FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended May 26, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to __________
Commission file number 0-7426
THE MARCUS CORPORATION
(Exact name of registrant)
as specified in its charter)
Wisconsin 39-1139844
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
250 East Wisconsin Avenue - Suite 1700
Milwaukee, Wisconsin 53202-4220
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 272-6020
Securities registered pursuant to Section 12(b) of the Act: Common Stock,
$1 par value
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this
Form 10-K. [__]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant as of August 12, 1994: $178,886,700.
Number of shares outstanding of each of the classes of the registrant's
capital stock as of August 12, 1994:
Common Stock, $1 par value: 6,808,864 shares
Class B Common Stock, $1 par value: 6,223,893 shares
PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED HEREIN BY REFERENCE:
Proxy Statement for 1994 annual meeting of shareholders (incorporated by
reference into Part III, to the extent indicated therein).
<PAGE>
PART I
Unless the context indicates otherwise, references to the number of
the Company's various facilities set forth in this Form 10-K Annual Report
are as of the date of the Company's 1994 fiscal year-end, May 26, 1994.
Item 1. Business.
The Marcus Corporation and its subsidiaries (collectively referred
to herein as the "Company") are engaged in four business segments:
motels; hotels and resorts; restaurants; and movie theatres. The Company
began in 1935 as the operator of a single movie theatre and currently
owns, operates or franchises 99 motels, five hotels, one resort, 68
restaurants, and 36 movie theatres with an aggregate of 189 screens.
The Company's motel operations include a chain of 98 Budgetel Inn
economy motels in 26 states and one Woodfield Suites all-suite motel in
Wisconsin. Of the 98 Budgetel Inns, 76 are owned or operated by the
Company and 22 are franchised.
The Company's hotel and resort operations include The Pfister and
the Marc Plaza, full-service hotels in the Milwaukee, Wisconsin
metropolitan area, and The Grand Geneva Resort & Spa, a full-facility
destination resort in Lake Geneva, Wisconsin. The Company also operates
or manages three hotels, the Sheraton Mayfair Inn in Milwaukee, Wisconsin,
The Mead Inn in Wisconsin Rapids, Wisconsin, and the Crowne-Plaza
Northstar in Minneapolis, Minnesota.
The Company's restaurant division includes 35 KFC (Kentucky Fried
Chicken) restaurants in Wisconsin; four Marc's Big Boy restaurants in
Wisconsin and Minnesota; 13 Marc's Cafe and Coffee Mill restaurants in
Wisconsin; 13 Applebee's Neighborhood Grill & Bar ("Applebee's")
restaurants in Wisconsin and Illinois; two Big Boy Express restaurants in
Wisconsin; and one Original Gino's East of Chicago Restaurant in
Wisconsin.
The Company operates 36 movie theatres with an aggregate of 189
screens throughout Wisconsin and in northern Illinois.
Business Segment Data
Set forth below is certain business segment data for the Company's
three most recent fiscal years relating to the Company's four industry
segments. As a result of the substantial expansion of the Company's hotel
and resort operations in fiscal 1994 and the increasingly different
operating characteristics of the Company's hotels and resort from the
Company's motels, the Company has commenced separate business segment
reporting for its hotel and resort division and its motel division and has
restated retroactively the following segment reporting information
accordingly. Intersegment sales and transfers are not material.
Fiscal Year(1)
1994 1993 1992
(Dollars in thousands)
Revenues from unaffiliated
customers:(2)
Motels $88,973 $80,596 $74,575
Hotels and resort 32,391 28,485 28,101
Restaurants 71,108 59,138 56,110
Theatres 51,389 43,880 42,959
Corporate items(3) 2,454 1,919 2,552
-------- ------- -------
$246,315 $214,018 $204,297
======== ======== ========
Operating profit or
(loss):
Motels $ 25,971 $ 23,775 $ 19,874
Hotels and resort 2,611 2,116 1,830
Restaurants 2,203 723 434
Theatres 12,378 9,660 9,130
Corporate items(3) (8,509) (9,232) (9,302)
-------- -------- -------
$ 34,654 $ 27,042 $ 21,966
======== ========= ========
Identifiable assets:
Motels $182,174 $166,193 $154,578
Hotels and resort 45,787 24,041 21,747
Restaurants 51,896 46,282 35,800
Theatres 47,244 36,898 35,994
Corporate items(3) 34,505 36,041 26,275
-------- -------- --------
$361,606 $309,455 $274,394
======== ======== ========
_______________
(1) Fiscal year 1992 consisted of 53 weeks in each of the hotels and
resort, motels and restaurants segments; all other segments and years
consisted of 52 weeks.
(2) Included revenues from affiliated customers are not material.
(3) Corporate items include amounts not allocable to specific business
segments. Revenues consist principally of earnings on cash
equivalents. Operating profit includes earnings on cash equivalents,
less interest expense and general corporate expenses. Assets include
primarily cash and cash equivalents, notes receivable, receivables
from joint ventures and land held for development.
Motel Operations
Budgetel Inns
The Company owns, operates or franchises 98 economy motels, with
over 10,000 rooms, under the name "Budgetel Inn" in 26 states. The
Company operates 22 Budgetel Inns through franchisees. The remaining
Budgetel Inns are either Company-owned (68) or operated under joint
venture agreements (eight).
Targeted at the business traveler, Budgetel Inns feature an
upscale, contemporary exterior appearance, are generally located in high
traffic commercial areas in close proximity to interstate highway exits
and major thoroughfares and typically vary in size between 60 and 150
rooms. Budgetel Inn daily room rates generally vary between $30 and $45
per night.
The Company believes that providing amenities not typically
associated with economy-priced motels help distinguish Budgetel Inns from
many of its competitors. These amenities include executive conference
centers, room-delivered complimentary continental breakfasts, king-sized
beds, free local telephone calls and incoming fax transmissions, no
smoking rooms, in-room coffeemakers and hair dryers, remote control cable
televisions, extra-long telephone cords and large working desks. To
enhance customer security, the Company has converted all of its Company-
owned and most of its franchised Budgetel Inn rooms to "card key" locking
systems and provides well-lighted parking areas and all night front desk
staffing. The interior of each Budgetel Inn is refurbished in accordance
with a strict periodic schedule.
Budgetel Inns operates a nationwide guest reservation center, where
travelers can call 1-800-4-BUDGET toll-free to obtain Budgetel Inn room
reservations and other information.
The Company has a national franchise program for its Budgetel Inns.
Franchisees pay an initial franchise fee and annual marketing assessments,
reservation system assessments and royalty fees based on room revenues.
To facilitate continued growth in Budgetel Inn franchising, the Company
offers certain financial assistance plans to its franchisees. The Company
is qualified to sell, and anticipates ultimately selling, franchises in
all 50 states.
During fiscal 1994, five new Company-owned units opened and one
franchised unit was opened. Since the end of fiscal 1994, two new
Company-owned Budgetel Inns have opened, with an additional five new
Company-owned and two new franchised units under various stages of
construction. Depending upon continuing favorable industry conditions and
other factors, the Company currently plans to add a substantial number of
new Budgetel Inns over the next five fiscal years through internal
expansion, franchising and acquisition.
Woodfield Suites
The Company operates a mid-priced, all-suite motel under the name
"Woodfield Suites" and plans to open two more Woodfield Suites in fiscal
1995 using its new prototype all-suites motel design. Woodfield Suites
offers all of its guests the use of its centrally-located swimming pool,
whirlpool and game room. Each suite has a bedroom and separate living
room and features an extra-length bed, sleeper sofa for additional guests,
microwave, refrigerator, wet bar, television and hair dryer. Some suites
also have a kitchenette. All guests receive a free continental breakfast
and are invited to a free cocktail hour.
Hotel and Resort Operations
The Pfister Hotel
The Company owns and operates The Pfister Hotel, a 307-room, full
service luxury hotel, in downtown Milwaukee. In fiscal 1994, The Pfister
Hotel earned its 18th consecutive four-diamond award from the American
Automobile Association. The Pfister is also a member of the Preferred
Hotels and Resorts Worldwide Association, an organization of independent
luxury hotels and resorts, and the Association of Historic Hotels of
America.
In 1988, The Pfister Hotel initiated a five-year exterior and
interior restoration and refurbishment plan which was completed prior to
May 1993, when The Pfister celebrated its centennial anniversary. The
renovation and centennial celebration contributed to increased occupancy
levels in fiscal 1994.
The Marc Plaza Hotel
The Company owns and operates the 500-room Marc Plaza Hotel,
located in downtown Milwaukee. The Company leases office suites on two
floors of The Marc Plaza to professional and other business tenants on a
short- to intermediate-term basis and provides such tenants with various
secretarial and other office-type services.
As a result of the planned opening of a new and expanded municipal
convention center adjacent to the Marc Plaza, the Company will commence
work on a major refurbishment of the Marc Plaza's existing facilities in
November 1994, with completion targeted for May 1995. Additionally, the
Marc Plaza plans to add an additional 250 rooms.
The Grand Geneva Resort & Spa
In July 1993, the Company acquired the Americana Lake Geneva Resort
in Lake Geneva, Wisconsin and renamed it the Grand Geneva Resort & Spa.
Originally opened in 1968, the Grand Geneva Resort & Spa is a full-
facility destination resort located on 1,300 acres. The resort includes
355 guest rooms, a convention center, three speciality restaurants, two
championship golf courses, several ski-hills, indoor tennis courts, a
fitness and sports complex, horse stables and an on-site airport. The
resort was closed by the Company in September 1993 for a complete
renovation and reopened in May 1994.
Operated and Managed Hotels
The Company operates the 150-room Sheraton Mayfair Inn in the
Milwaukee metropolitan area under a operating agreement which expires in
April 1995. The Company is currently evaluating the economic feasibility
of renewing this operating agreement and may enter into negotiations to
continue its operation of the Sheraton Mayfair Inn if the proposed
economic terms and conditions indicate that such a renewal would be in the
best interests of the Company.
The Company manages the 226-room Crowne Plaza - Northstar in
Minneapolis, Minnesota pursuant to a 15-year management agreement.
Formerly known as the Northstar Hotel, the property was substantially
remodeled in early 1994 and renamed the Crowne Plaza-Northstar, the luxury
brand of the Holiday Inn system.
The Company also manages the 154-room Mead Inn in Wisconsin Rapids,
Wisconsin, pursuant to a 15-year management agreement, with the Company
having an option to extend the term of the agreement for three successive
five-year periods.
Restaurant Operations
The restaurant division operates facilities under a number of
different restaurant concepts and the Company is continually trying to
position its restaurants in order to best respond to changing consumer
tastes and preferences. These efforts include closing or selling less
profitable locations, converting them into different concepts or
remodeling them. The Company's current principal emphasis is on casual-
theme dining, as evidenced through the Company's continuing expansion of
its successful Applebee's facilities. The Company also actively considers
developing or being the franchisee for new restaurant concepts. At the
close of fiscal 1994, the Company operated 13 Applebee's Neighborhood
Grill & Bars, 35 KFCs, 13 Marc's Cafe and Coffee Mills, four Marc's Big
Boys, two Big Boy Expresses and one Original Gino's East of Chicago.
KFC Restaurants
The Company has non-exclusive franchise rights to operate KFC
restaurants in the Milwaukee metropolitan area and in northeast Wisconsin.
The Company has operated KFC restaurants for 34 years. The Company
currently operates 35 KFC restaurants and is the largest operator of KFC
restaurants in Wisconsin, based on the number of facilities operated. The
restaurants feature Kentucky Fried Chicken and other franchisor-authorized
food items, including the introduction of the new Colonel's Rotisserie
Gold non-fried chicken in fiscal 1994.
In 1988, the KFC franchisor, Pepsico, Inc., began efforts to change
the KFC dining concept from providing facilities with only carryout
services ("carryout stores") to providing facilities with carryout, drive-
thru and sit-down service ("KFC restaurants"). In response to these
efforts, the Company has renovated, rebuilt or renovated 32 of its 35
carryout stores into KFC restaurants, providing virtually all new
facilities with inside seating for approximately 40 customers, drive-thru
windows and updated electronic equipment to better facilitate food
preparation and order processing. In fiscal 1994, the Company replaced
two carryout units with new KFC restaurants in Milwaukee. The Company
plans to build two or three new KFC's in late fiscal 1995.
Applebee's Neighborhood Grill & Bar Restaurants
The Company has the exclusive franchise rights to develop and
operate Applebee's restaurants in the Chicago metropolitan area and
surrounding counties and for substantially all of Wisconsin. The
Applebee's restaurant system is franchised by Applebee's International,
Inc., a publicly-held company headquartered in Kansas City, Missouri. A
majority of the restaurants in the Applebee's system are operated by
franchisees, such as the Company. The Company owns and operates 13
Applebee's, including four in the Milwaukee metropolitan area, two in
Madison, Wisconsin, one in Appleton, Wisconsin, and six in the Chicago
metropolitan area. During early fiscal 1995, the Company opened three new
units, one in Green Bay, Wisconsin and two in Illinois. The Company has
seven additional Applebee's in various stages of development in Wisconsin
and in the Chicago metropolitan area. The Company plans to open a total
of six to eight Applebee's in fiscal 1995.
Applebee's restaurants are local neighborhood establishments, with
a comfortable and casual atmosphere appealing to all ages. Menu items
consisting of beef, chicken, seafood and pasta entrees prepared in a
variety of cuisines include traditional favorites and innovative dishes,
in addition to a full range of appetizers and snack foods. The Company's
Applebee's restaurants generally have about 35 to 40 tables and seat
approximately 165 customers, with a centrally located bar.
Marc's Cafe and Coffee Mill Restaurants
The Company owns and operates 13 Marc's Cafe and Coffee Mill
restaurants. Renovated from former Big Boy restaurants, the updated decor
in each Marc's Cafe includes brass, greenery, rich upholstery and warm,
relaxing colors. Local memorabilia decorate the walls for a hometown
touch in each facility. Marc's Cafes are intended to provide customers
with a casual, intimate atmosphere, with menus featuring, among other
items, freshly-brewed specialty coffees, rotisserie chicken, beer and
wine. Operating in a highly competitive segment of the restaurant
industry, the Company continues to examine alternatives and refinements to
this internally-developed restaurant concept.
Marc's Big Boy Restaurants/Big Boy Express
The Company operates four Marc's Big Boy restaurants and has non-
exclusive franchise rights to operate restaurants under the "Big Boy" name
in Wisconsin, Illinois and Iowa and exclusive rights in Minnesota. In
response to changing consumer tastes and preferences, the Company has
closed, sold or converted 54 of its former Big Boy restaurants over the
last six years in order to focus on more promising locations and
restaurant concepts. The Company expects to ultimately close or convert
all of its remaining Marc's Big Boy locations as appropriate alternatives
arise.
The Company operates two Big Boy Express double drive-thru,
carryout restaurants in metropolitan Milwaukee, designed with a 1950s art
deco motif. Intended as a test concept, Big Boy Express features outdoor
patio seating and enclosed walk-up windows and serves the "Big Boy"
doubledecker hamburger sandwich, other sandwiches, french fries and
milkshakes. The Company continues to evaluate the potential long-term
feasibility of this concept.
The Original Gino's East of Chicago Restaurants
In September 1993, the Company acquired exclusive franchise rights
to operate Original Gino's East of Chicago restaurants in Wisconsin,
Minnesota, Iowa and selected sights in Illinois. Gino's East specializes
in Chicago-style (deep dish) pizza, together with pasta, salads,
sandwiches and Italian cuisine. In fiscal 1994, the Company opened a
Gino's East restaurant in Milwaukee.
Restaurant Franchise Agreements
The Company's restaurant franchise agreements impose various
specifications as to the preparation of the franchised products as well as
general operating procedures, including advertising, maintenance of
records and protection of trademarks. Such agreements also provide, among
other things, for inspection, counseling and advisory services by the
franchisors.
The Company's KFC locations operate under individual franchise
agreements ranging in terms from 10 to 20 years in length. Franchise fees
approximate 4% of gross sales and, in addition, an initial flat fee of
$20,000 is payable for each new KFC restaurant. The KFC franchise
arrangement has been, and is expected to continue to be, material to the
success of the Company's restaurant division.
The Company's Big Boy franchise agreement provides for payment of a
franchise fee of 1% of gross sales. The Big Boy franchise is non-
exclusive and continues in perpetuity, provided the Company complies with
the conditions of the franchise agreement, which relate primarily to
operating procedures and use of trademarks. The Company's exclusive
franchise rights in Wisconsin, Illinois and Iowa terminated as of August
1, 1994 as a result of the Company not maintaining a specified minimum
number of Big Boys in the franchise area. Given the Company's deemphasis
of the Big Boy concept, the Company does not believe this change in its
franchise rights impacts adversely its restaurant operations.
The Company's development agreements with the Applebee's franchisor
for its Chicago and Wisconsin franchise territories require the Company,
among other things, to build a specified number of Applebee's restaurants
in each territory in accordance with a development timetable. The
Applebee's franchisor charges an initial franchise fee of either $30,000
or $35,000 (depending on location) for each Applebee's restaurant
developed. A royalty fee of 4% of monthly gross sales is payable to the
franchisor. Additionally, as franchisee, the Company is required to pay
an advertising fee to the franchisor for national advertising purposes and
to spend certain amounts for local advertising. Applebee's franchise
agreements have a term of 20 years and can be renewed for an additional 20
years.
The Company's franchise agreement with the Gino's East franchisor
provides for an initial franchise fee of $25,000 for each Gino's East
franchise opened. A royalty fee of between 3% and 7% of total gross sales
is payable to the franchisor, depending upon individual franchise sales
levels. The Company's master development agreement for Gino's East
restaurants requires the Company, among other things, to open a specified
number of Gino's East restaurants within the Company's franchised
territory in accordance with a development schedule.
Each of the Company's restaurant franchisors, to varying degrees,
specify certain product requirements and provide for certain approved
suppliers of products and supplies in order to maintain the respective
franchise's quality standards.
Theatre Operations
The Company operates 36 movie theatres with an aggregate of 189
screens in Wisconsin and northern Illinois. The Company's facilities
include 32 automated multi-screen theatres, three single-screen theatres
and one outdoor twin theatre. The Company's long-term growth strategy is
to focus on multi-screen theatres, which typically vary in seating
capacity from 150 to 450 seats per screen. Multi-plex theatres allow the
Company to offer a diversified selection of films to attract additional
customers, to shift movies to larger or smaller auditoriums within the
same theatre depending on the popularity of the movie and to benefit from
the economies of having common box office, concession, projection and
lobby facilities. Virtually all of the Company's movie theatres feature
exclusively first-run films.
The results of the Company's movie theatre business (and the movie
theatre industry in general) are largely dependent upon the box office
appeal and marketing of available first-run films. Stimulated in large
part by additional demand from ancillary markets such as home video, pay-
per-view and cable television, as well as increased demand from European
film markets, the annual number of first-run film releases has more than
doubled since 1981. Over 160 first-run films were released in fiscal
1994, including such box office hits as Mrs. Doubtfire, Philadelphia,
Grumpy Old Men, Jurassic Park, The Firm, Schindler's List, Sleepless in
Seattle, The Fugitive, In the Line of Fire and The Pelican Brief. In
fiscal 1993, approximately 150 first-run films were released.
In fiscal 1994, the Company opened a new 10-plex theatre at Gurnee
Mills, Illinois. Three theatres with a total of five screens were closed
in fiscal 1994, two of which were sold; the Company also sold one of its
outdoor theatres. Since the end of fiscal 1988, the number of screens in
the Company's theatre circuit has grown by 49, representing a 35%
increase. In fiscal 1995, the Company anticipates opening a new eight-
plex theatre in Delafield, Wisconsin and adding up to 11 screens to
existing theatres. The Company currently plans to add up to 33 additional
screens in fiscal 1996, including additional theatres in Illinois, and to
aggressively continue its expansion thereafter as appropriate
opportunities arise.
The Company obtains its films from various national motion picture
production and distribution companies, has never experienced difficulties
in obtaining an adequate supply of available first-run films and is not
dependent on any one motion picture supplier. Bookings, advertising,
refreshment purchases and promotion are handled centrally by an
administrative staff.
The Company strives to provide its movie patrons with high-quality
picture and sound presentation in clean, comfortable, attractive and
contemporary theatre environments. Substantially all of the Company's
movie theatre complexes feature DTS (digital sound) Dolby stereo sound
systems; acoustical ceilings; side wall insulation; engineered drapery
folds to eliminate sound imbalance, reverberation and distortion; tiled
floors; loge seats; cup-holder chair-arms; and computer-controlled
heating, air conditioning and ventilation. Computerized box offices
permit most of the Company's movie theatres to sell tickets in advance and
allow tracking of attendance by film title and time. Most of the
Company's theatres are fully handicapped-accessible and provide wireless
headphones, as well as some closed-captioned films, for hearing-impaired
moviegoers. The Company also operates an exclusive customer information
telephone system in Milwaukee and Madison, allowing customers to call for
information as to the locations, times and titles of movies being shown by
the Company throughout each metropolitan area. In fiscal 1994, the
Company introduced digital sound systems at seven of its screens in four
of its theatres, with additional theatres scheduled to be upgraded to
digital sound in fiscal 1995.
The Company sells refreshments and other concessions at all of its
movie theatres. The Company believes a wide variety of food and
refreshment items, properly merchandized, increases concession revenue per
patron. Although popcorn still remains the traditional favorite with
moviegoers, the Company continues to attempt to upgrade its available
concessions by offering a wide range of choices. For example, some of the
Company's theatres offer hot dogs, pizza, ice cream, frozen yogurt,
coffee, mineral water, juices and dessert.
Competition
All of the Company's business segments are highly competitive and
there are other facilities in close proximity to many of the Company's
facilities which compete directly with those of the Company. In each of
its businesses, the Company experiences intense competition from national
and/or regional chain and franchise operations, some of which have
substantially greater financial and marketing resources than the Company.
The Company's Budgetel Inns compete with such national economy
motel chains as Days Inn, Hampton Inn (owned by The Promus Companies
Incorporated), Fairfield Inn (owned by Marriott Corporation), Red Roof
Inn, La Quinta Inn, Comfort Inn and others, as well as a large number of
regional and local motels.
The Company's hotels compete in the Milwaukee metropolitan area
with the hotels operated by Hilton Hotels, Hyatt Corporation, Marriott
Corporation, Ramada Inns, Holiday Inns and Wyndham Hotels. The Grand
Geneva Resort & Spa and the Company's managed and operated hotels compete
with other hotels, motels and resorts located in proximity to such
facilities.
In the restaurant business, the Company's Marc's Big Boy, Marc's
Cafe and Coffee Mill, Applebee's and Gino's East restaurants compete with
national chains such as Denny's, Shoney's, Cracker Barrel, Perkin's, Red
Lobster, TGI Friday's, Chili's and Olive Garden, among others, as well as
smaller regionalized restaurant chains and individual restaurants. The
Company's KFC restaurants compete locally with Hardee's, Popeye's and
similar national, as well as regional, fast food chains and individual
restaurants offering chicken.
The Company's movie theatres compete with national large movie
theatre operators, such as United Artists, Cinemark and Carmike Cinemas,
Inc., as well as with a wide array of smaller exhibitors. Although movie
exhibitors in general also compete with the home video, pay-per-view and
cable television markets, the Company believes that such markets have
assisted the growth of the movie theatre industry in general by
encouraging a significant increase in the number of first-run movies
produced and released for initial movie theatre exhibition.
The Company believes that the principal factors of competition in
each of its businesses, in varying degrees, are the price and quality of
its product, quality and location of its facilities, and customer service.
The Company believes that it is well positioned to compete on the basis of
these factors.
Seasonality
Historically, the Company's first and fourth fiscal quarters have
produced the strongest operating results, since such period (i.e., late
spring through the July 4th holiday season) coincides with the typical
summer seasonality of the movie theatre industry and the summer strength
of the travel and food service aspects of the Company's business.
However, the Company has been experiencing less seasonality in its theatre
segment over the past several fiscal years due to the continued increased
movie industry emphasis on producing films directed to more diverse and
mature audiences.
Research and Development
Research and development expenditures for the Company are not
material.
Environmental Regulation
The Company does not expect federal, state or local environmental
legislation to have a material effect on the Company's capital
expenditures, earnings or competitive position. However, the Company's
activities in acquiring and selling real estate for business development
purposes have been complicated by the continued increased emphasis placed
by Company personnel on properly analyzing real estate sites for potential
environmental problems. This circumstance has resulted in, and is expected
to continue to result in, greater time and increased costs involved in
acquiring and selling properties associated with the Company's various
businesses.
Employees
As of the end of fiscal 1994, the Company had approximately 7,500
employees, a majority of whom were employed on a part-time basis. A
majority of the Company's hotel employees in Milwaukee and Minneapolis are
covered by collective bargaining agreements. Relations with employees
have been satisfactory and there have been no work stoppages due to labor
disputes.
Item 2. Properties.
The Company owns a substantial portion of its facilities, including
The Pfister Hotel, the Marc Plaza Hotel and the Grand Geneva Resort and
Spa, and leases the remainder. The Company also manages or operates three
hotel properties. Additionally, the Company owns properties acquired for
the future construction and operation of new Company operating facilities.
Some of its properties are leased from entities owned by principal
shareholders of the Company. All of the Company's properties are suitably
maintained and adequately utilized to cover the respective business
segment served.
The operating properties owned or leased by the Company as of
May 26, 1994 are summarized in the following table:
<TABLE>
<CAPTION>
Total Number Leased From Leased From Managed for Managed for
of Facilities Unrelated Related Related Unrelated
Operation in Operation Owned(1) Parties Parties Parties Parties
<S> <C> <C> <C> <C> <C> <C>
Restaurants:
Marc's Big Boy 4 3 1 0 0 0
Marc's Cafe and
Coffee Mill 13 10 3 0 0 0
KFC 35 33 2 0 0 0
Applebee's 13 8 5 0 0 0
Big Boy Express 2 2 0 0 0 0
Gino's East 1 0 1 0 0 0
Movie Theatre
Screens:
Indoor 187 131 50 6 0 0
Outdoor 2 0 0 2 0 0
Hotels and Resorts
Hotels 5 2 1 0 0 2
Resorts 1 1 0 0 0 0
Motels
Budgetel 76 56 0 1 18 1
Woodfield Suites 1 1 0 0 0 0
--- --- --- --- --- ---
TOTALS 340 247 63 9 18 3
=== === === === === ===
<FN>
________________
(1) One of the Marc's Cafe restaurants, three of the KFC restaurants, two of the Applebee's, 16 of the indoor movie
theatre screens and one of the motels owned by the Company are on land leased from unrelated parties under long-term leases.
The Company's partnership interests in 18 Budgetel Inns and six indoor movie theatre screens are not included in this column.
</TABLE>
Certain of the above individual properties or facilities are subject
to purchase money or construction mortgages or commercial lease financing
arrangements, none of which encumbrances are considered in the aggregate
to be material to the Company.
Assuming exercise by the Company of all renewal and extension
options, the terms of the Company's operating property leases expire on
various dates, with over 90% of the leases expiring after 1995.
Item 3. Legal Proceedings.
The Company does not believe that any pending legal proceeding
involving the Company is material to its business. No legal proceeding
required to be disclosed under this item was terminated during the fourth
quarter of the Company's 1994 fiscal year.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's shareholders
during the fourth quarter of the Company's 1994 fiscal year.
<PAGE>
EXECUTIVE OFFICERS OF COMPANY
Each of the current executive officers of the Company is identified
below together with information about each such officer's age, current
position with the Company and employment history for at least the past
five years:
Name Position Age
Stephen H. Marcus Chairman of the Board, President
and Chief Executive Officer 59
Bruce J. Olson Group Vice President 44
H. Fred Delmenhorst Vice President-Human Resources 53
Kenneth A. MacKenzie Chief Financial Officer,
Treasurer and Controller 60
Thomas F. Kissinger Secretary and Director of
Legal Affairs 34
Stephen H. Marcus became Chairman of the Board of the Company in
December 1991. He has been the President of the Company for more than the
past five years. He also served as Treasurer of the Company prior to the
election of Mr. MacKenzie to such position in September 1987. In December
1988, he became the Chief Executive Officer of the Company, in addition to
Chief Operating Officer.
Bruce J. Olson has been employed in his present position with the
Company since July 1991. Mr. Olson previously served as Vice President-
Administration and Planning for the Company from September 1987 until July
1991 and as Executive Vice President and Chief Operating Officer of Marcus
Theatres Corporation from August 1978 until October 1988, when he was
appointed President of that corporation.
H. Fred Delmenhorst has been the Vice President-Human Resources since
he joined the Company in December 1984.
Kenneth A. MacKenzie has been the Controller of the Company or its
Marcus Restaurants, Inc. subsidiary since June 1979. He was elected
Treasurer of the Company in September 1987 and Chief Financial Officer in
June 1993.
Thomas F. Kissinger joined the Company in August 1993 as Secretary and
Director of Legal Affairs. Prior thereto, Mr. Kissinger was associated
with the law firm of Foley & Lardner for five years.
The executive officers of the Company are generally elected annually
by the Board of Directors after the annual meeting of shareholders. Each
executive officer holds office until his successor has been duly qualified
and elected or until his earlier death, resignation or removal.
PART II
Item 5. Market for the Company's Common Equity and Related Shareholder
Matters.
Last Sale Price Range of Common Stock*
First Second Third Fourth
Quarter Quarter Quarter Quarter
Fiscal Year Ended May 26, 1994
High $24 1/4 $26 1/4 $29 1/4 $28 1/2
Low $20 1/2 $23 1/4 $23 1/4 $25 3/4
Fiscal Year Ended May 27, 1993
High $15 5/8 $17 3/4 $23 1/2 $26 3/4
Low $11 1/2 $14 1/8 $16 1/4 $21 3/8
*The Company's Common Stock began trading on the New York Stock
Exchange on December 14, 1993. Prior thereto, the Common Stock was quoted
on the Nasdaq National Market.
On August 12, 1994, there were 1,749 shareholders of record for the
Common Stock and 36 shareholders of record for the Class B Common Stock.
See Item 6 for information on the Company's cash dividends paid on its
Common Stock. Cash dividends paid on the Company's Class B Common Stock
were $.25 and $.23 per share in fiscal 1994 and 1993, respectively.
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
Fiscal Year
1994 1993 1992 1991 1990 1989
Operating Results
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues $246,315 $214,018 $204,297 $188,008 $176,592 $166,710
Effective income tax rate 39.3% 39.1% 39.5% 38.4% 34.2% 34.5%
Net earnings $ 22,829* $ 16,482 $ 13,289 $ 11,618 $ 10,781 $ 10,042
Common Stock Data
Net earnings per share $ 1.74* $ 1.42 $ 1.18 $ 1.02 $ .94 $ .87
Cash dividends per common share $ 0.28 $ 0.26 $ 0.22 $ 0.20 $ 0.18 $ 0.17
Average shares outstanding (In
Thousands) 13,107 11,648 11,255 11,364 11,484 11,537
Book value per share $ 14.88 $ 13.40 $ 11.19 $ 10.22 $ 9.37 $ 8.61
Financial Position (Year-End)
(In Thousands)
Total assets $361,606 $309,455 $274,394 $255,117 $230,789 $197,898
Long-term debt 107,681 78,995 100,032 96,183 85,563 64,163
Shareholders' equity 193,918 173,980 124,874 114,697 106,983 98,250
Capital expenditures 75,825 47,237 27,238 39,861 42,385 34,253
Financial Ratios
Current ratio (year-end) .67 .90 .73 .65 .91 .75
Return on revenues 9.3% 7.7% 6.5% 6.2% 6.1% 6.0%
Return on average shareholders'
equity 12.4% 11.0% 11.1% 10.5% 10.5% 10.6%
<CAPTION>
Fiscal Year
1988 1987 1986 1985 1984
Operating Results
(In Thousands)
<S> <C> <C> <C> <C> <C>
Revenues $162,393 $152,531 $141,202 $131,844 $126,720
Effective income tax rate 40.3% 45.4% 39.7% 41.8% 45.4%
Net earnings $ 10,073 $ 8,078 $ 8,719 $ 8,215 $ 7,432
Common Stock Data
Net earnings per share $ .87 $ .70 $ .75 $ .71 $ .64
Cash dividends per common share $ 0.15 $ 0.15 $ 0.13 $ 0.13 $ 0.11
Average shares outstanding (In
Thousands) 11,576 11,576 11,543 11,552 11,613
Book value per share $ 7.93 $ 7.20 $ 6.65 $ 6.04 $ 5.46
Financial Position (Year-End)
(In Thousands)
Total assets $181,354 $167,289 $156,343 $122,170 $ 99,114
Long-term debt 56,635 55,255 52,316 31,537 18,225
Shareholders' equity 91,318 82,952 76,328 69,011 63,075
Capital expenditures 23,591 28,234 38,865 25,096 14,796
Financial Ratios
Current ratio (year-end) 1.00 .94 1.13 1.09 1.07
Return on revenues 6.2% 5.3% 6.2% 6.2% 5.9%
Return on average shareholders' equity 11.6% 10.1% 12.0% 12.4% 12.5%
<FN>
___________________________
* Includes one-time accounting change benefit of $1.8 million or $0.14 per share. See Item 7.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
Results of Operations - General
The Marcus Corporation and its divisions report their
consolidated results of operations on either a 52-or 53-week fiscal year.
Both fiscal 1994 and fiscal 1993 were 52-week years for the Company and
all of its divisions. Fiscal 1992 was a 53-week year for the motel,
hotels and resort and restaurant divisions. Fiscal 1995 will be a 52-week
fiscal year for the Company and all of its divisions.
Total consolidated revenues for fiscal 1994 were $246.3 million,
an increase of $32.3 million, or 15.1%, compared to fiscal 1993
consolidated revenues of $214.0 million. Net earnings for fiscal 1994
were $22.8 million, or $1.74 per share. Net earnings increased $6.3
million, or 38.5%, over fiscal 1993 net earnings of $16.5 million, or
$1.42 per share. Earnings per share in fiscal 1994 increased by a smaller
percentage, 22.5%, than net earnings due to the effect on weighted average
shares outstanding resulting from the 1,755,000 shares of Common Stock
issued by the Company in its March 1993 public offering. Weighted average
shares outstanding for fiscal 1994 were 13.1 million compared to 11.6
million for fiscal 1993. Fiscal 1994 earnings included a one-time $1.8
million tax benefit, or $0.14 per share, resulting from the Company's
adoption of SFAS 109 "Accounting for Income Taxes." Excluding the tax
benefit, fiscal 1994 earnings were $21.0 million, or $1.60 per share.
The Company's income tax expense for fiscal 1994 was $13.6
million, an increase of $3.0 million from fiscal 1993. The Company's
effective tax rate for fiscal 1994 was 39.3% versus the prior year's
39.1%.
Inflation has not had a material impact on the Company's
consolidated results of operation.
As a result of the substantial expansion of the Company's hotel
and resort operations in fiscal 1994 and the increasingly different
operating characteristics of the Company's hotels and resort from the
Company's motels, the Company has commenced separate business segment
reporting for its hotel and resort division and its motel division. All
segment information has been retroactively restated to take into account
the Company's change in segment reporting.
Motels
Fiscal 1994 Versus Fiscal 1993
Total revenues in fiscal 1994 for the motel division were $89.0
million, an increase of $8.4 million, or 10.4%, compared to fiscal 1993.
The motel division's operating profits in fiscal 1994 totaled $26.0
million, an increase of $2.2 million, or 9.2%, over the division's fiscal
1993 operating profits of $23.8 million.
Occupancy and average daily room rates continued to increase at
the Company's motels in fiscal 1994 principally as a result of improved
economic conditions and an effective Budgetel advertising campaign. The
Company's motel occupancy percentage increased by 1.4 percentage points
in fiscal 1994 from fiscal 1993 and the average daily motel room rate
increased by 4.0% in fiscal 1994 from 1993. The increased average
occupancy percentage and daily room rate contributed almost $3.8 million
to the motel division's increased fiscal 1994 revenues.
At the close of fiscal 1994, there were 98 Budgetel Inns and one
Woodfield Suites in operation, compared to 92 Budgetel Inns and one
Woodfield Suites at 1993 fiscal year-end. Five new Company-owned Budgetel
locations and one new franchised Budgetel location opened in fiscal 1994.
Together, the six new facilities contributed additional revenues of $4.6
million and nominal operating profits in fiscal 1994.
The Company currently anticipates that up to seven additional
Company-owned Budgetel Inns and two new Woodfield Suites will be opened
during fiscal 1995, together with up to six new franchised Budgetel Inns.
Fiscal 1993 Versus Fiscal 1992
Total revenues for the motel division in fiscal 1993 were $80.6
million, an increase of $6.0 million, or 8.1%, compared to fiscal 1992.
Operating profits for the motel division in fiscal 1993 totaled $23.8
million, an increase of $3.9 million, or 19.6%, over the division's fiscal
1992 operating profits of $19.9 million. The extra operating week in
fiscal 1992 had an immaterial impact on the foregoing comparisons.
Theatres
Fiscal 1994 Versus Fiscal 1993
The theatre division's fiscal 1994 revenues were $51.4 million,
an increase of $7.5 million, or 17.1%, over fiscal 1993. Operating
profits for fiscal 1994 were $12.4 million, an increase of $2.7 million,
or 28.1%, over fiscal 1993. At fiscal 1994 year-end, the Company operated
189 screens at 36 locations in Wisconsin and Illinois, compared to 184
screens at 38 locations at the end of fiscal 1993. Consistent with the
Company's long-term strategic plan to focus on operating large multi-
screen theatres, the Company opened its first Illinois location in fiscal
1994 at Gurnee Mills in metropolitan Chicago, sold a previously closed
outdoor theatre, sold two indoor theatres having a total of three screens
and closed one twin screen theatre. These theatre sales and closure
resulted in a reduction of approximately $445,000 of revenues from fiscal
1993. The Company intends to add 19 screens during fiscal 1995, including
a new eight-plex theatre in suburban Milwaukee and 11 screens to existing
theatres.
Revenues of the theatre business are heavily dependent on the
audience appeal of available films, a factor over which the Company has no
control. In fiscal 1994, over 160 first-run films were released,
including such box office hits as Jurassic Park, Mrs. Doubtfire, The
Fugitive, Sleepless in Seattle, The Firm and Schindler's List. Each of
these films produced box office receipts in excess of $1.0 million for the
theatre division.
Total box office receipts in fiscal 1994 were $35.5 million, an
increase of almost $5.0 million, or 16.2% from fiscal 1993. This increase
can be attributed to a 7.4% increase in attendance and an 8.1% increase in
the average ticket price. The increase in attendance was due principally
to the abundance of high-quality popular films released in fiscal 1994 and
the opening of the Gurnee Mills ten-plex theatre.
Vending revenues in fiscal 1994 were $13.6 million, an increase
of $1.7 million, or 14.6%, over fiscal 1993, due to the increase in
theatre attendance and the 6.4% increase in the average concession sales
per person in fiscal 1994 from fiscal 1993.
Fiscal 1993 Versus Fiscal 1992
The theatre division's total fiscal 1993 revenues were $43.9
million, an increase of $921,000, or 2.1%, over fiscal 1992. Operating
profits for fiscal 1993 were $9.7 million, an increase of $530,000, or
5.8%, over fiscal 1992.
The Company opened six new screens in fiscal 1993. During
fiscal 1993, the Company closed three theatres with a total of seven
screens.
Hotels and Resort
Fiscal 1994 Versus Fiscal 1993
Total revenues from the Company's hotel and resort division in
fiscal 1994 increased by $3.9 million, or 13.7%, to $32.4 million, over
the previous fiscal year, while operating profits increased by $500,000,
or 23.4%, to $2.6 million, over fiscal 1993. Fiscal 1994 occupancy rates
at the Company's three continuing hotels increased by 5.8% and average
room rates for the hotel division increased by 1.4% in fiscal 1994. The
increase in occupancy and room rates contributed $1.2 million to the
division's revenues in fiscal 1994. The remainder of the division's
increase in revenues in fiscal 1994 was attributable principally to the
opening of the Grand Geneva Resort & Spa and, to a significantly lesser
extent, management fees derived from the partial year of operating the
Company's two newly managed hotels during fiscal 1994.
As indicated above, during fiscal 1994, the hotel and resort
division added three new properties totaling 735 rooms through the
Company's July 1993 purchase of The Grand Geneva Resort & Spa and by
entering into two hotel management contracts, one for the 226-room Crowne
Plaza-Northstar in November 1993, and the other for the 154-room Mead Inn
in February 1994. The Company intends to continue pursuing additional
hotel and resort acquisitions and management contracts.
Fiscal 1993 Versus Fiscal 1992
Total revenues for the hotel and resort division in fiscal 1993
were $28.5 million, an increase of $400,000, or 1.4%, compared to fiscal
1992. Operating profits for the hotel and resort division in fiscal 1993
totaled $2.1 million, an increase of $286,000, or 15.6%, over the
division's fiscal 1992 operating profits of $1.8 million. The hotel and
resort division reported results for a 53-week year in fiscal 1992, with
the additional week generating approximately $300,000 in added revenues
and $100,000 in operating profits. Excluding the additional week in
fiscal 1992, the division's revenue increase in fiscal 1993 was negligible
over fiscal 1992, and the comparative operating profits increase was
$386,000 or 22.3%.
Restaurants
Fiscal 1994 Versus Fiscal 1993
The restaurant division operates facilities under a number of
different restaurant concepts and the Company is continually trying to
position its restaurants in order to best respond to changing consumer
tastes and preferences. These efforts include closing or selling less
profitable locations, converting them into different concepts or
remodeling them. The Company also actively considers developing or being
the franchisee for new restaurant concepts. At the close of fiscal 1994,
the Company operated 13 Applebee's Neighborhood Grill & Bars, 35 KFCs, 13
Marc's Cafe and Coffee Mills, four Marc's Big Boys, two Big Boy Expresses
and one Original Gino's East of Chicago.
Restaurant division revenues totaled $71.1 million for fiscal
1994, an increase of $12.0 million, or 20.2%, from fiscal 1993. The
revenue increase was due almost entirely to the Company's newly opened
Applebee's and increasing customer counts and average check amounts at the
Company's continuing Applebee's and KFC restaurants. The division's
operating profits for fiscal 1994 were $2.2 million, an increase of $1.5
million, or 204.7%, from fiscal 1993. Fiscal 1994 operating profit
improvements were derived principally from improved same store sales at
continuing Applebee's and cost savings realized from closing or selling a
number of underperforming Big Boy restaurants during the last two fiscal
years.
In fiscal 1994, the Company's continuing Applebee's restaurants
achieved an 8.8% increase in same store sales and a 3.9% increase in guest
counts. These factors contributed a $715,000 increase in the division's
fiscal 1994 revenues.
Additionally, the Company opened two new Applebee's restaurants
during fiscal 1994 in its metropolitan Chicago franchise market, together
with one new restaurant and one expanded location in its Wisconsin
franchise area. These new and expanded locations contributed $4.3 million
in additional revenues in fiscal 1994, although start-up costs associated
with the new restaurants resulted in a $278,000 reduction in the
division's operating profits. In fiscal 1995, the Company plans to open
six to eight new Applebee's restaurants.
KFC experienced an increase in guest counts, coupled with an
increase in average check amounts, which resulted in a same store sales
increase of 5.2%, or approximately $ 1.2 million, over fiscal 1993.
During fiscal 1994, the Company's KFC restaurants introduced two new
franchisor-sponsored products, The Colonel's Rotisserie Gold Chicken in
the fall of 1993, and a new eight-piece fried chicken cut with larger
breast pieces in May 1994. These new products contributed approximately
$2 million in revenues in fiscal 1994. Additionally, the Company realized
$288,000 in additional revenue during the year from the relocation of two
KFC restaurants in Milwaukee. The Company plans to open two or three new
KFCs late in fiscal 1995.
The Company continued to reduce its number of underperforming
Marc's Big Boy restaurants by closing one Big Boy during fiscal 1994 and
plans to ultimately close its remaining four Big Boy locations. The Big
Boy closing, combined with the other Big Boy closings in fiscal 1993,
resulted in a loss of $2.1 million of fiscal 1993 revenues, but had a
positive impact of $340,000 on the division's fiscal 1994 operating
profits.
The Marc's Cafe and Coffee Mill concept entered its second year
in fiscal 1994, continuing its developmental process as customer counts
and same store sales varied by location. On an aggregate basis, revenues
and operating profits in fiscal 1994 from Marc's Cafes were flat compared
to fiscal 1993. This family-oriented restaurant segment is highly
competitive and the Company continues to examine alternatives and
refinements to this restaurant concept in order to improve further the
division's over-all results.
The Company continues to monitor closely the operating
performance and consumer acceptance of its two Big Boy Express restaurant
locations and its newly opened Gino's East of Chicago restaurant. These
locations contributed nominally to the division's revenues in fiscal 1994
and experienced operating losses because of anticipated start-up expenses.
