its duties and obligations
hereunder and shall require each Director of Operations, Multi-Unit Manager,
Project Manager and general, assistant general, kitchen and other managers to
dedicate their respective full time and best efforts to the development,
construction, management, operation, supervision and promotion of the
Restaurant.
B. Franchisee shall promptly provide to Franchisor, without
charge, any information concerning any new process or improvements in the
development, construction, management, operation, supervision or promotion of
the Restaurant developed by Franchisee or any Principal. Any such process or
improvement shall be Franchisor's exclusive property.
C. Franchisee shall comply with all requirements of
applicable rules, regulations and ordinances.
D. Franchisee shall maintain a current list of all Principals
and deliver a certified
<PAGE>
copy thereof to Franchisor upon (i) any Transfer; or (ii) request.
E. Each Security issued subsequent to the date hereof shall
bear a legend (in a form acceptable to Franchisor) indicating that any
Transfer is subject to Sections 14.02 and 14.03.
13.03 Franchisee acknowledges to and/or negatively covenants with
Franchisor as follows:
A. Franchisee shall not amend its certificate or articles
of incorporation, corporate charter, by-laws, partnership agreement or other
governing documents in a manner which is inconsistent with Sections 13.01.C,
14.02 and 14.03.
B. Franchisee shall not remove or permit removal from any
Security or its partnership agreement, or issue any Security that does not
have endorsed upon it, the legend described in Section 13.01.G.
C. Franchisee and each Principal shall receive valuable,
unique training, trade secrets and the Confidential Information which are
beyond the present skills, experience and knowledge of Franchisee, any
Principal and Franchisee's employees. Franchisee and each Principal
acknowledge (i) that such training, trade secrets and the Confidential
Information (a) are essential to the development of the Restaurants and (b)
provides a competitive advantage to Franchisee; and (ii) access to such
training, trade secrets and the Confidential Information is a primary reason
for their execution of this Agreement. In consideration thereof, Franchisee
and each Principal covenant that, during the Term and for a period of two (2)
years after the expiration or termination of this Agreement, neither
Franchisee nor any Principal shall, directly or indirectly:
(1) employ or seek to employ any person (or
induce such person to leave his or her employment) who is, or has within
one (1) year been, employed (i) by Franchisor; (ii) by any developer or
franchisee of Franchisor; or (iii) in any other concept or system owned,
operated or franchised by an Affiliate, as a director, officer or in any
managerial capacity;
(2) own, maintain, operate or have any
interest in any Competing Business;
(3) own, maintain, operate or have any
interest in any Competing Business which business is, or is intended to
be, located in the Territory; or
(4) own, maintain, operate or have any
interest in any Competing Business which business is, or is intended to
be, located within a twenty (20) kilometer radius of any restaurant in the
System (for purposes of enforcement of this Section 13.03.C.(4) the law of
the jurisdiction where such restaurant is located shall control).
D. Sections 13.03.C (2), (3) and (4) shall not apply to the
acquisition by Franchisee of an interest for investment only of five percent
(5%) or less of the capital stock of a Publicly-Held Entity if such owner is
not a director, officer or manager therefor or consultant thereto.
13.04 Each of the foregoing covenants is independent of each
other covenant or agreement contained in this Agreement.
13.05 Franchisor may, in its sole discretion, reduce the area,
duration or scope of any covenant contained in Section 13.03 without
Franchisee's or any Principal's consent, effective upon notice to Franchisee.
Franchisee and each Principal shall comply with any covenant as so modified.
13.06 Franchisee's representations, warranties, covenants and
agreements herein are continuing representations, warranties, covenants and
agreements, each of which shall survive the expiration or termination hereof.
<PAGE>
14. TRANSFER
14.01 Franchisor may assign this Agreement, or any of its rights or
obligations herein, to any person or entity without Franchisee's or any
Principal's consent; PROVIDED, HOWEVER, that any such assignment shall not
affect Franchisee's rights hereunder.
14.02 A. Franchisee and each Principal acknowledge that Franchisee's
rights and obligations herein and in each Franchise Agreement are personal to
Franchisee and that Franchisor has entered into this Agreement relying upon
the business skill, experience and aptitude, financial resources and
reputation of Franchisee and each Principal. Therefore, neither Franchisee
nor any Principal, or their respective successors or permitted assigns, shall
complete, or allow to be completed, any Transfer without Franchisor's
consent. Any purported Transfer, by operation of law or otherwise, without
Franchisor's consent shall be null and void and constitute an Event of
Default.
B. Franchisor may require satisfaction of any of the following
conditions, and such other conditions as Franchisor may reasonably require,
prior to consenting to any Transfer:
(1) (i) no Event of Default shall have occurred
under this Agreement and be continuing, and (ii) no event shall have
occurred under this Agreement which, with the giving of notice or lapse of
time, or both, would constitute an Event of Default;
(2) Franchisee and/or any affected Principal
shall deliver a general release of any and all claims against the
Indemnitees, including, without limitation, claims arising under this
Agreement, in a form acceptable to Franchisor;
(3) Franchisee and/or any affected Principal
shall remain liable for the performance of its obligations, covenants and
agreements herein through the date of Transfer and shall execute all
instruments reasonably requested by Franchisor to evidence such liability;
(4) the transferee and all owners of any record
or beneficial interest in the capital stock (or other interest) thereof shall
(i) make each of Franchisee's and Principal's representations and warranties;
(ii) assume full, unconditional, joint and several liability for, and agree
to perform from the date of Transfer, each of Franchisee's and Principal's
obligations, covenants and agreements herein; and (iii) execute all
instruments (in a form acceptable to Franchisor) reasonably requested by
Franchisor to evidence the foregoing;
(5) the transferee shall satisfy, in Franchisor's
reasonable judgment, Franchisor's then existing criteria for international
franchisees or principals, including, without limitation: (i) education;
(ii) business skill, experience and aptitude; (iii) character and reputation;
and (iv) financial resources;
(6) the transferee and all of its owners shall
execute (without extending the Term) the standard form of franchise
agreement then being offered to new System franchisees in international
markets or other form of this Agreement and such other ancillary agreements
as Franchisor may request, all of which shall supersede this Agreement and
its ancillary documents and the terms of which may differ from the terms
hereof including, without limitation, higher Franchise and Royalty Fees and
advertising contributions;
(7) the transferee at its expense shall satisfy
the requirements of Sections 2.03.B. hereof as if Franchisee had exercised
a Renewal Term; and
<PAGE>
(8) at the transferee's expense, the transferee's
Representative, any Multi-Unit Manager(s), Director of Operations, Project
Manager, general manager(s) and other managers shall complete such training
as then required (if not previously trained pursuant to the terms hereof),
upon such terms and conditions as Franchisor may reasonably require.
14.03 Franchisee and each Principal agree that (i) no Transfer
(including the issuance of any new Securities) shall occur without
Franchisor's prior written consent; (ii) Franchisor shall have and is hereby
granted a right of first refusal and option with respect to any Transfer;
(iii) should any Principal desire to accept a BONA FIDE offer to so Transfer
or should Franchisee desire to issue or sell any new Securities, such party
shall promptly notify Franchisor thereof and shall provide such information
and documents relating thereto as Franchisor may require; (iv) within thirty
(30) days after receipt of such notice and documents, Franchisor may notify
such party that it intends to complete such Transfer upon such terms and
conditions (PROVIDED, HOWEVER, that (a) Franchisor may elect to make payment
in United States dollars or such other currency Franchisor designates and (b)
such transaction shall be consummated within a reasonable period of time
after Franchisor has given such notice); (v) any material change in the terms
of any offer or any change in the identity of the proposed transferee shall
constitute a new offer subject to Franchisor's right and option; and (vi)
Franchisor's failure to exercise such right and option shall not constitute a
waiver of such right and option with respect to future offers.
14.04 In the event Franchisee requests Franchisor's consent to any
proposed Transfer, there shall be paid to Franchisor a non-refundable fee to
compensate Franchisor for its costs and expenses associated with reviewing
the proposed Transfer, including, without limitation, travel costs and
expenses, legal and accounting fees and diversion of employee resources. No
such fee shall be payable with respect to a transaction with Franchisor
described in Section 14.03.
14.05 In the event any Principal is a natural person, Franchisee
shall promptly notify Franchisor of the death or Permanent Disability of such
Principal. Any Transfer upon death or Permanent Disability shall be subject
to the terms and conditions described in Sections 14.02 and 14.03 and shall
be completed prior to a date which is (i) one (1) year after date of death;
or (ii) ninety (90) days after the date such Principal becomes, or is deemed
to be, Permanently Disabled. Any Principal refusing to submit to examination
with respect to Permanent Disability shall be deemed Permanently Disabled.
14.06 Franchisor's consent to any Transfer shall not constitute a
waiver of (i) any claims it may have against the transferor; or (ii) the
transferee's compliance with terms hereof.
15. CONSENT AND WAIVER
15.01 When required, Franchisee or any Principal shall make written
request for Franchisor's consent in advance and such consent shall not be
deemed given by Franchisee unless it is set forth in writing. Franchisor's
consent shall not be unreasonably withheld, except as expressly provided
herein.
15.02 Except as expressly made herein, Franchisor makes no
representations or warranties upon which Franchisee or any Principal may rely
and assumes no liability or obligation to Franchisee, any Principal or any
third party by providing any waiver, approval, advice, consent or services to
Franchisee or due to any delay or denial thereof.
