SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 10, 1997
DavCo Restaurants, Inc.
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(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
000-22006
(Commission File Number)
52-1633813
(IRS Employer Identification No.)
1657 Crofton Boulevard
Crofton, Maryland 21114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (410) 721-3770
Not Applicable
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(Former name or former address, if changed since last report)
Item 5. Other Events.
DavCo Restaurants, Inc.'s wholly owned
subsidiary FriendCo Restaurants, Inc. ("FriendCo") has
entered into agreements with Friendly's Ice Cream
Corporation and Friendly's Restaurants Franchise, Inc.
signed July 10, 1997, effective July 14, 1997. The
agreements set forth the terms pursuant to which FriendCo
has purchased certain assets and rights to 34 existing
restaurants, and will manage under contracts with an option
to purchase 14 other Friendly's locations and have exclusive
rights to develop and operate Friendly's Restaurants in
Maryland, northern Virginia, Delaware and the District of
Columbia. The purchase price was $8,486,000 and was
allocated as follows: $860,000 to initial franchise fees,
$2,700,000 to equipment and tenant improvements,
$3,496,000 to goodwill, $500,000 to franchise development
rights and $930,000 as payment of one-half of the initial
franchise fee for the first 74 restaurants to be developed.
Existing store inventories, as of July 14, 1997 will be
purchased and paid for within 30 days. The transaction was
financed through a term loan for $10,000,000, signed July
11, 1997. A copy of the Purchase and Sale Agreement,
Development Agreement, and the Franchise Agreement are
attached hereto as Exhibits 10.55, 10.56 and 10.57
respectively.
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits.
(a) Not Applicable.
(b) Not Applicable.
(c) Exhibits.
10.55 Purchase and Sale Agreement dated
as of July 10, 1997, effective as of July 14, 1997
by and among Friendly Ice Cream
Corporation and FriendCo Restaurants,
Inc.
10.56 Development Agreement dated as of
July 10, 1997, effective as of July 14, 1997
by and among Friendly Ice Cream Corporation and
FriendCo Restaurants, Inc.
10.57 Franchise Agreement dated as of
July 10, 1997, effective as of July 14, 1997, by
and among Friendly's Restaurant Franchise, Inc.
and FriendCo Restaurants, Inc.
SIGNATURE
Pursuant to the requirements of the
Securities Exchange Act of 1934, as amended, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DAVCO RESTAURANTS, INC.
By: /S/Ronald D. Kirstien
Name: Ronald D. Kirstien
Title: President and Chairman
Dated: July 25, 1997
PURCHASE AND SALE AGREEMENT
BETWEEN
FRIENDLY ICE CREAM CORPORATION
1855 Boston Road
Wilbraham, Massachusetts 01095
AND
FRIENDCO RESTAURANTS, INC.
1657 Crofton Boulevard
Crofton, Maryland 21114
DATED
July 10, 1997
TABLE OF CONTENTS
Section Page
1. Assets Purchased 1
A. Franchise Rights 2
B. Management Rights 2
C. Development Rights 2
D. Equipment and Tenant Improvements 3
E. Software Rights 3
F. Trademark and Service Mark Rights 3
G. Inventory and Restaurant Cash 3
2. Purchase Price and Allocation 4
3. Purchase Price Refunded on Loss
of Franchised Restaurant 5
4. Holdback of Portion of Purchase
Price 6
A. Creation of Escrow Account 6
B. Application of Escrow 7
C. Notice of Claims 8
D. Disbursement by Escrow Agent 9
5. Closing 9
A. Time and Place 9
B. Documents Executed at Closing 10
C. Documents Delivered at Closing 10
D. Real Estate Closing 11
E. Documents Executed at Real
Estate Closing 11
F. Documents Delivered at
Post-Real Estate Closing 11
6. Conditions of F.I.C.C.'s
Obligation to Close 12
A. Board of Director Approval 12
B. Approval of Non-Disturbance
Agreement
By Voting Majority of
Lending Group 12
C. Representations and Warranties 13
D. Opinion of FriendCo's Counsel 13
E. Evidence of Payment 13
7. Conditions of FriendCo's
Obligation to Close 13
A. Board of Director Approval of
FriendCo and
DavCo Restaurants, Inc 14
B. Receipt of Executed
Non-Disturbance
Agreement 14
C. Representations and Warranties 14
8. Representations and Warranties
of F.I.C.C. 14
A. Organization 14
B. Authorization 15
C. No Violations 15
D. Title to Assets 16
E. Joint Inspection 16
F No Brokers 16
G. Post Closing 17
9. Representations and Warranties
of FriendCo 17
A. Organization 17
B. Authorization 17
C. No Violations 18
D. No Conflict with Wendy's
International 18
E. No Brokers 19
F. Offer of Employment 19
10. Indemnification 19
A. Pre-Effective Date 19
B. Post-Effective Date Expenses 20
C. General Indemnification 20
D. Environmental Indemnification 20
11. Definitions 21
12. Choice of Law and Jurisdiction 23
A. Governing Law and Forum 23
B. Arbitration of Minor Disputes 23
C. Award of Costs and Attorney's
Fees 23
13. Survival of Terms,
Representations and Warranties 24
14. Severability 24
15. Notices 25
EXHIBITS: SCHEDULES:
Exhibit A: Franchise Agreement Schedule A: List of Franchised Restaurants
Exhibit B: Management Agreement Schedule B: List of Managed Restaurants
Exhibit C: Development Agreement Schedule C: List of Exempted Equipment
Exhibit D: Software License
Agreement
Exhibit E: Trademark License
Agreement
Exhibit F: Escrow Agreement
Exhibit G: Non-Disturbance Agreement
Exhibit H: Guaranty
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is dated ______________ , 1997
by and between Friendly Ice Cream
Corporation, a Massachusetts corporation ("F.I.C.C.")
and FriendCo Restaurants, Inc., a Maryland
corporation ("FriendCo").
WHEREAS, F.I.C.C. owns and operates 51
Friendly's Restaurants in Delaware, Maryland and
certain counties of Northern Virginia; and
WHEREAS, F.I.C.C. desires to achieve
additional market penetration in the above-mentioned
territory, and FriendCo desires to operate Friendly's
Restaurants and to construct new Friendly's
Restaurants;
NOW, THEREFORE, in consideration of the
exchange of mutual covenants and the consideration
contained herein, F.I.C.C. hereby agrees to sell, and
FriendCo hereby agrees to buy, the following rights
and assets pursuant to the terms and conditions of this
Agreement.
1. ASSETS PURCHASED
Upon the Effective Date of this Agreement,
FriendCo will acquire from F.I.C.C. and its relevant
subsidiaries all right, title and interest in the following
assets:
A. Franchise Rights.
FriendCo will receive the right to operate the thirty-four (34)
Friendly's Restaurants identified in Schedule A
pursuant to the terms of a Franchise Agreement with
Friendly's Restaurants Franchise, Inc. ("F.R.F.I.") in
the form attached hereto as Exhibit A.
B. Management Rights.
FriendCo will receive the right to manage fourteen
(14) Friendly's Restaurants identified in Schedule B
pursuant to the terms of a Management Agreement
with F.I.C.C. in the form attached hereto as Exhibit B.
FriendCo will also receive the right to convert any
managed restaurant to a franchised restaurant during
the term of the Management Agreement at FriendCo's
sole option (subject only to landlord consent to lease
assignment or subletting, if necessary) upon notice to
F.I.C.C., payment of an initial franchise fee, execution
of a Franchise Agreement, execution of a sublease in
substantially the form of the subleases employed the
parties pursuant to this transaction and payment to
F.I.C.C. of an amount equal to a 5.3 multiple of the
restaurant earnings before interest, taxes, depreciation
and amortization (hereinafter "Restaurant EBITDA")
as measured on a trailing twelve (12) month basis from
the last day of the last full month preceding the notice
to F.I.C.C. (but in no event shall the payment be less
than the amount of the depreciated book value of the
restaurant equipment, cash and inventory).
C. Development Rights.
FriendCo will receive the right to construct and
operate up to one hundred (100) additional Friendly's
Restaurants in an exclusive territory consisting of the
States of Delaware and Maryland, the District of
Columbia, and certain<PAGE>
counties of Northern Virginia, all as is more
specifically set forth in the Development Agreement
between F.R.F.I. and FriendCo, in the form attached
hereto as Exhibit C.
D. Equipment and Tenant Improvements.
FriendCo will receive all of
F.I.C.C.'s rights, title and interest to the equipment and
tenant improvements (but not fixtures) in each of the
thirty-four (34) Friendly's Restaurants identified in
Schedule A, with the sole exception of such
equipment identified in Schedule C, attached hereto.
E. Software Rights.
FriendCo will receive the rights to use all current
F.I.C.C. operating software in all franchised restaurants, and
will be entitled to receive all improvements and
upgrades to such software, pursuant to the terms of a
Software License Agreement with F.I.C.C. in the form
attached hereto as Exhibit D.
F. Trademark and Service Mark Rights.
FriendCo will receive the non-exclusive
rights to utilize for the benefit of each
franchised or managed restaurant all valid Trademarks
and Service Marks owned or licensed by F.I.C.C.
pursuant to the terms of the Franchise Agreements
with F.R.F.I. and a Trademark License Agreement
with F.I.C.C. in the form attached hereto as Exhibit E.
G. Inventory and Restaurant Cash.
FriendCo will receive on the Effective Date the
rights to all inventory and restaurant cash for each of
the thirty-four (34) franchised restaurants identified in
Schedule A.
2. PURCHASE PRICE AND ALLOCATION
A. With respect to the assets listed
in subparagraphs 1.A., 1.B., 1.C., 1.D., 1.E. and 1.F.,
the purchase price shall be Seven Million Five
Hundred Fifty-Six Thousand Dollars ($7,556,000.00),
representing approximately a 5.3 times multiple of the
represented Restaurant EBITDA of the thirty-four
(34) restaurants identified in Schedule A.
B. With respect to the assets listed
in category 1.G., the purchase price shall be an amount
agreed upon by F.I.C.C. and FriendCo following the
conclusion of an Inventory and Restaurant Cash audit
performed jointly by F.I.C.C. and FriendCo on the
Effective Date.
C. The purchase price set forth in
subparagraph 2.A. shall be allocated as follows: first,
in the amount of Eight Hundred Sixty Thousand
Dollars ($860,000.00) to initial franchise fees for the
thirty-four (34) franchised restaurants; second, in the
amount of Two Million Seven Hundred Thousand
Dollars ($2,700,000.00) to equipment and tenant
improvements in the thirty-four (34) franchised
restaurants; third, in the amount of Three Million Four
Hundred Ninety-Six Thousand Dollars
($3,496,000.00) to goodwill; and fourth in the amount
of Five Hundred Thousand Dollars ($500,000.00) to
franchise development rights for the States of
Delaware and Maryland, the District of Columbia and
Northern Virginia.
3. PURCHASE PRICE REFUNDED
ON LOSS OF FRANCHISED
RESTAURANT
A. For any of the thirty-four (34)
franchised restaurants being acquired by FriendCo
from F.I.C.C., if the right to occupy and operate such
restaurant is terminated by a landlord, lender or
governmental agency or if primary access to such
restaurant is lost due to a defect in title existing as of
the Effective Date, within ten (10) years of the
Effective Date hereof, and such termination was
neither caused nor contributed to by FriendCo but
results from the loss or denial of a Certificate of
Occupancy, or the loss of the right to occupy or
access the property other than through an eminent
domain proceeding which provides FriendCo with
compensation for its loss of business at such location,
then for each such terminated restaurant, an allocable
portion of the purchase price will be refunded to
FriendCo by F.I.C.C. in accordance with the following
formula:
1) For each full year less than ten
(10) years of occupancy lost
through such termination,
F.I.C.C. shall refund 10% of
the allocable portion of the
restaurant purchase price (i.e.
5.3 times the restaurant's 1996
E.B.I.T.D.A.) to FriendCo.
2) For any partial year of
occupancy lost through such
termination, F.I.C.C. shall
refund an amount equal to
.00274 times the number of
days lost in such partial year
times the allocable portion of
the restaurant purchase price
(i.e. 5.3 times the restaurant's
1996 E.B.I.T.D.A.) to
FriendCo.
3) In addition, FriendCo shall be
entitled to recover from
F.I.C.C. FriendCo's reasonable
expenses incurred in attempting
to prevent the termination of its
right to occupy and operate
such restaurant only, if F.I.C.C.
does not elect to attempt to
prevent the termination of such
rights itself.
B. No refund shall be due to
FriendCo for any of the thirty-four (34) franchised
restaurants lost or terminated after ten (10) years of
occupancy by FriendCo, for any franchised restaurant
lost or terminated due to any action or inaction
specifically attributable to FriendCo, or for any newly
constructed restaurant beyond the original thirty-four
(34) franchised restaurants.
C. The sole exceptions to the ten
(10) year period of occupancy and operation required
under this Paragraph shall be for the expiration of the
lease for restaurant numbered 751 and 461, which the
parties hereby acknowledge expire on January 31,
2006 and February 28, 2007.
4. HOLDBACK OF PORTION OF
PURCHASE PRICE
A. Creation of Escrow Account.
F.I.C.C. and FriendCo agree to the
creation of an Escrow Account at First National Bank
of Maryland pursuant to the terms of an Escrow
Agreement, in the form attached hereto as Exhibit F,
to be funded by the<PAGE>
holdback of Two Hundred Fifty Thousand Dollars
($250,000.00), which amount shall be deposited into
the Escrow Account.
B. Application of Escrow.
1) Subject to subparagraph 4.B.2),
below, the parties hereto agree that the amounts in the
Escrow Account shall be used to indemnify and hold
harmless FriendCo from and against losses relating to
cash, inventory and restaurant conditions existing as of
the Effective Date in the manner set forth in Paragraph
4 of this Agreement and in the Escrow Agreement.
All such amounts shall be disbursed out of the Escrow
Account in accordance with the terms of the Escrow
Agreement, and any such amounts distributed to
FriendCo shall be deemed to reduce the goodwill
portion of the Purchase Price as set forth in Paragraph
2 of this Agreement.
2) FriendCo may not make any
claim for losses (other than for Restaurant Cash
Losses or Inventory Losses) pursuant to this
Paragraph 4 unless the claim relates to a condition
which existed as of the Effective Date and such claim
amounts to Ten Thousand Dollars ($10,000.00) for a
loss relating to an individual item, occurrence or event
or Twenty Thousand Dollars ($20,000.00) for a claim
arising out of or relating to a series of items,
occurrences or events or related items occurrences or
events (collectively, the "Threshold Amount"). A
claim for each of Restaurant Cash Losses or Inventory
Losses may not be made unless such claim exceeds
One Hundred Dollars ($100.00) on an individual
restaurant basis.
C. Notice of Claims.
1) For any claims relating to
Restaurant Cash Losses or Inventory Losses,
FriendCo shall have thirty (30) days from the Effective
Date hereof to send written notice of the claim(s)
simultaneously to the Escrow Agent and to F.I.C.C.
Such written notice shall identify the franchised
restaurant(s) to which the claim applies and shall state
the factual basis for the claim and well as the exact
amount of the claim.
2) For any other claims for losses
which exceed the Threshold Amount, FriendCo shall
have ninety (90) days from the Effective Date to send
written notice of such claims(s) simultaneously to the
Escrow Agent and to F.I.C.C. Such written notice
shall identify the franchised restaurant(s) to which the
claim applies and shall state the factual basis for the
claim as well as the exact amount of the claim or an
estimate of the amount of the claim if the exact
amount is not determinable at the time written notice
is given.
3) If F.I.C.C. shall object to either
the claim or the amount claimed in the written notice,
F.I.C.C. shall send written notice of its objection
simultaneously to the Escrow Agent and FriendCo
within thirty (30) days of its receipt of the written
notice of the claim. If no objection is provided within
such thirty (30) day period, F.I.C.C. shall be deemed
to have acknowledged the validity of the amount
claimed, and the Escrow Agent shall thereafter transfer
to FriendCo in immediately available funds an amount
equal to the claim, pursuant to the terms of the
Escrow Agreement.
4) If F.I.C.C. shall have sent a
written objection to FriendCo and the Escrow Agent
within the thirty (30) day period for objection, F.I.C.C.
and FriendCo shall have a period of thirty (30) days
thereafter to resolve or compromise the claim. If a
resolution or compromise is reached, the parties shall
jointly send to the Escrow Agent a notice of
resolution, and the Escrow Agent shall make such
distribution(s) as are specified in the notice of
resolution. If F.I.C.C. and FriendCo are unable to
resolve or compromise the claim within the thirty (30)
day period, then the Escrow Agent shall retain an
amount equal to the amount in dispute between the
parties, and either F.I.C.C. or FriendCo shall have the
right to refer the disputed claim(s) to arbitration
pursuant to Paragraph 12.B, infra.
D. Disbursement by Escrow Agent.
If the Escrow Agent shall not have received
any written notice of claim(s) by the ninety-third
(93rd) day following the Effective Date of this
Agreement, or if the total amount of all claims
received does not equal or exceed the amount of the
Escrow Account, the Escrow Agent shall thereafter
proceed to disburse to F.I.C.C. the amount by which
the Escrow Account exceeds the amount of any claims
in immediately available funds, pursuant to the terms
of the Escrow Agreement.
5. CLOSING
A. Time and Place. The Closing
on this Purchase and Sale Agreement will take place at
the offices of DavCo Restaurants, Inc., 1657 Crofton
Boulevard, Crofton, Maryland, 21114 on Thursday,
July 10, 1997, or at such time and place as the parties
hereto may agree. Any documents necessary to
effectuate the Closing on this Purchase and Sale
Agreement may be executed in two (2) or more
original counterparts, any one of which need not
contain the signatures of more than one (1) party, but
all such counterparts taken together will constitute one
and the same agreed document.
B. Documents Executed at Closing.
The following documents shall be executed
by all such necessary parties at the Closing:
1) Purchase and Sale
Agreement
between F.I.C.C. and FriendCo
2) Development Agreement
between F.R.F.I. and FriendCo
3) 34 Individual Restaurant
Franchise Agreements
between F.R.F.I. and FriendCo
4) Trademark License
Agreement
between F.I.C.C. and FriendCo
5) Software License Agreement
between F.I.C.C. and FriendCo
6) Escrow Agreement
between F.I.C.C., FriendCo and
First National Bank of Maryland
7) Letter Agreement regarding
Maryland Science Center
restaurant
between F.I.C.C. and FriendCo
C. Documents Delivered at
Closing.
The following documents shall be delivered
by the designated party at Closing:
1) Non-Disturbance Agreement
between Lender's of F.I.C.C.,
FriendCo and
DavCo Restaurants (F.I.C.C.)
2) Opinion of Counsel of FriendCo
D. Real Estate Closing.
The Closing on all necessary Real Estate Documents will
take place at the offices of DavCo Restaurants, Inc.,
1657 Crofton Boulevard, Crofton, Maryland, 21114,
at 11:00 a.m. on the Effective Date, or at such time
and place as the parties hereto may agree. Any
documents necessary to effectuate the Real Estate
Closing may be executed in two (2) or more original
counterparts, any one of which need not contain the
signatures of more than one (1) party, but all such
counterparts taken together will constitute one and the
same agreed document.