Fiscal 1993 Versus Fiscal 1992
Restaurant division revenues totaled $59.1 million for fiscal
1993, an increase of $3.0 million, or 5.4%, from fiscal 1992. The
division's fiscal 1993 results were based on 52 weeks, versus 53 weeks in
fiscal 1992. Excluding the additional week in fiscal 1992, revenues in
fiscal 1993 increased approximately 6.3% from the prior year. The
division's operating profits for fiscal 1993 were $723,000, an increase of
$289,000, or 66.6%, from fiscal 1992 operating profits of $434,000. The
operating profits from the additional week in fiscal 1992 were
approximately $150,000.
Financial Condition
At the end of fiscal 1994, the Company's current ratio was .67,
compared to .90 at the end of fiscal 1993. Given the cash nature of the
Company's various businesses and the availability to the Company of $15
million in unused credit lines at fiscal 1994 year-end, the Company
believes that the cash generated from its ongoing operations and available
credit facilities are adequate to support the ongoing operational
liquidity needs of the Company's businesses.
Net cash provided from operations increased $13.3 million in
fiscal 1994 to $50.1 million compared to fiscal 1993. The increase
resulted from increased net earnings, an increase in depreciation and
amortization expense reflecting the Company's continuing facilities
expansion and an increase in net liabilities resulting from differences in
the timing of payments on accounts payable.
Investing activity increased $29.2 million to $74.8 million in
fiscal 1994 primarily resulting from capital expenditures to support the
Company's expansion. The most significant amount of capital spent by the
Company during fiscal 1994 was on the renovation of the Grand Geneva
Resort & Spa. The Grand Geneva renovation is expected to be completed by
the fall of 1994. Other significant capital expenditures in fiscal 1994
were made in opening new motels, theatres and restaurants.
Principally as a result of funding a portion of the Company's
fiscal 1994 facility expansions and renovations, the Company's total debt
increased to $112.0 million at the close of fiscal 1994 compared to $89.0
million at the end of fiscal 1993. In addition to the incurrence of $23.7
million of new debt to finance expansion, approximately $41.0 million in
debt was raised to refinance at reduced interest rates existing debt. The
Company's debt- capitalization ratio at May 26, 1994 was .37 compared to
.34 at May 27, 1993.
The Company is currently undertaking an aggressive five-year
expansion plan which will impact all four of its business segments. The
current aggregate estimated cost of these expansion plans is between $350
million and $400 million, with total estimated capital expenditures in
fiscal 1995 (including normal continuing capital maintenance projects)
expected to be almost $90 million. The Company's fiscal 1995 expansion
plans are expected to be funded by cash generated from operations and up
to $55 million in additional long-term debt.
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
of The Marcus Corporation
We have audited the accompanying consolidated balance sheets of The Marcus
Corporation as of May 26, 1994 and May 27, 1993, and the related
consolidated statements of earnings, shareholders' equity and cash flows
for each of the three years in the period ended May 26, 1994. 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 consolidated financial position of The
Marcus Corporation at May 26, 1994 and May 27, 1993, and the consolidated
results of its operations and its cash flows for each of the three years
in the period ended May 26, 1994, in conformity with generally accepted
accounting principles.
As discussed in Note 6 to the consolidated financial statements, effective
May 28, 1993, the Company changed its method of accounting for income
taxes.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
July 22, 1994
<PAGE>
THE MARCUS CORPORATION
CONSOLIDATED BALANCE SHEETS
May 26, May 27,
1994 1993
(In Thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,974 $ 15,839
Accounts and notes receivable
(Note 2) 6,359 5,497
Receivables from joint ventures
(Note 8) 7,983 10,372
Other current assets 3,049 1,674
-------- --------
Total current assets 27,365 33,382
PROPERTY AND EQUIPMENT, NET
(Note 2) 321,871 267,841
OTHER ASSETS:
Investments in joint ventures
(Notes 7 and 8) 662 1,223
Other (Note 9) 11,708 7,009
-------- -------
Total other assets 12,370 8,232
-------- -------
Total assets $361,606 $309,455
======== =======
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Notes payable (Note 8) $ 4,533 $ 5,017
Accounts payable 13,248 6,850
Income taxes 2,796 261
Taxes other than income taxes 7,307 7,319
Accrued compensation 1,448 1,554
Other accrued liabilities 6,978 5,706
Current maturities on long-term
debt (Note 3) 4,357 10,503
-------- -------
Total current liabilities 40,667 37,210
LONG-TERM DEBT (Note 3) 107,681 78,995
DEFERRED INCOME TAXES (Note 6) 15,999 16,138
DEFERRED COMPENSATION AND OTHER
(Note 5) 3,341 3,132
COMMITMENTS, LICENSE RIGHTS AND
CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY (Note 4):
Preferred Stock, $1 par;
authorized 500,000 shares; none
issued
Common Stock:
Common Stock, $1 par; authorized
20,000,000 shares; issued
7,365,987 shares in 1994 and
7,269,457 shares in 1993 7,366 7,269
Class B Common Stock, $1 par;
authorized 9,000,000 shares;
issued and outstanding 6,225,333
shares in 1994 and 6,321,863
shares in 1993 6,225 6,322
Capital in excess of par 44,745 44,557
Retained earnings 139,777 120,429
-------- --------
198,113 178,577
Less cost of Common Stock in
treasury (559,608 shares in 1994
and 604,117 shares in 1993) 4,195 4,597
-------- -------
Total shareholders' equity 193,918 173,980
-------- -------
Total liabilities and
shareholders' equity $361,606 $309,455
======= ========
See accompanying notes.
<PAGE>
THE MARCUS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
THREE YEARS ENDED MAY 26, 1994
May 26, May 27, May 28,
1994 1993 1992
(In Thousands, Except
Per Share Data)
REVENUES:
Rooms and telephone $100,691 $ 91,332 $ 84,788
Food and beverage 81,948 69,225 66,517
Theatre operations 50,263 43,551 42,959
Other income 13,413 9,910 10,033
------- ------- -------
Total revenues 246,315 214,018 204,297
COSTS AND EXPENSES:
Rooms and telephone 37,100 33,603 32,876
Food and beverage 64,241 54,565 52,896
Theatre operations 30,212 26,285 25,364
Administrative and selling 36,056 32,265 29,462
Depreciation and amortization 20,385 18,273 17,563
Rent (Note 7) 3,572 3,028 2,963
Property taxes 8,873 8,320 7,611
Other operating expenses 4,291 3,437 4,601
Interest 6,931 7,200 8,995
------- ------- -------
Total costs and expenses 211,661 186,976 182,331
------- ------- -------
EARNINGS BEFORE INCOME TAXES
AND CHANGE IN ACCOUNTING
PRINCIPLE 34,654 27,042 21,966
INCOME TAXES (Note 6) 13,607 10,560 8,677
------- ------- -------
EARNINGS BEFORE CHANGE IN
ACCOUNTING PRINCIPLE 21,047 16,482 13,289
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES
(Note 6) 1,782 -- --
------- ------- -------
NET EARNINGS $ 22,829 $ 16,482 $ 13,289
======= ======= =======
EARNINGS PER SHARE:
EARNINGS BEFORE CHANGE IN
ACCOUNTING PRINCIPLE $ 1.60 $ 1.42 $ 1.18
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING FOR INCOME
TAXES .14 -- --
------- ------- ------
NET EARNINGS $ 1.74 $ 1.42 $ 1.18
======== ======= ======
WEIGHTED AVERAGE SHARES
OUTSTANDING (Note 4) 13,107 11,648 11,255
======== ======= =======
See accompanying notes.
<PAGE>
<TABLE>
THE MARCUS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE YEARS ENDED MAY 26, 1994
<CAPTION>
Class B Capital
Common Common in Excess Retained Treasury
Stock Stock of Par Earnings Stock
(In Thousands)
<S> <C> <C> <C> <C> <C>
BALANCES AT MAY 30, 1991 $3,465 $4,427 $15,624 $ 95,723 $(4,542)
Cash dividends:
$.20 per share Class B Common Stock -- -- -- (1,328) --
$.22 per share Common Stock -- -- -- (1,009) --
Exercise of stock options -- -- 9 -- 118
Purchase of treasury stock -- -- -- -- (1,126)
Savings and profit-sharing
contribution -- -- 33 -- 187
Reissuance of treasury stock -- -- -- -- 4
Conversions of Class B Common Stock 43 (43) -- -- --
Net earnings for the year -- -- -- 13,289 --
----- ------ ------ ------- ------
BALANCES AT MAY 28, 1992 3,508 4,384 15,666 106,675 (5,359)
Cash dividends:
$.23 per share Class B Common Stock -- -- -- (1,203) --
$.26 per share Common Stock -- -- -- (1,525) --
Three-for-two stock split 1,767 2,177 (3,944) -- --
Secondary stock offering 1,755 -- 32,856 -- --
Exercise of stock options -- -- (226) -- 646
Purchase of treasury stock -- -- -- -- (50)
Savings and profit-sharing
contribution -- -- 203 -- 163
Reissuance of treasury stock -- -- 2 -- 3
Conversions of Class B Common Stock 239 (239) -- -- --
Net earnings for the year -- -- -- 16,482 --
------ ------ ------ ------- -------
BALANCES AT MAY 27, 1993 7,269 6,322 44,557 120,429 (4,597)
Cash dividends:
$.25 per share Class B Common Stock -- -- -- (1,609) --
$.28 per share Common Stock -- -- -- (1,872) --
Exercise of stock options -- -- (38) -- 389
Purchase of treasury stock -- -- -- -- (148)
Savings and profit-sharing
contribution -- -- 224 -- 160
Reissuance of treasury stock -- -- 2 -- 1
Conversions of Class B Common Stock 97 (97) -- -- --
Net earnings for the year -- -- -- 22,829 --
------- -------- -------- ------- ------
BALANCES AT MAY 26, 1994 $7,366 $6,225 $44,745 $139,777 $(4,195)
======= ======== ======== ======= =======
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
THE MARCUS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED MAY 26, 1994
<CAPTION>
May 26, 1994 May 27, 1993 May 28, 1992
(In Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $22,829 $16,482 $13,289
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Earnings on investments in joint ventures (533) (641) (444)
Loss (gain) on disposition of property and
equipment (1,539) 717 270
Depreciation and amortization 20,385 18,273 17,563
Deferred income taxes 1,643 1,580 671
Deferred compensation and other 901 211 359
Contribution of Company stock to savings
and profit-sharing plan 384 366 220
Changes in assets and liabilities, net of
effects from purchase of joint ventures
(Note 8):
Accounts and notes receivable (862) (166) (635)
Other current assets (1,375) 374 821
Accounts payable 6,398 (363) 2,071
Income taxes 2,535 (1,610) (485)
Taxes other than income taxes (12) 1,027 825
Accrued compensation (106) (734) (139)
Other accrued liabilities 1,272 1,277 (1,353)
------- ------- -------
Total adjustments 29,091 20,311 19,744
Cumulative effect of change in accounting
for income taxes (Note 6) (1,782) -- --
------- ------- -------
Net cash provided by operating activities 50,138 36,793 33,033
INVESTING ACTIVITIES
Additions to property and equipment (75,825) (47,237) (27,238)
Proceeds from disposals of property and
equipment 3,349 1,782 3,298
Payment for purchase of interest in joint
ventures, net of cash acquired (692) -- (50)
Net distributions from (investments in)
joint ventures 841 -- (460)
Loan to affiliated hotel (2,860) -- --
Increase in other assets (1,986) (126) (3,413)
Cash received from (advanced to) joint
ventures 2,389 (24) 3,064
-------- ------- -------
Net cash used in investing activities (74,784) (45,605) (24,799)
FINANCING ACTIVITIES
Debt transactions:
Proceeds from issuance of long-term debt 64,650 3,695 6,771
Principal payments on notes payable and
long-term debt (42,594) (19,401) (10,976)
Equity transactions:
Proceeds from secondary stock offering -- 34,611 --
Treasury stock transactions, except for
stock options (145) (45) (1,122)
Exercise of stock options 351 420 127
Cash dividends paid (3,481) (2,728) (2,337)
------ ------ ------
Net cash provided by (used in) financing
activities 18,781 16,552 (7,537)
------ ------ ------
Net increase (decrease) in cash and cash
equivalents (5,865) 7,740 697
Cash and cash equivalents at beginning of
year 15,839 8,099 7,402
------ ------- ------
Cash and cash equivalents at end of year $ 9,974 $15,839 $ 8,099
======= ======= =======
</TABLE>
See accompanying notes.
<PAGE>
THE MARCUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 26, 1994
1. Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements
include the accounts of The Marcus Corporation and all of its subsidiaries
(the Company). Investments in 50%-owned affiliates for which the Company
has the ability to exercise significant influence are accounted for on the
equity method. All intercompany accounts and transactions have been
eliminated in consolidation.
Fiscal Year - The Company reports on a 52/53-week year ending the last
Thursday of May.
Cash Equivalents - The Company considers all highly liquid investments
with maturities of three months or less when purchased to be cash
equivalents.
Inventories - Inventories, consisting principally of food and beverages,
are stated at average cost or at first-in, first-out cost.
Preopening Costs - Costs pertaining to new or remodeled motels and certain
restaurant concepts are charged to operations over 12 months. Similar
expenses incurred in connection with the opening and remodeling of
theatres and all other restaurants are charged to operations at the time
of opening. Costs incurred in connection with the opening of the Grand
Geneva Resort have been capitalized and will be charged to operations over
three years.
Depreciation and Amortization - Depreciation and amortization of property
and equipment, including capital leases, is provided using the
straight-line method over the following estimated useful lives:
Years
Land improvements 10 33
Buildings and improvements 10 33
Leasehold improvements 3 33
Furniture, fixtures and equipment 3 15
Net Earnings Per Share - Net earnings per share were computed based on the
weighted average number of shares of Common Stock, Class B Common Stock
and common stock equivalents (stock options) outstanding during the year.
Capitalization of Interest - The Company capitalizes interest on borrowed
funds during construction periods by adding such interest to the cost of
property and equipment. Interest of approximately $726,000, $314,000 and
$177,000 was capitalized in fiscal 1994, 1993 and 1992, respectively.
2. Additional Balance Sheet Information
The composition of accounts and notes receivable is as follows:
May 26, 1994 May 27, 1993
(In Thousands)
Trade receivables $2,720 $ 2,336
Notes receivable 1,603 2,011
Other receivables 2,036 1,150
------ ------
$6,359 $5,497
====== ======
The composition of property and equipment, which is stated at cost, is as
follows:
May 26, 1994 May 27, 1993
(In Thousands)
Land and improvements $ 49,618 $ 41,919
Buildings and improvements 231,905 209,891
Leasehold improvements 7,565 8,150
Furniture, fixtures and equipment 118,123 103,935
Construction in progress 37,302 13,174
------- -------
Total property and equipment 444,513 377,069
Less accumulated depreciation and
amortization 122,642 109,228
------- -------
$321,871 $267,841
======== ========
3. Long-Term Debt
Long-term debt is summarized as follows:
May 26, 1994 May 27, 1993
(In Thousands)
Mortgage notes due to 2006 $ 13,130 $32,889
Senior notes, unsecured, due 2005 at
10.22% 28,773 30,000
Industrial Development Revenue Bonds due
to 2006 10,135 14,903
Unsecured term notes 60,000 --
Commercial paper -- 8,606
Revolving credit agreement -- 3,100
------- -------
112,038 89,498
Less current maturities 4,357 10,503
------- -------
$107,681 $78,995
======= =======
Substantially all of the mortgage notes, both fixed rate and adjustable,
bear interest from 6% to 9% at May 26, 1994. Adjustable rate Industrial
Development Revenue Bonds ($5,745,000 at May 26, 1994) bear interest at
76.5% of prime plus 1%, or are adjustable based on high quality tax-exempt
obligation rates. The Company's remaining Industrial Development Revenue
Bonds bear interest at approximately 8.8%.
The mortgage notes and the Industrial Development Revenue Bonds are
secured by land, buildings and equipment with a cost of approximately
$33,580,000 and a net book value of $21,544,000 at May 26, 1994.
The Company has three unsecured term notes outstanding, as follows:
May 26,
1994
(In
thousands)
Note due May 31, 2004, with quarterly principal
payments of $781,250 due beginning May 31, 1996.
The variable interest rate is based on the LIBOR
rate with an effective rate of 5.375% at May 26,
1994. $25,000
Note due February 1, 2001, with quarterly principal
payments of $714,286 due beginning May 1, 1997. The
variable interest rate is based on the LIBOR rate
with an effective rate of 4.38% at May 26, 1994. 20,000
Note due November 1, 2000, with quarterly principal
payments of $750,000 due beginning January 1, 1996.
The variable interest rate is based on the LIBOR
rate with an effective rate of 4.6875% at May 26,
1994. 15,000
------
$60,000
======
The Company issues commercial paper through an agreement with a bank. The
agreement requires the Company to maintain unused bank lines of credit at
least equal to the principal amount of its outstanding commercial paper.
At May 26, 1994, the Company had $15,000,000 of unused credit lines
available under various bank revolving credit agreements. There is an
annual commitment fee of .25% of the unused portion of $10,000,000 of
these commitments.
Scheduled annual principal payments on long-term debt for the five years
subsequent to May 26, 1994, are:
Fiscal Year (In Thousands)
1995 $ 4,357
1996 8,559
1997 9,566
1998 15,710
1999 11,890
Interest paid, net of amounts capitalized, in 1994, 1993 and 1992 totaled
$7,266,000, $7,277,000 and $9,205,000, respectively.
The Company has entered into interest rate swap agreements on a notional
amount aggregating $30,000,000. Two of the swap agreements covering
$15,000,000 expire June 30, 1995, and require the Company to pay interest
at defined variable rates (3.50% and 5.25%) and receive interest at
defined fixed rates (4.13% and 4.57%). The remaining swap agreement
covering $15,000,000 expires October 31, 2000, and requires the Company to
pay interest at a defined fixed rate of 5.08% while receiving interest at
a defined variable rate of LIBOR. The Company recorded expense related to
these swap agreements in 1994 totaling $94,000. The accompanying
consolidated balance sheet at May 26, 1994, does not reflect the fair
market value of these swap agreements which totals approximately $680,000.
4. Shareholders' Equity
The Company's Board of Directors declared a three-for-two stock split,
effected in the form of a 50% stock dividend, distributed on November 6,
1992, to all holders of Common and Class B Common Stock. All per share,
weighted average shares outstanding and stock option data prior to
November 6, 1992, have been adjusted to reflect this dividend.
Shareholders may convert their shares of Class B Common Stock into shares
of Common Stock at any time. Class B Common Stock shareholders are
substantially restricted in their ability to transfer their Class B Common
Stock. Holders of Common Stock are entitled to cash dividends per share
equal to 110% of all dividends declared and paid on each share of the
Class B Common Stock. Holders of Class B Common Stock are entitled to ten
votes per share while holders of Common Stock are entitled to one vote per
share on any matters brought before the shareholders of the Company.
Liquidation rights are the same for both classes of stock.
Shareholders have approved the issuance of up to 562,500 shares of Common
Stock under stock option plans. The options generally become exercisable
40% after two years, 60% after three years and 80% after four years. The
remaining options are exercisable four and one-half years after the date
of the grant. At May 26, 1994, there were 147,255 shares available for
grants under the plans.
Transactions with respect to the Company's stock option plans for each of
the three years in the period ended May 26, 1994, are summarized as
follows:
Price Range Number of
Shares
Outstanding at May 30, 1991 $ 7.00 - $ 9.67 226,500
Exercised $ 7.00 - $ 9.67 (14,865)
Canceled $ 7.00 - $ 9.67 (46,860)
-------
Outstanding at May 28, 1992 $ 7.00 - $ 9.67 164,775
Granted $15.00 119,550
Exercised $ 7.00 - $ 9.67 (64,080)
Canceled $ 7.00 - $ 9.67 (7,080)
-------
Outstanding at May 27, 1993 $ 7.00 - $15.00 213,165
Granted $ 20.75 - $27.00 140,850
Exercised $ 7.00 - $15.00 (32,085)
Canceled $ 7.00 - $15.00 (28,215)
-------
Outstanding at May 26, 1994 $ 7.00 - $27.00 293,715
=======
Shares exercisable at
May 26, 1994 $ 7.00 - $ 7.67 24,300
=======
The Company's Board of Directors has approved the repurchase of up to
750,000 shares of Common Stock to be held in treasury. The Company intends
to reissue these shares upon the exercise of stock options. The Company
purchased 6,167; 3,451 and 100,535 shares pursuant to this plan during
1994, 1993 and 1992, respectively. At May 26, 1994, there were 236,538
shares available for repurchase under this authorization.
The Company's loan agreements include, among other covenants, restrictions
on retained earnings and maintenance of certain financial ratios. At May
26, 1994, retained earnings of approximately $56,107,000 were
unrestricted.
5. Employee Benefit Plans
The Company has a qualified profit-sharing savings plan (401(k) plan)
covering eligible employees. The 401(k) plan provides for a contribution
of a minimum of 1% of defined compensation for all plan participants and
matching of 25% of employee contributions up to 6% of defined
compensation. In addition, the Company may make additional discretionary
contributions. The Company also operates unfunded nonqualified defined
benefit and deferred compensation plans. Pension and profit-sharing
expense for all plans was $1,138,000, $902,000 and $789,000 for 1994, 1993
and 1992, respectively.
6. Income Taxes
Income tax expense consists of the following:
Year Ended
May 26, May 27, May 28,
1994 1993 1992
(In Thousands)
Currently payable:
Federal, after jobs tax credits
of $300,000, $250,000 and
$350,000, respectively $ 9,470 $ 7,068 $6,176
State 2,494 1,912 1,830
Deferred 1,643 1,580 671
------ ------ -----
$13,607 $10,560 $8,677
====== ====== ======
Effective May 28, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes
(SFAS No. 109). SFAS No. 109 requires recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates for the year in which the differences
are expected to reverse.
As of May 28, 1993, the Company recorded a tax benefit of $1,782,000, or
$.14 per share, which amount represents the net change in its deferred
income tax assets and liabilities at that date. Such amount has been
reflected in the consolidated statement of earnings as the cumulative
effect of change in accounting for income taxes.
The components of the net deferred tax liability as of May 26, 1994, were
as follows (in thousands):
Deferred tax assets:
Tax credit carryforwards $ 921
Accrued employee benefits 604
Other accrued liabilities 203
-------
Total deferred assets 1,728
Deferred tax liability -
Depreciation and amortization 17,727
-------
Net deferred tax liability included
in balance sheet $15,999
=======
Deferred income taxes in 1993 and 1992 also related principally to
differences between financial and tax reporting of depreciation and
amortization.
A reconciliation of the statutory federal tax rate to the effective tax
rate follows:
Year ended
May 26, May 27, May 28,
1994 1993 1992
Expected tax expense: 35.0% 34.0% 34.0%
State income taxes, net of
federal income tax benefit 5.3 5.3 5.2
Jobs tax credits (.6) (0.9) (1.6)
Other (.4) 0.7 1.9
----- ----- -----
39.3% 39.1% 39.5%
===== ===== ======
Income taxes paid in 1994, 1993 and 1992 totaled $9,445,000, $10,610,000
and $8,502,000, respectively.
7. Commitments, License Rights and Contingencies
Lease Commitments - The Company leases real estate under various
noncancellable operating leases with an initial term greater than one
year. Percentage rentals are based on the revenues at the specific rented
property. Rent expense charged to operations under operating leases was as
follows:
Year ended
May 26, May 27, May 28,
1994 1993 1992
(In Thousands)
Fixed minimum rentals $2,519 $2,208 $1,986
Percentage rentals 1,218 1,012 1,016
Sublease rental income (165) (192) (39)
------ ------ ------
$3,572 $3,028 $2,963
====== ====== ======
Payments to affiliated parties for operating lease obligations were
approximately $390,000, $491,000 and $460,000 in 1994, 1993 and 1992,
respectively.
Aggregate minimum rental commitments at May 26, 1994, are as follows:
Fiscal Year Operating Leases
(In Thousands)
1995 $ 1,669
1996 1,450
1997 1,298
1998 1,089
1999 1,041
After 1999 10,994
------
$17,541
=======
Included in the above commitments is $1,675,000 in minimum rental
commitments to affiliated parties.
Construction Commitments - The Company has commitments for the completion
of construction at various properties totaling approximately $14,582,000
at May 26, 1994.
License Rights - The Company owns the license rights in certain areas to
operate a number of its restaurants and to sell products using the
Applebee s, Big Boy, Original Gino s East of Chicago and Kentucky Fried
Chicken trademarks. Under the terms of the licenses, the Company is
obligated to pay fees based on defined gross sales. Three of these
licenses also require the Company to pay an additional fee for each new
location established.
Contingencies - The Company is contingently liable for debt guarantees of
joint ventures totaling approximately $6,958,000 at May 26, 1994.
8. Joint Venture Transactions
At May 26, 1994 and May 27, 1993, the Company held investments of $662,000
and $1,223,000, respectively, in various approximately 50%-owned
affiliates (joint ventures) which are accounted for under the equity
method. In fiscal 1992, the Company paid $50,000 (net of $750,000 cash
acquired in the purchase) to acquire complete ownership of four previously
partially owned joint ventures. In connection with the acquisitions (which
were accounted for using the purchase method) and consolidation of joint
ventures, the assets acquired and liabilities assumed were as follows:
(In Thousands)
Fair value of assets acquired $15,354
Net cash paid for joint ventures (50)
------
Liabilities assumed $15,304
=======
The Company has receivables from the joint ventures of $7,983,000 and
$10,372,000 at May 26, 1994 and May 27, 1993, respectively. The Company
earns interest on $7,373,000 and $9,702,000 of the receivables at
approximately prime to prime plus 1.5%.
Included in notes payable at May 26, 1994 and May 27, 1993, is $1,223,000
and $1,735,000, respectively, due to joint ventures in connection with
cash advanced to the Company. The Company pays interest on the cash
advances based on the 90-day certificate of deposit rates.
9. Business Segment Information
The Company operates principally in four business segments: Restaurants,
Theatres, Hotels/Resorts and Motels. Prior to 1994, the Company reported
in three business segments. However, due to the expansion of the hotel
operations and the increasingly different operating characteristics of the
hotel division from the motel division, the Company has commenced separate
business segment reporting in 1994 for the hotel and motel divisions,
resulting in four segments. All prior year segment information has been
restated to reflect this change. Following is a summary of business
segment information for 1992 through 1994:
<TABLE>
<CAPTION>
Hotels/ Corporate
Restaurants Theatres Resorts Motels Items Total
(In Thousands)
1994
<S> <C> <C> <C> <C> <C> <C>
Revenues $71,108 $51,389 $32,391 $ 88,973 $ 2,454 $246,315
Operating profit (loss) 2,203 12,378 2,611 25,971 (8,509) 34,654
Depreciation and
amortization 3,112 2,519 3,030 11,246 478 20,385
Assets 51,896 47,244 45,787 182,174 34,505 361,606
Capital expenditures 8,165 2,791 19,403 31,884 13,582 75,825
1993
Revenues $59,138 $43,880 $28,485 $ 80,596 $ 1,919 $214,018
Operating profit (loss) 723 9,660 2,116 23,775 (9,232) 27,042
Depreciation and
amortization 2,503 2,463 2,572 10,224 511 18,273
Assets 46,282 36,898 24,041 166,193 36,041 309,455
Capital expenditures 12,451 4,282 6,358 22,536 1,610 47,237
1992
Revenues $56,110 $42,959 $28,101 $ 74,575 $ 2,552 $204,297
Operating profit (loss) 434 9,130 1,830 19,874 (9,302) 21,966
Depreciation and
amortization 2,426 2,497 2,819 9,150 671 17,563
Assets 35,800 35,994 21,747 154,578 26,275 274,394
Capital expenditures 5,702 5,540 910 14,897 189 27,238
</TABLE>
Corporate items include amounts not allocable to the business segments.
Corporate revenues consist principally of earnings on cash equivalents and
operating profit includes earnings on cash equivalents less interest
expense and general corporate expenses. Corporate assets primarily include
cash and cash equivalents, notes receivable, receivables from joint
ventures and land held for development.
The 1992 results of operations for the Restaurants, Hotels/Resorts and
Motels segments include 53 weeks. All other periods include 52 weeks.
During 1994, the Company entered into contracts to manage two hotel
properties. The Company also loaned $2,860,000 to one of these hotels
which bears interest at the prime rate plus 1% and matures December 31,
2008.
<TABLE>
Supplementary Quarterly Consolidated Financial Data
(Unaudited, dollars in thousands, except per share data)
<CAPTION>
12 Weeks Ended 12 Weeks Ended 12 Weeks Ended 16 Weeks Ended
Fiscal 1994 August 19, 1993 November 11, 1993 February 3, 1994 May 26, 1994
<S> <C> <C> <C> <C>
Revenues $64,746 $55,459 $51,753 $74,357
Gross profit 31,280 25,587 21,206 32,398
Net earnings 9,577 4,494 2,223 6,535
Net earnings
per share $ 0.73 $ 0.34 $ 0.17 $ 0.50
<CAPTION>
12 Weeks Ended 12 Weeks Ended 12 Weeks Ended 16 Weeks Ended
Fiscal 1993 August 20, 1992 November 12, 1992 February 4, 1993 May 27, 1993
<S> <C> <C> <C> <C>
Revenues $54,063 $47,299 $46,312 $66,344
Gross profit 26,234 22,052 18,666 29,176
Net earnings 5,808 3,525 1,620 5,529
Net earnings
per share $ 0.51 $ 0.31 $ 0.14 $ 0.44
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Company.
The information required by this item with respect to directors
is incorporated herein by reference to the information pertaining thereto
set forth under the caption entitled "Election of Directors" in the Proxy
Statement. The required information with respect to executive officers
appears at the end of Part I of this Form 10-K.
Item 11. Executive Compensation.
The information required by this item is incorporated herein by
reference to the information pertaining thereto set forth under the
caption entitled "Executive Compensation" in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is incorporated herein by
reference to the information pertaining thereto set forth under the
caption entitled "Stock Ownership of Management and Others" in the Proxy
Statement.
Item 13. Certain Relationships and Related Transactions.
The information required by this item, to the extent applicable,
is incorporated herein by reference to the information pertaining thereto
set forth under the caption entitled "Certain Transactions" in the Proxy
Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed, and incorporated by reference
herein, as a part of this report:
Form 10-K Page
Reference
1. Financial Statement Schedules.
Independent Auditors' Report - Ernst & Young N/A
LLP (incorporated by reference from
Exhibit 23.1)
Schedule II - Amounts Receivable from F-1
Related Parties and Underwriters,
Promoters and Employees other than
Related Parties
Schedule V - Property, Plant and Equipment F-2
Schedule VI - Accumulated Depreciation and F-3
Amortization of Property, Plant and
Equipment
Schedule IX - Short-Term Borrowings F-4
Schedule X - Supplementary Income F-5
Statement Information
All other schedules are omitted because they are inapplicable, not
required under the instructions or the financial information is included
in the consolidated financial statements or notes thereto.
2. Exhibits and Reports on Form 8-K.
(a) The exhibits filed herewith or incorporated by reference herein
are set forth on the attached Exhibit Index.*
(b) No reports on Form 8-K were required to be filed by the Company
during the fourth quarter of fiscal 1994.
__________________
* Exhibits to this Form 10-K will be furnished to shareholders upon
advance payment of a fee of $0.20 per page, plus mailing expenses.
Requests for copies should be addressed to Thomas F. Kissinger,
Secretary, The Marcus Corporation, 250 East Wisconsin Avenue, Suite
1700, Milwaukee, Wisconsin 53202.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
THE MARCUS CORPORATION
Date: August 24, 1994 By: /s/ Stephen H. Marcus
Stephen H. Marcus,
Chairman of the Board and President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Company and in the capacities as of the date indicated above.
By: /s/ Stephen H. Marcus By: /s/ George R. Slater
Stephen H. Marcus, George R. Slater, Director
Chairman of the Board
and President (Chief
Executive Officer)
By: /s/ Kenneth A. MacKenzie By: /s/ Lee Sherman Dreyfus
Kenneth A. MacKenzie, Lee Sherman Dreyfus, Director
Treasurer and Controller
(Chief Financial
and Accounting Officer)
By: /s/ Ben Marcus By: /s/ Daniel F. McKeithan, Jr.
Ben Marcus, Director Daniel F. McKeithan, Jr.,
Director
By: /s/ John L. Murray By: /s/ Diane Marcus Gershowitz
John L. Murray, Director Diane Marcus Gershowitz,
Director
<PAGE>
<TABLE>
THE MARCUS CORPORATION - FORM 10-K FOR YEAR-ENDED MAY 26, 1994
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES
AND UNDERWRITERS, PROMOTERS AND EMPLOYEES
OTHER THAN RELATED PARTIES
THREE YEARS ENDED MAY 26, 1994
(Dollars in thousands)
<CAPTION>
Balance at Balance at
Beginning Amounts Amounts End of
Name of Debtor of Year Additions Collected Written Off Year
1992
<S> <C> <C> <C> <C> <C>
Dave Lucas (1) $163 $ 30 $ 13 -- $180
Michael Kominsky 103 -- 2 -- 101
Richard Slayton 203 30 27 -- 207
----- ----- ----- -----
Total $469 $ 60 $ 42 -- $488
==== ==== ==== ====
1993
Dave Lucas (1) $180 $ 30 $ 87 -- $123
Michael Kominski 101 -- 101 -- --
Richard Slayton 207 30 89 -- 148
Daniel Kite (2) -- 298 -- -- 298
----- ----- ---- ---- -----
Total $488 $358 $277 -- $569
==== ==== ==== ==== ====
1994
Dave Lucas (1) $123 $ 30 $ 23 -- $130
Michael Kominsky 148 -- 148 -- --
Daniel Kite (2) 298 -- -- -- 298
----- ----- ----- ---- -----
Total $569 $30 $171 $-- $428
==== ==== ==== === ====
<FN>
_____________________
(1) Amounts receivable are due on demand. Interest rate is prime.
(2) Amounts receivable are due on demand from a partnership in which Mr. Kite is a general partner. Interest rate is prime
plus 1/2%. Secured by mortgage on real property.
</TABLE>
<PAGE>
<TABLE>
THE MARCUS CORPORATION - FORM 10-K FOR YEAR-ENDED MAY 26, 1994
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
THREE YEARS ENDED MAY 26, 1994
(Dollars in thousands)
<CAPTION>
Furniture,
Land Held Buildings Capital Fixtures Construction
Land and for and Leases- Leasehold and in
Improvements Development Improvements Buildings Improvements Equipment Progress Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, MAY 30,
1991 $28,975 $ 2,484 $176,882 $ 4,122 $ 8,456 $ 91,680 $ 2,043 $314,642
Additions at cost 2,117 --- 11,391 --- 899 10,933 1,898 27,238
Additions, through
acquisition of
joint ventures 2,898 --- 8,565 --- --- 3,070 --- 14,533
Retirements (486) --- (3,067) --- (892) (8,239) (200) (12,884)
Reclassifications 2,484 ( 2,484) 1,572 --- (391) 657 (1,838) ---
------- -------- -------- -------- ------- -------- -------- --------
BALANCE, MAY 28,
1992 35,988 --- 195,343 4,122 8,072 98,101 1,903 343,529
Additions at cost 6,147 --- 12,529 --- 1,697 13,949 12,915 47,237
Retirements (216) --- (1,391) (1,223) (1,698) (9,169) --- (13,697)
Reclassifications --- --- 3,253 (2,742) 79 1,054 (1,644) ---
------- -------- --------- -------- -------- -------- --------- ---------
BALANCE, MAY 27,
1993 41,919 --- 209,734 157 8,150 103,935 13,174 377,069
Additions at cost 7,854 --- 17,942 --- 901 13,616 35,512 75,825
Retirements (808) --- (1,003) (157) (607) (5,790) (16) (8,381)
Reclassifications 653 --- 5,232 --- (879) 6,362 (11,368) ---
-------- --------- --------- --------- --------- --------- --------- ----------
BALANCE, MAY 26,
1994 $49,618 $ --- $231,905 $ --- $ 7,565 $118,123 $37,302 $444,513
======== ========= ========== ========= ========= ========= ========= ==========
</TABLE>
<PAGE>
<TABLE>
THE MARCUS CORPORATION - FORM 10-K FOR YEAR-ENDED MAY 26, 1994
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
THREE YEARS ENDED MAY 26, 1994
(Dollars in thousands)
<CAPTION>
Buildings Capital Furniture,
and Leases - Leasehold Fixtures and
Improvements Buildings Improvements Equipment Total
<S> <C> <C> <C> <C> <C>
BALANCE, MAY 30, 1991 $43,859 $ 1,788 $ 3,619 $44,831 $ 94,097
Additions charged to
costs and expenses 6,966 125 462 9,924 17,477
Reclassifications (201) --- 201 --- ---
Retirements (1,874) --- (729) (6,713) (9,316)
------- -------- ----- ------ -------
BALANCE, MAY 28, 1992 48,750 1,913 3,553 48,042 102,258
Additions charged to
costs and expenses 7,129 50 441 10,548 18,168
Reclassifications 49 --- (4) (45) ---
Retirements (228) (1,807) (789) (8,374) (11,198)
------- ------- ------ ------- -------
BALANCE, MAY 31, 1993 55,700 156 3,201 50,171 109,228
Additions charged to
costs and expenses 7,828 --- 695 11,759 20,282
Reclassifications (682) --- 881 (199) ---
Retirements --- (156) (221) (6,491) (6,868)
------- -------- ------- -------- --------
BALANCE, MAY 26, 1994 $62,846 $ --- $ 4,556 $55,240 $122,642
======= ======== ======= ======= ========
</TABLE>
<PAGE>
<TABLE>
THE MARCUS CORPORATION - FORM 10-K FOR YEAR-ENDED MAY 26, 1994
SCHEDULE IX - SHORT-TERM BORROWINGS
THREE YEARS ENDED MAY 26, 1994
(Dollars in thousands)
<CAPTION>
Balance Weighted Maximum Amount Average Amount Weighted Average
Payable to Holders of at End of Average Outstanding During Outstanding During Interest Rate During
Short-Term Borrowings Period Interest Rate the Period the Period the Period(B)
<S> <C> <C> <C> <C> <C>
MAY 26, 1994: --- --- $10,838 $ 2,494(A) 3.5%
Commercial paper
MAY 27, 1993:
Commercial paper $8,606(C) 3.4% $16,526 $8,111(A) 3.8%
MAY 28, 1992:
Commercial paper $16,526(C) 4.3% $16,526 $7,920(A) 5.2%
Revolving credit
agreements -- -- 6,000 4,418(D) 6.8%
<FN>
_______________
(A) Average amount outstanding during the period is computed by dividing the total of the daily outstanding principal
balance by 365.
(B) Weighted average interest rate for the year is computed by dividing the actual short-term interest expense by the
average short-term debt outstanding during the period prorated for the period outstanding.
(C) The Company has the ability to replace commercial paper borrowings and the revolving credit agreements with borrowings
under a long-term revolving credit agreement. Accordingly, the Company has classified the outstanding commercial paper
and revolving credit agreement borrowings as long-term debt.
(D) Average amount outstanding during the period is computed by dividing the total of the daily outstanding principal
balance by 96 (beginning of the fiscal year through final payment on the revolving credit agreement on September 3,
1991).
</TABLE>
<PAGE>
THE MARCUS CORPORATION - FORM 10-K FOR YEAR-ENDED MAY 26, 1994
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT
INFORMATION THREE YEARS ENDED MAY 26, 1994
(Dollars in thousands)
1994 1993 1992
Maintenance and repairs $10,980 $9,884 $8,804
Taxes, other than payroll and
income taxes 8,570 8,067 7,690
Advertising costs 13,172 11,037 10,344
Amounts for amortization of intangible assets and royalties are not
presented as such amounts are less than 1% of revenues.
<PAGE>
EXHIBIT INDEX
Sequential Page No.
3.1 Articles of Incorporation. [Incorporated N/A
by reference to Exhibit 3.1 to the
Company's Form S-3 Registration Statement
(No. 33-57468).]
3.2 Bylaws. 53
4 Senior Note Purchase Agreement dated N/A
May 31, 1990 between the Company and The
Northwestern Mutual Life Insurance Company.
[Incorporated by reference to Exhibit 4 to
the Company's Annual Report on From 10-K
for the fiscal year ended May 31, 1990.]
4.1 Other than as set forth in Exhibit (4), the N/A
Company has numerous instruments which
define the rights of holders of long-term
debt. These instruments, primarily
promissory notes, have arisen from the
purchase of operating properties in the
ordinary course of business. These
instruments are not being filed with this
Annual Report on Form 10-K in reliance upon
Item 601(b)(4)(iii) of Regulation S-K.
Copies of these instruments will be
furnished to the Securities and Exchange
Commission upon request.
10.1 Franchise Contract dated August 29, 1958 N/A
between Big Boy Franchises, Inc. and Marc's
Big Boy Corporation. [Incorporated by
reference to Exhibit 13.5 to the Company's
Registration Statement on Form S-1 (Reg.
No. 2-45091).]
10.2 Franchise Contract dated November 20, 1959 N/A
between Big Boy Franchises, Inc. and Marc's
Big Boy Corporation. [Incorporated by
reference to Exhibit 13.6 to the Company's
Registration Statement on Form S-1 (Reg.
No. 2-45091).]
10.3 Franchise Contract dated November 20, 1959 N/A
between Big Boy Franchises, Inc. and Marc's
Big Boy Corporation. [Incorporated by
reference to Exhibit 13.7 to the Company's
Registration Statement on Form S-1 (Reg.
No. 2-45091).]
10.4 The Company is the guarantor and/or obligor N/A
under various loan agreements in connection
with operating properties (primarily
Budgetel Inns) which were financed through
the issuance of industrial development
bonds. These loan agreements and the
additional documentation relating to these
projects are not being filed with this
Annual Report on Form 10-K in reliance upon
Item 601(b)(4)(iii) of Regulation S-K.
Copies of these documents will be furnished
to the Securities and Exchange Commission
upon request.
*10.5 1987 Stock Option Plan. [Incorporated by N/A
reference to Exhibit A to the Company's
Proxy Statement for its Annual Meeting of
Shareholders held on September 29, 1987.]
*10.6 Form of Incentive Stock Option Agreement N/A
used in connection with 1987 stock option
plan. [Incorporated by reference to
Exhibit 4.3 to the Company's Registration
Statement on Form S-8 (Reg. No. 33-21060).]
*10.7 Form of Nonstatutory Stock Option Agreement N/A
used in connection with 1987 Stock Option
Plan. [Incorporated by reference to
Exhibit 4.4 to the Company's Registration
Statement on Form S-8 (Reg. No. 33-21060).]
10.8 Form of Addendum dated March 6, 1985 to Big N/A
Boy Franchise Contracts listed as Exhibits
10.2, 10.3 and 10.4 between the Company and
Marriott Corporation. [Incorporated by
reference to Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 29, 1986.]
10.9 Comprehensive Image Enhancement Agreement N/A
dated October 12, 1988 between the Company
and KFC Corporation. [Incorporated by
reference to Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 25, 1989.]
10.10 Form of individual Kentucky Fried Chicken N/A
franchise agreement between the Company and
KFC Corporation. [Incorporated by
reference to Exhibit 10.12 to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 25, 1989.]
10.11 Standard Form - Applebee's Neighborhood 76
Grill & Bar Development Agreement for
Chicago, Illinois A.D.I. dated April 8,
1994 between Marcus Restaurants, Inc. and
Applebee's International, Inc.
10.12 Standard Form - Applebee's Neighborhood N/A
Grill & Bar Development Agreement for
Milwaukee, Wisconsin, Madison, Wisconsin,
La Crosse-Eau Claire, Wisconsin,
Wausau-Rhinelander, Wisconsin and Green
Bay-Appleton, Wisconsin A.D.I.s dated
December 29, 1989 between Marcus
Restaurants, Inc. and Applebee's
International, Inc. [Incorporated by
reference to Exhibit 10.14 to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 31, 1990.]
10.13 Amendment to Applebee's Neighborhood Grill N/A
& Bar Development Agreement for Milwaukee,
Madison, LaCrosse-Eau Claire, Wausau-
Rhinelander and Green Bay-Appleton,
Wisconsin A.D.I.s dated April 8, 1993
between Marcus Restaurants, Inc. and
Applebee's International, Inc.
[Incorporated by reference to Exhibit 10.14
to the Company's Form 10-K Annual Report
for the year ended May 27, 1993.]
10.14 Area Development Agreement dated September N/A
27, 1993 between Gino's East Restaurant
Corp. and Marcus Restaurants, Inc. for the
State of Wisconsin Development Area.