16. DEFAULT AND REMEDIES
16.01 The following shall constitute Events of Default by Franchisee:
(i) failure to
<PAGE>
(a) commence or complete construction of the Restaurant or (b) open and
thereafter continually operate the Restaurant, as described herein; (ii) the
breach or falsity of any representation or warranty herein; (iii) failure to
deliver executed covenants as required in Section 8.04; (iv) failure to
comply with or perform its covenants, obligations and agreements herein; (v)
any Transfer that (a) occurs other than as provided in Section 14, or (b)
fails to occur within the time periods described in Section 14
(notwithstanding any lack of, or limits upon, the enforceability of any term
or provision of Sections 13.01.F. or 14.02; (vi) failure to make any Payment
on or before the date payable; (vii) failure to meet and/or maintain the
Standards; (viii) Franchisee (a) is adjudicated, or is, bankrupt or
insolvent, (b) makes an assignment for the benefit of creditors, or (c) seeks
protection from creditors by petition in bankruptcy or otherwise or there is
filed against Franchisee a similar petition which is not dismissed within
thirty (30) days; (ix) the appointment of a liquidator or receiver that is
not dismissed within thirty (30) days of appointment for (a) all or
substantially all of Franchisee's assets or (b) the Restaurant; (x) breach or
failure to perform any other term or condition of this Agreement; (xi)
Franchisee or any Principal pleads guilty to or is convicted of a felony or a
crime involving moral turpitude or any other crime or offense that Franchisor
reasonably believes is likely to adversely affect the System or the goodwill
associated therewith (whether in the United States, the Territory or
elsewhere) or Franchisor's interest therein; or (xii) any (a) two (2) or more
Events of Default shall arise under any single Section of this Section 16.01
or (b) three (3) or more Events of Default shall arise under this Section
16.01, in any continuous twelve (12) month period notwithstanding the
previous cure of such Events of Default.
Franchisor shall not exercise any remedies available
hereunder with respect to the following described Events of Default unless
such Events of Default remain uncured after notice from Franchisor thereof
and the expiration of the following cure periods:
(a) with respect to any Event of Default arising under
Section 16.01 (vi) - ten (10) days; or
(b) with respect to any Event of Default arising under
Sections 16.01 (i) - (v) inclusive, (vii) and (x) - thirty (30) days.
No such limitation upon Franchisor's right to exercise
remedies shall exist with respect to Events of Default risen under Sections
16.01 (viii), (ix), (xi) or (xii).
16.02 Upon the occurrence of an Event of Default, Franchisor
may exercise one or more of the following remedies or such other remedies as
may be available at law or in equity:
A. cure such Event of Default at Franchisee's expense and,
in connection therewith, Franchisee (i) hereby grants to Franchisor all
rights and powers necessary or appropriate to accomplish such cure; (ii)
shall indemnify and hold the Indemnitees harmless from and against all costs,
expenses (including reasonable fees of counsel and other engaged
professionals), liabilities, claims, demands and causes of action (including
actions of third parties) incurred by or alleged against any Indemnitee in
connection with Franchisor's cure; and (iii) shall reimburse or pay such
costs or damages within ten (10) days of receipt of Franchisor's invoice
therefor;
B. in the event of a material Event of Default, terminate
this Agreement and all rights granted hereunder, upon notice to Franchisee,
without waiving any (i) claim for damages suffered by Franchisor; or (ii)
other rights, remedies or claims; or
C. with respect to an Event of Default arising from a
breach of covenant contained in Section 13.03.C (1), the affected former
employer shall be compensated by the breaching party (and Franchisee shall be
additionally liable for breaches by any Principal) for the reasonable costs
and expenses incurred by such employer in connection with training such
employee. Franchisee and each Principal acknowledge that such expenses are
impossible to accurately quantify and agree that, as
<PAGE>
liquidated damages and not as a penalty, an amount equal to such employee's
annual rate of compensation in the final twelve (12) months of employment (or
an annualized rate if employed for a shorter period) by such former employer
shall be paid by the breaching party to the former employer at such time as
such employee commences employment.
For purposes of this Section 16, "material" shall mean
substantial deviation from the performance required. The parties agree that
Events of Default arising under Section 16.01(i), (iii), (iv) [with respect
to Events of Default arising, without limitation, under Sections 9.01 through
9.03, inclusive], (v), (vi), (viii), (ix), (xi) or (xii) (without limitation)
shall constitute material Events of Default.
D. Franchisee and each Principal agree that Franchisor's
exercise of the rights and remedies set forth herein are reasonable.
Franchisor may, in addition to pursuing any other remedies, specifically
enforce such obligations, covenants and agreements or obtain injunctive or
other equitable relief in connection with the violation or anticipated
violation of such obligations, covenants and agreements without the necessity
of showing (i) actual or threatened harm; (ii) the inadequacy of damages as a
remedy; or (iii) likelihood of success on the merits, and without being
required to furnish bond or other security. Nothing in this Agreement shall
impair Franchisor's right to obtain equitable relief.
16.03 Franchisor's rights and remedies shall be cumulative, and not
exclusive, of any other right or remedy described herein or available at law
or in equity. The expiration or termination of this Agreement shall not
release Franchisee or any Principal from any liability or obligation then
accrued or any liability or obligation continuing beyond, or arising from,
such expiration or termination.
16.04 Franchisor's failure to exercise any right or remedy or to
enforce any obligation, covenant or agreement herein shall not constitute a
waiver by, or estoppel of, Franchisor's right to enforce strict compliance
with any such obligation, covenant or agreement. No custom or practice shall
modify or amend this Agreement. Franchisor's waiver of, or failure or
inability to enforce, any right or remedy shall not impair Franchisor's
rights or remedies with respect to subsequent Events of Default of the same,
similar or different nature. Franchisor's delay, forbearance or failure to
exercise any right or remedy in connection with any Event of Default or
default by other franchisees shall not affect, impair or constitute a waiver
of such rights or remedies. Acceptance of any Payment shall not waive any
Event of Default.
16.05 Franchisee and each Principal shall, jointly and severally,
pay all costs and expenses (including reasonable fees of counsel and other
engaged professionals) incurred by Franchisor in successfully enforcing this
Agreement. The existence of any claims, demands or actions which either
Franchisee or any Principal may have against Franchisor, whether arising from
this Agreement or otherwise, shall not constitute a defense to Franchisor's
enforcement of Franchisee's or any Principal's representations, warranties,
covenants, agreements or obligations herein.
16.06 During the Term, the parties acknowledge that:
A. if any governmental authority expropriates or threatens
to expropriate any of the assets of Franchisee;
B. if any governmental authority expropriates or
threatens to expropriate any assets (including, but not limited to, the
intellectual property rights) of Franchisor; or
C. if Franchisee is prevented by any governmental authority
whether due to foreign exchange restrictions or for any other reason from
paying any Royalty Fee or making any other payment to Franchisor in United
States Dollars for a period of twelve (12) months, Franchisor or Franchisee
may, at either party's option, terminate this Agreement on the giving of
thirty (30) days notice in writing to the other party.
<PAGE>
17. OBLIGATIONS UPON TERMINATION OR EXPIRATION
17.01 Upon any termination or expiration of this Agreement, and
subject to Section 2.A (second sentence) of the Development Agreement (if
then if effect), Franchisor may establish, or authorize others to establish,
T.G.I. Friday's restaurants in the Territory.
17.02 Upon any termination or expiration of this Agreement, all
rights granted to Franchisee herein shall terminate and Franchisee shall:
A. immediately cease to operate the Restaurant under
the System;
B. immediately cease to use (subject to other franchise
agreements executed pursuant to the Development Agreement (if then in
effect)) (i) any Confidential Information; (ii) the System and the Standards;
and (iii) the Proprietary Marks and other distinctive signs, symbols and
devices associated with the System;
C. immediately deliver to Franchisor all Confidential
Information and all copies thereof, retaining copies thereof only as
reasonably required to comply with law; and
D. cancel any assumed name or equivalent registration
which contains any of the Proprietary Marks or any other name, service mark
or trademark of Franchisor or TGIFM.
Franchisee shall furnish evidence of compliance with these
obligations within five (5) days after any termination hereof.
17.03 A. Franchisee grants to Franchisor the option, exercisable
upon notice within thirty (30) days after any such termination or expiration
of this Agreement, to acquire Franchisee's rights and obligations under the
Occupancy Contract.
B. If Franchisor exercises such option, Franchisee grants
to Franchisor the further option, to be exercised within thirty (30) days
after taking possession of the Restaurant premises, to purchase the
Furnishings at Franchisee's then current book value or fair market value,
whichever is less, free and clear of all liens, encumbrances or claims. For
purposes of computing book value, depreciation shall be calculated on a
straight-line basis, using useful lives as recommended by the
[LOCAL ACCOUNTING BOARD]. If the parties cannot agree on the fair market
value within fifteen (15) days, fair market value shall be determined by
arbitration pursuant to Section 18 hereof. Franchisor's purchase shall be
completed not later than thirty (30) days after the book and fair market
value are established (by agreement or arbitration). Such amount, less any
sums otherwise due Franchisor from Franchisee, shall be paid to Franchisee at
a closing which shall take place at Headquarters. At such closing, the
parties shall execute such instruments of conveyance and/or transfer as
reasonably required by Franchisor.
C. In the event Franchisor does not elect to purchase the
Furnishings, Franchisee shall, at its expense, remove the Furnishings from
the Restaurant within ten (10) days after notice or ten (10) days after
expiration of the option granted in Section 17.03.B, whichever first occurs.
If Franchisee fails to so remove the Furnishings, Franchisor may remove same
at Franchisee's expense.
17.04 If Franchisor does not exercise its option to acquire the
Occupancy Contract, Franchisee shall, within thirty (30) days after any
termination or expiration of this Agreement, make such alterations to the
Restaurant as may be necessary, in Franchisor's reasonable judgment, to
distinguish the appearance of the Site from that of other T.G.I. Friday's
restaurants in the System, including, but not limited to:
A. removal of decorative memorabilia, including wall
hangings, the racing scull, gas
<PAGE>
pumps or street lamps and brass railings;
B. removal of stained glass and Tiffany lamps and
chandeliers;
C. removal of proprietary phone booth;
D. removal of red and white striped outside awnings;
E. removal or painting of interior awnings and exterior
and interior walls to a solid color other than a color specified in the
Standards;
F. removal of signage; and
G. removal of all items, such as menus, recipes or
any other items bearing any Proprietary Mark and all other proprietary items
or inventory, including, without limitation, china, service ware, uniforms,
tablecloths and spice packs.
