U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934.
For the quarterly period ended January 24, 1999.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the transition period from _________ to __________.
Commission File Number
0-18369
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BOSTON RESTAURANT ASSOCIATES, INC.
----------------------------------
(Name of Small Business Issuer as Specified in its Charter)
Delaware 61-1162263
-------- ----------
(State or Other I.R.S. Employer
Jurisdiction of Identification
Incorporation or No.)
Organization)
999 Broadway
Saugus - Massachusetts
----------------------
(Address of Principal
Executive Offices)
(781) 231-7575 01906
(Issuer's Telephone Number (Zip Code)
Including area code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of March 5, 1999, there were 7,024,170 shares of the issuer's Common Stock,
par value $.01 per share, outstanding.
1
<PAGE>
BOSTON RESTAURANT ASSOCIATES, INC.
INDEX
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of January 24, 1999 and
April 26, 1998 ........................................................ 3
Condensed Consolidated Statements of Operations for the thirteen
weeks and thirty-nine weeks ended January 24, 1999 and
January 25, 1998........................................................ 4
Condensed Consolidated Statements of Cash Flows for the thirty-nine
weeks ended January 24, 1999 and January 25, 1998 ..................... 5
Notes to Condensed Consolidated Financial Statements ................... 6
Item 2. Management's Discussion and Analysis or Plan of Operations ........ 9
PART II - OTHER INFORMATION .............................................. 17
SIGNATURES ........................................................... 18
2
<PAGE>
BOSTON RESTAURANT ASSOCIATES, INC. AND SUBSIDIARIES
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
JAN 24 APRIL 26
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current:
Cash and cash equivalents $1,715,923 $1,788,361
Accounts receivable $39,070 $46,958
Inventories $231,672 $212,071
Prepaid expenses and other $95,758 $49,152
------------ ------------
Total current assets $2,082,423 $2,096,542
Net property and equipment $3,381,096 $3,345,273
Other assets $1,322,420 $1,323,160
------------ ------------
Total assets $6,785,939 $6,764,975
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $283,846 $314,124
Accrued liabilities $419,429 $490,525
Current maturities:
Notes payable-stockholder $4,770 $4,495
Long-term debt $119,272 $200,000
Obligations under capital leases $82,984 $74,206
------------ ------------
Total current liabilities $910,301 $1,083,350
Long-term obligations:
Notes payable-stockholder, less current maturities $116,620 $121,336
Long-term debt, less current maturities $419,200 $425,000
Obligations under capital leases, less current maturities $298,164 $361,548
Subordinated debentures $1,500,000 $1,500,000
Deferred rent $103,261 $85,662
------------ ------------
Total liabilities $3,347,546 $3,576,896
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 25,000,000
shares authorized, 7,024,170 and $70,242 $70,220
7,021,970 shares issued
Additional paid in capital $10,895,021 $10,846,333
Accumulated deficit ($7,526,870) ($7,728,474)
------------ ------------
Total stockholders' equity $3,438,393 $3,188,079
Total liabilities and stockholders' equity $6,785,939 $6,764,975
============ ============
</TABLE>
See accompanying notes.
3
<PAGE>
BOSTON RESTAURANT ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
-------------------- -----------------------
January 24 January 25 January 24 January 25
1999 1998 1999 1998
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales $3,175,151 $2,818,548 $9,237,834 $8,654,253
----------- ----------- ------------ -----------
Cost of food, beverages and liquor $677,865 $570,668 $1,934,217 $1,747,761
Payroll $875,059 $844,099 $2,607,586 $2,567,632
Other operating expenses $923,446 $871,489 $2,708,253 $2,627,784
General and administrative $444,827 $330,435 $1,186,183 $1,035,537
Depreciation and amortization $137,873 $107,434 $415,622 $331,102
----------- ----------- ------------ -----------
Total costs and expenses $3,059,070 $2,724,125 $8,851,861 $8,309,816
----------- ----------- ------------ -----------
Operating income $116,081 $94,423 $385,973 $344,437
Other income ($1,273) ($2,018) ($3,714) ($4,539)
Interest income ($17,122) ($3,876) ($55,733) ($18,877)
Interest expense $83,395 $73,019 $243,816 $222,046
----------- ----------- ------------ -----------
Net Income $51,081 $27,298 $201,604 $145,807
=========== =========== ============ ===========
Income per share-basic $0.01 $0.01 $0.03 $0.03
=========== =========== ============ ===========
Income per share-diluted $0.01 $0.01 $0.03 $0.03
=========== =========== ============ ===========
Weighted average number of
common shares outstanding-basic 7,024,170 5,015,693 7,023,928 5,015,693
=========== =========== ============ ===========
Weighted average number of
dilutive common shares outstanding 7,024,170 5,308,348 7,196,468 5,283,146
=========== =========== ============ ===========
</TABLE>
See accompanying notes.
4
<PAGE>
BOSTON RESTAURANT ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Thirty-nine Weeks Ended
Jan 24 Jan 25
1999 1998
<S> <C> <C>
Cash flows provided by operating activities $522,259 $335,425
------------ ----------
Cash flows from investing activities:
Capital expenditures ($449,121) ($861,242)
------------ ----------
Cash flows used for investing activities ($449,121) ($861,242)
------------ ----------
Cash flows from financing activities:
Repayments of long-term debt ($625,000) ($150,003)
Repayments of capital lease obligations ($54,606) ($22,701)
Repayments of stockholder loans ($4,442) ($3,154)
Proceeds from subordinated debentures $0 $218,750
Proceeds from long-term debt $538,472 $0
------------ ----------
Cash flows provided by (used for) financing activities ($145,576) $42,892
------------ ----------
Increase (decrease) in cash and cash equivalents ($72,438) ($482,925)
Cash and cash equivalents at beginning of period $1,788,361 $726,054
------------ ----------
Cash and cash equivalents at end of period $1,715,923 $243,129
============ ==========
</TABLE>
See accompanying notes.
5
<PAGE>
BOSTON RESTAURANT ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 24, 1999
(unaudited)
NATURE OF BUSINESS AND BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the thirteen-week period and thirty-nine week period ended January
24, 1999 are not necessarily indicative of the results that may be expected for
the year ending April 25, 1999. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended April 26, 1998. The
balance sheet at April 26, 1998 has been derived from the audited financial
statements at that date.
The accompanying statements of operations and cash flows for the fiscal 1999
thirty-nine week period reflect the consolidated operations and cash flows of
one casual dining Italian restaurant and ten Pizzeria Regina restaurants for the
entire period. The accompanying statements of operations and cash flows for the
fiscal 1998 thirty-nine week period reflect the consolidated operations and cash
flows of one casual dining Italian restaurant and six Pizzeria Regina
restaurants for the entire period and one additional casual dining Italian
restaurant and five additional Pizzeria Regina restaurants for part of the
period.
NET INCOME PER SHARE
The Company follows Statement of Financial Accounting Standards No. 128,
"Earnings per Share". The following is a reconciliation of the denominator
(number of shares) used in the computation of earnings per share. The numerator
(net income) is the same for the basic and diluted computations.
6
<PAGE>
<TABLE>
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
-------------------- -----------------------
January 24 January 25 January 24 January 25
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic 7,024,170 5,015,693 7,023,928 5,015,693
Shares
Effect of
Dilutive
Securities:
Options 0 292,655 172,540 267,453
---------- ---------- ---------- ----------
Diluted
Shares 7,024,170 5,308,348 7,196,468 5,283,146
========= ========= ========= =========
</TABLE>
The following table summarizes securities that were outstanding as of January
24, 1999 and January 25, 1998, but were not included in the calculation of net
income per share because such securities are anti-dilutive:
<TABLE>
<CAPTION>
Thirteen weeks ended Thirty-nine weeks ended
-------------------- -----------------------
January 24 January 25 January 24 January 25
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Options 1,078,746 57,000 228,346 57,000
Warrants 2,843,000 2,335,875 2,843,000 2,335,875
Convertible
Debentures 1,200,000 1,070,000 1,200,000 1,070,000
</TABLE>
7
<PAGE>
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued. SFAS No.
131, "Disclosure about Segments of an Enterprise and Related Information", which
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise". SFAS No. 131 establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas, and major customers. SFAS No. 131 defines operating segments
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
This new standard is effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated. Management does not expect implementation of this
standard to materially affect future financial statements and disclosures.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No.
133). SFAS No. 133 requires companies to recognize all derivative contracts as
either assets or liabilities in the balance sheet and to measure them at fair
value. If certain conditions are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the timing of gain or
loss recognition on the hedging derivative with the recognition of (i) the
changes in the fair value of the hedged asset or liability or (ii) the earnings
effect of the hedged forecasted transaction. For a derivative not designated as
a hedging instrument, the gain or loss is recognized in income in the period of
change. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999.
Historically, the Company has not entered into derivative contracts
either to hedge existing risks or for speculative purposes. Accordingly, the
Company does not expect adoption of the new standard to affect its financial
statements.
Franchise Activities
- --------------------
In December 1998, Boston Restaurant International, Inc. ("BRAII"), a
wholly owned subsidiary of the Company entered into a joint venture agreement
with Italian Ventures, LLC, a Kentucky corporation controlled by a Company
director for the purpose of developing and expanding Company restaurants in the
continental United States. The newly formed company, Regina Ventures, LLC, is
embarking upon a franchise program and currently has one franchisee under
agreement.
In January 1999, BRAII entered into a franchise agreement with Shining
Seas, LLC for the development of Pizzeria Reginas in Seoul, Korea.
As of January 24, 1999, no franchise revenues have been recognized by
the Company.
8
<PAGE>
Credit Facility
- ---------------
In November 1998, the Company entered into a new line of credit facility
with BankBoston. The credit facility provides for borrowings of up to $2 million
dollars.
Currently the Company has accessed $538,472 repayable in installments of
$12,984 at an interest rate of 7.84%. This line of credit is renewable on an
annual basis.
ITEM 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
- ---------------------
Overview
- --------
In the thirteen weeks ending January 24, 1999, the Company recorded net income
of $51,081 compared to $27,298 for the quarter ending January 25, 1998. The
Company's profit in the current fiscal quarter is substantially attributable to
the income generated by the Company's Pizzeria Regina restaurant business.
Polcari's North End also realized sales increases of approximately $101,000.
Thirteen Weeks Ended January 24, 1999 as Compared to Thirteen Weeks ended
January 25, 1998
- -------------------------------------------------------------------------
Sales. Net sales in the current period were $3,175,000 compared to net sales in
the prior year's period of $2,819,000. The increase in net sales in the fiscal
1999 period, as compared to the fiscal 1998 period, was attributable to the
opening of the new Richmond, Virginia Pizzeria Regina food court kiosk in
November of 1997; the opening of the new Oviedo, Florida Pizzeria Regina food
court kiosk in March of 1998; and the opening of the new Auburn, Massachusetts
Pizzeria Regina food court kiosk in May of 1998. This increase was partially
offset by the closure of the Bel Canto Restaurant in December of 1997.