E. Documents Executed at Real Estate Closing.
The following documents
shall be executed by all necessary parties at the Real
Estate Closing:
1) 13 Prime Leases
between F.I.C.C. and FriendCo
2) 21 Subleases
between F.I.C.C. and FriendCo
F. Documents Delivered Post-Real Estate Closing.
The following documents shall be delivered by
F.I.C.C. to FriendCo within six
(6) months of the Effective Date, pursuant to
paragraph 8.G.:
1) 11 Landlord Consents to
Sublease (F.I.C.C.)
2) Lease Extensions on
Restaurants
Nos. 404, 411, 751 and 813
3) Evidence of Financing
4) 34 Memoranda of Lease or
Sublease
between F.I.C.C. and FriendCo
5) 21 Estoppel Certificates on
Subleases
6) 21 Non-Disturbance
Agreements
from Lenders of Subleased
Properties
6. CONDITIONS OF F.I.C.C.'S
OBLIGATION TO CLOSE
The obligations of F.I.C.C. to close on this
Purchase and Sale Agreement shall be subject to the
fulfillment at or prior to the Closing of each of the
following conditions:
A. Board of Director Approval.
The Board of Directors of F.I.C.C. shall
have approved the transactions contemplated under
this Purchase and Sale Agreement and shall have
authorized its execution by F.I.C.C.
B. Approval of Non-Disturbance Agreement By Voting Majority of
Lending Group.
F.I.C.C. shall have received the
approval of a majority of the votes of the Lending
Group for the Non-Disturbance Agreement between
the Lenders, FriendCo and DavCo Restaurants, as
evidenced by the signature of the Collateral Agent on
the Non-Disturbance Agreement.
C. Representations and Warranties.
The representations and warranties of
FriendCo set forth in Paragraph 9 shall be true and
correct in all material respects as of the date of this
Agreement and as of the Effective Date.
D. Opinion of FriendCo's Counsel.
F.I.C.C. shall have received an opinion of
FriendCo's counsel, Mason, Ketterman & Morgan,
dated as of the Closing Date, as to FriendCo's
authority to execute the Purchase and Sale Agreement,
DavCo Restaurants, Inc.'s authority to execute any
guarantee, and the lack of any conflict between this
transaction and any contracts with Wendy's
International, Inc., whether executed by FriendCo, its
corporate parent, or any affiliate.
E. Evidence of Payment.
F.I.C.C. shall have received by the Real Estate Closing
Date evidence of FriendCo's ability to transfer
sufficient funds to F.I.C.C. to satisfy the purchase
price set forth in Paragraph 2, supra.
7. CONDITIONS OF FRIENDCO'S
OBLIGATION TO CLOSE
The obligations of FriendCo to close on the
Purchase and Sale Agreement shall be subject to the
fulfillment at or prior to the Closing of each of the
following conditions:
A. Board of Director Approval.
of FriendCo and DavCo Restaurants, Inc.
The Boards of Directors of FriendCo and its corporate
parent, DavCo Restaurants, Inc., shall both have
approved of this Purchase and DavCo's guarantee and
shall both have authorized execution.
B. Receipt of Executed Non-Disturbance Agreement.
FriendCo shall have
received an original Non-Disturbance Agreement
between F.I.C.C.'s Lenders, FriendCo and DavCo
Restaurants, Inc., in the form attached hereto as
Exhibit G, executed by the Collateral Agent for
F.I.C.C.'s Lenders.
C . Representations and
Warranties.
The representations and warranties of
F.I.C.C. set forth in Paragraph 8 shall be true and
correct in all material respects as of the date of this
Agreement and the Effective Date.
8. REPRESENTATION AND
WARRANTIES OF F.I.C.C.
F.I.C.C. hereby represents and warrants to
FriendCo as follows:
A. Organization.
F.I.C.C. is a
corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power
and authority to execute all documents contemplated
in this transaction.
B. Authorization.
F.I.C.C. has
full corporate power and authority to perform its
obligations under this Agreement and the documents
to be signed at Closing and all other transactions
contemplated hereby. The execution and delivery of
this Agreement and the consummation of the other
transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action by
F.I.C.C. The Board of Directors of F.I.C.C. has
approved the execution, delivery and performance of
this Agreement and the consummation of all other
transactions contemplated hereby. This Agreement
has been duly executed and delivered by F.I.C.C. and
constitutes the valid and binding agreement of
F.I.C.C., enforceable against F.I.C.C. in accordance
with its terms, subject to applicable bankruptcy,
insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general
equitable principles and the discretion of courts in
granting equitable remedies.
C. No Violations.
The execution,
delivery and performance of this Agreement, the
consummation of the other transactions contemplated
hereby and the fulfillment of a compliance with the
terms and conditions of this Agreement do not and
will not violate or conflict with (i) any terms or
provisions of the Articles of Incorporation or By-laws
of F.I.C.C. or (ii) any judgment, decree, order, statute,
rule or regulation applicable to F.I.C.C. or any of its
assets listed in Paragraph 1, supra, except for such
violations which could not reasonably be expected to
materially impair or delay the ability of F.I.C.C. to
consummate the transactions contemplated hereby.
D. Title to Assets.
Title to all
assets identified in Paragraph 1, supra, which F.I.C.C.
will transfer, lease or license to FriendCo is valid and
transferable by F.I.C.C., except as specifically
excluded. The trademarks and service marks to be
licensed to FriendCo are validly held by F.I.C.C. or
licensed to F.I.C.C. for use without dispute or
challenge. F.I.C.C. maintains current and valid
Certificates of Occupancy for each of the thirty-four
(34) franchised restaurants and fourteen (14) managed
restaurants, the cash flow represented to FriendCo as
the 1996 E.B.I.T.D.A. for the thirty-four (34)
franchised restaurants is correct and accurate to the
best of F.I.C.C.'s knowledge and understanding, and
each of the thirty-four (34) franchised restaurants have
valid and existing primary access as of the Effective
Date, provided, however, any breach of this warranty
of access shall have as its sole remedy the rights
provided under Paragraph 3, supra.
E. Joint Inspection.
Repairs reasonably determined to be necessary to the
Restaurant and Premises to bring them into standard
operating condition through a Joint Inspection will be
made by F.I.C.C. at its sole cost and expense, in a
good and workmanlike manner at a time mutually
convenient to F.I.C.C. and FriendCo.
F. No Brokers.
None ofF.I.C.C., F.R.F.I., or any of their respective executive
officers or directors has employed any broker, finder
or investment banker or incurred any liability for
commissions or finders fees in connection with the
transactions contemplated hereby.
G. Post Closing.
F.I.C.C. shall employ reasonable and good faith efforts to
expeditiously obtain and deliver to FriendCo all third
party landlord consents to sublet, lease extensions,
estoppel certificates and non-disturbance certificates
for the twenty-one (21) subleased franchised
restaurants. A breach of this warranty shall be deemed
to have occurred upon any third party landlord (or its
successor-in-interest) terminating or attempting to
terminate its lease with F.I.C.C.; however, FriendCo's
sole remedy for a breach of this warranty shall be
pursuant to Paragraph 3, supra.
9. REPRESENTATIONS AND WARRANTIES OF FRIENDCO
FriendCo hereby represents and warrants to
F.I.C.C. as follows:
A. Organization. FriendCo is a
corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power
and authority to execute all documents contemplated
in this transaction.
B. Authorization. FriendCo has
full corporate power and authority to perform its
obligations under this Agreement and the documents
to be signed at Closing and all other transactions
contemplated hereby. The execution and delivery of
this Agreement and the consummation of the other
transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action by
FriendCo. The Board of Directors of FriendCo has
approved the execution, delivery and performance of
this Agreement and<PAGE>
the consummation of all other transactions
contemplated hereby. This Agreement has been duly
executed and delivered by FriendCo and constitutes
the valid and binding agreement of FriendCo,
enforceable against FriendCo in accordance with its
terms, subject to applicable bankruptcy, insolvency
and other similar laws affecting the enforceability of
creditors' rights generally, general equitable principles
and the discretion of courts in granting equitable
remedies.
C. No Violations. The execution,
delivery and performance of this Agreement, the
consummation of the other transactions contemplated
hereby and the fulfillment of a compliance with the
terms and conditions of this Agreement do not and
will not violate or conflict with (i) any terms or
provisions of the Articles of Incorporation or By-laws
of FriendCo or (ii) any judgment, decree, order,
statute, rule or regulation applicable to FriendCo or
any of its assets listed in Paragraph 1, supra, except
for such violations which could not reasonably be
expected to materially impair or delay the ability of
FriendCo to consummate the transactions
contemplated hereby.
D. No Conflict with Wendy's
International. The execution, delivery and
performance of this Agreement and the consummation
of the other transactions contemplated hereby will not
violate or conflict with any agreements, contracts or
obligations between FriendCo or its corporate parent,
DavCo Restaurants, Inc. and Wendy's International,
Inc.
E. No Brokers. Neither FriendCo
nor its respective executive officers or directors has
employed any broker, finder or investment banker or
incurred any liability for commissions or finders fees in
connection with the transactions contemplated hereby.
F. Offer of Employment.
FriendCo agrees to make an offer of employment to
the restaurant level employees at the thirty-four (34)
Friendly's Restaurants identified in Schedule A upon
substantially the same terms as each employee is
presently employed. For purposes of this Paragraph
9F only, restaurant level employees shall include
waiter/waitress, host/hostess, guest services,
supervisor, grill workers, fountain worker, dish
washer, district manager, general manager and
assistant manager.
10. INDEMNIFICATION
A. Pre-Effective Date
Expenses. Except as provided in subparagraph 10.D.
infra, F.I.C.C. will indemnify and hold FriendCo
harmless for any and all expenses of restaurant
occupation or operation which arise or are fully due
prior to the Effective Date hereof. Further, F.I.C.C.
will indemnify and hold FriendCo harmless for
F.I.C.C.'s pro rata portion of any expenses of
restaurant occupation or operation which do not
become due until after the Effective Date hereof.
B. Post-Effective Date Expenses.
Except as provided in subparagraph
10.D., infra, FriendCo will indemnify and hold F.I.C.C.
harmless for any and all expenses of restaurant
occupation or operation which arise or are fully due
after the Effective Date hereof. Further, FriendCo will
indemnify and hold F.I.C.C. harmless for FriendCo's
pro rata portion of any expenses of restaurant
occupation or operation which become due prior to
the Effective Date hereof.
C. General Indemnification.
Except as otherwise provided in this Paragraph 10,
F.I.C.C. and FriendCo will indemnify, defend, and
hold each other harmless from claims, demands and
causes of action asserted against the indemnitee by any
person (including, without limitation, F.I.C.C.'s and
FriendCo's employees, agents, contractors or any third
party) for personal injury or death or for loss of or
damage to property and resulting from the
indemnitor's active or passive negligence or willful
misconduct. Where personal injury, death, or loss of
or damage to property is a result of the joint active or
passive negligence or willful misconduct of F.I.C.C.
and FriendCo, the indemnitor's duty of indemnification
shall be in proportion to its allocable share of joint
active or passive negligence or willful misconduct.
D. Environmental Indemnification.
In the event of any leak, spill,
discharge, seepage or other contamination which
occurred or was first present in any of the thirty-four
(34) franchised restaurants or the surrounding leased
or subleased premises prior to the Effective Date, or
which occurred or was present in any of the fourteen
(14) managed restaurants at any time prior to their conversion
to the status of a franchised restaurant, F.I.C.C. shall
indemnify and hold FriendCo harmless from any and
all claims, losses, demands, remediation, testing or
clean-up arising from such leak, spill, discharge,
seepage or other contamination. In the event of any
leak, spill, discharge, seepage or other contamination
which occurred or was first present in any of the
thirty-four (34) franchised restaurants after the
Effective Date, FriendCo shall indemnify and hold
F.I.C.C. harmless from any and all claims, losses,
demands, remediation, testing or clean-up, unless such
leak, spill, discharge, seepage or other contamination
first occurs or is first present after the reversion of
control over such property to F.I.C.C.
11. DEFINITIONS
A. As used in this Agreement, the
following terms shall have the following meanings:
1) "Certificate of Occupancy"
shall mean all documentation
issued from the appropriate state
or county authorities which
permit the occupation and use of
the restaurant as a retail food
service establishment.
2) "Closing"
shall mean the execution of all
documents set forth in Paragraph
5B of this Agreement
3) "Closing Date"
shall mean the date of execution
of all documents set forth in
Paragraph 5B of this Agreement.
4) "Effective Date"
shall mean the date of transfer of
operational control, title to all
assets and right to receive all
income of the thirty-four (34)
franchised Friendly's Restaurants
purchased by FriendCo from
F.I.C.C. and the receipt of the
purchase price by F.I.C.C.
5) "Escrow Agent"
shall mean First National Bank of
Maryland or such affiliated
banking entity as may be designed
by First National Bank of
Maryland.
6) "Inventory"
shall mean all saleable food
products, merchandise, supplies,
flatware, dishes or other items
maintained as restaurant inventory
by F.I.C.C.
7) "Inventory Losses"
shall mean any damaged, missing
or unsaleable food products,
merchandise, unusable, missing or
unservicable supplies.
8) "Joint Inspection"
shall mean F.I.C.C. and FriendCo
shall jointly inspect each
Restaurant and Premises to
determine what if any repairs are
necessary to the Building, the
Outside Areas, the Systems, the
Trade Fixtures or the Equipment
to bring the foregoing into
standard operable condition.
9) "Lending Group" or "Lenders"
shall mean those financial
institutions identified in the
Second Amended and Restated
Revolving Credit.
10) "Restaurant Cash"
shall mean all cash maintained at
any individual restaurant.
11) "Restaurant Cash Losses"
shall mean any shortfall or
negative discrepancy between the
amount of Restaurant Cash
determined to be present upon the
Joint Inspection and paid for by
FriendCo, and the amount of
Restaurant Cash determined to be
present upon the opening of the
restaurant for business by
FriendCo's employees.
12. CHOICE OF LAW AND
JURISDICTION
A. Governing Law and Forum.
This Agreement shall be governed and interpreted in
accordance with the substantive laws (but not the
choice of law provisions) of the State of Delaware.
No party to this Agreement may bring or maintain an
action against, or which includes, another party to this
Agreement except in the federal or state courts located
in the State of Delaware unless the sole and exclusive
forum for such claim lies in another jurisdiction. All
parties to this Agreement expressly waive any defense
of lack of jurisdiction or improper venue to any action
brought in the State of Delaware.
B. Arbitration of Minor Disputes.
For any action or dispute in which the
damages claimed, less costs and attorneys fees, do not
exceed Two Hundred Fifty Thousand Dollars
($250,000.00), the parties expressly agree that the sole
and exclusive forum shall be in arbitration before the
American Arbitration Association, pursuant to its rules
in effect at the time the action or dispute is brought,
with the situs of the arbitration in Wilmington,
Delaware.
C. Award of Costs and Attorney's Fees.
For any action or dispute between
the parties, the forum court or arbitration panel shall
have the power to award costs and attorneys fees
incurred along with a judgment in favor of the
prevailing party.
13. SURVIVAL OF TERMS, REPRESENTATIONS
AND WARRANTIES
None of the terms, obligations, representations
or warranties contained in this Agreement shall be
deemed merged with the Closing of this Agreement or
the execution of any documents contemplated
hereunder but rather shall survive the Closing until the
expiration or termination of such terms, obligations,
representations and warranties by the written action of
all parties hereto.
14. SEVERABILITY
Any provision hereof which is prohibited or
unenforceable in any jurisdiction will, as to such
jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction will not
invalidate or render unenforceable such provision in
any other jurisdiction. To the extent permitted by law,
the parties hereto waive any provision of law which
renders any such provision prohibited or unenforceable
in any respect.
15. NOTICES
All notices, communications and deliveries
hereunder shall be made in writing signed by the party
making the same, shall specify the Paragraph of this
Agreement pursuant to which it is being made or
given, and shall be deemed given or made on (a) the
date delivered if delivered in person or sent by
telecopier, (b) the first business day after the date it is
sent by a nationally recognized courier, or (c) the third
business day after the date it is mailed if mailed by
registered or certified mail, return receipt requested,
with all postage and other fees prepaid, as follows:
To F.I.C.C.:
Friendly Ice Cream
Corporation
1855 Boston Road
Wilbraham,
Massachusetts 01095
Attention: Donald N. Smith
Chairman
and President
Telecopier: (413)543-3186
with a copy to:
Aaron B. Parker, Esquire
Associate General Counsel
Friendly Ice Cream Corporation
1855 Boston Road
Wilbraham, Massachusetts 01095
Telecopier: (410)543-3282
To FriendCo:
FriendCo Restaurants, Inc.
1657 Crofton Boulevard
Crofton, Maryland 21114
Attention: Ronald D. Kirstien
Chairman and President
Telecopier: (410)793-0754
with a copy to:
David J. Norman, Esquire
Mason, Ketterman and Morgan
1657 Crofton Boulevard
Suite 100
Crofton, Maryland 21114
Telecopier: (410)793-0522
IN WITNESS WHEREOF, the parties
hereto have caused their hands and seals to be
subscribed on the day and date first set forth above.
ATTEST: FRIENDLY ICE CREAM CORPORATION
/S/ Henry P. Pettis, III By: /S/ Donald N.Smith (Seal)
Name: Name: Donald N. Smith
Title: Title: Chairman and President
FRIENDCO RESTAURANTS, INC.
/S/ Rick Borchers By: /S/ Ronald Kirstien (Seal)
Name: Name: Ronald Kirstien
Title: Title: Chairman and President
EXHIBIT H
GUARANTY
As an inducement to FRIENDLY ICE CREAM
CORPORATION ("Friendly's") to execute the
Purchase and Sale Agreement and all Exhibits
thereto, dated July 10, 1997 between Friendly's and
FRIENDCO RESTAURANTS, INC. ("FriendCo")
and all addenda and amendments thereto (collectively
the "Agreement"), the undersigned, jointly and
severally, hereby unconditionally warrant to Friendly's
and its successors and assigns that all FriendCo's
representations in the Agreement are true and
guarantee that all of FriendCo's obligations and
covenants under the Agreement will be punctually paid
and performed.
Upon notice by Friendly's of a default by
FriendCo the undersigned will within the applicable
cure period make each payment and perform each
obligation required of FriendCo under the Agreement.
Without affecting the obligations of the undersigned,
Friendly's may extend, modify or release any
indebtedness or obligation of FriendCo or any of the
undersigned or settle, adjust or compromise any claims
against FriendCo of any of the undersigned. The
undersigned waive notice of amendment of the
Agreement, notice of demand for payment or
performance by FriendCo, and all other notices or
demands of any nature whatsoever.
The undersigned further agrees that this
Guaranty shall continue to be effective or be reinstated
as the case may be, if at any time payment of any of
the guaranteed obligations is
rescinded or must otherwise be restored or returned by
Friendly's upon the insolvency, bankruptcy, or
reorganization of FriendCo, all as though such
payment has not been made.