17.05 Subsequent to any termination or expiration of this Agreement,
Franchisee shall not (i) use any reproduction, counterfeit, copy or colorable
imitation of any of the Proprietary Marks which could cause confusion,
mistake or deception as to source of origin or which could dilute
Franchisor's rights in and to any of the Proprietary Marks; (ii) utilize any
designation of origin, description or representation which suggests an
association or connection with Franchisor; or (iii) utilize the System or any
part thereof.
17.06 Until all Payments are made and any damages, costs or expenses
incurred or suffered by Franchisor have been paid, Franchisor shall have, and
Franchisee shall be deemed to have granted, a lien against any and all of the
Furnishings and Franchisee's interest in the Occupancy Contract and Site.
17.07 Franchisee shall execute an irrevocable power of attorney
contemporaneously herewith, in such form as Franchisor shall provide, pursuant
to which Franchisee shall authorize its attorney-in-fact designated therein to
carry out Franchisee's obligations in this Section 17.
17.08 Franchisee and each Principal shall, jointly and severally, pay
all costs and expenses (including reasonable attorneys' fees) incurred by
Franchisor in connection with the successful enforcement of this Section 17. In
the event Franchisee fails to comply with this Section 17, Franchisor may enter
upon the Site, without being guilty of trespass or otherwise liable, for the
purpose of making or causing to be made such alterations at Franchisee's
expense.
17.09 Franchisee expressly and irrevocably waives any and all rights
and/or remedies which may now or hereafter exist or arise to post-termination or
post-nonrenewal indemnity or compensation from Franchisor (including, without
limitation, for loss of goodwill or future business) and any such rights and/or
remedies are hereby assigned to Franchisor.
18. ARBITRATION
18.01 EXCEPT AS IS OTHERWISE EXPRESSLY PROVIDED HEREIN, ANY DISPUTE
UNDER THIS AGREEMENT NOT SETTLED BY AGREEMENT SHALL BE REFERRED TO ARBITRATION.
ARBITRATION MAY BE INITIATED AND ARBITRATORS CHOSEN AS PROVIDED IN THE UNCITRAL
ARBITRATION RULES.
18.02 NO ARBITRATOR CHOSEN PURSUANT TO SECTION 18.01 SHALL BE RELATED
TO OR AFFILIATED WITH FRANCHISOR, FRANCHISEE, EITHER PARTY'S AFFILIATES, ANY
<PAGE>
PRINCIPAL, THE REPRESENTATIVE OR THE DIRECTOR OF OPERATIONS. ALL ARBITRATORS
SHALL BE FLUENT IN THE ENGLISH LANGUAGE.
18.03 THE ARBITRAL PROCEEDINGS SHALL BE CONDUCTED IN (i) ACCORDANCE
WITH AND SHALL BE SUBJECT TO THE UNCITRAL ARBITRATION RULES IN EFFECT FROM TIME
TO TIME; AND (ii) THE ENGLISH LANGUAGE. THE ARBITRATION PROCEEDINGS SHALL BE
CONDUCTED IN THE CITY IN WHICH THE RESPONDENT PARTY'S CORPORATE HEADQUARTERS IS
LOCATED.
18.04 THE DECISION IN WRITING OF THE ARBITRATOR(S) SHALL BE (i) IN THE
ENGLISH LANGUAGE AND (ii) FINAL AND BINDING. THE COSTS AND EXPENSES OF
ARBITRATION SHALL BE BORNE 50% BY FRANCHISOR AND 50% BY FRANCHISEE. EACH PARTY
SHALL BEAR THE COSTS AND EXPENSES OF THE ARBITRATOR IT HAS CHOSEN AND THE COSTS
AND EXPENSES OF ANY ADDITIONAL ARBITRATORS SHALL BE SHARED 50% BY FRANCHISOR AND
50% BY FRANCHISEE. EITHER PARTY MAY APPLY TO ANY COURT HAVING JURISDICTION FOR
AN ORDER CONFIRMING, OR TO ENFORCE, THE AWARD. ANY RIGHT OF EITHER PARTY TO
JUDICIAL ACTION ON ANY MATTER SUBJECT TO ARBITRATION HEREUNDER IS HEREBY WAIVED,
EXCEPT SUIT TO ENFORCE THE ARBITRATION AWARD.
18.05 THE ARBITRATOR(S) SHALL NOT EXTEND, MODIFY OR SUSPEND ANY OF THE
TERMS OF THIS AGREEMENT OR THE REASONABLE STANDARDS OF BUSINESS PERFORMANCE AND
OPERATION ESTABLISHED BY FRANCHISOR IN GOOD FAITH. A NOTICE OF, OR REQUEST FOR,
ARBITRATION WILL NOT OPERATE TO STAY, POSTPONE OR RESCIND THE EFFECTIVENESS OF
ANY DEMAND FOR PERFORMANCE OR NOTICE OF TERMINATION.
18.06 NOTWITHSTANDING THE FOREGOING, ACTIONS INITIATED OR MAINTAINED BY
FRANCHISOR FOR INJUNCTIVE OR OTHER EQUITABLE RELIEF ARE NOT LIMITED TO
ARBITRATION AND MAY BE BROUGHT IN ANY COURT HAVING JURISDICTION.
19. INDEMNIFICATION
19.01 Subject to Section 9.01.C. hereof, Franchisee and each Principal
shall, at all times, indemnify and hold harmless, to the fullest extent
permitted by law, the Indemnitees, from all "losses and expenses" (as defined
below) incurred in connection with any action, suit, proceeding, claim, demand,
investigation or inquiry (formal or informal), or any settlement thereof
(whether or not a formal proceeding or action has been instituted) which arises
out of or is based upon any of the following:
(1) The infringement, alleged infringement, or any other
violation or alleged violation by Franchisee or any Principal of any patent,
mark or copyright or other proprietary right owned or controlled by third
parties.
(2) The violation, breach or asserted violation or breach by
Franchisee or any Principal of any contract, federal, state or local law,
regulation, ruling, standard or directive or any industry standard.
(3) Libel, slander or any other form of defamation of
Franchisor or the System, by Franchisee or any Principal.
(4) The violation or breach by Franchisee or any Principal
of any warranty, representation, agreement or obligation in this Agreement.
(5) Acts, errors or omissions of Franchisee or any of its
agents, servants,
<PAGE>
employees, contractors, partners, affiliates or representatives.
B. Franchisee and each Principal agrees to give Franchisor immediate
notice of any such action, suit, proceeding, claim, demand, inquiry or
investigation.
C. Franchisor shall at all times have the absolute right to retain
counsel of its own choosing in connection with any action, suit, proceeding,
claim, demand, inquiry or investigation. Franchisor shall at all times have the
absolute right to investigate any action, suit proceeding, claim or demand
itself.
D. Franchisee and each Principal shall indemnify Franchisor for its
attorneys' fees, expenses, and costs incurred in connection with the exercise of
Franchisor's rights under Section 19.01.C. This provision shall not be construed
so as to limit or in any way affect Franchisee's indemnity obligations pursuant
to the other provisions of Section 19.01.
E. In the event that Franchisor's exercise of its rights under Section
19.01.C actually results in Franchisee's insurer (with respect to insurance
required to be maintained by Franchisee pursuant to Section 11) (hereinafter,
the "Insurer") refusing to pay on a third-party claim, all causes of action and
legal remedies which Franchisee might have against the Insurer shall be
automatically assigned to Franchisor without the need for any further action on
Franchisor's or Franchisee's part. For the purposes of Section 19.01, "actually
results" means that, but for Franchisor's exercise of its rights under Section
19.01.C, the Insurer would not have refused to pay on said third-party claim.
F. In the event that Franchisor's exercise of its rights under Section
19.01.C actually results in the Insurer refusing to pay on a third-party claim,
Franchisee shall not be required to indemnify Franchisor for the Franchisor's
attorneys' fees, expenses and costs incurred in connection with that claim.
G. In the event that the Insurer subsequently reverses its previous
decision to not pay a claim, by in fact paying that claim, Franchisee shall be
required to indemnify Franchisor for the Franchisor's attorneys' fees, expenses
and costs incurred in connection with that claim, just as if the Insurer had
never denied the claim.
H. In the event that Franchisee encourages, requests, or suggests that
the Insurer deny a claim, Franchisee shall indemnify Franchisor for its
attorneys' fees, expenses and costs in connection with that claim.
I. Subject to the provisions of Section 19.01.B above, in order to
protect persons or property, or its reputation or goodwill, or the reputation or
goodwill of others, Franchisor may, at any time and without notice, as it, in
its judgment, deems appropriate, consent or agree to settlements or take such
other remedial or corrective action as it deems expedient with respect to the
action, suit, proceeding, claim, demand, inquiry or investigation if, in
Franchisor's sole judgment, there are reasonable grounds to believe that:
(1) any of the acts or circumstances enumerated in
Section 19.01.A above have occurred; or
(2) any act, error, or omission of Franchisee or any
Principal may result directly or indirectly in damage, injury or harm to any
person or any property.
J. In addition to its indemnity obligations under Section 19.01.D,
Franchisee and each Principal shall indemnify Franchisor for any and all losses,
compensatory damages, exemplary or punitive damages, fines, charges, costs,
expenses, lost profits, settlement amounts, judgments, compensation for damages
to the Franchisor's reputation and goodwill, costs of or resulting from delays,
financing, costs of advertising material and media time/space, and costs of
changing, substituting or replacing the same, and
<PAGE>
any and all expenses of recall, refunds, compensation, public notices and
other such amounts incurred in connection with the matters described, which
result from any of the items set forth in Section 19.01.
K. Franchisor does not assume any liability whatsoever for acts,
errors, or omissions of those with whom Franchisee or any Principal may
contract, regardless of the purpose. Franchisee and Principal shall hold
harmless and indemnify Franchisor for all losses and expenses which may arise
out of any acts, errors or omissions of these third parties.