Comparable sales for the restaurants open throughout both fiscal 1999 and 1998
periods increased by approximately 5.9%. Net sales at the Company's Pizzeria
Regina restaurants increased to $2,414,000 in the current period from $2,038,000
in the prior year's period.
Net sales at the Company's full service casual dining restaurants, Polcari's
North End and Bel Canto's, decreased to $759,000 in the current period from
$778,000 in the prior year's period. The decrease was primarily attributable to
closure of the Bel Canto restaurant in December 1997, which was partially offset
by increased sales of approximately $101,000 at the Polcari's North End
restaurant.
Costs and Expenses
- ------------------
Cost of Food and Beverages. Cost of food and beverages as a percentage of net
sales was 21% in the fiscal 1999 period as compared to 20% in the fiscal 1998
period. The cost of food and beverages as a percentage of net sales at the
Pizzeria Regina restaurants was 19% and 17% in the fiscal 1999 and 1998 periods,
respectively. The cost of food and beverages as a percentage of net sales
increased at the Pizzeria Regina restaurants, principally due to higher cheese
costs and increased sales of gourmet pizzas, which have a higher selling price
and higher food cost than traditional pizzas.
9
<PAGE>
The cost of food and beverages as a percentage of net sales at the Company's
full service casual dining restaurants was 30% and 29% in the fiscal 1999 and
1998 periods, respectively. The increase in cost as a percentage of net sales
was due to the closure of the Bel Canto restaurant, which had lower food and
beverage costs.
Payroll Expenses. Payroll expenses were $875,000 (28 % of net sales) in the
current period compared to payroll expenses in the prior year's period of
$844,000 (30% of net sales).
Payroll expenses at the Pizzeria Regina restaurants increased to $606,000 (25%
of sales) in the current period from $536,000 (26% of net sales) in the prior
year's period. The increase in payroll expenses at the Pizzeria Regina
restaurants was primarily attributable to the opening of the three new Pizzeria
Regina food court kiosks.
Payroll expenses at the Company's full service casual dining restaurants
decreased to $221,000 (29% of net sales) in the current period from $263,000
(34% of net sales) in the prior year's period, reflecting the closure of the Bel
Canto restaurant. Payroll expenses at the Company's Commissary were $48,000 for
the fiscal 1999 period as compared to $45,000 in the fiscal 1998 period.
Other Operating Expenses, Exclusive of Payroll. Other operating expenses
exclusive of payroll in the current period were $923,000 (29% of net sales),
compared to $871,000 (31% of net sales) in the prior year's period. The increase
in other operating expenses in the current period was primarily attributable to
the opening of the three new Pizzeria Regina food court kiosks and costs
associated with future expansion, partially offset by the closure of the Bel
Canto restaurant.
Other operating expenses from the Pizzeria Regina restaurants increased to
$679,000 (28% of net sales) in the current period from $572,000 (28% of net
sales) in the prior year's period. This increase is primarily attributable to
the addition of three new Pizzeria Regina food court kiosks.
Other operating expenses at the Company's full service casual dining restaurants
decreased to $204,000 (27% of net sales) in the current period from $276,000
(36% of net sales) in the prior year's period. This decrease was primarily
attributable to the closure of the Bel Canto restaurant. Other operating
expenses also include commissary expenses, which were $14,000 in the current
period, as compared to $14,000 in the prior year's period. In addition, the
Company realized franchising costs and future expansion costs of $26,000 in the
fiscal 1999 period as compared to $10,000 in the prior year's period.
General and Administrative Expenses. General and administrative expenses were
$445,000 (14% of net sales) in the current period, as compared to $330,000 (12 %
of net sales) in the prior year's period. The increase in general and
administrative expenses was principally due to increased staff support, legal
costs and real estate site selections consulting expenses.
10
<PAGE>
Depreciation and Amortization Expenses. Depreciation and amortization expense
was $138,000 (4% of net sales) in the fiscal 1999 period, compared to $107,000
(4% of net sales) in the fiscal 1998 period. The increase in depreciation and
amortization expense was primarily attributable to the opening of the three new
Pizzeria Regina food court kiosks.
Interest Expense and Interest Income. Interest expense increased to $83,000 in
the current period from $73,000 in the prior year's period. This increase in
interest expense was due to additional equipment leases associated with the
three new Pizzeria Regina food court kiosks.
Interest income increased to $17,000 in fiscal 1999 from $4,000 in fiscal 1998.
The increase in interest income was attributable to the proceeds from the March
1998 rights offering.
Thirty-nine Weeks Ended January 24, 1999 as Compared to Thirty-nine Weeks ended
January 25, 1998
- -------------------------------------------------------------------------------
Sales. Net sales in the current period were $9,238,000 compared to net sales in
the prior year's period of $8,654,000. The increase in net sales in the fiscal
1999 period as compared to fiscal 1998 period was attributable to the opening of
the new Paramus, New Jersey Pizzeria Regina food court kiosk in August of 1997
the opening of the new Richmond, Virginia Pizzeria Regina food court kiosk in
November of 1997 the opening of the new Oviedo, Florida Pizzeria Regina food
court kiosk in March of 1998 and the opening of the new Auburn, Massachusetts
Pizzeria Regina food court kiosk in May of 1998. The increase in net sales was
partially offset by the closure of the self-service in-line Pizzeria Regina at
the Burlington Mall in October of 1997, the closure of the Brookline Pizzeria
Regina restaurant in October of 1997 at the completion of its lease, due to the
inability to renegotiate a market value lease at that location, and the closure
of the Bel Canto Restaurant. Comparable sales for the restaurants open
throughout both fiscal 1999 and 1998 periods increased approximately 6.5%. Net
sales at the Company's Pizzeria Regina restaurants increased to $7,040,000 in
the current period from $6,038,000 in the prior's year's period.
Net sales at the Company's full service casual dining restaurants, Polcari's
North End and Bel Canto's decreased to $2,188,000 in the current period from
$2,602,000 in the prior year's period. This decrease was primarily attributable
to the closure of the Bel Canto restaurant in December 1997, which was partially
offset by increased sales of approximately $190,000 at the Polcari's North End
restaurant.
Cost of Food and Beverages. Cost of food and beverages as a percentage of net
sales was 21% in the fiscal 1999 period as compared to 20% in the fiscal 1998
period.
The cost of food and beverages as a percentage of net sales at the Pizzeria
Regina restaurants was 18% and 16% in the fiscal 1999 and 1998 periods,
respectively. The cost of food and beverages as a percentage of net sales
increased at the Pizzeria Regina restaurants, principally due to higher cheese
costs and increased sales of gourmet pizzas, which have a higher selling price
and higher food costs than traditional pizzas.
11
<PAGE>
The cost of food and beverages as a percentage of net sales at the Company's
full service casual dining restaurants was 31% and 29% in the fiscal 1999 and
1998 periods respectively. The increase in cost of food and beverages as a
percentage of net sales was due to the closure of the Bel Canto restaurant,
which had lower food and beverage costs.
Payroll Expenses. Payroll expenses were $2,608,000 (28% of net sales) in the
current period compared to payroll expenses in the prior year's period of
$2,568,000 (30% of net sales).
Payroll expenses at the Pizzeria Regina restaurants increased to $1,810,000 (26%
of sales) in the current period from $1,607,000 (27% of net sales) in the prior
year's period. The increase in payroll expenses at the Pizzeria Regina
restaurants was primarily attributable to the opening of the four new Pizzeria
Regina food court kiosks, which was partially offset by a decrease in payroll
expenses associated with the closure of three Pizzeria Regina restaurants.
Payroll expenses at the Company's full service casual dining restaurant
decreased to $651,000 (30% of net sales) in the current period from $849,000
(33% of net sales) in the prior year's period, reflecting the closure of the Bel
Canto restaurant. Payroll expenses at the Company's Commissary were $147,000 for
the fiscal 1999 period as compared to $112,000 in the fiscal 1998 period. The
increase is primarily due to the reclassification of the purchasing director's
salary to the Commissary's payroll expense.
Other Operating Expenses. Other operating expenses in the current period were
$2,708,000 (29% of net sales), compared to $2,628,000 (30% of net sales) in the
prior year's period. The increase in other operating expenses in the current
period was primarily attributable to the opening of the four new Pizzeria Regina
food kiosks, partially offset by the closure of three Pizzeria Regina
restaurants and the closure of the Bel Canto restaurant.
Other operating expenses from the Pizzeria restaurants increased to $2,032,000
(29% of net sales) in the current period from $1,781,000 (29% of net sales) in
the prior year's period. The increase is primarily attributable to the addition
of four new Pizzeria Regina food kiosks, partially offset by the closure of the
self-service in-line Pizzeria Regina restaurant at the Burlington Mall and the
closure of the Brookline Pizzeria Regina restaurant.
Other operating expenses at the Company's full service casual dining restaurants
decreased to $577,000 (26% of net sales) in the current period from $774,000
(30% of net sales) in the prior year's period. This decrease was primarily
attributable to the closure of the Bel Canto restaurant. Other operating
expenses also include commissary expenses, which decreased to $40,000 in the
current period, as compared to $45,000 in the prior year's period. In addition
the Company realized franchising costs and future expansion costs of $59,000 in
the fiscal 1999 period as compared to $29,000 in the prior years period.
General and Administrative Expenses. General and administrative expenses were
$1,186,000 (13% of net sales) in the current period, as compared to $1,036,000
(12% of net sales) in the prior year's period. The increase in general and
administrative expenses was due principally to an increase in support staff,
real estate site selection consulting expenses, and legal costs.
12
<PAGE>
Depreciation and Amortization Expenses. Depreciation and amortization expense
was $416,000 (5% of net sales) in fiscal 1999 period, compared to $331,000 (4%
of net sales) in fiscal 1998 period. The increase in depreciation and
amortization expense was primarily attributable to the opening of the four new
Pizzeria Regina food court kiosks.
Interest Expense and Interest Income. Interest Expense increased to $244,000 in
the current period as compared to interest expense in the prior year's period of
$222,000. This increase in interest expense is due to additional equipment
leases associated with the three new Pizzeria Regina food court kiosks. Interest
income increased to $56,000 in fiscal 1999 from $19,000 in fiscal 1998. The
increase in interest income was attributable to the proceeds from the March 1998
rights offering.
Liquidity and Capital Resources.
- --------------------------------
At January 24, 1999, the Company had net working capital of approximately
$1,172,000 and cash and cash equivalents of approximately $1,716,000.
During the thirty-nine weeks ended January 24, 1999, the Company had a decrease
in cash and cash equivalents of $72,000 reflecting net cash provided by
operating activities of $522,000, net cash used for investing activities of
$449,000 and net cash used for financing activities of $146,000. Net cash
provided by operating activities included a decrease in accounts receivable of
$8,000 and an increase in deferred rent of $18,000, partially offset by an
increase in inventory of $20,000, an increase in prepaid expenses of $47,000, a
reduction in accounts payable of $30,000, and a reduction in accrued expenses of
$71,000. Net cash used for investing activities reflects costs associated with
the opening of the new Auburn, MA Pizzeria Regina location, renovations of the
executive office in Saugus, MA, and future expansion costs. Net cash used for
financing activities reflects $146,000 to repay long-term debt, lease
obligations and stockholder loans.