[Incorporated by reference to Exhibit 10.16
to the Company's Form 10-Q/A for its fiscal
quarter ended August 19, 1993.] [Marcus
Restaurants, Inc. is a party to Area
Development Agreements dated September 27,
1993 with Gino's East Restaurant Corp. for
the State of Iowa Development Area and
State of Minnesota Development Area,
respectively, each of which Area
Development Agreements are substantially
identical in all material respects with the
Area Development Agreement incorporated by
reference herein, except with respect to
the designated market area and applicable
restaurant development schedules. Such
other Area Development Agreements are not
being filed or incorporated by reference
herein, but a copy thereof will be provided
to the Commission upon request.]
10.15 Master Development Agreement dated N/A
September 27, 1993 between Gino's East
Restaurant Corp. and Marcus Restaurants,
Inc. [Incorporated by reference to Exhibit
10.17 to the Company's Form 10-Q/A for its
fiscal quarter ended August 19, 1993.]
10.16 Form of Gino's East Restaurant Corp. N/A
Franchise Agreement between Gino's East
Restaurant Corp. and Marcus Restaurants,
Inc. [Incorporated by reference to Exhibit
10.18 to the Company's Form 10-Q/A for its
fiscal quarter ended August 19, 1993.]
21 Subsidiaries of the Company as of May 26, 186
1994.
23.1 Consent of Ernst & Young LLP. 188
99 Proxy Statement for Annual Meeting of N/A
Shareholders scheduled to be held on
September 30, 1994. (To be filed with the
Securities and Exchange Commission under
Regulation 14A within 120 days of May 26,
1994 and, upon such filing, to be hereby
incorporated by reference herein to the
extent indicated).
_________
* This exhibit is a management contract or compensatory plan
or arrangement required to be filed as an exhibit to this
form pursuant to Item 14(c) of Form 10-K.
____________________
Exhibit 3.2
BY-LAWS
OF
THE MARCUS CORPORATION
(a Wisconsin corporation)
ARTICLE I. OFFICES
1.01. Principal and Business Offices. The corporation may
have such principal and other business offices, either within or without
the State of Wisconsin, as the Board of Directors may designate or as the
business of the corporation may require from time to time.
1.02. Registered Office. The registered office of the
corporation required by the Wisconsin Business Corporation Law to be
maintained in the State of Wisconsin may be, but need not be, identical
with the principal office in the State of Wisconsin, and the address of
the registered office may be changed from time to time by the Board of
Directors or by the registered agent. The business office of the
registered agent of the corporation shall be identical to such registered
office.
ARTICLE II. SHAREHOLDERS
2.01. Annual Meeting. The annual meeting of the shareholders
shall be held on such day in September or October of each year as may be
designated by or under the authority of the Board of Directors, for the
purpose of electing directors and for the transaction of such other
business as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday in the State of Wisconsin, such meeting
shall be held on the next succeeding business day.
2.02. Special Meetings. Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by the Wisconsin
Business Corporation Law, may be called by the Chairman of the Board, the
President or the Board of Directors. The corporation shall call a special
meeting of shareholders in the event that the holders of at least 10% of
all of the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting sign, date and deliver to the
corporation one or more written demands for the meeting describing one or
more purposes for which it is to be held. The corporation shall give
notice of such a special meeting within thirty days after the date that
the demand is delivered to the corporation.
2.03. Place of Meeting. The Board of Directors may designate
any place, either within or without the State of Wisconsin, as the place
of meeting for any annual or special meeting of shareholders. If no
designation is made, the place of meeting shall be the principal office of
the corporation. Any meeting may be adjourned to reconvene at any place
designated by vote of the shares represented thereat.
2.04. Notice of Meeting. Written notice stating the date,
time and place of any meeting of shareholders and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten days nor more than sixty days before the date
of the meeting (unless a different time is provided by the Wisconsin
Business Corporation Law or the articles of incorporation), either
personally or by mail, by or at the direction of the President or the
Secretary, to each shareholder of record entitled to vote at such meeting
and to such other persons as required by the Wisconsin Business
Corporation Law. If mailed, such notice shall be deemed to be effective
when deposited in the United States mail, addressed to the shareholder at
his or her address as it appears on the stock record books of the
corporation, with postage thereon prepaid. If an annual or special meeting
of shareholders is adjourned to a different date, time or place, the
corporation shall not be required to give notice of the new date, time or
place if the new date, time or place is announced at the meeting before
adjournment; provided, however, that if a new record date for an adjourned
meeting is or must be fixed, the corporation shall give notice of the
adjourned meeting to persons who are shareholders as of the new record
date.
2.045. Proper Business or Purposes of Shareholder Meetings. To
be properly brought before a meeting of shareholders for voting
consideration, business must be (a) specified in the notice of the meeting
(or any supplement thereto) given by or at the discretion of the Board of
Directors or otherwise as provided in Section 2.04 hereof; (b) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors; or (c) otherwise properly brought before the meeting by a
shareholder. For business to be properly brought before a meeting by a
shareholder, the shareholder must have given written notification thereof,
either by personal delivery or by United States mail, postage prepaid, to
the Secretary of the corporation at its principal business office, and, in
the case of an annual meeting of shareholders, such notification must be
given not later than fifteen (15) days in advance of the Originally
Scheduled Date of such meeting. Any such notification shall set forth as
to each matter the shareholder proposes to bring before the meeting for
voting consideration (i) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at
the meeting and, in the event that such business includes a proposal to
amend either the articles of incorporation or bylaws of the corporation,
the exact language of the proposed amendment; (ii) whether or not such
business is in the nature of a precatory proposal; (iii) the name and
address of the shareholder proposing such business; (iv) a representation
that the shareholder is a holder of record of stock of the corporation
entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to propose such business; and (v) any material
interest of the shareholder in such business. No business shall be
conducted at a meeting of shareholders except in accordance with this
Section 2.045, and the chairperson of any meeting of shareholders may
refuse to permit any business to be brought before such meeting without
compliance with the foregoing procedures. For purposes of these bylaws,
the "Originally Scheduled Date" of any meeting of shareholders shall be
the date such meeting is scheduled to occur as specified in the notice of
such meeting first generally given to shareholders regardless of whether
any subsequent notice is given for such meeting or the record date of such
meeting is changed. Nothing contained in this Section 2.045 shall be
construed to limit the rights of a shareholder to submit proposals to the
corporation which comply with Regulation 14A of the Securities Exchange
Act of 1934, as amended ("Registration 14A"), for inclusion in the
corporation's proxy statement for voting consideration at shareholder
meetings.
2.05. Waiver of Notice. A shareholder may waive any notice
required by the Wisconsin Business Corporation Law, the articles of
incorporation or these bylaws before or after the date and time stated in
the notice. The waiver shall be in writing and signed by the shareholder
entitled to the notice, contain the same information that would have been
required in the notice under applicable provisions of the Wisconsin
Business Corporation Law (except that the time and place of meeting need
not be stated) and be delivered to the corporation for inclusion in the
corporate records. A shareholder's attendance at a meeting, in person or
by proxy, waives objection to all of the following: (a) lack of notice or
defective notice of the meeting, unless the shareholder at the beginning
of the meeting or promptly upon arrival objects to holding the meeting or
transacting business at the meeting; and (b) consideration of a particular
matter at the meeting that is not within the purpose described in the
meeting notice, unless the shareholder objects to considering the matter
when it is presented.
2.06. Fixing of Record Date. The Board of Directors may fix
in advance a date as the record date for the purpose of determining
shareholders entitled to notice of and to vote at any meeting of
shareholders, shareholders entitled to demand a special meeting as
contemplated by Section 2.02 hereof, shareholders entitled to take any
other action, or shareholders for any other purpose. Such record date
shall not be more than seventy days prior to the date on which the
particular action, requiring such determination of shareholders, is to be
taken. If no record date is fixed by the Board of Directors or by the
Wisconsin Business Corporation Law for the determination of shareholders
entitled to notice of and to vote at a meeting of shareholders, the record
date shall be the close of business on the day before the first notice is
given to shareholders. If no record date is fixed by the Board of
Directors or by the Wisconsin Business Corporation Law for the
determination of shareholders entitled to demand a special meeting as
contemplated in Section 2.02 hereof, the record date shall be the date
that the first shareholder signs the demand. Except as provided by the
Wisconsin Business Corporation Law for a court-ordered adjournment, a
determination of shareholders entitled to notice of and to vote at a
meeting of shareholders is effective for any adjournment of such meeting
unless the Board of Directors fixes a new record date, which it shall do
if the meeting is adjourned to a date more than 120 days after the date
fixed for the original meeting. The record date for determining
shareholders entitled to a distribution (other than a distribution
involving a purchase, redemption or other acquisition of the corporation's
shares) or a share dividend is the date on which the Board of Directors
authorized the distribution or share dividend, as the case may be, unless
the Board of Directors fixes a different record date.
2.07. Shareholders' List for Meetings. After a record date
for a special or annual meeting of shareholders has been fixed, the
corporation shall prepare a list of the names of all of the shareholders
entitled to notice of the meeting. The list shall be arranged by class or
series of shares, if any, and show the address of and number of shares
held by each shareholder. Such list shall be available for inspection by
any shareholder, beginning two business days after notice of the meeting
is given for which the list was prepared and continuing to the date of the
meeting, at the corporation's principal office or at a place identified in
the meeting notice in the city where the meeting will be held. A
shareholder or his or her agent may, on written demand, inspect and,
subject to the limitations imposed by the Wisconsin Business Corporation
Law, copy the list, during regular business hours and at his or her
expense, during the period that it is available for inspection pursuant to
this Section 2.07. The corporation shall make the shareholders' list
available at the meeting and any shareholder or his or her agent or
attorney may inspect the list at any time during the meeting or any
adjournment thereof. Refusal or failure to prepare or make available the
shareholders' list shall not affect the validity of any action taken at a
meeting of shareholders.
2.08. Quorum and Voting Requirements. Shares entitled to vote
as a separate voting group may take action on a matter at a meeting only
if a quorum of those shares exists with respect to that matter. If the
corporation has only one class of stock outstanding, such class shall
constitute a separate voting group for purposes of this Section 2.08.
Except as otherwise provided in the articles of incorporation, any bylaw
adopted under authority granted in the articles of incorporation, or the
Wisconsin Business Corporation Law, a majority of the votes entitled to be
cast on the matter shall constitute a quorum of the voting group for
action on that matter. Once a share is represented for any purpose at a
meeting, other than for the purpose of objecting to holding the meeting or
transacting business at the meeting, it is considered present for purposes
of determining whether a quorum exists for the remainder of the meeting
and for any adjournment of that meeting unless a new record date is or
must be set for the adjourned meeting. If a quorum exists, except in the
case of the election of directors, action on a matter shall be approved if
the votes cast within the voting group favoring the action exceed the
votes cast opposing the action, unless the articles of incorporation, any
bylaw adopted under authority granted in the articles of incorporation, or
the Wisconsin Business Corporation Law requires a greater number of
affirmative votes. Unless otherwise provided in the articles of
incorporation, directors shall be elected by a plurality of the votes cast
by the shares entitled to vote in the election of directors at a meeting
at which a quorum is present. For purposes of this Section 2.08,
"plurality" means that the individuals with the largest number of votes
are elected as directors up to the maximum number of directors to be
chosen at the meeting. Though less than a quorum of the outstanding votes
of a voting group are represented at a meeting, a majority of the votes so
represented may adjourn the meeting from time to time without further
notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
2.09. Conduct of Meeting. The Chief Executive Officer, and in
his or her absence, the Chairman of the Board or the President, as the
case may be, and in their absence, a Vice President in the order provided
under Section 4.09 hereof, and in their absence, any person chosen by the
shareholders represented at the meeting in person or by proxy shall call
the meeting of the shareholders to order and shall act as chairperson of
the meeting, and the Secretary of the corporation shall act as secretary
of all meetings of the shareholders, but, in the absence of the Secretary,
the presiding officer may appoint any other person to act as secretary of
the meeting.
2.10. Proxies. At all meetings of shareholders, a shareholder
may vote his or her shares in person or by proxy. A shareholder may
appoint a proxy to vote or otherwise act for the shareholder by signing an
appointment form, either personally or by his or her attorney-in-fact. An
appointment of a proxy is effective when received by the Secretary or
other officer or agent of the corporation authorized to tabulate votes.
An appointment is valid for eleven months from the date of its signing
unless a different period is expressly provided in the appointment form.
2.11. Voting of Shares. Except as provided in the articles of
incorporation or in the Wisconsin Business Corporation Law, each
outstanding share of Common Stock is entitled to one (1) vote, and each
outstanding share of Class B Common Stock shall be entitled to ten (10)
votes, upon each matter voted on at a meeting of shareholders.
2.12. Action without Meeting. Any action required or
permitted by the articles of incorporation or these bylaws or any
provision of the Wisconsin Business Corporation Law to be taken at a
meeting of the shareholders may be taken without a meeting and without
action by the Board of Directors if a written consent or consents,
describing the action so taken, is signed by all of the shareholders
entitled to vote with respect to the subject matter thereof and delivered
to the corporation for inclusion in the corporate records.
2.13. Acceptance of Instruments Showing Shareholder Action.
If the name signed on a vote, consent, waiver or proxy appointment
corresponds to the name of a shareholder, the corporation, if acting in
good faith, may accept the vote, consent, waiver or proxy appointment and
give it effect as the act of a shareholder. If the name signed on a vote,
consent, waiver or proxy appointment does not correspond to the name of a
shareholder, the corporation, if acting in good faith, may accept the
vote, consent, waiver or proxy appointment and give it effect as the act
of the shareholder if any of the following apply:
(a) The shareholder is an entity and the name signed
purports to be that of an officer or agent of the entity.
(b) The name purports to be that of a personal
representative, administrator, executor, guardian or conservator
representing the shareholder and, if the corporation requests,
evidence of fiduciary status acceptable to the corporation is
presented with respect to the vote, consent, waiver or proxy
appointment.
(c) The name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation
requests, evidence of this status acceptable to the corporation
is presented with respect to the vote, consent, waiver or proxy
appointment.
(d) The name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the shareholder and, if
the corporation requests, evidence acceptable to the corporation
of the signatory's authority to sign for the shareholder is
presented with respect to the vote, consent, waiver or proxy
appointment.
(e) Two or more persons are the shareholders as co-tenants
or fiduciaries and the name signed purports to be the name of at
least one of the co-owners and the person signing appears to be
acting on behalf of all co-owners.
The corporation may reject a vote, consent, waiver or proxy appointment if
the Secretary or other officer or agent of the corporation who is
authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
ARTICLE III. BOARD OF DIRECTORS
3.01. General Powers and Number. All corporate powers shall
be exercised by or under the authority of, and the business and affairs of
the corporation managed under the direction of, the Board of Directors.
The number of directors constituting the Board of Directors of the
corporation shall initially be seven (7) and thereafter such number as is
fixed from time to time by a majority vote of the Board of Directors then
in office.
3.02. Tenure and Qualifications. Each director shall hold
office until the next annual meeting of shareholders and until his or her
successor shall have been elected and, if necessary, qualified, or until
there is a decrease in the number of directors which takes effect after
the expiration of his or her term, or until his or her prior death,
resignation or removal. A director may be removed by the shareholders
only at a meeting called for the purpose of removing the director, and the
meeting notice shall state that the purpose, or one of the purposes, of
the meeting is removal of the director. A director may be removed from
office with or without cause if the number of votes cast to remove the
director exceeds the number of votes cast not to remove such director. A
director may resign at any time by delivering written notice which
complies with the Wisconsin Business Corporation Law to the Board of
Directors, to the President (in his or her capacity as chairperson of the
Board of Directors) or to the corporation. A director's resignation is
effective when the notice is delivered unless the notice specifies a later
effective date. Directors need not be residents of the State of Wisconsin
or shareholders of the corporation.
3.025. Shareholder Nomination Procedure. Nominations for the
election of directors may be made by (a) the Board of Directors; (b) a
committee appointed by the Board of Directors; or (c) any shareholder
entitled to vote for the election of directors at such meeting who
complies fully with the requirements of this Section 3.025. Any
shareholder entitled to vote for the election of directors at a meeting
may nominate a person or persons for election as a director or directors
only if written notice of such shareholder's intent to make any such
nomination is given, either by personal delivery or by United States mail,
postage prepaid, to the Secretary of the corporation at its principal
business office not later than fifteen (15) days in advance of the
Originally Scheduled Date of such meeting. Each such notice shall set
forth: (a) the name and address of the shareholder who intends to make the
nomination and of the person or persons to be nominated; (b) a
representation that the shareholder is a holder of record of stock of the
corporation entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or
understandings between the shareholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (d) such
background and other information regarding each nominee proposed by such
shareholder as would have been required to be included in a proxy
statement filed pursuant to Regulation 14A had each nominee been
nominated, or intended to be nominated, by the Board of Directors; and (e)
the written consent of each nominee to serve as a director of the
corporation if so elected. The chairperson of any meeting of shareholders
to elect directors and the Board of Directors may refuse to acknowledge
the nomination by a shareholder of any person not made in compliance with
the foregoing procedure.
3.03. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this bylaw immediately
after the annual meeting of shareholders and each adjourned session
thereof. The place of such regular meeting shall be the same as the place
of the meeting of shareholders which precedes it, or such other suitable
place as may be announced at such meeting of shareholders. The Board of
Directors may provide, by resolution, the date, time and place, either
within or without the State of Wisconsin, for the holding of additional
regular meetings of the Board of Directors without other notice than such
resolution.
3.04. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chief Executive
Officer, the Chairman of the Board, the President, the Secretary or any
two directors. The President or Secretary may fix any place, either
within or without the State of Wisconsin, as the place for holding any
special meeting of the Board of Directors, and if no other place is fixed
the place of the meeting shall be the principal office of the corporation
in the State of Wisconsin.
3.05. Notice; Waiver. Notice of each meeting of the Board of
Directors (unless otherwise provided in or pursuant to Section 3.03) shall
be given by written notice delivered in person, by telegraph, teletype,
facsimile or other form of wire or wireless communication, or by mail or
private carrier, to each director at his business address or at such other
address as such director shall have designated in writing filed with the
Secretary, in each case not less than forty-eight (48) hours prior to the
meeting. The notice need not describe the purpose of the meeting of the
Board of Directors or the business to be transacted at such meeting. If
mailed, such notice shall be deemed to be effective when deposited in the
United States mail so addressed, with postage thereon prepaid. If notice
is given by telegram, such notice shall be deemed to be effective when the
telegram is delivered to the telegraph company. If notice is given by
private carrier, such notice shall be deemed to be effective when
delivered to the private carrier. Whenever any notice whatever is
required to be given to any director of the corporation under the articles
of incorporation or these bylaws or any provision of the Wisconsin
Business Corporation Law, a waiver thereof in writing, signed at any time,
whether before or after the date and time of meeting, by the director
entitled to such notice shall be deemed equivalent to the giving of such
notice. The corporation shall retain any such waiver as part of the
permanent corporate records. A director's attendance at or participation
in a meeting waives any required notice to him or her of the meeting
unless the director at the beginning of the meeting or promptly upon his
or her arrival objects to holding the meeting or transacting business at
the meeting and does not thereafter vote for or assent to action taken at
the meeting.
3.06. Quorum. Except as otherwise provided by the Wisconsin
Business Corporation Law or by the articles of incorporation or these
bylaws, a majority of the number of directors specified in Section 3.01 of
these bylaws shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors. Except as otherwise provided by
the Wisconsin Business Corporation Law or by the articles of incorporation
or by these bylaws, a quorum of any committee of the Board of Directors
created pursuant to Section 3.12 hereof shall consist of a majority of the
number of directors appointed to serve on the committee. A majority of
the directors present (though less than such quorum) may adjourn any
meeting of the Board of Directors or any committee thereof, as the case
may be, from time to time without further notice.
3.07. Manner of Acting. The affirmative vote of a majority of
the directors present at a meeting of the Board of Directors or a
committee thereof at which a quorum is present shall be the act of the
Board of Directors or such committee, as the case may be, unless the
Wisconsin Business Corporation Law, the articles of incorporation or these
bylaws require the vote of a greater number of directors.
3.08. Conduct of Meetings. The Chief Executive Officer, and
in his or her absence, the Chairman of the Board or the President, as the
case may be, and in their absence, a Vice President, in the order provided
under Section 4.09, and in their absence, any director chosen by the
directors present, shall call meetings of the Board of Directors to order
and shall act as chairperson of the meeting. The Secretary of the
corporation shall act as secretary of all meetings of the Board of
Directors but in the absence of the Secretary, the presiding officer may
appoint any other person present to act as secretary of the meeting.
Minutes of any regular or special meeting of the Board of Directors shall
be prepared and distributed to each director.
3.09. Vacancies. Except as provided below, any vacancy
occurring in the Board of Directors, including a vacancy resulting from an
increase in the number of directors, may be filled by any of the
following: (a) the shareholders; (b) the Board of Directors; or (c) if
the directors remaining in office constitute fewer than a quorum of the
Board of Directors, the directors, by the affirmative vote of a majority
of all directors remaining in office. In the case of a vacancy created by
the removal of a director by vote of the shareholders, the shareholders
shall have the right to fill such vacancy at the same meeting or any
adjournment thereof. If the vacant office was held by a director elected
by a voting group of shareholders, only the holders of shares of that
voting group may vote to fill the vacancy if it is filled by the
shareholders, and only the remaining directors elected by that voting
group may vote to fill the vacancy if it is filled by the directors. A
vacancy that will occur at a specific later date, because of a resignation
effective at a later date or otherwise, may be filled before the vacancy
occurs, but the new director may not take office until the vacancy occurs.
3.10. Compensation. The Board of Directors, irrespective of
any personal interest of any of its members, may establish reasonable
compensation of all directors for services to the corporation as directors
or may delegate such authority to an appropriate committee. The Board of
Directors also shall have authority to provide for or delegate authority
to an appropriate committee to provide for reasonable pensions, disability
or death benefits, and other benefits or payments, to directors, officers
and employees and to their estates, families, dependents or beneficiaries
on account of prior services rendered by such directors, officers and
employees to the corporation.
3.11. Presumption of Assent. A director who is present and is
announced as present at a meeting of the Board of Directors or any
committee thereof created in accordance with Section 3.12 hereof, when
corporate action is taken, assents to the action taken unless any of the
following occurs: (a) the director objects at the beginning of the
meeting or promptly upon his or her arrival to holding the meeting or
transacting business at the meeting; (b) the director dissents or abstains
from an action taken and minutes of the meeting are prepared that show the
director's dissent or abstention from the action taken; (c) the director
delivers written notice that complies with the Wisconsin Business
Corporation Law of his or her dissent or abstention to the presiding
officer of the meeting before its adjournment or to the corporation
immediately after adjournment of the meeting; or (d) the director dissents
or abstains from an action taken, minutes of the meeting are prepared that
fail to show the director's dissent or abstention from the action taken,
and the director delivers to the corporation a written notice of that
failure that complies with the Wisconsin Business Corporation Law promptly
after receiving the minutes. Such right of dissent or abstention shall
not apply to a director who votes in favor of the action taken.
3.12. Committees. The Board of Directors by resolution
adopted by the affirmative vote of a majority of all of the directors then
in office may create one or more committees, appoint members of the Board
of Directors to serve on the committees and designate other members of the
Board of Directors to serve as alternates. Each committee shall have two
or more members who shall, unless otherwise provided by the Board of
Directors, serve at the pleasure of the Board of Directors. A committee
may be authorized to exercise the authority of the Board of Directors,
except that a committee may not do any of the following: (a) authorize
distributions; (b) approve or propose to shareholders action that the
Wisconsin Business Corporation Law requires to be approved by
shareholders; (c) fill vacancies on the Board of Directors or, unless the
Board of Directors provides by resolution that vacancies on a committee
shall be filled by the affirmative vote of the remaining committee
members, on any Board committee; (d) amend the corporation's articles of
incorporation; (e) adopt, amend or repeal bylaws; (f) approve a plan of
merger not requiring shareholder approval; (g) authorize or approve
reacquisition of shares, except according to a formula or method
prescribed by the Board of Directors; and (h) authorize or approve the
issuance or sale or contract for sale of shares, or determine the
designation and relative rights, preferences and limitations of a class or
series of shares, except that the Board of Directors may authorize a
committee to do so within limits prescribed by the Board of Directors.
Unless otherwise provided by the Board of Directors in creating the
committee, a committee may employ counsel, accountants and other
consultants to assist it in the exercise of its authority.
3.13. Telephonic Meetings. Except as herein provided and
notwithstanding any place set forth in the notice of the meeting or these
bylaws, members of the Board of Directors (and any committees thereof
created pursuant to Section 3.12 hereof) may participate in regular or
special meetings by, or through the use of, any means of communication by
which all participants may simultaneously hear each other, such as by
conference telephone. If a meeting is conducted by such means, then at
the commencement of such meeting the presiding officer shall inform the
participating directors that a meeting is taking place at which official
business may be transacted. Any participant in a meeting by such means
shall be deemed present in person at such meeting. Notwithstanding the
foregoing, no action may be taken at any meeting held by such means on any
particular matter which the presiding officer determines, in his or her
sole discretion, to be inappropriate under the circumstances for action at
a meeting held by such means. Such determination shall be made and
announced in advance of such meeting.
3.14. Action Without Meeting. Any action required or
permitted by the Wisconsin Business Corporation Law to be taken at a
meeting of the Board of Directors or a committee thereof created pursuant
to Section 3.12 hereof may be taken without a meeting if the action is
taken by all members of the Board or of the committee. The action shall
be evidenced by one or more written consents describing the action taken,
signed by each director or committee member and retained by the
corporation. Such action shall be effective when the last director or
committee member signs the consent, unless the consent specifies a
different effective date.
ARTICLE IV. OFFICERS
4.01. Number. The principal officers of the corporation shall
be a President, a Secretary, and a Treasurer, each of whom shall be
elected by the Board of Directors. A Chairman of the Board, any number of
Vice Presidents, other officers and assistant officers as may be deemed
necessary may be elected or appointed by the Board of Directors. The
Board of Directors may also authorize any duly appointed officer to
appoint one or more officers or assistant officers. The Chief Executive
Officer, designated in accordance with Section 4.06 of these By-laws, may
from time to time appoint any number of Vice Presidents as he shall
determine necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as the Chief Executive
Officer shall from time to time determine. Any two or more offices may be
held by the same person.
4.02. Election and Term of Office. The officers of the
corporation to be elected by the Board of Directors shall be elected
annually by the Board of Directors at the first meeting of the Board of
Directors held after each annual meeting of the shareholders. If the
election of officers shall not be held at such meeting, such election
shall be held as soon thereafter as is practicable. Each officer shall
hold office until his or her successor shall have been duly elected or
until his or her prior death, resignation or removal.
4.03. Removal. The Board of Directors may remove any officer
and, unless restricted by the Board of Directors or these By-laws, an
officer may remove any officer or assistant officer appointed by that
officer, at any time, with or without cause and notwithstanding the
contract rights, if any, of the officer removed. The appointment of an
officer does not of itself create contract rights.
4.04. Resignation. An officer may resign at any time by
delivering notice to the corporation that complies with the Wisconsin
Business Corporation Law. The resignation shall be effective when the
notice is delivered, unless the notice specifies a later effective date
and the corporation accepts the later effective date.
4.05. Vacancies. A vacancy in any principal office because of
death, resignation, removal, disqualification or otherwise, shall be
filled by the Board of Directors for the unexpired portion of the term.
If a resignation of an officer is effective at a later date as
contemplated by Section 4.04 hereof, the Board of Directors may fill the
pending vacancy before the effective date if the Board provides that the
successor may not take office until the effective date.
4.06. Chief Executive Officer. The Board of Directors shall
from time to time designate the Chairman of the Board, if any, or the
President of the corporation as the Chief Executive Officer of the
corporation. The President shall be the Chief Executive Officer whenever
the office of Chairman of the Board of the corporation is vacant. Subject
to the control of the Board of Directors, the Chief Executive Officer
shall in general supervise and control all of the business and affairs of
the corporation. He shall preside at all meetings of the shareholders and
of the Board of Directors. He shall have authority, subject to such rules
as may be prescribed by the Board of Directors, to appoint and remove such
agents and employees of the corporation as he shall deem necessary, to
prescribe their powers, duties and compensation, and to delegate authority
to them. He shall have authority to sign, execute and acknowledge, on
behalf of the corporation, all deeds, mortgages, securities, contracts,
leases, reports, and all other documents or other instruments necessary or
proper to be executed in the course of the corporation's regular business,
or which shall be authorized by resolution of the Board of Directors; and,
except as otherwise provided by law or the Board of Directors, he may
authorize any elected Vice President or other officer or agent of the
corporation to sign, execute and acknowledge such documents or instruments
in his place and stead. In general, he shall perform all duties incident
to the office of Chief Executive Officer of the corporation and such other
duties as may be prescribed by the Board of Directors from time to time.
4.07. Chairman of the Board. The Chairman of the Board, if
one be chosen by the Board of Directors, when present, and in the absence
of the Chief Executive Officer if the President is designated as the Chief
Executive Officer, shall preside at all meetings of the Board of Directors
and of the shareholders and shall perform all duties incident to the
office of Chairman of the Board of the corporation and such other duties
as may be prescribed by the Board of Directors from time to time.
4.08. President. The President shall be the principal
executive officer of the corporation and, subject to the direction of the
Board of Directors, shall in general supervise and control all of the
business and affairs of the corporation; provided, however, that should
the Board of Directors elect a Chairman of the Board, any or all of the
powers customarily incidental to the office of President may be assigned
by the Board of Directors to the Chairman of the Board. If the Chairman
of the Board is designated as the Chief Executive Officer, the President
shall be the chief operating officer of the corporation. Unless the Board
of Directors otherwise provides, in the absence of the Chairman of the
Board or in the event of his inability or refusal to act, or in the event
of a vacancy in the office of the Chairman of the Board, the President
shall perform the duties of the Chairman of the Board, and when so acting
shall have all the powers of and be subject to all the restrictions upon
the Chairman of the Board. The President shall, when present, preside at
all meetings of the shareholders and of the Board of Directors. He or she
shall have authority, subject to such rules as may be prescribed by the
Board of Directors, to appoint such agents and employees of the
corporation as he or she shall deem necessary, to prescribe their powers,
duties and compensation, and to delegate authority to them. Such agents
and employees shall hold office at the discretion of the President. He or
she shall have authority to sign, execute and acknowledge, on behalf of
the corporation, all deeds, mortgages, bonds, stock certificates,
contracts, leases, reports and all other documents or instruments
necessary or proper to be executed in the course of the corporation's
regular business, or which shall be authorized by resolution of the Board
of Directors; and, except as otherwise provided by law or the Board of
Directors, he or she may authorize any Vice President or other officer or
agent of the corporation to sign, execute and acknowledge such documents
or instruments in his or her place and stead. In general he or she shall
perform all duties incident to the office of President and such other
duties as may be prescribed by the Board of Directors from time to time.
4.09. The Vice Presidents. In the absence of the Chairman of
the Board, if any, and the President or in the event of their death,
inability or refusal to act, or in the event for any reason it shall be
impracticable for the Chairman of the Board and the President to act
personally, 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 the Chief Executive Officer, or in the absence of any
designation, then in the order of their election) shall perform the duties
of the Chairman of the Board and/or the President, and when so acting,
shall have all the powers of and be subject to all the restrictions upon
the Chairman of the Board and/or the President. Any Vice President may
sign, with the Secretary or Assistant Secretary, certificates for shares
of the corporation; and shall perform such other duties and have such
authority as from time to time may be delegated or assigned to him or her
by the Chief Executive Officer, the President or the Board of Directors.
The execution of any instrument of the corporation by any Vice President
shall be conclusive evidence, as to third parties, of his or her authority
to act in the stead of the Chairman of the Board and/or the President.
4.10. The Secretary. The Secretary shall: (a) keep minutes
of the meetings of the shareholders and of the Board of Directors (and of
committees thereof) in one or more books provided for that purpose
(including records of actions taken by the shareholders or the Board of
Directors (or committees thereof) without a meeting); (b) see that all
notices are duly given in accordance with the provisions of these bylaws
or as required by the Wisconsin Business Corporation Law; (c) be custodian
of the corporate records and of the seal of the corporation and see that
the seal of the corporation is affixed to all documents the execution of
which on behalf of the corporation under its seal is duly authorized; (d)
maintain a record of the shareholders of the corporation, in a form that
permits preparation of a list of the names and addresses of all
shareholders, by class or series of shares and showing the number and
class or series of shares held by each shareholder; (e) sign with the
President, or a Vice President, certificates for shares of the
corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of Secretary and have such other duties and
exercise such authority as from time to time may be delegated or assigned
by the Chief Executive Officer, the President or by the Board of
Directors.
4.11. The Treasurer. The Treasurer shall: (a) have charge
and custody of and be responsible for all funds and securities of the
corporation; (b) maintain appropriate accounting records; (c) receive and
give receipts for moneys due and payable to the corporation from any
source whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositaries as shall
be selected in accordance with the provisions of Section 5.04; and (d) in
general perform all of the duties incident to the office of Treasurer and
have such other duties and exercise such other authority as from time to
time may be delegated or assigned by the Chief Executive Officer or by the
Board of Directors. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his or her duties in such
sum and with such surety or sureties as the Board of Directors shall
determine.
4.12. Assistant Secretaries and Assistant Treasurers. There
shall be such number of Assistant Secretaries and Assistant Treasurers as
the Board of Directors or the Chief Executive Officer may from time to
time authorize. The Assistant Secretaries may sign with the President or
a Vice President certificates for shares of the corporation the issuance
of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Treasurers shall respectively, if required by
the Board of Directors, give bonds for the faithful discharge of their
duties in such sums and with such sureties as the Board of Directors shall
determine. The Assistant Secretaries and Assistant Treasurers, in
general, shall perform such duties and have such authority as shall from
time to time be delegated or assigned to them by the Secretary or the
Treasurer, respectively, or by the Chief Executive Officer, the President
or the Board of Directors.
4.13. Other Assistants and Acting Officers. The Board of
Directors and the Chief Executive Officer shall have the power to appoint,
or to authorize any duly appointed officer of the corporation to appoint,
any person to act as assistant to any officer, or as agent for the
corporation in his or her stead, or to perform the duties of such officer
whenever for any reason it is impracticable for such officer to act
personally, and such assistant or acting officer or other agent so
appointed by the Board of Directors or the Chief Executive Officer shall
have the power to perform all the duties of the office to which he or she
is so appointed to be an assistant, or as to which he or she is so
appointed to act, except as such power may be otherwise defined or
restricted by the Board of Directors or the appointing officer.
4.14. Salaries. The salaries of the principal officers shall
be fixed from time to time by the Board of Directors or by a duly
authorized committee thereof, and no officer shall be prevented from
receiving such salary by reason of the fact that he or she is also a
director of the corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS
AND DEPOSITS; SPECIAL CORPORATE ACTS
5.01. Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or
execute or deliver any instrument in the name of and on behalf of the
corporation, and such authorization may be general or confined to specific
instances. In the absence of other designation, all deeds, mortgages and
instruments of assignment or pledge made by the corporation shall be
executed in the name of the corporation by the Chief Executive Officer,
the President or one of the Vice Presidents and by the Secretary, an
Assistant Secretary, the Treasurer or an Assistant Treasurer; the
Secretary or an Assistant Secretary, when necessary or required, shall
affix the corporate seal, if any, thereto; and when so executed no other
party to such instrument or any third party shall be required to make any
inquiry into the authority of the signing officer or officers.
5.02. Loans. No indebtedness for borrowed money shall be
contracted on behalf of the corporation and no evidences of such
indebtedness shall be issued in its name unless authorized by or under the
authority of a resolution of the Board of Directors. Such authorization
may be general or confined to specific instances.
5.03. Checks, Drafts, etc. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued
in the name of the corporation, shall be signed by such officer or
officers, agent or agents of the corporation and in such manner as shall
from time to time be determined by or under the authority of a resolution
of the Board of Directors.
5.04. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositaries as may be
selected by or under the authority of a resolution of the Board of
Directors.
5.05. Voting of Securities Owned by this Corporation. Subject
always to the specific directions of the Board of Directors, (a) any
shares or other securities issued by any other corporation and owned or
controlled by this corporation may be voted at any meeting of security
holders of such other corporation by the President of this corporation if
he or she be present, or in his or her absence by any Vice President of
this corporation who may be present, and (b) whenever, in the judgment of
the President, or in his or her absence, of any Vice President, it is
desirable for this corporation to execute a proxy or written consent in
respect to any shares or other securities issued by any other corporation
and owned by this corporation, such proxy or consent shall be executed in
the name of this corporation by the President or one of the Vice
Presidents of this corporation, without necessity of any authorization by
the Board of Directors, affixation of corporate seal, if any, or
countersignature or attestation by another officer. Any person or persons
designated in the manner above stated as the proxy or proxies of this
corporation shall have full right, power and authority to vote the shares
or other securities issued by such other corporation and owned by this
corporation the same as such shares or other securities might be voted by
this corporation.
ARTICLE VI. CERTIFICATES FOR SHARES; TRANSFER OF SHARES
6.01. Certificates for Shares. Certificates representing
shares of the corporation shall be in such form, consistent with the
Wisconsin Business Corporation Law, as shall be determined by the Board of
Directors. Such certificates shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary. All
certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the corporation.
All certificates surrendered to the corporation for transfer shall be
cancelled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
cancelled, except as provided in Section 6.06 hereof.
6.02. Facsimile Signatures and Seal. The seal of the
corporation, if any, on any certificates for shares may be a facsimile.
The signature of the President or Vice President and the Secretary or
Assistant Secretary upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent, or a
registrar, other than the corporation itself or an employee of the
corporation.
6.03. Signature by Former Officers. The validity of a share
certificate is not affected if a person who signed the certificate (either
manually or in facsimile) no longer holds office when the certificate is
issued.
6.04. Transfer of Shares. Prior to due presentment of a
certificate for shares for registration of transfer the corporation may
treat the registered owner of such shares as the person exclusively
entitled to vote, to receive notifications and otherwise to have and
exercise all the rights and power of an owner. Where a certificate for
shares is presented to the corporation with a request to register for
transfer, the corporation shall not be liable to the owner or any other
person suffering loss as a result of such registration of transfer if (a)
there were on or with the certificate the necessary endorsements, and (b)
the corporation had no duty to inquire into adverse claims or has
discharged any such duty. The corporation may require reasonable
assurance that such endorsements are genuine and effective and compliance
with such other regulations as may be prescribed by or under the authority
of the Board of Directors.
6.05. Restrictions on Transfer. The face or reverse side of
each certificate representing shares shall bear a conspicuous notation of
any restriction imposed by the corporation upon the transfer of such
shares.
6.06. Lost, Destroyed or Stolen Certificates. Where the owner
claims that certificates for shares have been lost, destroyed or
wrongfully taken, a new certificate shall be issued in place thereof if
the owner (a) so requests before the corporation has notice that such
shares have been acquired by a bona fide purchaser, (b) files with the
corporation a sufficient indemnity bond if required by the Board of
Directors or any principal officer, and (c) satisfies such other
reasonable requirements as may be prescribed by or under the authority of
the Board of Directors.
6.07. Consideration for Shares. The Board of Directors may
authorize shares to be issued for consideration consisting of any tangible
or intangible property or benefit to the corporation, including cash,
promissory notes, services performed, contracts for services to be
performed or other securities of the corporation. Before the corporation
issues shares, the Board of Directors shall determine that the
consideration received or to be received for the shares to be issued is
adequate. The determination of the Board of Directors is conclusive
insofar as the adequacy of consideration for the issuance of shares
relates to whether the shares are validly issued, fully paid and
nonassessable. The corporation may place in escrow shares issued in whole
or in part for a contract for future services or benefits, a promissory
note, or other property to be issued in the future, or make other
arrangements to restrict the transfer of the shares, and may credit
distributions in respect of the shares against their purchase price, until
the services are performed, the benefits or property are received or the
promissory note is paid. If the services are not performed, the benefits
or property are not received or the promissory note is not paid, the
corporation may cancel, in whole or in part, the shares escrowed or
restricted and the distributions credited.
6.08. Stock Regulations. The Board of Directors shall have
the power and authority to make all such further rules and regulations not
inconsistent with law as it may deem expedient concerning the issue,
transfer and registration of shares of the corporation.
ARTICLE VII. SEAL
7.01. The Board of Directors may provide for a corporate seal
for the corporation.
ARTICLE VIII. INDEMNIFICATION
8.01. Certain Definitions. All capitalized terms used in this
Article VIII and not otherwise hereinafter defined in this Section 8.01
shall have the meaning set forth in Section 180.0850 of the Statute. The
following capitalized terms (including any plural forms thereof) used in
this Article VIII shall be defined as follows:
(a) "Affiliate" shall include, without limitation, any
corporation, partnership, joint venture, employee benefit plan,
trust or other enterprise that directly or indirectly through
one or more intermediaries, controls or is controlled by, or is
under common control with, the Corporation.
(b) "Authority" shall mean the entity selected by the
Director or Officer to determine his or her right to
indemnification pursuant to Section 8.04.
(c) "Board" shall mean the entire then elected and serving
Board of Directors of the Corporation, including all members
thereof who are Parties to the subject Proceeding or any related
Proceeding.
(d) "Breach of Duty" shall mean the Director or Officer
breached or failed to perform his or her duties to the
Corporation and his or her breach of or failure to perform those
duties is determined, in accordance with Section 8.04, to
constitute misconduct under Section 180.0851(2)(a) l, 2, 3 or 4
of the Statute.
(e) "Corporation," as used herein and as defined in the
Statute and incorporated by reference into the definitions of
certain other capitalized terms used herein, shall mean this
Corporation, including, without limitation, any successor
corporation or entity to this Corporation by way of merger,
consolidation or acquisition of all or substantially all of the
capital stock or assets of this Corporation.
(f) "Director or Officer" shall have the meaning set forth
in the Statute; provided, that, for purposes of this Article
VIII, it shall be conclusively presumed that any Director or
Officer serving as a director, officer, partner, trustee, member
of any governing or decision-making committee, employee or agent
of an Affiliate shall be so serving at the request of the
Corporation.
(g) "Disinterested Quorum" shall mean a quorum of the
Board who are not Parties to the subject Proceeding or any
related Proceeding.
(h) "Party" shall have the meaning set forth in the
Statute; provided, that, for purposes of this Article VIII, the
term "Party" shall also include any Director or Officer or
employee of the Corporation who is or was a witness in a
Proceeding at a time when he or she has not otherwise been
formally named a Party thereto.
(i) "Proceeding" shall have the meaning set forth in the
Statute; provided, that, in accordance with Section 180.0859 of
the Statute and for purposes of this Article VIII, the term
"Proceeding" shall also include all Proceedings (i) brought
under (in whole or in part) the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, their
respective state counterparts, and/or any rule or regulation
promulgated under any of the foregoing; (ii) brought before an
Authority or otherwise to enforce rights hereunder; (iii) any
appeal from a Proceeding; and (iv) any Proceeding in which the
Director or Officer is a plaintiff or petitioner because he or
she is a Director or Officer; provided, however, that any such
Proceeding under this subsection (iv) must be authorized by a
majority vote of a Disinterested Quorum.
(j) "Statute" shall mean Sections 180.0850 through
180.0859, inclusive, of the Wisconsin Business Corporation Law,
Chapter 180 of the Wisconsin Statutes, as the same shall then be
in effect, including any amendments thereto, but, in the case of
any such amendment, only to the extent such amendment permits or
requires the Corporation to provide broader indemnification
rights than the Statute permitted or required the Corporation to
provide prior to such amendment.
8.02. Mandatory Indemnification of Directors and Officers. To
the fullest extent permitted or required by the Statute, the Corporation
shall indemnify a Director or Officer against all Liabilities incurred by
or on behalf of such Director or Officer in connection with a Proceeding
in which the Director or Officer is a Party because he or she is a
Director or Officer.
8.03. Procedural Requirements.
(a) A Director or Officer who seeks indemnification under
Section 8.02 shall make a written request therefor to the Corporation.
Subject to Section 8.03(b), within sixty days of the Corporation's receipt
of such request, the Corporation shall pay or reimburse the Director or
Officer for the entire amount of Liabilities incurred by the Director or
Officer in connection with the subject Proceeding (net of any Expenses
previously advanced pursuant to Section 8.05).
(b) No indemnification shall be required to be paid by the
Corporation pursuant to Section 8.02 if, within such sixty-day period, (i)
a Disinterested Quorum, by a majority vote thereof, determines that the
Director or Officer requesting indemnification engaged in misconduct
constituting a Breach of Duty or (ii) a Disinterested Quorum cannot be
obtained.
(c) In either case of nonpayment pursuant to Section 8.03(b),
the Board shall immediately authorize by resolution that an Authority, as
provided in Section 8.04, determine whether the Director's or Officer's
conduct constituted a Breach of Duty and, therefore, whether
indemnification should be denied hereunder.