L. Under no circumstances shall Franchisor be required or obligated to
seek recovery from third parties or otherwise mitigate its losses in order to
maintain a claim against Franchisee or any Principal. Franchisee and each
Principal agree that the failure to pursue such recovery or mitigate losses will
in no way reduce the amounts recoverable by Franchisor from Franchisee or any
Principal.
M. Notwithstanding anything to the contrary contained in this
Agreement, Franchisee is not required to indemnify Franchisor with regard to any
infringement, alleged infringement or other violation or alleged violation by
Franchisee or any Principal of any patent, mark, or copyright or other
proprietary right owned or controlled by a third party, arising in connection
with the use of the Proprietary Marks and System franchised to Franchisee when
used in the manner authorized and required by Franchisor pursuant to this
Agreement. In the event Franchisee is involved in such an action, Franchisor
agrees to indemnify Franchisee and each Principal in connection with the defense
thereof, and to indemnify and hold Franchisee and each Principal harmless from
any and all losses, damages, claims, liabilities, expenses, including attorney's
fees (prior to litigation, during litigation, and on appeal) and all costs
(whether taxed or not taxed) in connection with proceedings regarding the same.
Franchisee shall give notice to Franchisor of any such claim no later than
fifteen (15) days after Franchisee becomes aware of same or is given notice
thereof. This indemnity shall be inoperative to the extent that failure to have
timely provided such notice to Franchisor materially impairs Franchisor's
ability to defend any such claim, in whole or in part, or to minimize the costs
of this indemnity. Franchisee shall not be required to defend Franchisor with
regard to Franchisee's utilization pursuant to this Agreement of the Proprietary
Marks and System provided such utilization is in strict compliance with that
authorized and required by Franchisor pursuant to this Agreement.
20. NOTICES
20.01 All notices required or desired to be given hereunder shall be in
writing and shall be sent by personal delivery, expedited delivery service or
facsimile to the following addresses (or such other addresses as designated
pursuant to this Section 20):
if to Franchisor: TGI FRIDAY'S INC.
Attention: General Counsel
7540 LBJ Freeway, Suite 100
Dallas, Texas USA 75251
Facsimile No (1) (972) 450-5636
if to Franchisee or any Principal:
[Franchisee Name]
[Attention]
[Address1]
[Address2]
Facsimile No. (011) [Fax #]
<PAGE>
Notices posted by personal delivery or given by facsimile shall be
deemed given upon receipt. Notices posted by expedited delivery service shall be
deemed received three (3) Business Days after the date of posting.
21. FORCE MAJEURE
21.01 No party shall be liable for any inability to perform resulting
from acts of God or other causes beyond their reasonable control; PROVIDED,
HOWEVER, that (i) nothing herein shall excuse or permit any delay or failure to
remit any Payment on the date due; (ii) financial inability or insolvency shall
never be deemed an act of God or other cause beyond a party's control; and (iii)
no such cause shall excuse or permit any delay or failure to perform for more
than one-hundred eighty (180) days. The party whose performance is affected by
an event of force majeure shall, within three (3) days of the occurrence of such
event, give notice thereof to the other party setting forth the nature thereof
and an estimate of its duration.
22. SEVERABILITY
22.01 Should any term, covenant or provision hereof, or the application
thereof, be determined by a valid, final, non-appealable order to be invalid or
unenforceable, the remaining terms, covenants or provisions hereof shall
continue in full force and effect without regard to the invalid or unenforceable
provision. In such event such term, covenant or provision shall be deemed
modified to impose the maximum duty permitted by law and such term, covenant or
provision shall be valid and enforceable in such modified form as if separately
stated in and made a part of this Agreement. Notwithstanding the foregoing, if
any term hereof is so determined to be invalid or unenforceable and such
determination adversely affects, in Franchisor's reasonable judgment,
Franchisor's ability to preserve its or TGIFM's rights (if any) in, or the
goodwill (if any) underlying, the Proprietary Marks, the System and/or the
Confidential Information, Franchisor may terminate this Agreement upon notice to
Franchisee.
22.02 Captions in this Agreement are for convenience only and shall not
affect the meaning or construction of any provision hereof.
23. INDEPENDENT CONTRACTOR
23.01 Franchisee is an independent contractor. Nothing herein shall
create the relationship of principal and agent, legal representative, joint
venturers, partners, employee and employer or master and servant between the
parties. No fiduciary duty is owed by, or exists between, the parties.
23.02 Nothing herein authorizes Franchisee or any Principal to make any
contract, agreement, warranty or representation or to incur any debt or
obligation in Franchisor's name.
24. DUE DILIGENCE AND ASSUMPTION OF RISK
24.01 Franchisee and each Principal (i) have conducted such due
diligence and investigation as it desires; (ii) recognize that the business
venture described herein involves risks; and (iii) acknowledge that the success
of such business venture is dependent upon the abilities of Franchisee and
Principals. FRANCHISOR EXPRESSLY DISCLAIMS THE MAKING OF, AND FRANCHISEE AND
EACH PRINCIPAL ACKNOWLEDGES THAT IT HAS NOT RECEIVED OR RELIED UPON, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE POTENTIAL PERFORMANCE
OR VIABILITY OF THE BUSINESS VENTURE CONTEMPLATED BY THIS
<PAGE>
AGREEMENT.
24.02 Franchisee and each Principal have received, read and understands
this Agreement, the documents referred to herein and the Attachments and
Schedules hereto. Franchisee and each Principal have had ample time and
opportunity to consult with their advisors concerning the potential benefits and
risks of entering into this Agreement.
25. MISCELLANEOUS
25.01 Time is of the essence with respect to this Agreement.
25.02 Franchisor shall not be considered to be engaged in or doing
business in [Country] or in any political subdivision thereof by virtue of
being a party to this Agreement.
25.03 There are no third party beneficiaries to this Agreement, except
for the remedy provided for breach of Franchisee's or any Principal's covenant
contained in Section 13.03.C (1) and the provision for liquidated damages
contained in Section 16.02.C.
25.04 This Agreement may be executed in any number of counterparts,
each of which when so executed shall be an original, but all of which together
shall constitute one and the same instrument.
25.05 Franchisee and each Principal acknowledges that each has been
offered certain products and services in connection herewith and understands
that System franchisees are free to obtain these and any other products or
services used in the operation of the Restaurant from sources of their own
choosing, subject only to compliance with the Standards and the requirements of
Sections 6.06, 6.07, 7.07 and 7.09.
25.06 Except as otherwise provided in Section 13.03.C (4), this
Agreement shall be interpreted and construed under the laws of [Country].
25.07 All references herein to the masculine, neuter or singular shall
be construed to include the masculine, feminine, neuter or plural.
25.08 This Agreement shall be executed in English only. Franchisee may
translate this Agreement into [native language], but the English language
version of that this Agreement shall define the rights, duties and remedies of
the parties and shall control in all respects. Franchisee shall prepare all
correspondence, reports, notices and other materials required or permitted
hereunder in English. If required and upon notice to Franchisor, Franchisee may
translate, at its expense, any materials provided by Franchisor. Franchisee's
translator must be consented to by Franchisor. Any changes or improvements that
occur as a result of translation shall inure to the sole benefit of Franchisor.
25.09 Franchisee shall not use the words "Friday's," "T.G.I. Friday's,"
"TGIF" or "the American Bistro," or any part thereof, as part of its corporate
or other name.
26. ENTIRE AGREEMENT
26.01 This Agreement and the Attachments and Schedules hereto
constitute the entire agreement between Franchisor, Franchisee and the
Principals concerning the subject matter hereof. All prior agreements,
discussions, representations, warranties and covenants are merged herein. THERE
ARE NO WARRANTIES, REPRESENTATIONS, COVENANTS OR AGREEMENTS, EXPRESS OR IMPLIED,
BETWEEN THE PARTIES EXCEPT THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT. Except
those permitted to be made unilaterally by Franchisor, any amendments or
modifications of this Agreement shall be in writing and executed by Franchisee
and Franchisor.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
Franchisor: TGI FRIDAY'S INC. Franchisee: [FRANCHISEE NAME]
By:__________________________ By:___________________________
Name:________________________ Name:_________________________
Title:_______________________ Title:________________________
<PAGE>
EXHIBIT 10.11
(Principal's Name) acknowledges, covenants and represents
- ------------------------------------------
as follows:
(1) he/it has read the terms and conditions of this Agreement;
(2) he/it is a "Principal" as described in this Agreement;
(3) he/it is the owner of and has the right to vote_____percent (____%) of
the Securities of Franchisee;
(4) he/it makes all of the representations, warranties, covenants and
agreements of the Franchisee (including liability to make Payments) and
a Principal set forth in this Agreement (including, without limitation,
the covenants and agreements concerning Transfer and maintenance of
Confidential Information) and is obligated to perform thereunder;
(5) he/it has derived and expects to derive financial or other benefit,
directly or indirectly, from this Agreement and the transaction
described herein;
(6) he/it acknowledges that his/its execution of this Agreement, and
his/its undertakings and agreements herein, have induced Franchisor to
enter into the transactions described in, and to execute, this
Agreement; and
(7) he/it consents to and shall be bound by any amendment of this Agreement
made by Franchisor and Franchisee pursuant to the terms hereof.
Signed, sealed and delivered
in the presence of:
___________________________ Name:__________________________
Name:______________________ Date:__________________________
<PAGE>
EXHIBIT 10.11
ATTACHMENT A TO FRANCHISE AGREEMENT
COMMENCEMENT DATE AGREEMENT
This COMMENCEMENT DATE AGREEMENT ("Agreement") is entered into this
____ day of ________, 19__ by and between TGI FRIDAY'S INC. ("Franchisor")
and [FRANCHISEE NAME] ("Franchisee").
WHEREAS, Franchisor and Franchisee have entered into a Franchise
Agreement dated ___________________, 19__ ("Franchise Agreement"), relating
to the operation of a T.G.I. Friday's Restaurant; and
WHEREAS, Franchisor and Franchisee desire to supplement the Franchise
Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Franchisor and Franchisee agree as follows:
1. The Commencement Date of the term of the Franchise Agreement
is ___________________.