The Pizzeria Regina food court kiosk at the Auburn Mall, Auburn, MA opened on
May 7, 1998. The Company entered into a lease for a food court kiosk in Holyoke,
MA to open in the second quarter of fiscal 2000. The Company anticipates that
the cost of opening this restaurant will be approximately $350,000, but cannot
assure that the Company will open this restaurant on a timely basis or within
budget.
At January 24, 1999, the Company had current liabilities of $910,000, including
$284,000 of accounts payable, $419,000 of accrued liabilities and current
maturities of long term obligations in the amount of $207,000. At January 24,
1999, the Company had long-term obligations, less current maturities, in the
amount of $2,437,000, including $419,000 due under its new credit facility with
BankBoston, $117,000 of loans payable to a stockholder, $298,000 due under the
capital lease obligations, $1,500,000 of convertible subordinated debentures,
and $103,000 of deferred rent. On November 23, 1998, the Company discharged its
credit facility with Haymarket Bank and entered into a new two million dollar
($2,000,000.00) line of credit facility with BankBoston. To date, the Company
has accessed this line in the amount of $538,472.
13
<PAGE>
The Company believes that its existing resources, cash flow from operations,
borrowing under its credit facility, and the net proceeds from its March 1998
rights offering will be sufficient to allow it to meet its obligations over the
next twelve months. The Company currently intends to fund its current
obligations and operating expenses through cash generated from operations. The
net proceeds of the March 1998 rights offering will be used for repayment of
indebtedness, to finance its expansion plans and for other working capital
requirements.
Other Events
- ------------
In December 1998, the Company entered into a joint venture arrangement with
Italian Ventures, LLC, a Kentucky corporation, controlled by Mr. Richard Reeves,
a Company director, for the purpose of developing and expanding Polcari's
Restaurants in the continental United States. Under the agreement, a new limited
liability company (Regina Ventures, LLC) was formed to carry out the joint
venture activities. The Company owns 51% of the new LLC and Italian Ventures,
LLC owns 49%.
In January 1999, the Company entered into a franchisee agreement with Shining
Sea, LLC for the development of Pizzeria Regina restaurants in Seoul, Korea. The
first restaurant is expected to open in the fall of 1999.
New Accounting Standards
- ------------------------
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosure about Segments of an Enterprise and Related Information", which
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise". SFAS No. 131 establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas, and major customers. SFAS No. 131 defines operating segments
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
This new standard is effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated. Management does not expect implementation of this
standard to materially affect future financial statements and disclosures.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No.
133). SFAS No. 133 requires companies to recognize all derivative contracts as
either assets or liabilities in the balance sheet and to measure them at fair
value. If certain conditions are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the timing of gain or
loss recognition on the hedging derivative with the recognition of (i) the
changes in the fair value of the hedged asset or liability or (ii) the earnings
effect of the hedged forecasted transaction. For a derivative not designated as
a hedging instrument, the gain or
14
<PAGE>
loss is recognized in income in the period of change. SFAS No. 133 is effective
for all fiscal quarters of fiscal years beginning after June 15, 1999.
Historically, the Company has not entered into derivative contracts
either to hedge existing risks or for speculative purposes. Accordingly, the
Company does not expect adoption of the new standard to affect its financial
statements.
Subsequent Events
- -----------------
On January 27, 1999, the Board of Directors of Boston Restaurant Associates,
Inc. (the "Company") authorized the Company to purchase up to 500,000 shares of
its Common Stock in the market from time to time during the twenty-four month
period from January 27, 1999. Any shares of Common Stock so purchased will be
held in treasury.
Year 2000 Readiness Disclosure
- ------------------------------
The Company has undertaken a review concerning the ability of its internal
information systems, including its internal accounting systems, to handle date
information and to function appropriately from and after January 1, 2000. As a
result of that review, the Company does not believe that the total cost to
address any changes required to its internal systems as a result of the
so-called "Year 2000 Problem" will be material. In addition, the Company has
evaluated the impact of possible Year 2000 problems encountered by its suppliers
and customers upon the Company and does not believe that any problems would have
a material effect upon the Company. The Company also has reviewed various
scenarios, including realistic worst case scenarios, and has concluded that it
is unlikely that there will be any material impact on the Company under any of
those scenarios. Accordingly, the Company has determined that it is not
necessary to develop a contingency plan for such scenarios.
15
<PAGE>
"Safe Harbor" Statement, Under the Private Securities Litigation Reform Act
of 1995
- ------------------------------------------------------------------------------
Forward-looking statements in this report, including without limitation
statements relating to the adequacy of the Company's resources, and the timing
of the Company's expansion, are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Investors are cautioned
that such forward-looking statements involve risks and uncertainties, including
without limitation: potential quarterly fluctuations in the Company's operating
results; seasonality of sales; competition; risks associated with expansion; the
Company's reliance on key employees; risks generally associated with the
restaurant industry; risks associated with geographic concentration of the
Company's restaurants; risks associated with serving alcoholic beverages; and
other risks and uncertainties indicated from time to time in the Company's
filings with the Securities and Exchange Commission.
16
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings
No material litigation
ITEM 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.24 Franchise Agreement
10.25 Development Agreement
(27) Financial Data Schedule
(b) Reports On Form 8-K
(i) Form 8-K dated December 19, 1998 Disclosing under Item 5, a
joint venture arrangement for the purpose of developing and
expanding Polcari's Restaurants.
(ii) Form 8-K dated January 22, 1999 Disclosing under Item 5, a
franchise agreement with Shining Sea, LLC for the
development of Pizzeria Reginas in Seoul, Korea.
(iii) Form 8-K dated January 25, 1999 Disclosing under Item 5,
3rd Quarter sales results for Polcari's Restaurant.
17
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BOSTON RESTAURANT ASSOCIATES, INC.
Date: March 9, 1999 By: /s/ George R. Chapdelaine
-------------------------
George R. Chapdelaine, President and
Chief Executive Officer
18
PIZZERIA REGINA(R)
FRANCHISE AGREEMENT
-------------------
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS..............................................................1
1.1. ADVERTISING FUND. .......................................................1
1.2. AFFILIATES...............................................................1
1.3. AGREEMENT................................................................1
1.4. APPROVED PRODUCTS........................................................1
1.5. CO-OP....................................................................2
1.6. DIRECT OR INDIRECT.......................................................2
1.7. FRANCHISEE...............................................................2
1.8. FULLY OPERATIONAL........................................................2
1.9. GOOD STANDING............................................................2
1.10. GROSS SALES..............................................................2
1.11. INTEREST.................................................................2
1.12. LEASE....................................................................3
1.13. LOCATION(S)..............................................................3
1.14. OPERATING MANUAL.........................................................3
1.15. PERSON...................................................................3
1.16. BRAII....................................................................2
1.17. PIZZERIA REGINA MARKS....................................................3
1.18. CONFIDENTIAL AND PROPRIETARY INFORMATION.................................2
1.19. RELATED PERSONS..........................................................3
1.20. SPECIALIZED PIZZA OVEN...................................................3
1.21. SYSTEM RESTAURANTS.......................................................3
1.22. SYSTEM RESTAURANT CONCEPTS...............................................3
1.23. TERM.....................................................................4
1.24. TRANSFER.................................................................4
2. GRANT OF FRANCHISE.......................................................4
2.1. GRANT OF FRANCHISE.......................................................4
2.2. NO SUBFRANCHISE RIGHT....................................................4
2.3. RELOCATION RIGHTS........................................................4
2.4. LIMITATIONS ON THE FRANCHISE.............................................4
2.5. PROTECTED RADIUS.........................................................5
3. DESIGNATION AND USE OF MARKS.............................................5
3.1. DESIGNATION OF PIZZERIA REGINA MARKS.....................................5
3.2. USE OF PIZZERIA REGINA MARKS.............................................5
3.3. OWNERSHIP OF PIZZERIA REGINA MARKS.......................................5
3.4. PROTECTION OF PIZZERIA REGINA MARKS......................................6
4. TRAINING AND ASSISTANCE..................................................7
4.1. MANAGEMENT TRAINING PROGRAMS.............................................7
5. MANUAL...................................................................8
5.1. LOAN OF OPERATING MANUAL.................................................8
5.2. OWNERSHIP OF OPERATING MANUAL............................................8
5.3. CONFIDENTIALITY OF OPERATING MANUAL......................................8
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BRAII FRANCHISE AGREEMENT
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5.4. PROTECTION OF TRADE SECRETS..............................................8
5.5. UPDATES..................................................................8
5.6. E-MAIL TRANSMITTALS......................................................8
6. STANDARDS; DUTIES OF FRANCHISEE AND OPERATOR.............................9
6.1. INTERPRETATION OF STANDARDS..............................................9
6.2. PROMULGATION OF STANDARDS................................................9
6.3. LIMITATION ON PROMULGATION OF STANDARDS..................................9
6.4. INSPECTIONS..............................................................9
6.5. COMPLIANCE WITH LAWS.....................................................9
6.6. IDENTIFICATION...........................................................9
6.7. UNIFORMS................................................................10
6.8. COIN-OPERATED MACHINES..................................................10
6.9. ASSUMED NAME CERTIFICATE................................................10
6.10. APPROVED PRODUCTS.......................................................10
6.11. COMPUTER SYSTEM.........................................................10
6.12. PRICES..................................................................11
6.13. REPORTS.................................................................11
6.14. LOCATION DESIGN CRITERIA................................................11
6.15. DEVELOPMENT SCHEDULE....................................................11
6.16. DEVELOPMENT OF BUSINESS.................................................12
6.17. HOURS AND DAYS OF OPERATIONS............................................12
6.18. MAINTENANCE - SPECIALIZED PIZZA OVEN....................................12
7. ADVERTISING.............................................................12
7.1. NATIONAL ADVERTISING....................................................12
7.2. LOCAL ADVERTISING.......................................................12
7.3. APPROVAL OF ADVERTISING.................................................13
7.4. CO-OPERATIVE ADVERTISING................................................13
8. PURCHASE OF EQUIPMENT, SUPPLIES AND OTHER PRODUCTS......................13
8.1. USE OF APPROVED SUPPLIES AND APPROVED DISTRIBUTORS......................13
8.2. TRADE SECRET ITEMS......................................................14
8.3. PIZZERIA REGINA PIZZA OVEN..............................................14
9. FEES AND PAYMENT SCHEDULE...............................................14
9.1. INITIAL FRANCHISE TERRITORY FEE.........................................14
9.2. OPENING FEE.............................................................14