The Guarantor specifically waives any
obligation of Friendly's to proceed against FriendCo
on any other money or held by FriendCo or any other
person as collateral security, by way of set-off or
otherwise.
IN WITNESS WHEREOF, the undersigned
has signed this Guaranty as of the date of the
Agreement.
ATTEST: GUARANTOR:
DavCo Restaurants, Inc.
By:
Name:
Title:
SCHEDULE B
Management Agreement Properties (14 Total)
No. Rest. No. City Address State
1 0384 Baltimore 6901 Security Boulevard MD
2 0780 Cockeysville 240 Hunt Valley MD
3 0880 Randallstown 9428 - 30 Liberty MD
4 0905 Laurel 14750 Baltimore
Washington Blvd. MD
5 0919 Gaithersburg 701 Russell Avenue MD
6 0929 Fredericksburg 280 Spotsylvania Mall VA
7 0939 Waldorf 2850 Crain Highway MD
8 0956 Manassas 8891 Centerville Road VA
9 0972 Alexandria 6550-A Little River Turnpike VA
10 1013 Columbia 8660 Guilford Road MD
11 1028 Glen Burnie 7900 Ritchie Highway MD
12 0393 Wilmington Concord Mall DE
13 0452 Towson 825 Dulaney Valley Road MD
14 0835 Woodbridge 14510 Jefferson Davis Highway VA
DEVELOPMENT AGREEMENT
BETWEEN
FRIENDLY ICE CREAM
CORPORATION
1855 Boston Road
Wilbraham, Massachusetts 01095
AND
FRIENDCO RESTAURANTS, INC.
1657 Crofton Boulevard
Crofton, Maryland 21114
DATED
July , 1997
TABLE OF CONTENTS
Section Page
1. Schedule and Exclusivity. . . . . . . . . . . 2
2. Term. . . . . . . . . . . . . . . . . . . . . 6
3. Fees. . . . . . . . . . . . . . . . . . . . . 6
4. Application of Development Fee. . . . . . . . 7
5. Application Procedures. . . . . . . . . . . . 8
6. Restaurant Closing Procedure. . . . . . . . . 9
7. Assignment. . . . . . . . . . . . . . . . . . 11
8. Non-Competition . . . . . . . . . . . . . . . 12
9. Default and Termination . . . . . . . . . . . 14
10. Agency and Indemnity. . . . . . . . . . . . . 17
11. Notices . . . . . . . . . . . . . . . . . . . 19
12. Miscellaneous . . . . . . . . . . . . . . . . 20
13. Acknowledgement of Risk . . . . . . . . . . . 21
EXHIBITS:
Exhibit A: Territory and Time Schedule. .A-1
Exhibit B: Omitted
Exhibit C: Franchise Agreement. . . . . .C-1
Exhibit D: Commitment Agreement . . . . .D-1
DEVELOPMENT AGREEMENT
THIS AGREEMENT dated
, 19 , between FRIENDLY'S
RESTAURANTS FRANCHISE, INC., a Delaware
corporation ("Friendly's"), and FRIENDCO
RESTAURANTS, INC., a Maryland corporation
("Developer").
WHEREAS, Friendly's owns, operates and
licenses others to operate distinctive high quality
restaurants ("Friendly's Restaurants") serving the
public under the name Friendly's (the "System"); and
WHEREAS, Friendly's desires to achieve
market penetration in various areas of the United
States in order to more effectively expand, advertise
and market the System, and
WHEREAS, Friendly's has concluded that to
further its goals, it desires to grant to experienced and
financially qualified persons or organizations the
opportunity for exclusive development of Friendly's
Restaurants using the System within limited territories
for specified periods of time; and
WHEREAS, Developer desires to obtain the
right to acquire sites within a specific territory during
a specified period of time on which to construct
Friendly's Restaurants using the System, to submit to
Friendly's applications for franchise agreements to
operate Friendly's Restaurants on such sites, and upon
the approval of each such application, to
enter into a franchise agreement with Friendly's to
operate a Friendly's Restaurant using the System upon
such sites; and
WHEREAS, Developer represents that it has
the organizational, operational and financial strength,
experience and resources necessary to carry out the
multiple development of Friendly's Restaurants within
the Territory, as defined below, in the specified time
set forth below.
NOW, THEREFORE, in consideration of the
mutual covenants contained herein and pursuant to the
terms and conditions of this Agreement, the parties
hereby agree as follows:
1. SCHEDULE AND EXCLUSIVITY.
A. Developer agrees to construct,
equip and open seventy-four (74) Friendly's
Restaurants using the System within the time
schedule and territory (the "Territory") set
forth on Exhibit A attached hereto and made a
part hereof, and to maintain the operation of an
additional thirty-four (34) Friendly's
Restaurants pursuant to a franchise agreement,
subject to Paragraph 1.G., infra.
B. Developer agrees that time is of
the essence under this Agreement, and agrees
to comply strictly with each and every element
of the time schedule set forth on Exhibit A.
Developer further agrees that Exhibit A sets
forth the minimum number of Friendly's
Restaurants to be constructed, that Developer
will be required to have
the minimum number under contract and to
demonstrate the number under contract in
order to qualify for any cure period for any
default, and that it is the mutual goal of
Friendly's and Developer that Developer
construct, equip and open a greater number in
an extended time period (the "Target
Number") of Friendly's Restaurants as
described on Exhibit A, but the failure to
open the Target Number shall not be a
default hereunder.
C. For the purposes of this
Agreement, a restaurant will be
considered open or under construction in
such calendar year as the construction
permit is obtained and the building
footings are poured. The Developer will
have six (6) months for the date
construction commences to have the
restaurant open for business in order for
the restaurant to be included in the
minimum number required to be open or
under construction in any given year.
D. During the term of this
Agreement, Friendly's shall not operate,
or license or franchise others to operate
restaurants using the System within the
Territory except as provided in this
Agreement; provided however, that if the
Target Number has not been achieved,
Friendly's may operate, or license others
to operate Friendly's Restaurants within
the Territory and, provided further, that
during the term of this Agreement only,
Friendly's shall not own, license or
franchise any Friendly's Restaurant within
the Trade Area (as defined in Paragraph
8) of any Friendly's Restaurant operated
by Developer.
E. Developer agrees that this
Agreement does not grant it the right to
use the System at any location, nor does
it grant Developer any rights with respect
to the System or to use any of the
trademarks or trade secrets of Friendly's,
such rights being exclusively governed by
a Franchise Agreement for each
Friendly's Restaurant opened hereunder.
F. Each Friendly's Restaurant
as and when constructed, equipped and
opened, and the relationship of Developer
and Friendly's with respect to each such
restaurant, shall be governed by the terms
of an individual Franchise Agreement on
the form of such agreement attached
hereto as Exhibit C which will be granted to
Developer by Friendly's in the good faith
exercise of its sole discretion; provided,
however, that upon the earlier of the expiration
of this Agreement, the completion the Target
number or the elapse of ten (10) years from
December 31, 1997, Developer shall thereafter
use the then current form of Franchise
Agreement.
G. Developer agrees that all
Friendly's Restaurants set forth on Exhibit A
must be open and operating during established
business hours at all times (excepting casualty
or condemnation or act of God) on and after
their scheduled opening date and in the event
any such restaurant(s) is not at all times open
and operating during established business
hours, it will constitute a default hereunder,
except for such restaurant closings as are
permitted in accordance with Paragraph 6
hereof.
H. Upon final expiration or
termination of this Agreement for any reason,
Developer's territorial rights and rights to
construct, equip, open and operate Friendly's
Restaurants shall terminate and expire and
Developer's rights to use the System shall be
limited to those Friendly's Restaurants
operating pursuant to effective Franchise
Agreements which Friendly's and Developer
may have entered into prior to the final
expiration or termination of this Agreement.
I. Developer shall have a right of
first refusal on the operation of any Friendly's
Restaurant located in the Territory in an
Institutional Site (such as a government office,
theme park, hospital, airport, university or
college, military base or similar setting serving
essentially a captive audience or customer
base). The sole exceptions to the exclusivity of
territory granted hereunder shall be the
fourteen (14) managed Restaurants, the two
(2) restaurants operated by F.I.C.C. (which
shall be closed and de-identified no later than
four (4) months after the Effective Date and
the Maryland Science Center restaurant. Any
Friendly's Restaurant in the Territory which is
not managed or operated by Developer may
only be managed and operated by employees of
Friendly Ice Cream Corporation during the
term of this Agreement. Such exclusivity shall
not limit the rights reserved by Friendly's or
F.I.C.C. under Paragraph 1.C. of the Franchise
Agreement.
2. TERM.
This Agreement shall commence upon the date
first written above and shall terminate upon the earlier
of December 31, 2007, or the date of Developer's
execution of a Termination Agreement following the
opening of the seventy-fourth (74th) Friendly's
Restaurant required to be constructed, equipped,
opened and operating pursuant to this Agreement,
unless terminated earlier as provided for herein. The
feasibility of further development in the Territory shall
be assessed by Friendly's and Developer after the
completion of the 74th restaurant and again after the
completion of the 100th restaurant, and thereafter
every five (5) years. An agreement to continue the
development of additional restaurants hereunder shall
operate to extend the Term of this Agreement. In no
event shall the completion of the 74th restaurant cause
this Agreement to terminate prior to December 31,
2003.
3. FEES.
In consideration of the rights granted
Developer, Developer shall pay to Friendly's the sum
of Nine Hundred Thirty Thousand and 00/100 Dollars
($930,000.00) (the "Development Fee") all of which
is non-refundable except as provided under Paragraph
9G and all or part of which has either heretofore been
paid or is tendered herewith.
4. APPLICATION OF
DEVELOPMENT FEE.
A. Developer agrees that Friendly's
is not obligated in any event, including the
termination or expiration of this Agreement, to
return to Developer all or any part of the
Development Fee, except as provided in
Paragraph 9G of this Agreement.
B. Developer has no rights in the
Development Fee except as are specifically set
out in this Agreement.
C. Friendly's agrees that, at such
time as Developer and Friendly's execute a
Commitment Agreement for the issuance of a
Franchise Agreement ("Commitment
Agreement") for any of the Friendly's
Restaurants to be constructed, equipped and
opened hereunder, Friendly's shall apply the
Development Fee in an amount equal to one
half (.5) of the initial franchise fee required to
be paid in connection with each such
application and subsequent grant of a Franchise
Agreement. The Franchise Fee shall be Thirty
Thousand Dollars ($30,000.00) for the first
two (2) restaurants constructed hereunder and
Twenty-Five Thousand Dollars ($25,000.00)
for each additional restaurant set forth in
Exhibit A, and thereafter shall be an amount
equal to the then-current initial franchise fee.
D. In the event the Development
Fee has been applied such that there is a
balance owed against any initial fee(s) which
may become due, Developer shall pay
any balance of such initial fee due to Friendly's
with Developer's application for a Franchise
Agreement.
5. APPLICATION PROCEDURES.
A. Developer acknowledges and
agrees that franchise agreements are granted by
Friendly's only after submission and approval of
a formal application on Friendly's then-current
application form supplying all information
requested thereon and paying all required fees.
Developer further understands that a
Commitment Agreement is first executed and
delivered following approval of such
application and that if the terms and conditions
of the Commitment Agreement are complied
with, a Franchise Agreement granting a
franchise to operate a Friendly's Restaurant will
be executed and delivered. Developer
acknowledges and agrees that the Commitment
Agreement and the Franchise Agreement will
be the forms of such agreements as are
attached hereto as Exhibits C and D for the
restaurants developed in accordance with
Exhibit A .
B. Developer shall comply in all
respects with Friendly's franchise
application policies and procedures when
Developer applies for a Franchise
Agreement in order to fulfill its obligations
under this Agreement. Developer
understands that it should obtain a
Commitment Agreement before making
any unconditional binding commitments to
third parties, and understands and agrees
that any activities undertaken in reliance
on this Agreement prior to such time are
at Developer's own risk and expense.
C. Developer acknowledges
and agrees that Friendly's may choose to
grant or deny applications for franchise
agreements; however, Friendly's will
exercise good faith in exercising its
discretion.
D. Developer shall be solely
responsible for locating appropriate sites
for the construction of Friendly's
Restaurants as contemplated hereunder
and taking all other actions necessary to
finance, build, and construct such
restaurants. Developer understands and
agrees that all proposed sites are subject
to Friendly's prior approval, not to be
unreasonably withheld.
6. RESTAURANT CLOSING
PROCEDURE.
A. Developer may discontinue
operations at any Friendly's Restaurant opened
or maintained pursuant to this Development
Agreement (other than through condemnation
or casualty loss) only in accordance with the
procedure set forth in this Section 6.
Developer shall notify Friendly's that the
restaurant to be discontinued does not produce
a profit at a restaurant operating level, and shall
afford Friendly's not less than thirty (30) days
to audit the operations of such restaurant,
should Friendly's choose to do so. Evidence of
a restaurant's failure to produce a profit shall be
established through six (6) quarters of
consecutive losses totaling Seventy-Five
Thousand Dollars ($75,000.00) or if an aggregate loss of
Seventy-Five Thousand
Dollars ($75,000.00) is achieved in such shorter
period when measured on the basis
of restaurant operating income. Thereafter,
Developer may proceed to discontinue
operations at the restaurant so long as de-identification
of the restaurant occurs within fifteen (15) days of the
cessation of restaurant operations.
B. Developer shall replace any closed
restaurant with (and shall transfer
the Franchise Agreement for such closed restaurant) to a
newly constructed or remodeled restaurant within
eighteen (18) months of the
cessation of restaurant
operations, if the replacement restaurant does not
have a drive-thru window, or within
twenty-four (24) months if the replacement restaurant
does have a drive-thru window
(collectively, such period shall be considered the "Replacement Period").
C. Developer shall be entitled to a moratorium on
royalties and marketing
fees for the Replacement Period for a total of four (4)
closed restaurants; however, for
each additional closed restaurant, Developer shall
continue to pay the average monthly
royalty and marketing fee for such restaurant as
was paid during the last twelve (12)
months of operation until each such additional
restaurant is replaced pursuant to the
terms of this Paragraph 6, and the Franchise
Agreement for such closed restaurant is
transferred to the replacement restaurant.
D. For each closed Restaurant to
be replaced, Developer shall pay a Site
Replacement Fee to Friendly's to cover
Friendly's costs of reviewing and approving the
proposed replacement site, such Fee to be in
the amount of the lesser of Friendly's actual
costs or Two Thousand Five Hundred Dollars
($2,500.00).
7. ASSIGNMENT.
A. Friendly's may assign all or any
part of its rights or obligations hereunder to
any person or entity, provided, however, that
such person or entity has no right or authority,
at the time of such assignment, to license
others to operate Friendly's Restaurants within
the Territory, unless and until this Agreement
has expired or terminated.
B. The rights and obligations of
Developer hereunder are not assignable
without the prior written consent of Friendly's
which may be withheld in Friendly's sole
discretion. For the purposes of this clause, an
assignment includes an assignment, sale, or
other transfer, directly or indirectly of any
interest in Developer, but shall not include a
transfer by merger with the corporate parent or
other affiliate of Developer, provided that the
net worth of the affiliate successor entity is the
same or greater than the net worth of the
Developer and its corporate parent as of the
Effective Date.
C. Developer shall not assign, sell
or transfer any interest in Developer during the
term hereof without the prior written consent
of Friendly's, not to be unreasonably withheld.
D. Any purported assignment
contrary to the foregoing provisions shall be
void and of no force and effect and shall
constitute a default hereunder.
8. NON-COMPETITION.
Developer acknowledges and agrees that
Friendly's has invested a substantial amount of time
and money in developing the System and the
confidential information associated therewith (the
"Confidential Information") and that Friendly's
would be unable to protect its System, the
Confidential Information and trade secrets against
unauthorized use or disclosure and would be unable to
encourage a free exchange of ideas and information
among Friendly's and its licensees if prospective
licensees or licensees were permitted to hold interests
in or perform services for any competing business and
that the following restrictions are reasonably required
in order to protect Friendly's information, marketing
strategies, operating policies and other elements of the
System from unauthorized appropriation and to ensure
that Developer is using its best efforts in employing its
financial and management resources effectively to
meet and exceed the minimum and target development
schedule set forth in this Agreement. Therefore,
Developer agrees that, during the term of this
Agreement, neither Developer nor any of its corporate
parent, subsidiaries or their affiliates will have any
direct or indirect legal or beneficial interest or perform
services in any business which owns, operates,
licenses, franchises or develops any restaurant concept
which both (i) has sit down, table service, and (ii) is a
mid-scale priced, family style restaurant, coffee shop
or ice cream/frozen yogurt shoppe (as defined by
CREST operators list as of June 1, 1997) including
but not limited to Denny's Shoney's Big Boy, Country
Kitchen, Bob Evans, Cracker Barrel, IHOP, Village
Inn, Waffle House, Dairy Queen, Swensen's, Carvel,
Baskin Robbins, TCBY or similar. Notwithstanding
the above, a restaurant concept which is a mid-scale
priced family style restaurant will be deemed
competitive if frozen deserts comprise 5% or more of
the sales mix as measured on any six (6) month basis.
Developer further agrees that for a period of two (2)
years after the termination or expiration of this
Agreement, Developer and all of such persons will be
subject to the same restriction on competing activities
(i) within the Territory and (ii) within the trade area
(as reasonably determined by Friendly's) of any
Friendly's Restaurant currently operated by Friendly's
or any licensee, but in no event within a radius of three
(3) miles from any such restaurant. Developer further
acknowledges that this paragraph confers no
exclusivity on Developer with respect to Developer's
further operation of any Restaurant within the
Territory after the expiration or termination of this
Agreement.
The restrictions of this section shall not be
applicable to the Friendly's Restaurants operated under
franchise agreements between Developer and
Friendly's, to the ownership of shares of a class of
securities listed on a stock exchange or traded on the
over-the-counter market that represent five percent
(5%) or less of the numbers of shares of that class of
securities issued and outstanding, or to any restaurants
franchised by Wendy's International and operated by
the corporate parent or any affiliate of Developer.
9. DEFAULT AND TERMINATION.
A. This Agreement shall terminate
without further notice at the time and date set
forth in Paragraph 2 hereof, unless extended or
earlier terminated as set forth hereinbelow.