2. The term of the Franchise Agreement shall expire on
______________________ , unless sooner terminated as therein provided.
3. The street address of the Restaurant is
__________________________.
4. This Agreement shall not amend or otherwise modify the terms
and conditions of the Franchise Agreement or the interpretation of the rights
and duties of Franchisor and Franchisee thereunder.
IN WITNESS WHEREOF, Franchisor and Franchisee have caused this
Commencement Date Agreement to be executed as of the day and year first above
written.
TGI FRIDAY'S INC. [FRANCHISEE NAME]
By:___________________________ By:
Name:_________________________ Name:
Title:________________________ Title:
<PAGE>
ATTACHMENT B TO FRANCHISE AGREEMENT
[ATTACHMENT B SHALL BE MODIFIED UPON EXECUTION OF EACH FRANCHISE AGREEMENT TO
REFLECT STATUS OF THE PROPRIETARY MARKS AT THE TIME]
PROPRIETARY MARKS - [COUNTRY]
TRADEMARK CLASS STATUS REGISTRATION/APPLICATION #
Any and all registrations or applications are held in the name of TGI
Friday's of Minnesota Inc. ("TGIFM") a wholly owned subsidiary of Franchisor.
Franchisee and each Principal acknowledge that there can be no
assurance that Franchisor or TGIFM will succeed in obtaining or maintaining
trademark or service mark registration in ________ of the marks "T.G.I.
Friday's Logo," "T.G.I. Friday's & Device," "T.G.I. Friday's" or "Friday's,"
any other of the Proprietary Marks or any other marks in all or any of the
classes described in this Attachment B. Franchisor or TGIFM shall pursue
registration in ________ of the marks "T.G.I. Friday's Logo," "T.G.I.
Friday's & Device," "T.G.I. Friday's" and "Friday's" (and other Proprietary
Marks) in the manner and to the extent determined by Franchisor or TGIFM in
their sole discretion. Franchisor or TGIFM may abandon all or any of such
registrations or applications therefor and any future applications for
trademark or such service mark registration in ________ at any time without
notice to, or consent of, Franchisee or any Principal.
Neither Franchisor nor TGIFM shall incur any liability or obligations
to Franchisee or any Principal by reason of (i) any of the foregoing or (ii) the
ownership of, or application for ownership of, any registrations of trademarks,
service marks, trade names, or other identifying names or marks in ____________
<PAGE>
EXHIBIT 10.11
ATTACHMENT C TO FRANCHISE AGREEMENT
COVENANT AND AGREEMENT FOR CONFIDENTIALITY
This agreement ("Agreement") is made by [PRINCIPAL'S NAME]
("Principal") and TGI FRIDAY'S INC. ("Franchisor"), a corporation organized
under the laws of the State of New York, United States of America, in
connection with that certain Franchise Agreement dated_________, 199__ (the
"Franchise Agreement"), by and between Franchisor and [Franchisee Name]
("Franchisee").
WHEREAS, Franchisor and Franchisee have entered into the Franchise
Agreement; and
WHEREAS, the Confidential Information provides economic advantages
to Franchisor that are not generally known to, and are not legally available
to, third parties; and
WHEREAS, Franchisor has taken and intends to take all steps
necessary to maintain the confidentiality of the Confidential Information; and
WHEREAS, Principal will receive, and desires to receive, the
Confidential Information in his capacity as a Principal of Franchisee; and
WHEREAS, this Agreement is executed and delivered pursuant to
Section 8.04 of the Franchise Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, Principal and Franchisor agree as follows:
1. Franchisor or Franchisee may disclose to Principal certain
Confidential Information which may be utilized by Principal solely (a) in
[his/its] capacity as a Principal of Franchisee and (b) in connection with
Franchisee's performance of its duties and obligations pursuant to the Franchise
Agreement. No other use or disclosure of any of the Confidential Information
shall be made by Principal. Principal acknowledges and agrees that Franchisor or
TGIFM is the exclusive owner of the Confidential Information, the System and the
Proprietary Marks. Principal shall not, directly or indirectly, contest or
impair Franchisor's or TGIFM's ownership of, or interest in, the Confidential
Information, the System or the Proprietary Marks.
2. Principal shall receive the Confidential Information in strict
confidence. The Confidential Information may be utilized by Principal only (a)
so long as Principal remains a Principal of Franchisee and (b) during the Term.
The Confidential Information shall not be used in any manner that is adverse or
detrimental to, or competitive with, Franchisor, TGIFM or Franchisee. Except as
permitted pursuant to the Franchise Agreement or this Agreement, the
Confidential Information shall not, without the prior written consent of
Franchisor, be (x) copied, (y) compiled (in total or in part) with other
information, or (z) disclosed to any third party.
3. Principal shall not communicate, disclose or use the Confidential
Information, or any part thereof, except as (a) permitted herein, or (b)
required by law. The Confidential Information may be disclosed to Principal's
agents, representatives and employees who need to know the Confidential
Information for the sole purpose of providing services to Principal in his
capacity as a Principal of Franchisee. Each of such agents, representatives and
employees shall have been advised by Principal, prior to disclosure of any
Confidential Information, of the confidential and proprietary nature of the
Confidential Information and each shall have agreed to be bound by the terms and
conditions of this Agreement. Notwithstanding such agreement, Principal shall
indemnify the Indemnitees from and against
<PAGE>
any damages, costs (including attorney's fees) and expenses resulting from
any disclosure or use of the Confidential Information, or any part thereof,
by such agents, representatives or employees contrary to the terms hereof.
4. Immediately upon Franchisor's request or upon any termination of
the Term, Principal shall return to Franchisor the Confidential Information
(and any copies thereof), including that portion of the Confidential
Information which consists of analyses, compilations, studies or other
documents containing or referring to any part of the Confidential Information
prepared by Developer.
5. Each of the representations, warranties, covenants, acknowledgments
and agreements of Principal, and the rights and remedies of Franchisor in
connection therewith, contained in the Franchise Agreement, including, without
limitation, those contained in Sections 8, 9, 13.03.C., 14.02, 14.03, 14.04 and
16.02.C. of the Franchise Agreement, are incorporated in this Agreement by
reference as if fully set forth herein. In connection with Franchisor's
enforcement of such rights and remedies (or other rights and remedies of
Franchisor under this Agreement), any court of competent jurisdiction selected
by Franchisor shall have personal jurisdiction (to which Principal hereby
irrevocably consents) over Principal.
6. Franchisor may, in addition to pursuing any other remedies,
specifically enforce such obligations, covenants and agreements or obtain
injunctive or other equitable relief in connection with the violation or
anticipated violation of such obligations, covenants and agreements without the
necessity of showing (i) actual or threatened harm; (ii) the inadequacy of
damages as a remedy; or (iii) likelihood of success on the merits, and without
being required to furnish bond or other security. Nothing in this Agreement
shall impair Franchisor's right to obtain equitable relief.
7. Should any term, covenant or provision hereof, or the application
thereof, be determined by a valid, final, non-appealable order to be invalid or
unenforceable, the remaining terms, covenants or provisions hereof shall
continue in full force and effect without regard to the invalid or unenforceable
provision. In such event such term, covenant or provision shall be deemed
modified to impose the maximum duty permitted by law and such term, covenant or
provision shall be valid and enforceable in such modified form as if separately
stated in and made a part of this Agreement.
8. Any of Principal's agreements, obligations or covenants which
contemplate performance thereof after the termination or expiration of this
Agreement shall survive such termination or expiration.
9. Principal acknowledges and warrants that [he/it] has derived and
expects to derive financial or other advantage and benefit, directly or
indirectly, from the Franchise Agreement, this Agreement and/or the provision of
the Confidential Information to Franchisee and/or Principal.
10. Capitalized terms used herein and not otherwise defined shall have
the meanings attributed to them in the Franchise Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the
parties on the dates indicated below.
- ------------------------- TGI FRIDAY'S INC.
Name: By:
-------------------- ----------------------
Date: Its:
-------------------- ----------------------
Date:
----------------------
WITNESS:
- -------------------------
Date:
--------------------
<PAGE>
EXHIBIT 10.11
ATTACHMENT D TO FRANCHISE AGREEMENT
COVENANT AND AGREEMENT FOR CONFIDENTIALITY
This agreement ("Agreement") is made by [EMPLOYEE'S NAME]
("Employee"), [Franchisee Name] ("Franchisee") and TGI FRIDAY'S INC.
("Franchisor"), a corporation organized under the laws of the State of New
York, United States of America, in connection with that certain Franchise
Agreement dated ____________, 199_ (the "Franchise Agreement"), by and
between Franchisor and Franchisee.
WHEREAS, Franchisor and Franchisee have entered into the Franchise
Agreement; and
WHEREAS, the Confidential Information provides economic advantages
to Franchisor that are not generally known to, and are not legally available
to, third parties; and
WHEREAS, Franchisor has taken and intends to take all steps
necessary to maintain the confidentiality of the Confidential Information; and
WHEREAS, it will be necessary for certain employees of Franchisee to
have access to and to use some or all of the Confidential Information in
connection with the performance of their job functions related to the
development, construction and operation of Restaurants under the System; and
WHEREAS, Employee is the [INSERT TITLE] of Franchisee; and
WHEREAS, Employee needs to receive, and desires to receive and use, the
Confidential Information in the course of his employment by Franchisee in order
to effectively perform his job function; and
WHEREAS, the Agreement is executed and delivered pursuant to Section
8.04 of the Franchise Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, Employee, Franchisee and Franchisor agree as
follows:
1. Franchisor or Franchisee shall disclose to Employee certain
Confidential Information which may be utilized by Employee solely (a) in his
capacity as the [TITLE] of Franchisee and (b) in connection with Employee's
performance of his job functions. No other use or disclosure of any of the
Confidential Information shall be made by Employee. Employee acknowledges and
agrees that Franchisor or TGIFM is the exclusive owner of the Confidential
Information, the System and the Proprietary Marks. Employee shall not, directly
or indirectly, contest or impair Franchisor's or TGIFM's ownership of, or
interest in, the Confidential Information, the System or the Proprietary Marks.