9.3. ROYALTY FEES............................................................14
9.4 OPERATION SUPPORT FEE...................................................14
9.5. TRANSFER FEES...........................................................15
9.6. OFFSET RIGHTS...........................................................15
9.7. TAXES...................................................................15
9.8. ELECTRONIC TRANSFER OR DEBIT............................................15
10. BUSINESS PREMISES.......................................................15
10.1. GENERAL.................................................................15
10.2. RESTRICTIONS ON USE.....................................................16
10.3. SITE SELECTION..........................................................16
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BRAII FRANCHISE AGREEMENT
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10.4. CONSTRUCTION OF SYSTEM RESTAURANTS......................................16
10.5. RIGHT TO DE-IDENTIFY....................................................16
10.6. REPAIR AND MAINTENANCE..................................................16
10.7. PROOF OF COMPLIANCE.....................................................16
10.8. SYSTEM RESTAURANT CLOSURE...............................................16
11. BOOKS AND RECORDS.......................................................17
11.1. MAINTENANCE OF BOOKS AND RECORDS........................................17
11.2. INSPECTION AND AUDIT....................................................17
11.3. SELECTION OF ACCOUNTANTS................................................17
12. COVENANTS AGAINST COMPETITION...........................................18
12.1. ACKNOWLEDGMENTS.........................................................18
12.2. IN-TERM COVENANTS.......................................................18
12.3. POST-TERM COVENANTS.....................................................18
12.4. PERPETUAL COVENANT......................................................19
12.5. STOCK OWNERSHIP.........................................................19
13. EMPLOYMENT RELATIONS....................................................20
13.1. FRANCHISEE'S EMPLOYEES..................................................20
13.2. INTERFERENCE............................................................20
14. TRANSFERS...............................................................20
14.1. TRANSFERS BY BRAII......................................................20
14.2. TRANSFERS BY FRANCHISEE.................................................20
14.3. TRANSFER OF ASSETS......................................................20
14.4. CONSENT TO TRANSFERS....................................................21
14.5. DEATH OR INCAPACITY.....................................................21
14.6. RIGHT OF FIRST REFUSAL..................................................22
15. NON-INDIVIDUAL FRANCHISEES..............................................22
15.1. LIST OF INDIVIDUAL OWNERS...............................................22
15.2. ORGANIZATIONAL DOCUMENTS................................................22
15.3. TRANSFER RESTRICTIONS...................................................23
15.4. PERMITTED ASSIGNMENTS...................................................23
15.5. NO PUBLICLY TRADED OWNERSHIP INTERESTS..................................23
15.6. CHANGES IN OWNERSHIP OR ORGANIZATION....................................23
16. INSURANCE AND INDEMNIFICATION...........................................24
16.1. PROPERTY INSURANCE......................................................24
16.2. LIABILITY INSURANCE.....................................................24
16.3. PROOF OF INSURANCE......................................................24
16.4. INDEMNIFICATION AND WAIVER..............................................24
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BRAII FRANCHISE AGREEMENT
Page iii
<PAGE>
17. REQUESTS FOR WAIVERS AND CONSENTS.......................................25
17.1. REQUESTS FOR WAIVERS OR CONSENTS........................................25
17.2. EFFECT OF WAIVERS AND CONSENTS..........................................25
17.3. NO IMPLIED WAIVERS......................................................25
18. DEFAULT AND TERMINATION.................................................25
18.1. DEFAULTS WITHOUT CURE RIGHT.............................................25
18.2. DEFAULTS SUBJECT TO CURE RIGHTS.........................................26
18.3. NON-TERMINATION REMEDIES................................................27
19. POST-TERMINATION PROVISIONS.............................................27
19.1. USE OF PIZZERIA REGINA MARKS AND SYSTEMS................................27
19.2. CESSATION OF RIGHTS.....................................................27
19.3. EFFECT ON OTHER DUTIES..................................................27
19.4. TRADE SECRET ITEMS......................................................28
19.5. TRADEMARKED ITEMS.......................................................28
19.6. TELEPHONE NUMBERS.......................................................28
19.7. RIGHT OF ASSIGNMENT - LEASE.............................................28
20. DISPUTE RESOLUTION......................................................28
20.1. JURISDICTION AND GOVERNING LAW DOMESTIC FRANCHISEES.....................28
20.2. REMEDIES CUMULATIVE.....................................................28
20.3. MEDIATION...............................................................29
20.4. INJUNCTIVE RELIEF.......................................................29
20.5. ATTORNEYS' FEES.........................................................29
21. MISCELLANEOUS...........................................................29
21.1. RELATION OF PARTIES.....................................................29
21.2. COUNTERPARTS............................................................30
21.3. THIRD-PARTY BENEFICIARIES...............................................30
21.4. SEVERABILITY............................................................30
21.5. PROTESTS, REQUESTS AND NOTICES..........................................30
21.6. TIME OF ESSENCE.........................................................31
21.7. RULES OF CONSTRUCTION...................................................31
21.8. MERGER..................................................................31
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BRAII FRANCHISE AGREEMENT
Page iv
<PAGE>
PIZZERIA REGINA(R)
LOCATION FRANCHISE AGREEMENT
DATE: _________________________________
PARTIES: "BRAII" -- Boston Restaurant Associates International, Inc.
A Delaware Corporation
999 Broadway, Suite 400
Saugus, Massachusetts 01906
"Franchisee" -- ___________________________________________
___________________________________________
___________________________________________
___________________________________________
RECITALS: BRAII franchises a system of restaurants throughout the United States
and in certain foreign countries under the name and mark "Pizzeria Regina".
Franchisee desires to obtain a franchise to operate Pizzeria Regina(R)
restaurants at the site(s) specified in this Agreement. BRAII is willing to
grant the rights set forth in this Agreement to Franchisee, subject to
Franchisee's strict compliance with the terms of this Agreement;
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth in this Agreement, BRAII and Franchisee agree as follows:
1. DEFINITIONS In this Agreement, the following terms have the following
meanings:
1.1. Advertising Fund. The "Advertising Fund" is the fund, if established in
accordance with Section 7.1, into which BRAII, Franchisee, and other franchisees
of BRAII (subject to the terms of Section 7.1) make payments for national
advertising, and which BRAII or its designee will spend in accordance with
Section 7.1.
1.2. Affiliates. A Person's "Affiliates" are all Persons that directly or
indirectly control, are controlled by, or are under common control with, the
Person.
1.3. Agreement. "Agreement" means this Franchise Agreement (including all
Appendices), as amended from time-to-time.
1.4. Approved Products. "Approved Products" are the food, beverages, promotional
items, and other products approved by BRAII (in the Operating Manual or another
written document) for sale in, or other disposition to the public from, System
Restaurants.
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BRAII FRANCHISE AGREEMENT
Page 1
<PAGE>
1.5. BRAII. "BRAII" means Boston Restaurant Associates International, Inc., a
Delaware corporation, and its successors and assigns.
1.6. Confidential and Proprietary Information. "Confidential and Proprietary
Information" includes, but is not limited to, processes, formulas, data and
know-how, marketing plans, strategies, forecasts, market information, contracts,
customer lists, business plans, financial information, all information collected
from vendors and customers and all information, specifications relating to the
design, construction and use of the Specialized Pizza Oven. Confidential and
Proprietary Information is in part set forth in BRAII's Operating Manual,
memoranda, marketing and advertising materials, specifications, accounting and
sales records and other documents and records of BRAII, whether or not such
documents and records are identified as "Confidential" or "Proprietary", some of
such documents actually may be prepared in full or in part by the Franchisee.
Proprietary Information shall exclude information that has become public, except
(i) when and to the extent that such public information, when applied to or
combined with other information, is non-public and proprietary or (ii) where
such information became public through disclosure by you.
1.7. Co-op. "Co-op" means any co-operative advertising association established
in accordance with Section 7.4.
1.8. Direct or Indirect. "Direct or indirect", when used in describing ownership
or other interests in an entity or an agreement, means that intervening levels
of ownership are disregarded.
1.9. Franchisee. "Franchisee", when capitalized, means the Person(s) identified
as "Franchisee" on the first page of this Agreement, or any approved successor.
1.10. Fully Operational. "Fully Operational" when used in describing a System
Restaurant refers to a location which is open for the hours of operation and
serving all Approved Products.
1.11. Good Standing. Franchisee is in "Good Standing" under this Agreement at
all times except when Franchisee is in default of this Agreement (regardless of
whether BRAII has given Franchisee notice pursuant to Section 18.2).
1.12. Gross Sales. "Gross Sales" means the total of all cash or other payments
received (including the fair value of an exchange and all payments by check,
credit, or charge account, regardless of whether the checks, credits, or charge
accounts are ultimately paid) for the sale or use of any products, goods, or
services that are sold at or from any System Restaurant. Gross Sales exclude
only price discounts and allowances, and taxes imposed directly on sales or
services by governmental authorities, and then only if the amount of the tax is
added to or absorbed in the selling price and is actually paid to the
appropriate governmental authority.
1.13. Interest. "Interest", when used in the context of an interest in
Franchisee or in this Agreement, means any direct or indirect beneficial or
legal ownership interest in Franchisee or in this Agreement.
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BRAII FRANCHISE AGREEMENT
Page 2
<PAGE>
1.14. Lease. "Lease" means any written or oral contract allowing one Person to
possess or use the property of another Person, and includes subleases and
contracts for deed.
1.15. Location(s). "Location(s)" means the specific site or sites, listed in
Appendix G, at which franchisee is authorized by this Agreement to operate
System Restaurants.
1.16. Operating Manual. The "Operating Manual" is the set of documents (in one
or more volumes), as published, supplemented and revised (from time-to-time),
and disseminated by BRAII, that explain and define the proper operation of
System Restaurants. The Operating Manual is considered Confidential and
Proprietary Information and has been registered as a BRAII trademark.
1.17. Person. "Person" means both natural persons and legal entities (including
corporations, partnerships, limited liability companies, and trusts).
1.18. Pizzeria Regina Marks. "Pizzeria Regina Marks" means only those
trademarks, trade names, service marks, trade dress (including product package
designs), symbols, slogans, emblems, logos, insignia, designs, external and
internal building designs and other architectural features, and any combination
of the foregoing that Franchisee is authorized to use in connection with the
System Restaurants. Appendix H to this Agreement is a list of the Pizzeria
Regina Marks that consist of words or a combination of words and design that
Franchisee is authorized to use on the date of this Agreement. BRAII may, from
time to time, designate other Pizzeria Regina Marks pursuant to Section 3.1 of
this Agreement.
1.19. Protected Territory. "Protected Territory" means the protected area in
which you will be allowed to operate as defined in Exhibit I hereto. BRAII will
not operate or license for operation any System Restaurants In Protected
Territory.
1.20. Related Persons. Franchisee's "Related Persons" consist of all Persons
having an Interest in Franchisee; all of Franchisee's Affiliates; the officers,
directors, partners, trustees, and beneficiaries of Franchisee and of any Person
having an Interest in Franchisee; and the spouses and minor children of any of
the foregoing individuals.