B. This Agreement shall
automatically terminate without notice in the
event Developer becomes insolvent or is unable
to pay its debts as they may mature or make an
assignment for the benefit of creditors or an
admission of inability to pay obligations as they
become due or file a voluntary petition in
bankruptcy or any pleading seeking any
reorganization, liquidation, dissolution or
composition or other settlement with creditors
under any law, or admitting or failing to
contest the material allegations of any such
pleading filed against Developer, or its
adjudicated a bankrupt or insolvent or a
receiver or other custodian is appointed for a
substantial part of Developer's assets or the
assets of any Friendly's Restaurant owned by
Developer or a final judgment remains
unsatisfied or of record for ninety (90) days or
longer (unless supersedeas bond is filed), or if
execution is levied against any substantial part
of Developer's assets is made, or suit to
foreclose any lien or mortgage against
Developer or any Friendly's Restaurant owned
by Developer is instituted and is not dismissed
within ninety (90) days, or if a substantial part
of Developer's real or
personal property is sold after levy of judgment
thereupon by any sheriff, marshal or constable,
or the claims of Developer's creditors are
abated or subject to a moratorium under any
law;
C. In the event Developer
materially fails to comply with any of the terms
and conditions of this Agreement (excepting
only by reason of force majeure, such as, but
not limited to: civil strife or commotion, labor
strike, lockout or Acts of God) or the terms
and conditions of any Commitment Agreement,
Franchise Agreement orother agreement
between Friendly's and Developer, it shall
constitute a default of this Agreement, and if
Developer fails to cure such default(s) within
one hundred eighty (180) days in the first year
of this Agreement, or sixty (60) days in the
next four (4) subsequent years, of Friendly's
giving written notice of said default(s) to
Developer or the cure period provided in such
other agreement, Friendly's, in its sole and
absolute discretion, and in addition to any other
rights and remedies it may have at law or in
equity, may terminate this Agreement and any
Commitment Agreements in force at the time
of the default without further notice.
D. In the event of termination of
this Agreement, Friendly's shall retain all of the
Development Fee, as a liquidated damage
except as provided for in Subparagraph G
herein, and any unaccrued portion of the
Development Fee shall be retained by Friendly's
without the necessity of notice thereof.
E. A default under this Agreement
shall not constitute a default under any
Franchise Agreement between Friendly's and
Developer. However, the failure of Developer
to complete the minimum development
required hereunder shall grant to Friendly's the
option to purchase the assets and rights relating
to the original thirty-four (34) restaurants sold
to Developer by Friendly Ice Cream
Corporation at the same multiple of cash flow
(i.e. 5.3 times EBITDA on a trailing twelve
(12) month basis) as in the original transaction
by Friendly Ice Cream Corporation and
Developer, pursuant to the Purchase and Sale
Agreement dated July 10, 1997.
Upon the exercise of the repurchase
option, the leases and subleases between
Friendly Ice Cream Corporation and
Developer, as well as any guarantee of such
leases or subleases by DavCo Restaurants, Inc.
will terminate, excepting only such leases or
subleases which Developer shall have assigned
or sublet to a third party (the "Remaining
Leases").
The assignment or sublease between
Developer and any third party on the
Remaining Leases shall attorn to Friendly Ice
Cream Corporation, and any guarantee of the
Remaining Leases by DavCo Restaurants, Inc.
shall remain in full force and effect throughout
the remainder of the base term (and renewals at
the sole discretion of such third party) of such
assignment or sublease.
F. Upon final expiration or
termination of this Agreement for any reason,
Developer's territorial rights and rights to
construct, equip, open and operate Friendly's
Restaurants using the System shall
automatically terminate and expire and
Developer's rights to use the System shall be
limited to those Friendly's Restaurants pursuant
to effective Franchise Agreements which
Friendly's and Developer may have executed
and delivered prior to such expiration or
termination.
G. Friendly's failure to comply with
the terms and conditions of this Agreement
shall constitute a default hereunder. If
Friendly's fails to cure such default(s) within
thirty (30) days of its receipt of written notice
thereof, this Agreementshall terminate and any
portion of the Development Fee not applied
pursuant to Paragraph 4 hereunder shall be
refunded to Developer.
10. AGENCY AND INDEMNITY.
A. Developer and Friendly's agree
that this Agreement does not create any
fiduciary relationship between them and
nothing in this Agreement is intended to make
either party an agent, legal representative, joint
venturer, partner, employee or servant of the
other for any purpose whatsoever. Each party
to this Agreement is an independent contractor
and shall hold itself out to the public as an
independent contractor.
B. Developer shall not make any
contract, agreement, warranty or
representation in the name of Friendly's, and
Friendly's assumes no liability for, nor shall it
be deemed liable by reason of, any action or
omission of Developer and its conduct of
business pursuant to this Agreement or any
claim or action arising therefrom.
C. Developer shall indemnify and hold Friendly's
harmless from and promptly reimburse it for any and all claims,
demands, taxes or penalties, actions and payment of money
(including, but not limited to, fines, damages legal fees and
expenses) by reason of any or all claims, demands, taxes, or
penalties arising directly or indirectly from, as a result of, or in
connection with Developer's actions or
omissions hereunder or those of its agents or employees,
including those of its contractors and subcontractors. At the
election of Friendly's, Developer will also defend Friendly's
against same at Developer's expense. In any event, and
regardless of Developer's payment of legal fees, Friendly's will
have the right, through counsel of its choice, to control any
claim, demand, action or matter to the extent it could directly
or indirectly affect Friendly's financially, and all such expenses
shall be subject to indemnity hereunder. Developer's
obligations under this paragraph shall survive the termination
or expiration of this Agreement.
D. Except as provided above, Friendly's and
Developer shall indemnify, defend and hold each other
harmless from claims, demands and causes of action asserted
against the indemnitee by any person for personal injury or
death or for loss of or damage to property and resulting from
the indemnitor's active or passive negligence or willful
misconduct. Where such injury, death, loss or damage is the
result of joint active or passive negligence or willful
misconduct, the duty of indemnification shall be in proportion
to the allocable share of the joint active or passive negligence
or willful misconduct.
11. NOTICES.
All notices required under this Agreement shall be in writing
and shall be personally delivered, sent by facsimile or overnight
courier or mailed by United States Mail, Return Receipt Requested,
to the respective parties at the following addresses unless and until a
different address has been designated by written notice to the other
party:
Friendly's: FRIENDLY'S
RESTAURANTS FRANCHISE, INC.
1855 Boston Road
Wilbraham, Massachusetts 01095
Attention: General Counsel
Developer: FRIENDCO RESTAURANTS, INC.
1657 Crofton Boulevard
Crofton, Maryland 21114
Attention: President
Notices sent (i) by personal delivery or facsimile shall be
effective when received; (ii) by mail on the third business day after
mailing; and (iii) by overnight courier on the second business day after
delivery to the courier.
12. MISCELLANEOUS.
A. No failure or delay of Friendly's or Developer
to exercise any rights reserved to it in this Agreement or to
insist upon compliance by either party of any obligation or
condition in this Agreement, and no custom or practice of the
parties at variance with the terms hereof, shall constitute a
waiver of either party's right to demand strict compliance with
the terms of this Agreement. Waiver by either party of any
particular default will not affect or impair the rights of
Friendly's or Developer with respect to any subsequent default
of the same or a different nature.
B. This Agreement is solely for the benefit of the
parties hereto and their permitted assignees and is not intended
to and shall not be construed to benefit any other person, firm
or entity.
C. The title headings of the respective paragraphs
of this Agreement are for reference purposes only and shall not
effect the meaning or interpretation of this Agreement in any
way.
D. This Agreement and any rights or liabilities
arising from or in connection with this Agreement shall be
governed by the laws of the State of Delaware. Any action
brought to enforce any provision of this Agreement shall be
brought and maintained only in a state or federal court of
competent jurisdiction in Wilmington, Delaware.
E. This is the entire agreement between the parties
concerning the development of Friendly's Restaurants within
the Territory and any modifications must be in writing and
signed by both parties, or said modifications will be void and
of no force and effect.
F. If any term or provision of this Agreement or
the application thereof to any person or circumstances shall, to
any extent, be invalid or unenforceable, the remainder of this
Agreement, or the application of such term or provision to
persons whose circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby.
13. ACKNOWLEDGEMENT OF RISK.
A. Developer acknowledges the success of the
business ventures contemplated by this Agreement involves
substantial business risks and is dependent upon the
Developer's ability. Friendly's expressly disclaims the making
of, and Developer acknowledges that it has not received and is
not relying upon, any warranty or guarantee,
express or implied, as to the potential
volume, profits, or success of the business venture
contemplated by this Agreement.
B. Developer represents that it has independently
investigated the risks of the business venture contemplated by
this Agreement and has read the disclosure documents
prepared by Friendly's in accordance with the state and federal
franchise laws and agrees that Friendly's has made no
representation that is not fully set forth therein or herein.
C. Developer acknowledges that it has not and
agrees that it will not rely upon any representations not
contained herein or in the disclosure documents prepared by
Friendly's in accordance with state and federal franchise laws.
<PAGE>
WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date and year first above written.
ATTEST: FRIENDLY'S RESTAURANTS FRANCHISE, INC.
/S/Henry P. Pettis, III By: /S/ Donald N. Smith
Print Name: Donald N. Smith
Its: Chairman and President
Date: July 10, 1997
WITNESS: DEVELOPER
/S/Rick Borchers FriendCo Restaurants, Inc.
By: /S/Ronald Kirstien
Print Name: Ronald Kirstien
Its: Chairman and President
Date: July 10, 1997
E X H I B I T A
to
DEVELOPMENT AGREEMENT
Dated: ________________ , 199_
between
FRIENDLY'S RESTAURANTS FRANCHISE, INC.
and
- ---------------------------------------------
Territory:
States of Delaware,
Maryland, the District of
Columbia and following
Virginia counties:
Alexandria, Arlington,
Caroline, Clarke, Culpeper,
Essex, Fairfax, Fauquier,
Frederick, King George,
Lancaster, Loudoun, North
Umberland, Prince William,
Rappahanock, Richmond,
Shenandoah, Spotsylvania,
Stafford, Warren and
Westmoreland.
The boundaries of the Territory defined above shall,
throughout the term of this Development Agreement,
be those boundaries as they exist as of the date hereof.
TIME SCHEDULE:
No later than (Date) Minimum number of new Target number of Friendly's
Friendly's Restaurants to be Restaurants to be opened or
opened or under construction under construction
(permits obtained, footings
poured - six (6) months to
to complete construction)
December 31, 1998 11
December 31, 1999 26
December 31, 2000 41
December 31, 2001 52
December 31, 2002 63
December 31, 2003 74
December 31, 2004 81
December 31, 2005 88
December 31, 2006 94
December 31, 2007 100
FRANCHISE AGREEMENT
BETWEEN
FRIENDLY'S
RESTAURANTS FRANCHISE, INC.
1855 Boston Road
Wilbraham, MA 01095
AND
FRIENDCO RESTAURANTS, INC.
1657 Crofton Boulevard
Crofton, Maryland 21114
DATED
July , 1997
FOR
[RESTAURANT STREET ADDRESS]
[STATE, CITY]
TABLE OF CONTENTS
Section Page
1. INTRODUCTION AND GRANT OF FRANCHISE 1
A. Introduction 1
B. Grant of Franchise 2
C. Rights Reserved by Company 4
2. TRAINING 5
3. GUIDANCE 6
A. Guidance and Assistance 6
B. Operations Manual 7
4. MARKS 8
A. Goodwill and Ownership of Marks 8
B. Limitations on Licensee's Use of Marks 9
C. Notification of Infringements and Claims 10
D. Discontinuance of Use of Marks 10
E. Indemnification of Franchisee 11
5. RELATIONSHIP OF THE PARTIES/
INDEMNIFICATION . . . . . . . . . . . . 11
A. Independent Contractors 11
B. No Liability for Acts of Other Party 12
C. Taxes 13
D. Idemnification 13
6. CONFIDENTIAL INFORMATION . . . . . . . . 14
7. FEES 17
A. Initial Franchise Fee 17
B. Royalty Fee 18
C. Definition of Gross Sales 18
D. Interest on Late Payments 19
E. Application of Payments 19
8. RESTAURANT OPERATING STANDARDS 20
A. Condition, Appearance and Operation of the
Restaurant 20
B. Restaurant Menu 21
C. Approved Products, Distributors and
Suppliers 22
D. Specifications, Standards and Procedures 25
E. Compliance with Laws and Good Business
Practices 26
F. Management and Personnel of the Restaurant 27
G. Insurance 27
9. MARKETING 29
A. By Company 29
B. By Licensee 32
C. By Cooperative 33
10. REPORTS, FINANCIAL STATEMENTS
AND FINANCIAL CONDITION . . . . . . . . . . . 33
11. INSPECTIONS AND AUDITS 35
A. Company's Right to Inspect the Restaurant 35
B. Company's Right to Audit 36
12. TRANSFER OF FRANCHISE. . . . . . . . . . .. 37
A. By Company 37
B. Franchisee May Not Transfer
Without Approval of Company 37
C. Right of First Refusal 38
D. Conditions for Approval of Transfer 40
E. Transfer to a Wholly-Owned Entity 41
F. Effect of Consent to Transfer . . . . . . 42
13. CONDEMNATION AND CASUALTY 42
14. TERMINATION OF THE FRANCHISE 43
15. DAMAGES 46
16. COVENANT NOT TO COMPETE; RIGHTS
AND OBLIGATIONS OF COMPANY AND
FRANCHISEE UPON TERMINATION OR
EXPIRATION OF THE FRANCHISE . . . . . . . . . 48
A. Covenant Not to Compete 48
B. Payment of Amounts Owed to Company 50
C. Marks and System 50
D. Confidential Information 51
E. Continuing Obligations 52
17. RENEWAL OF FRANCHISE 52
18. ENFORCEMENT 53
A. Severability and Substitution of Valid
PROVISIONS 53
B. Waiver of Obligations 55
C. Force Majeure . . . . . . . . . . . . . . . 56
D. Injunctive Relief 57
E. Rights of Parties Are Cumulative 57
F. Costs and Attorneys' Fees 57
G. Governing Law 58
H. Waiver of Punitive/Exemplary Damages;
Limitation of Actions. . . . . . . . . . 58
I. Venue and Jurisdiction 59
J. Waiver of Jury Trial. . . . . 59
K. Binding Effect 59
L. Interpretation 60
M. Time 61
19. NOTICES AND PAYMENTS 61
20. ACKNOWLEDGEMENTS 62
EXHIBITS:
Exhibit A: Disclosure Acknowledgment Statement . . A-1
FRANCHISE AGREEMENT
THIS FRANCHISE (the "Agreement") is
made and entered into as of_________ , 19__ (the "Agreement Date"),
by and between FRIENDLY'S RESTAURANTS,
FRANCHISE, INC., a Delaware corporation, whose
principal address is 1855 Boston Road, Wilbraham, MA 01095
and FRIENDCO RESTAURANTS, INC.
whose principal address is 1657 Crofton
Boulevard, Crofton, Maryland 21114. For purposes
of simplicity, we will sometimes refer to Friendly's as
"us", "we" or the "Company," and we will sometimes
refer to you as "you" or "Franchisee."
1. INTRODUCTION AND GRANT OF
FRANCHISE
A. Introduction
Through expenditure of considerable time, skill,
effort and money, we have developed a system for
establishing, operating and franchising distinctive, high
quality restaurants ("Friendly's Restaurants") serving
the public under the name "Friendly's." A Friendly's
Restaurant consists of all structures, facilities,
appurtenances, grounds, landscaping, signs, furniture,
fixtures, equipment and entry, exit, parking and other
areas commonly associated with such a restaurant.
The approved food, beverage and other products
served and sold by Friendly's Restaurants (the
"Products") for consumer consumption and not for
resale are prepared in accordance with our standards,
specifications and secret recipes. Friendly's
Restaurants are established pursuant to our plans and
specifications for construction, conversion,
remodeling, decorating, equipment and layout, and are
operated in accordance
with our distinctive business formats, construction
plans, inspection and consultation programs, signs,
equipment, layouts, methods, specifications, standards,
recipes (including ice cream and other frozen dessert
and related toppings recipes), confidential information,
trade secrets, operating procedures, training programs
and materials, guidance, policy statements and related
materials, designs, advertising, publicity, and
marketing programs and other materials (which we
may modify from time to time) (collectively, the
"System"). We own, use, promote and license certain
trade names, trademarks, service marks and other
commercial symbols, and applications related thereto,
including but not limited to "Friendly's" and "Friendly's
Restaurants" (collectively, the "Marks"), and the
confidential information, copyrights, and business
format and related property rights which comprise the
System. We may change, modify or improve the
System from time to time to enhance the operations of
Friendly's Restaurants. All improvements and
additions you, we or anyone else makes to the
System, whenever made or used in connection with
the system, will inure to us and become our sole
property. We grant, to qualified persons, franchises to
own and operate Friendly's Restaurants pursuant to
the System selling the Products and services we
authorize and approve.
B. Grant of Franchise
(1) Grant. You have applied for a
franchise to own and operate a Friendly's
Restaurant (the "Restaurant") at, and only at,
the location known as:
(the "Premises") and we have approved
your application in reliance upon all of the
representations and warranties you have made
to us in connection with this Agreement,
including but not limited to the information
contained in your application for a franchise
and, if the Restaurant is newly constructed and
equipped, the representations and warranties
you made to us in the Commitment Agreement
between you and us dated _____ , 19--.
Subject to the provisions of the Agreement,
and in reliance on such representations and
warranties, we hereby grant to you, effective
upon the execution of this Agreement, a
franchise (the "Franchise") to operate a
Friendly's Restaurant at the Premises, and to
use the System and the Marks in operating the
Restaurant, for a term of twenty (20) years,
beginning on the date of completion, expiration
or termination of the Development Agreement
between you and us dated July 10, 1997, unless
this Agreement is sooner terminated as
provided in Section 14 of this Agreement.
Termination or expiration of this Agreement
will constitute a termination or expiration of
the Franchise. Except as otherwise provided in
the Development Agreement, you may not
conduct your business pursuant to this
Agreement from any location other than the
Premises except upon our approval of your
application for change of location, and the
payment of the then current change of location
fee.
(2) Best Efforts. You agree that
you will at all times faithfully, honestly and
diligently perform your obligations under this
Agreement and that you will continuously
exert, during the full term of this Agreement,
your best reasonable efforts
to promote and enhance the business of the
Restaurant and the goodwill of the Marks and
the System.
(3) Operation. You agree that
you will continuously, from the date you open
the Restaurant for business to the public,
operate, occupy and do business in the
Restaurant, 7 days a week, 365 days a year
during the hours of 6:00 a.m. to 11:00 p.m.
weekdays, and to 12:00 midnight on weekends
(it being understood that the Restaurant may be
closed for business while any repairs or
refurbishments are being undertaken and that
different hours of operation may be approved
by the Vice President of Operations of the
Company) and to operate the Restaurant in a
manner reasonably calculated to produce the
maximum volume of gross sales (as defined in
Section 7C of this Agreement) and to help
establish and maintain a high reputation for the
Restaurant, unless the Restaurant is in the
process of being replaced pursuant to the
provisions of any applicable Development
Agreement.
C. Rights Reserved by Company
We retain the right, subject to the exercise of
good faith, in our sole and absolute discretion, to: (1)
operate and grant to others the right to operate,
Friendly's Restaurants or other restaurants using the
System or the Marks at such locations which may
include locations within the Trade Area (as defined in
Section 16A, unless an exclusive territory has been
granted pursuant to a Development Agreement, in
which case the terms of the
Development Agreement will apply) and on such
terms and conditions as we deem appropriate; (2)
operate, and grant to others the right to operate
restaurants under other trade names, trademarks,
service marks and commercial symbols different from
the Marks, notwithstanding the fact that such
restaurants may be the same as or similar to a
Friendly's Restaurant; and (3) sell the Products or
other products identified by the Marks or by other
trademarks in any channel of distribution.