2. Employee shall receive the Confidential Information in strict
confidence. The Confidential Information may be utilized by Employee only (a) so
long as Employee is employed by Franchisee and (b) during the Term. The
Confidential Information shall not be used in any manner that is adverse or
detrimental to, or competitive with, Franchisor, TGIFM or Franchisee. Except as
permitted pursuant to this Agreement, the Confidential Information shall not,
without the prior written consent of Franchisor, be (x) copied, (y) compiled (in
total or in part) with other information, or (z) disclosed to any third party.
3. Employee shall not communicate, disclose or use the Confidential
Information, or any part thereof, except as (a) permitted herein, or (b)
required by law. The Confidential Information may be disclosed to fellow
employees as necessary to train or assist such other employees of Franchisee in
the
<PAGE>
performance of their job functions with respect to the development,
construction or operation of a Restaurant.
4. Immediately upon Franchisor's request, upon Employee's termination
of employment with Franchisee, or upon the conclusion of the use for which any
Confidential Information was furnished, Employee shall return to Franchisee or
Franchisor the Confidential Information (and any copies thereof), including that
portion of the Confidential Information which consists of analyses,
compilations, studies or other documents containing or referring to any part of
the Confidential Information.
5. In order to protect the goodwill and unique qualities of the System
and the confidentiality and value of the Confidential Information, and in
consideration of the disclosure to Employee of the Confidential Information,
Employee covenants that, during the period of his employment by Franchisee and
for a period of two (2) years following termination of such employment, Employee
shall not, directly or indirectly:
(a) employ or seek to employ any person (or induce such
person to leave his or her employment) who is, or has
within one (1) year been, employed (i) (by Franchisor
or Franchisee; (ii) by any other developer or
franchisee of Franchisor; or (iii) in any other
concept or system owned, operated or franchised by an
Affiliate, as a director, officer or in any
managerial capacity;
(b) own, maintain, operate or have any interest in any
business offering the same or similar products and
services as offered by restaurants in the System;
(c) own, maintain, operate or have any interest in any
business offering the same or similar products and
services as offered by restaurants in the System
which business is, or is intended to be, located in
the Territory; or
(d) own, maintain, operate or have any interest in any
business offering the same or similar products and
services as offered by restaurants in the System,
which business is, or is intended to be, located
within a radius of twenty (20) kilometers of any
restaurant in the System (for purposes of enforcement
of this Section (d) the law of the jurisdiction where
such restaurant is located shall control).
6. A. Franchisor may, in addition to pursuing any other remedies,
specifically enforce such obligations and covenants or obtain injunctive or
other equitable relief in connection with the violation or anticipated violation
of such obligations and covenants without the necessity of showing (i) actual or
threatened harm; (ii) the inadequacy of damages as a remedy; or (iii) likelihood
of success on the merits, and without being required to furnish bond or other
security. Nothing in this Agreement shall impair Franchisor's right to obtain
equitable relief.
B. With respect to Employee's breach of the covenants
contained in Section 5(a) hereof, the affected former employer shall be
compensated by Employee (and Franchisee shall be additionally liable for such
breach) for the reasonable costs and expenses incurred by such employer in
connection with training such employee. Franchisee and Employee acknowledge that
such expenses are impossible to accurately quantify and agree that, as
liquidated damages and not as a penalty, an amount equal to such employee's
annual rate of compensation in the final twelve (12) months of employment (or an
annualized rate if employed for a shorter period) by such former employer shall
be paid by Employee and Franchisee (jointly and severally) to the former
employer at such time as such employee commences employment.
<PAGE>
C. In connection with Franchisor's enforcement of such rights
and remedies (or other rights and remedies of Franchisor under this Agreement),
any court of competent jurisdiction selected by Franchisor shall have personal
jurisdiction (to which Employee hereby irrevocably consents) over Employee.
7. Should any term, covenant or provision hereof, or the application
thereof, be determined by a valid, final, non-appealable order to be invalid or
unenforceable, the remaining terms, covenants or provisions hereof shall
continue in full force and effect without regard to the invalid or unenforceable
provision. In such event, such term, covenant or provision shall be deemed
modified to impose the maximum duty permitted by law and such term, covenant or
provision shall be valid and enforceable in such modified form as if separately
stated in and made a part of this Agreement.
8. Any of Employee's agreements, obligations or covenants which
contemplate performance thereof after the termination or expiration of this
Agreement shall survive such termination or expiration.
9. Franchisee undertakes to cause Employee to comply with the terms
and conditions of this Agreement. Franchisee shall indemnify and hold the
Indemnitees harmless from and against any damages, costs or expenses
resulting from any disclosure or use of Confidential Information, or any part
thereof, by Employee contrary to the terms hereof.
10. Capitalized terms used herein and not otherwise defined shall
have the meanings attributed to them on ANNEX A hereto.
IN WITNESS WHEREOF, this Agreement has been executed by the parties on
the dates indicated below.
[EMPLOYEE] TGI FRIDAY'S INC.
- --------------------------
Name: By:
--------------------- ------------------------
Date: Its:
--------------------- ------------------------
Date:
------------------------
WITNESS: [FRANCHISEE NAME]
- -------------------------- By:
Name: ------------------------
--------------------- Its:
------------------------
Date:
------------------------
<PAGE>
EXHIBIT 10.11
Annex A to Covenant and Agreement for Confidentiality
AFFILIATE - Carlson Restaurants Worldwide Inc. or any subsidiary thereof or
of Franchisor
COMMENCEMENT DATE - _____________, 19__
CONFIDENTIAL INFORMATION - the terms of the Development Agreement and
Franchise Agreement and any amendments thereto, the System, the Development
Manual, the Manuals, other manuals, the Standards, written directives and all
drawings, equipment, recipes, computer and point of sale programs (and output
from such programs); and all other information, know-how, techniques,
material and data imparted or made available by Franchisor which is
(i) designated as confidential, (ii) known by Franchisee or Employee to be
considered confidential by Franchisor, or (iii) by its nature inherently or
reasonably considered confidential
DEVELOPMENT MANUAL - Franchisor's manual, as amended from time to time,
describing (generally) the procedures and parameters required for the
development of T.G.I. Friday's restaurants
INDEMNITEES - Franchisor, its directors, officers, employees, agents,
shareholders, affiliates, successors and assigns and the respective
directors, officers, employees, agents, shareholders and affiliates of each
MANUALS - Franchisor's United States confidential operating manuals, as
amended from time to time
PROPRIETARY MARKS - certain trademarks, trade names, service marks, emblems
and indicia of origin designated by Franchisor from time to time in
connection with the operation of T.G.I. Friday's restaurants pursuant to the
System in the Territory
RESTAURANT - a T.G.I. Friday's restaurant developed and operated pursuant to
the Franchise Agreement
STANDARDS - the standards and specifications, as amended from time to time,
contained in, and being a part of, the Confidential Information pursuant to
which Franchisee shall develop and operate T.G.I. Friday's restaurants in the
Territory
SYSTEM - a unique, proprietary system developed and owned by Franchisor for
the establishment and operation of T.G.I. Friday's restaurants which
includes, without limitation, distinctive exterior and interior design,
decor, color scheme and furnishings; special recipes, menu items and full
service bar; employee uniform standards, products, services and
specifications; procedures with respect to operations and inventory and
management control (including accounting procedures and policies); training
and assistance; and advertising and promotional programs (as further
developed by Franchisor from time to time);
TERM - the duration of the Franchise Agreement commencing on the
Commencement Date and continuing until (15 years), 2__, or until _________, 2__,
if extended, unless sooner terminated
TERRITORY - [Country], as geographically constituted on [Dev Agmt Date]
TGIFM - TGI Friday's of Minnesota Inc., a Minnesota (U.S.) corporation and a
subsidiary of Franchisor
<PAGE>
SCHEDULE 3.01.A. TO FRANCHISE AGREEMENT
CALCULATION OF FRANCHISE FEE
The Franchise Fee shall be calculated by dividing U.S. $100,000.00 by a
number equal to 1.00 minus any applicable withholding, value added or similar
tax or fee (expressed as a percentage; rate of "X") or:
U.S. $100,000.00 = Franchise Fee
-----------
1.00-X
Example: If the applicable withholding, value added or similar tax or fee
(expressed as a percentage) is 10%, the Franchise Fee is calculated as
follows:
U.S. $100,000.00 = $111,111.11
-----------
1.00-0.10
It is the intention of the parties that, after Franchisee's payment of
applicable taxes or fees as described in Section 3.03.B, the net amount
received by Franchisor shall be U.S. $100,000.00.
- --------------------------------------------------------------------------------
SCHEDULE 3.01.B. TO FRANCHISE AGREEMENT
CALCULATION OF ROYALTY FEE RATE
The Royalty Fee rate (expressed as a percentage) shall be calculated by
dividing four percent (4%) by a number equal to 1.00 minus any applicable
withholding, value added or similar tax or fee (expressed as a
percentage-rate of "Y"), or:
4.00
----
1.00-X = Royalty Fee rate
Example: If rate of "X" is equal to 10%, the Royalty Fee rate is
calculated as follows:
4.00
----
1.00 - 0.10 = 4.444...%
It is the intention of the parties that, after Franchisee's payment of
applicable taxes or fees as described in Section 3.03.B., the net amount
received by Franchisor shall be four percent (4%) of Gross Sales.
<PAGE>
CHIEF OPERATING OFFICER, FRIDAY'S DOMESTIC
2000 BONUS PROGRAM
Participation in the Company Bonus Plan is intended to motivate and reward you
for the attainment and over achievement of strategic short and long term goals.
It is additionally intended to align the Brand's performance with the Company's
overall financial results. You will be eligible to earn a targeted bonus of
$150,000 which is approximately 50% of your base salary minus the car allowance.