1.21. Specialized Pizza Oven. "Specialized Pizza Oven" means that oven designed
and developed by BRAII specifically and solely for preparation of Approved
Products in System Restaurants. Design construction and use of the oven are
confidential and proprietary information as defined herein. Franchisee may at no
time attempt to reverse engineer or disassemble the oven.
1.22. System Restaurants. "System Restaurants" are only the following type of
"Pizzeria Regina" restaurant concept: "Pizzeria Regina" restaurants - (BRAII's
original concept) and food court locations from which Pizzeria Regina pizza (and
other Approved Products) are sold for dine-in and carryout consumption.
1.23. System Restaurant Concepts. The phrase "System Restaurant Concepts" refers
collectively to the type of Systems Restaurant described in Section 1.21.
"System Restaurants" and "System Restaurant Concepts" do not include any other
"Pizzeria Regina" restaurant concept or any other type of restaurant or business
owned by BRAII or its Affiliates.
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BRAII FRANCHISE AGREEMENT
Page 3
<PAGE>
1.24. Term. "Term" means the period during which the rights granted by this
Agreement are in effect, which starts on the date of this Agreement, and (unless
terminated early as allowed by Section 18) ends on the day before the 10th
anniversary of this Agreement for domestic Franchisees and the day before the
15th anniversary for international Franchisees, with no rights of renewal. The
Agreement may be renewed upon mutual consent of the parties hereto.
1.25. Transfer. "Transfer" includes every absolute or conditional method of
transferring a legal or equitable, record or beneficial Interest in Franchisee
or in this Agreement, whether voluntary, involuntary, or by operation of law,
and includes a change in beneficiaries or trustees of a trust.
2. GRANT OF FRANCHISE
2.1. Grant of Franchise. BRAII grants to Franchisee, during the Term, the
non-exclusive franchise to operate System Restaurants at the specific
Location(s), using the Pizzeria Regina Marks; to promote and sell Approved
Products and related services from System Restaurants at the specific
Location(s). Franchisee may not operate any System Restaurant except at the
Location(s), and may not use the Pizzeria Regina Marks except at the System
Restaurants. Franchisee covenants that it will use its best efforts to promote
sales of Approved Products from its System Restaurants.
2.2. No Subfranchise Right. The franchise granted by this Agreement is personal
to Franchisee. Franchisee may not subfranchise to any other Person all or any
part of the franchise granted by this Agreement.
2.3. Relocation Rights. If Franchisee desires to relocate any of Franchisee's
existing System Restaurants, Franchisee will request BRAII's permission to do
so. As part of its request, Franchisee must supply BRAII with justification for
the relocation (such as expiration of an existing lease or changed demographics)
and any other information BRAII requests. If BRAII consents to the relocation,
BRAII will notify Franchisee of the portion (if any) of the Territory Fee or
Opening Fee that Franchisee may transfer from the existing System Restaurant to
the proposed replacement System Restaurant and the date by which Franchisee must
open the replacement System Restaurant to receive the credit (if any). To
receive any credit, Franchisee must open the replacement System Restaurant for
business within 12 months after closure of the existing System Restaurant. This
Agreement will govern Franchisee's operations at any such replacement System
Restaurant.
2.4. Limitations on the Franchise. Franchisee may not conduct any business using
any portion of the System Restaurant Concepts or the Specialized Pizza Oven
licensed by this Agreement or any other Agreement contemplated hereby, at any
sites except the specific Location(s).
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BRAII FRANCHISE AGREEMENT
Page 4
<PAGE>
2.5. Protected Radius. During the Term, BRAII will not develop or operate, or
allow any other franchisee or Franchisee to develop or operate, System
Restaurants (i.e., specifically limited to the System Restaurant Concepts
franchised by this Agreement) at the Location(s) or at any point within 500
yards of the Location(s).
Except as set forth in this Section 2.5, or in a subsequently executed Area
Development Agreement ("Area Development Agreement") Franchisee has no
exclusivity and no rights to exclude development of concepts owned, franchised
or licensed by BRAII or its Affiliates. BRAII and its Affiliates may develop and
operate, or may franchise and license others to operate, any business concept
except the System Restaurant Concepts at any place, including immediately
adjacent to the Location(s), and may use the Pizzeria Regina Marks or any other
trademarks owned or developed by BRAII or its Affiliates in connection with
those concepts, even if such concepts sell products that are the same as, or
similar to, Approved Products.
3. DESIGNATION AND USE OF MARKS
3.1. Designation of Pizzeria Regina Marks. BRAII may, from time-to-time,
designate new Pizzeria Regina Marks as applicable to the System Restaurants. In
addition, BRAII may, from time-to-time, modify or delete existing Pizzeria
Regina Marks. BRAII will give Franchisee written notice of the addition,
modification, or deletion of Pizzeria Regina Marks. Franchisee will cease use of
any deleted Pizzeria Regina Marks within the time stated in the notice of
deletion. BRAII now owns and may in the future own marks that are not Pizzeria
Regina Marks. Franchisee will have absolutely no right to use any mark owned or
controlled by BRAII except the Pizzeria Regina Marks.
3.2. Use of Pizzeria Regina Marks. The franchise granted to Franchisee to use
the Pizzeria Regina Marks is applicable only to Franchisee's System Restaurants
located at the Location(s), except that Franchisee may use the Pizzeria Regina
Marks in connection with advertisements for the System Restaurants. Franchisee
will use the Pizzeria Regina Marks strictly according to the terms and
conditions of this Agreement.
Franchisee may not offer or sell any food, beverage, or other product
(whether or not an Authorized Product) at or from any System Restaurant under or
in connection with any trademark, service mark, trade name, or trade dress
(including product package design) other than the Pizzeria Regina Marks, without
BRAII's prior, written consent in each case. Franchisee will cause all point of
purchase materials and all other paper goods, all exterior/interior signage, and
all promotional and advertising materials to bear the Pizzeria Regina Marks as
instructed by BRAII.
3.3. Ownership of Pizzeria Regina Marks. BRAII is the sole and exclusive owner
of the Pizzeria Regina Marks. Nothing contained in this Agreement vests in
Franchisee any interest in any of the Pizzeria Regina Marks, other than the
limited license granted by this Agreement. All goodwill now or in the future
associated with and/or identified by one or more of the Pizzeria Regina Marks
(including any goodwill arising out of Franchisee's use of the Pizzeria Regina
Marks) belongs directly and exclusively to BRAII.
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Page 5
<PAGE>
Franchisee may not interfere in any manner with, and will not attempt to
attack, contest, or prohibit, (a) any use of the Pizzeria Regina Marks by BRAII
or by any other franchisee of BRAII that is not directly contrary to the terms
of this Agreement, or (b) BRAII's ownership of the Pizzeria Regina Marks. The
provisions of this Section 3.3 will survive the termination or expiration of
this Agreement.
3.4. Protection of Pizzeria Regina Marks. Franchisee will immediately notify
BRAII, in writing, if (a) a third party claims that the Pizzeria Regina Marks
infringe trademarks owned by the third party, or otherwise challenges
Franchisee's use of the Pizzeria Regina Marks, or (b) Franchisee knows or
suspects that a third party is infringing the Pizzeria Regina Marks. Franchisee
will provide BRAII with any information available to Franchisee about the
matter.
BRAII will use reasonable efforts to protect the Pizzeria Regina Marks,
including (in its sole and absolute discretion) instituting, prosecuting, and/or
settling judicial or administrative actions or proceedings. Whenever requested
to do so by BRAII, Franchisee will cooperate fully in those actions or
proceedings. Franchisee may not, however, take any action with respect to any
challenges against Franchisee's use of the Pizzeria Regina Marks, or any known
or suspected infringements of the Pizzeria Regina Marks by other parties,
without BRAII's prior, written approval (which BRAII may grant or withhold in
its sole discretion).
Franchisee will exercise caution in its use of the Pizzeria Regina Marks to
ensure that the Pizzeria Regina Marks (and the goodwill associated with them)
are not jeopardized in any manner. Franchisee may not use the Pizzeria Regina
Marks in any manner or in connection with any statement or material that is (in
BRAII's reasonable judgment) in bad taste or inconsistent with BRAII's public
image, or that could tend to involve BRAII in a matter of political or public
controversy, or tend to bring disparagement, ridicule, or scorn upon BRAII, the
Pizzeria Regina Marks, or the goodwill associated with the Pizzeria Regina
Marks.
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4. TRAINING AND ASSISTANCE
4.1. Management Training Programs.
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A. BRAII Programs. BRAII will offer a training program for Franchisee and the
managers of Franchisee's System Restaurants, at locations and at times selected
by BRAII. The training programs, which may include more than one segment, will
be structured to provide practical training in the implementation of the System
Restaurant Concepts, and the operation of System Restaurants. BRAII will bear
the costs of providing the actual training programs, including the overhead
costs of training, staff salaries, materials, and all technical training tools.
Franchisee will pay all traveling, living, compensation, and other expenses
incurred by Franchisee or Franchisee's employees in connection with attendance
at the training programs. The course content, format, operation, and manner of
conducting these training programs will be in the sole control of BRAII.
B. Training Mandatory. Franchisee will not allow any of Franchisee's System
Restaurants to be managed by any person who has not successfully completed
BRAII's management training course. If a manager dies, resigns, or is
terminated, Franchisee will not be in default of this requirement if the
successor manager begins the required training course within 90 days after first
assuming the duties of a manager and successfully completes the course.
C. Operations Manager or Store Manager. Not later than sixty (60) days before
the scheduled opening of Franchisee's first System Restaurant hereunder,
Franchisee shall nominate an Operations Manager for the System Restaurant.
Franchisee's nominee must be approved by BRAII. The Operations Manager must be
highly qualified to supervise restaurant operations for Franchisee and entirely
satisfactory to BRAII. Franchisee agrees to furnish the Company with all
relevant background and other information required by BRAII relating to the
proposed Operations Manager for use in BRAII's determination of whether such
person is qualified to serve as Franchisee's Operations Manager. The Operations
Manager shall have direct responsibility for restaurant operations on a day to
day basis. Franchisee agrees and acknowledges that BRAII and its representatives
will have the right to communicate directly with the Operations Manager
concerning all matters regarding the System Restaurant. Franchisee may terminate
the Operations Manager in its sole discretion.
D. Independent Training Programs. Franchisee may request that BRAII approve a
management training program proposed by Franchisee as an alternate method of
complying with this Section 4.1. BRAII has no duty to review Franchisee's
program unless Franchisee pays all costs of BRAII's review; BRAII has no duty to
approve Franchisee's program unless Franchisee satisfies BRAII that Franchisee's
program is at least the equivalent of BRAII's program. BRAII may revoke its
approval of Franchisee's training program whenever, in BRAII's opinion, the
training program fails to satisfy this standard.
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5. MANUAL
5.1. Loan of Operating Manual. BRAII will loan to Franchisee, at no charge, one
complete set of the applicable portions of the Operating Manual for each System
Restaurant. Franchisee may borrow from BRAII further copies of some or all
portions of the Operating Manual, upon payment of the fee set by BRAII.