(d) (i) If the Board does not authorize an Authority to
determine the Director's or Officer's right to indemnification hereunder
within such sixty-day period and/or (ii) if indemnification of the
requested amount of Liabilities is paid by the Corporation, then it shall
be conclusively presumed for all purposes that a Disinterested Quorum has
affirmatively determined that the Director or Officer did not engage in
misconduct constituting a Breach of Duty and, in the case of subsection
(i) above (but not subsection (ii)), indemnification by the Corporation of
the requested amount of Liabilities shall be paid to the Director or
Officer immediately.
8.04. Determination of Indemnification.
(a) If the Board authorizes an Authority to determine a
Director's or Officer's right to indemnification pursuant to Section 8.03,
then the Director or Officer requesting indemnification shall have the
absolute discretionary authority to select one of the following as such
Authority:
(i) An independent legal counsel; provided, that such
counsel shall be mutually selected by such Director or Officer
and by a majority vote of a Disinterested Quorum or, if a
Disinterested Quorum cannot be obtained, then by a majority vote
of the Board;
(ii) A panel of three arbitrators selected from the panels
of arbitrators of the American Arbitration Association in
Wisconsin; provided, that (A) one arbitrator shall be selected
by such Director or Officer, the second arbitrator shall be
selected by a majority vote of a Disinterested Quorum or, if a
Disinterested Quorum cannot be obtained, then by a majority vote
of the Board, and the third arbitrator shall be selected by the
two previously selected arbitrators, and (B) in all other
respects (other than this Article VIII), such panel shall be
governed by the American Arbitration Association's then existing
Commercial Arbitration Rules; or
(iii) A court pursuant to and in accordance with Section
180.0854 of the Statute.
(b) In any such determination by the selected Authority there
shall exist a rebuttable presumption that the Director's or Officer's
conduct did not constitute a Breach of Duty and that indemnification
against the requested amount of Liabilities is required. The burden of
rebutting such a presumption by clear and convincing evidence shall be on
the Corporation or such other party asserting that such indemnification
should not be allowed.
(c) The Authority shall make its determination within sixty
days of being selected and shall submit a written opinion of its
conclusion simultaneously to both the Corporation and the Director or
Officer.
(d) If the Authority determines that indemnification is
required hereunder, the Corporation shall pay the entire requested amount
of Liabilities (net of any Expenses previously advanced pursuant to
Section 8.05), including interest thereon at a reasonable rate, as
determined by the Authority, within ten days of receipt of the Authority's
opinion; provided, that, if it is determined by the Authority that a
Director or Officer is entitled to indemnification against Liabilities'
incurred in connection with some claims, issues or matters, but not as to
other claims, issues or matters, involved in the subject Proceeding, the
Corporation shall be required to pay (as set forth above) only the amount
of such requested Liabilities as the Authority shall deem appropriate in
light of all of the circumstances of such Proceeding.
(e) The determination by the Authority that indemnification is
required hereunder shall be binding upon the Corporation regardless of any
prior determination that the Director or Officer engaged in a Breach of
Duty.
(f) All Expenses incurred in the determination process under
this Section 8.04 by either the Corporation or the Director or Officer,
including, without limitation, all Expenses of the selected Authority,
shall be paid by the Corporation.
8.05. Mandatory Allowance of Expenses.
(a) The Corporation shall pay or reimburse from time to time or
at any time, within ten days after the receipt of the Director's or
Officer's written request therefor, the reasonable Expenses of the
Director or Officer as such Expenses are incurred; provided, the following
conditions are satisfied:
(i) The Director or Officer furnishes to the Corporation
an executed written certificate affirming his or her good faith
belief that he or she has not engaged in misconduct which
constitutes a Breach of Duty; and
(ii) The Director or Officer furnishes to the Corporation
an unsecured executed written agreement to repay any advances
made under this Section 8.05 if it is ultimately determined by
an Authority that he or she is not entitled to be indemnified by
the Corporation for such Expenses pursuant to Section 8.04.
(b) If the Director or Officer must repay any previously
advanced Expenses pursuant to this Section 8.05, such Director or Officer
shall not be required to pay interest on such amounts.
8.06. Indemnification and Allowance of Expenses of Certain
Others.
(a) The Board may, in its sole and absolute discretion as it
deems appropriate, pursuant to a majority vote thereof, indemnify a
director or officer of an Affiliate (who is not otherwise serving as a
Director or Officer) against all Liabilities, and shall advance the
reasonable Expenses, incurred by such director or officer in a Proceeding
to the same extent hereunder as if such director or officer incurred such
Liabilities because he or she was a Director or Officer, if such director
or officer is a Party thereto because he or she is or was a director or
officer of the Affiliate.
(b) The Corporation shall indemnify an employee who is not a
Director or Officer, to the extent he or she has been successful on the
merits or otherwise in defense of a Proceeding, for all reasonable
Expenses incurred in the Proceeding if the employee was a Party because he
or she was an employee of the Corporation.
(c) The Board may, in its sole and absolute discretion as it
deems appropriate, pursuant to a majority vote thereof, indemnify (to the
extent not otherwise provided in Section 8.06(b) hereof) against
Liabilities incurred by, and/or provide for the allowance of reasonable
Expenses of, an employee or authorized agent of the Corporation acting
within the scope of his or her duties as such and who is not otherwise a
Director or Officer.
8.07. Insurance. The Corporation may purchase and maintain
insurance on behalf of a Director or Officer or any individual who is or
was an employee or authorized agent of the Corporation against any
Liability asserted against or incurred by such individual in his or her
capacity as such or arising from his or her status as such, regardless of
whether the Corporation is required or permitted to indemnify against any
such Liability under this Article VIII.
8.08. Notice to the Corporation. A Director, Officer or
employee shall promptly notify the Corporation in writing when he or she
has actual knowledge of a Proceeding which may result in a claim of
indemnification against Liabilities or allowance of Expenses hereunder,
but the failure to do so shall not relieve the Corporation of any
liability to the Director, Officer or employee hereunder unless the
Corporation shall have been irreparably prejudiced by such failure (as
determined, in the case of Directors or Officers only, by an Authority
selected pursuant to Section 8.04(a)).
8.09. Severability. If any provision of this Article VIII
shall be deemed invalid or inoperative, or if a court of competent
jurisdiction determines that any of the provisions of this Article VIII
contravene public policy, this Article VIII shall be construed so that the
remaining provisions shall not be affected, but shall remain in full force
and effect, and any such provisions which are invalid or inoperative or
which contravene public policy shall be deemed, without further action or
deed by or on behalf of the Corporation, to be modified, amended and/or
limited, but only to the extent necessary to render the same valid and
enforceable; it being understood that it is the Corporation's intention to
provide the Directors and Officers with the broadest possible protection
against personal liability allowable under the Statute.
8.10. Nonexclusivity of Article VIII. The rights of a
Director, Officer or employee (or any other person) granted under this
Article VIII shall not be deemed exclusive of any other rights to
indemnification against Liabilities or allowance of Expenses which the
Director, Officer or employee (or such other person) may be entitled to
under any written agreement, Board resolution, vote of shareholders of the
Corporation or otherwise, including, without limitation, under the
Statute. Nothing contained in this Article VIII shall be deemed to limit
the Corporation's obligations to indemnify against Liabilities or allow
Expenses to a Director, Officer or employee under the Statute.
8.11. Contractual Nature of Article VIII; Repeal or Limitation
of Rights. This Article VIII shall be deemed to be a contract between the
Corporation and each Director, Officer and employee of the Corporation and
any repeal or other limitation of this Article VIII or any repeal or
limitation of the Statute or any other applicable law shall not limit any
rights of indemnification against Liabilities or allowance of Expenses
then existing or arising out of events, acts or omissions occurring prior
to such repeal or limitation, including, without limitation, the right to
indemnification against Liabilities or allowance of Expenses for
Proceedings commenced after such repeal or limitation to enforce this
Article VIII with regard to acts, omissions or events arising prior to
such repeal or limitation.
ARTICLE IX. AMENDMENTS
9.01. By Shareholders. These bylaws may be amended or
repealed and new bylaws may be adopted by the shareholders at any annual
or special meeting of the shareholders at which a quorum is in attendance.
9.02. By Directors. Except as otherwise provided by the
Wisconsin Business Corporation Law or the articles of incorporation, these
bylaws may also be amended or repealed and new bylaws may be adopted by
the Board of Directors by affirmative vote of a majority of the number of
directors present at any meeting at which a quorum is in attendance;
provided, however, that the shareholders in adopting, amending or
repealing a particular bylaw may provide therein that the Board of
Directors may not amend, repeal or readopt that bylaw.
9.03. Implied Amendments. Any action taken or authorized by
the shareholders or by the Board of Directors which would be inconsistent
with the bylaws then in effect but which is taken or authorized by
affirmative vote of not less than the number of shares or the number of
directors required to amend the bylaws so that the bylaws would be
consistent with such action shall be given the same effect as though the
bylaws had been temporarily amended or suspended so far, but only so far,
as is necessary to permit the specific action so taken or authorized.
Exhibit 10.11
STANDARD FORM
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
DEVELOPMENT AGREEMENT
MARCUS RESTAURANTS, INC.
APRIL 8, 1994
A PORTION OF THE CHICAGO, ILLINOIS A.D.I.
<PAGE>
TABLE OF CONTENTS
RECITALS . . . . . . . . . . . . . . . . . . . . . . . 1
1. GRANT OF DEVELOPMENT RIGHTS . . . . . . . . . . 2
2. INITIAL DEVELOPMENT SCHEDULE . . . . . . . . . . 2
3. SUBSEQUENT DEVELOPMENT SCHEDULE;
DEVELOPMENT OBLIGATIONS GENERALLY . . . . . . . 4
4. FRANCHISE FEE AND ROYALTY RATE . . . . . . . . . 5
5. SITE APPROVALS: PLANS AND SPECIFICATIONS . . . 7
6. FEES AND FRANCHISE AGREEMENTS . . . . . . . . . 8
7. DEVELOPER ORGANIZATION, AUTHORITY,
FINANCIAL CONDITION AND SHAREHOLDERS . . . . . . 8
8. TRANSFER . . . . . . . . . . . . . . . . . . . . 10
9. TERMINATION . . . . . . . . . . . . . . . . . . 13
10. PREREQUISITES TO OBTAINING FRANCHISES
FOR INDIVIDUAL RESTAURANT UNITS . . . . . . . . 15
11. RESTRICTIONS . . . . . . . . . . . . . . . . . . 16
12. DEVELOPMENT PROCEDURES . . . . . . . . . . . . . 18
13. NO WAIVER OF DEFAULT . . . . . . . . . . . . . . 19
14. FORCE MAJEURE . . . . . . . . . . . . . . . . . 19
15. CONSTRUCTION, SEVERABILITY, GOVERNING
LAW AND JURISDICTION . . . . . . . . . . . . . . 20
16. MISCELLANEOUS . . . . . . . . . . . . . . . . . 21
SCHEDULE 1: RESTAURANT LOCATIONS FOR WHICH FRANCHISE
AGREEMENTS HAVE BEEN PREVIOUSLY ISSUED
APPENDIX A: TERRITORY
APPENDIX B: FORM OF FRANCHISE AGREEMENT
APPENDIX C: STATEMENT OF OWNERSHIP INTERESTS
APPENDIX D: REVIEW AND CONSENT WITH RESPECT TO TRANSFERS
APPENDIX E: CONFIDENTIALITY AGREEMENT AND COVENANT NOT
TO COMPETE
APPENDIX F: CONFIDENTIALITY AGREEMENT
APPENDIX G: EXISTING COMPETITIVE RESTAURANTS
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
DEVELOPMENT AGREEMENT
This Agreement is made this ________ day of _____________________,
19_____, by and between APPLEBEE'S INTERNATIONAL, INC., a Delaware
corporation ("FRANCHISOR"), MARCUS RESTAURANTS, INC., a Wisconsin
corporation ("DEVELOPER") and N/A
(collectively, the "PRINCIPAL SHAREHOLDERS" and, individually, a
"PRINCIPAL SHAREHOLDER" of Developer).
WITNESSETH:
RECITALS
A. Franchisor has acquired rights to develop and operate a unique
system of restaurants which specialize in the sale of high quality,
moderately priced food and alcoholic beverages in an attractive, casual
setting, which include proprietary rights in certain valuable trade names,
service marks and trademarks, including the service mark Applebee's
Neighborhood Grill & Bar and variations of such mark, designs, decor and
color schemes for restaurant premises, signs, equipment, procedures and
formulae for preparing food and beverage products, specifications for
certain food and beverage products, inventory methods, operating methods,
financial control concepts, a training facility and teaching
techniques (the "System").
B. Franchisor has determined to establish, through its own
development and operation, and through the granting of franchises, a chain
of Applebee's Neighborhood Grill & Bar restaurants which are distinctive;
which are similar in appearance, design and decor; and which are uniform
in operation and product consistency.
C. The value of Franchisor's trade names, service marks and
trademarks is based upon: (1) the maintenance of uniform high quality
standards in connection with the preparation and sale of
Franchisor-approved food and beverage products, (2) the uniform high
standards of appearance of the individual restaurant units in the System,
(3) the use of distinctive trademarks, service marks, building designs and
advertising signs representing a uniformly high quality of product and
services, and (4) the assumption by Franchisor and its franchisees of the
obligation to maintain and enhance the goodwill and public acceptance of
the System (and of Franchisor's trade names, service marks and trademarks)
by strict adherence to the high standards required by Franchisor.
D. Developer desires to obtain the exclusive right to develop
restaurant units franchised by Franchisor within the geographic area
specified in Appendix A hereto ("Territory"), for the period specified in
Subsection 1.1, pursuant to the terms, conditions and provisions which are
set forth in this Agreement.
NOW, THEREFORE, in consideration of Franchisor granting to Developer the
exclusive right to develop restaurant units franchised by Franchisor which
employ the System ("Restaurants") in the Territory for such period, and in
consideration of the mutual obligations which are provided for herein, it
is hereby agreed as follows:
1. GRANT OF DEVELOPMENT RIGHTS
1.1 Franchisor grants Developer the exclusive right to develop
Restaurants only in the Territory for a period commencing on the date
hereof and expiring on November 27, 2009, unless sooner terminated as
hereinafter provided. Developer has no rights under this Agreement to
develop Restaurants outside of the Territory.
1.2 During the term of this Agreement, Franchisor shall not
operate a restaurant utilizing the System or license any other person to
operate a restaurant utilizing the System in the Territory.
1.3 After this Agreement expires or is terminated, Franchisor
shall have the complete and unrestricted right to operate or license other
persons to operate a restaurant utilizing the System in the Territory.
2. INITIAL DEVELOPMENT SCHEDULE
2.1 Developer shall develop a total of ten (10)* Restaurants
franchised by Franchisor in the Territory during the period commencing on
the date hereof and expiring on December 31, 1997, in accordance with the
following development schedule:
*This figure does not include eight (8) Restaurants located in the
Territory for which franchise agreements have been previously issued, the
locations of said Restaurants being more specifically described on
Schedule 1, attached hereto and incorporated herein by reference.
(a) During the first Initial Development Period under this
Agreement, Developer shall develop at least two (2) Restaurants within
the Territory, each of which shall be open for operation and doing
business on December 31, 1994 (the end of the first Initial
Development Period under this Agreement).
(b) During the second Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within
the Territory necessary to result in the existence of three (3) such
Restaurants developed by Developer which are open for operation and
doing business on June 30, 1995 (the end of the second Initial
Development Period under this Agreement).
(c) During the third Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within
the Territory necessary to result in the existence of four (4) such
Restaurants developed by Developer which are open for operation and
doing business on September 30, 1995 (the end of the third Initial
Development Period under this Agreement).
(d) During the fourth Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within
the Territory necessary to result in the existence of five (5) such
Restaurants developed by Developer which are open for operation and
doing business on December 31, 1995 (the end of the fourth Initial
Development Period under this Agreement).
(e) During the fifth Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within
the Territory necessary to result in the existence of six (6) such
Restaurants developed by Developer which are open for operation and
doing business on June 30, 1996 (the end of the fifth Initial
Development Period under this Agreement).
(f) During the sixth Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within
the Territory necessary to result in the existence of seven (7) such
Restaurants developed by Developer which are open for operation and
doing business on September 30, 1996 (the end of the sixth Initial
Development Period under this Agreement).
(g) During the seventh Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within
the Territory necessary to result in the existence of eight (8) such
Restaurants developed by Developer which are open for operation and
doing business on December 31, 1996 (the end of the seventh Initial
Development Period under this Agreement).
(h) During the eighth Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within
the Territory necessary to result in the existence of nine (9) such
Restaurants developed by Developer which are open for operation and
doing business on June 30, 1997 (the end of the eighth Initial
Development Period under this Agreement).
(i) During the ninth Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within
the Territory necessary to result in the existence of ten (10) such
Restaurants developed by Developer which are open for operation and
doing business on December 31, 1997 (the end of the ninth Initial
Development Period under this Agreement).
Each of the periods specified in Subparagraphs (a) through (i) hereof is
sometimes referred to hereinafter as an "Initial Development Period."
2.2 During any Initial Development Period, subject to the
provisions of this Agreement, Developer is free to develop more than the
total minimum number of Restaurants which Developer is required to develop
during that Initial Development Period. Any such Restaurants developed,
open for operation and doing business during an Initial Development Period
in excess of the minimum number required to be developed during that
Initial Development Period shall be applied to satisfy Developer's
development obligation during the next succeeding Initial Development
Period or next succeeding Subsequent Development Period (as defined in
Section 3 hereof), if any, as the case may be. Notwithstanding the above,
Developer shall not develop more than the total number Restaurants
approved by Franchisor for development under this Agreement.
2.3 Strict compliance with the development schedule specified in
Subsection 2.1 hereof is of the essence of this Agreement. If Developer
fails to fulfill its specified development obligation with respect to any
of the Initial Development Periods specified in Subsection 2.1 hereof,
this Agreement shall terminate sixty (60) days after the end of the
Initial Development Period in question, unless by the end of such
sixty (60) day period Developer has fulfilled the development obligation
relating to such Initial Development Period.
3. SUBSEQUENT DEVELOPMENT SCHEDULE; DEVELOPMENT
OBLIGATIONS GENERALLY
3.1 During the period commencing on January 1, 1998 and expiring
on November 27, 2009, Developer shall develop and open for business in the
Territory, from time to time in accordance with the development schedule
established under Subsection 3.2, that number of additional Restaurants as
is required to achieve at the end of such period a total number of
Restaurants open for business within the Territory which, after including
the Restaurants developed during the Initial Development Periods, would be
equal to (a) one (1) Restaurant for every twenty-five thousand (25,000)
households within the Territory having an income of twenty-five thousand
dollars ($25,000) or more, or (b) one (1) Restaurant for every
seventy-five thousand (75,000) individuals within the Territory who are
between the ages of twenty (20) and forty-nine (49) years old, whichever
computation results in a lesser number of Restaurants.
3.2 (a) Each consecutive twelve (12) month period, commencing
with the period beginning on January 1, 1998, is hereafter referred to as
a "Subsequent Development Period." Each period consisting of two (2)
consecutive Subsequent Development Periods, commencing with the period
beginning on January 1, 1998, is hereinafter referred to as a "Calculation
Period."
(b) Franchisor and Developer shall agree in writing on or
before the commencement of each Calculation Period on the number of
Restaurants which Developer must develop, each of which shall be open for
operation and doing business, during each of the two (2) Subsequent
Development Periods included in such Calculation Period; provided that
such agreement is subject to the following minimum and maximum development
requirements: (i) Minimum development requirements: Developer hereby
agrees to develop during each Subsequent Development Period at least that
number of Restaurants, each of which shall be open for operation and doing
business, which will be equal to one-third (1/3) of the total number of
Restaurants (rounded to the nearest whole number) which were required to
be developed by Developer during all prior Initial Development and
Calculation Periods; and (ii) Maximum development requirements:
Notwithstanding the minimum development requirements, Developer shall not
be required to develop during any Subsequent Development Period more than
that number of Restaurants which, when added to the number of Restaurants
which were required to be developed by Developer during all prior Initial
Development and Calculation Periods, would exceed the number of
Restaurants prescribed by the formula set forth in Subsection 3.1, if such
formula had been applied to determine the total number of Restaurants
required to service the Territory immediately prior to the Calculation
Period in question. No later than sixty (60) days prior to the
commencement of each Calculation Period, Franchisor shall provide
Developer with census data necessary for Developer to ascertain, for
purposes of the maximum development requirements, the number of
Restaurants which would be required in the Territory by application of the
formula. Franchisor shall use census figures provided by National
Decision Systems, or such other generally recognized demographic service
as Developer and Franchisor shall reasonably designate.
3.3 Strict compliance with the development schedule established in
accordance with Subsection 3.2 hereof is of the essence of this Agreement.
If Developer shall fail to fulfill its specified development obligation
with respect to any Subsequent Development Period, this Agreement shall
automatically terminate sixty (60) days after the end of the Subsequent
Development Period in question, unless by the end of such sixty (60) day
period Developer has fulfilled the development obligation relating to such
Subsequent Development Period.
3.4 If, during the term of this Agreement, (a) Developer transfers
or disposes of any Restaurant developed hereunder in accordance with the
provisions hereof, or for any other reason ceases to operate any
Restaurant developed hereunder, and (b) after such transfer or other
cessation of operation the premises no longer are utilized for the
operation of a Restaurant, Developer's development obligation in the
Initial or Subsequent Development Period in which such transfer or other
cessation of operations occurred shall increase, subject to the general
limitations on Developer's development obligations set forth in Section 2
and Section 3, by the number of Restaurants which Developer so
transferred, disposed of or which otherwise ceased to operate.
3.5 Franchisor represents that it is the sole owner of the service
mark Applebee's Neighborhood Grill & Bar. If Franchisor determines that a
third person has rights under the law of any state with respect to such
mark which precludes Developer from fulfilling any portion of its
development obligations pursuant to this Agreement, Franchisor and
Developer shall negotiate in good faith for a revision of those
development obligations, a redefinition of the Territory, or such other
modifications of this Agreement as may be reasonable in the circumstances.
4. FRANCHISE FEE AND ROYALTY RATE
4.1 Developer shall pay Franchisor a franchise fee of $35,000 with
respect to each Restaurant which is developed pursuant to this Agreement
during the Initial Development Periods. Thereafter, Developer shall pay
Franchisor a franchise fee in an amount which is equal to the amount of
the franchise fee then in effect at the time of the issuance of the
franchise agreement for each additional restaurant to be opened during any
Subsequent Development Period. The amount of the franchise fee shall be
set forth in the franchise offering circular received by the Developer
from Franchisor immediately preceding the issuance of such franchise
agreement. Simultaneously with the execution of this Agreement, Developer
shall pay to Franchisor, by certified check, the amount of $35,000
("Franchise Fee Deposit"). Said Franchise Fee Deposit shall be equal to
the greater of (a) the franchise fee for one of the Restaurants to be
developed during the Initial Development Periods, or (b) ten percent (10%)
of the entire franchise fees covering the ten (10) Restaurants to be
developed during the first nine (9) Initial Development Periods pursuant
to this Agreement (as reduced by a credit of $6,000 based on Developer's
prior payment, if so paid, of a non-refundable $6,000 application fee).
The remaining balance of the franchise fees for each of the Restaurants to
be developed during the nine (9) Initial Development Periods shall be paid
by certified check as follows: one-half (1/2) of the balance shall be
paid upon signing a franchise agreement for that Restaurant and the
remaining balance shall be paid fourteen (14) days prior to the scheduled
opening of the Restaurant. The Franchise Fee Deposit shall be
proportionately allocated to the franchise fee due with respect to each
Restaurant to which it applies. The franchise fee with respect to each
Restaurant to be developed during a Subsequent Development Period or with
respect to any additional Restaurants developed during the Initial
Development Periods shall be paid by certified check in the same manner.
4.2 Except as provided in this Subsection 4.2 and in
Subsection 19.1 of the form of franchise agreement which is attached
hereto as Appendix B, Developer shall have no right to recover from
Franchisor, directly or indirectly, any of the franchise fees which are
prepaid pursuant to Subsection 4.1 hereof. If Developer's failure to
develop the total number of Restaurants specified in Subsection 2.1 of
this Agreement is the result of the assertion of rights by a third party
as described in Subsection 3.5 hereof, those prepaid franchise fees which
relate to the Restaurants which cannot be so developed shall be refunded
to Developer in cash.
4.3 As partial consideration for the rights granted to Developer
pursuant to the franchise agreements covering the Restaurants which
Developer develops hereunder, Developer (as franchisee under each such
franchise agreement) shall pay Franchisor a monthly royalty fee as
determined by Franchisor, not to exceed five percent (5%) of each calendar
month's gross sales (as that term is defined in the form of franchise
agreement which is attached hereto as Appendix B).
4.4 Pursuant to its obligations hereunder and under the applicable
franchise agreements, Franchisor will make various expenditures in
connection with the development of prospective Restaurant sites by
Developer, including expenditures for travel, lodging, meals, obtaining of
information about prospective sites, demographic information, traffic
counts, and inquiries into local laws and ordinances. Developer shall
promptly notify Franchisor of a decision to cease development of a
prospective Restaurant site. In the event that Developer fails to open a
restaurant at any such site, in lieu of the payment of the franchise fee
therefor, Franchisor in its sole discretion may require Developer to
reimburse Franchisor for Franchisor's expenditures with respect to that
site. In such event, Franchisor shall provide Developer with an itemized
list of Franchisor's expenditures with respect to that site within
thirty (30) business days after Franchisor receives notice that Developer
no longer intends to develop a Restaurant at that site, and Developer
shall reimburse Franchisor for such costs within thirty (30) days after
receiving such list.
5. SITE APPROVALS: PLANS AND SPECIFICATIONS
5.1 Developer assumes all cost, liability, expense and
responsibility for locating, obtaining, financing and developing sites for
Restaurants, and for constructing and equipping Restaurants at such sites.
To assist Developer in the site selection process, Franchisor will provide
Developer with certain demographic information regarding the site, will
conduct an on-site inspection and will review any lease or contract under
negotiation for the prospective site, such services to be provided to
Developer at no additional cost. The development of a Restaurant at any
site must be approved by Franchisor in accordance with its then-existing
site approval procedure. In connection with a request for approval of a
proposed site for a Restaurant, Franchisee shall provide a related
contract of sale or lease agreement and such other information and
material as the Franchisor may reasonably require. Franchisor's approval
of a prospective Restaurant site shall not be unreasonably withheld.
Franchisor shall notify Developer whether it approves a proposed site and
the related contract of sale or lease agreement within thirty (30)
business days of receiving Developer's request for approval. Failure of
Franchisor to so notify Developer within such thirty (30) business day
period shall be deemed to be an approval of such site and the related
contract of sale or lease agreement. Developer acknowledges that
Franchisor's approval of a prospective site for a Restaurant does not
constitute a representation, promise or guarantee by Franchisor that a
Restaurant operated at that site will be profitable or otherwise
successful. Developer shall not make any binding commitment to a
prospective vendor or lessor of real estate with respect to a site for a
Restaurant unless Franchisor has approved that site in accordance with
Franchisor's then-existing site approval procedure. After Franchisor has
approved a site for a Restaurant, Franchisee shall provide Franchisor with
a copy of the executed contract of sale or lease, as applicable, relating
to the site within a reasonable period of time.
5.2 For each Restaurant which Developer develops pursuant to this
Agreement, Franchisor will make available to Developer Franchisor's
specifications for a typical Restaurant. Developer will obtain
architectural and engineering services independently and at its own
expense. Franchisor shall have the right to review all such architectural
and/or engineering plans which Developer obtains and to prohibit the
implementation of any plan, or part thereof, which Franchisor, in its sole
and absolute discretion, believes is not consistent with the best
interests of the System. In the event that Franchisor desires to prohibit
the implementation of any such plan, or part thereof, Franchisor shall so
notify Developer within thirty (30) business days of receiving such
architectural and/or engineering plans for review. Failure of Franchisor
to so notify Developer within such thirty (30) business day period shall
be deemed to be an approval of such plans. In the event Franchisor does
object to any such plan, Franchisor shall provide Developer with a
reasonable detailed list of changes necessary to make such plans
acceptable to Franchisor. Franchisor shall, upon resubmission of such
plans, with such changes as Developer has prepared, notify Developer
within fifteen (15) business days of receiving such plans whether they are
acceptable. Failure to so notify Developer within such fifteen (15)
business day period shall be deemed to be an approval of such amended
plans.
5.3 If Developer acquires a leasehold interest in a site, that
leasehold interest shall be for a term which is at least as long as the
term of the form of franchise agreement which is attached hereto as
Appendix B, and the lease shall provide that if the applicable franchise
agreement is terminated prior to the expiration of that term for whatever
reason, Developer may assign the lease to Franchisor without the lessor
having any right to impose conditions on such assignment or to obtain any
payment in connection therewith.
6. FEES AND FRANCHISE AGREEMENTS
Not later than ninety (90) days prior to the scheduled opening of any
Restaurant which has been developed pursuant to this Agreement, Developer
shall deliver to Franchisor an executed franchise agreement substantially
in the form which is attached hereto as Appendix B, provided however, that
the franchise agreement which Developer executes shall require the payment
of a franchise fee in the amount described in Subsection 4.1, royalty fees
as described in Subsection 4.3, and advertising payments at the rates then
established by Franchisor with respect to new Restaurants, except that in
no event shall such rates exceed five percent (5%) of a Restaurant's gross
sales (as defined in Subsection 9.3 of the form of a franchise agreement
which is attached hereto as Appendix B).
7. DEVELOPER ORGANIZATION, AUTHORITY, FINANCIAL
CONDITION AND SHAREHOLDERS
7.1 Developer and each Principal Shareholder represent and warrant
that: (a) Developer is a corporation duly incorporated, validly existing
and in good standing under the laws of the state of its incorporation;
(b) Developer is duly qualified and is authorized to do business and is in
good standing as a foreign corporation in each jurisdiction in which its
business activities or the nature of the properties owned by it requires
such qualification; (c) the execution and delivery of this Agreement and
the transactions contemplated hereby are within Developer's corporate
power; (d) the execution and delivery of this Agreement have been duly
authorized by the Developer; (e) the articles of incorporation and by-laws
of Developer delivered to Franchisor are true, complete and correct, and
there have been no changes therein since the date thereof; (f) the
certified copies of the minutes electing the officers of Developer and
authorizing the execution and delivery of this Agreement are true, correct
and complete, and there have been no changes therein since the date(s)
thereof; (g) the specimen stock certificate delivered to Franchisor is a
true specimen of Developer's stock certificate; (h) the financial
statement of Developer and financial statements of its Principal
Shareholders, heretofore delivered to Franchisor, are true, complete and
correct, and fairly present the financial positions of Developer and each
Principal Shareholder, respectively, as of the date thereof; (i) such
financial statements have been prepared in accordance with generally
accepted accounting principles; and (j) there have been no materially
adverse changes in the condition, assets or liabilities of Developer or
Principal Shareholders since the date or dates thereof.
7.2 Developer and each Principal Shareholder covenant that during
the term of this Agreement: (a) Developer shall do or cause to be done
all things necessary to preserve and keep in full force its corporate
existence and shall be in good standing as a foreign corporation in each
jurisdiction in which its business activities or the nature of the
properties owned by it requires such qualification; (b) Developer shall
have the corporate authority to carry out the terms of this Agreement; and
(c) Developer shall print, in a conspicuous fashion on all certificates
representing shares of its stock when issued, a legend referring to this
Agreement and the restrictions on and obligations of Developer and
Principal Shareholders hereunder, including the restrictions on transfer
of Developer's shares.
7.3 Prior to development of the first Restaurant pursuant to this
Agreement, Developer shall maintain an average monthly balance of five
hundred thousand dollars ($500,000) in liquid assets. For purposes of
this Agreement, "liquid assets" shall consist of cash, cash available to
Developer pursuant to an irrevocable line of credit issued by a commercial
bank in favor of Developer, marketable securities, or any other similar
asset in which Franchisor's Chief Financial Officer designates in writing
as a liquid asset. After development of the first Restaurant pursuant to
this Agreement, and at any time thereafter in which Developer is operating
one (1) Restaurant in the Territory, Developer shall maintain an average
monthly balance of three hundred twenty-five thousand dollars ($325,000)
in liquid assets. After development of the second Restaurant pursuant to
this Agreement, and thereafter, so long as Developer is operating at least
two (2) Restaurants in the Territory, Developer shall maintain an average
monthly balance of one hundred fifty thousand dollars ($150,000) in liquid
assets. At all times Developer shall maintain the necessary financial
resources to satisfy its development obligations hereunder.
7.4 In addition to its obligations pursuant to Subsections 7.1 and
7.3 hereof, Developer and Principal Shareholders shall provide Franchisor
with such financial information as Franchisor may reasonably request from
time to time, including, on an annual basis, copies of the then-most
current financial statements of Developer and each Principal Shareholder,
dated as of the end of the last preceding fiscal year of the Developer or
Principal Shareholder, said statements to be delivered to Franchisor no
later than April 15 of each year.
7.5 Developer and each Principal Shareholder represent, warrant
and covenant that all Interests (as defined in Subsection 8.4 hereto) in
Developer are owned as set forth on Appendix C hereto, that no Interest
has been pledged or hypothecated (except in accordance with Section 8 of
this Agreement), and that no change will be made in the ownership of any
such Interest other than as permitted by this Agreement, or otherwise
consented to in writing by Franchisor. Developer and Principal
Shareholders agree to furnish Franchisor with such evidence as Franchisor
may request, from time to time, for the purpose of assuring Franchisor
that the Interests of Developer and Principal Shareholders remain as
represented herein.
7.6 Each Principal Shareholder, jointly and severally, hereby
personally and unconditionally guarantees each of Developer's financial
obligations to Franchisor (including, but not limited to, all obligations
relating to the payment of fees by Developer to Franchisor). Each
Principal Shareholder agrees that Franchisor may resort to such Principal
Shareholder (or any of them) for payment of any such financial obligation,
whether or not Franchisor shall have proceeded against Developer, any
other Principal Shareholder or any other obligor primarily or secondarily
obligated to Franchisor with respect to such financial obligation. Each
Principal Shareholder hereby expressly waives presentment, demand, notice
of dishonor, protest, and all other notices whatsoever with respect to
Franchisor's enforcement of this guaranty. In addition, each Principal
Shareholder agrees that if the performance or observance by Developer of
any term or provision hereof is waived or the time of performance thereof
extended by Franchisor, or payment of any such financial obligation is
accelerated in accordance with any agreement between Franchisor and any
party liable in respect thereto or extended or renewed, in whole or in
part, all as Franchisor may determine, whether or not notice to or consent
by any Principal Shareholder or any other party liable in respect to such
financial obligations is given or obtained, such actions shall not affect
or alter the guaranty of each Principal Shareholder described in this
Subsection.
8. TRANSFER
8.1 There shall be no Transfer of any Interest of Developer, or of
a Principal Shareholder in Developer, in whole or in part (whether
voluntarily or by operation of law), directly, indirectly or contingently,
except in accordance with the provisions of this Section 8. "Transfer"
and "Interest" are defined in Subsections 8.2, 8.3 and 8.4.
8.2 Except as provided in Subsection 8.3, "Transfer" shall mean
any assignment, sale, pledge, hypothecation, gift or any other such event
which would change ownership of or create a new Interest, including, but
not limited to:
(a) any change in the ownership of or rights in or to any
shares of stock or other equity interest in Developer which would
result from the act of any shareholder of Developer ("Shareholder"),
such as a sale, exchange, pledge or hypothecation of shares, or any
interest in or rights to any of Developer's profits, revenues or
assets, or any such change which would result by operation of law; and
(b) any change in the percentage interest owned by any
Shareholder in the shares of stock of Developer, or interests in its
profits, revenues or assets which would result from any act of
Developer such as a sale, pledge or hypothecation of any Restaurant
assets (other than a pledge of assets to secure bona fide loans made
or credit extended in connection with acquisition of the assets
pledged, provided that immediately before and after such transaction
Developer satisfies the applicable liquid asset requirement described
in Subsection 7.3 of this Agreement); any sale or issuance of any
shares of Developer's stock; the retirement or redemption of any
shares of Developer's stock; or any sale or grant to any person of any
right to participate in or otherwise to share or become entitled to
any part of Developer's profits, revenues, assets or equity.
8.3 "Transfer" shall not include (a) a change in the ownership of
or rights to any shares or other equity interest in Developer pursuant to
a public offering of Developer's securities registered under the
Securities Act of 1933, or (b) a change in the ownership of or rights to
any securities or other equity interest in Developer pursuant to a private
offering of Developer's securities exempted from registration under such
Act, provided that Developer provides Franchisor with a copy of its S-1
prospectus and/or offering memorandum ten (10) days prior to its filing
with the Securities and Exchange Commission or circulation to third
parties so that Franchisor may comment and, if necessary, correct any
information concerning Franchisor and/or the System, and further provided
that after giving effect to any such public or private offering, the
Principal Shareholders, or any of them, "control" Developer. For purposes
of this Section 8, "control" means either (1) holding fifty-one
percent (51%) or more of the outstanding voting securities of Developer,
or (2) having the contractual power presently to designate a majority of
the directors of Developer.
8.4 "Interest" shall mean: when referring to interests or rights
in Developer, any shares of Developer's stock, and any other equitable or
legal right in or to any of Developer's stock, revenues, profits or
assets; when referring to rights or assets of Developer, Developer's
rights under and interest in this Agreement, any Restaurant and its
revenues, profits and assets.
8.5 (a) The Interest of a Principal Shareholder may be
transferred to such Principal Shareholder's spouse or children or to a
person designated in such Principal Shareholder's will or trust
(individually and collectively referred to as "Successor"), upon such
Principal Shareholder's death or permanent incapacity, without
Franchisor's approval, provided that such Successor shall agree to be
bound by the restrictions contained in this Section 8, and the other
agreements and covenants of the Principal Shareholders contained in this
Agreement.
(b) The Interest of a Principal Shareholder may not be
transferred to another Principal Shareholder without Franchisor's
approval, which approval will not be unreasonably withheld.
(c) The Interest of a Successor may only be transferred in
accordance with Subsection 8.5(b) or 8.8, regardless of whether such
Transfer is for consideration or by gift or will or other device.
8.6 If at any time the Principal Shareholders desire to dispose of
all or substantially all of the Interests of the Principal Shareholders in
Developer, or the Principal Shareholders (or Developer) desire to dispose
of all or substantially all of Developer's Interest in this Agreement or
in the assets which Developer has acquired pursuant to this Agreement, the
Principal Shareholders or Developer, as the case may be, shall notify
Franchisor of that desire, in writing, thirty (30) days before announcing
that fact publicly or engaging the services of a broker or sales agent.
8.7 (a) If at any time any of the Principal Shareholders or
Developer, as the case may be, obtains from a third party or third parties
a bona fide offer (the "Offer") in writing for the purchase of all or
substantially all of the Interests of the Principal Shareholders in
Developer or of all or substantially all of Developer's Interest in this
Agreement or in the assets which Developer has acquired pursuant to this
Agreement, the Principal Shareholders or Developer shall give notice (the
"Selling Notice") to Franchisor stating that the Principal Shareholders or
Developer, as the case may be, have received the Offer, identifying the
prospective purchaser by name and address, specifying the proposed
purchase price and attaching a true and complete copy of the Offer.
(b) Franchisor shall have an option (the "Option"), exercisable
within a period of forty-five (45) days after receipt of the Selling
Notice (the "Option Period"), to purchase such Interests at the price and
on the conditions set forth in the Offer, except that Franchisor shall not
be obligated to pay any finder's or broker's fee, and if the Offer
provides for payment of consideration other than cash, or if the Offer
involves certain intangible benefits, Franchisor may elect to purchase
such Interests by offering a reasonable cash substitute for the non-cash
part of the Offer.
(c) The Option shall be exercisable by Franchisor delivering to
the Principal Shareholders or Developer, as the case may be, within the
Option Period, a notice (i) stating that the Option is being exercised,
and (ii) specifying the time, date and place at which such purchase and
sale will take place, which date shall be within forty-five (45) days
after Franchisor delivers such notice. The forty-five (45) day limitation
described at the end of the preceding sentence shall not apply if at the
end of said forty-five (45) day period the only issue which prevents
completion of the purchase and sale is the need to effect transfers of the
applicable liquor licenses. In the event of such a delay, the purchase
and sale shall take place within seven (7) business days after those
liquor licenses have been transferred.
(d) If the Option is not exercised, the Principal Shareholders
or Developer, as the case may be, may sell the Interests in or of
Developer to the third party which made the Offer, on conditions no more
favorable to the third-party offerer than those set forth in the Offer,
provided that Franchisor approves the proposed transferee in accordance
with the criteria set forth in Appendix D and provided further that such
sale takes place within ninety (90) days after the expiration of the
Option Period. The ninety (90) day limitation described in the preceding
sentence shall not apply if at the end of said ninety (90) day period the
only issue which prevents completion of the purchase and sale is the need
to effect transfers of the applicable liquor licenses. In the event of
such a delay, the purchase and sale shall take place within seven (7)
business days after those liquor licenses have been transferred.
(e) If the Option is not exercised, the Principal Shareholders
or Developer, as the case may be, shall immediately notify Franchisor in
writing of any change in the terms of an Offer. Any material change in
the terms of an Offer shall cause it to be deemed a new Offer, conferring
upon Franchisor a new Option pursuant to this Subsection 8.7; the Option
Period with respect to the new Option shall be deemed to commence on the
day on which Franchisor receives written notice of a material change in
the terms of the original Offer.
8.8 (a) Developer understands and acknowledges that the rights
and duties set forth in this Agreement are personal to Developer and that
Franchisor has entered into this Agreement in reliance on the business
skill and financial capacity of Developer, and the business skill,
financial capability and personal character of each Principal Shareholder.
Except as otherwise provided in this Section 8, the Principal Shareholders
shall at all times retain control of Developer. Except as otherwise
provided in this Section 8, no Transfer of any part of Developer's
Interest in this Agreement, and no Transfer of any Interest of any
Principal Shareholder shall be completed except in accordance with this
Subsection 8.8. In the event of such a proposed Transfer of any part of
Developer's Interest in this Agreement, or of any Interest of any
Principal Shareholder, the party or parties desiring to effect such
Transfer shall give Franchisor notice in writing of the proposed Transfer,
which notice shall set forth the name and address of the proposed
transferee, its financial condition, including a copy of its financial
statement dated not more than ninety (90) days prior to the date of said
notice, and all the terms and conditions of the proposed Transfer. Upon
receiving such notice, Franchisor may (i) approve the Transfer, or
(ii) withhold its consent to the Transfer. Franchisor shall, within
forty-five (45) days of receiving such notice and all the information
required therein, advise the party or parties desiring to effect the
Transfer whether it (1) approves the Transfer, or (2) withholds its
consent to the Transfer, giving the reasons for such disapproval. Failure
of Franchisor to so advise said party or parties within that forty-
five (45) day period shall be deemed to be approval of the proposed
Transfer. Appendix D sets forth the criteria for obtaining Franchisor's
consent to a proposed Transfer.
(b) In the event that Franchisor approves the Transfer, and the
Transfer is not completed within ninety (90) days of the later of
(i) expiration of the forty-five (45) day notice period, or (ii) delivery
of notice of Franchisor's approval of the proposed Transfer, Franchisor's
approval of the proposed Transfer shall automatically be revoked. The
ninety (90) day limitation described in the preceding sentence shall not
apply if at the end of said ninety (90) day period the only issue which
prevents completion of the Transfer is the need to effect transfers of the
applicable liquor licenses. In the event of such a delay, the Transfer
shall take place within seven (7) business days after those liquor
licenses have been transferred. Any subsequent proposal to complete the
proposed Transfer shall be subject to Franchisor's right of approval as
provided herein. The party which desires to effect the proposed Transfer
shall immediately notify Franchisor in writing of any change in the terms
of a Transfer. Any material change in terms of a Transfer prior to
closing shall cause it to be deemed a new Transfer, revoking any approval
previously given by Franchisor and conferring upon Franchisor a new right
to approve such Transfer, which shall be deemed to commence on the day on
which Franchisor receives written notice of such change in terms.
8.9 In connection with any request for Franchisor's approval of a
proposed Transfer to this Section 8, the parties to the proposed Transfer
shall pay Franchisor a fee to defray the actual cost of review and the
administrative and professional expenses related to the proposed Transfer
and the preparation and execution of documents and agreements, up to a
maximum of two thousand five hundred dollars ($2,500).
9. TERMINATION
9.1 This Agreement shall expire on November 27, 2009, unless
sooner terminated pursuant to the terms hereof.