The bonus program includes both quarterly and annual bonuses based on the
components outlined below:
_ SIXTY-SEVEN PERCENT of your bonus opportunity will be paid based
upon the achievement of the Friday's Domestic Brand Cumulative
OIBT. This bonus is earned quarterly and paid out annually with
the Gold Zone Bonus paid for exceeding the annual budget.
_ THIRTY-THREE PERCENT of your bonus opportunity will be based upon
the Company meeting its annual financial objectives as outlined
under the CCI Management Bonus Plan. This bonus is paid annually.
FRIDAY'S DOMESTIC BRAND OIBT COMPONENT (67%):
A targeted quarterly bonus of $25,000 ($100,000 annually) will be paid
based upon the achievement of the cumulative quarterly Friday's Domestic
Brand OIBT Budget. One hundred percent of the bonus target will be earned
quarterly for achieving the cumulative budget, and paid out annually. The
bonus amount will be reduced for OIBT performance below budget with no
bonus earned for performance less than 80% of budget. The bonus will be
prorated for OIBT performance between the levels listed below.
<TABLE>
<CAPTION>
Q1 Q2 Q3 Q4
-------------------------------------------
<S> <C> <C> <C> <C>
Cumulative OIBT Budget 20,869 43,156 67,659 88,462
</TABLE>
<TABLE>
<CAPTION>
FRIDAY'S DOMESTIC BRAND OIBT BONUS TABLE
------------------------------------- ----------------------------------- ----------------------------------
OIBT PERFORMANCE VS. BUDGET % OF QUARTERLY TARGET BONUS QUARTERLY BONUS AMOUNT
------------------------------------- ----------------------------------- ----------------------------------
<S> <C> <C>
100% 100.0% $25,000
------------------------------------- ----------------------------------- ----------------------------------
95% 87.5% $21,875
------------------------------------- ----------------------------------- ----------------------------------
90% 75.0% $18,750
------------------------------------- ----------------------------------- ----------------------------------
85% 62.5% $15,625
------------------------------------- ----------------------------------- ----------------------------------
80% 50.0% $12,500
------------------------------------- ----------------------------------- ----------------------------------
</TABLE>
The Gold Zone Bonus will be paid at the end of the year for exceeding the
annual Friday's Domestic OIBT budget. This annual bonus is in addition to
the quarterly bonuses described above. The bonus will be prorated for OIBT
performance between the levels listed below.
<PAGE>
2000 Bonus Plan
Page 2
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BRAND OIBT BONUS SCHEDULE (OIBT IN 000'S)
---------------------------------------------------------------------
'00 ACTUAL '00 ACTUAL % OF ANNUAL
OIBT VS OIBT TARGET GOLD
PRIOR YEAR BONUS ZONE
---------------------------------------------------------------------
<S> <C> <C> <C>
122.50% $93,726 150.0% $50,000
---------------------------------------------------------------------
120.78% $92,410 137.5% $37,500
---------------------------------------------------------------------
119.06% $91,094 125.0% $25,000
---------------------------------------------------------------------
117.34% $89,778 112.5% $12,500
---------------------------------------------------------------------
115.62% $88,462 100.0% $0
---------------------------------------------------------------------
</TABLE>
CCI MANAGEMENT BONUS PLAN COMPONENT (33%):
A targeted annual bonus of $50,000 will be paid based upon the achievement
of the Carlson Company Management Bonus. Of this 33% target, 50% of the
bonus will based on OIBT improvement, 20% will be based on ICC attainment,
and 30% will be based on strategic imperatives as follows:
- 10% comp sales improvement versus Knaptrack
- 0% = 2.1% or greater below Knaptrack results
- 33% = 1.1% to 2% below Knaptrack results
- 66% = .1% to 1% below Knaptrack results
- 100% = at or greater than Knaptrack results
- 10% management retention
- 50% for improvement over prior year of 23.8%
- 50% for exceeding Y2K People Report average
- 10% hourly retention
- 50% for improvement over prior year of 130.7%
- 50% for exceeding Y2K People Report average
A separate letter from CCI will be sent explaining the specific details of
this bonus component.
BONUS ADMINISTRATION
This Plan will be in effect for the fiscal year 2000. There will be a cap
of 150% of your target bonus on all bonus money paid to you for the year.
To that end, Carlson Restaurants Worldwide, Inc. reserves the right to
amend, alter or change the provisions of this Bonus Plan during this or
subsequent years. Any disputes arising out of the accounting pay out or
interpretations of the plan will be resolved through the sole discretion of
the Company's Compensation Committee.
This letter is not to be construed as a contract of employment for any
fixed period. You must be employed by the Company at the end of the
accounting period and leave the Company in good standing to be eligible for
a bonus.
<PAGE>
CHIEF OPERATING OFFICER, FRIDAY'S INTERNATIONAL
2000 BONUS PROGRAM
Participation in the Company Bonus Plan is intended to motivate and reward you
for the attainment and over achievement of strategic short and long term goals.
It is additionally intended to align the Brand's performance with the Company's
overall financial results. You will be eligible to earn a targeted bonus of
$135,200 which is approximately 50% of your base salary minus the car allowance.
The bonus program includes both quarterly and annual bonuses based on the
components outlined below:
_ SIXTY-SEVEN PERCENT of your bonus opportunity will be paid based
upon the achievement of the Friday's International Brand
Cumulative OIBT. This bonus is earned quarterly and paid out
annually with the Gold Zone Bonus paid for exceeding the annual
budget.
_ THIRTY-THREE PERCENT of your bonus opportunity will be based upon
the Company meeting its annual financial objectives as outlined
under the CCI Management Bonus Plan. This bonus is paid annually.
FRIDAY'S INTERNATIONAL BRAND OIBT COMPONENT (67%):
A targeted quarterly bonus of $22,650 ($90,600 annually) will be paid based
upon the achievement of the cumulative quarterly Friday's International
Brand OIBT Budget. One hundred percent of the bonus target will be earned
quarterly for achieving the cumulative budget, and paid out annually. The
bonus amount will be reduced for OIBT performance below budget with no
bonus earned for performance less than 80% of budget. The bonus will be
prorated for OIBT performance between the levels listed below.
<TABLE>
<CAPTION>
Q1 Q2 Q3 Q4
----------------------------------------
<S> <C> <C> <C> <C>
Cumulative OIBT Budget 1,869 3,606 5,867 8,293
</TABLE>
<TABLE>
<CAPTION>
FRIDAY'S INTERNATIONAL BRAND OIBT BONUS TABLE
------------------------------------- ----------------------------------- ----------------------------------
OIBT PERFORMANCE VS. BUDGET % OF QUARTERLY TARGET BONUS QUARTERLY BONUS AMOUNT
------------------------------------- ----------------------------------- ----------------------------------
<S> <C> <C>
100% 100% $22,650
------------------------------------- ----------------------------------- ----------------------------------
95% 87.5% $19,819
------------------------------------- ----------------------------------- ----------------------------------
90% 75.0% $16,988
------------------------------------- ----------------------------------- ----------------------------------
85% 62.5% $14,156
------------------------------------- ----------------------------------- ----------------------------------
80% 50.0% $11,325
------------------------------------- ----------------------------------- ----------------------------------
</TABLE>
The Gold Zone Bonus will be paid at the end of the year for exceeding the
annual Friday's International OIBT budget. This annual bonus is in addition
to the quarterly bonuses described above. The bonus will be prorated for
OIBT performance between the levels listed below.
<TABLE>
<CAPTION>
FRIDAY'S INTERNATIONAL BRAND OIBT GOLD ZONE BONUS TABLE
----------------------------- -------------------------- --------------------- -----------------------------
OIBT PERFORMANCE ANNUALIZED BONUS GOLD ZONE GOLD ZONE
VS. BUDGET TARGET BONUS % BONUS AMOUNT
----------------------------- -------------------------- --------------------- -----------------------------
<S> <C> <C> <C>
120% $90,600 50.0% $45,300
----------------------------- -------------------------- --------------------- -----------------------------
115% $90,600 37.5% $33,975
----------------------------- -------------------------- --------------------- -----------------------------
110% $90,600 25.0% $22,650
----------------------------- -------------------------- --------------------- -----------------------------
105% $90,600 12.5% $11,325
----------------------------- -------------------------- --------------------- -----------------------------
</TABLE>
<PAGE>
2000 Bonus Plan
Page 2
- ------------------------------------------------------------------------------
CCI MANAGEMENT BONUS PLAN COMPONENT (33%):
A targeted annual bonus of $44,600 will be paid based upon the achievement of
the Carlson Company Management Bonus. Of this 33% target, 50% of the bonus
will be based on OIBT improvement, 20% will be based on ICC attainment, and
30% will be based on strategic imperatives as follows:
- 10% comp sales growth of .95% or greater (local economy)
- 10% NSO sales weeks versus budget
- 5% Italianni's management retention
- 50% for improvement over prior year of 64.9%
- 50% for exceeding Y2K People Report average
- 5% Italianni's hourly retention
- 50% for improvement over prior year of 156.6%
- 50% for exceeding Y2K People Report average
A separate letter from CCI will be sent explaining the specific details of
this bonus component.
BONUS ADMINISTRATION
This Plan will be in effect for the fiscal year 2000. There will be a cap
of 150% of your target bonus on all bonus money paid to you for the year.
To that end, Carlson Restaurants Worldwide, Inc. reserves the right to
amend, alter or change the provisions of this Bonus Plan during this or
subsequent years. Any disputes arising out of the accounting pay out or
interpretations of the plan will be resolved through the sole discretion of
the Company's Compensation Committee.
This letter is not to be construed as a contract of employment for any
fixed period. You must be employed by the Company at the end of the
accounting period and leave the Company in good standing to be eligible for
a bonus.
<PAGE>
SR. VICE PRESIDENT, EMERGING BRANDS
2000 BONUS PROGRAM
Participation in the Company Bonus Plan is intended to motivate and reward you
for the attainment and over achievement of strategic short and long term goals.
It is additionally intended to align the Brand's performance with the Company's
overall financial results. You will be eligible to earn a targeted bonus of
$88,920 which is approximately 50% of your base salary minus the car allowance.