5.2. Ownership of Operating Manual. All copies of the Operating Manual will
remain the exclusive property of BRAII. Franchisee may not copy, and will
prevent all Persons, including Franchisee's employees and Related Persons, from
copying, any portion of the Operating Manual. Franchisee will return to BRAII,
at the end of the Term, all copies of the Operating Manual in the possession of
Franchisee, Franchisee's employees or its Related Persons.
5.3. Confidentiality of Operating Manual. The entire contents of the Operating
Manual constitute BRAII's confidential trade secrets. Franchisee may not, and
will use its best efforts to ensure that no other Persons disclose or use
(except as authorized by this Agreement) any of the contents of the Operating
Manual or any other trade secrets of BRAII, whether during or after the Term.
5.4. Protection of Trade Secrets. The information contained in the Operating
Manual and electronic correspondence or data transmitted via e-mail or the
internet as may occur from time to time are a trade secrets; disclosure of any
of the information contained in the Operating Manual would cause irreparable
harm to BRAII. BRAII is entitled to obtain injunctive relief against Franchisee,
without posting bond or other security, to protect the contents of the Operating
Manual from disclosure and improper use. Franchisee waives all defenses it might
otherwise have to equitable relief for this purpose.
5.5. Updates. BRAII may, from time-to-time, update, correct or modify the
Operating Manual. Franchisee will follow any instructions from BRAII concerning
those updates, corrections and modifications, including instructions to remove
and replace certain pages contained in the Operating Manual, and instructions to
destroy or to return to BRAII the old (or removed) pages or volumes. If there is
ever a disagreement about the proper contents of the Operating Manual, the
master copy of the Operating Manual kept by BRAII at its home office is
conclusively the controlling version.
5.6. E-mail Transmittals. Any portion of the manual transmitted via e-mail,
facsimile or via other electronic means shall be considered Confidential and
Proprietary Information and shall be accessible only by approved personnel and
Franchisee shall take all reasonable measures to maintain the security and
confidentiality of such items.
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6. STANDARDS; DUTIES OF FRANCHISEE AND OPERATOR
6.1. Interpretation of Standards. BRAII has sole discretion to interpret the
standards that it sets forth in the Operating Manual or elsewhere.
6.2. Promulgation of Standards. In the Operating Manual, BRAII has promulgated
standards of operation for each type of System Restaurant. BRAII has also
promulgated standards of usage for the Pizzeria Regina Marks, and other
standards intended to ensure the consistency of the System Restaurant Concepts.
BRAII may, from time-to-time, add to, delete, or change standards. Franchisee
will comply with any change in the standards within the time-frame set by BRAII.
At all times throughout the Term, Franchisee will comply with all standards then
current.
6.3. Limitation on Promulgation of Standards. BRAII will not impose any new or
modified standard that requires structural changes, remodeling, or renovation
with a cost estimated by BRAII to exceed $10,000.00 per System Restaurant, more
often than once every 5 years.
6.4. Inspections. BRAII's authorized representatives may enter upon the premises
of Franchisee's System Restaurants at any time during the System Restaurant's
normal business hours, and at any other reasonable time, for the purpose of
determining whether the business is being conducted in accordance with BRAII's
standards, the Operating Manual and the terms of this Agreement.
If any inspection indicates any deficiency, Franchisee will correct or
repair the deficiency within 48 hours after Franchisee receives a written report
of the deficiency from BRAII. If (a) the deficiency is one that Franchisee has a
right to cure under Section 18.2 and (b) the deficiency cannot be cured within
48 hours, Franchisee will not be in default if Franchisee begins the necessary
corrections or repairs within the 48-hour period, and diligently pursues the
work to completion. If the deficiency is one that imminently threatens the
health or safety of Franchisee's employees or the consuming public, BRAII may
(instead of terminating this Agreement as allowed by Section 18.1 H) require
Franchisee to cease operating the effected System Restaurant until the
deficiency is corrected. If Franchisee does not cure the deficiency within the
permitted time, BRAII may make, or hire someone else to make, the corrections or
repairs. Franchisee will reimburse BRAII, upon demand, for all of BRAII's repair
expenses.
6.5. Compliance with Laws. Franchisee will comply with all applicable laws and
regulations governing the operation of its System Restaurants.
6.6. Identification. Franchisee will maintain BRAII-approved signage,
identifying the System Restaurant as a Pizzeria Regina Restaurant, and giving
any other information that BRAII requires. In addition, Franchisee will
prominently post a BRAII-approved sign inside each System Restaurant, stating
Franchisee's name and stating that the System Restaurant is operated by
Franchisee under a franchise from BRAII.
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BRAII FRANCHISE AGREEMENT
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6.7. Uniforms. Franchisee will require all employees, while working in any
System Restaurant, to: (a) wear uniforms of the color, design, and other
specifications that BRAII designates from time-to-time, and (b) present a neat
and clean appearance.
6.8. Coin-Operated Machines. Franchisee may not permit any vending, game, audio,
video, other coin- or currency-operated machines, or any other service, product,
or entertainment machine of any kind (whether or not similar to those listed),
to be installed or maintained on the premises of Franchisee's System Restaurants
without BRAII's prior written approval.
6.9. Assumed Name Certificate. Franchisee will promptly file and publish, in all
states and counties in which Franchisee does business, a certificate of doing
business under an assumed or fictitious name. Franchisee will indicate in each
certificate that it is doing business as "Pizzeria Regina" under a franchise
from BRAII. Franchisee will furnish a certified copy of each certificate to
BRAII promptly after its filing.
6.10. Approved Products. Franchisee may not manufacture, advertise for sale,
sell, or give away from any System Restaurant any product except Approved
Products. All Approved Products will be distributed under the specific name or
Mark (if any) approved by BRAII.
A. Sale of Products. Nothing herein shall prevent BRAII or any entity
specifically licensed by BRAII from selling in the Protected Territory set forth
in this Agreement, food or beverage products for in-home consumption which bear
the same or different trade names, trademarks, or service marks from those
licensed to Franchisee hereunder. BRAII will not sell any such products directly
to another Non-System Restaurant.
B. Standard and Optional Items. Franchisee will offer for sale in each of its
System Restaurants all Approved Products that BRAII designates as "standard" for
the type of System Restaurant, unless BRAII agrees otherwise in writing. In
addition, Franchisee may offer Approved Products designated by BRAII as
"optional" for the System Restaurant in which offered.
C. Menu Modification. Any time BRAII notifies Franchisee that an item will
become a "standard" Approved Product, or that an item will no longer be an
Approved Product (either "standard" or "optional"), BRAII will include a
deadline by which Franchisee must offer the new "standard" Approved Product for
sale, or must cease selling the item that is no longer an Approved Product. The
deadline will be at least 90 days after BRAII gives Franchisee the notice, in
the case of a new "standard" Approved Product, and at least 30 days after BRAII
gives Franchisee the notice, in the case of a product that is no longer an
Approved Product.
D. No Unprepared Products. Franchisee may not sell or distribute any food
product or ingredient except as a complete and fully prepared food product ready
for immediate consumption.
6.11. Computer System. Franchisee will use and maintain in all System
Restaurants the franchisee version of the BRAII computer system (the "Computer
System") (or such other computerized point-of-sale system as BRAII may designate
or approve), including all
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BRAII FRANCHISE AGREEMENT
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enhancements, upgrades, modifications, and additions to the Computer System
designated by BRAII. Franchisee will acquire all necessary hardware to operate
the BRAII Computer software from a vendor approved by BRAII, and will dedicate
that hardware solely to the operation of the BRAII Computer System.
The BRAII Computer System software, and all enhancements, additions, upgrades,
and modifications thereto, constitute BRAII's confidential information subject
to the confidentiality requirements of Sections 5.3, 5.4 and 12. Franchisee will
store all data and information on the BRAII Computer System as BRAII may
designate from time to time. BRAII may, at any time, access Franchisee's
computer and retrieve, analyze, download and use all software, data and files
stored or used thereon. BRAII owns all aspects of the Computer System, including
all enhancements, upgrades, modifications and additions, regardless of who
develops or conceives of any such changes. Upon termination of this Agreement,
Franchisee will cooperate fully in the removal of the Computer System software
from all of Franchisee's System Restaurants.
The hardware component used Acer Power: Business Multimedia System, Pentium 200
(or higher, 32 MB memory, 3.2 gig hard drive (or larger), internal 33.6 modem,
CD Rom drive, 15" monitor, Okidata Laser Printer and Okipage 4W. Software
program used is Microsoft Windows 95, Microsoft Office 97, PanPoll for Panasonic
Register system and Norton Antivirus.
6.12. Prices. Franchisor will establish, in its sole discretion, prices for all
Approved Products sold by Franchisee.
6.13. Reports. All weekly, monthly and required reports will be transferred to
Franchisor via electronic mail.
6.14. Location Design Criteria. Franchisee shall utilize only BRAII approved
designs for construction of the System Restaurant. BRAII will provide Franchisee
with its current design criteria. At its option, BRAII may change or modify
design criteria from time to time and BRAII will provide Franchisee with timely
notice of design changes in System Restaurants.
6.15. Development Schedule. Franchisee shall use its best efforts to construct,
open and have a Fully Operational System Restaurant pursuant to the Area
Development Agreement (except to the extent otherwise delayed by events of force
majeure).
If at any time Franchisee does not construct and have a Fully Operational
System Restaurant in accordance with the foregoing development requirement, this
Agreement shall, without notice to Franchisee, terminate and be of no further
force and effect and the provisions of Section 18 hereof shall apply.
The UFOC as Exhibit D Area Development Agreement which we are providing you
with a generic copy of said agreement. Each Area Development Agreement will
reflect the terms agreed upon between Franchisee and Franchisor and the
development schedule, hours and days of operation. Due to the fact that the size
of territories may vary due to demographics, each development schedule must be
Franchisee specific.
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BRAII FRANCHISE AGREEMENT
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6.16. Development of Business. Franchisee shall diligently develop the business
of each System Restaurant. Franchisee shall use its best efforts and facilities
to establish, maintain and increase sales of Approved Products at System
Restaurants, and shall at all times maintain a sufficient supply of Approved
Products to meet the demands of the public.
6.17. Hours and Days of Operations. Franchisee agrees to operate each System
Restaurant established hereunder for a minimum of three hundred sixty (360) days
each calendar year, subject to the limitations of local law and except for such
days a location is closed for repairs or by reason of casualty loss, or loss by
eminent domain. Each day a System Restaurant operated by Franchisee is open,
Franchisee shall conduct business and serve food and beverage during such hours
as may be specified by the Company from time to time during the term hereof,
subject to the limitations of local law.
6.18. Maintenance - Specialized Pizza Oven. BRAII, or its designee shall provide
any and all maintenance required to properly maintain the Specialized Pizza
Oven. BRAII or its designee are the only approved suppliers of maintenance and
replacement parts for the Specialized Pizza Oven as required by Section 8.1.