9.2 Franchisor shall have the right to terminate this Agreement
immediately upon written notice to Developer stating the reason for such
termination, and Developer shall no longer have any of the rights created
by this Agreement, in the event of:
(a) development by Developer of a Restaurant without first
obtaining approval from Franchisor of the Restaurant site or of
Developer's architectural and/or engineering plans in accordance with
Section 5 hereof;
(b) any breach or default of any of the provisions of
Sections 8 and 11 of this Agreement and Subsection 14.1 of any
franchise agreement entered into pursuant to this Agreement;
(c) the filing by Developer of a petition in bankruptcy, an
arrangement for the benefit of creditors, or a petition for
reorganization; the filing against Developer of a petition in
bankruptcy, an arrangement for the benefit of creditors, or petition
for reorganization, not dismissed within ninety (90) days of the
filing thereof; the making of an assignment by Developer for the
benefit of creditors; or the appointment of a receiver or trustee for
Developer, which receiver or trustee shall not have been dismissed
within ninety (90) days of such appointment;
(d) the discovery by Franchisor that Developer made any
material misrepresentation or omitted any material fact in the
information which was furnished to Franchisor in connection with this
Agreement;
(e) failure by Developer to locate and employ a Director of
Operations who is approved by Franchisor in accordance with
Subsection 12.2 within ninety (90) days of the date of this Agreement
or, with respect to a replacement Director of Operations, failure by
Developer to locate such a replacement who is approved by Franchisor
in accordance with Subsection 12.2 within one hundred eighty (180)
days of the date on which the last Director of Operations who was
approved by Franchisor ceased to be employed by Developer in that
capacity;
(f) any part of this Agreement relating to the payment of fees
to Franchisor, or the preservation of any of Franchisor's trade names,
service marks, trademarks, trade secrets or secret formulae licensed
or disclosed hereunder or under any franchise agreement between
Franchisor and Developer, for any reason being declared invalid or
unenforceable;
(g) Developer or any Principal Shareholder being convicted of
or pleading nolo contendere to a felony or any crime involving moral
turpitude; or
(h) the franchisee under any franchise agreement executed
pursuant to this Agreement committing a default subject to immediate
termination under the franchise agreement and Franchisor terminates
the franchise agreement.
9.3 Except as provided above in Subsection 9.2, if Developer
defaults in the performance or observance of any of its other obligations
hereunder or under any franchise agreement between Developer and
Franchisor, and any such default continues for a period of thirty (30)
days after written notice to Developer specifying such default, Franchisor
shall have the right to terminate this Agreement upon written notice to
Developer. If Developer defaults in the performance or observance of the
same obligation two (2) or more times within a twelve (12) month period,
Franchisor shall have the right to terminate this Agreement immediately
upon commission of the second act of default, upon written notice to
Developer stating the reason for such termination, without allowance for
any curative period.
9.4 This Agreement shall automatically terminate under the
conditions and at the times specified in Subsection 2.3 and 3.3.
10. PREREQUISITES TO OBTAINING FRANCHISES FOR INDIVIDUAL
RESTAURANT UNITS
10.1 Developer understands and agrees that this Agreement does not
confer upon Developer a right to obtain a franchise for any Restaurant,
but is intended by the parties to set forth the terms and conditions
which, if fully satisfied, shall entitle Developer to obtain such a
franchise, located within the Territory.
10.2 In the event that Developer shall have obtained Franchisor's
approval of a particular proposed site for a Restaurant, and if
Franchisor, in the exercise of its sole discretion, has granted Developer
operational, financial and legal approval, then Franchisor will grant
Developer a franchise for a Restaurant at the site in question. As used
herein, Franchisor will give Developer "operational", "financial" and
"legal" approval under the following circumstances:
"Operational" approval will be granted if Franchisor has determined,
in the exercise of its sole discretion, that Developer is conducting
the operation of each of its Restaurants, and is capable of conducting
the operation of the proposed Restaurant, including physical aspects
thereof, (a) in accordance with the terms and conditions of this
Agreement, (b) in accordance with the provisions of the respective
franchise agreements, and (c) in accordance with the standards,
specifications and procedures set forth and described in the Franchise
Operations Manual and in any other materials or manuals provided or
made available to Developer by Franchisor (collectively, the
"Manuals"), as such may be amended from time to time. Developer
understands that changes in said standards, specifications and
procedures may become necessary from time to time. Developer agrees
to accept said changes, and Developer further agrees that it is within
the sole discretion of Franchisor to make said changes.
"Financial" approval will be granted if (a) Developer is not in breach
of its obligations under Subsection 7.3 hereof and has been and is
faithfully performing all terms and conditions under each of its
existing franchise agreements with Franchisor, (b) Developer or its
affiliates is not in default of any money obligations owed to
Franchisor, and (c) Developer is not in default of any financial
obligation to any of its suppliers, unless any such obligation is
being disputed in good faith by the Developer. Developer acknowledges
and agrees that it is vital to Franchisor's interest that each of its
franchisees be financially sound to avoid failure of a franchised
business (which would adversely affect the reputation and good name of
Franchisor and the System). Developer acknowledges and agrees that it
is vital to Franchisor's interest and to the interests of the System
that Developer (in its capacity as franchisee) remain current in
satisfying its financial obligations to it suppliers.
"Legal" approval will be granted if Franchisor has determined, in the
exercise of its sole discretion, that Developer has submitted to
Franchisor, in a timely manner as requested, all information and
documents requested by Franchisor prior to and as a basis for the
issuance of individual franchises or pursuant to any right granted to
Franchisor by this Agreement or by any franchise agreement between
Developer and Franchisor, and has taken such additional actions in
connection therewith as may be requested from time to time.
10.3 It is understood and agreed that the foregoing criteria apply to
the operational, financial and legal aspects of any Restaurant franchised
by Franchisor in which Developer or any Principal Shareholder has any
legal or equitable interest. It is further understood and agreed that
Developer and Principal Shareholders have an ongoing responsibility to
operate each Restaurant in which Developer or any Principal Shareholder
has any legal or equitable interest in a manner which satisfies the
foregoing requirements for operational, financial and legal approval.
11. RESTRICTIONS
11.1 Developer and its Principal Shareholders acknowledge that over
the term of this Agreement they are to receive proprietary information
which Franchisor has developed over time at great expense, including, but
not limited to, methods of site selection, marketing methods, product
analysis and selection, and service methods and skills relating to the
development and operation of Restaurants. They further acknowledge that
this information, which includes, but is not necessarily limited to, that
contained in the Manuals, is not generally known in the industry and is
beyond their own present skills and experience, and that to develop it
themselves would be expensive, time-consuming and difficult. Developer
and Principal Shareholders further acknowledge that the Franchisor's
information provides a competitive advantage and will be valuable to them
in the development of their business, and that gaining access to it is
therefore a primary reason why they are entering into this Agreement.
Accordingly, Developer and its Principal Shareholders agree that
Franchisor's information, as described above, which may or may not be
"trade secrets" under prevailing judicial interpretations, is private and
valuable, and constitutes trade secrets belonging to Franchisor; and in
consideration of Franchisor's confidential disclosure to them of these
trade secrets, Developer and Principal Shareholders agree as follows:
(a) During the term of this Agreement, neither Developer nor
any Principal Shareholder, for so long as such Principal Shareholder
owns an Interest in Developer, may, without the prior written consent
of Franchisor, directly or indirectly engage in, or acquire any
financial or beneficial interest (including any interest in
corporations, partnerships, trusts, unincorporated associations or
joint ventures) in, advise, help, guarantee loans or make loans to,
any restaurant business whose menu or method of operation is similar
to that employed by restaurant units within the System which is either
(i) located in the Territory, (ii) located in the Area of Dominant
Influence (as defined and established from time to time by Arbitron
Ratings Company) of any Restaurant developed pursuant to this
Agreement, (iii) located within a five (5) mile radius of any
restaurant unit within the System, or (iv) determined by Franchisor,
exercising reasonable good faith judgment, to be a direct competitor
of the System.
(b) Neither Developer, for two (2) years following the
termination of this Agreement, nor any Principal Shareholder, for
two (2) years following the termination of all of his or her Interest
in Developer or the termination of this Agreement, whichever occurs
first, may directly or indirectly engage in or acquire any financial
or beneficial interest (including any interest in corporations,
partnerships, trusts, unincorporated associations or joint ventures)
in, advise, help, guarantee loans or make loans to, any restaurant
business whose menu or method of operation is similar to that employed
by restaurant units within the System which is located either (i) in
the Territory, (ii) in the Area of Dominant Influence (as defined and
established from time to time by Arbitron Ratings Company) of any
Restaurant developed pursuant to this Agreement, (iii) within a
five (5) mile radius of any restaurant unit within the System, or
(iv) within any area for which an active, currently binding
development agreement has been granted by Franchisor to another
franchisee as of the date of termination.
11.2 Neither Developer nor any Shareholder shall at any time
(a) appropriate or use the trade secrets incorporated in the System, or
any portion thereof, in any other restaurant business which is not within
the System, (b) disclose or reveal any portion of the System to any person
other than to Developer's employees as an incident of their training,
(c) acquire any right to use any name, mark or other intellectual property
right which may be granted pursuant to any agreement between Franchisor
and Developer, except in connection with the operation of a Restaurant, or
(d) communicate, divulge or use for the benefit of any other person or
entity any confidential information, knowledge or know-how concerning the
methods of development or operation of a restaurant utilizing the System,
which may be communicated by Franchisor in connection with the Restaurants
to be developed hereunder.
11.3 Developer and Principal Shareholders agree that the provisions
of this Section 11 are and have been a primary inducement to Franchisor to
enter into this Agreement, and that in the event of breach thereof
Franchisor would be irreparably injured and would be without an adequate
remedy at law. Therefore, in the event of a breach, or a threatened or
attempted breach, of any of such provisions Franchisor shall be entitled,
in addition to any other remedies which it may have hereunder or in law or
in equity (including the right to terminate this Agreement), to a
preliminary and/or permanent injunction and a decree for specific
performance of the terms hereof without the necessity of showing actual or
threatened damage, and without being required to furnish a bond or other
security.
11.4 The restrictions contained in Subsection 11.1 above shall not
apply to ownership of less than two percent (2%) of the shares of a
company whose shares are listed and traded on a national securities
exchange if such shares are owned for investment only, and are not owned
by an officer, director, employee or consultant of such publicly traded
company.
11.5 If any court or other tribunal having jurisdiction to determine
the validity or enforceability of this Section 11 determines that it would
be invalid or unenforceable as written, then the provisions hereof shall
be deemed to be modified or limited to such extent or in such manner as
necessary for such provisions to be valid and enforceable to the greatest
extent possible.
12. DEVELOPMENT PROCEDURES
12.1 Franchisor will use its reasonable efforts to furnish Developer
with advice and assistance in developing Restaurants and in selecting
sites therefor.
12.2 Developer shall designate an individual employee who shall be
personally responsible for Developer's activities during the term of this
Agreement, and who shall devote his or her full-time, best efforts and
constant personal attention, on a day-to-day basis, to Developer's
activities in the Territory (the "Director of Operations"). Developer
shall require that the Director of Operations maintain his or her
principal personal residence in the Territory. Franchisor reserves the
right to require that, as a condition of his or her employment, the
Director of Operations, as well as each supervisory employee referred to
in Subsection 12.3, must successfully complete Franchisor's interview
process and a psychological profile test in a manner which satisfies a
uniform standard established by Franchisor. The test shall be
administered by Franchisor, or by a testing agency designated by
Franchisor, at Developer's expense. Developer's designation of the first
Director of Operations, and any subsequent Director of Operations, shall
be subject to the written approval of Franchisor, which approval shall not
be arbitrarily withheld, and shall also be subject to the time limitations
described in Subsection 9.2(e) hereof. Franchisor shall notify Developer
in writing within fourteen (14) business days of receipt of Developer's
request whether Franchisor disapproves such person. Failure by Franchisor
to so notify Developer within that period shall be deemed to constitute
Franchisor's approval of such person.
12.3 In the event that Developer desires to designate an employee (in
addition to the Director of Operations) who will have supervisory
authority over the development of operation of more than one (1)
Restaurant within the Territory, Developer's designation of such a
supervisory employee shall be subject to the written approval of
Franchisor, which approval shall not be arbitrarily withheld. Franchisor
shall notify Developer in writing within fourteen (14) business days of
receipt of Developer's request whether Franchisor disapproves such person.
Failure by Franchisor to so notify Developer within that period shall be
deemed to constitute Franchisor's approval of such person. Developer
shall require that any such supervisory employee maintain his or her
principal personal residence in the Territory.
12.4 Developer shall require the Director of Operations to execute a
confidentiality agreement and covenant not to compete in the form attached
hereto as Appendix E. In addition, at Franchisor's request, Developer
shall obtain from the Director of Operations an agreement verifying his or
her employment status. Developer shall require that each other employee
of Developer who will have supervisory authority over the development or
operation of more than one (1) Restaurant execute a confidentiality
agreement in the form attached hereto as Appendix F. Developer shall be
responsible for compliance of its employees with the agreements identified
in this Subsection.
12.5 (a) Developer shall require its Director of Operations and any
other supervisory employee designated pursuant to Subsection 12.3 to
attend, and to successfully complete to Franchisor's reasonable
satisfaction, an operations training course provided by Franchisor. If
the Director of Operations or any such supervisory employee fails to
successfully complete Franchisor's operations training course, Franchisor
may require designation of a new Director of Operations or replacement
supervisory employee, as the case may be, and Developer shall designate a
new Director of Operations or replacement supervisory employee who shall
be required to successfully complete such training course.
(b) The Director of Operations and supervisory employees
designated pursuant to Subsection 12.3 shall, from time to time as
reasonably requested by Franchisor, attend and successfully complete to
Franchisor's reasonable satisfaction a Franchisor-provided refresher
course in restaurant operations.
12.6 With respect to each Restaurant within the Territory developed
by Developer, Developer's employees must satisfy the training requirements
described in Section 6 of Appendix B hereto. After Developer opens it
first Restaurant pursuant to this Agreement, Franchisor may at its option,
and subject to such conditions as Franchisor deems necessary, permit
Developer (at Developer's own expense) to conduct a portion of the
required training at one of Developer's existing Restaurants. In that
event, Developer will be required to provide qualified personnel to
administer training tests and to maintain records relating to the training
and performance of employees.
13. NO WAIVER OF DEFAULT
13.1 The waiver by any party to this Agreement of any breach or
default, or series of breaches or defaults, of any term, covenant or
condition herein, or of any same or similar term, covenant or condition
contained in any other agreement between Franchisor and any other person,
shall not be deemed a waiver of any subsequent or continuing breach or
default of the same or any other term, covenant or condition in this
Agreement, or in any other agreement between Franchisor and any other
person.
13.2 All rights and remedies of Franchisor shall be cumulative and
not alternative, in addition to and not exclusive of any other rights or
remedies which are provided for herein or which may be available at law or
in equity in case of any breach, failure or default or threatened breach,
failure or default of any term, provision or condition of this Agreement.
Franchisor's rights and remedies shall be continuing and shall not be
exhausted by any one (1) or more uses thereof, and may be exercised at any
time or from time to time as often as may be expedient; and any option or
election to enforce any such right or remedy may be exercised or taken at
any time and from time to time. The expiration or earlier termination of
this Agreement shall not discharge or release Developer or any Principal
Shareholder from any liability or obligation then accrued, or any
liability or obligation continuing beyond, or arising out of, the
expiration or earlier termination of this Agreement.
14. FORCE MAJEURE
14.1 As used in this Agreement, the term "Force Majeure" shall mean
any act of God, strike, lock-out or other industrial disturbance, war
(declared or undeclared), riot, epidemic, fire or other catastrophe, act
of any government and any other similar cause not within the control of
the party affected thereby.
14.2 If the performance of any obligation by any party under this
Agreement is prevented, hindered or delayed by reason of Force Majeure,
which cannot be overcome by use of normal commercial measures, the parties
shall be relieved of their respective obligations to the extent the
parties are respectively necessarily prevented, hindered or delayed in
such performance during the period of such Force Majeure. The party whose
performance is affected by an event of Force Majeure shall give prompt
notice of such Force Majeure event to the other party by telephone or
telegram (in each case to be confirmed in writing), setting forth the
nature thereof and an estimate as to its duration, and shall be liable for
failure to give such timely notice only to the extent of damage actually
caused.
15. CONSTRUCTION, SEVERABILITY, GOVERNING LAW AND
JURISDICTION
15.1 If any part of this Agreement shall for any reason be declared
invalid, unenforceable or impaired in any way, the validity of the
remaining portions shall remain in full force and effect as if this
Agreement had been executed with such invalid portion eliminated, and it
is hereby declared the intention of the parties that they would have
executed the remaining portion of this Agreement without including therein
any such portions which might be declared invalid; provided however, that
in the event any part hereof relating to the payment of fees to
Franchisor, or the preservation of any of Franchisor's trade names,
service marks, trademarks, trade secrets or secret formulae licensed or
disclosed hereunder or pursuant to any franchise agreement between
Franchisor and Developer is for any reason declared invalid or
unenforceable, then Franchisor shall have the option of terminating this
Agreement upon written notice to Developer. If any clause or provision
herein would be deemed invalid or unenforceable as written, it shall be
deemed to be modified or limited to such extent or in such manner as may
be necessary to render the clause or provision valid and enforceable to
the greatest extent possible in light of the interest of the parties
expressed in that clause or provision, subject to the provisions of the
preceding sentence.
15.2 DEVELOPER AND PRINCIPAL SHAREHOLDERS ACKNOWLEDGE THAT FRANCHISOR
MAY ENTER INTO OTHER DEVELOPMENT AGREEMENTS THROUGHOUT THE UNITED STATES
ON TERMS AND CONDITIONS SIMILAR TO THOSE SET FORTH IN THIS AGREEMENT, AND
THAT IT IS OF MUTUAL BENEFIT TO DEVELOPER AND PRINCIPAL SHAREHOLDERS AND
TO FRANCHISOR THAT THESE TERMS AND CONDITIONS BE UNIFORMLY INTERPRETED.
THEREFORE, THE PARTIES AGREE THAT TO THE EXTENT THAT THE LAW OF THE STATE
OF MISSOURI DOES NOT CONFLICT WITH LOCAL FRANCHISE STATUTES, RULES AND
REGULATIONS, MISSOURI LAW SHALL APPLY TO THE CONSTRUCTION OF THIS
AGREEMENT AND SHALL GOVERN ALL QUESTIONS WHICH ARISE WITH REFERENCE
HERETO; PROVIDED HOWEVER, THAT PROVISIONS OF MISSOURI LAW REGARDING
CONFLICTS OF LAW SHALL NOT APPLY HERETO.
15.3 THE PARTIES 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, MAY, AT
THE OPTION OF THE CLAIMANT, BE RESOLVED BY A PROCEEDING IN A COURT IN
JACKSON COUNTY, MISSOURI, AND DEVELOPER AND THE PRINCIPAL SHAREHOLDERS
EACH IRREVOCABLY ACCEPT THE JURISDICTION OF THE COURTS OF THE STATE OF
MISSOURI AND THE FEDERAL COURTS LOCATED IN JACKSON COUNTY, MISSOURI FOR
SUCH CLAIMS, CONTROVERSIES OR DISPUTES.
The parties agree that service of process in any proceeding arising
out of or relating to this Agreement or the performance thereof may be
made as to Developer and any Principal Shareholder by serving a person of
suitable age and discretion (such as the person in charge of the office)
at the address of Developer specified in this Agreement and as to
Franchisor by serving the president or a vice-president of Franchisor at
the address of Franchisor or by serving Franchisor's registered agent.
16. MISCELLANEOUS
16.1 All notices and other communications required or permitted to be
given hereunder shall be deemed given when delivered in person or mailed
by registered or certified mail addressed to the recipient at the address
set forth below, unless that party shall have given written notice of
change of address to the sending party, in which event the new address so
specified shall be used.
FRANCHISOR: Applebee's International, Inc.
4551 W. 107th Street, Suite 100
Overland Park, Kansas 66207
Attention: President
DEVELOPER: Marcus Restaurants, Inc.
250 E. Wisconsin Avenue, Suite 1600
Milwaukee, Wisconsin 53202-4223
Attention: President
PRINCIPAL SHAREHOLDERS: N/A
16.2 All terms used in this Agreement, regardless of the number and
gender in which they are used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context or sense of this Agreement may require,
the same as if such words had been written in this Agreement themselves.
The headings inserted in this Agreement are for reference purposes only
and shall not affect the construction of this Agreement or limit the
generality of any of its provisions. The term "business day" means any
day other than Saturday, Sunday, or the following national holidays: New
Year's Day, Martin Luther King Day, Washington's Birthday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and
Christmas.
16.3 This Agreement, the Uniform Franchise Offering Circular
currently in effect and the documents referred to herein constitute the
entire agreement between parties, superseding and canceling any and all
prior and contemporaneous agreements, understandings, representations,
inducements and statements, oral or written, of the parties in connection
with the subject matter hereof.
16.4 Except as expressly authorized herein, no amendment or
modification of this Agreement shall be binding unless executed in writing
both by Franchisor and by Developer and Principal Shareholders.
16.5 In the event that any party to this Agreement initiates any
legal proceeding to construe or enforce any of the terms conditions and/or
provisions of this Agreement, including, but not limited to, its
termination provisions, or to obtain damages or other relief to which any
party may be entitled by virtue of this Agreement, the prevailing party or
parties shall be paid its reasonable attorneys' fees and expenses by other
party or parties.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of
the date first above written.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Robert T. Steinkamp Name: Abe J. Gustin, Jr.
Title: Secretary Title: President
DEVELOPER:
ATTEST: MARCUS RESTAURANTS, INC.
By:
Name: Thomas F. Kissinger Name: Stephen Marcus
Title: Secretary Title: President
<PAGE>
SCHEDULE 1 TO DEVELOPMENT AGREEMENT
RESTAURANT LOCATIONS FOR WHICH
FRANCHISE AGREEMENTS
HAVE BEEN PREVIOUSLY ISSUED
Schuamburg, Illinois (Unit #8680)
Bloomingdale, Illinois (Unit #8719)
Deerfield, Illinois (Unit #8750)
Mt. Prospect, Illinois (Unit #8753)
Streamwood, Illinois
Hodgkins, Illinois
Naperville, Illinois
Crystal Lake, Illinois
<PAGE>
APPENDIX A TO DEVELOPMENT AGREEMENT
TERRITORY
A PORTION OF THE CHICAGO, ILLINOIS A.D.I., CONSISTING OF:
In the state of Illinois, the counties of:
McHenry Kane La Salle
Kankakee Lake Cook
Kendall Grundy De Kalb
DuPage Will Livingston
Iroquois
In the state of Wisconsin, the county of:
Kenosha
<PAGE>
APPENDIX B TO DEVELOPMENT AGREEMENT
STANDARD FORM
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
FRANCHISE AGREEMENT
___________________________________
(Location Address)
___________________________________
(Franchisee Name)
___________________________________
(Date)
<PAGE>
TABLE OF CONTENTS
RECITALS . . . . . . . . . . . . . . . . . . . . . . . 1
1. FRANCHISE GRANT AND TERM . . . . . . . . . . . . 2
2. UNIFORM STANDARDS . . . . . . . . . . . . . . . 3
3. COMPLIANCE WITH THE SYSTEM . . . . . . . . . . . 4
4. GENERAL SERVICES OF FRANCHISOR . . . . . . . . . 4
5. RESTAURANT SYSTEM AND PROCEDURES . . . . . . . . 5
6. TRAINING . . . . . . . . . . . . . . . . . . . . 8
7. RESTAURANT MAINTENANCE . . . . . . . . . . . . . 8
8. ADVERTISING . . . . . . . . . . . . . . . . . . 9
9. FEES . . . . . . . . . . . . . . . . . . . . . . 12
10. RECORD KEEPING . . . . . . . . . . . . . . . . . 13
11. FRANCHISEE ORGANIZATION, AUTHORITY,
FINANCIAL CONDITION AND SHAREHOLDERS . . . . . . 14
12. TRANSFER . . . . . . . . . . . . . . . . . . . . 15
13. CONFIDENTIALITY; RESTRICTIONS . . . . . . . . . 18
14. INSPECTIONS . . . . . . . . . . . . . . . . . . 20
15. RELATIONSHIP OF PARTIES AND INDEMNIFICATION . . 21
16. INSURANCE . . . . . . . . . . . . . . . . . . . 23
17. DEBTS AND TAXES . . . . . . . . . . . . . . . . 24
18. TRADE NAMES, SERVICE MARKS AND TRADEMARKS . . . 24
19. EXPIRATION AND TERMINATION; OPTION TO
PURCHASE RESTAURANT; ATTORNEYS' FEES . . . . . . 26
20. NO WAIVER OF DEFAULT . . . . . . . . . . . . . . 31
21. CONSTRUCTION, SEVERABILITY,
GOVERNING LAW AND JURISDICTION . . . . . . . . . 32
22. INTERFERENCE WITH EMPLOYMENT RELATIONS . . . . . 33
23. LIQUOR LICENSE . . . . . . . . . . . . . . . . . 33
24. FORCE MAJEURE . . . . . . . . . . . . . . . . . 34
25. MISCELLANEOUS . . . . . . . . . . . . . . . . . 35
26. ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . 36
EXHIBIT 1: ROYALTY FEE
APPENDIX A: STATEMENT OF OWNERSHIP INTERESTS
APPENDIX B: REVIEW AND CONSENT WITH RESPECT TO TRANSFERS
APPENDIX C: CONFIDENTIALITY AGREEMENT
<PAGE>
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
FRANCHISE AGREEMENT
This Agreement is made this ________ day of _____________________,
19______, by and between APPLEBEE'S INTERNATIONAL, INC., a Delaware
corporation ("FRANCHISOR"), _____________________________________________,
a (_______________ corporation, sole proprietorship, _______________
partnership, _______________ limited partnership [strike inappropriate
language]) ("FRANCHISEE") and ______________________________________
______________________________ (collectively, the "PRINCIPAL SHAREHOLDERS"
and, individually, a "PRINCIPAL SHAREHOLDER" of Franchisee if a
corporation or general partner if Franchisee is a limited partnership
having as its general partner a corporation) and
__________________________________________________________________________
_______
("GENERAL PARTNER" of Franchisee if Franchisee is a limited partnership).*
* (If Franchisee is not a corporation or a sole proprietorship, the
parties hereto hereby agree that an Addendum shall be attached to this
Agreement so as properly to reflect the responsibilities of the partners
of any general partnership, the general partner of any limited partnership
and the shareholders of any corporate general partner of any partnership.)
WITNESSETH:
RECITALS
A. Franchisor has acquired rights to develop and operate a unique
system of restaurants which specialize in the sale of high quality,
moderately priced food and alcoholic beverages in an attractive, casual
setting, which includes proprietary rights in certain valuable trade
names, service marks and trademarks, including the service mark Applebee's
Neighborhood Grill & Bar and variations of such mark, designs, decor and
color schemes for restaurant premises, signs, equipment, procedures and
formulae for preparing food and beverage products, specifications for
certain food and beverage products, inventory methods, operating methods,
financial control concepts, a training facility and teaching
techniques ("the System").
B. Franchisor has determined to establish, through its own
development and operation, and through the granting of franchises, a chain
of Applebee's Neighborhood Grill & Bar restaurants which are distinctive;
which are similar in appearance, design and decor; and which are uniform
in operation and product consistency.
C. The value of Franchisor's trade names, service marks and
trademarks is based upon: (1) the maintenance of uniform high quality
standards in connection with the preparation and sale of
Franchisor-approved food and beverage products, (2) the uniform high
standards of appearance of the individual restaurant units in the System,
(3) the use of distinctive trademarks, service marks, building designs and
advertising signs representing a uniformly high quality of product and
services, and (4) the assumption by Franchisor and its franchisees of the
obligation to maintain and enhance the goodwill and public acceptance of
the System (and of Franchisor's trade names, service marks and trademarks)
by strict adherence to the high standards required by Franchisor.
D. Franchisor, Franchisee and the Principal Shareholders have entered
into a Development Agreement dated __________________, 19______
("Development Agreement"), relating to the development by Franchisee of
Applebee's Neighborhood Grill & Bar restaurants.
E. Franchisee desires to use the System in connection with the
operation of an Applebee's Neighborhood Grill & Bar restaurant at the
location which is specified in Subsection 1.1 of this Agreement, pursuant
to the terms, conditions and provisions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual obligations contained
herein, it is hereby agreed as follows:
1. FRANCHISE GRANT AND TERM
1.1 Franchisor grants Franchisee, for the term stated below, the
right, license and privilege:
(a) to use the System incident to the operation of an
Applebee's Neighborhood Grill & Bar restaurant at
_____________________________________________________ (the
"Restaurant");
(b) to use the trade names, service marks and trademarks which
Franchisor shall from time to time designate as part of the System,
but only in connection with the sale at the Restaurant of those
products which Franchisor has designated and approved; and
(c) to hold itself out to the public as a Franchisee of
Franchisor.
1.2 The term of the franchise shall commence as of the
Commencement Date, as hereinafter defined, and shall end twenty (20) years
thereafter, unless this Agreement is terminated prior to that date in
accordance with its provisions. "Commencement Date," as used herein,
shall mean the date upon which the Restaurant opens for business. The
parties agree to affix to this Agreement an addendum expressly setting
forth the Commencement Date, which, when so affixed, shall become a part
of this Agreement.
1.3 At the expiration of the term hereof, Franchisee shall have an
option to operate the Restaurant for four (4) successive terms of five (5)
years (unless the franchise agreement with respect to that additional term
is sooner terminated in accordance with its provisions), provided that
immediately prior to each such five (5) year term (a) Franchisee satisfies
the requirements which Franchisor then-imposes on its new franchisees,
(b) all other restaurant units within the System which Franchisee then-
operates substantially comply, in the opinion of Franchisor, with
Franchisor's then-current standards, specifications, requirements and
instructions, and (c) Franchisee executes the form of franchise agreement
which Franchisor is then using with respect to new restaurants within the
System, with the amount of royalty and advertising fees payable at the
rates then-prevailing under the franchise agreements which Franchisor is
then using for new restaurants within the System, and Franchisee pays to
Franchisor for each of said five (5) year periods a franchise fee equal to
ten percent (10%) of the prevailing franchise fee paid by new franchisees
at that time. Any franchise agreement which Franchisee executes for such
additional term will also contain options to obtain an assignment of
Franchisee's lease with a third party and/or to purchase certain property
or to purchase or lease the Restaurant premises exercisable by Franchisor
upon termination thereof and an option to purchase or lease the Restaurant
premises exercisable by Franchisor upon expiration of the renewal term
(subject to any then-existing renewal rights of Franchisee). Such options
will contain provisions substantially similar to the provisions of
Franchisor's options described in Subsection 19.4 hereof. Franchisee
shall give Franchisor written notice of its desire to exercise its option
to operate the Restaurant for an additional term no earlier than
twelve (12) months, and no later than seven (7) months, prior to
expiration of the initial term. If Franchisee gives that notice,
Franchisor, in its sole discretion, reasonably exercised, shall determine
whether Franchisee has satisfied the foregoing requirements. Within
forty-five (45) days of receiving the notice described above, Franchisor
shall notify Franchisee in writing whether or not Franchisee is eligible
to exercise the option described in this Subsection.
1.4 During the period from the date of this Agreement to the
expiration or earlier termination of this Agreement, Franchisor shall not
establish a restaurant unit utilizing the System, or license another
franchisee to establish a restaurant unit utilizing the System, at any
location within the lesser of a three (3) mile radius of the Restaurant or
a radius from the Restaurant which includes either a daytime or
residential population of forty thousand (40,000) or more people.
1.5 Franchisee, in consideration of the benefits and privileges
provided to it by this Agreement, agrees to operate the Restaurant and
perform as required hereunder for the full term of this Agreement.
1.6 This Agreement is entered into pursuant to and subject to the
terms and conditions which are set forth in the Development Agreement.
2. UNIFORM STANDARDS
2.1 The System is a comprehensive restaurant system for the
retailing of certain uniform and quality food and beverage products
(including alcoholic beverages), emphasizing a varied menu of high
quality, moderately priced food products (including appetizers, creative
sandwiches, dinner entrees and desserts), a selection of alcoholic and
other beverages, and prompt and courteous service in a clean, wholesome,
casual atmosphere. The foundation of the System is the establishment and
maintenance of a reputation among the public for the operation of high
quality restaurant units. A fundamental requirement of the System, this
Franchise Agreement and franchises which Franchisor will grant to others
is adherence by all franchisees to Franchisor's standards and policies
providing for the uniform operation of all restaurant units within the
System, including, but not limited to, (a) selling only those products
which Franchisor has designated and approved, (b) using only Franchisor's
prescribed building layout and designs, equipment, signs, interior and
exterior decor items, fixtures and furnishings, (c) adhering strictly to
Franchisor's standards and specifications relating to the selection,
purchase, storage, preparation, packaging, service and sale of all food
and beverage products being sold at the Restaurant, and (d) satisfying all
of Franchisor's prescribed standards of quality, service and cleanliness.
Compliance by all franchisees with the foregoing standards and policies in
conjunction with the use of Franchisor's trade names, service marks and
trademarks provides the basis for the wide public acceptance of the System
and its valuable goodwill. Accordingly, strict adherence by all
franchisees to all aspects of the System is required at all times.
2.2 The provisions of the Agreement shall be interpreted to give
effect to the intent of the parties stated in this Section 2 to assure
that Franchisee shall operate the Restaurant in conformity with the
System, through strict adherence to Franchisor's standards and policies as
they now exist and as they may be modified from time to time.
3. COMPLIANCE WITH THE SYSTEM
Franchisee acknowledges that every component of the System is
important to Franchisor, to all franchisees and to the operation of the
Restaurant, including the requirements (a) that only those products
designated and approved by the Franchisor are sold at the Restaurant, and
(b) that there is uniformity of food and beverage specifications,
preparation methods, quality, appearance, building and interior design,
color and decor, landscaping, facilities and service among all restaurant
units in the System. Accordingly, Franchisee agrees to and shall comply
with all aspects of the System (as it now exists and as it may be modified
from time to time). Franchisee recognizes and agrees that Franchisor may
prohibit the use of the System and its trade names, notwithstanding the
granting of this Agreement, if Franchisee fails to design, construct,
equip or furnish its Restaurant in compliance with the specifications
designated by Franchisor, unless prior written approval has been received
from Franchisor.
4. GENERAL SERVICES OF FRANCHISOR
4.1 Franchisor shall advise and consult with Franchisee
periodically in connection with the operation of the Restaurant, and at
other reasonable times upon Franchisee's request. Franchisor will provide
to Franchisee such of its know-how, new developments, techniques and
improvements in areas of restaurant design, management, food and beverage
preparation, sales promotion and service concepts as may be pertinent to
the construction and operation of the Restaurant under the System.
Franchisor may provide the foregoing information (a) by sending
representatives to visit the Restaurant, (b) by providing written or other
material, (c) at meetings or seminars, and (d) at training sessions at
Franchisor's training facility and/or such other locations as may be
selected by Franchisor from time to time. Franchisor also shall make
available to Franchisee all additional services, facilities, rights and
privileges which Franchisor makes available from time to time to its
franchisees of the System generally.
4.2 For approximately eight (8) days prior to the opening of the
Restaurant and the first six (6) days that the Restaurant is open for
business, Franchisor shall provide Franchisee, at Franchisor's expense,
with the services of up to a maximum of six (6) of Franchisor's training
personnel to facilitate proper operation of the kitchen, bar and dining
room areas during that period and to assist in correcting any operational
problems which may arise.
4.3 From time to time during the term of this Agreement,
Franchisor will develop and test new menu items. The menu consists of
approved national food and beverage selections. Franchisee shall comply
with all menu changes which generally occur every six (6) months. The
menu may be modified to reflect food and beverage items peculiar to
Franchisee's local area, subject to Franchisor's testing and approval.
5. RESTAURANT SYSTEM AND PROCEDURES
5.1 Franchisor shall furnish Franchisee with advice and assistance
in managing and operating the Restaurant, and Franchisor's representatives
will visit the Restaurant periodically. Franchisor will assist Franchisee
in coordinating the Restaurant's pre-opening activities, and as noted more
particularly in Subsection 4.2 hereof, shall provide Franchisee with the
services of certain of Franchisor's personnel to facilitate proper
operation of the Restaurant when it opens for business.
5.2 Franchisee shall designate an employee who will supervise the
Restaurant, and devote his or her full time, best efforts and constant
personal attention to the day-to-day operation of the Restaurant (the
"General Manager"). Franchisee also shall designate an employee who will
supervise the Restaurant kitchen, and devote his or her full time, best
efforts and constant personal attention to the day-to-day operation of the
Restaurant kitchen (the "Kitchen Manager").
5.3 Franchisee shall require that the General Manager, the Kitchen
Manager and each of Franchisee's employees who serve as Restaurant
managers to maintain his or her principal personal residence within a
usual driving time of not more than approximately one (1) hour from the
Restaurant. Franchisor reserves the right to require that, as a condition
of his or her employment, the General Manager must successfully complete
Franchisor's interview process and a psychological profile test in a
manner which satisfies a uniform standard established by Franchisor. The
test shall be administered by Franchisor, or by a testing agency
designated by Franchisor, at Franchisee's expense.
5.4 Unless Franchisor shall have given its prior written approval,
Franchisee shall keep the Restaurant open for business only during the
hours which are specified by Franchisor in the Franchise Operations Manual
or in such other materials or manuals provided or made available by
Franchisor to Franchisee (collectively the "Manuals"), provided that such
hours do not conflict with state laws or local ordinances relating to the
sale of alcoholic beverages or governing the hours during which restaurant
establishments may be open for business. In addition, Franchisee
expressly agrees to:
(a) operate the Restaurant in a clean, safe and orderly manner,
providing courteous, first-class service to the public;
(b) diligently promote and make every reasonable effort to
increase the business of the Restaurant;
(c) advertise the business of the Restaurant by the use of the
Franchisor's trade names, service marks and trademarks and such other
insignia, slogans, emblems, symbols, designs and other identifying
characteristics as may be developed or established from time to time
by Franchisor and included in the Manuals, subject to the limitations
of Subsections 8.4 and 8.5 hereof;
(d) prohibit and, to the best of Franchisee's ability, prevent
the use of the Restaurant for any immoral or illegal purpose, or for
any other purpose, business activity, use of function which is not
expressly authorized hereunder or in the Manuals; and
(e) comply fully with all applicable laws and regulations,
including, but not limited to, those relating to building
construction, maintenance and safety, fire prevention, food safety,
and the sale of alcoholic beverages.
5.5 Franchisee hereby acknowledges receipt and loan of a copy of
the Manuals heretofore or hereinafter furnished to Franchisee, and agrees
to faithfully, completely and continuously perform, fulfill, observe and
follow all instructions, requirements, standards, specifications, systems
and procedures contained therein, including (a) those relating to the
construction, design, decor, building and equipping of the Restaurant,
(b) those relating to the selection, purchase, storage, preparation,
packaging, service and sale of all products being sold at the Restaurant,
(c) those relating to the maintenance and repair of Restaurant building,
grounds, equipment, signs, interior and exterior decor items, fixtures and
furnishings, and (d) those relating to employee uniforms and dress,
accounting, bookkeeping, record retention, and other business systems,
procedures and operations. The Manuals are incorporated herein by
reference and hereby made part of this Agreement. Franchisee acknowledges
and agrees that the materials contained in the Manuals are integral,
necessary and material elements of the System.
5.6 Franchisee understands, acknowledges and agrees that strict
conformity with the System, including the standards, specifications,
systems, procedures, requirements and instructions contained in this
Agreement and in the Manuals, is vitally important, not only to the
success of Franchisor, but to the collective success of all of
Franchisor's other franchisees, by reason of the benefits which Franchisor
and all of its franchisees will derive from uniformity in products sold,
identity, quality, appearance, facilities and service among all restaurant
units which are part of the System. Without limiting the generality of
the foregoing provisions, Franchisee agrees to adhere strictly to the
requirements in the Manuals relating (a) to the construction, design,
decor, building and equipping of the Restaurant, (b) to the maximum
permissible ratio of sales of alcoholic beverages to sales of food at the
Restaurant, and (c) to the limitations on the number of video games or
similar devices which may be placed on the Restaurant premises. Any
failure to adhere to the standards, specifications, systems, requirements
or instructions contained in this Agreement or in the Manuals shall
constitute a material breach of this Agreement.
5.7 Franchisor shall have the right, at any time and from time to
time, in the good faith exercise of its reasonable business judgment,
consistent with the overall best interests of the System generally, having
due regard for the financial burden which may be placed upon its
franchisees, to revise, amend, delete from and add to the System and the
material contained in the Manuals. Franchisee expressly agrees to comply
with all such revisions, amendments, deletions and additions.
5.8 Franchisee shall offer for sale from the Restaurant, at all
times when the Restaurant is open for business, only the products which
are expressly designated in the Manuals, except, as noted more
particularly in Subsection 4.3, to the extent that Franchisee has obtained
Franchisor's prior written consent to a modification of that requirement.
No product shall be offered or sold at or from the Restaurant under, or in
connection with, any trademark or service mark other than Franchisor's
designated trademarks and service marks without Franchisor's prior written
consent.
5.9 Franchisee shall obtain all food and beverage products,
equipments, signs, interior and exterior decor items, fixtures,
furnishings, supplies, and other products and materials required for the
operation of or sold at the Restaurant solely from suppliers (including
manufacturers, distributors and other sources) who demonstrate, to
Franchisor's continuing reasonable satisfaction, the ability to meet
Franchisor's then-current standards and specifications for such items; who
possess adequate quality controls and capacity to supply Franchisee's
needs promptly and reliably; and who have been approved in writing by
Franchisor and not thereafter disapproved. The Manuals contain a list of
approved suppliers. If Franchisee desires to purchase any items from an
unapproved supplier, Franchisee shall submit to Franchisor a written
request for such approval, which approval shall not be unreasonably
withheld, or shall request the supplier itself to do so. Franchisor shall
have the right to inspect the supplier's facilities, and to require that
samples from the supplier be delivered, at Franchisor's option, either to
Franchisor or to an independent, certified laboratory designated by
Franchisor for testing. Franchisee or the supplier shall pay the costs of
any such test. Franchisor shall notify Franchisee in writing within
forty-five (45) days of receiving any such request whether it disapproves
the supplier. Failure by Franchisor to so notify Franchisee within that
period shall be deemed to constitute Franchisor's approval of such
supplier. Franchisor reserves the right, at its option, to reinspect the
facilities and retest products of any such approved supplier at any time
and to revoke its approval upon the supplier's failure to continue to meet
any of Franchisor's criteria. Notwithstanding the foregoing, any supplier
of goods having any trademark, trade name, service mark, logo or symbol
owned by Franchisor shall not be approved to supply Franchisee such goods
until such supplier has entered a written agreement with Franchisor
regarding the production, use and sale of such goods.
5.10 No food or beverage product, interior or exterior decor item,
sign, item of equipment, fixtures, furnishings or supplies, or other
product or material required for the operation of the Restaurant, which
bears any of Franchisor's trade names, service marks or trademarks, shall
be used or sold in or upon the Restaurant premises unless the same shall
have been first submitted to and approved in writing by Franchisor.
5.11 The Manuals and all related material furnished to Franchisee
hereunder are and shall remain the property of Franchisor, and must be
returned to Franchisor, along with any copies made thereof, immediately
upon request or upon the expiration or earlier termination of this
Agreement.
6. TRAINING
6.1 Franchisor shall make its operations training course available
to the General Manager, the Kitchen Manager, and Franchisee's Assistant
Managers and other Restaurant managers.
6.2 Before the Restaurant opens for business, and thereafter as
replacement personnel are employed by Franchisee, the General Manager, the
Kitchen Manager and each Assistant Manager shall attend Franchisor's
operations training facility for such period of time as Franchisor shall
deem reasonably necessary, and shall successfully complete that course to
Franchisor's reasonable satisfaction. If the General Manager, Kitchen
Manager or an Assistant Manager fails to successfully complete
Franchisor's operations training course, Franchisor may require
designation of a new General Manager, Kitchen Manager or Assistant
Manager, as the case may be, and Franchisee shall designate a new General
Manager, Kitchen Manager or Assistant Manager, who shall be required to
successfully complete such training course.
6.3 The General Manager, the Kitchen Manager and each Assistant
Manager shall, from time to time as reasonably required by Franchisor,
attend and successfully complete to Franchisor's reasonable satisfaction a
Franchisor-provided refresher course in restaurant operations.
6.4 Franchisee shall be responsible for the Restaurant's
compliance with the operating standards, methods, techniques and material
taught at Franchisor's operations training course, and shall cause the
employees of the Restaurant to be trained in such standards, methods and
techniques as are relevant to the performance of their respective duties.
6.5 Attendance of the General Manager, the Kitchen Manager and
each Assistant Manager at any of Franchisor's training courses shall be
tuition-free. Franchisee shall pay all other costs and expenses relating
to the attendance of Franchisee's personnel at any of Franchisor's
training courses, including, without limitation, the cost of travel,
lodging, meals, and other related and incidental expenses.