The bonus program includes both quarterly and annual bonuses based on the
components outlined below:
_ SIXTY-SEVEN PERCENT of your bonus opportunity will be paid based
upon the achievement of the Emerging Brands Cumulative OIBT. This
bonus is earned quarterly and paid out annually with the Gold Zone
Bonus paid for exceeding the annual budget.
_ THIRTY-THREE PERCENT of your bonus opportunity will be based upon
the Company meeting its annual financial objectives as outlined
under the CCI Management Bonus Plan. This bonus is paid annually.
EMERGING BRANDS OIBT COMPONENT (67%):
A targeted quarterly bonus of $14,900 ($59,600 annually) will be paid based
upon the achievement of the cumulative quarterly Emerging Brands OIBT
Budget. One hundred percent of the bonus target will be earned quarterly
for achieving the cumulative budget, and paid out annually. The bonus
amount will be reduced for OIBT performance below budget with no bonus
earned for performance less than 80% of budget. The bonus will be prorated
for OIBT performance between the levels listed below.
<TABLE>
<CAPTION>
Q1 Q2 Q3 Q4
----------------------------------------
<S> <C> <C> <C> <C>
Cumulative OIBT Budget (473) (456) (1,282) (1,054)
</TABLE>
<TABLE>
<CAPTION>
EMERGING BRANDS OIBT BONUS TABLE
------------------------------------- ----------------------------------- ----------------------------------
OIBT PERFORMANCE VS. BUDGET % OF QUARTERLY TARGET BONUS QUARTERLY BONUS AMOUNT
------------------------------------- ----------------------------------- ----------------------------------
<S> <C> <C>
100% 100% $14,900
------------------------------------- ----------------------------------- ----------------------------------
95% 87.5% $13,038
------------------------------------- ----------------------------------- ----------------------------------
90% 75.0% $11,175
------------------------------------- ----------------------------------- ----------------------------------
85% 62.5% $9,312
------------------------------------- ----------------------------------- ----------------------------------
80% 50.0% $7,450
------------------------------------- ----------------------------------- ----------------------------------
</TABLE>
The Gold Zone Bonus will be paid at the end of the year for exceeding the
annual Emerging Brands OIBT budget. This annual bonus is in addition to the
quarterly bonuses described above. The bonus will be prorated for OIBT
performance between the levels listed below.
<PAGE>
2000 Bonus Plan
Page 2
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING BRANDS OIBT GOLD ZONE BONUS TABLE
----------------------------- -------------------------- --------------------- -----------------------------
OIBT PERFORMANCE ANNUALIZED BONUS GOLD ZONE GOLD ZONE
VS. BUDGET TARGET BONUS % BONUS AMOUNT
----------------------------- -------------------------- --------------------- -----------------------------
<S> <C> <C> <C>
120% $59,600 50.0% $29,800
----------------------------- -------------------------- --------------------- -----------------------------
115% $59,600 37.5% $22,350
----------------------------- -------------------------- --------------------- -----------------------------
110% $59,600 25.0% $14,900
----------------------------- -------------------------- --------------------- -----------------------------
105% $59,600 12.5% $7,450
----------------------------- -------------------------- --------------------- -----------------------------
</TABLE>
CCI MANAGEMENT BONUS PLAN COMPONENT (33%):
A targeted annual bonus of $29,320 will be paid based upon the achievement
of the Carlson Company Management Bonus. Of this 33% target, 50% of the
bonus will be based on OIBT improvement, 20% will be based on ICC
attainment, and 30% will be based on strategic imperatives as follows:
- 10% new store sales improvement
- 0% = 2.1% or greater below Knaptrack results
- 33% = 1.1% to 2% below Knaptrack results
- 66% = .1% to 1% below Knaptrack results
- 100% = at or greater than Knaptrack results
- 10% management retention
- 50% for improvement over prior year of 54.5%
- 50% for exceeding Y2K People Report average
- 10% hourly retention
- 50% for improvement over prior year of 148.7%
- 50% for exceeding Y2K People Report average
A separate letter from CCI will be sent explaining the specific details of
this bonus component.
BONUS ADMINISTRATION
This Plan will be in effect for the fiscal year 2000. There will be a cap
of 150% of your target bonus on all bonus money paid to you for the year.
To that end, Carlson Restaurants Worldwide, Inc. reserves the right to
amend, alter or change the provisions of this Bonus Plan during this or
subsequent years. Any disputes arising out of the accounting pay out or
interpretations of the plan will be resolved through the sole discretion of
the Company's Compensation Committee.
This letter is not to be construed as a contract of employment for any
fixed period. You must be employed by the Company at the end of the
accounting period and leave the Company in good standing to be eligible for
a bonus.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF CARLSON RESTAURANTS WORLDWIDE INC.
Registrant has the following direct and indirect subsidiaries that operate
full-service restaurants in various locations throughout the United States and
internationally under the names T.G.I. Friday's, Front Row Sports Grill,
Friday's American Bar, Italianni's, Timpano Italian Chophouse, Star Canyon,
AquaKnox, Samba Room, a Cuban Bar and Latin Cafe, and Taqueria Canonita.
BFP Corporation, a Pennsylvania corporation
Brand X Concepts, Inc., a Texas corporation
Burlington Towne Crossing, Inc., a New Jersey corporation
Continental Hackensack, Inc., a New Jersey corporation
Eatontown Equity, Inc., a New Jersey corporation
EBRANDS, Inc., a Texas corporation
Fast Friday's Inc., an Oklahoma corporation
FD Holdings Inc., a Delaware corporation
Friday's - Netherlands, B.V., a Netherlands corporation
Georgia Holdings Inc., a Texas corporation
L.B.D. Corporation, a Texas corporation
Star Concepts, Inc., a Texas corporation
Star Concepts of Nevada, Inc., a Nevada corporation
TGI Friday's Greater China Limited, a China corporation
TGIF Holdings, Inc., a Texas corporation
T.G.I. Friday Limited, a London corporation
TGI Fridays Inc., a New York corporation
TGI Friday's Japan, Inc., a Japan corporation
TGI Fridays of Annapolis, Inc., a Maryland corporation
TGI Fridays of Greenbelt, Inc., a Maryland corporation
TGI Fridays of Howard County, Inc., a Maryland corporation
TGI Fridays of Minnesota, Inc., a Minnesota corporation
TGI Friday's of Plymouth Meeting, Inc., a Pennsylvania corporation
TGI Fridays of Rockville, Inc., a Maryland corporation
TGI Fridays of Towson, Inc., a Maryland corporation
T.G.I. Friday's of Vermont, Inc., a Vermont corporation
TGI Fridays of Wisconsin, Inc., a Wisconsin corporation
TGI Fridays Management Company, Inc., a Texas corporation
T.G.I. Friday's National Marketing Association, a Texas corporation
Wayne Towne Restaurant, Inc., a New Jersey corporation
Webco Products Incorporated, a New Jersey corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this registration statement.
ARTHUR ANDERSEN LLP
Dallas, Texas,
April 19, 2000
<PAGE>
Exhibit 24.2
CARLSON RESTAURANTS WORLDWIDE INC.
Power of Attorney
of Director and/or Officer
The undersigned director and/or officer of Carlson Restaurants
Worldwide Inc., a Delaware corporation, does hereby make, constitute and appoint
Wallace B. Doolin, Jeff D. Warne and Leslie Sharman, and any of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Company to
Amendment No. 1 to Registration Statement on Form S-1 (No. 333-85601) to be
filed by said Company with the Securities and Exchange Commission, Washington,
D.C., in connection with the registration under the Securities Act of 1933, as
amended, of shares of Class A Common Stock of said Company to be issued pursuant
to a public offering, and to file the same, with all exhibits thereto and other
supporting documents, with said Commission, granting unto said
attorneys-in-fact, and any of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the
undersigned's hand this 12th day of April, 2000.
/s/ Curtis C. Nelson
--------------------------
Curtis C. Nelson
<PAGE>
Exhibit 24.3
CARLSON RESTAURANTS WORLDWIDE INC.
Power of Attorney
of Director and/or Officer
The undersigned director and/or officer of Carlson Restaurants
Worldwide Inc., a Delaware corporation, does hereby make, constitute and appoint
Wallace B. Doolin, Jeff D. Warne and Leslie Sharman, and any of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Company to
a Registration Statement or Registration Statements, on Form S-1 or other
applicable form, and all amendments, including post-effective amendments,
thereto, to be filed by said Company with the Securities and Exchange
Commission, Washington, D.C., in connection with the registration under the
Securities Act of 1933, as amended, of shares of Class A Common Stock of said
Company to be issued pursuant to a public offering, and to file the same, with
all exhibits thereto and other supporting documents, with said Commission,
granting unto said attorneys-in-fact, and any of them, full power and authority
to do and perform any and all acts necessary or incidental to the performance
and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has hereunto set the
undersigned's hand this 12th day of April, 2000.
/s/ Eric A. Danziger
--------------------------------
Eric A. Danziger
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-27-1999
<PERIOD-START> DEC-29-1998
<PERIOD-END> DEC-27-1999
<CASH> 14,121
<SECURITIES> 0
<RECEIVABLES> 24,751
<ALLOWANCES> 1,597
<INVENTORY> 6,428
<CURRENT-ASSETS> 54,625
<PP&E> 387,734
<DEPRECIATION> 175,140
<TOTAL-ASSETS> 324,722
<CURRENT-LIABILITIES> 57,321
<BONDS> 228,667
0
0
<COMMON> 0
<OTHER-SE> 8,632
<TOTAL-LIABILITY-AND-EQUITY> 324,722
<SALES> 644,964
<TOTAL-REVENUES> 691,291
<CGS> 187,512
<TOTAL-COSTS> 370,638
<OTHER-EXPENSES> 96,633
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,344
<INCOME-PRETAX> 26,164
<INCOME-TAX> 9,155
<INCOME-CONTINUING> 17,009
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,009
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