2. TRAINING
Prior to the execution of this Agreement, we
have furnished you and your Restaurant Managers
(each as hereinafter defined) training in the operation
of a Friendly's Restaurant. We will require similar
training for all successors to such persons. No person
shall be permitted to supervise the Restaurant until the
training has been completed. The training program
will include classroom instruction and field training
and will be furnished at our training facility and/or at
a Friendly's Restaurant, and will last for such duration
as we determine to be necessary.
Your Restaurant Managers must complete the
training program to our reasonable satisfaction. If we,
in our sole discretion, determine that any of such
persons are unable to complete the training program
satisfactorily, upon our request you agree to hire, as
soon as practicable, a replacement who must complete
our training program to our reasonable satisfaction.
We may also offer such refresher or supplemental
training programs to you and such persons as we, from
time to time, deem appropriate at such places as we
designate.<PAGE>
By giving you prior written notice, we will have the
right to require attendance at any refresher or
supplemental training program by you or any of such
persons.
No tuition charge will be made for required
initial training programs. You will be responsible for
the travel, local transportation, lodging and meal
expenses, and compensation of yourself and your
Restaurant Managers incurred while attending the
training program and any refresher or supplemental
training programs we offer to you or require you or
such persons to attend. Reasonable charges may be
made by us for training materials and we may require
you to purchase certain equipment to be used in such
training.
3. GUIDANCE
A. Guidance and Assistance
We will furnish guidance to you with respect
to:
(1) preparation, packaging, sale
and delivery of Products
authorized for sale at Friendly's
Restaurants;
(2) development, preparation and
packaging of new Products we
develop for sale at Friendly's
Restaurants;
(3) specifications, standards and
operating procedures utilized
by Friendly's Restaurants, and
any modification thereof;
(4) approved equipment, furniture,
furnishings, signs, food
products, operating materials
and supplies;
(5) development and
implementation of local
advertising and promotional
programs; and
(6) general operating and
management procedures of
Friendly's Restaurants.
In our discretion, we will furnish this guidance and
assistance to you in the form of our confidential
operations manual, bulletins, written reports and
recommendations, electronic mail or other written or
electronic materials (all of which are hereinafter
referred to as the "Operations Manual"), inspection
reports for the Restaurant, refresher training programs
and/or telephonic consultations at our offices or at the
Restaurant. If you request, we will furnish additional
guidance and assistance relative to the operation of the
Restaurant at per diem fees and charges we establish
from time to time. If special training of Restaurant
personnel or other assistance in operating the
Restaurant is requested by you, and must take place at
the Restaurant, all our expenses for such training,
including a per diem charge and travel, local
transportation, lodging and meal expenses for our
personnel, must be paid by you.
B. Operations Manual
We will loan to you during the term of the
Franchise one (1) copy of the Operations Manual
which may consist of multiple parts and/or volumes.
The Operations Manual will contain mandatory and
suggested specifications, standards and operating
procedures that we prescribe from time to time for
Friendly's Restaurants and information relative to your
obligations under this Agreement and in the operation
of a Friendly's Restaurant. We may modify the
Operations Manual from time to time to reflect
changes in the specifications, standards and operating
procedures of Friendly's Restaurants, to disclose
information concerning new Products and services which we may
develop for sale at Friendly's Restaurants, to specify
types, brands and models of equipment which you
must utilize to produce and sell such new Products
and services, and to specify changes in the decor,
format, image, Products, services and operation of a
Friendly's Restaurant. You must keep your copy of
the Operations Manual current by immediately
inserting all modified pages we furnish to you and
destroying the then obsolete pages. In the event of a
dispute relative to the contents of the Operations
Manual, the master copies we maintain at our principal
office will be controlling. You may not at any time
copy any part of the Operations Manual, disclose any
part of it to employees or others not having a need to
know its contents for purposes of operating the
Restaurant, or permit its removal from the Restaurant
without our prior approval. In the event a new version
of the Operations Manual is provided to you, you must
immediately return the then obsolete version to us. To
the extent the Operations Manual contains any
specification, standard or operating procedure
concerning the operation of the Restaurant, such
provision shall be deemed to be incorporated into this
Agreement, unless such provision conflicts with
applicable laws or ordinances.
4. MARKS
A. Goodwill and Ownership of Marks
You acknowledge that we have the right to
license the Marks, that the Marks are represented to
be valid, and that your right to use the Marks is
derived solely from this Agreement (and the
Trademark License Agreement if applicable) and is
limited to your operation of the Restaurant pursuant to
and in compliance with this Agreement and all
applicable standards, specifications and operating
procedures we prescribe from time to time during the
term of the Franchise. Any unauthorized use of the
Marks by you will constitute a breach of this
Agreement and may constitute an infringement of our
rights in and to the Marks. You acknowledge and
agree that all of your usage of the Marks and any
goodwill established by your use of the Marks will
inure to our exclusive benefit, and that this Agreement
does not confer any goodwill or other interests in the
Marks upon you (other than the right to operate a
Friendly's Restaurant in compliance with this
Agreement). All provisions of this Agreement
applicable to the Marks will apply to any other
trademarks, service marks and commercial symbols we
later develop, authorize and license you to use.
B. Limitations on Franchisee's Use of
Marks
You agree to use the Marks as the sole trade
identification of the Restaurant. You must also
identify yourself as the independent owner of the
Restaurant in the manner we reasonably prescribe.
You must not use any Mark as part of any corporate
or trade name or with any prefix, suffix or other
modifying words, terms, designs or symbols (other
than logos and additional trade and service marks we
license to you under this Agreement), or in any
modified form, nor may you use any Mark in
connection with the performance or sale of any
unauthorized services or products or in any other
manner we have not expressly authorized in writing.
You must prominently display the Marks in the
manner we reasonably prescribe at the Restaurant, on
menus and in connection with advertising and
marketing materials. You must not employ any of the
Marks in signing contracts, applications for licenses or
permits, or in any manner that may imply our
responsibility for,
or result in our liability for, any of your indebtedness
or obligations, nor may you use the Marks in any way
not authorized herein. You further agree to give such
notices of trade and service mark registrations as we
specify, and you must obtain such fictitious or
assumed name registrations as may be required under
applicable law.
C. Notification or Infringements and
Cla Claims
You agree to immediately notify us of any
apparent infringement of or challenge to your use of
any Mark, or claim by any person of any rights in any
mark. You agree not to communicate with any person
other than us, your counsel and our counsel in
connection with any such infringement, challenge or
claim. We will have sole discretion to take such action
as we deem appropriate in connection with any
infringement, challenge or claim, and the right to
exclusively control any settlement, litigation or U.S.
Patent and Trademark Office or other proceeding
arising out of the alleged infringement, challenge or
claim or otherwise relating to any Mark. You agree to
execute any and all instruments and documents, render
such assistance and do such acts and things as may, in
the opinion of our counsel, be necessary or advisable
to protect and maintain our interest in any litigation or
other proceeding or to otherwise protect and maintain
our interest in the Marks.
D. Discontinuance of Use of Marks
If it becomes advisable at any time in our
reasonable judgment to modify or discontinue use of
any Mark and/or for the Restaurant to use one (1) or
more additional or substitute trade or service marks,
you agree, at your expense, to comply with our
directions to modify or otherwise discontinue the use of such
Mark, and/or use one (1) or more additional or
substitute trade or service marks, within a reasonable
time after we give you notice.
E. Indemnification of Franchisee
We agree to indemnify you against, and to
reimburse you for, and to our option, to defend you
against, all damages for which you are held liable in
any proceeding arising out of your use of the marks
"Friendly's" and "Friendly's Restaurant", pursuant to
and in compliance with this Agreement, and for all
costs you reasonably incur in the defense of any such
claim brought against you or in any such proceeding in
which you are named as a party, including reasonable
attorney's fees, provided that you have timely notified
us of such claim or proceeding and you have otherwise
substantially complied with this Agreement. We have
the right to approve any counsel employed by you in
the defense of any such claim, and in the event we
elect to defend any such claim, the fees and expenses
of any separate counsel employed by you shall not be
reimbursable.
5. RELATIONSHIP OF
PARTIES/INDEMNIFICATION
A. Independent Contractors
It is understood and agreed that this Agreement
does not create a fiduciary relationship between you
and us, that we and you are and shall be independent
contractors, and that nothing in this Agreement is
intended to make either you or us a general or special
agent, legal representative, joint venturer, partner or
employee of the other for any purpose
or to grant either you or us the right to direct or
supervise the daily affairs of the other. You agree to
identify yourself conspicuously in all dealings with
customers, suppliers, public officials, Restaurant
personnel and others as the owner of the Restaurant
under a franchise granted by us. You also agree to
place such other notices of independent ownership on
forms, business cards, stationery, advertising and other
materials as we may require from time to time. You
acknowledge that no agreement we make with any
third party is for your benefit. Neither we nor you will
interfere with each other's contractual relations.
B. No Liability for Acts of Other
Party
You agree that you will not employ any of the
Marks in signing any contract, check, legal obligation,
application for any license or permit, or in a manner
that may imply that we are responsible, or which may
result in liability to us for, any of your indebtedness or
obligations. You further agree not to use the Marks in
any way not expressly authorized by this Agreement.
Except as expressly authorized in writing, neither we
nor you may make any express or implied agreements,
warranties, guarantees or representations, or incur any
debt in the name of or on behalf of the other, or
represent that our relationship is other than franchisor
and franchisee, and neither we nor you will be
obligated by or have any liability under any agreement
or representations made by the other that are not
expressly authorized in writing. We will not be
obligated for any damages to any person or property
directly or indirectly arising out of the operation of the
Restaurant or your business.
C. Taxes
You agree that except for taxes which we are
required to collect from you in connection with items
you purchase from us, we will have no liability for any
sales, use, service, occupation, excise, gross receipts,
income, property or other taxes, whether levied upon
you, the Restaurant, your property, use or the royalty
fees which you pay to us, in connection with the sales
made or business conducted by you. Payment of all
such taxes will be your responsibility.
D. Indemnification
You agree, during and after the term of the
Agreement, to indemnify, defend and hold us, our
affiliated entities, and their and our shareholders,
directors, partners, officers, employees, agents,
representatives, successors and assignees harmless
against and reimburse the Indemnities for all claims,
obligations and damages descried in Section 5B, any
and all claims arising out of the use of the Marks in
any manner not in accordance with this Agreement and
all losses, liabilities, claims, taxes, demands, damages,
causes of action, governmental inquiries and
investigations, costs and expenses, including
reasonable attorneys' and accountants' fees,
consequently, directly and indirectly incurred, arising
from, as a result of, or in connection with the
operation of the Restaurant or any of your actions,
errors, omissions, breaches or defaults under this
Agreement or any acts or omissions alleged or proven
to be a result of your negligence or willful misconduct.
Except as provided above, Friendly's and you shall
indemnify, defend and hold each other harmless from
laims, demands and causes of action asserted against
the indemnitee by any person for personal
injury or death or for loss of or damage to property
and resulting from the indemnitor's active or passive
negligence or willful misconduct. Where such injury,
death, loss or damage is the result of joint active or
passive negligence or willful misconduct, the duty of
indemnification shall be in proportion to the allocable
share of the joint active or passive negligence or
willful misconduct. For purposes of this
indemnification, "claims" shall mean and include all
obligations, actual and consequential damages,
expenses, losses, costs and other liabilities reasonably
incurred in the defense of any claim against the
Indemnities, including without limitation reasonable
accountants', attorneys' and expert witness fees, costs
of investigation and proof of facts, court costs, other
litigation expenses and travel, lodging and meal
expenses incurred in litigation or preparation for
litigation, whether or not litigation is filed. If the
indemnities reasonably conclude that their interests are
not being adequately represented by your counsel, the
indemnities will have the right to employ their own
attorneys to defend any claim against them in the
manner they deem appropriate or desirable in their sole
discretion, and the indemnification hereunder shall
apply to and include the costs incurred in any such
defense. The obligation to indemnify the indemnities
will continue in full force and effect subsequent to and
notwithstanding the expiration or termination of this
Agreement.
6. CONFIDENTIAL INFORMATION
We possess certain confidential and proprietary
information and trade secrets consisting of, but not
limited to, the following categories of information,
methods,<PAGE>
techniques, procedures and knowledge we have
developed (collectively, the "Confidential
Information"):
(1) methods and procedures
related to the development and
operation of Friendly's
Restaurants, whether contained
in the Operations Manual or
otherwise;
(2) secret recipes of ice cream and
other frozen desserts and
related toppings, menu analysis
and methods of preparation of
Products and services offered
in Friendly's Restaurants;
(3) methods, procedures and
techniques for preparing,
packaging, marketing, selling
and delivering Products and
services offered in Friendly's
Restaurants;
(4) knowledge of test programs,
concepts and results relating to
the planning, development and
testing of the System and
Products and services offered
in Friendly's Restaurants;
(5) sources of purchase of food,
beverages and other
ingredients used by Friendly's
Restaurants;
(6) marketing programs and image;
and
(7) methods, techniques,
specifications, procedures,
information, systems and
knowledge of and experience
in the development, licensing
and operation of Friendly's
Restaurants.
We will disclose the Confidential Information
to you during training, in the Operations Manual and
training manuals, and in guidance and assistance
furnished to you during the term of this Agreement.
You may also learn additional Confidential
Information and trade secrets of ours during the term
of this Agreement. You acknowledge and agree that
you will not acquire any interest in the Confidential
Information, other than the right to utilize it in the
operation of the Restaurant, and that the use of the
Confidential Information in any other business, or the
disclosure of the Confidential Information to any
other person or entity, would constitute an unfair
method of competition with us and other Friendly's
Restaurant licensees.
We claim that the Confidential Information,
which we have invested a substantial amount of money
and time in developing, is a valuable asset of ours,
includes trade secrets of ours, and will be disclosed to
you solely on the condition that you agree, and you do
hereby agree, that you:
(1) will not use the Confidential
Information in any other
business or capacity;
(2) will maintain the absolute
secrecy and confidentiality of
the Confidential Information
during and after the term of
this Agreement (except as
authorized by this Agreement);
(3) will not make unauthorized
copies of any portion of the
Confidential Information which
is in written, audio, video or
other reproducible form; and
(4) will adopt and implement all
reasonable procedures we
prescribe from time to time to
prevent unauthorized use or
disclosure of the Confidential
Information, including
requiring your Restaurant
Manages and other employees
who have access to the
Confidential Information to
execute confidential
agreements in the form we
approve or prescribe prior to
or during their employment.
Furthermore, other than for
consumption in the Restaurant
or approved carry-out or retail
sales programs, you agree not
to sell or provide to any person
or entity other than us or our
designee, for use, testing or
any other purpose, any mixes
or formulations for preparation
of Products you purchase from
us or our designees.
Notwithstanding anything to the contrary
contained in this Agreement, the restrictions on your
disclosure and use of Confidential Information will not
apply to the following: (i)
information, processes or techniques which are or
become generally known in the restaurant industry,
other than through disclosure (whether deliberate or
inadvertent) by you; and (ii) disclosure of Confidential
Information in judicial or administrative proceedings
to the extent that you are legally compelled to disclose
such information, provided that you have used your
best reasonable efforts, and have afforded us the
opportunity, to obtain an appropriate protective order
or other assurance satisfactory to us of confidential
treatment of the information required to be so
disclosed.
You will fully and promptly disclose to us, all
ideas, concepts, formulas, recipes methods and
techniques relating to the development and/or
operation of the Restaurant, conceived or developed
by you and/or your employees during the term of this
Agreement. You acknowledge that such ideas,
concepts, formulas, recipes, methods and techniques
shall be our sole property, and you shall not be entitled
to any compensation whatsoever for the same.
7. FEES
A. Initial Franchise Fee
The initial franchise fee for your first franchise
and second franchise is thirty thousand dollars
($30,000.00) each and the franchise fee for any
additional franchises is twenty-five thousand dollars
($25,000.00) (collectively referred to as the "Fee").
The Fee is paid as follows:
Five thousand dollars ($5,000.00)
upon submissions of an application for
a franchise. If the application is
approved, that portion of the Fee
becomes non-refundable. If the
application is withdrawn prior to a
decision by Friendly's, or if the
application is denied, the Fee (less
Friendly's costs and expenses in
processing the application) is refunded
without interest.
Twenty-five thousand dollars
($25,000.00) (or twenty thousand
dollars ($20,000.00) in the case of the
third or additional franchises) upon
your execution of a Commitment
Agreement ("Commitment
Agreement").
B. Royalty Fee
You agree to pay to us a royalty fee equal to
four percent (4%) of the Gross Sales (as defined in
Subsection C of this Section) of the Restaurant. The
royalty fee shall be payable by electronic funds transfer
not later than the 21st day after the end of each
calendar month, based on Gross Sales for the prior
month. Upon the installation of an upgraded
processing system by Franchisee, we may require that
the royalty fee be payable by electronic funds transfer
not later than the 14th day after the end of each
calendar month. In any event, no default may be
declared for late payment of the royalty or marketing
fees unless and until seven (7) days have elapsed from
the date the payment was due.
C. Definition of Gross Sales
As used in this Agreement, the term "Gross
Sales" shall mean gross sales of all food, beverage,
other menu items, merchandise, and goods and other
services sold or performed by or for you or the
Restaurant, in, upon, or from the Premises, or through
or by means of the business conducted at the
Restaurant or the Premises, whether for cash or credit.
Sales and service taxes collected from customers and
paid to the appropriate taxing authority, all
management or employee meals, and sale of cigars,
cigarettes and newspapers as well as income from pay
telephones shall not be included in Gross Sales. The
discounted portion of menu prices whether by way of
coupons, promotions or otherwise shall not be
included in Gross Sales.
D. Interest on Late Payments
All royalty fees, Marketing Fund contributions
(as described in Section 9 of this Agreement), amounts
due for your purchases from us or our subsidiaries or
affiliates, and other amounts which you owe to us or
our subsidiaries or affiliates will bear interest beginning
on the date due at the highest applicable legal rate for
open account business credit, not to exceed one and
one-half percent (1.5%) per month. This Section 7D
does not constitute an agreement on our part to accept
payments from you after the payments are due or our
commitment to extend credit to, or otherwise finance
your operation of, the Restaurant. Further, you
acknowledge that your failure to pay all amounts when
due may constitute grounds for termination of this
Agreement, as provided in Section 14 of this
Agreement, notwithstanding the provisions of this
Section 7D.
E. Application of Payments
Notwithstanding your designation, we will have
sole discretion to apply any of your payments to any of
your past due indebtedness for initial or royalty fees,
Marketing Fund contributions, purchases from us or
our subsidiaries or affiliates, interest or any other
outstanding indebtedness in such order and amounts as
we may elect. The acceptance of
a partial or late payment will not constitute a waiver of
any of our rights or remedies contained in this
Agreement.