7. ADVERTISING
7.1. National Advertising.
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A. BRAII may, from time-to-time, establish a National Advertising Fund for the
mutual use of all System Restaurants. Upon establishment of the National
Advertising Fund, Franchisee will be required to contribute an amount not in
excess of 2.0% of the prior months Gross Sales (as defined herein), for national
advertising placed for the benefit of all System Restaurants. Upon establishment
of the National Advertising Fund, BRAII shall establish an advertising council
("Advertising Council") to act as the board of directors for the National
Advertising Fund. The Advertising Council shall consist of eight (8) members:
the President, Director of Operations, and Vice President of Corporate
Administration and the Vice President of Operations of BRAII (or such other
members of the BRAII as designated by BRAII) and four (4) Franchisee
representatives who shall be elected by a majority vote of Franchisees.
B. Delegation of Authority. Upon establishment of the National Advertising Fund
and the Advertising Council, BRAII may, at its discretion, delegate its
authority over, and control of, the National Advertising Fund to the Advertising
Council. During the period of this delegation, BRAII will have no responsibility
for the National Advertising Fund, or for the decisions made by the Advertising
Council. BRAII will nonetheless retain final control over all uses of the
Pizzeria Regina Marks.
7.2. Local Advertising. In addition to the payments required by Section 7.1,
Franchisee will expend each month 0.5% of Franchisee's prior month's Gross Sales
from each System Restaurant on local advertising in the general marketing area
of Franchisee's System Restaurants, subject to BRAII's prior written consent.
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7.3. Approval of Advertising. All advertising copy and other materials used by
Franchisee will be in strict conformity with the standards, formats, and
specimens contained in the Operating Manual or otherwise established by BRAII.
Domestic Franchisee may not use any design, advertisement, sign, or form of
publicity, unless first submitted to BRAII and approved by BRAII in writing and
not later disapproved.
Any request by Franchisee for BRAII's approval will be addressed to BRAII
marked, "Attention: Advertising Department - Ad Review"), and BRAII will
endeavor to respond within 30 days. Whenever Franchisee elects to use, in the
manner and time frame intended by BRAII, advertising supplied by BRAII or a
promotional item specifically approved by BRAII, Franchisee may use that
advertising or promotional item without further approval.
Upon written notice from BRAII, Franchisee will immediately discontinue use of
any unapproved advertising materials. If Franchisee does not discontinue and
remove the unapproved materials within 5 days after notice, BRAII or its
authorized agents may, at any time, enter upon the premises of Franchisee's
System Restaurants or elsewhere and remove and destroy the materials without
paying for them and without being liable for trespass or other tort.
7.4. Co-operative Advertising. BRAII may, from time-to-time, establish
co-operative advertising associations ("Co-ops") for various groups of System
Restaurants. BRAII may establish or modify Co-ops based upon marketing areas,
type(s) of System Restaurants, or any other criteria chosen by BRAII in its sole
discretion. If BRAII elects to establish Co-ops, it may, from time-to-time,
direct Franchisee to join one or more Co-ops and to contribute some or all of
Franchisee's local advertising money (otherwise required to be expended by
Franchisee pursuant to Section 7.2) to one or more of the Co-ops. The monthly
contributions to a Co-op (if any) required by this Section 7.4 will be made on
or before the 20th day of each month, based on the prior month's Gross Sales of
each of Franchisee's System Restaurants in the Co-op. BRAII reserves the right
to establish by-laws, voting rules, membership agreements, standard advertising
agency agreements, and other standards concerning the operation of Co-ops,
advertising agencies retained by Co-ops, and advertising programs conducted by
Co-ops.
8. PURCHASE OF EQUIPMENT, SUPPLIES AND OTHER PRODUCTS
8.1. Use of Approved Supplies and Approved Distributors. BRAII may, from
time-to-time, publish one or more listings of approved equipment, supplies, and
distributors, which listings may be specific as to manufacturer, brand name,
item/model/catalog number, preparation or manufacturing facility, or other
factors considered relevant by BRAII. BRAII may add to or delete from the
listings at any time. Franchisee will only purchase and use approved equipment
and supplies in connection with Franchisee's operations under this Agreement,
and will obtain all equipment and supplies only from or through approved
distributors. If Franchisee desires to purchase any equipment or supplies that
are not then approved, or to purchase any items from or through a distributor
that is not then approved, Franchisee will submit to BRAII a written request for
approval. BRAII may inspect the facilities of the manufacturer, producer, or
distributor, and may require Franchisee (or the manufacturer, producer, or
distributor) to submit samples, specifications, and other information concerning
any equipment or supplies for which approval is
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sought. BRAII is not required to inspect or test any proposed manufacturer,
producer, or distributor until BRAII is satisfied that all costs associated with
inspection and testing of the proposed manufacturer, producer, or distributor
and of samples of their products (including salaries of BRAII employees, travel
costs, and laboratory charges) will be borne by Franchisee (or the manufacturer,
producer, or distributor). BRAII may re-inspect the facilities and products of
any approved manufacturer, producer, or distributor from time-to-time, and may
revoke its approval upon failure to continue to meet any of BRAII's criteria as
then in effect. BRAII may, without notice to Franchisee, establish a subsidiary
for the sale or maintenance of equipment in the System Restaurant.
8.2. Trade Secret Items. BRAII's pizza dough, cheese blends, pizza sauce,
sausage mix, and spice package are highly confidential secret recipes and are
trade secrets of BRAII. Accordingly, Franchisee may use only BRAII's pizza
dough, cheese blends and pizza sauce in the preparation of Approved Products and
will buy from BRAII, or a source designated by BRAII, Franchisee's full
requirements of BRAII's these items as well as any other trade secret or
patented items that BRAII develops in the future.
8.3. Pizzeria Regina Pizza Oven. For proper preparation of the Approved Products
BRAII requires the Franchisee to lease a Specialized Pizza Oven. The oven lease
price is subject to adjustment from time to time by BRAII. The current price is
specified in attached Exhibit J. The oven, together with backup parts have been
developed by BRAII and an Approved Supplier solely for the use of Franchisees'
and may not be sold, leased or used by anyone other than the Franchisee. You
must execute the Oven Lease Agreement in Exhibit J. Lease payments for the oven
may be paid in two equal installments each, payable (90) and (7) days before the
projected opening date of a System Restaurant as provided in Section 6.15
hereof. At the termination of this agreement, the oven, together with all backup
parts shall be returned to BRAII within (90) days of termination. The design,
construction and use of the Specialized Pizza Oven is Confidential and
Proprietary Information as defined herein, which Franchisee shall keep
confidential.
9. FEES AND PAYMENT SCHEDULE
9.1. Initial Franchise Territory Fee. Franchisee will pay BRAII territory fee of
$10,000 (the "Territory Fee") for each System Restaurant opened in the
territory. All franchise fees will be fully earned when due, and will not be
refundable, in whole or in part, under any circumstances. The entire Territory
Fee is payable upon execution of this Franchise Agreement.
9.2. Opening Fee. Franchise will also pay BRAII an opening fee of $20,000 (the
"Opening Fee") for each System Restaurant upon opening. All franchise fees will
be fully earned when due, and will not be refundable, in whole or in part, under
any circumstances.
9.3. Royalty Fees. Franchisee will pay BRAII monthly an amount equal to 5.0% of
Franchisee's Gross Sales from each System Restaurant for the prior month as a
royalty fee (the "Royalty Fee"). If applicable law prohibits Franchisee from
paying BRAII a percentage of Franchisee's revenues from the sale of alcoholic
beverages, Franchisee will pay BRAII monthly
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an amount equal to 5.5% of Franchisee's Gross Sales (excluding from those Gross
Sales, however, all revenues from the sale of alcoholic beverages) from each
System Restaurant in the affected jurisdiction for the prior month. Franchisee
will pay all Royalty Fees on or before the 20th day of the month via electronic
debit from Franchisee's account. If BRAII has not received the fee by the last
day of the month in which the payment is due, Franchisee will pay a "late
charge" equal to 1.5% of the delinquent amount (or such lesser amount as BRAII
may designate) and an equal late charge for each subsequent month that payment
is delayed. BRAII may apply any payments received from Franchisee to the oldest
amounts due from Franchisee, regardless of any contrary designation by
Franchisee.
9.4. Operation Support Fee. Intentionally Omitted.
9.5. Transfer Fees. As partial reimbursement of BRAII's costs of review and
approval of a Transfer of any Interest in Franchisee or in this Agreement,
Franchisee will pay BRAII, on or before the effective date of each Transfer, and
as a condition to BRAII's approval, a transfer fee equal to $5,000 plus an
additional $2,000 training fee for each Location covered by this Agreement
(whether or not Franchisee is then operating a System Restaurant at any
Location).
9.6. Offset Rights. At any time that Franchisee or its Related Persons are 30
days or more delinquent in paying any sums owed to BRAII or its Affiliates,
BRAII may offset any sums owing by BRAII against moneys owed by Franchisee or
its Related Persons.
9.7. Taxes. In addition to the other payments provided for in this Agreement,
Franchisee will pay BRAII, or its Affiliates, all sales taxes, personal property
taxes, excise taxes, value added taxes and similar taxes imposed upon or
required to be collected or paid by BRAII, or its Affiliates, on account of
services or goods furnished to Franchisee through sale, lease or otherwise, or
on account of collection by BRAII of any franchise or royalty fees called for by
this Agreement. Franchisee shall pay such taxes upon demand and in the manner
designated by BRAII, or its Affiliates.
9.8. Electronic Transfer or Debit. All fees due under this Section 9 shall,
where applicable, be payable weekly to BRAII in U.S. Currency via electronic
transfer or debit. All Fees payable by domestic Franchisees shall be paid
weekly, on or before the Monday following week in which the fee is earned.
Domestic Franchisees will each execute a consent to electronic funds transfer in
favor of BRAII and shall allow BRAII to make weekly withdrawals each Monday.
Domestic Franchisee's shall execute a consent to such transfer as provided in
Appendix F hereto. All Fees payable by Franchise locations existing outside the
United States shall be paid monthly on or before the first Monday following the
month in which the Fee is earned and shall be paid to BRAII via electronic
transfer. Appendix E hereto provides wire transfer instructions for such
transfers.
10. BUSINESS PREMISES
10.1. General. If a Franchisee occupies the premises of a System Restaurant
under a lease, prior to the execution of the lease, Franchisee shall submit the
lease (translated into English) to
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Franchisor for its written approval. No lease shall be executed unless
previously approved by Franchisor in its reasonable discretion. All leases for
System Restaurants shall contain the right of assignment as provided in Section
19.7 hereof.
10.2. Restrictions on Use. Unless Franchisee receives BRAII's prior, written
consent, Franchisee will conduct from the premises of each of Franchisee's
System Restaurants (including any adjacent sidewalks and parking areas) only
business activities licensed by this Agreement.