7. RESTAURANT MAINTENANCE
7.1 Franchisee shall, at Franchisee's sole cost and expense,
maintain the Restaurant in conformity with the standards, specifications
and requirements of the System, as the same may be designated by
Franchisor from time to time. Franchisee specifically agrees to repair or
replace, at Franchisee's cost and expense, equipment, signs, interior and
exterior decor items, fixtures, furnishings, supplies, and other products
and materials required for the operation of the Restaurant as necessary or
desirable, and to obtain, at Franchisee's cost and expense, any new or
additional equipment, signs, interior and exterior decor items, fixtures,
furnishings, supplies, and other products and materials which may be
reasonably required by Franchisor for new products or procedures. Except
as may be expressly provided in the Manuals, no alterations or
improvements, or changes of any kind in design, equipment, signs, interior
or exterior decor items, fixtures or furnishings shall be made in or about
the Restaurant or Restaurant premises without the prior written approval
of Franchisor in each instance.
7.2 In order to assure the continued success of the Restaurant,
Franchisee shall, at any time from time to time after ________________,
_________, (i.e., six [6] years after the date of this Agreement) as
reasonably required by Franchisor (taking into consideration the cost and
then-remaining term of this Agreement), modernize the Restaurant premises,
equipment, signs, interior and exterior decor items, fixtures,
furnishings, supplies, and other products and materials required for the
operation of the Restaurant, to Franchisor's then-current standards and
specifications, provided that at the time Franchisor requires Franchisee
to so modernize the Restaurant premises at least twenty-five percent (25%)
of Franchisor-owned and operated Restaurants meet such standards and
specifications. Franchisee's obligations under this Subsection are in
addition to, and shall not relieve Franchisee from, any of its other
obligations under this Agreement, including those contained in the
Manuals.
7.3 If Franchisee is or becomes a lessee of the Restaurant
premises, Franchisee shall have included in the lease provisions expressly
permitting both Franchisee and Franchisor to take all actions and make all
alterations referred to under Subsections 7.1 and 7.2 hereof, requiring
the lessor thereunder to give Franchisor reasonable notice of any
contemplated termination, and providing that Franchisee has the
unrestricted right to assign the lease to Franchisor without the lessor
having any right to impose conditions on such assignment or to obtain any
payment in connection therewith. Franchisee shall not, without the prior
written consent of Franchisor, execute any lease or other agreement which
imposes, or purports to impose, any limitations on the ability of
Franchisee and/or of Franchisor to operate additional restaurants at any
particular location beyond the geographic limitation set forth in Section
1.4 hereof, or any lease the term of which is shorter than the term of
this Agreement.
8. ADVERTISING
8.1 Franchisor shall develop and administer advertising, public
relations and sales promotion programs designed to promote and enhance the
collective success of all restaurant units in the System. It is expressly
understood, acknowledged and agreed that in all phases of such advertising
and promotion, including, without limitation, type, quantity, timing,
placement and choice of media and medium, market areas, advertising
agencies and public relations firms, Franchisor's decisions shall be final
and binding. Franchisee shall have the right to participate actively in
all such advertising, public relations and sales promotion programs, but
only in full and complete accordance with such terms and conditions as may
be established by Franchisor for each such program.
8.2 Franchisee shall pay Franchisor, in the manner described in
Section 9 hereof, a minimum dollar amount equal to one and one-half
percent (1.5%) of Franchisee's gross sales, as defined in Subsection 9.3
hereof. Such funds shall become the sole and absolute property of
Franchisor, to be allocated to a separate "advertising account"
established by Franchisor. Franchisor shall use such funds for market
studies, advertising and marketing studies or services, production of
commercials, advertising copy and layouts, traffic costs, agency fees,
marketing personnel, or any other costs associated with the development,
marketing and testing of advertising, and for the purchase of advertising
time, space or materials in national, regional or other advertising media,
in a manner determined by Franchisor in its sole discretion. Within
six (6) months following the end of Franchisor's fiscal year, Franchisor
shall provide all franchisees with an accounting of all amounts received
from them and expended by Franchisor for the matters set forth above. In
addition, Franchisee shall expend a minimum dollar amount equal to one and
one-half percent (1.5%) of Franchisee's gross sales, for local promotional
activities, subject to the provisions of Subsections 8.4 and 8.5 hereof.
Franchisor shall have the right at all times to review Franchisee's books
and records, and to require Franchisee to produce evidence of its gross
sales and local promotional activities, to ensure Franchisee's compliance
with this Section. Any amount determined by said audit to be due
Franchisor as part of the advertising fee will be paid to Franchisor by
Franchisee within ten (10) days thereafter. At any time after execution
of this Agreement, Franchisor may in its sole discretion increase, to a
maximum of four percent (4%) of gross sales, the percentage of gross sales
which Franchisee shall be required to pay to Franchisor for allocation to
a separate advertising account pursuant to this Subsection 8.2.
Franchisor shall use the funds paid pursuant to that increased percentage
requirement solely for the purchase of advertising time, space or
materials in national, regional or other advertising media, in a manner
determined by Franchisor in its sole discretion, provided that in each
calendar year (or other twelve [12] month period established by
Franchisor) in which Franchisor makes expenditures for advertising from
such an advertising account, so long as Franchisee is in compliance with
its obligations hereunder, Franchisor's expenditures for advertising in
the Territory encompassed by the Development Agreement (including
expenditures for national or regional advertising in media which reach
that Territory) shall be on a basis which is roughly proportional to
Franchisee's contribution to that advertising account during that calendar
year or other twelve (12) month period. Franchisor also may increase the
percentage of gross sales which Franchisee shall be required to spend for
local promotional activities, provided however, that in no event shall
Franchisee be required to make payments pursuant to this Subsection 8.2 in
a dollar amount in excess of five percent (5%) of gross sales.
8.3 Franchisee shall submit to Franchisor, for Franchisor's
approval, an advertising campaign plan relating to the promotion of the
opening of the Restaurant which is sufficient to meet the needs of the
market. The Manuals contain a Press Release kit to assist Franchisee in
this regard. Franchisee shall conduct the approved advertising campaign
and make all expenditures for advertising to promote the opening of the
Restaurant no later than sixty (60) days after the Restaurant opens for
business. Franchisor will reimburse fifty percent (50%) of Franchisee's
out-of-pocket opening advertising expenditures up to a maximum of two
thousand five hundred dollars ($2,500), if Franchisee meets the following
criteria:
(a) Franchisee's opening advertising expenditures are made
within sixty (60) days after the opening of the Restaurant;
(b) Franchisee submits to Franchisor within one hundred
twenty (120) days after the opening of the Restaurant documentation
for the opening advertising expenditures, such as paid invoices from
suppliers of goods or services evidencing expenditure on the opening
advertising promotion; and
(c) Franchisee's opening advertising expenditures are made
pursuant to the approved advertising campaign plan and in accordance
with the Grand Opening Reimbursement Program Policy Guidelines set
forth in the Manuals.
8.4 Nothing in the foregoing Subsections shall be deemed to
prohibit Franchisee from making additional expenditures for local
promotional activities. All of the Franchisee's local promotional
activities shall utilize approved advertising media. "Approved
advertising media" are limited to the following:
(a) Newspapers, magazines and other such periodicals;
(b) Radio and television;
(c) Outdoor advertising by signs displayed on billboards or
buildings; and
(d) Handbills, flyers, door-hangers and direct mail.
In the event Franchisee wants to use a form of advertising medium not set
forth above, Franchisee shall submit a description of such medium and
advertising to Franchisor. Franchisor shall notify Franchisee whether it
approves the use of such medium within thirty (30) days of Franchisee's
request. Failure by Franchisor to so notify Franchisee within that period
shall be deemed to constitute Franchisor's approval of such request.
Guidelines for local promotional activities are contained in the Manuals.
8.5 All advertising copy and other materials employed by
Franchisee in local promotional activities shall be in strict accordance
and conformity with the standards, formats and specimens contained in the
Manuals and shall receive the prior approval of Franchisor. In the event
Franchisee wishes to deviate from the materials contained in the Manuals,
Franchisee shall submit, in each instance, the proposed advertising copy
and materials to Franchisor for approval in advance of publication.
Franchisor shall notify Franchisee in writing, within fifteen (15) days of
such submission, whether Franchisor disapproves such advertising copy and
materials. Failure by Franchisor to so notify Franchisee within that
period shall be deemed to constitute Franchisor's approval of such
advertising copy and materials. In no event shall Franchisee's
advertising contain any statement or material which may be considered
(a) in bad taste or offensive to the public or to any group of persons,
(b) defamatory of any person or an attack on any competitor, (c) to
infringe upon the use, without permission, of any other persons' trade
name, trademark, service mark or identification, or (d) inconsistent with
the public image of Franchisor or of the System.
9. FEES
9.1 As partial consideration for the rights granted hereunder,
Franchisee shall pay Franchisor:
(a) an initial franchise fee of _____________________
dollars ($__________), to be paid in the manner prescribed in
Subsection 4.l of the Development Agreement as payment for the grant
of the franchise;
(b) a monthly royalty fee as determined by Franchisor, not to
exceed five percent (5%) of each calendar month's gross sales, as
provided in Subsection 4.3 of the Development Agreement, as payment
for Franchisee's continuing right to operate the Restaurant as part of
the System (see Exhibit 1); and
(c) a monthly advertising fee equal to such percentage of each
calendar month's gross sales as Franchisor may require pursuant to
Subsection 8.2 hereof.
Notwithstanding anything contained herein to the contrary, if the
royalty fee set forth in Subsection 9.1(b) is equal to five percent (5%)
of monthly gross sales, then in such an event, the advertising fee
described in Subsection 9.1(c) shall not exceed four percent (4%) of
monthly gross sales.
9.2 The fees referred to in Subsections 9.l(b) and (c) (the
"Fees") shall be paid by check mailed and postmarked on or before the
twelfth day of the next full month immediately following the month to
which the Fees relate. Any Fees, including the initial franchise fee,
which are not paid when due shall bear interest from and after the due
dates thereof at the rate of eighteen percent (18%) per annum or the
highest rate permitted by applicable law, whichever is less.
9.3 (a) Except as provided in Subsection 9.3(b) hereof, the
term "gross sales," as used in this Agreement, shall mean all receipts
(cash, cash equivalents or credit) or revenues from sales from all
business conducted upon or from the Restaurant premises, whether evidenced
by check, cash, credit, charge account, exchange or otherwise, including,
but not limited to, amounts received from the sale of goods, wares and
merchandise (including sales of food, beverages and tangible property of
every kind and nature, promotional or otherwise), from all services
performed from or at the Restaurant premises, and from all orders taken or
received at the Restaurant premises, regardless of where such orders are
filled. Gross sales shall not be reduced by any deductions for cash
shortages incurred in connection with the transaction of business with
customers, credit card company charges or theft which is reimbursed by
insurance or is not reported to the appropriate police authorities. Each
charge or sale upon installment or credit shall be treated as a sale for
the full price in the month during which such charge or sale shall be
first made, irrespective of the time when Franchisee shall receive payment
(whether full or partial) therefor.
(b) Gross sales shall not include: (i) the sale of merchandise
for which cash has been refunded or, except as provided in the second
sentence of Subsection 9.3(a), not received, or allowances made for
merchandise, if the sales of any such returned or exchanged merchandise
shall have been previously included in gross sales, (ii) the amount of any
sales tax imposed by any federal, state, municipal or other governmental
authority directly on sales and intended to be collected from customers,
provided that the amount thereof is added to the selling price and
actually paid by the Franchisee to such governmental authority, (iii) the
sale of merchandise for which a gift certificate is redeemed, provided
that the initial sale of said gift certificate shall have been previously
included in gross sales, (iv) the sale of waste products of the
Restaurant, (v) the sale of meals to employees, (vi) telephone, game and
vending machine revenues, (vii) the sale of non-food items or beverages at
a discount in connection with a promotional campaign, (viii) one-time sale
of furniture, fixtures or equipment, and (ix) theft which is not covered
by insurance and is reported to the appropriate police authorities. In
addition, Franchisor may, from time to time, in writing, permit or allow
certain other items to be excluded from gross sales. Any such permission
or allowance may be revoked or withdrawn at Franchisor's discretion.
10. RECORD KEEPING
10.1 Franchisor shall provide Franchisee with a choice of two (2) or
more approved point of sales systems, and Franchisee shall employ one (1)
of such approved systems, without modification, in connection with the
business of the Restaurant. Franchisee shall use such bookkeeping and
record keeping forms as shall be prescribed in the Manuals.
10.2 Franchisee shall complete and submit to Franchisor, on a
regular, continuous basis, each of the following reports, in the form
specified in the Manuals:
(a) monthly Restaurant reports, on or before the twelfth day of
each calendar month following the month to which the report relates;
(b) annual Restaurant reports, on or before the fifteenth day
of April of each year; and
(c) weekly gross sales reports, on or before the Tuesday
following the calendar week to which the report relates.
10.3 The annual Restaurant reports referred to above shall include a
balance sheet dated as of the end of Franchisee's fiscal year or calendar
year and a profit and loss statement for such year, together with such
additional financial information as Franchisor may reasonably request.
Such balance sheet and profit and loss statement shall be prepared in
accordance with generally accepted accounting principles, certified as
correct and complete by Franchisee's chief executive officer, president,
chief financial officer or controller and reported on and reviewed by an
independent state-licensed certified public accountant. If Franchisee
fails to provide Franchisor with such balance sheet and profit and loss
statement, Franchisor shall have the right to have an independent audit
made of Franchisee's books and records, and Franchisee shall promptly
reimburse Franchisor for the cost thereof.
10.4 Each of the reports referred to in this Section 10 shall be
completed by Franchisee or its accountant in the respective specimen
forms, and in accordance with the instructions, contained in the Manuals.
Subsection 10.3 notwithstanding, time is of the essence with respect to
the completion and submission of each such report.
11. FRANCHISEE ORGANIZATION, AUTHORITY,
FINANCIAL CONDITION AND SHAREHOLDERS
11.1 Franchisee and each Principal Shareholder represent and warrant
that: (a) Franchisee is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of its incorporation;
(b) Franchisee is duly qualified and is authorized to do business and is
in good standing as a foreign corporation in each jurisdiction in which
its business activities or the nature of the properties owned by it
requires such qualification; (c) the execution and delivery of this
Agreement and the transaction contemplated hereby are within Franchisee's
corporate power; (d) the execution and delivery of this Agreement has been
duly authorized by the Franchisee; (e) the articles of incorporation and
by-laws of Franchisee delivered to Franchisor are true, complete and
correct, and there have been no changes therein since the date thereof;
(f) the certified copies of the minutes electing the officers of
Franchisee and authorizing the execution and delivery of this Agreement
are true, correct and complete, and there have been no changes therein
since the date(s) thereof; (g) the specimen stock certificate delivered to
Franchisor is a true specimen of Franchisee's stock certificate; (h) the
balance sheet of Franchisee as of ____________________, ________ ("Balance
Sheet") and the balance sheets of its Principal Shareholders as of
____________________, ________, heretofore delivered to Franchisor, are
true, complete and correct, and fairly present the financial positions of
Franchisee and each Principal Shareholder, respectively, as of the dates
thereof; (i) the Balance Sheet and each such balance sheet have been
prepared in accordance with generally accepted accounting principles; and
(j) there have been no materially adverse changes in the condition, assets
or liabilities of Franchisee or Principal Shareholders since the date or
dates thereof.
11.2 Franchisee and each Principal Shareholder covenant that during
the term of this Agreement: (a) Franchisee shall do or cause to be done
all things necessary to preserve and keep in full force its corporate
existence and shall be in good standing as a foreign corporation in each
jurisdiction in which its business activities or the nature of the
properties owned by it requires such qualification; (b) Franchisee shall
have the corporate authority to carry out the terms of this Agreement; and
(c) Franchisee shall print, in a conspicuous fashion on all certificates
representing shares of its stock when issued, a legend referring to this
Agreement and the restrictions on and obligations of Franchisee and
Principal Shareholders hereunder, including the restrictions on transfer
of Franchisee's shares.
11.3 In addition to the financial information which Franchisee is
required to provide to Franchisor under Subsections 10.2 and 11.1 hereof,
Franchisee and Principal Shareholders shall provide Franchisor with such
other financial information as Franchisor may reasonably request from time
to time, including, on an annual basis, copies of the then-most current
financial statements of Franchisee and each Principal Shareholder, dated
as of the end of the last preceding fiscal year of the Franchisee or
Principal Shareholder, said statements to be delivered to Franchisor no
later than April 15 of each year.
11.4 Franchisee and each Principal Shareholder represent, warrant and
covenant that all Interests (as defined in Subsection 12.4 hereto) in
Franchisee are owned as set forth on Appendix A hereto, that no Interest
has been pledged or hypothecated (except in accordance with Section 12 of
this Agreement), and that no change will be made in the ownership of any
such Interest other than as permitted by this Agreement, or otherwise
consented to in writing by Franchisor. Franchisee and Principal
Shareholders agree to furnish Franchisor with such evidence as Franchisor
may request, from time to time, for the purpose of assuring Franchisor
that the Interests of Franchisee and Principal Shareholders remain as
represented herein.
11.5 Each Principal Shareholder, jointly and severally, hereby
personally and unconditionally guarantees each of Franchisee's financial
obligations to Franchisor (including, but not limited to, all obligations
relating to the payment of fees by Franchisee to Franchisor). Each
Principal Shareholder agrees that Franchisor may resort to such Principal
Shareholder (or any of them) for payment of any such financial obligation,
whether or not Franchisor shall have proceeded against Franchisee, any
other Principal Shareholder or any other obligor primarily or secondarily
obligated to Franchisor with respect to such financial obligation. Each
Principal Shareholder hereby expressly waives presentment, demand, notice
of dishonor, protest, and all other notices whatsoever with respect to
Franchisor's enforcement of this guaranty. In addition, each Principal
Shareholder agrees that if the performance or observance by Franchisee of
any term or provision hereof is waived or the time of performance thereof
extended by Franchisor, or payment of any such financial obligation is
accelerated in accordance with any agreement between Franchisor and any
party liable in respect thereto or extended or renewed, in whole or in
part, all as Franchisor may determine, whether or not notice to or consent
by any Principal Shareholder or any other party liable in respect to such
financial obligations is given or obtained, such actions shall not affect
or alter the guaranty of each Principal Shareholder described in this
Subsection.
12. TRANSFER
12.1 There shall be no Transfer of any Interest of Franchisee, or of
a Principal Shareholder in Franchisee, in whole or in part (whether
voluntarily or by operation of law), directly, indirectly or contingently,
except in accordance with the provisions of this Section 12. "Transfer"
and "Interest" are defined in Subsections 12.2, 12.3 and 12.4. Any
proposed Transfer also shall be subject to the provisions of the
Development Agreement.
12.2 Except as provided in Subsection 12.3, "Transfer" shall mean any
assignment, sale, pledge, hypothecation, gift or any other event which
would change ownership of or change or create a new Interest, including,
but not limited to:
(a) any change in the ownership of or rights in or to any
shares of stock or other equity interest in Franchisee which would
result from the act of any shareholder of Franchisee ("Shareholder"),
such as a sale, exchange, pledge or hypothecation of shares, or any
interest in or rights to any of Franchisee's profits, revenues or
assets, or any such change which would result by operation of law; and
(b) any change in the percentage interest owned by any
Shareholder in the shares of stock of Franchisee, or interests in its
profits, revenues or assets which would result from any act of
Franchisee such as a sale, pledge or hypothecation of any Restaurant
assets (other than a pledge of assets to secure bona fide loans made
or credit extended in connection with acquisition of the assets
pledged, provided that immediately before and after such transaction
the net worth of Franchisee shall not be less than the amount which is
reflected on the Balance Sheet referred to in Subsection 11.1 of this
Agreement); any sale or issuance of any shares of Franchisee's stock;
the retirement or redemption of any shares of Franchisee's stock; or
any sale or grant to any person of any right to participate in or
otherwise to share or become entitled to any part of Franchisee's
profits, revenues, assets or equity.
12.3 "Transfer" shall not include (a) a change in the ownership of or
rights to any shares or other equity interest in Franchisee pursuant to a
public offering of Franchisee's securities registered under the Securities
Act of 1933, or (b) a change in the ownership of or rights to any
securities or other equity interest in Franchisee pursuant to a private
offering of Franchisee's securities exempted from registration under such
Act, provided that Franchisee provides Franchisor with a copy of its S-1
prospectus and/or offering memorandum ten (10) days prior to its filing
with the Securities and Exchange Commission or circulation to third
parties so that Franchisor may comment and, if necessary, correct any
information concerning Franchisor and/or the System, and further provided
that after giving effect to such public or private offering, the Principal
Shareholders, or any of them, "control" Franchisee. For purposes of this
Section 12, "control" means either (1) holding fifty-one percent (51%) or
more of the outstanding voting securities of Franchisee, or (2) having the
contractual power presently to designate a majority of the directors of
Franchisee.
12.4 "Interest" shall mean: when referring to interests or rights in
Franchisee, any shares of Franchisee's stock and any other equitable or
legal right in or to any of Franchisee's stock, revenues, profits or
assets; when referring to rights or assets of Franchisee, Franchisee's
rights under and interest in this Agreement, the Restaurant and its
revenues, profits and assets.
12.5 (a) The Interest of a Principal Shareholder may be transferred
to such Principal Shareholder's spouse or children or to a person
designated in such Principal Shareholder's will or trust (individually and
collectively referred to as a "Successor"), upon such Principal
Shareholder's death or permanent incapacity, without Franchisor's
approval, provided that such Successor shall agree to be bound by the
restrictions contained in this Section 12, and the other agreements and
covenants of the Principal Shareholders contained in this Agreement.
(b) The Interest of a Principal Shareholder may not be
transferred to another Principal Shareholder without Franchisor's
approval, which approval shall not be unreasonably withheld.
(c) The Interest of a Successor may only be transferred in
accordance with Subsection 12.5(b) or 12.6, regardless of whether such
Transfer is for consideration or by gift or will or other device.
12.6 (a) Franchisee understands and acknowledges that the rights and
duties set forth in this Agreement are personal to Franchisee and that
Franchisor has entered into this Agreement in reliance on the business
skill and financial capability of Franchisee, and the business skill,
financial capability and personal character of each Principal Shareholder.
Except as otherwise provided in this Section 12, the Principal
Shareholders shall at all times retain control of Franchisee. Except as
otherwise provided in this Section 12, no Transfer of any part of
Franchisee's Interest in this Agreement or in the Restaurant, and no
Transfer of any Interest of any Principal Shareholder, shall be completed
except in accordance with this Subsection 12.6. In the event of such a
proposed Transfer of any part of Franchisee's Interest in this Agreement
or in the Restaurant, or of any Interest of any Principal Shareholder, the
party or parties desiring to effect such Transfer shall give Franchisor
notice in writing of the proposed Transfer, which notice shall set forth
the name and address of the proposed transferee, its financial condition,
including a copy of its financial statement dated not more than
ninety (90) days prior to the date of said notice, and all the terms and
conditions of the proposed Transfer. Upon receiving such notice,
Franchisor may (i) approve the Transfer, or (ii) withhold its consent to
the Transfer. Franchisor shall, within forty-five (45) days of receiving
such notice and all of the information required therein, advise the party
or parties desiring to effect the Transfer whether it (1) approves the
Transfer, or (2) withholds its consent to the Transfer, giving the reasons
for such disapproval. Failure of Franchisor to so advise said party or
parties within that forty-five (45) day period shall be deemed to be an
approval of the proposed Transfer. Appendix B sets forth the criteria for
obtaining Franchisor's consent to a proposed Transfer.
(b) In the event that Franchisor approves the Transfer, and the
Transfer is not completed within ninety (90) days of the later of
(i) expiration of the forty-five (45) day notice period, or (ii) delivery
of notice of Franchisor's approval of the proposed Transfer, Franchisor's
approval of the proposed Transfer shall automatically be revoked. The
ninety (90) day limitation described in the preceding sentence shall not
apply if at the end of said ninety (90) day period the only issue which
prevents completion of the Transfer is the need to effect transfers of the
applicable liquor licenses. In the event of such a delay, the Transfer
shall take place within seven (7) business days after those liquor
licenses have been transferred. Any subsequent proposal to complete the
proposed Transfer shall be subject to Franchisor's right of approval as
provided herein. The party which desires to effect the proposed Transfer
shall immediately notify Franchisor in writing of any change in the terms
of a Transfer. Any material change in the terms of a Transfer prior to
closing shall cause it to be deemed a new Transfer, revoking any approval
previously given by Franchisor and conferring upon Franchisor a new right
to approve such Transfer, which shall be deemed to commence on the day on
which Franchisor receives written notice of such changes in terms.
12.7 In connection with any request for Franchisor's approval of a
proposed Transfer pursuant to this Section 12, the parties to the proposed
Transfer shall pay Franchisor a fee to defray the actual cost of review
and the administrative and professional expenses related to the proposed
Transfer and the preparation and execution of documents and agreements, up
to a maximum of two thousand five hundred dollars ($2,500).
13. CONFIDENTIALITY; RESTRICTIONS
13.1 Franchisee and its Principal Shareholders acknowledge that over
the term of this Agreement they are to receive proprietary information
which Franchisor has developed over time at great expense, including, but
not limited to, information regarding the System, methods of site
selection, marketing and public relations methods, product analysis and
selection, and service methods and skills relating to the development and
operation of Restaurants. They further acknowledge that this information,
which includes, but is not necessarily limited to, that contained in the
Manuals, is not generally known in the industry and is beyond their own
present skills and experience, and that to develop it themselves would be
expensive, time consuming and difficult. Franchisee and its Principal
Shareholders further acknowledge that the Franchisor's information
provides a competitive advantage and will be valuable to them in the
development of their business, and that gaining access to it is therefore
a primary reason why they are entering into this Agreement. Accordingly,
Franchisee and its Principal Shareholders agree that Franchisor's
information, as described above, which may or may not be "trade secrets"
under prevailing judicial interpretations, is private and valuable, and
constitutes trade secrets belonging to Franchisor. Accordingly, in
consideration of Franchisor's confidential disclosure to them of these
trade secrets, Franchisee and Principal Shareholders agree as follows
(subject to the provisions of the Development Agreement and any other
franchise agreement between Franchisor and Franchisee):
(a) During the term of this Agreement, neither Franchisee nor
any Principal Shareholder, for so long as such Principal Shareholder
owns an Interest in Franchisee, may, without the prior written consent
of Franchisor, directly or indirectly engage in, or acquire any
financial or beneficial interest (including any interest in
corporations, partnerships, trusts, unincorporated associations or
joint ventures) in, advise, help, guarantee loans or make loans to,
any restaurant business whose menu or method of operation is similar
to that employed by restaurant units within the System which is either
(i) located in the Territory, as defined in the Development Agreement,
(ii) located in the Area of Dominant Influence (as defined and
established from time to time by Arbitron Ratings Company) of any
Restaurant developed pursuant to the Development Agreement,
(iii) located within a five (5) mile radius of any restaurant unit
within the System, or (iv) determined by Franchisor, exercising
reasonable good faith judgment, to be a direct competitor of the
System.
(b) Neither Franchisee, for two (2) years following the
termination of this Agreement, nor any Principal Shareholder, for
two (2) years following the termination of all of his or her Interest
in Franchisee or the termination of this Agreement, whichever occurs
first, may directly or indirectly engage in, or acquire any financial
or beneficial interest (including any interest in corporations,
partnerships, trusts, unincorporated associations or joint ventures)
in, advise, help, guarantee loans or make loans to, any restaurant
business whose menu or method of operation is similar to that employed
by restaurant units within the System which is located either (i) in
the Territory, as defined in the Development Agreement, (ii) in the
Area of Dominant Influence (as defined and established from time to
time by Arbitron Ratings Company) of any restaurant developed pursuant
to the Development Agreement, (iii) within a five (5) mile radius of
any restaurant unit within the System, or (iv) within any area for
which an active, currently binding development agreement has been
granted by Franchisor to another franchisee as of the date of the
termination.
(c) Neither Franchisee nor any Shareholder shall at any time
(i) appropriate or use the trade secrets incorporated in the System,
or any portion thereof, in any restaurant business which is not within
the System, (ii) disclose or reveal any portion of the System to any
person, other than to Franchisee's Restaurant employees as an incident
of their training, (iii) acquire any right to use any name, mark or
other intellectual property right which is or may be granted by this
Agreement, except in connection with the operation of the Restaurant,
or (iv) communicate, divulge or use for the benefit of any other
person or entity any confidential information, knowledge or know-how
concerning the methods of development or operation of a restaurant
utilizing the System, which may be communicated by Franchisor in
connection with the franchise granted hereunder.
13.2 Franchisee and Principal Shareholders agree that the provisions
of this Section 13 are and have been a primary inducement to Franchisor to
enter into this Agreement, and that in the event of breach thereof
Franchisor would be irreparably injured and would be without adequate
remedy at law. Therefore, in the event of a breach, or a threatened or
attempted breach, of any of such provisions Franchisor shall be entitled,
in addition to any other remedies which it may have hereunder or at law or
in equity (including the right to terminate this Agreement), to a
preliminary and/or permanent injunction and a decree for specific
performance of the terms hereof without the necessity of showing actual or
threatened damage, and without being required to furnish a bond or other
security.
13.3 The restrictions contained in Subsection 13.1(a) and (b) above
shall not apply to ownership of less than two percent (2%) of the shares
of a company whose shares are listed and traded on a national securities
exchange if such shares are owned for investment only, and are not owned
by an officer, director, employee, or consultant of such publicly traded
company.
13.4 If any court or other tribunal having jurisdiction to determine
the validity or enforceability of this Section 13 determines that it would
be invalid or unenforceable as written, then the provisions hereof shall
be deemed to be modified or limited to such extent or in such manner as
necessary for such provisions to be valid and enforceable to the greatest
extent possible.
13.5 Franchisee shall require the General Manager, the Kitchen
Manager and each of its Restaurant managers to execute a confidentiality
agreement in the form attached hereto as Appendix C. Franchisee shall be
responsible for compliance of its employees with the agreements identified
in this Subsection.
14. INSPECTIONS
14.1 Franchisor shall have the right at any time, and from time to
time, to have its representatives enter the Restaurant premises without
notice for the purpose of inspecting the condition thereof and the
operation of the Restaurant in order to determine whether Franchisee is in
compliance with the standards, specifications, requirements and
instructions contained in this Agreement and in the Manuals, and for any
other reasonable purpose connected with the operation of the Restaurant.
14.2 Without limiting the generality of Subsection 14.1, a
representative of Franchisor shall be present in the Restaurant to consult
with Franchisee or its General Manager once each calendar quarter and, at
least semi-annually, a representative shall conduct an inspection/
consultation at the Restaurant (which may be conducted with or without
notice). During such inspection, Franchisor's representative will inspect
the condition of the Restaurant and observe procedures and operations at
the Restaurant. Also during the inspection/consultation, Franchisor's
representative will meet with the General Manager and such other
Restaurant employees as Franchisor's representative may designate, for the
purpose of evaluating the condition and operation of the Restaurant and
seeking to maintain or achieve compliance with the standards,
specifications, requirements and instructions contained in this Agreement
and in the Manuals.
14.3 Without limiting the generality of Subsection 14.1, Franchisor's
representatives shall have the right at all times during normal business
hours to confer with Restaurant employees and customers, and to inspect
Franchisee's books, records and tax returns, or such portions thereof as
pertain to the operation of the Restaurant. All such books, records and
tax returns shall be kept and maintained at the principal executive
offices of Franchisee or such other place as may be agreed upon by the
parties in writing. If any inspection reveals that the gross sales
reported in any report or statement are less than the actual gross sales
ascertained by such inspection, then the Franchisee shall immediately pay
Franchisor the additional amount of fees owing by reason of the
understatement of gross sales previously reported, together with interest
as provided in Subsection 9.2. In the event that any report or statement
understates gross sales by more than three percent (3%) of the actual
gross sales ascertained by Franchisor's inspection, Franchisee shall, in
addition to making the payment provided for in the immediately preceding
sentence, pay and reimburse Franchisor for any and all expenses incurred
in connection with its inspection, including, but not limited to,
reasonable accounting and legal fees. Such payments shall be without
prejudice to any other rights or remedies which Franchisor may have under
this Agreement or otherwise. If any inspection reveals that the gross
sales reported in any report or statement are greater than the actual
gross sales ascertained by such inspection, and that Franchisee thereby
has made an overpayment of fees, the amount of the overpayment (without
interest) shall be offset against future fees owing by Franchisee to
Franchisor.
14.4 Franchisee shall maintain an accurate stock register. In the
event that the beneficial ownership of Franchisee's stock differs in any
respect from record ownership, Franchisee also shall maintain a list of
the names, addresses and interests of all beneficial owners of its stock.
Franchisee shall produce its stock register, and any list of beneficial
owners certified by the corporation's secretary to be correct, at its
principal executive offices upon ten (10) days prior written request by
Franchisor. Franchisor's representatives shall have the right to examine
the stock register and any list of beneficial owners, and to reproduce all
or any part thereof. Further, upon ten (10) days written notice,
Franchisor may request a copy of the list of stockholders and owners of
beneficial interests to be forwarded to it at Franchisor's principal
office.
15. RELATIONSHIP OF PARTIES AND INDEMNIFICATION
15.1 Franchisee is not, and shall not represent or hold itself out
as, an agent, legal representative, joint venturer, partner, employee or
servant of Franchisor for any purpose whatsoever and, where permitted by
law to do so, shall file a business certificate to such effect with the
proper recording authorities. Franchisee is an independent contractor and
is not authorized to make any contract, agreement, warranty or
representation on behalf of Franchisor, or to create any obligation,
express or implied, on behalf of Franchisor. Franchisee agrees that
Franchisor does not have any fiduciary obligation to Franchisee.
Franchisee shall not use the name Applebee's Neighborhood Grill & Bar
(other than in connection with the operation of the Restaurant), or
Applebee's International, Inc., or any similar words as part of or in
association with any trade name of any business entity which is, directly
or indirectly, associated with Franchisee.
15.2 Franchisee shall indemnify and hold harmless Franchisor and its
officers, directors, employees, agents, affiliates, successors and assigns
from and against (a) any and all claims based upon, arising out of, or in
any way related to the operation or condition of any part of the
Restaurant or Restaurant premises, the conduct of business thereat, the
ownership or possession of real or personal property, and any negligent
act, misfeasance or nonfeasance by Franchisee or any of its agents,
contractors, servants, employees or licensees (including, without
limitation, the performance by Franchisee of any act required by, or
performed pursuant to, any provision of this Agreement), and (b) any and
all fees (including reasonable attorneys' fees), costs and other expenses
incurred by or on behalf of Franchisor in the investigation of or defense
against any and all such claims.
15.3 In addition to, and not in limitation of, any subsection hereof,
Franchisee specifically covenants, represents and warrants that Franchisee
is in compliance in all material respects with all federal, state,
municipal and local laws governing the generation, use or disposal of
hazardous waste or hazardous materials, and any and all other laws
designed to protect the environment and that:
(a) There have been no past, and there are no current or
anticipated, releases or substantial threats of a release of a
hazardous substance, pollutant or contaminant from or onto the
Restaurant or real property upon which the Restaurant is located and
referred to in this Agreement ("Premises") which is or may be subject
to regulation under the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. 9601, et seq.) or other
laws designed to protect the environment;
(b) The Premises have not previously been used, are not now
being used and are not contemplated to be used for the treatment,
collection, storage or disposal of any refuse or objectionable waste
so as to require a permit or approval from the Environmental
Protection Agency pursuant to the Hazardous and Solid Waste Amendments
of 1984 (96 Stat. 3221) or any other federal, state, county or
municipal agency charged with the responsibility of protecting the
environment;
(c) The Premises have not previously been used, are not now
being used, and are not contemplated to be used, for the generation,
transportation, treatment, storage or disposal of any hazardous waste;
(d) No portion of the Premises are located on or over a
"sanitary landfill" or an "open dump" within the meaning of the
Resource Conservation and Recovery Act (42 U.S.C. 6941 et seq.), as
amended by the Hazardous and Solid Waste Amendments of 1984 (96 Stat.
3221);
(e) No asbestos fibers or materials or polychlorinated
biphenyls (PCB's) are on or in the Premises;
(f) There have not been, nor are there presently pending, any
federal or state enforcement actions against the Premises, nor is the
Franchisee or its Landlord, if any, subject to any outstanding
administrative orders which require ongoing compliance efforts in
connection with compliance with laws designed to protect the
environment;
(g) The Franchisee has not entered into any consent decrees or
administrative consent orders with any agency charged with the
responsibility of protecting the environment;
(h) There have not been any notices of violation sent to the
Franchisee under the Citizens Suit Provisions of any statute;
(i) The Franchisee has not received any request for
information, notice or demand letters for administrative inquiries
from any governmental entity with regard to its environmental
practices;
(j) The Franchisee has maintained all required records under
each and every applicable environmental statute and is in full
compliance with all environmental permits issued to it by any
governmental or regulatory agency;
(k) The Franchisee maintains all insurance policies as may be
required by any applicable law governing the environment;
(l) The Franchisee has no reason to believe that any operation
of equipment on or at the Premises may be the cause of a future spill
or release of a pollutant;
(m) The Franchisee has not in the past, nor is it presently,
generating, transporting or disposing of a hazardous substance as
defined by Section 9601(12) of CERCLA; and
(n) The Franchisor shall have the right, at Franchisee's
expense, to require an environmental audit of the Premises from a
company or companies satisfactory to Franchisor.
16. INSURANCE
16.1 Franchisee shall procure before the commencement of Restaurant
operations, and shall maintain in full force and effect during the entire
term of this Agreement, at its sole cost and expense, an insurance policy
or policies protecting Franchisee and Franchisor and their respective
officers, directors and employees against any and all claims, loss,
liability or expense whatsoever, arising out of or in connection with the
condition, operation, use or occupancy of the Restaurant or Restaurant
Premises. Franchisee shall procure workers' compensation coverage for
each of its employees no later than the first date of such employee's
employment. Franchisee shall also insure the Restaurant building and
other improvements, equipment, signs, interior and exterior decor items,
furnishings and fixtures, and any additions thereto, in accordance with
standard fire and extended coverage insurance policies then in effect for
similar businesses. Franchisor shall be named as an additional insured in
all such policies, workers' compensation excepted, and the certificate or
certificates of insurance shall state that the policy or policies shall
not be subject to cancellation or alteration without at least thirty (30)
days prior written notice to Franchisor. Such policy or policies shall be
written by a responsible insurance company or companies satisfactory to
Franchisor, and shall be in such form and contain such limits of liability
as shall be satisfactory to Franchisor from time to time. In any event,
such policy or policies shall include at least the following:
KIND OF INSURANCE MINIMUM LIMITS OF LIABILITY
Workers' Compensation Statutory
General Public Liability, $1,000,000 each person,
including Product Liability, $1,000,000 each occurrence
Injury and Liquor Liability
Fire and Extended Coverage Full replacement value
Umbrella Liability Insurance $2,000,000
Franchisee shall, upon request, exhibit certificates of such insurance to
Franchisor. The insurance afforded by the policy or policies respecting
public liability shall not be limited in any way by reason of any
insurance which may be maintained by Franchisor.
16.2 Within sixty (60) days after the execution of this Agreement,
but in no event later than the day before the Restaurant opens for
business, Franchisee shall submit to Franchisor for approval certificates
of insurance showing compliance with the requirements of Subsection 16.1.
Notwithstanding the foregoing, Franchisee shall submit to Franchisor for
approval certificates of insurance showing compliance with the worker's
compensation requirements set forth in Subsection 16.1 prior to the
training of any Franchisee employee at a Restaurant operated by
Franchisor. Maintenance of such insurance and the performance by
Franchisee of its obligations under this Section 16 shall not relieve
Franchisee of liability under the indemnity provisions of this Agreement,
and shall not limit such liability.
16.3 Should Franchisee, for any reason, fail to procure or maintain
the insurance coverage required by this Section, then Franchisor shall
have the right and authority to immediately procure such insurance
coverage and to charge the cost thereof to Franchisee, which amounts shall
be paid immediately upon notice and shall be subject to charges for late
payments in the manner set forth in Subsection 9.2.
16.4 No later than thirty (30) days following Franchisee's receipt of
same, Franchisee shall submit to Franchisor a copy of any written report
relating to the condition of the Restaurant premises, or any aspect
thereof, prepared by an insurer or prospective insurer or by a
representative of a federal, state or local government agency, provided
that if any such report contains comments or information which could
materially and detrimentally affect the Restaurant, such report shall be
submitted to Franchisor within three (3) days following Franchisee's
receipt thereof.
17. DEBTS AND TAXES
Franchisee shall pay or cause to be paid promptly when due all
obligations incurred, directly or indirectly, in connection with the
Restaurant and its operation, including, without limitation, (a) all taxes
and assessments that may be assessed against the Restaurant land, building
and other improvements, equipment, fixtures, signs, furnishings, and other
property; (b) all liens and encumbrances of every kind and character
created or placed upon or against any of said property, and; (c) all
accounts and other indebtedness of every kind and character incurred by or
on behalf of Franchisee in the conduct of the Restaurant business.
Notwithstanding the foregoing, Franchisee will not be in default of this
Agreement as a result of a non-payment or non-performance of the foregoing
so long as it disputes said debt or lien and is, in the sole opinion of
Franchisor, validly and in good faith pursuing a resolution of said claim
or lien and has reserved sufficient sums to pay the debt/claim as is
agreed to by Franchisor.
18. TRADE NAMES, SERVICE MARKS AND TRADEMARKS
18.1 Franchisee acknowledges the sole and exclusive right of
Franchisor (except for rights granted under existing and future franchise
agreements) to use Franchisor's trade names, service marks and trademarks
in connection with the products and services to which they are or may be
applied by Franchisor, and represents, warrants and agrees that Franchisee
shall not, either during the term of this Agreement, or after the
expiration or other termination hereof, directly or indirectly, contest or
aid in contesting the validity, ownership or use thereof by Franchisor, or
take any action whatsoever in derogation of the rights claimed herein by
Franchisor.
18.2 The right granted to Franchisee under this Agreement to use
Franchisor's trade names, service marks and trademarks is nonexclusive,
and Franchisor, in its sole discretion, subject only to the limitations
contained in Subsection 1.4 of this Agreement, has the right to grant
other rights in, to and under those names and marks in addition to those
rights already granted, and to develop and grant rights in other names and
marks on any such terms and conditions as Franchisor deems appropriate.
The rights granted under this Agreement do not include any right or
authority of any kind whatsoever to pre-package or sell pre-packaged food
products under any of Franchisor's names or marks.
18.3 Franchisee understands and acknowledges and agrees that
Franchisor has the unrestricted right, subject only to the limitations
contained in Subsection 1.4 of this Agreement, to engage, directly and
indirectly, through its employees, representatives, licenses, assigns,
agents, and others, at wholesale, retail, and otherwise, in (a) the
production, distribution and sale of products under the names and marks
licensed hereunder 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.
18.4 Nothing contained in this Agreement shall be construed to vest
in Franchisee any right, title or interest in or to any of Franchisor's
names or marks, the goodwill now or hereafter associated therewith, or any
right in the design of any restaurant building or premises, or the decor
or trade-dress of the Restaurant, other than the rights and license
expressly granted herein for the term hereof. Any and all goodwill
associated with or identified by any of Franchisor's names or marks shall
inure directly and exclusively to the benefit of Franchisor, including,
without limitation, any goodwill resulting from operation and promotion of
the Restaurant, provided that this Subsection shall not be construed to
entitle Franchisor to receive any portion of the consideration paid to
Franchisee and/or any Principal Shareholder as a result of a Transfer of
an Interest pursuant to Section 12 hereof.
18.5 Franchisee shall adopt and use Franchisor's names and marks only
in a manner expressly approved by Franchisor, and shall not use any of
Franchisor's names or marks in connection with any statement or material
which may, in the judgment of Franchisor, be in bad taste or inconsistent
with Franchisor's public image, or tend to bring disparagement, ridicule
or scorn upon Franchisor, any of Franchisor's names or marks, or the
goodwill associated therewith. Franchisee shall not adopt, use or
register as its corporate name (by filling a certificate or articles of
incorporation or otherwise) any trade or business name, style or design
which includes, or is similar to, any of Franchisor's trademarks, service
marks, trade names, logos, insignia, slogans, emblems, symbols, designs or
other identifying characteristics.
18.6 Franchisor shall have the right, at any time and from time to
time, upon notice to Franchisee, to make additions to, deletions from and
changes in any of Franchisor's names or marks, or all of them, all of
which additions, deletions and changes shall be made in good faith, on a
reasonable basis and with a view toward the overall best interests of the
System. Franchisor will use its best efforts to protect and preserve the
integrity and validity of Franchisor's names and marks, including the
taking of actions deemed by Franchisor to be appropriate in the event of
any apparent infringement of any of Franchisor's names or marks.
18.7 (a) Franchisor shall hold Franchisee harmless from any
liability or expense (but excluding consequential damages) resulting from
infringement of a third party's service mark, trade name or trademark by
Franchisor's service mark, Applebee's Neighborhood Grill & Bar, or by any
other service mark, trademark or trade name of Franchisor which Franchisor
shall designate as part of the System. This hold-harmless indemnity shall
not apply to any unauthorized use by Franchisee of any such service mark,
trade name or trademark.