8. RESTAURANT OPERATING
STANDARDS
A. Condition, Appearance and
Operation
Of the Restaurant
You agree that :
(1) neither the Restaurant nor the
Premises will be used for any
purpose other than the
operation of a Friendly's
Restaurant in compliance with
this Agreement, unless and
until restaurant operations are
appropriately discontinued on
the site (pursuant to this
Agreement or the terms of a
Development Agreement);
(2) you will maintain the condition
and appearance of the
Restaurant, its equipment,
furniture, furnishings, signs and
the Premises in accordance
with our specifications and
standards as in effect from time
to time and consistent with the
image of a Friendly's
Restaurant as an efficiently
operated business offering high
quality food service and
observing the highest standards
of cleanliness and sanitation;
and will, upon our reasonable
request, add or alter such
equipment in the Restaurant so
as to efficiently and
hygienically prepare and serve
any new menu items approved
for sale throughout the
Friendly's Restaurant system;
(3) you will perform all periodic
maintenance with respect to
the decor, equipment,
furniture, furnishings and signs
of the Restaurant and the
Premises that is required from
time to time to maintain such
condition, appearance and
efficient operation, including,
without limitation:
(a) thorough cleaning,
repainting and
redecorating of the
interior and exterior of
the Premises at
reasonable intervals;
(b) interior and exterior
repair of the Premises; and
(c) repair or replacement
of damaged, worn out
or obsolete equipment,
furniture, furnishings
and signs.
(4) you will not make any material
alterations to the Premises, or
to the appearance of the
Restaurant as originally
developed, except as required
by applicable real estate codes,
local authorities or landlords,
without our prior written
approval, which approval shall
not be unreasonably withheld;
(5) we have the right to require
that you remodel, redecorate,
re-equip, modernize and
refurnish in a non-structural
manner the Premises and the
Restaurant not more than once
in any five (5) year period and
only after fifty percent (50%)
of the Company-operated
restaurants in the Friendly's
Restaurant system have been
so remodeled, redecorated,
re-equipped or modernized, to
reflect any changes in
Friendly's Restaurants that we
prescribe as our then-current
standards and specifications.
You understand that such
remodeling, redecorating, re-equipping,
modernization or
refurnishing may require a
substantial investment on your
part and that we cannot make
any guarantee of any particular
return on that investment. We
have the right to approve the
layouts, designs, and new
equipment, furniture and
furnishings you use in any
remodeling, redecorating and
re-equipping, such approval
not to be unreasonably
withheld; and
(6) you will place or display at the
Premises (interior and exterior)
only such signs, emblems,
lettering, logos and display and
advertising materials that we
from time to time approve,
such approval not to be
unreasonably withheld.
B. Restaurant Menu
You agree that the Restaurant will offer for sale
all food and beverage products and services that we
from time to time require. You agree that the
Restaurant will sell only products that we have
approved. You agree that the Restaurant will not sell
any Products to any person for resale to any third
person. The Restaurant must not offer for sale or sell
at the Premises or any other location any unapproved
products, or use the Premises for any purpose other
than the operation of the Restaurant.
We have the right to approve the Restaurant's
offering of Products or services on a test basis, which
approval we may condition in any reasonable manner.
We will have the right to stop the test at any time after
its commencement, upon reasonable notice.
C. Approved Products, Distributors
and Suppliers
The reputation and goodwill of Friendly's
Restaurants is based upon, and can be maintained only
by, the sale of distinctive, high quality food products
and beverages and the presentation, packaging, service
and delivery of such products in an efficient and
appealing manner. We have developed various
proprietary products which are prepared by or for us
according to our proprietary and secret recipes and
formulas. We have developed standards and
specifications for food products, ingredients,
seasonings, mixes, beverages, materials and supplies
incorporated in or used in the preparation, cooking,
serving, packaging and delivery of prepared food
products authorized for sale at Friendly's Restaurants.
We have and will periodically approve suppliers and
distributors of the foregoing products that meet our
standards and requirements, including, without
limitation, standards and requirements relating to
product quality, prices, consistency, reliability,
financial capability, labor relations and customer
relations. You agree that for use in the Restaurant
you will:
(1) purchase our proprietary ice
cream, frozen yogurt and other
frozen desserts and related
toppings, muffin and other
mixes and batters, and other
products developed by us from
time to time pursuant to secret
recipes or formulas, only from
us or a third party licensed by
us to prepare and sell such
products; and
(2) purchase all other food
products, ingredients,
seasonings, mixes, beverages,
materials and supplies used in
the preparation of Products;
menus, paper, glassware, china
and plastic products; packaging
or other materials, utensils and
uniforms that meet our
standards and specifications
from suppliers we have
approved.
You must at all times maintain an inventory of
approved food products, beverages, ingredients and
other products sufficient in quantity and variety to
realize the full potential of the Restaurant.
We may approve a single distributor or other
supplier for any Product and may approve a distributor
or other supplier only as to certain of the Products.
We may concentrate purchases with one (1) or more
distributors or suppliers to obtain lower prices and/or
the best advertising support and/or services for any
group of Friendly's Restaurants we license and/or
operate. Approval of a distributor or other supplier
may be conditioned on requirements relating to the
frequency and delivery, standards of service, including
prompt attention to complaints or other criteria, and
concentration of purchases, as set forth above, and
may be temporary, pending our further evaluation of
such distributor or other supplier.
Notwithstanding the above, you have the right
to request our approval of alternative suppliers or
distributors and we will consider alternative suppliers
and distributors. Our evaluation of prospective
suppliers and/or distributors will be conditioned upon
payment of our reasonable evaluation costs of their
products and/or services. You agree to notify us and
submit to us all information, specifications and samples
that we request if you propose
to purchase any food products, mixes, seasonings,
beverages, menus, paper, glassware, china or plastic
products, packaging, uniforms or other materials or
utensils from a distributor or other supplier who has
not been previously approved by us. We will notify
you within a reasonable time whether you are
authorized to purchase such products from such
distributor or other supplier.
We may, from time to time, conduct market
research and testing to determine consumer trends and
the marketability of new food products and services.
You agree to cooperate and assist us by participating
in our consumer surveys and market research
programs, test marketing new food products and
services in the Restaurant and providing us with timely
reports and other relevant information regarding such
customer surveys and market research.
You may from time to time conduct your own
market research and testing to determine consumer
trends and the marketability in your Trade Area of
new food products or services. Prior to undertaking
such market research or testing, you agree to provide
us with written notice no less than thirty (30) days
prior to the commencement of such research or testing
for our approval of such research or testing, which
approval shall not be unreasonably withheld.
D. Specifications, Standards and
Procedures
You acknowledge that the operation of the
Restaurant in compliance with our high standards is
important to us and all other Friendly's Restaurant
licensees. You agree to cooperate with us by
maintaining our high standards in the operation of the
Restaurant. You further agree to comply with all
mandatory specifications, standards and operating
procedures relating to appearance, function,
cleanliness, sanitation, safety, business hours, delivery
services, new Products, purchasing or leasing new or
different equipment for preparation and sale of new
Products, compliance with the decor, format and
image, including equipment, furniture, fixtures and
signage, of a Friendly's Restaurant. Mandatory
specifications, standards and operating procedures we
prescribe from time to time in the Operations Manual,
or otherwise communicate to you in writing, will
constitute provisions of this Agreement as if fully set
forth in this Agreement unless such provisions conflict
with applicable laws or local ordinances. All references
to this Agreement include all such mandatory
specifications, standards and operating procedures.
You agree that the Restaurant will conduct business in
the ordinary course seven days a week (excluding
holidays we specify if any) and 17 hours a day, except
as we may otherwise authorize in writing. You
acknowledge that approved restaurant hours may vary
from one location to another depending on conditions
in the market where the restaurant is located.
E. Compliance with Laws and Good
Business Practices
You agree to secure and maintain in force in
your name all required licenses, permits and
certificates relating to the operation of the Restaurant.
You further agree to operate the Restaurant in full
compliance with all applicable laws, ordinances and
regulations, including, without limitation, all
government regulations relating to health and
sanitation, workers' compensation insurance,
unemployment insurance and withholding and payment
of federal, state and local income taxes, social security
taxes and sales taxes. All of your advertising must
conform to applicable legal standards, be in good taste
in our reasonable judgment and conform to the highest
standards of ethical advertising. You agree that in all
dealings with us, your customers, suppliers and public
officials, you will adhere to the highest standards of
honesty, integrity, fair dealing and ethical conduct.
You agree to refrain from any business or advertising
practice which may be injurious to our business or to
the goodwill associated with the Marks and other
Friendly's Restaurants.
You agree to notify us, by telephone within
seventy-two (72) hours followed within five (5) days
by written notification, including copies of any
pleadings or process received of: (i) the
commencement of any action, suit or proceeding
relative to the Restaurant; (ii) the issuance of any
order, writ, injunction, award or decree of any court,
agency or other governmental instrumentality which
may adversely affect the operation or financial
condition of the Restaurant; and (iii) any notice of
violation of any law, ordinance or regulation relating
to health or safety. You agree that you will not accept
service of process for us and on our behalf.
F. Management and Personnel of the
Restaurant
You agree that at all times you will (i) employ
on terms reasonably satisfactory to us a General
Manager who shall have principal operational
responsibility for the Restaurant and who shall have
such qualifications and experience as we shall
reasonably require and who shall have completed our
training program and (ii) employ on a full-time basis a
Manager and an Assistant Manager, each of whom has
completed our training program (collectively, the
General Manager and Manager and Assistant Manager
are referred to as "Restaurant Managers"). The
Restaurant shall during all business hours be under the
direct on-premises supervision of a Restaurant
Manager. You agree to hire all employees to maintain
a neat and clean appearance and to conform to the
standards of dress and/or uniforms that we specify
from time to time for Friendly's Restaurants. You
shall not recruit or hire any of our employees or any
employees of any Friendly's Restaurant operated by us
or by a Friendly Restaurant licensee without obtaining
our prior written permission or the prior written
permission of the other licensee unless six months have
expired since such employee's termination of
employment with us or the licensee.
G. Insurance
During the term of the Franchise, you agree to
comply with all insurance requirements related to the
Restaurant's lease or mortgage and to maintain in
force at all times, under policies of insurance issued by
carriers we have approved:
(1) employer's liability and
workers' compensation
insurance as prescribed by
applicable law;
(2) comprehensive general liability
insurance (with products,
completed operations and
contractual liability and
independent contractors and
escalators coverage) and
comprehensive motor vehicle
liability insurance (for owned
and non-owned vehicles)
against claims for bodily and
personal injury, death and
property damage caused by or
occurring in conjunction with
the operation of the Restaurant
(or otherwise in conjunction
with your conduct of business
pursuant to this Franchise)
under one (1) or more policies
of insurance, each on an
occurrence basis, with single-limit coverage for
personal and
bodily injury, death and
property damage of at least
one million dollars
($1,000,000.00) (or such other
amount as we may reasonably
require), with no less than a
five million dollar
($5,000,000.00) umbrella
liability policy in force;
(3) All-risk building and contents
insurance including flood and
earthquake, vandalism and
theft insurance for the
replacement value of the
Restaurant and its contents;
(4) business interruption insurance
for a period adequate to
reestablish normal business
operations; and
(5) builders' risk insurance on a
completed value non-reporting
basis during the period of any
remodeling of the Restaurant.
We may periodically increase the amounts of
insurance you will be required to maintain, and we
may require different or additional kinds of insurance
at any time, including excess liability insurance, to
reflect inflation, identification of new risks, changes in
law or standards of liability, higher damage awards, or
other relevant changes in circumstances. Each
insurance policy must name us as an additional insured
and must provide for thirty (30) days' prior written
notice to us of any material modification, cancellation,
termination or expiration of such policy.
<PAGE>
Prior to the expiration of the term of each
insurance policy, you agree to furnish us with a
certificate of insurance or with a certified copy of each
renewal or replacement insurance policy you will
maintain for the immediately following term and
evidence of the payment of the premium for the
insurance policy. If you fail or refuse to maintain
required insurance coverage, or to furnish satisfactory
evidence of required insurance coverage and payment
of the premiums we, at our option and in addition to
our other rights and remedies under this Agreement,
may obtain the required insurance coverage on your
behalf. You must cooperate fully with us in our effort
to obtain such insurance policies, promptly execute all
forms or instruments required to obtain or maintain
such insurance and pay to us, on demand any costs
and premiums we incur.
Your obligations to maintain insurance
coverage as described above will not be affected in any
manner by reason of any separate insurance we
maintain, nor will the maintenance of insurance relieve
you of any obligation under Section 5 of this
Agreement.
9. MARKETING
A. By Company
You agree that because of the value of
advertising to the goodwill and public image of
Friendly's Restaurants, we may maintain and
administer a marketing fund (the "Marketing Fund")
for the marketing program that we deem necessary or
appropriate, in our sole discretion. You agree to
contribute to the Marketing Fund three percent (3%)
of Gross Sales<PAGE>
of the Restaurant calculated in the same manner as,
and payable monthly together with, the royalty fees
due under this Agreement.
You agree that we will direct all marketing
programs financed by the Marketing Fund, and we will
have sole discretion over the creative concepts,
materials and endorsements used in the programs, and
the geographic, market and media placement and
allocation of the programs. You agree that the
Marketing Fund may be used to pay the costs of
preparing and producing video, audio and written
advertising materials; administering multi-regional
advertising programs, including, without limitation,
purchasing direct mail and other media advertising,
and employing advertising agencies to assist therewith;
supporting public relations, market research, and menu
development; and other advertising and marketing
activities that we, in our sole discretion, deem
appropriate.
The Marketing Fund will be accounted for
separately from our other funds and will not be used to
defray any of our general operating expenses, except
for such reasonable salaries, administrative costs and
overhead as we may incur in activities reasonably
related to the administration of the Marketing Fund
and its marketing programs including, without
limitations, conducting market research and menu
development, preparing advertising and marketing
materials, and collecting and accounting for
contributions to the Marketing Fund (including, but
not limited to, attorneys' and accountants' fees and
other expenses of litigation). You agree that we may
spend in any fiscal year an amount greater or less than
the aggregate contribution of all Friendly's Restaurants
to the Marketing Fund in that year
and the Marketing Fund
may borrow from us or from
other lenders to cover deficits of the Marketing Fund
or cause the Marketing Fund to invest any surplus for
future use by the Marketing Fund. You authorize us to
collect for the Marketing Fund any advertising or
promotional monies or credits offered by any supplier
based upon your purchases. All interest earned on
monies contributed to the Marketing Fund will be used
to pay the expenses of the Marketing Fund incurred in
advertising and promotion, including the reasonable
administrative expenses related thereto before other
assets of the Marketing Fund are expended. We will
prepare an annual statement of monies collected and
costs incurred by the Marketing Fund within one
hundred twenty (120) days after the end of our fiscal
year and will furnish this statement to you upon your
written request. We have the right to cause the
Marketing Fund to be incorporated or operated
through a separate entity at such time as we deem
appropriate, and if we do so, that entity will have all of
our rights and duties pursuant to this Section 9A.
You understand and acknowledge that the
Marketing Fund is intended to enhance recognition of
the Marks and patronage of Friendly's Restaurants and
Friendly's proprietary branded products. Although we
will endeavor to utilize the Marketing Fund to develop
advertising and marketing materials and programs, and
to place advertising that will benefit all Friendly's
Restaurants, we undertake no obligation to ensure that
expenditures by the Marketing Fund in or affecting any
geographic area are proportionate or equivalent to the
contributions to the Marketing Fund by Friendly's
Restaurants operating in that geographic area or that
any Friendly's Restaurant will benefit directly or in
proportion to the<PAGE>
contributions to the Marketing Fund from the
development of advertising and marketing materials or
the placement of advertising. Except as expressly
provided in this Section 9A, we assume no direct or
indirect liability or obligation to you with respect to
our maintenance, direction or administration of the
Marketing Fund. You acknowledge that we have the
right, and you hereby authorize us, to settle or
otherwise compromise all disputes with regard to the
Marketing Fund.
B. By Franchisee
Until such time as a Cooperative Marketing
Fund is established and funded, you agree we may
expend the marketing contribution less administrative
expenses not to exceed one-half percent (.5%)
required in Section 9A in your DMA in accordance
with marketing plans reviewed and approved by
Friendly's. Samples of any advertising and
promotional material we have not prepared or
previously approved must be submitted to us for
approval prior to your use. You may not use any
advertising or promotional materials that we have not
approved or which we have disapproved. You agree
to cooperate in the development of a Cooperative
Marketing Fund and to coordinate any local or DMA
advertising with Friendly's. Local advertising
programs approved by Friendly's will be paid for or
credited against the three percent (3%) marketing
expenditure required hereunder at the option of
Friendly's.
C. By Cooperative
Unless your franchise is granted pursuant to a
Development Agreement for an exclusive territory
covering an entire DMA, Friendly's reserves the right
to form and you agree to join a cooperative marketing
fund organized on a regional basis. Each franchisee
within the affected region may contribute up to two
percent (2%) of its Gross Sales to the cooperative
marketing fund in addition to the marketing and
advertising expense obligations under Section 9A and
9B of this Agreement. Each company operated
restaurant within the region of the cooperative
marketing fund shall likewise be required to contribute
to the cooperative fund on a per restaurant basis equal
to the franchisee's percentage of the Gross Sales
contribution. Each franchised and company operated
restaurant contributing to the cooperative shall have
one (1) vote per restaurant in determining how the
cooperative will apply the funds of such cooperative.
10. REPORTS, FINANCIAL
STATEMENTS AND FINANCIAL
CONDITION
Unless otherwise agreed to by us in writing,
you agree to adopt the Company's financial and
operational reporting chart of accounts format, as set
forth in the Operations Manual or otherwise furnished
to you, which may be amended from time to time.
You also agree to maintain accurate books of account,
governmental reports, register tapes, guest checks,
daily reports and complete copies of all federal and
state income tax returns, property and sales and use
tax returns. Such records, reports and returns must be
preserved<PAGE>
for such periods of time as are reasonably specified by
us from time to time in the Operations Manual or
otherwise but not less than the minimum time
prescribed by applicable law.
With respect to the operation and financial
condition of the Restaurant, you agree to furnish us, in
the form we from time to time prescribe:
(1) by the tenth (10th) day of each
month for the preceding
calendar month, a report of the
Gross Sales of the Restaurant,
other revenues generated at the
Restaurant and other
information which we may
reasonably request that may be
useful in connection with our
marketing and other legitimate
functions. This report must
also include a statement
computing amounts then due
for royalty fees and Marketing
Fund contributions and be
certified by you or by your
chief executive or financial
officer;
(2) by the twentieth (20th) day of
each month for the preceding
calendar month, a profit and
loss statement for the
Restaurant and be certified by
you or by your chief executive
or financial officer;
(3) upon our request, such other
data, information and
supporting records for such
periods as we from time to
time reasonably require; and
(4) within one hundred twenty
(120) days after the end of
your fiscal year, a fiscal year-end
balance sheet, income
statement and statement of
changes in financial position
(cash flow) of the Restaurant
for such fiscal year, reflecting
all year-end adjustments
(audited if available) and a
statement of annual Gross
Sales certifying that your Gross
Sales for the immediately
preceding fiscal year have been
calculated and reported in
compliance with the terms of
this Agreement, each of which
shall be certified by you or by
your chief executive or
financial officer.
If at any time you are delinquent in the payment
of any amount owed to us or our affiliates, you agree:
(1) upon our request, to furnish us income statements
and balance sheets for such periods and as of such
dates and all in such detail as we may request, for
you and each entity affiliated with you, whether or not
such entity conducts any business with the Restaurant,
(2) that we may directly contact any lender, lessor,
supplier or vendor for the purpose of obtaining
information relating to the Restaurant and any lease or
financial arrangements and you hereby authorize such
persons to disclose all such information to us and, if
you are an entity, you agree that we may contact any
of your officers, directors, shareholders or partners for
any purpose reasonably related to your undertakings
contained in this Agreement and (3) to furnish, at our
request, books of account, governmental reports,
register tapes, guest checks, daily reports and
complete copies of federal and state income tax
returns, property and sales and use tax returns.
11. INSPECTIONS AND AUDITS
A. Company's Rights to Inspect the
Restaurant
To determine whether you and the Restaurant
are complying with this Agreement, and with
specifications, standards and operating procedures we
prescribe for the operation of Friendly's Restaurants,
we or our agents will have the right, at any reasonable
time, to:
(1) inspect the Restaurant and the
Premises;
(2) observe and video tape the
operations of the Restaurant
for such consecutive or
intermittent periods as we
deem necessary;
(3) remove, in reasonable
quantities, samples of any food
and beverage product, material
or other products for testing
and analysis;
(4) interview personnel of the
Restaurant;
(5) interview customers of the
Restaurant; and
(6) inspect and copy any books,
records and documents relating
to the operation of the
Restaurant.
You agree to fully cooperate with us in
connection with any such inspections, observations,
video taping, product removal and interviews. You
agree to present to your customers any evaluation
forms we periodically prescribe and to participate
and/or request your customers to participate in any
surveys performed by us or on our behalf.
B. Company's Right to Audit
We have the right at any time during the
business hours, and without prior notice to you, to
inspect and audit, or cause to be inspected and
audited, the business records of the Restaurant and the
books and records and tax returns of any entity which
holds the Franchise granted under this Agreement.
You must fully cooperate with our representatives and
any independent accountants that we hire to conduct
any such inspection or audit. If any such inspection or
audit discloses an understatement of the Gross Sales
of the Restaurant, you agree to pay to us, within
fifteen (15) days after receipt of the inspection or audit
report, the royalty fees and Marketing Fund
contributions due on the amount of such
understatement, plus interest (at the rate and on the
terms provided in Section 7D of this Agreement) from
the date originally due until the date of payment.
Further, in the event such inspection or audit is made
necessary due to your failure to furnish us with
reports, supporting records, other information or
financial statements, as required by this Agreement, or
to furnish such reports, records, information or
financial statements on a timely basis, or if an
understatement of Gross Sales for the period of any
audit is determined by any such audit or inspection to
be greater that two percent (2%), you agree to
reimburse us promptly upon notice for the cost of the
inspection or audit, including, without limitation, the
charges<PAGE>
of attorneys and independent accountants, and the
reasonable travel, lodging and meal expenses and
applicable per diem charges for our employees. The
forgoing rights will be in addition to all other remedies
and rights that we may have under this Agreement or
under applicable law.
12. TRANSFER OF FRANCHISE
A. By Company
This Agreement is fully transferable by us and
will inure to the benefit of any transferee or other legal
successor to our interests in this Agreement.
B. Franchisee May Not Transfer
Without
Approval of Company
The rights and duties created by this Agreement
are personal to you. We have granted the Franchise to
you in reliance upon the individual and collective
character, skill, aptitude, attitude, and business ability
of the persons who will be engaged in the ownership
and management of the Restaurant, your financial
capacity and the representations and warranties made
to us in the application and the Commitment
Agreement, if applicable, and the representations,
warranties and covenants contained in this Agreement.
Accordingly, neither this Agreement nor the Franchise
(or any interest therein), nor any part or all of the
ownership of Franchisee (if an entity) or the
Restaurant (or any interest therein), may be
transferred, directly or indirectly, except by operation
of legal merger with your corporate parent or other
affiliate (subject to the successor merged entity having
a net worth equal to the net worth of the Franchisee
and corporate parent on the effective date hereof)
without<PAGE>
our prior written approval, and any attempted transfer
without our prior written approval will constitute a
breach of this Agreement and convey no rights to or
interests in this Agreement or the Franchise. As used
in this Agreement the term "transfer" means and
includes the voluntary, involuntary, direct or indirect
assignment, sale, gift, pledge, grant of security
interest or other transfer by you of any interest in: (i)
this Agreement or any related agreement between you
and us; (ii) the Franchise; (iii) the Franchisee; (iv) the
Restaurant or (v) the Premises. This Section 12B shall
not apply to any interest in the Restaurant or the
Premises conditionally transferred to any bona fide
lender as collateral security for any loans to you or to
any financing or refinancing structured as a sale-leaseback,
provided that upon the sale of the
Restaurant, it is simultaneously leased back pursuant
to a Lease Agreement which is subject to our rights
under this Agreement.
C. Right of First Refusal
If at any time during the term of this Agreement
and for a period of one (1) year thereafter, any interest
in this Agreement or the Franchise is proposed to be
sold, the seller shall obtain a bona fide, executed,
written offer from a responsible and fully disclosed
purchaser and shall submit an exact copy of such offer
to us along with any other information that we may
reasonably request to evaluate the offer and the
identity of the proposed purchaser shall be disclosed to
us. We shall have the right, exercisable by written
notice delivered to you within thirty (30) days after the
date of delivery of an exact copy of such offer and all
requested information to us, to purchase such interest
for the price and on the terms and conditions
contained in such offer. Regardless of the terms of the
offer,<PAGE>
we may, in our discretion, structure the transaction as
an asset purchase, rather than a stock purchase and to
substitute cash for securities or other property as
consideration. If less than the entire interest in this
Agreement or the Franchise is proposed to be sold, we
shall have the right to purchase the entire interest for
a price equal to the proposed price plus a pro-rata
increase based on the value of the interest to be
purchased. Our credit shall be deemed equal to the
credit of any proposed purchaser and we shall have
not less than ninety (90) days to prepare for closing.
We shall be entitled to all representations and
warranties given by the seller to the proposed buyer.
We shall not be obligated to pay any finder's or
broker's fee or commission.
If we do not exercise our right of first refusal,
the sale or other transfer may be completed pursuant
to and on the terms of such offer, subject to our
approval of the transfer as otherwise provided in this
Agreement; provided, however, that if the proposed
sale or other transfer is not completed within one
hundred eighty (180) days after delivery of such offer
to us, or if there is any change in the terms of the
proposed transaction, we shall have an additional right
of first refusal for an additional thirty (30) days.
Our right of first refusal shall not apply to the
sale or transfer of an interest in this Agreement or the
Franchise, to a member of Franchisee's immediate
family or, if Franchisee is an entity, between or among
the owners of Franchisee or their affiliates provided
that such transfer is otherwise permissible under this
Agreement.
D. Conditions for Approval of
Transfer
The proposed transferee and its owners (if the
proposed transferee is an entity) must meet our then
applicable standards for Friendly's Restaurant
licensees. In addition, if the transfer is one of a series
of transfers which in the aggregate constitute the
transfer of the Franchise, all of the following
conditions must also be met prior to, or concurrently
with, the effective date of the transfer:
(1) the transferee must have
sufficient business experience,
aptitude and financial resources
to operate the Restaurant;
(2) prior to the effective date of
the transfer, you or the
transferee must pay all royalty
fees, Marketing Fund
contributions and all other
amounts owed to us or our
subsidiaries and affiliates,
which are then due and unpaid,
and cure all defaults under this
Agreement or any other
agreement between you and us
to our satisfaction (or make
provision for their cure
satisfactory to us);
(3) the transferee and its
management personnel must
have completed our training
program to our satisfaction;
(4) the transferee must apply for a
new license agreement in
accordance with our then
current standards for a term
equal to the remaining term of
this Agreement or for a full
term. If the application is
approved, we and the
transferee will enter into a
commitment agreement to
govern the operation of the
Restaurant until
commencement of the new
license agreement, provided
that the transferee upgrades
and modernizes the Restaurant
to our then-current standards
and meets the other
requirements of the
commitment agreement;
(5) you or the transferee must pay
us the then current transfer fee
to defray expenses incurred by
us in connection with the
transfer;
(6) you, and if you are an entity
(and have signed the Entity
Addendum (the "Entity
Addendum")), your owners,
officers and directors must
execute a general release, in a
form satisfactory to us, of any
and all existing claims against
us, our subsidiaries and
affiliates, and our and their
officers, directors, partners,
employees and agents;
(7) we must approve the material
terms and conditions of such
transfer, including, without
limitation, our determination
that the price and terms of
payment are not so
burdensome as to adversely
affect the subsequent operation
or financial results of the
Restaurant;
(8) you and any guarantors must
execute a non-competition
covenant in favor of us and the
transferee, containing the terms
contained in Section 16A;
(9) the lessor and lender, if any, of
the Premises must give you its
or their advance written
consent to the transfer of the
Premises, if required, and you
must provide us with a copy of
such consent; and
(10) you and any guarantors must
guarantee the transferee's
financial obligations to us in its
commitment agreement and
license agreement for two
years from the date of transfer.
If the proposed transfer is to or among owners
of you, subsection (5) of the above requirements shall
not apply.
E. Transfer to a Wholly-owned
Entity
If you are in full compliance with this
Agreement, we will not unreasonably withhold our
approval of a transfer to an entity which conducts no
business other than the Restaurant (or other Friendly's
Restaurants), which is actually managed by you and in
which you maintain management control and own and
control one hundred percent (100%) of the equity and
voting power of all issued and outstanding securities,
provided that you (i) guarantee, in accordance with
our then current form, the performance of such
transferee's obligations under this Agreement, and (ii)
execute our current form of Entity Addendum.
Transfers of interests in such entity will be subject to
the other provisions of this Section 12.
F. Effect of Consent to Transfer
Our consent to a transfer of this Agreement,
the Franchise, the Restaurant or an interest in you will
not constitute a waiver of any claims we may have
against you (or your owners if you are an entity), nor
shall it be deemed a waiver of our right to demand
exact compliance with any of the terms or conditions
of this Agreement by the transferee.
13. CONDEMNATION AND CASUALTY
You must give us immediate notice in writing
of any proposed taking of the Restaurant or the
Premises by eminent domain. If we agree that the
Restaurant or the Premises (or substantial parts
thereof) will be taken, we will give due and prompt
consideration to transferring the License to a nearby
location which you select within two (2) months of the
taking. If we approve the location and authorize the
transfer, and if you open a new restaurant at such
location in accordance with our specifications within
eighteen (18) months if the new restaurant does not
have a drive-thru, or if the new restaurant does have a
drive-thru, within two (2) years of the closing of the
Restaurant, the new restaurant will henceforth be
deemed to be the Restaurant under this Agreement. If
a condemnation takes place and the new restaurant
does not, for whatever reason, become the Restaurant
under this Agreement in strict accordance with this
Section 13 (or if it is reasonably evident that such will
be the case), the Franchise and this Agreement will
terminate as provided for in Section 14.
If the Restaurant is damaged by fire or other
casualty, you will expeditiously repair the damage. If
the damage or repair requires closing the Restaurant,
you will immediately notify us, will repair or rebuild
the Restaurant in accordance with our standards, will
commence reconstruction within four (4) months after
closing, and will reopen the Restaurant for continuous
business operations as soon as practicable but in no
event later than twelve (12) months after closing of the
Restaurant, giving us ample advance written notice of
the date of reopening. If the Restaurant is not
reopened in accordance with this Section 13, the
Franchise and this Agreement will terminate as
prescribed in Section 14.
Nothing in this Section 13 will extend the term
of this Agreement but you will not be required to pay
us any royalty fee or Marketing Fund contribution
payments for periods during which the Restaurant is
closed by reason of condemnation or casualty.
14. TERMINATION OF THE FRANCHISE
A. Unless cured to our satisfaction, this
Agreement shall terminate 30 days from the date
notice is given to you in accordance with Section 19,
if you or any guarantor:
(1) fail to report accurately the
Gross Sales of the Restaurant
or fail to make payments of any
amounts due to us for royalty
fees, Marketing Fund
contributions, or any other
amounts due to us, our
affiliates or our subsidiaries;
(2) fail to comply with any other
provision of this Agreement or
any mandatory specification,
standard or operating
procedure we prescribe, unless
such failure cannot reasonably
be corrected within such thirty
(30) day period and you
undertake within ten (10) days
after such written notice is
delivered to you, and continue,
efforts to bring the
Restaurant and the Premises
into full compliance, and
furnish proof acceptable to us
of such efforts and the date by
which full compliance will be
achieved;
(3) you or any person controlling
you, controlled by you, or
under common control with
you is in default of any other
agreement with us (for
purposes of this clause control
means the ownership by a
person or entity, directly or
indirectly, of ten percent (10%)
or more of another person or
entity or the power to affect
the policies of another person
or entity);
(4) in our good faith reasonable
judgment, fail to use your
reasonable efforts employ on a
full time basis qualified
Restaurant Managers with
qualifications and experience
acceptable to us.
(5) if you violate the Continuous
Operation covenant set forth in
Section 1B(3) of this
Agreement, or there are three
(3) or more breaches of any
duration during any twelve-month period.
B. Unless we have notified you in writing
to the contrary after discovering the relevant facts, this
Agreement will terminate automatically and
immediately without further action by us or notice to
you, if you:
(1) become insolvent or are unable
to pay your or their debts as
they mature or make an
assignment for the benefit of
creditors or an admission of
inability to pay obligations as
they become due or file a
voluntary petition in
bankruptcy or any pleading
seeking any reorganization,
liquidation, dissolution or
composition or other settlement
with creditors under any law,
or admit or fail to contest the
material allegations of any such
pleading filed against you, or
are adjudicated a bankrupt or
insolvent or a receiver or other
custodian is appointed for a
substantial part of your assets
or the Restaurant or a final
judgment remains unsatisfied or
of record for ninety (90) days
or longer (unless a supersedeas
bond is filed), or if execution is
levied against any substantial
part of your assets or a tax levy
is made, or suit to foreclose any
lien or mortgage against you or
the Restaurant is instituted and
is not dismissed within ninety
(90) days, or if a substantial
part of your real or personal
property is sold after levy of
judgment thereupon by any
sheriff, marshal or constable, or
the claims of your creditors are
abated or subject to a
moratorium under any law;
(2) except as provided in Section
13, discontinue operating the
Restaurant as a Friendly's
Restaurant, or abandon,
surrender or transfer control of
the Restaurant without our
prior approval;
(3) have made any material
misrepresentation or omission
in the application for the
Franchise or in the
Commitment Agreement or in
this Agreement or in any other
material submitted to us on
which we have relied in
determining whether to grant
you the Franchise.
(4) are, or are discovered to have
been, convicted of or plead no
contest to a felony, or other
crime or offense that is likely to
have a material adverse effect
on your reputation or the
reputation of the Company, the
System, or the Restaurant;
(5) make or attempt to make an
unauthorized transfer in
violation of Section 12;
(6) make any unauthorized use or
disclosure of any Confidential
Information or any portion of
the Operations Manual;
(7) lose the right to possession of
the Premises or a substantial
part thereof, whether or not
due to your fault, except as
otherwise provided in Section
13 of this Agreement regarding
condemnation and casualty;
(8) take action toward dissolving
or liquidating the entity owning
the Franchise, or any such
action is taken against you,
without providing us advance
written notice or complying
with Section 12 of this
Agreement;
(9) deny our representatives the
right to enter and inspect the
Restaurant or to examine or
audit its books and records
pursuant to Section 11B of this
Agreement;
(10) make any unauthorized use of
the Marks or contest in any
court or proceeding our
ownership of the Marks or the
System or any part thereof;
(11) fail on three (3) or more
separate occasions, for which
notices of default were given,
within any period of twelve
(12) consecutive months to
comply with this Agreement
whether or not such failures to
comply are corrected after
notice of default is given, or fail
on two (2) or more separate
occasions, for which notices of
default were given,
within any period of twelve
(12) consecutive months to
comply with the same
obligation under this
Agreement whether or not such
failures to comply are corrected
after notice of default is given;
(12) you breach a material
obligation, representation or
warranty contained in this
Agreement and such breach by
its nature cannot be cured; or
(13) have made any material
misrepresentation to us
regarding your organizational
or financial structure of
financial condition.
In any judicial proceeding in which the validity
of termination is at issue, we will not be limited to
relying on the reasons for termination which are set
forth in any notice sent to you in accordance with this
Section 14.
C. You may terminate this Agreement at
any time by giving us at least twelve (12) but not more
than fifteen (15) months written notice.
D. Our rights to terminate this Agreement
are in addition to all rights or remedies available at law
or in equity in case of any breach, failure or default, or
threatened breach, failure or default, all of which rights
and remedies shall be cumulative and not alternative.
15. DAMAGES
Except as otherwise provided in this
Agreement, if this Agreement and the Franchise
granted hereby terminate under any of the provisions
of Section 14 of this Agreement, you agree to
promptly pay us (as liquidated damages for the loss of
the benefit bargained for in this Agreement due to
premature termination only, and not as a penalty or as
damages for breaching this Agreement or in lieu of any
other payment) a lump sum equal to the royalty
fees and Marketing Fund contributions payable to us
during the thirty-six (36) calendar months immediately
preceding the termination. In the event the Restaurant
shall not have been open for thirty-six (36) months
prior to termination, the monthly average of such
payments during such shorter period shall be
multiplied by thirty-six (36) for purposes of this
section. In the event there are fewer than thirty-six
(36) months remaining in the term hereof, the amount
that you agree to pay shall be equal to the number of
months remaining in the term of this Agreement
multiplied by the average monthly royalty fees and
Marketing Fund contributions payable to us during the
thirty-six (36) months immediately preceding
termination. In no event shall the damages for the
termination of this Agreement, if any, exceed the
greater of the liquidated damages set forth above or
the actual damages proven by Friendly's.
If we are unable to determine the amount
payable to us by you by reason of your failure to
submit some or all of your Gross Sales reports as
required pursuant to Section 10 of this Agreement,
you agree that we may estimate the Gross Sales of
your Restaurant for the applicable periods described
above for the purpose of computing the amount
payable to us by you under this Section 15.