(b) Franchisee agrees to notify Franchisor promptly in writing
of any suit or claim for infringement which is within the scope of the
hold-harmless indemnity set forth in this Subsection 18.7. Subject to the
terms and conditions of this Subsection 18.7, Franchisor shall have the
sole right to defend or settle any such suit or claim of infringement at
Franchisor's expense. Franchisee, at Franchisee's expense, shall have the
right to be represented by counsel. Franchisor shall, however, retain
control of any negotiations with respect to such claim or of any
litigation involving such suit. Franchisee agrees to cooperate with
Franchisor and to assist Franchisor whenever reasonably requested by
Franchisor, at Franchisor's expense, in the defense of any such
infringement suit or claim. Franchisee shall not enter into any
settlement of any such claim or suit or conduct any settlement
negotiations relative thereto without the prior approval of Franchisor in
writing and, if Franchisee does so, the hold-harmless indemnity set forth
in this Subsection 18.7 shall be deemed to have been waived and released
in all respects.
18.8 Franchisor represents that it is the sole owner of the service
mark Applebee's Neighborhood Grill & Bar. In the event that Franchisee is
precluded from operating the Restaurant because Franchisor determines that
a third person has acquired rights under the law of any state in such
mark, which so precludes Franchisee, Franchisor agrees (a) to repay to
Franchisee the initial franchise fee paid by Franchisee with respect to
the Restaurant, and (b) to assist Franchisee, at Franchisee's request, in
locating an alternative site for the Restaurant.
19. EXPIRATION AND TERMINATION;
OPTION TO PURCHASE RESTAURANT; ATTORNEYS' FEES
19.1 Franchisor shall have the right to terminate this Agreement
immediately upon written notice to Franchisee stating the reason for such
termination:
(a) in the event of any breach or default of any of the
provisions of Subsection 9.1, Sections 12 or 13, Subsection 14.1 or
Section 23;
(b) if a petition in bankruptcy, an arrangement for the benefit
of creditors, or a petition for reorganization is filed by Franchisee,
or is filed against Franchisee and not dismissed within ninety (90)
days from the filing thereof, or if Franchisee shall make any
assignment for the benefit of creditors, or if a receiver or trustee
is appointed for Franchisee and is not dismissed within ninety (90)
days of such appointment;
(c) if Franchisee ceases to operate the Restaurant without the
prior written consent of Franchisor or loses its right to possession
of the Restaurant premises; provided however, this provision will not
apply if Franchisee ceases to operate the Restaurant or loses its
right to possession of the Restaurant premises by reason of Force
Majeure and Franchisee complies with the requirements of Section 24 of
this Agreement;
(d) if Franchisor discovers that Franchisee has made any
material misrepresentation or omitted any material fact in the
information which was furnished to Franchisor in connection with this
Agreement;
(e) if any part of this Agreement relating to the payment of
fees to Franchisor, or the preservation of any of Franchisor's trade
names, service marks, trademarks, trade secrets or secret formulae
licensed or disclosed hereunder is, for any reason, declared invalid
or unenforceable; or
(f) if Franchisee or any Principal Shareholder is convicted of
or pleads nolo contendere to a felony or any crime involving moral
turpitude.
If Franchisee defaults in the performance or observance of any of its
other obligations hereunder, and such default continues for a period of
sixty (60) days after written notice to Franchisee specifying such
default, Franchisor shall have the right to terminate this Agreement upon
thirty (30) days written notice to Franchisee. If Franchisee defaults in
the performance or observance of the same obligation two (2) or more times
within a twelve (12) month period, Franchisor shall have the right to
terminate this Agreement immediately upon commission of the second act of
default, upon thirty (30) days written notice to Franchisee stating the
reason for such termination, without allowance for any curative period.
The foregoing provisions of this Subsection 19.1 are subject to the
provisions of any local statutes or regulations which limit the grounds
upon which Franchisor may terminate this Agreement, or which require that
Franchisor give Franchisee additional prior written notice of termination
and opportunity to cure any default.
In the event of termination by reason of Franchisee's failure after a
good faith effort to obtain the necessary state or local liquor licenses
(as required in Section 23), Franchisor shall refund to Franchisee,
without interest, the franchise fee payment referred to in
Subsection 9.1(a), less any expenses incurred and damages sustained by
Franchisor in connection with its performance hereunder prior to the date
of such termination. Franchisor shall also repay the initial franchise
fee in the circumstances described in Subsection 18.8 hereof. In the
event of termination for any other reason, Franchisor shall have no
obligation to refund any amount previously paid by Franchisee, and
Franchisee shall be obligated to promptly pay all sums which are then due
Franchisor.
19.2 Upon the termination of this Agreement by Franchisor, Franchisee
may not remove any property from the Restaurant premises for thirty (30)
days after the termination. Upon the expiration or earlier termination of
this Agreement for any reason:
(a) Franchisee shall immediately discontinue its use of the
System and its use of Franchisor's trade names, service marks,
trademarks, logos, insignia, slogans, emblems, symbols, designs and
other identifying characteristics;
(b) if the Restaurant premises are owned by Franchisee or
leased from a third party, Franchisee shall, upon demand by
Franchisor, remove (at Franchisee's expense) Franchisor's trade names,
service marks, trademarks, logos, insignia, slogans, sign facia,
emblems, symbols, designs and other identifying characteristics from
all premises, and paint all premises and other improvements maintained
pursuant to this Agreement a design and color which is basically
different from Franchisor's authorized design and color. If
Franchisee shall fail to make or cause to be made any such removal or
repainting within thirty (30) days after written notice, then
Franchisor shall have the right to enter upon the Restaurant premises,
without being deemed guilty of trespass or any tort (or Franchisee
shall cause Franchisor to be permitted on the premises as necessary),
and make or cause to be made such removal, alterations and repainting
at the reasonable expense of Franchisee, which expense Franchisee
shall pay to Franchisor immediately upon demand; and
(c) Franchisee shall not thereafter use any trademark, trade
name, service mark, logo, insignia, slogan, emblem, symbol, design or
other identifying characteristic that is in any way associated with
Franchisor or similar to those associated with Franchisor, or use any
food or proprietary menu item, recipe or method of food preparation or
operate or do business under any name or in any manner that might tend
to give the public the impression that Franchisee is or was a licensee
or franchisee of, or otherwise associated with, Franchisor.
19.3 In the event that any part to this Agreement initiates any legal
proceeding to construe or enforce any of the terms, conditions and/or
provisions of this Agreement, including, but not limited to, its
termination provisions and its provisions requiring Franchisee to make
certain payments to Franchisor incident to the operation of the
Restaurant, or to obtain damages or other relief to which any such party
may be entitled by virtue of this Agreement, the prevailing party or
parties shall be paid its reasonable attorneys' fees and expenses by the
other party or parties. If Franchisee fails to comply with a written
notice of termination sent by Franchisor and a court later upholds such
termination of this Agreement, Franchisee's operation of the Restaurant,
from and after the date of termination stated in such notice, shall
constitute willful trademark infringement and unfair competition by
Franchisee, and Franchisee shall be liable to Franchisor for damages
resulting from such infringement in addition to any fees paid or payable
hereunder, including, without limitation, any profits which Franchisee
derived from such post-termination operation of the Restaurant.
19.4 (a) With respect to Restaurant premises owned by Franchisee, in
the event of termination of this Agreement, Franchisor shall have, for
thirty (30) days after the termination is effective, an option,
exercisable upon written notice to Franchisee within such thirty (30) day
period, to elect to purchase the Restaurant premises from Franchisee for
the fair market value of the land and buildings, furnishings and equipment
located therein.
(b) In addition to the option described above, Franchisor shall
have an option, exercisable upon written notice to Franchisee, to elect to
purchase the Restaurant premises from Franchisee upon expiration of this
Agreement for the fair market value of the land and buildings,
furnishings, and equipment located therein subject to Franchisee's option
to operate the Restaurant for an additional term under Subsection 1.3
hereof. If Franchisee does not notify Franchisor, pursuant to
Subsection 1.3 hereof, of a desire to operate the Restaurant for an
additional term, then Franchisor shall provide the written notice
described in the preceding sentence within thirty (30) days after the
latest date by which Franchisee is required by Subsection 1.3 to advise
Franchisor of such a desire; if Franchisee does notify Franchisor of a
desire to operate the Restaurant for an additional term and Franchisor
determines that Franchisee is not eligible to do so, Franchisor shall
provide the written notice described in the preceding sentence within
thirty (30) days of its written notice to Franchisee that Franchisee is
not eligible to operate the Restaurant for such additional term. With
respect to the option to purchase upon expiration of this Agreement, this
option shall not apply if prior to thirty (30) days before said
expiration, Franchisee enters into an agreement to sell such Restaurant
premises to a third party upon the expiration of the Franchise Agreement,
provided that Franchisee's agreement with the purchaser includes a
covenant by the purchaser, which is expressly enforceable by Franchisor as
a third-party beneficiary thereof, pursuant to which the purchaser agrees
that, for a period of twelve (12) months after the expiration of this
Agreement, the purchaser shall not use such premises for the operation of
a restaurant business whose menu or method of operation is similar to that
employed by restaurant units within the System.
(c) If Franchisee receives approval to operate the Restaurant
premises for an additional term in accordance with Subsection 1.3 hereof,
Franchisee will be required to execute the then-existing form of franchise
agreement, which shall contain an option to obtain assignment of
Franchisee's lease with a third party and/or to purchase certain property,
exercisable by Franchisor upon termination thereof, and an option to
purchase the Restaurant premises, exercisable by Franchisor upon
expiration of the additional term (subject to any then-existing rights to
renew of Franchisee). Such options shall be substantially similar to the
provisions described in this Subsection 19.4.
(d) If the parties cannot agree on the purchase price or other
terms of purchase within thirty (30) days following Franchisor's exercise
of its option pursuant to Subsection 19.4(a) and (b), the price or
disputed terms of purchase shall be determined by three (3) appraisers,
with each party selecting one (1) appraiser and the two (2) appraisers, so
chosen, selecting the third appraiser. In the event of such an appraisal,
each party shall bear its own legal and other costs and shall split the
appraisal fees. The appraisers' determination of the price and other
disputed terms of purchase shall be final and binding.
(e) If Franchisor elects to exercise its option to purchase
upon termination of this Agreement, the purchase price shall be paid
within thirty (30) days of the determination of the purchase price and
other terms of purchase. If Franchisor elects to exercise its option to
purchase upon expiration of this Agreement, the purchase price shall be
paid within thirty (30) days of the later of (a) the determination of the
purchase price and other terms of purchase, or (b) expiration of this
Agreement. If the Franchisor does not elect to exercise its option to
purchase the Restaurant premises, the Franchisee may sell such premises to
a third party, provided that Franchisee's agreement with the purchaser
includes a covenant by the purchaser, which is expressly enforceable by
Franchisor as a third-party beneficiary thereof, pursuant to which the
purchaser agrees that it shall not use such premises for the operation of
a restaurant business whose menu or method of operation is similar to that
employed by restaurant units within the System for a period of twelve (12)
months after the termination or expiration of this Agreement.
(f) If the Restaurant premises are leased by Franchisee from a
third party, such lease must allow Franchisee to assign the lease to
Franchisor. Upon termination of this Agreement for any reason, Franchisor
has the right, exercisable upon written notice to Franchisee within
thirty (30) days after termination is effective, to require Franchisee to
assign all Franchisee's rights and obligations under the lease to
Franchisor and to immediately surrender possession of the premises,
including all fixtures and leasehold improvements, to Franchisor. The
lessor may not impose any assignment fee or other similar charge on
Franchisor in connection with such assignment. If Franchisor exercises
that right, it has an additional right, to be exercised within thirty (30)
days after taking possession of the premises, to purchase all of
Franchisee's equipment, signs, decor items, furnishings, supplies and
other products and materials at their then-fair market value. If the
parties cannot agree on the price, the price will be determined in the
manner set forth in connection with Franchisee-owned Restaurant premises.
If Franchisor elects not to purchase the items mentioned above, Franchisee
shall, at Franchisee's own expense and under Franchisor's supervision
remove those items from the premises within ten (10) days after such final
election, or ten (10) days after expiration of the option period,
whichever is earlier. If Franchisee fails to remove all such property
from the premises within such period, Franchisor shall be entitled to do
so, or to authorize a third party to do so, all at Franchisee's expense.
19.5 In addition to the provisions contained in Subsection 19.4
hereof:
(a) With respect to Restaurant premises owned by Franchisee, in
the event of termination of this Agreement and Franchisor's exercise
of its option to purchase the Restaurant premises pursuant to
Subsection 19.4(a) hereof, Franchisee shall have, for ten (10) days
after its receipt of written notice of Franchisor's election to
purchase, an option, exercisable upon written notice to Franchisor, to
lease said premises to Franchisor, pursuant to a lease which provides
for rental at a rate not in excess of six percent (6%) of gross sales
and triple net terms. Said lease shall provide for a lease term of at
least ten (10) years with two (2) five (5)-year options to renew, and
for primary annual rent of not in excess of the number derived from
multiplying six percent (6%) times the gross sales reported by
Franchisee to Franchisor for which Franchisee has paid a royalty fee
for the next preceding calendar year times eighty percent (80%).
(b) In addition to the option described above, Franchisee shall
have an option, exercisable upon written notice to Franchisor, to
elect to lease the Restaurant premises to Franchisor upon expiration
of this Agreement and Franchisor's exercise of its option to purchase
the Restaurant premises pursuant to Subsection 19.4(b) hereof,
pursuant to the same terms set forth in Subsection 19.5(a) above,
subject to Franchisee's option to operate the Restaurant for an
additional term under Subsection 1.3 hereof. If (i) Franchisee does
not notify Franchisor, pursuant to Subsection 1.3 hereof, of a desire
to operate the Restaurant for an additional term, or (ii) Franchisee
does notify Franchisor of a desire to operate the Restaurant for an
additional term and Franchisor determines that Franchisee is not
eligible to do so, and Franchisor exercises its option to purchase the
Restaurant premises, then Franchisee shall provide the written notice
described in the preceding sentence within ten (10) days after its
receipt of written notice of Franchisor's election to purchase. With
respect to the option to lease upon expiration of this Agreement, this
option shall not apply if prior to thirty (30) days before said
expiration, Franchisee enters into an agreement to sell such
Restaurant premises to a third party upon the expiration of the
Franchise Agreement, provided that Franchisee's agreement with the
purchaser includes a covenant by the purchaser, which is expressly
enforceable by Franchisor as a third-party beneficiary thereof,
pursuant to which the purchaser agrees, at Franchisor's option, either
to lease said premises to Franchisor upon the terms set forth in
Subsection 19.5(a), or that for a period of twelve (12) months after
the expiration of this Agreement, the purchaser shall not use such
premises for the operation of a restaurant business whose menu or
method of operation is similar to that employed by restaurant units
within the System.
(c) If Franchisee receives approval to operate the Restaurant
premises for an additional term in accordance with Subsection 1.3
hereof, Franchisee will be required to execute the then-existing form
of franchise agreement which shall contain an option to obtain
assignment of Franchisee's lease with a third party and/or to lease
certain property, exercisable by Franchisor upon termination thereof,
and an option to lease the Restaurant premises, exercisable by
Franchisor upon expiration of the additional term (subject to any
then-existing rights to renew of Franchisee). Such options shall be
substantially similar to the provisions described in this Subsection
19.5.
20. NO WAIVER OF DEFAULT
20.1 The waiver by any party to this Agreement of any breach or
default, or series of breaches or defaults, of any term, covenant or
condition herein, or of any same or similar term, covenant or condition
contained in any other agreement between Franchisor and any franchisee,
shall not be deemed a waiver of any subsequent or continuing breach or
default of the same or any other term, covenant or condition contained in
this Agreement, or in any other agreement between Franchisor and any
franchisee.
20.2 All rights and remedies of the parties hereto shall be
cumulative and not alternative, in addition to and not exclusive of any
other rights or remedies which are provided for herein or which may be
available at law or in equity in case of any breach, failure or default or
threatened breach, failure or default of any term, provision or condition
of this Agreement. The rights and remedies of the parties hereto shall be
continuing and shall not be exhausted by any one (1) or more uses thereof,
and may be exercised at any time or from time to time as often as may be
expedient; and any option or election to enforce any such right or remedy
may be exercised or taken at any time and from time to time. The
expiration or earlier termination of this Agreement shall not discharge or
release Franchisee or any Principal Shareholder from any liability or
obligation then accrued, or any liability or obligation continuing beyond,
or arising out of, the expiration or earlier termination of the Agreement.
21. CONSTRUCTION, SEVERABILITY,
GOVERNING LAW AND JURISDICTION
21.1 If any part of this Agreement shall for any reason be declared
invalid, unenforceable or impaired in any way, the validity of the
remaining portions shall remain in full force and effect as if the
Agreement had been executed with such invalid portion eliminated, and it
is hereby declared the intention of the parties that they would have
executed the remaining portion of this Agreement without including therein
any such portions which might be declared invalid; provided however, that
in the event any part hereof relating to the payment of fees to
Franchisor, or the preservation of any of Franchisor's trade names,
service marks, trademarks, trade secrets or secret formulae licensed or
disclosed hereunder is for any reason declared invalid or unenforceable,
then Franchisor shall have the right to terminate this Agreement upon
written notice to Franchisee. If any clause or provision herein would be
deemed invalid or unenforceable as written, it shall be deemed modified or
limited to such extent or in such manner as may be necessary to render the
clause or provision valid and enforceable to the greatest extent possible
in light of the interest of the parties expressed in that clause or
provision, subject to the provisions of the preceding sentence.
21.2 FRANCHISEE AND PRINCIPAL SHAREHOLDERS ACKNOWLEDGE THAT
FRANCHISOR MAY GRANT NUMEROUS FRANCHISES THROUGHOUT THE UNITED STATES ON
TERMS AND CONDITIONS SIMILAR TO THOSE SET FORTH IN THIS AGREEMENT, AND
THAT IT IS OF MUTUAL BENEFIT TO FRANCHISEE AND PRINCIPAL SHAREHOLDERS AND
TO FRANCHISOR THAT THESE TERMS AND CONDITIONS BE UNIFORMLY INTERPRETED.
THEREFORE, THE PARTIES AGREE THAT TO THE EXTENT THAT THE LAW OF THE STATE
OF MISSOURI DOES NOT CONFLICT WITH LOCAL FRANCHISE STATUTES, RULES AND
REGULATIONS, MISSOURI LAW SHALL APPLY TO THE CONSTRUCTION OF THIS
AGREEMENT AND SHALL GOVERN ALL QUESTIONS WHICH ARISE WITH REFERENCE
HERETO; PROVIDED HOWEVER, THAT PROVISIONS OF MISSOURI LAW REGARDING
CONFLICTS OF LAW SHALL NOT APPLY HERETO.
21.3 THE PARTIES 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, MAY, AT
THE OPTION OF THE CLAIMANT, BE RESOLVED BY A PROCEEDING IN A COURT IN
JACKSON COUNTY, MISSOURI, AND FRANCHISEE AND PRINCIPAL SHAREHOLDERS EACH
IRREVOCABLY ACCEPT THE JURISDICTION OF THE COURTS OF THE STATE OF MISSOURI
AND THE FEDERAL COURTS LOCATED IN JACKSON COUNTY, MISSOURI FOR SUCH
CLAIMS, CONTROVERSIES OR DISPUTES.
The parties agree that service of process in any proceeding arising
out of or relating to this Agreement or the performance thereof may be
made as to Franchisee and any Principal Shareholder by serving a person of
suitable age and discretion (such as the person in charge of the office)
at the address of Franchisee specified in this Agreement and as to
Franchisor by serving the president or a vice-president of Franchisor at
the address of Franchisor or by serving Franchisor's registered agent.
22. INTERFERENCE WITH EMPLOYMENT RELATIONS
During the term of this Agreement, neither Franchisor nor Franchisee
shall employ or seek to employ in a managerial position (i.e., in a
position at a pay grade at or above that of Assistant Restaurant Manager
or Kitchen Manager), directly or indirectly, any person who is at the time
or was at any time during the prior six (6) months employed by the other
party or any of its subsidiaries or affiliates, or by any franchisee in
the System. This section shall not be violated if, at the time Franchisor
or Franchisee employs or seeks to employ such person, such former employer
has given its written consent. Notwithstanding any other provision of
this Agreement, the parties hereto acknowledge that if this Section is
violated, such former employer shall be entitled to liquidated damages
equal to three (3) times the annual salary of the employee involved, plus
reimbursement of all costs and attorneys' fees incurred. In addition to
the rights granted to the parties hereto, the parties acknowledge and
agree that any franchisee from which an employee was hired by either party
to this Agreement in violation of the terms of this Section shall be
deemed to be a third-party beneficiary of this provision and may sue and
recover against the offending party the liquidated damages herein set
forth; provided however, the failure by Franchisee to enforce this Section
shall not be deemed to be a violation of this Section.
23. LIQUOR LICENSE
The grant of the rights which are the subject of this Agreement is
expressly conditioned upon the ability of the Franchisee to obtain and
maintain any and all required state and/or local licenses permitting the
sale of liquor by the drink on the Restaurant premises, and Franchisee
agrees to use its best efforts to obtain such licenses. In the event
Franchisee fails, after a good faith effort, to obtain any and all such
required liquor licenses prior to the date on which the Restaurant is
otherwise ready to open for business, then, at the option of the
Franchisor, this Agreement may be terminated forthwith by Franchisor upon
written notice to Franchisee, in which event, Franchisor shall refund to
Franchisee, without interest, the initial franchise fee payment referred
to in Subsection 9.1, less any expenses incurred and damages sustained by
Franchisor in connection with its performance hereunder prior to the date
of such termination. After obtaining the necessary state or local liquor
licenses, Franchisee shall thereafter comply with all applicable laws and
regulations relating to the sale of liquor on the Restaurant premises.
If, during any twelve (12) month period during the term of this Agreement,
Franchisee is prohibited for any reason from selling liquor on the
Restaurant premises for more than thirty (30) days because of a violation
or violations of state or local liquor laws, then at the option of
Franchisor this Agreement may be terminated forthwith by Franchisor upon
written notice to Franchisee.
24. FORCE MAJEURE
24.1 As used in this Agreement, the term "Force Majeure" shall mean
any act of God, strike, lock-out or other industrial disturbance, war
(declared or undeclared), riot, epidemic, fire or other catastrophe, act
of any government and any other similar cause not within the control of
the party affected thereby.
24.2 If the performance of any obligation by any party under this
Agreement is prevented, hindered or delayed by reason of Force Majeure,
which cannot be overcome by use of normal commercial measures, the parties
shall be relieved of their respective obligations to the extent the
parties are respectively necessarily prevented, hindered or delayed in
such performance during the period of such Force Majeure. The party whose
performance is affected by an event of Force Majeure shall give prompt
notice of such Force Majeure event to the other party by telephone or
telegram (in each case to be confirmed in writing), setting forth the
nature thereof and an estimate as to its duration, and shall be liable for
failure to give such timely notice only to the extent of damage actually
caused.
24.3 Notwithstanding the provisions of this Section 24, if, as a
result of an event of Force Majeure (including condemnation proceedings),
the Franchisee ceases to operate the Restaurant or loses the right to
possession of the Restaurant premises, Franchisee shall apply within
thirty (30) days after the event of Force Majeure for Franchisor's
approval to relocate and/or reconstruct the Restaurant. If relocation is
necessary, Franchisor agrees to use its reasonable efforts to assist
Franchisee in locating an alternative site in the same general area where
Franchisee can operate a Restaurant within the System for the balance of
the term of the Franchise Agreement. If Franchisor so assists Franchisee,
Franchisee shall reimburse Franchisor for its reasonable out-of-pocket
expenses incurred as a result thereof. (This provision shall not be
construed to prevent Franchisee from receiving the full amount of any
condemnation award of damages relating to the closing of the Restaurant;
provided however, that if Franchisor or an affiliate is the lessor of the
Restaurant premises, Franchisee specifically waives and releases any claim
it may have for the value of any building, fixtures and other improvements
on the premises, whether or not installed or paid for by the Franchisee,
and Franchisee agrees to subordinate any claim it may have to Franchisor's
claim for such improvements.) Selection of an alternative location will
be subject to the site approval procedures set forth in Section 5 of the
Development Agreement. Once Franchisee has obtained Franchisor's approval
to relocate and/or reconstruct the Restaurant, Franchisee must diligently
pursue relocation and/or reconstruction until the Restaurant is reopened
for business.
25. MISCELLANEOUS
25.1 All notices and other communications required or permitted to be
given hereunder shall be deemed given when delivered in person or mailed
by registered or certified mail addressed to the recipient at the address
set forth below, unless that party shall have given written notice of
change of address to the sending party, in which event the new address so
specified shall be used.
FRANCHISOR: Applebee's International, Inc.
4551 W. 107th Street, Suite 100
Overland Park, Kansas 66207
Attention: President
FRANCHISEE:
PRINCIPAL SHAREHOLDERS:
25.2 All terms used in this Agreement, regardless of the number and
gender in which they are used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context or sense of this Agreement may require,
the same as if such words had been written in this Agreement themselves.
The headings inserted in this Agreement are for reference purposes only
and shall not affect the construction of this Agreement or limit the
generality of any of its provisions. The term "business day" means any
day other than Saturday, Sunday, or the following national holidays: New
Year's Day, Martin Luther King Day, Washington's Birthday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and
Christmas.
25.3 Franchisee shall, at its own cost and expense, promptly comply
with all laws, ordinances, orders, rules, regulations and requirements of
all federal, state and municipal governments and appropriate departments,
commissions, boards and offices thereof. Without limiting the generality
of the foregoing, Franchisee shall abide by all applicable rules and
regulations of any public health department.
25.4 In the event that Franchisor has leased the Restaurant premises
to Franchisee pursuant to a written lease agreement (the "Lease"), the
Lease is hereby incorporated in this Agreement by reference, and any
failure on the part of Franchisee (Lessee therein) to perform, fulfill or
observe any of the covenants, conditions or agreements contained in the
Lease shall constitute a material breach of this Agreement. It is
expressly understood, acknowledged and agreed by Franchisee that any
termination of the Lease shall result in automatic and immediate
termination of this Agreement without additional notice to Franchisee.
25.5 This Agreement and the documents referred to herein constitute
the entire agreement between the parties, superseding and canceling any
and all prior and contemporaneous agreements, understandings,
representations, inducements and statements, oral or written, of the
parties in connection with the subject matter hereof. FRANCHISEE
EXPRESSLY ACKNOWLEDGES THAT IT HAS ENTERED INTO THIS FRANCHISE AGREEMENT
AS A RESULT OF ITS OWN INDEPENDENT INVESTIGATION AND AFTER CONSULTATION
WITH ITS OWN ATTORNEY, AND NOT AS A RESULT OF ANY REPRESENTATIONS OF
FRANCHISOR, ITS AGENTS, OFFICERS OR EMPLOYEES, EXCEPT AS CONTAINED HEREIN
AND IN FRANCHISOR'S FRANCHISE OFFERING CIRCULAR, HERETOFORE MADE AVAILABLE
TO FRANCHISEE.
25.6 Except as expressly authorized herein, no amendment or
modification of this Agreement shall be binding unless executed in writing
both by Franchisor and by Franchisee and Principal Shareholders.
26. ACKNOWLEDGMENTS
Franchisee and Principal Shareholders acknowledge that:
(a) Franchisee has received a copy of this Agreement and has
had an opportunity to consult with its attorney with respect thereto
at least five (5) business days prior to execution of this Agreement;
(b) No representation has been made by Franchisor as to the
future profitability of the Restaurant;
(c) Prior to the execution of this Agreement, Franchisee has
had ample opportunity to contact Franchisor's existing franchisees, if
any, and to investigate all statements made by Franchisor relating to
the System;
(d) This Agreement establishes the right to construct and
operate a Restaurant only at the location specified in Subsection 1.1
hereof; and
(e) Franchisor is the sole owner of the service marks
identified in this Agreement, and of the goodwill associated
therewith, and Franchisee acquires no right, title or interest in
those names and marks other than the right to use them only in the
manner and to the extent prescribed and approved by Franchisor.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of
the date first above written.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Name:
Title: Title:
FRANCHISEE:
ATTEST:
By:
Name: Name:
Title: Title:
PRINCIPAL SHAREHOLDER(S):
Witness Name:
Witness Name:
Witness Name:
Witness Name:
<PAGE>
EXHIBIT 1 TO FRANCHISE AGREEMENT
ROYALTY FEE
The monthly royalty fee to be paid by Franchisee shall be four
percent (4%) of each calendar month's gross sales; provided however, on
and after January 1, 2000, Franchisor may, in its sole discretion,
increase the monthly royalty fee to five percent (5%) of each calendar
month's gross sales.
<PAGE>
APPENDIX A TO FRANCHISE AGREEMENT
STATEMENT OF OWNERSHIP INTERESTS
Percent of Issued
and Outstanding
Shareholder Shares of Franchisee
<PAGE>
APPENDIX B TO FRANCHISE AGREEMENT
REVIEW AND CONSENT WITH RESPECT TO TRANSFERS
In determining whether to grant or to withhold consent to a proposed
Transfer, Franchisor shall consider all of the facts and circumstances
which it views as relevant in the particular instance, including, but not
limited to, any of the following: (i) work experience and aptitude of
Proposed New Owner and/or proposed new management (a proposed transferee
of a Principal Shareholder's Interest and/or a proposed transferee of this
Agreement is referred to as "Proposed New Owner"); (ii) financial
background and condition of Proposed New Owner, and actual and pro forma
financial condition of Franchisee; (iii) character and reputation of
Proposed New Owner; (iv) conflicting interests of Proposed New Owner;
(v) the terms and conditions of Proposed New Owner's rights, if the
proposed Transfer is a pledge or hypothecation; (vi) the adequacy of
Franchisee's operation of any Restaurant and compliance with the System
and this Agreement; and (vii) such other criteria and conditions as
Franchisor shall then consider relevant in the case of an application for
a new franchise to operate a restaurant unit within the System by an
applicant that is not then currently doing so. Franchisor's consent also
may be conditioned upon execution by Proposed New Owner of an agreement
whereby Proposed New Owner assumes full, unconditional, joint and several
liability for, and agrees to perform from the date of such Transfer, all
obligations, covenants and agreements contained herein to the same extent
as if it had been an original party to this Agreement and may also require
Franchisee and Principal Shareholders, including the proposed
Transferor(s), to execute a general release which releases Franchisor from
any claims they may have had or then have against Franchisor. In the
event Proposed New Owner is a partnership (including, but not limited to,
a limited partnership), Proposed New Owner will also be required to
execute an addendum to the Agreement which amends the references to
Franchisee and its Principal Shareholders to include the partnership
approved by Franchisor and Proposed New Owner's general partner(s) and the
principal shareholders of the general partner(s), if the general
partner(s) is a corporation. This addendum will contain a provision
including in the definition of "Transfer" the withdrawal, removal or
voluntary/involuntary dissolution (if applicable) of the general
partner(s) or the substitution or addition of a new general partner.
Franchisee or Principal Shareholders, as the case may be, shall provide
Franchisor with such information as it may require in connection with a
request for approval of a proposed Transfer.
<PAGE>
APPENDIX C TO FRANCHISE AGREEMENT
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made this ________ day of ________________,
19_______, by and between _______________________________________, a
_____________ corporation ("Developer"), and __________________________,
an individual employed by Developer ("Employee").
WITNESSETH:
WHEREAS, APPLEBEE'S INTERNATIONAL, INC. ("Applebee's") is the owner
of all rights in and to a unique system for the development and operation
of restaurants (the "System"), which includes proprietary rights in
valuable trade names, service marks and trademarks, including the service
mark Applebee's Neighborhood Grill & Bar and variations of such mark,
designs and color schemes for restaurant premises, signs, equipment,
procedures and formulae for preparing food and beverage products,
specifications for certain food and beverage products, inventory methods,
operating methods, financial control concepts, a training facility and
teaching techniques;
WHEREAS, Developer is the owner of the exclusive right to develop
restaurants franchised by Applebee's which utilize the System
("Restaurants") for the period and in the territory described in the
Development Agreement between Applebee's and Developer (the "Development
Agreement"); and
WHEREAS, Developer acknowledges that Applebee's information as
described above was developed over time at great expense, is not generally
known in the industry and is beyond Developer's own present skills and
experience, and that to develop it itself would be expensive,
time-consuming and difficult, that it provides a competitive advantage and
will be valuable to Developer in the development of its business, and that
gaining access to it was therefore a primary reason why Developer entered
into the Development Agreement; and
WHEREAS, in consideration of Applebee's confidential disclosure to
Developer of these trade secrets, Developer has agreed to be obligated by
the terms of Development Agreement to execute, with each employee of
Developer who will have supervisory authority over the development or
operation of more than one Restaurant in the Territory described in the
Development Agreement, a written agreement protecting Applebee's trade
secrets and confidential information entrusted to Employee;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, the parties agree as follows:
(1) The parties acknowledge and agree that Employee is or will be
employed in a supervisory or managerial capacity and in such capacity will
have access to information and materials which constitute trade secrets
and confidential and proprietary information. The parties further
acknowledge and agree that any actual or potential direct or indirect
competitor of Applebee's, or of any of its franchisees, shall not have
access to such trade secrets and confidential information.
(2) The parties acknowledge and agree that the System includes
trade secrets and confidential information which Applebee's has revealed
to Developer in confidence, and that protection of said trade secrets and
confidential information and protection of Applebee's against unfair
competition from others who enjoy or who have had access to said trade
secrets and confidential information are essential for the maintenance of
goodwill and special value of the System.
(3) Employee agrees that he or she shall not at any time
(i) appropriate or use the trade secrets incorporated in the System, or
any portion thereof, for use in any business which is not within the
System; (ii) disclose or reveal any portion of the System to any person,
other than to Developer's employees as an incident of their training;
(iii) acquire any right to use, or to license or franchise the use of any
name, mark or other intellectual property right which is or may be granted
by any franchise agreement between Applebee's and Developer; or
(iv) communicate, divulge or use for the benefit of any other person or
entity any confidential information, knowledge or know-how concerning the
methods of development or operation of a Restaurant which may be
communicated to Employee or of which Employee may be apprised by virtue of
Employee's employment by Developer. Employee shall divulge such
confidential information only to such of Developer's other employees as
must have access to that information in order to operate a Restaurant or
to develop a prospective site for a Restaurant. Any and information,
knowledge and know-how, including, without limitation, drawings,
materials, equipment, specifications, techniques and other data, which
Applebee's designates as confidential, shall be deemed confidential for
purposes of this Agreement.
(4) Employee further acknowledges and agrees that the Franchise
Operations Manual and any other materials or manuals provided or made
available to Developer by Applebee's (collectively, the "Manuals"),
described in Section 5 of the applicable franchise agreement between
Applebee's and Developer, are loaned by Applebee's to Developer for
limited purposes only, remain the property of Applebee's, and may not be
reproduced, in whole or in part, without the written consent of
Applebee's.
(5) Employee agrees to surrender to Developer or to Applebee's each
and every copy of the Manuals and any other information or material in his
or her possession or control upon request, upon termination of employment
or upon completion of the use for which said Manuals or other information
or material may have been furnished to Employee.
(6) The parties agree that in the event of a breach of this
Agreement, Applebee's would be irreparably injured and would be without an
adequate remedy at law. Therefore, in the event of a breach or a
threatened or attempted breach of any of the provisions hereof, Applebee's
shall be entitled to enforce the provisions of this Agreement as a third-
party beneficiary hereof and shall be entitled, in addition to any other
remedies which it may have hereunder at law or in equity (including the
right to terminate the Development Agreement), to a temporary and/or
permanent injunction and a decree for specific performance of the terms
hereof without the necessity of showing actual or threatened damage, and
without being required to furnish a bond or other security.
(7) If any court or other tribunal having jurisdiction to determine
the validity or enforceability of this Agreement determines that it would
be invalid or unenforceable as written, the provisions hereof shall be
deemed to be modified or limited to such extent or in such manner
necessary for such provisions to be valid and enforceable to the greatest
extent possible.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
as of the date first above written.
DEVELOPER EMPLOYEE
By: By:
Name: Name:
Title:
<PAGE>
APPENDIX C TO DEVELOPMENT AGREEMENT
STATEMENT OF OWNERSHIP INTERESTS
Percent of Issued
and Outstanding
Shareholder Shares of Developer
The Marcus Corporation 100%
<PAGE>
APPENDIX D TO DEVELOPMENT AGREEMENT
REVIEW AND CONSENT WITH RESPECT TO TRANSFERS
In determining whether to grant or to withhold consent to a proposed
Transfer, Franchisor shall consider all of the facts and circumstances
which it views as relevant in the particular instance, including, but not
limited to, any of the following: (i) work experience and aptitude of
Proposed New Owner and/or proposed new management (a proposed transferee
of a Principal Shareholder's Interest and/or a proposed transferee of this
Agreement is referred to as "Proposed New Owner"); (ii) financial
background and condition of Proposed New Owner, and actual and pro forma
financial condition of Developer; (iii) character and reputation of
Proposed New Owner; (iv) conflicting interests of Proposed New Owner;
(v) the terms and conditions of Proposed New Owner's rights, if the
proposed Transfer is a pledge or hypothecation; (vi) the adequacy of
Developer's operation (as Franchisee) of any Restaurant and compliance
with the System and this Agreement; and (vii) such other criteria and
conditions as Franchisor shall then consider relevant in the case of an
application for a new franchise to operate a restaurant unit within the
System by an applicant that is not then currently doing so. Franchisor's
consent also may be conditioned upon execution by Proposed New Owner of an
agreement whereby Proposed New Owner assumes full, unconditional, joint
and several liability for, and agrees to perform from the date of such
Transfer, all obligations, covenants and agreements contained herein to
the same extent as if it had been an original party to this Agreement and
may also require Developer and Principal Shareholders, including the
proposed Transferor(s), to execute a general release which releases
Franchisor from any claims they may have had or then have against
Franchisor. In the event Proposed New Owner is a partnership (including,
but not limited to, a limited partnership), Proposed New Owner will also
be required to execute an addendum to the Agreement which amends the
references to Developer and its Principal Shareholders to include the
partnership approved by Franchisor and Proposed New Owner's general
partner(s) and the principal shareholders of the general partner(s), if
the general partner(s) is a corporation. This addendum will contain a
provision including in the definition of "Transfer" the withdrawal,
removal or voluntary/involuntary dissolution (if applicable) of the
general partner(s) or the substitution or addition of a new general
partner. Developer or Principal Shareholders, as the case may be, shall
provide Franchisor with such information as it may require in connection
with a request for approval of a proposed Transfer.
<PAGE>
APPENDIX E TO DEVELOPMENT AGREEMENT
CONFIDENTIALITY AGREEMENT AND
COVENANT NOT TO COMPETE
THIS AGREEMENT is made this ________ day of ________________,
19______, by and between _______________________________________, a
_____________ corporation ("Developer"), and __________________________,
an individual employed by Developer ("Employee").
WITNESSETH:
WHEREAS, APPLEBEE'S INTERNATIONAL, INC. ("Applebee's") is the owner
of all rights in and to a unique system for the development and operation
of restaurants (the "System"), which includes proprietary rights in
valuable trade names, service marks and trademarks, including the service
mark Applebee's Neighborhood Grill & Bar and variations of such mark,
designs and color schemes for restaurant premises, signs, equipment,
procedures and formulae for preparing food and beverage products,
specifications for certain food and beverage products, inventory methods,
operating methods, financial control concepts, a training facility and
teaching techniques;
WHEREAS, Developer is the owner of the exclusive right to develop
restaurants franchised by Applebee's which utilize the System
("Restaurants") for the period and in the territory described in the
Development Agreement between Applebee's and Developer (the "Development
Agreement");
WHEREAS, Developer acknowledges that Applebee's information as
described above was developed over time at great expense, is not generally
known in the industry and is beyond Developer's own present skills and
experience, and that to develop it itself would be expensive,
time-consuming and difficult, that it provides a competitive advantage and
will be valuable to Developer in the development of its business, and that
gaining access to it was therefore a primary reason why Developer entered
into the Development Agreement; and
WHEREAS, in consideration of Applebee's confidential disclosure to
Developer of these trade secrets, Developer has agreed to be obligated by
the terms of Development Agreement to execute, with its Director of
Operations, a written agreement protecting Applebee's trade secrets and
confidential information entrusted to Employee, and protecting against
unfair competition;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, the parties agree as follows:
(1) The parties acknowledge and agree that Employee is or will be
employed in a supervisory or managerial capacity and in such capacity will
have access to information and materials which constitute trade secrets
and confidential and proprietary information. The parties further
acknowledge and agree that any actual or potential direct or indirect
competitor of Applebee's or of any of its franchisees shall not have
access to such trade secrets and confidential information.
(2) The parties acknowledge and agree that the System includes
trade secrets and confidential information which Applebee's has revealed
or will reveal to Developer in confidence, and that protection of said
trade secrets and confidential information and protection of Applebee's
against unfair competition from others who enjoy or who have had access to
said trade secrets and confidential information are essential for the
maintenance of goodwill and special value of the System.
(3) Employee agrees that he or she shall not at any time
(i) appropriate or use the trade secrets incorporated in the System, or
any portion thereof, for use in any business which is not within the
System; (ii) disclose or reveal any portion of the System to any person
other than to Developer's employees as an incident of their training;
(iii) acquire any right to use, or to license or franchise the use of any
name, mark or other intellectual property right which is or may be granted
by any franchise agreement between Applebee's and Developer; or
(iv) communicate, divulge or use for the benefit of any other person or
entity any confidential information, knowledge or know-how concerning the
methods of development or operation of a Restaurant which may be
communicated to Employee or of which Employee may be apprised by virtue of
Employee's employment by Developer. Employee shall divulge such
confidential information only to such of Developer's other employees as
must have access to that information in order to operate a Restaurant or
to develop a prospective site for a Restaurant. Any and all information,
knowledge and know-how, including, without limitation, drawings,
materials, equipment, specifications, techniques and other data, which
Applebee's designates as confidential, shall be deemed confidential for
purposes of this Agreement.
(4) Employee agrees that for the duration of his or her employment
by Developer, and for two (2) years following termination thereof,
Employee may not, without the prior written consent of Applebee's,
directly or indirectly, for himself or through, on behalf of or in
conjunction with any person, partnership or corporation, engage in or
acquire any financial or beneficial interest (including any interest in
corporations, partnerships, trusts, unincorporated associations or joint
ventures) in, advise, help, guarantee loans or make loans to, any
restaurant business whose menu or method of operation is the same as or
similar to that employed by restaurant units within the System which is
located either (a) in the Territory, as defined in the Development
Agreement, or (b) in the Area of Dominant Influence (as defined and
established from time to time by Arbitron Ratings Company) of any
Restaurant developed pursuant to the Development Agreement.
(5) Employee further acknowledges and agrees that the Franchise
Operations Manual and any other materials and manuals provided or made
available to Developer by Applebee's (collectively, the "Manuals"),
described in Section 5 of the form of franchise agreement which is
attached as Appendix B to the Development Agreement are loaned by
Applebee's to Developer for limited purposes only, remain the property of
Applebee's, and may not be reproduced, in whole or in part, without the
written consent of Applebee's.
(6) Employee agrees to surrender to Developer or to Applebee's each
and every copy of the Manuals and any other information or material in his
or her possession or control upon request, upon termination of employment,
or upon completion of the use for which said Manuals or other information
or material may have been furnished to Employee.
(7) The parties agree that in the event of a breach of this
Agreement, Applebee's would be irreparably injured and would be without an
adequate remedy at law. Therefore, in the event of a breach or a
threatened or attempted breach of any of the provisions hereof, Applebee's
shall be entitled to enforce the provisions of this agreement as a third-
party beneficiary hereof and shall be entitled, in addition to any other
remedies which it may have hereunder at law or in equity (including the
right to terminate the Development Agreement), to a temporary and/or
permanent injunction and a decree for specific performance of the terms
hereof without the necessity of showing actual or threatened damage, and
without being required to furnish a bond or other security.
(8) The restrictions in Subsection (4) hereof shall not apply to
ownership of less than two percent (2%) of the shares of a company whose
shares are traded on a national securities exchange if such shares are
owned for investment only, and are not owned by an officer, director,
employee or consultant of such publicly traded company.
(9) If any court or other tribunal having jurisdiction to determine
the validity or enforceability of this Agreement determines that it would
be invalid or unenforceable as written, the provisions hereof shall be
deemed to be modified or limited to such extent or in such manner
necessary for such provisions to be valid and enforceable to the greatest
extent possible.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
as of the date first above written.
DEVELOPER: EMPLOYEE:
By: By:
Name: Name:
Title:
<PAGE>
APPENDIX F TO DEVELOPMENT AGREEMENT
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made this ________ day of ________________,
19_______, by and between ________________________________________, a
_____________ corporation ("Developer"), and __________________________,
an individual employed by Developer ("Employee").