16. COVENANT NOT TO COMPETE;
RIGHTS AND OBLIGATIONS
OF COMPANY AND LICENSE UPON
TERMINATION
OR EXPIRATION OF THE LICENSE
A. Covenant Not to Compete
You acknowledge and agree that we have
invested a substantial amount of time and money in
developing the System, the Marks, and the
Confidential Information and that we would be unable
to protect our System, the Marks, Confidential
Information and trade secrets against unauthorized use
or disclosure and would be unable to encourage a free
exchange of ideas and information among us or our
licensees if prospective licensees or licensees were
permitted to hold interests in or perform services for
any competing business and that the following
restrictions are reasonably required in order to protect
our information, marketing strategies, operating
policies and other elements of the System from
unauthorized appropriation. Therefore, you agree that
during the term of this Agreement, you will not have
any direct or indirect or beneficial interest or perform
services as an officer, director, manager, employee or
consultant or otherwise for or in any business which
owns, operates, licenses, franchises or develops any
restaurant concept which both (i) has sit down, table
service, and (ii) is a mid-scale priced, family style
restaurant, coffee shop or ice cream/frozen yogurt
shoppe (as defined by CREST operators list as of June
1, 1997) including but not limited to Denny's Shoney's
Big Boy, Country Kitchen, Bob Evans, Cracker
Barrel, IHOP, Village Inn, Waffle House, Dairy
Queen, Swensen's, Carvel, Baskin Robbins, TCBY or
similar. Notwithstanding the above, a restaurant
concept which is a mid-scale priced family style
restaurant will be deemed competitive if frozen deserts
comprise five percent (5%) or more of the sales mix as
measured on any six (6) month basis. You further
agree that for a period of two (2) years after the
termination or expiration of this Agreement, you and
all of such persons will be subject to the same
restriction on competing activities within the trade
area (the "Trade Area") of the Restaurant or within the
trade area (as reasonably determined by us) of any
Friendly's Restaurant operated currently by us or any
other licensee of ours, but in no event within a radius
of three (3) miles from any such restaurant. You and
all of such persons also agree during such periods of
time not to offer to employ or employ any person who
is then employed by us, our affiliates or any other
licensee. You acknowledge and agree that the Trade
Area is an area equal to a three (3) mile radius with its
epicenter at the Restaurant.
You acknowledge that the determination of the
Trade Area is based on many factors, some of which
are subjective, and that the Trade Area as described in
this Agreement is reasonable under the circumstances.
The restrictions of this Section shall not be applicable
to the ownership of a Friendly's Restaurant operated
pursuant to a License Agreement with us, to the
ownership of shares of a class of securities listed on a
stock exchange or traded on the over-the-counter
market that represent five percent (5%) or less of the
number of shares of that class of securities issued and
outstanding, or to the ownership or operation of any
restaurant franchised by Wendy's International to your
corporate parent or affiliate.
You further acknowledge that this Agreement
does not confer any rights of exclusivity on you with
respect to your operation of a Friendly's Restaurant
within the Trade Area and will not prevent us from
placing another Friendly's Restaurant or other food
service establishment within the Trade Area.
B. Payment of Amounts Owed to
Company
You must pay to us within fifteen (15) days
after the effective date of termination or expiration of
this Agreement, or such later date that the amounts
due to us are determined, all royalty fees, Marketing
Fund contributions, amounts owed for your purchases
from us or our subsidiaries and affiliates, predecessors,
successors and assigns, interest due on any of the
foregoing, and all other amounts owed to us or our
subsidiaries and affiliates under this Agreement or
otherwise.
C. Marks and System
You agree that immediately after the
termination or expiration of this Agreement, you will:
(1) not directly or indirectly at any
time or in any manner identify
yourself or any business as a
current or former Friendly's
Restaurant, or as a franchisee
or licensee of, or as otherwise
associated with us, or use any
Mark or any colorable imitation
thereof in any manner or for
any purpose, or utilize for any
purpose any trade name, trade
or service mark or other
commercial symbol that
suggests or indicates a
connection or association with
us;
(2) remove from the Premises,
discontinue using for any
purpose and return to us (or
with our consent, destroy) any
and all signs, menus, fixtures,
furniture, furnishings,
equipment, advertising,
materials,
stationary supplies, forms or
other articles that display or
contain any Mark or that
otherwise identify or relate to a
Friendly's Restaurant;
(3) remove all Marks that are
affixed to uniforms and/or, at
our direction, cease to use all
uniforms that have been used in
the Restaurant;
(4) take such action as may be
required to cancel all fictitious
or assumed name or equivalent
registrations relating to your
use of any Mark;
(5) change the telephone number
of the Restaurant and instruct
all telephone directory
publishers to modify all
telephone directory listings of
the Restaurant associated with
any Marks when the directories
are next published;
(6) take such action to alter the
physical interior and exterior
decor of the Restaurant as will
effectively de-identify and
distinguish the Premises from
the System; and
(7) furnish to us, within thirty (30)
days after the effective date of
termination or expiration,
evidence satisfactory to us of
your compliance with the
foregoing obligations.
In the event that you fail to take such actions as
required above to our satisfaction within the thirty
(30) days to termination or expiration of this
Agreement, you grant us the right to enter the
Premises to remove all items bearing the Marks and
take such actions as we deem necessary to de-identify
the Restaurant from the System without committing
any trespass or incurring any liability for such actions.
You acknowledge and agree that you will be
responsible for all costs and expenses that we incur in
taking such actions.
D. Confidential Information
You agree that upon termination or expiration
of this Agreement, you will immediately cease to use
in any business or otherwise any of our Confidential
Information disclosed to, or otherwise learned or
acquired by you, and that you will return to us all
copies of the Operations Manual and all other
Confidential Information which we have loaned or
made available to you or which is otherwise in your
possession. You must also provide us with any and all
supplies of our proprietary frozen desserts and
toppings for which you will be compensated at the
lower of their costs or market value.
E. Continuing Obligations
All obligations of the Company and Licensee
which expressly or by their nature survive the
expiration or termination of this Agreement shall
continue in full force and effect subsequent to and
notwithstanding its expiration or termination and until
they are satisfied in full or by their nature expire.
17. RENEWAL OF FRANCHISE
You understand that you have the conditional
right to renew this Agreement one time to operate the
Restaurant in the System for twenty (20) years beyond
the expiration date provided for in this Agreement.
However, if you desire to obtain a new license upon
the expiration of this Agreement, you must apply to us
for a new license agreement at least ninety (90) days,
but not more than twelve (12) months, before
expiration of the term of this Agreement. Upon
payment of a renewal fee, which will not exceed our
then standard initial license fee, we will process your
application in good faith and in accordance with our
procedures, criteria and requirements regarding
upgrading of facilities, credit, market feasibility and
related criteria then being applied by us in issuing new
licenses to use the System. If you fulfill our upgrading
and other then-current requirements, we will grant you
a new license in the form of agreement then in use by
us. If you are granted a new license, you (and if you
are an entity, your owners) will be required to execute
a general release, in a form satisfactory to us, of any
and all claims against us and our subsidiaries, affiliates,
partners, agents, employees, representatives and
servants, including claims arising under this Agreement
and federal, state and local laws, rules and regulations.
If you are not granted a new license, we will return the
renewal fee less expenses incurred in processing your
application.
During the pendency of your application for the
issuance of a new license, royalty fees and Marketing
Fund contributions will be paid at the rate specified in
this Agreement. Upon issuance of the new license
agreement, fees must be paid at the rates specified in
the new license agreement, which may be greater than
the rates specified in this Agreement.
18. ENFORCEMENT
A. Severability and Substitution of
Valid Provisions
Except as expressly provided to the contrary,
each section, paragraph, term and provision of this
Agreement, and any portion thereof, shall be
considered severable and if, for any reason, any such
provision of this Agreement is held to be invalid,
contrary to, or in conflict with any applicable present
or future law or regulation in a final, unappealable
ruling issued by any court, agency or tribunal with
competent jurisdiction in a proceeding to which we
are a party, that ruling shall not impair the operation
of, or have any other effect upon, such other portions
of this Agreement as may remain otherwise
enforceable, all
of which shall continue to be given full force and effect
and bind the parties to this Agreement, although any
portion held to be invalid shall be deemed not to be a
part of this Agreement from the date the time for
appeal expires, if you are a party thereto, or otherwise
upon your receipt of a notice of non-enforcement
thereof from us. To the extent that any provision of
Section 12D(8) or Section 16A is deemed
unenforceable by virtue of its scope in terms of area,
business activity prohibited and/or length of time, but
could be made enforceable by reducing any or all
thereof, you and we agree that such provisions shall be
enforced to the fullest extent permissible under the
laws and public policies applied in the jurisdiction in
which enforcement is sought. If any applicable and
binding law or rule of any jurisdiction requires a
greater prior notice of the termination of or refusal to
renew this Agreement, than is required in this
Agreement, or if under any applicable and binding law
or rule of any jurisdiction, any provision of this
Agreement or any specification, standard or operating
procedure we prescribe is invalid or unenforceable, the
prior notice and/or other action required by such law
or rule shall be substituted for the comparable
provisions of this Agreement, and we will have the
right, in our sole discretion, to modify such invalid or
unenforceable provision, specification, standard or
operating procedure to the extent required to be valid
and enforceable. You agree to be bound by any
promise or covenant imposing the maximum duty
permitted by law which is contained within the terms
of any provision of this Agreement, as though it were
separately articulated in and made a part of this
Agreement, that may result from striking from any of
the provisions of this Agreement, or any specification,
standard or operating procedure that we prescribe, any
portion or portions which a court may hold to be
unenforceable in a final decision to which we are
a party, or from reducing the scope of any promise or
covenant to the extent required to comply with such a
court order. Such modifications to this Agreement
shall be effective only in such jurisdiction, unless we
elect to give them greater applicability, and shall be
enforced as originally made and entered into in all
other jurisdictions.
B. Waiver of Obligations
You and we may by written instrument
unilaterally waive or reduce any obligation of or
restriction upon the other under this Agreement,
effective upon delivery of written notice thereof to the
other or such other effective date stated in the notice
of waiver. Any waiver granted by us shall be without
prejudice to any other rights we may have, will be
subject to continuing review by us, and may be
revoked, in the good faith exercise of our sole
discretion, at any time and for any reason, effective
upon delivery to you of ten (10) days' prior written
notice. You and we shall not be deemed to have
waived or impaired any right, power or option
reserved by this Agreement (including, without
limitation, the right to demand strict compliance with
every term, condition, and covenant herein, or to
declare any breach thereof to be default and to
terminate the License prior to the expiration of its
term), by virtue of any custom or practice of the
parties at variance with the terms hereof; any failure,
refusal, or neglect by you or us to exercise any right
under this Agreement or to insist upon exact
compliance by the other with its obligations hereunder,
including, without limitation, any mandatory
specification, standard, or operating procedure; any
waiver, forbearance, delay, failure, or omission by us
to exercise any right, power, or
option, whether of the same, similar or different
nature, with respect to any other Friendly's Restaurant;
or the acceptance by us of any payments from you
after any breach by you of this Agreement.
C. Force Majeure
Neither you nor we shall be liable for loss or
damage or deemed to be in breach of this Agreement
if a failure to perform particular obligations results
from: (i) transportation shortages, inadequate supply
or unavailability from the manufacturers or suppliers
of equipment, merchandise, supplies, labor, material,
or energy, or the voluntary surrender of the right to
acquire or use any of the foregoing in order to
accommodate or comply with the orders, requests,
regulations, recommendations, or instructions or any
federal, state or municipal government or any
department or agency thereof; (ii) compliance with any
law, ruling, order, regulation, requirement or
instruction of any federal, state or municipal
government or any department or agency thereof; (iii)
acts of God; (iv) fire, strikes, embargos, war or riot;
or (v) any other similar event or cause.
Any delay resulting from any of such causes
shall extend the time for performance or excuse
performance, in whole or in party, as may be
reasonable, except that such causes shall not excuse
payments of amounts owed at the time of such
occurrence or payment of any amounts due thereafter.
D. Injunctive Relief
You agree that we will have the right to
preliminary injunctive relief to restrain any conduct by
you in the development or operation of the Restaurant
that could materially damage the goodwill associated
with the System, the Marks and Friendly's Restaurants.
You further agree that we will not be required to post
a bond to obtain injunctive relief.
E. Rights of Parties Are Cumulative
Your and our rights under this Agreement are
cumulative and no exercise or enforcement by you or
us of any right or remedy hereunder shall preclude the
exercise or enforcement by you or either of us of any
right or remedy hereunder or which you or we are
entitled by law to enforce.
F. Costs and Attorneys' Fees
In any proceeding by either party to enforce or
interpret any provision of this Agreement, or appeal
thereof, the party prevailing in such proceeding shall
be entitled to reimbursement of its costs and expenses,
including but not limited to, reasonable accounting and
attorneys' fees. Attorneys' fees shall include, without
limitation, reasonable legal and expert witness fees,
cost of investigation and proof of facts, court costs,
other litigation expenses and travel and living
expenses, whether incurred prior to or in preparation
for or in contemplation of the filing of any written
demand or claim, action, hearing or proceeding. In
any such proceeding involving more than one (1)
allegation, issue or provision of this
Agreement under circumstances where neither party
prevails on all allegations or issues, the presiding court
or other body may apportion costs and expenses
between the parties.
G. Governing Law
EXCEPT TO THE EXTENT GOVERNED
BY THE UNITED STATES TRADEMARK ACT OF
1946 OR OTHER FEDERAL LAW, THIS
AGREEMENT AND THE LICENSE SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF
DELAWARE WITHOUT REGARD TO CONFLICT
OF LAWS RULES.
H. Waiver of Punitive/Exemplary
Damages:
Limitations of Actions
THE PARTIES HEREBY WAIVE TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY
RIGHT OR CLAIM TO ANY PUNITIVE OR
EXEMPLARY DAMAGES AGAINST THE OTHER
AND AGREE THAT IN THE EVENT OF A
DISPUTE BETWEEN THEM EACH SHALL BE
LIMITED TO THE RECOVERY OF ANY ACTUAL
DAMAGES SUSTAINED. ANY AND ALL
CLAIMS, EXCEPT CLAIMS FOR MONIES DUE
US OR OUR AFFILIATES, ARISING FROM OR
RELATING TO THIS AGREEMENT OR THE
RELATIONSHIP AMONG THE PARTIES SHALL
BE BARRED UNLESS AN ACTION OR LEGAL
PROCEEDING IS COMMENCED WITHIN ONE
(1) YEAR FROM THE DATE THE CLAIMANT
KNEW OR SHOULD HAVE KNOWN OF THE
FACTS GIVING RISE TO SUCH CLAIMS.
I. Venue and Jurisdiction
YOU AGREE THAT WE MAY INSTITUTE
ANY ACTION AGAINST YOU TO ENFORCE THE
PROVISIONS OF THIS AGREEMENT IN ANY
STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF DELAWARE
AND YOU IRREVOCABLY SUBMIT TO THE
JURISDICTION AND VENUE OF SUCH COURTS
AND WAIVE ANY OBJECTION YOU MAY HAVE
TO EITHER THE JURISDICTION OR VENUE OF
SUCH COURTS. YOU AGREE THAT ANY
ACTION BROUGHT BY YOU TO ENFORCE ANY
PROVISION OF THIS AGREEMENT WILL BE
BROUGHT AND MAINTAINED ONLY IN A
STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF DELAWARE.
J. Waiver of Jury Trial
THE PARTIES HEREBY IRREVOCABLY
WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER
AT LAW OR IN EQUITY, BROUGHT BY EITHER
OF THEM.
K. Binding Effect
This Agreement is binding upon the parties
hereto and their respective executors, administrators,
heirs, assigns and successors in interest, and shall not
be modified except by written agreement signed by
both you and us.
L. Interpretation
The preambles and exhibits are a part of this
Agreement, which together with the Commitment
Agreement and the Development Agreement, if any,
constitutes the entire agreement of the parties, and
there are no other oral or written understandings or
agreements between the Company and the Franchisee
relating to the subject matter of this Agreement except
for the Commitment Agreement, certain portions of
which survive the execution and delivery of this
Agreement. In the event of a conflict between this
Agreement and the Commitment Agreement (if
applicable), the provisions of this Agreement shall
control. In the event of a conflict between this
Agreement and the Purchase and Sale Agreement or
the Development Agreement, the provisions of the
Purchase and Sale Agreement shall first control the
interpretation, with the Development Agreement also
superseding this Agreement. This Agreement may be
modified only by a writing signed by both you and us.
Nothing in this Agreement is intended, nor shall be
deemed, to confer any rights or remedies upon any
person or legal entity not a party hereto. Except
where this Agreement expressly obligates the
Company to reasonably approve or not unreasonably
withhold its approval of any action or request of the
Franchisee, the Company has the absolute right to
refuse any request by the Franchisee or to withhold its
approval of any action or omission by the Franchisee.
The headings of the several sections and paragraphs
hereof are for convenience only and do not define,
limit or construe the contents of such sections or
paragraphs. The term "attorneys' fees" shall include,
without limitation, reasonable legal fees, whether
incurred prior to, in preparation for or in
contemplation of the filing of any written demand or
claim, action, hearing or proceeding, including
appellate proceedings, to enforce the obligations of this
Agreement. The term "family member" as used herein
refers to parents, spouses, offspring and siblings, and
the spouses of parents and siblings. The term
"affiliate" as used herein means any person or entity
that directly or indirectly owns or controls, or is
owned or controlled by, or is under common
ownership or control with, another person or entity.
References to a "controlling interest" in the Franchisee
means fifty-one (51%) or such lesser percentage that
may have the power to control the management and
affairs of the Restaurant or the Licensee. The term
"Franchisee" as used herein is applicable to one (1) or
more persons, a corporation or a partnership or other
entity, as the case may be, and the singular usage
includes the plural and the masculine and neuter
usages include the other and the feminine. If two or
more persons are at any time the Franchisee
hereunder, whether or not as partners or joint
venturers, their obligations and liabilities to the
Company shall be joint and several. This Agreement
may be executed in counterparts, each of which shall
be deemed an original.
M. Time
Time is of the essence of this Agreement
19. NOTICES AND PAYMENTS
All written notices and reports permitted or
required to be delivered hereunder shall be deemed so
delivered at the time delivered by hand, the day of
transmission by facsimile or other electronic system,
one (1) business day after being placed in the hands of
a commercial courier service for overnight delivery, or
three (3) business days after placement
in the United States
Mail by Registered or Certified
Mail, Return Receipt Requested, postage prepaid and
addressed to the party to be notified at its most current
principal business address of which the notifying party
has been notified. All payments and reports required
by this Agreement shall be directed to the Company at
the address notified to the Franchisee from time to
time, or to such other persons and places as the
Company may direct from time to time. Any required
payment or report not actually received by the
Company during regular business hours on the date
due (or postmarked by postal authorities at least two
(2) days prior thereto) shall be deemed delinquent.
20. ACKNOWLEDGEMENTS
Contemporaneously with the execution of this
Agreement, you have carefully reviewed and executed
the Disclosure Acknowledgement Statement attached
and incorporated into this Agreement as Exhibit A.
You acknowledge that, due to the length of
time we have been granting licenses to operate
Friendly's Restaurants or other food service concepts
using the Marks, there is more than one form of
license agreement in effect between us and our various
licensees and that such agreements contain provisions
that may be materially different from the provisions
contained in this Agreement and that you are not
entitled to rely on any provision of any other such
agreement, whether to establish course of dealing,
waiver, estoppel or for any other purpose.
IN WITNESS WHEREOF the parties hereto
have executed and delivered this Agreement as of the
Agreement Date.
FRIENDLY'S RESTAURANTS FRANCHISEE:
FRANCHISE, INC.
By: /S/ Don Smith By: /S/ Ronald Kirstien
Its: Chairman and President Its: Chairman and President