WITNESSETH:
WHEREAS, APPLEBEE'S INTERNATIONAL, INC. ("Applebee's") is the owner
of all rights in and to a unique system for the development and operation
of restaurants (the "System"), which includes proprietary rights in
valuable trade names, service marks and trademarks, including the service
mark Applebee's Neighborhood Grill & Bar and variations of such mark,
designs and color schemes for restaurant premises, signs, equipment,
procedures and formulae for preparing food and beverage products,
specifications for certain food and beverage products, inventory methods,
operating methods, financial control concepts, a training facility and
teaching techniques;
WHEREAS, Developer is the owner of the exclusive right to develop
restaurants franchised by Applebee's which utilize the System
("Restaurants") for the period and in the territory described in the
Development Agreement between Applebee's and Developer (the "Development
Agreement"); and
WHEREAS, Developer acknowledges that Applebee's information as
described above was developed over time at great expense, is not generally
known in the industry and is beyond Developer's own present skills and
experience, and that to develop it itself would be expensive,
time-consuming and difficult, that it provides a competitive advantage and
will be valuable to Developer in the development of its business, and that
gaining access to it was therefore a primary reason why Developer entered
into the Development Agreement; and
WHEREAS, in consideration of Applebee's confidential disclosure to
Developer of these trade secrets, Developer has agreed to be obligated by
the terms of Development Agreement to execute, with each employee of
Developer who will have supervisory authority over the development or
operation of more than one Restaurant in the Territory described in the
Development Agreement, a written agreement protecting Applebee's trade
secrets and confidential information entrusted to Employee;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, the parties agree as follows:
(1) The parties acknowledge and agree that Employee is or will be
employed in a supervisory or managerial capacity and in such capacity will
have access to information and materials which constitute trade secrets
and confidential and proprietary information. The parties further
acknowledge and agree that any actual or potential direct or indirect
competitor of Applebee's, or of any of its franchisees, shall not have
access to such trade secrets and confidential information.
(2) The parties acknowledge and agree that the System includes
trade secrets and confidential information which Applebee's has revealed
to Developer in confidence, and that protection of said trade secrets and
confidential information and protection of Applebee's against unfair
competition from others who enjoy or who have had access to said trade
secrets and confidential information are essential for the maintenance of
goodwill and special value of the System.
(3) Employee agrees that he or she shall not at any time
(i) appropriate or use the trade secrets incorporated in the System, or
any portion thereof, for use in any business which is not within the
System; (ii) disclose or reveal any portion of the System to any person
other than to Developer's employees as an incident of their training;
(iii) acquire any right to use, or to license or franchise the use of any
name, mark or other intellectual property right which is or may be granted
by any franchise agreement between Applebee's and Developer; or
(iv) communicate, divulge or use for the benefit of any other person or
entity any confidential information, knowledge or know-how concerning the
methods of development or operation of a Restaurant which may be
communicated to Employee or of which Employee may be apprised by virtue of
Employee's employment by Developer. Employee shall divulge such
confidential information only to such of Developer's other employees as
must have access to that information in order to operate a Restaurant or
to develop a prospective site for a Restaurant. Any and information,
knowledge and know-how, including, without limitation, drawings,
materials, equipment, specifications, techniques and other data, which
Applebee's designates as confidential, shall be deemed confidential for
purposes of this Agreement.
(4) Employee further acknowledges and agrees that the Franchise
Operations Manual and any other materials or manuals provided or made
available to Developer by Applebee's (collectively, the "Manuals"),
described in Section 5 of the applicable franchise agreement between
Applebee's and Developer, are loaned by Applebee's to Developer for
limited purposes only, remain the property of Applebee's, and may not be
reproduced, in whole or in part, without the written consent of
Applebee's.
(5) Employee agrees to surrender to Developer or to Applebee's each
and every copy of the Manuals and any other information or material in his
or her possession or control upon request, upon termination of employment
or upon completion of the use for which said Manuals or other information
or material may have been furnished to Employee.
(6) The parties agree that in the event of a breach of this
Agreement, Applebee's would be irreparably injured and would be without an
adequate remedy at law. Therefore, in the event of a breach or a
threatened or attempted breach of any of the provisions hereof, Applebee's
shall be entitled to enforce the provisions of this Agreement as a third-
party beneficiary hereof and shall be entitled, in addition to any other
remedies which it may have hereunder at law or in equity (including the
right to terminate the Development Agreement), to a temporary and/or
permanent injunction and a decree for specific performance of the terms
hereof without the necessity of showing actual or threatened damage, and
without being required to furnish a bond or other security.
(7) If any court or other tribunal having jurisdiction to determine
the validity or enforceability of this Agreement determines that it would
be invalid or unenforceable as written, the provisions hereof shall be
deemed to be modified or limited to such extent or in such manner
necessary for such provisions to be valid and enforceable to the greatest
extent possible.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
as of the date first above written.
DEVELOPER EMPLOYEE
By: By:
Name: Name:
Title:
<PAGE>
APPENDIX G TO DEVELOPMENT AGREEMENT
EXISTING COMPETITIVE RESTAURANTS
Big Boy restaurants
Captain's restaurants
Pancho O'Mally's restaurants
Kentucky Fried Chicken restaurants
Marc's Cafe & Coffee Mill restaurants
Gino's East of Chicago restaurants
<PAGE>
FIRST ADDENDUM TO DEVELOPMENT AGREEMENT
THIS FIRST ADDENDUM is made and entered into this ________ day of
________________, 19_____, by and between APPLEBEE'S INTERNATIONAL, INC.,
a Delaware corporation, hereinafter referred to as "Franchisor", MARCUS
RESTAURANTS, INC., a Wisconsin corporation, hereinafter sometimes referred
to as "Developer" or "Franchisee".
WITNESSETH:
WHEREAS, Franchisor franchises nationally the Applebee's Neighborhood
Grill & Bar restaurant system (the "System"), and
WHEREAS, contemporaneous with the execution of this First Addendum to
Development Agreement, Franchisor and Franchisee have entered into an
Applebee's Neighborhood Grill & Bar Development Agreement (the
"Development Agreement") whereby Franchisor will grant to Franchisee the
right to develop Applebee's Neighborhood Grill & Bar Restaurants, as such
term is defined in the Development Agreement, in a market generally
described as a portion of the Chicago, Illinois A.D.I. and more
specifically defined in the Development Agreement (the "Territory"), and
WHEREAS, the parties desire to amend and supplement said Development
Agreement as hereinafter set forth,
NOW THEREFORE, for good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. The parties acknowledge that no rights regarding the Franchisor's
trade names, trademarks and service marks are granted to Developer
pursuant to the Development Agreement; however, if Franchisor authorizes
Developer to use Franchisor's trade names, trademarks or service marks for
an identified purpose, the terms of Section 18.7 of the form of franchise
agreement attached to the Development Agreement as Appendix B (the
"Franchise Agreement") shall apply to Developer's use of the trade names,
trademarks and service marks, provided that the Developer's use of such
names and marks is consistent with the requirements and restrictions of
Section 18 of the Franchise Agreement.
2. Developer agrees to require Axel Wolff and Bruce Olson to execute
the form of Confidentiality Agreement and Covenant Not To Compete attached
as Appendix E to the Development Agreement.
3. The parties agree that if and when Franchisor adopts the new form
of the franchise agreement agreed upon by the Franchisor and the
Applebee's franchise business council for use in the System,
notwithstanding Section 6 of the Development Agreement, Developer will
have the option for thirty (30) days after receipt of the new form of
franchise agreement to adopt all of the provisions of the new form of
franchise agreement for all of its franchises and to substitute the new
form for the Franchise Agreement to be used for all future Restaurants
developed. If Developer wishes to exercise its option, Developer must
notify Franchisor in writing within the thirty (30) day option period.
Developer acknowledges that its option relates only to the adoption of the
new form of franchise agreement in its entirety and that Developer may not
choose to adopt only select provisions of the new form.
4. Subsection 8.8(a) of the Development Agreement shall be
supplemented by the following sentence:
"Franchisor's approval of a Transfer will not be unreasonably
withheld."
5. Section 9 of the Development Agreement shall be supplemented with
the following Subsection 9.5:
"9.5 If Franchisor is liquidated pursuant to the Chapter 7
of Title 11 of the U.S. Code and the Development Agreement is
not assumed by Franchisor or its trustee or assigned,
transferred or conveyed to a third party, the Development
Agreement will automatically terminate."
6. Subsections 11.1(a) and (b) of the Development Agreement shall be
deleted in their entirety and the following provisions inserted in lieu
thereof:
"(a) During the term of this Agreement, neither
Developer nor any Principal Shareholder, for so long as such
Principal Shareholder owns an Interest in Developer, may,
without the prior written consent of Franchisor, directly or
indirectly engage in, or acquire any financial or beneficial
interest (including interests in corporations, partnerships,
trusts, unincorporated associations or joint ventures) in,
advise, help, guarantee loans or make loans to, any restaurant
business, except those restaurant businesses listed in
Appendix G to the Development Agreement, whose menu or method of
operation is similar to that employed by restaurant units within
the System which is either (i) located in the Territory,
(ii) located in the Area of Dominant Influence (as defined and
established from time to time by Arbitron Ratings Company) of
any Restaurant developed pursuant to this Agreement,
(iii) located within a five (5) mile radius of any restaurant
unit within the System, or (iv) determined by Franchisor,
exercising reasonable good faith judgment, to be a direct
competitor of the System.
"(b) Neither Developer, for two (2) years following
the termination of this Agreement, nor any Principal
Shareholder, for two (2) years following the termination of all
of his or her Interest in Developer or the termination of this
Agreement, whichever occurs first, may directly or indirectly
engage in, or acquire any financial or beneficial interest
(including any interest in corporations, partnerships, trusts,
unincorporated associations or joint ventures) in, advise, help,
guarantee loans or make loans to, any restaurant business,
except those restaurant businesses listed in Appendix G to the
Development Agreement, whose menu or method of operation is
similar to that employed by restaurant units within the System
which is located either (i) in the Territory, (ii) in the Area
of Dominant Influence (as defined and established from time to
time by Arbitron Ratings Company) of any Restaurant developed
pursuant to this Agreement, (iii) within a five (5) mile radius
of any restaurant unit within the System, or (iv) within any
area for which an active, currently binding development
agreement has been granted by Franchisor to another franchisee
as of the date of termination."
7. The Franchise Agreement which is attached to the Development
Agreement as Appendix B and all future Franchise Agreements to be entered
between the parties hereto pursuant to this Development Agreement shall be
amended as set forth in the following paragraphs 8 through 10 and shall be
interpreted and governed in accordance with this First Addendum. Any
future amendment or modification to such a Franchise Agreement shall not
affect this First Addendum unless such amendment or modification expressly
refers to this First Addendum.
8. Subsection 12.6(a) of the Franchise Agreement shall be
supplemented by the following sentence:
"Franchisor's approval of a Transfer will not be unreasonably
withheld."
9. Subsections 13.1(a) and (b) of the Franchise Agreement shall be
deleted in their entirety and the following provisions inserted in lieu
thereof:
"(a) During the term of this Agreement, neither
Franchisee nor any Principal Shareholder, for so long as such
Principal Shareholder owns an Interest in Franchisee, may,
without the prior written consent of Franchisor, directly or
indirectly engage in, or acquire any financial or beneficial
interest (including interests in corporations, partnerships,
trusts, unincorporated associations or joint ventures) in,
advise, help, guarantee loans or make loans to, any restaurant
business, except those restaurant businesses listed in
Appendix G to the Development Agreement, whose menu or method of
operation is similar to that employed by restaurant units within
the System which is either (i) located in the Territory, as
defined in the Development Agreement (ii) located in the Area of
Dominant Influence (as defined and established from time to time
by Arbitron Ratings Company) of any restaurant developed
pursuant to the Development Agreement, (iii) located within a
five (5) mile radius of any restaurant unit within the System,
or (iv) determined by Franchisor, exercising reasonable good
faith judgment, to be a direct competitor of the System.
"(b) Neither Franchisee, for two (2) years following
the termination of this Agreement, nor any Principal
Shareholder, for two (2) years following the termination of all
of his or her Interest in Franchisee or the termination of this
Agreement, whichever occurs first, may directly or indirectly
engage in, or acquire any financial or beneficial interest
(including any interest in corporations, partnerships, trusts,
unincorporated associations or joint ventures) in, advise, help,
guarantee loans or make loans to, any restaurant business,
except those restaurant businesses listed in Appendix G to the
Development Agreement, whose menu or method of operation is
similar to that employed by restaurant units within the System
which is located either (i) in the Territory, as defined by the
Development Agreement (ii) in the Area of Dominant Influence (as
defined and established from time to time by Arbitron Ratings
Company) of any restaurant developed pursuant to the Development
Agreement, (iii) within a five (5) mile radius of any restaurant
unit within the System, or (iv) within any area for which an
active, currently binding development agreement has been granted
by Franchisor to another franchisee as of the date of
termination."
10. Section 19 of the Franchise Agreement shall be supplemented
with the following Subsection 19.6:
"19.6 If Franchisor is liquidated pursuant to the Chapter 7
of Title 11 of the U.S. Code and the Franchise Agreement is not
assumed by Franchisor or its trustee or assigned, transferred or
conveyed to a third party, the Franchise Agreement will
automatically terminate."
11. This First Addendum shall be considered an integral part of
the Development Agreement and the terms of this First Addendum shall
govern with respect to the subject matter hereof. Except as modified or
supplemented by this First Addendum, the terms of the Development
Agreement are hereby ratified and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed this First
Addendum to Development Agreement the day and year first above written.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Robert T. Steinkamp Name: Abe J. Gustin, Jr.
Title: Secretary Title: President
FRANCHISEE:
ATTEST: MARCUS RESTAURANTS, INC.
By:
Name: Thomas F. Kissinger Name: Stephen Marcus
Title: Secretary Title: President
The Marcus Corporation, the principal shareholder of Developer, hereby
executes this First Addendum to Development Agreement for the sole purpose
of signifying its agreement with the terms contained in Paragraphs 6 and 9
of this First Addendum.
ATTEST: THE MARCUS CORPORATION
By:
Name: Name:
Title: Title:
<PAGE>
SECOND ADDENDUM TO DEVELOPMENT AGREEMENT
THIS SECOND ADDENDUM is made and entered into this ________ day of
________________, 19_____, by and between APPLEBEE'S INTERNATIONAL, INC.,
a Delaware corporation, hereinafter referred to as "Franchisor", MARCUS
RESTAURANTS, INC., a Wisconsin corporation, hereinafter referred to as
"Developer".
WITNESSETH:
WHEREAS, Franchisor franchises nationally the Applebee's Neighborhood
Grill & Bar restaurant system (the "System"), and
WHEREAS, contemporaneous with the execution of this Second Addendum
to Development Agreement, Franchisor and Franchisee have entered into an
Applebee's Neighborhood Grill & Bar Development Agreement and a First
Addendum to Development Agreement (collectively, the "Development
Agreement") whereby Franchisor will grant to Franchisee the right to
develop Applebee's Neighborhood Grill & Bar Restaurants, as such term is
defined in the Development Agreement, in a market generally described as a
portion of the Chicago, Illinois A.D.I. and more specifically defined in
the Development Agreement (the "Territory"), and
WHEREAS, an attachment to said Development Agreement is the form
Franchise Agreement which will be entered between the parties with respect
to each of said Restaurants, and
WHEREAS, Article 19 of the Franchise Agreement grants to Franchisor
certain rights and options with respect to the Restaurant to which each of
the franchise agreements will refer, and
WHEREAS, the parties hereto desire to amend and supplement said form
Franchise Agreement now and in the future as hereinafter set forth,
NOW THEREFORE, for good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. This Agreement shall be a part of the Development Agreement and
Appendices entered this date to which it is attached, the same as if the
provisions hereof were an integral part thereof.
2. Irrespective of the provisions of Article 19 of the Franchise
Agreement attached to the Development Agreement as an Appendix or any
other provision of either the Development Agreement or Franchise
Agreement, if:
(i) All or substantially all of the assets of the Marcus
Corporation, the principal shareholder of Developer, including the
assets or stock of Developer, are sold to a third-party purchaser as
a part of one (1) transaction and so long as the third-party
purchaser is not a Direct Competitor (as hereinafter defined) of
Franchisor, as determined by Franchisor in its discretion, and is
approved by Franchisor as a new franchisee in the manner provided in
the Development and Franchise Agreements; or
(ii) All or substantially all of the assets of Developer,
including all of its Applebee's Restaurants (both the property and
the operation thereof), are sold to a third-party purchaser as a part
of one (1) transaction and so long as the third-party purchaser is
not a Direct Competitor of Franchisor, as determined by Franchisor in
its discretion, and is approved by Franchisor as a new franchisee in
the manner provided in the Development and Franchise Agreements; or
(iii) All of Developer's Applebee's Restaurants, including the
property and the operation thereof, are sold to a third-party
purchaser as a part of one (1) transaction and so long as the third-
party purchaser is not a Direct Competitor of Franchisor, as
determined by Franchisor in its discretion, and is approved by
Franchisor as a new franchisee in the manner provided in the
Development and Franchise Agreements;
then, in any one of such events, the rights and options granted Franchisor
in Article 19 of the Franchise Agreement to purchase a Restaurant site or
accept an assignment of the Restaurant lease, is hereby waived by
Franchisor.
For purposed of this Addendum, a "Direct Competitor" of Franchisor
shall mean a person, firm, corporation or other entity which operates a
chain of three (3) or more restaurants that are upscale, with moderately
priced menu items, that serves alcoholic beverages, and that has a menu
and/or method of operation substantially similar to Franchisor's menu and
method of operation and which competitor operates its restaurants within
the continental United States.
Developer shall notify Franchisor of any proposed sale and within
fifteen (15) days after receipt of such notice Franchisor will notify
Developer whether Franchisor has determined the third-party purchaser to
be a Direct Competitor. If Franchisor determines that said third-party
purchaser is not a Direct Competitor and said third-party purchaser is
approved by Franchisor as a new franchisee in the manner and in the time
period provided in the Development and Franchise Agreements, Franchisor
shall have no right to purchase said Restaurant or take an assignment of
such lease as a result of the options granted it in Article 19 of the
Franchise Agreement. Alternatively, if Franchisor determines that the
third-party purchaser is a Direct Competitor as hereinbefore provided, or
does not approve said third-party purchaser as a new franchisee, the
provisions of Article 19 shall apply, unaffected by the terms of this
Second Addendum. In all other respects, except as set forth in the other
Addenda to this Development Agreement, the Development Agreement and form
Franchise Agreement shall remain unaffected by the terms hereof.
3. Franchisor acknowledges that the Marcus Corporation, the
principal shareholder of the Developer, is not a party to the Development
Agreement, nor any Franchise Agreement to be entered pursuant to the terms
of said Development Agreement. Accordingly, any reference to obligations,
responsibilities, guarantees or liabilities of the Marcus Corporation
referred to in the Development Agreement, Franchise Agreement or Addenda
thereto is hereby eliminated.
4. This Second Addendum shall amend each and every Franchise
Agreement entered between the parties pursuant to the Development
Agreement now and in the future without the necessity of referring hereto
in those agreements. This Second Addendum may be amended by the parties
hereto only by a written instrument specifically referring to this Second
Addendum.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Addendum to Development Agreement the day and year first above written.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Robert T. Steinkamp Name: Abe J. Gustin, Jr.
Title: Secretary Title: President
FRANCHISEE:
ATTEST: MARCUS RESTAURANTS, INC.
By:
Name: Thomas F. Kissinger Name: Stephen Marcus
Title: Secretary Title: President
The Marcus Corporation, the principal shareholder of Developer, hereby
executes this Second Addendum to Development Agreement for the sole
purpose of signifying its agreement with the terms contained in
Paragraph 2 of this Second Addendum.
ATTEST: THE MARCUS CORPORATION
By:
Name: Name:
Title: Title:
<PAGE>
THIRD ADDENDUM TO DEVELOPMENT AGREEMENT
THIS THIRD ADDENDUM is made and entered into this ________ day of
________________, 19_____, by and between APPLEBEE'S INTERNATIONAL, INC.,
a Delaware corporation, hereinafter referred to as "Franchisor", MARCUS
RESTAURANTS, INC., a Wisconsin corporation, hereinafter referred to as
"Franchisee".
WITNESSETH:
WHEREAS, Franchisor franchises nationally the Applebee's Neighborhood
Grill & Bar restaurant system (the "System"), and
WHEREAS, on or about November 22, 1991, Franchisor and Franchisee
entered into a franchise agreement (the "8680 Franchise Agreement"),
pursuant to the terms of which Franchisee was granted the right to operate
an Applebee's Restaurant located at 601 Martingale Road, Schaumburg,
Illinois, upon the terms and conditions specified in the Franchise
Agreement, and
WHEREAS, on or about September 9, 1992, Franchisor and Franchisee
entered into a franchise agreement (the "8719 Franchise Agreement"),
pursuant to the terms of which Franchisee was granted the right to operate
an Applebee's Restaurant located at 354 West Army Trail Road,
Bloomingdale, Illinois, upon the terms and conditions specified in the
Franchise Agreement, and
WHEREAS, on or about February 16, 1993, Franchisor and Franchisee
entered into a franchise agreement (the "8750 Franchise Agreement"),
pursuant to the terms of which Franchisee was granted the right to operate
an Applebee's Restaurant located at 100 South Waukegan Road, Deerfield,
Illinois, upon the terms and conditions specified in the Franchise
Agreement, and
WHEREAS, on or about March 23, 1993, Franchisor and Franchisee
entered into a franchise agreement (the "8753 Franchise Agreement"),
pursuant to the terms of which Franchisee was granted the right to operate
an Applebee's Restaurant located at Randhurst Shopping Center, 999
Elmhurst Road, Mt. Prospect, Illinois, upon the terms and conditions
specified in the Franchise Agreement, and
WHEREAS, on or about __________________, _______, Franchisor and
Franchisee entered into a franchise agreement (the "Streamwood Franchise
Agreement"), pursuant to the terms of which Franchisee was granted the
right to operate an Applebee's Restaurant located in Streamwood, Illinois,
upon the terms and conditions specified in the Franchise Agreement, and
WHEREAS, on or about __________________, _______, Franchisor and
Franchisee entered into a franchise agreement (the "Hodgkins Franchise
Agreement"), pursuant to the terms of which Franchisee was granted the
right to operate an Applebee's Restaurant located in Hodgkins, Illinois,
upon the terms and conditions specified in the Franchise Agreement, and
WHEREAS, on or about __________________, _______, Franchisor and
Franchisee entered into a franchise agreement (the "Naperville Franchise
Agreement"), pursuant to the terms of which Franchisee was granted the
right to operate an Applebee's Restaurant located in Naperville, Illinois,
upon the terms and conditions specified in the Franchise Agreement, and
WHEREAS, on or about __________________, _______, Franchisor and
Franchisee entered into a franchise agreement (the "Crystal Lake Franchise
Agreement"), pursuant to the terms of which Franchisee was granted the
right to operate an Applebee's Restaurant located in Crystal Lake,
Illinois, upon the terms and conditions specified in the Franchise
Agreement (the 8680 Franchise Agreement, the 8719 Franchise Agreement, the
8750 Franchise Agreement, the 8753 Franchise Agreement, the Streamwood
Franchise Agreement, the Hodgkins Franchise Agreement, the Naperville
Franchise Agreement and the Crystal Lake Franchise Agreement shall be
collectively referred to herein as the "Franchise Agreements"), and
WHEREAS, contemporaneous with the execution of this Third Addendum to
Development Agreement, Franchisor and Franchisee have entered into an
Applebee's Neighborhood Grill & Bar Development Agreement and addenda
thereto (collectively, the "Development Agreement") whereby Franchisor
will grant to Franchisee the right to develop Applebee's Neighborhood
Grill & Bar Restaurants, as such term is defined in the Development
Agreement, in a market generally described as a portion of the Chicago,
Illinois A.D.I. and more specifically defined in the Development Agreement
(the "Territory"), and
WHEREAS, the Restaurants operated pursuant to the terms of the
Franchise Agreements are located in the Territory, and
WHEREAS, the parties desire to amend said Development Agreement as
hereinafter set forth,
NOW THEREFORE, for good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. The Development Agreement to which this Third Addendum is
attached shall be, and the same hereby is, amended and supplemented by
this Third Addendum. Any conflict between this Third Addendum and the
Development Agreement shall be governed and controlled by the terms of
this Third Addendum.
2. Notwithstanding the fact that the Franchise Agreements were
issued prior to the execution of the Development Agreement, the parties
hereto agree that the Franchise Agreements will be deemed to be franchise
agreements issued under the Development Agreement, and accordingly, any
violation of the terms and conditions of the Franchise Agreements shall be
deemed to be, and shall be, a breach of and a default under the
Development Agreement and may result in a termination of such Development
Agreement the same as if said Franchise Agreements were issued pursuant
thereto.
3. Franchisee hereby covenants and agrees that the Restaurants
operated pursuant to the terms of the Franchise Agreements shall be
operated by the Franchisee in accordance and compliance with the terms of
the Franchise Agreements. Franchisee hereby acknowledges its continuing
obligations under the Franchise Agreements and hereby agrees to be bound
by all provisions of such Franchise Agreements.
4. In all other respects, said Development Agreement shall remain
in full force and effect as originally written.
5. This Third Addendum to Development Agreement and the Development
Agreement contain the entire agreement between the parties, and except as
otherwise provided herein, no other agreements, representations or
commitments made or discussed prior to the date hereof shall survive the
execution of the Development Agreement and this Third Addendum.
IN WITNESS WHEREOF, the parties hereto have executed this Third
Addendum the day and year first above written.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Robert T. Steinkamp Name: Abe J. Gustin, Jr.
Title: Secretary Title: President
FRANCHISEE:
ATTEST: MARCUS RESTAURANTS, INC.
By:
Name: Thomas F. Kissinger Name: Stephen Marcus
Title: Secretary Title: President
<PAGE>
FOURTH ADDENDUM TO
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
DEVELOPMENT AGREEMENT
THIS FOURTH ADDENDUM made and entered this _______ day of
_______________, 19_____ by and between APPLEBEE'S INTERNATIONAL, INC., a
Delaware corporation, hereinafter referred to as "FRANCHISOR", and MARCUS
RESTAURANTS, INC., a Wisconsin corporation, hereinafter referred to as
"DEVELOPER".
WHEREAS, Franchisor and Developer have this ________ day of
_________________, 19_____ entered into a development agreement and
addenda thereto (collectively, the "Development Agreement") relating to
the right to develop Applebee's Neighborhood Grill & Bar restaurants
("Restaurants") in certain areas in the states of Illinois and Wisconsin
and will enter into separate franchise agreements which will be in the
form of the franchise agreement ("Franchise Agreement") attached as
Appendix B to the Development Agreement. In exchange for the mutual
obligations of the parties set forth in this Fourth Addendum and for other
good a valuable consideration, the receipt, adequacy and sufficiency of
which is hereby acknowledged, the parties now wish to amend and supplement
the Development Agreement as follows:
1. Attached hereto and incorporated herein by reference are
documents noted as Attachment DA-1-1 which contain certain provisions
required by the state of Illinois. The parties agree that said Attachment
DA-1-1 (Illinois) shall only apply to that portion of the Territory
granted to Developer which is located within the state of Illinois to
which said Attachment refers and shall not otherwise govern the agreement
between the parties except as expressly required and mandated by laws of
the state of Illinois for that portion of the Territory which is located
therein.
2. Attached hereto and incorporated herein by reference are
documents noted as Attachment DA-1-2 which contain certain provisions
required by the state of Wisconsin. The parties agree that said
Attachment DA-1-2 (Wisconsin) shall only apply to that portion of the
Territory granted to Developer which is located within the state of
Wisconsin to which said Attachment refers and shall not otherwise govern
the agreement between the parties except as expressly required and
mandated by laws of the state of Wisconsin for that portion of the
Territory which is located therein.
3. This Fourth Addendum shall amend each and every Franchise
Agreement entered between the parties pursuant to the Development
Agreement now and in the future without the necessity of referring hereto
in those agreements. This Fourth Addendum may be amended by the parties
hereto only by a written instrument specifically referring to this Fourth
Addendum.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
as of the date first above written.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
______________________________ By: ________________________________
Name: Robert T. Steinkamp Name: Abe J. Gustin, Jr.
Title: Secretary Title: President
DEVELOPER:
ATTEST: MARCUS RESTAURANTS, INC.
______________________________ By: ________________________________
Name: Thomas F. Kissinger Name: Stephen Marcus
Title: Secretary Title: President
<PAGE>
ADDENDUM TO
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
FRANCHISE AGREEMENT
THIS ADDENDUM made and entered this _______ day of _______________,
19_____ by and between APPLEBEE'S INTERNATIONAL, INC., a Delaware
corporation, hereinafter referred to as "FRANCHISOR", and MARCUS
RESTAURANTS, INC., a Wisconsin corporation, hereinafter referred to as
"DEVELOPER".
WHEREAS, Franchisor and Developer have this ________ day of
_________________, 19_____ entered into a development agreement
("Development Agreement") relating to the right to develop Applebee's
Neighborhood Grill & Bar restaurants ("Restaurants") in certain areas in
the states of Illinois and Wisconsin and will enter into separate
franchise agreements which will be in the form of the franchise agreement
("Franchise Agreement") attached as Appendix B to the Development
Agreement. In exchange for the mutual obligations of the parties set
forth in this Addendum and for other good a valuable consideration, the
receipt, adequacy and sufficiency of which is hereby acknowledged, the
parties now wish to amend and supplement the Franchise Agreement as
follows:
1. Attached hereto and incorporated herein by reference are
documents noted as Attachment FA-1-1 which contain certain provisions
required by the state of Illinois. The parties agree that said Attachment
FA-1-1 (Illinois) shall apply only as to those franchise agreements issued
by Franchisor to Developer regarding Restaurants to be located in the
state of Illinois except as otherwise expressly required or mandated by
the laws of said state.
2. Attached hereto and incorporated herein by reference are
documents noted as Attachment FA-1-2 which contain certain provisions
required by the state of Wisconsin. The parties agree that said
Attachment FA-1-2 (Wisconsin) shall apply only as to those franchise
agreements issued by Franchisor to Developer regarding Restaurants to be
located in the state of Wisconsin except as otherwise expressly required
or mandated by the laws of said state.
3. This Addendum shall be considered an integral part of the
Franchise Agreement and the terms of this Addendum shall govern with
respect to the subject matter hereof. Except as modified or supplemented
by this Addendum, the terms of the Franchise Agreement are hereby ratified
and confirmed.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
as of the date first above written.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
______________________________ By: ________________________________
Name: Robert T. Steinkamp Name: Abe J. Gustin, Jr.
Title: Secretary Title: President
DEVELOPER:
ATTEST: MARCUS RESTAURANTS, INC.
______________________________ By: ________________________________
Name: Thomas F. Kissinger Name: Stephen Marcus
Title: Secretary Title: President
<PAGE>
ATTACHMENT DA-1-1
AMENDMENT TO APPLEBEE'S NEIGHBORHOOD GRILL & BAR
DEVELOPMENT AGREEMENT
REQUIRED BY THE STATE OF ILLINOIS
In recognition of the requirement of the Illinois Franchise
Disclosure Act of 1987 (the "Act"), the parties to the attached APPLEBEE'S
NEIGHBORHOOD GRILL & BAR DEVELOPMENT AGREEMENT (the "Development
Agreement") agree as follows:
1. Section 9, "Termination," of the Development Agreement shall be
supplemented by the following subsection, which shall be inserted
following Subsection 9.4 and shall be considered an integral part of the
Development Agreement:
9.5 Notwithstanding anything to the contrary contained in
this Agreement, if any provisions of this Section 9, governing
termination, are inconsistent with Section 19 of the Illinois
Franchise Disclosure Act of 1987, if applicable, the provisions
of the Act shall apply rather than the contrary provisions of
this Section 9. As provided in Subsection 15.1 hereof, however,
each provision of this Agreement shall be considered severable,
and if, for any reason, any provision of this Section 9 is
determined to be invalid and contrary to, or in conflict with,
Section 19 of the Act, such shall not impair the operation of,
or have any other effect upon, such other provisions of this
Section 9 as may remain otherwise enforceable, and the latter
shall continue to be given full force and effect and bind the
parties hereto.
2. Subsection 15.3 of Section 15 of the Development Agreement,
"Construction, Severability, Governing Law and Jurisdiction," shall be
deleted in its entirety and shall be of no force or effect.
IN WITNESS WHEREOF, the parties hereto have fully executed, sealed
and delivered this Amendment to the Development Agreement (Attachment
DA-1) on the day and year first above written in the Development
Agreement.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Robert T. Steinkamp Name: Abe J. Gustin, Jr.
Title: Secretary Title: President
DEVELOPER:
ATTEST: MARCUS RESTAURANTS, INC.
By:
Name: Thomas F. Kissinger Name: Stephen Marcus
Title: Secretary Title: President
<PAGE>
ATTACHMENT FA-1-1
AMENDMENT TO APPLEBEE'S NEIGHBORHOOD GRILL & BAR
FRANCHISE AGREEMENT
REQUIRED BY THE STATE OF ILLINOIS
In recognition of the requirements of the Illinois Franchise
Disclosure Act of 1987 (the "Act"), the parties to the attached APPLEBEE'S
NEIGHBORHOOD GRILL & BAR FRANCHISE AGREEMENT (the "Franchise Agreement")
agree as follows:
1. The following language shall be added to Subsection 1.3 of
Section 1 of the Franchise Agreement, "Franchise Grant and Term":
Notwithstanding anything to the contrary contained in this
Agreement, if any of the provisions of this Subsection 1.3,
concerning non-renewal, are inconsistent with Section 20 of the
Illinois Franchise Disclosure Act of 1987, the provisions of the
Act shall apply rather than the contrary provisions of this
Subsection 1.3. As provided under Subsection 21.1 hereof,
however, each provision of this Agreement shall be considered
severable, and if, for any reason, any provision of this
Subsection 1.3 is determined to be invalid and contrary to, or
in conflict with, Section 20 of the Act, such shall not impair
the operation of, or have any other effect upon, such other
provisions of this Subsection 1.3 as may remain otherwise
enforceable, and the latter shall continue to be given full
force and effect and bind the parties hereto.
2. Section 19, "Expiration and Termination; Option to Purchase
Restaurant; Attorneys' Fees," of the Franchise Agreement shall be
supplemented by the following subsection, which shall be inserted
following Subsection 19.4 and shall be considered an integral part of the
Franchise Agreement:
19.5 Notwithstanding anything to the contrary contained in
this Agreement, if any provisions of this Section 19, governing
termination, are inconsistent with Section 19 of the Illinois
Franchise Disclosure Act of 1987, the provisions of the Act
shall apply rather than the contrary provisions of this
Section 19. As provided under Subsection 21.1 hereof, however,
each provision of this Agreement shall be considered severable,
and if, for any reason, any provision of this Section 19 is
determined to be invalid and contrary to, or in conflict with,
Section 19 of the Act, such shall not impair the operation of,
or have any other effect upon such other provisions of this
Section 19 as may remain otherwise enforceable, and the latter
shall continue to be given full force and effect and bind the
parties hereto.
3. Subsection 21.3 of Section 21 of the Franchise Agreement,
"Construction, Severability, Governing Law and Jurisdiction," shall be
deleted in its entirety and shall be of no force or effect.
4. The second sentence of Subsection 25.5 of Section 25 of the
Franchise Agreement, "Miscellaneous," shall be deleted in its entirety and
shall be of no force or effect.
5. Subsections 26(a) and 26(b) of Section 26 of the Franchise
Agreement, "Acknowledgements," shall be deleted in their entirety and
shall be of no force or effect.
IN WITNESS WHEREOF, the parties have duly executed, sealed and
delivered this Amendment to the Franchise Agreement (Attachment FA-1) on
the day and year first above written in the Franchise Agreement.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Name:
Title: Title:
ATTEST: FRANCHISEE:
By:
Name: Name:
Title: Title:
PRINCIPAL SHAREHOLDER(S):
Witness Name:
Witness Name:
Witness Name:
<PAGE>
ATTACHMENT DA-1-2
AMENDMENT TO APPLEBEE'S NEIGHBORHOOD GRILL & BAR
DEVELOPMENT AGREEMENT
REQUIRED BY THE STATE OF WISCONSIN
In recognition of the requirements of the Wisconsin Fair Dealership
Law, Wisconsin Statutes, Chapter 135, the parties to the attached
APPLEBEE'S NEIGHBORHOOD GRILL & BAR DEVELOPMENT AGREEMENT (the
"Development Agreement") agree as follows:
1. Section 9 of the Development Agreement, "Termination," shall be
supplemented by the following Subsection 9.5, which shall be considered an
integral part of the Development Agreement:
9.5 To the extent that the above provisions regarding
termination are inconsistent with the requirements of the
Wisconsin Fair Dealership Law, Wisconsin Statutes, Chapter 135
(which, among other things, grants the right, in most
circumstances, to ninety (90) days prior written notice of
termination and sixty (60) days within which to remedy any
claimed deficiencies), if applicable to this Agreement, the
above-mentioned termination provisions shall be superseded by
the Law's requirements and shall have no force or effect.
2. Section 15 of the Development Agreement, "Construction,
Severability, Governing Law and Jurisdiction," shall be supplemented by
the following Subsection 15.4, which shall be considered an integral part
of the Development Agreement:
15.4 TO THE EXTENT THAT ANY PROVISIONS OF THIS AGREEMENT
CONFLICTS WITH THE WISCONSIN FAIR DEALERSHIP LAW, IF APPLICABLE
TO THIS AGREEMENT, SUCH PROVISION SHALL BE SUPERSEDED BY THE
LAW'S REQUIREMENTS.
IN WITNESS WHEREOF, the parties hereto have duly executed, sealed and
delivered this Amendment to the Development Agreement (Attachment DA-1) on
the _______ day of ________________, 19_____.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Robert T. Steinkamp Name: Abe J. Gustin, Jr.
Title: Secretary Title: President
DEVELOPER:
ATTEST: MARCUS RESTAURANTS, INC.
By:
Name: Thomas F. Kissinger Name: Stephen Marcus
Title: Secretary Title: President
<PAGE>
ATTACHMENT FA-1-2
AMENDMENT TO APPLEBEE'S NEIGHBORHOOD GRILL & BAR
FRANCHISE AGREEMENT
REQUIRED BY THE STATE OF WISCONSIN
In recognition of the requirements of the Wisconsin Fair Dealership
Law, Wisconsin Statutes, Chapter 135, the parties to the attached
APPLEBEE'S NEIGHBORHOOD GRILL & BAR FRANCHISE AGREEMENT (the "Franchise
Agreement") agree as follows:
1. Section 1 of the Franchise Agreement, "Franchise Grant and
Term," shall be supplemented by the following Subsection 1.7, which shall
be considered an integral part of the Agreement:
1.7 To the extent that the provisions in this Section 1
regarding renewal are inconsistent with the requirements of the
Wisconsin Fair Dealership Law, Wisconsin Statutes, Chapter 135
(which, among other things, grants a Franchisee the right, in
most circumstances, to ninety (90) days prior written notice of
non-renewal and sixty (60) days within which to remedy any
claimed deficiencies), the renewal provisions shall be
superseded by the Law's requirements and shall have no force or
effect.
2. Section 19 of the Franchise Agreement, "Expiration and
Termination; Option to Purchase Restaurant; Attorneys' Fees," shall be
supplemented by the following Subsections 19.4(g) and 19.5, which shall be
considered an integral part of the Franchise Agreement:
(g) To the extent that the provisions herein regarding the
repurchase of inventory are inconsistent with the requirements
of the Wisconsin Fair Dealership Law, Wisconsin Statutes,
Chapter 135.045, those provisions shall be superseded, where
applicable, by the Law's requirements, which state that if
Franchisor, at the option of Franchisee, repurchases inventory
which was sold by Franchisor to Franchisee for resale, fair
wholesale market value must be paid for all merchandise bearing
a name, trade name, label or other mark which identifies
Franchisor. All other provisions related to the purchase of
property described in Section 19 shall be applicable to such
items.
19.5 To the extent that provisions in this Section 19
regarding termination are inconsistent with the requirements of
the Wisconsin Fair Dealership Law, Wisconsin Statutes,
Chapter 135 (which, among other things, grants a Franchisee the
right, in most circumstances, to ninety (90) days prior written
notice of non-renewal and sixty (60) days within which to remedy
any claimed deficiencies), the renewal provisions shall be
superseded by the Law's requirements and shall have no force or
effect.
3. Section 21 of the Franchise Agreement, "Construction,
Severability, Governing Law and Jurisdiction," shall be supplemented by
the following Subsection 21.4, which shall be considered an integral part
of the Franchise Agreement:
21.4 TO THE EXTENT THAT ANY PROVISIONS OF THIS AGREEMENT
CONFLICTS WITH THE WISCONSIN FAIR DEALERSHIP LAW SUCH PROVISION
SHALL BE SUPERSEDED BY THE LAW'S REQUIREMENTS.
IN WITNESS WHEREOF, the parties hereto have duly executed,
sealed and delivered this Amendment to the Franchise Agreement (Attachment
FA-1) on the _______ day of ________________, 19_____.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Name:
Title: Title:
ATTEST: FRANCHISEE:
By:
Name: Name:
Title: Title:
PRINCIPAL SHAREHOLDER(S):
Witness Name:
Witness Name:
Witness Name:
Exhibit 21
Subsidiaries of the Company
as of May 26, 1994
The Company owns all of the stock of the following corporations:
Name State of Incorporation
Marcus Theatres Corporation Wisconsin
Marcus Restaurants, Inc. Wisconsin
B & G Realty, Inc. Wisconsin
First American Finance Corporation Wisconsin
Marc Plaza Corporation Wisconsin
Pfister Corporation Wisconsin
Marcus Geneva, Inc. Wisconsin
Marcus Hotels, Inc. Wisconsin
Budgetel Inns, Inc. Wisconsin
Marcus Theatres Corporation owns all of the stock of the
following corporations:
Name State of Incorporation
Appleton Theatres Corporation Wisconsin
Centre Theatres Corporation Wisconsin
La Crosse Amusement Company Wisconsin
Lake-Vue Drive-In Corp. Wisconsin
Marcus Cinemas, Inc. Wisconsin
Marcus Productions,, Inc. Wisconsin
M & S Amusement, Inc. Wisconsin
Pilgrim Theatre Corporation Wisconsin
Southtown Corporation Wisconsin
Starlight-24 Corporation Wisconsin
Stephen Amusement Corporation Wisconsin
Tower 41-Corporation Wisconsin
Vending Corporation Wisconsin
41-Bowl, Inc. Wisconsin
Budgetel Inns, Inc. owns all of the stock of the following
corporations:
Name State of Incorporation
Budgetel Partners, Inc. Wisconsin
Guest House Inn--Appleton, Inc. Wisconsin
Guest House Inn of Manitowoc, Inc. Wisconsin
Marc's Budgetel of Nebraska, Inc. Nebraska
Budgetel Franchises International, Inc. Wisconsin
Woodfield Refreshments of Colorado, Inc. Colorado
Marcus Restaurants, Inc. owns all of the stock of the following
corporations, except it owns 50% of 642, Inc.:
Name State of Incorporation
Marc's Carryout Corporation Wisconsin
Tops, Inc. Illinois
Hasty Host Distributing Corp. Illinois
B & G Leasing Corporation Wisconsin
Captains--Juneau, Inc. Wisconsin
Captains--Mayfair, Inc. Wisconsin
Captains--Wausau, Inc. Wisconsin
Captains--Kenosha, Inc. Wisconsin
Colony Inns Southgate Corporation Wisconsin
Marc's Steak House, Inc. Wisconsin
642, Inc. Wisconsin
Red Garter--Manitowoc, Inc. Wisconsin
Captains--Appleton, Inc. Wisconsin
Speciality Products Corporation
of Wisconsin Wisconsin
Glendale Refreshments, Inc. Wisconsin
Grand Avenue Refreshments, Inc. Wisconsin
Marc's Big Boy Corporation has an option to purchase the remaining 50% of
the stock of 642, Inc. for $5.
Colony Inns Southgate Corporation owns 80% of the stock of
Colony Inns Refreshments, Inc., a Wisconsin corporation, and has an option
to purchase the remaining 20% for $5.
Marcus Hotels, Inc. owns all of the stock of Marcus Northstar,
Inc., a Minnesota corporation.
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-18801) of The Marcus Corporation of our report dated July
22, 1994, with respect to the consolidated financial statements and
schedules of The Marcus Corporation included in the Annual Report (Form
10-K) for the year ended May 26, 1994.
Our audits also included the financial statement schedules of The Marcus
Corporation listed in Item 14(a). These schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion
based on our audits. In our opinion, the financial statement schedules
referred to above, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
August 24, 1994