10.3. Site Selection. Franchisee is solely responsible for selecting sites at
which to develop System Restaurants. BRAII will not be liable to Franchisee if a
location chosen by Franchisee fails to be profitable or otherwise fails to meet
Franchisee's expectations. Franchisee shall be solely responsible for any Site
Selection fees incurred.
10.4. Construction Of System Restaurants. Franchisee will obtain all necessary
governmental permits and licenses before Constructing, modifying, or remodeling
any System Restaurant. Franchisee will complete any construction or other work
on each System Restaurant within a reasonable time after Franchisee begins work
on that System Restaurant. Franchisee will begin operation of each new System
Restaurant within 30 days after completion of construction, and will give BRAII
at least 10 days written notice before beginning operations.
Right to De-Identify. If the premises at which a System Restaurant is
operated are leased, Franchisee shall obtain a fully executed Fee Owners
Certificate as provided in Exhibit A which will provide BRAII in
addition to other rights, the right to de-identify the premises.
10.5. Repair and Maintenance. Franchisee will repair and repaint the interior
and exterior of all System Restaurants as appropriate and as requested by BRAII.
Franchisee will, at all times, maintain the interior and exterior of the System
Restaurants as well as the surrounding premises in a clean and orderly
condition. If Franchisee leases the locations on which the System Restaurants
are located, Franchisee will require the leases to contain an express right to
undertake this repair and maintenance.
10.6. Proof of Compliance. Before opening each System Restaurant, Franchisee
will provide to BRAII either a copy of a deed showing that title to the real
estate on which the System Restaurant will be located is held by Franchisee, or
a letter from the landlord of the premises in the form of Appendix A.
10.7. System Restaurant Closure. Franchisee may not cease to operate any System
Restaurant without BRAII's prior consent, except upon condemnation or expiration
of a lease pursuant to its terms at execution. Franchisee acknowledges that the
damages to BRAII from unauthorized closure of a System Restaurant are difficult
to calculate; therefore, if Franchisee violates this Section 10.8, Franchisee
will pay as liquidated damages, and not as a penalty, an amount equal to 24
times the average Royalty Fees paid or due with respect to the closed System
Restaurant during the calendar year before the closing. If the System Restaurant
was not open for
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business for a full calendar year, the liquidated damages will be 24 times the
highest monthly service fee during the period the System Restaurant was open.
11. BOOKS AND RECORDS
11.1. Maintenance of Books and Records. Franchisee will keep on the premises of
each of Franchisee's System Restaurants or at Franchisee's principal place of
business, and will preserve for-at least 5 years after the date of their
preparation (regardless of any intervening expiration or termination of this
Agreement), true and accurate records, ledgers, accounts, books, and data in the
form that BRAII requires. Franchisee's records will accurately reflect all
details relating to the business done at each System Restaurant. Franchisee will
submit to BRAII with its payment of the Royalty Fees a monthly statement of
Gross Sales and, within 45 days after the close of each fiscal quarter, a
quarterly profit and loss statement, on a unit-by-unit basis. In addition,
Franchisee will, within 90 days after the end of each of Franchisee's fiscal
years, provide BRAII with a complete annual profit and loss statement and a
consolidated balance sheet prepared in accordance with generally accepted
accounting principles, consistently applied. If requested by BRAII, the annual
profit and loss statement and balance sheet will be reviewed by an independent
certified public accountant in accordance with the Statements on Standards for
Accounting and Review Services, and will contain a signed opinion by the
accountant to that effect. BRAII reserves the right to require any further
information about Franchisee's business under this Agreement that BRAII from
time to time reasonably prescribes. BRAII will take reasonable precautions to
maintain the confidentiality of all financial reports provided by Franchisee,
but if Franchisee executes any promissory notes to BRAII, BRAII may disclose the
financial reports provided by Franchisee to any third party to whom BRAII sells
or pledges (or attempts to sell or pledge) the promissory notes from Franchisee.
11.2. Inspection and Audit. BRAII and its agents or representatives may examine
and audit all of Franchisee's records, accounts, and books at all reasonable
times. Franchisee will cooperate with any examination or audit by gathering
records, accounts, and books for easy access, and by providing other assistance
BRAII reasonably requests. If any inspection or audit discloses that any
financial statement delivered to BRAII by Franchisee is in error, Franchisee
will immediately pay to BRAII any deficiency found to be owing, plus a finance
charge at the rate of 18%, accruing from the date payment was first due. If the
deficiency is 2% or more of the amount due, then in addition, Franchisee will
reimburse BRAII for the cost and expense of the inspection or audit within 5
business days after receiving a bill from BRAII.
11.3. Selection of Accountants. Franchisee will use the accounting services of a
national or large regional firm of certified public accountants selected by
Franchisee, or another accounting service reasonably satisfactory to BRAII.
Franchisee will notify BRAII of the name and qualifications of any accounting
service (other than a national or large regional firm of certified public
accountants) selected by Franchisee; that accounting service will be considered
satisfactory to BRAII unless, within 30 days after BRAII's receipt of
Franchisee's notice of the name and qualifications of the accounting service,
BRAII notifies Franchisee of BRAII's objection to the accounting service. BRAII
may withdraw its approval of any accounting service (including national and
large regional firms) upon reasonable advance notice to Franchisee.
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12. COVENANTS AGAINST COMPETITION
12.1. Acknowledgments. Franchisee acknowledges:
A. Uniqueness. The food products, methods of doing business, and other elements
composing the System Restaurant Concepts (including the information set forth in
the Operating Manual) are distinctive, and have been developed by BRAII at great
effort, time, and expense.
B. Secret Information. Franchisee has regular and continuing access to valuable
and confidential trade Secrets regarding the System Restaurant Concepts, and to
BRAII's knowledge, know-how, and expertise concerning the operation of a retail
food business. It would be an unfair method of competition for Franchisee to use
or duplicate any of BRAII's trade secrets, knowledge, know-how, or expertise for
any use other than operations pursuant to this Agreement.
12.2. In-Term Covenants. During the Term, Franchisee and its Related Persons may
not (without the prior, written consent of BRAII), directly or indirectly,
individually or as a partner, joint venturer, shareholder, officer, creditor,
director, employee, trustee, or agent of an organization, own, operate, finance,
or provide consulting services to any business (other than a System Restaurant
operated pursuant to this Agreement) engaged in the business of operating
restaurants (including the delivery and carryout aspects of restaurants) that
sell pizza, pasta or other food items similar to Approved Products, or build,
sell, repair or design of food preparation equipment similar to the Specialized
Pizza Oven.
During the Term, Franchisee and its Related Persons may not (without the
prior, written consent of BRAII) lease, sublease, or otherwise permit the use
of, any portion of any premises owned, leased, or controlled by any of them for
purposes of operating a business (other than a System Restaurant operated
pursuant to this Agreement) engaged in whole or substantial part (more than 10%
of its sales), in the production or sale (wholesale or retail) of any items,
including but not limited to pizza, pasta, or food items similar to Approved
Products, or food preparation equipment similar to the Specialized Pizza Oven.
In addition, Franchisee agrees to execute employee non-disclosure and
non-competition agreements, with its managers, which shall prohibit competition
by such persons during and for a period of one (1) year after termination of
their employment with Franchisee in any business selling at or within a ten (10)
mile radius of the Location and which shall further prohibit disclosure by such
parties to any other person or legal entity of any trade secrets or any other
information, knowledge or know-how deemed confidential by Franchisor concerning
the operation of the Franchised Business. The form of such employee
non-disclosure agreements shall be subject to the prior written approval of
Franchisor and shall also be for the benefit of Franchisor. Franchisor shall be
a third party beneficiary of such agreements and Franchisee shall not amend,
modify or terminate any such agreement without Franchisor's prior written
consent.
12.3. Post-Term Covenants. For a period beginning on the termination or
expiration of this Agreement and ending on the date specified below, neither
Franchisee nor its Related Persons may engage, nor assist others to engage,
directly or indirectly, individually or as a partner, joint
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venturer, shareholder, officer, creditor, director, employee, or agent, in the
production or sale (at wholesale or retail) of any pizza, pasta or other food
items similar to Approved Products or building, sale, repair or design of food
preparation equipment similar to the Specialized Pizza Oven: (a) within a
25-mile radius of any Location; (b) anywhere within the county within which one
or more Locations are situated; or (c) anywhere within 10 miles of a location at
which BRAII or any subsidiary, Affiliates or franchisee of BRAII operates a
System Restaurant on the date of termination or expiration of this Agreement.
For a period beginning on the date any Person Transfers all of its Interest
in Franchisee or in this Agreement, and ending on the date specified below, the
transferring Person may not engage, directly or indirectly, individually or as a
partner, joint venturer, shareholder, officer, creditor, director, employee, or
agent, in the production or sale (at wholesale or retail) of any pizza, pasta or
other food items similar to Approved Products: (a) within a 25-mile radius of
any Location; (b) anywhere within the county within which one or more Locations
are situated; or (c) anywhere within 10 miles of a location at which BRAII or
any subsidiary, Affiliates or franchisee of BRAII operates a System Restaurant
on the date of termination or expiration of this Agreement.
As to each of the covenants, and any Person bound by the covenants,
contained in this Section 12.3, the covenant will expire on the date the Person
has been in full compliance with the covenant for 36 consecutive months. Each of
the covenants set forth in the foregoing paragraphs are independent of the
others, and the unenforceability of one will not affect the others.
12.4. Perpetual Covenant. In addition to the covenants of confidentiality
contained in Section 5.3, Franchisee and its Related Persons may never (whether
during or after the Term) take any actions that would have the probable effect
of impairing BRAII's ownership of or goodwill in the Pizzeria Regina Marks
and/or in the System Restaurant Concepts.
12.5. Stock Ownership. The limitations on being a direct or indirect owner or
shareholder of a business, as contained in this Section 12, do not apply to
ownership of 1% or less of the issued and outstanding stock in any corporation
traded on a national stock exchange or NASDAQ.
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13. EMPLOYMENT RELATIONS
13.1. Franchisee's Employees. Franchisee will be solely responsible for all of
Franchisee's employment practices, including hirings, terminations, and other
personnel actions. Franchise will protect, defend, and indemnify BRAII, its
affiliates, officers, and employees, from any and all proceedings, claims, and
causes of action instituted by Franchisee's employees, or by others, that arise
from Franchisee's employment practices.
13.2. Interference. During the Term, neither BRAII nor Franchisee may employ,
directly or indirectly, any individual in a managerial position who is at the
time, or was at any time during the prior 6 months, employed in a managerial
position by the other party, nor may Franchisee employ, directly or indirectly,
any individual in a managerial position who is at the time, or was at any time
during the prior 6 months employed in a managerial position by any other
franchisee of BRAII. This restriction will not be violated if, at the time BRAII
or Franchisee employs the individual, the current or former employer has given
its written consent. If the restrictions contained in this Section 13 are
violated, the amount of actual damages will be difficult to determine;
therefore, the former employer will be entitled to liquidated damages in an
amount equal to twice the total annual compensation of the employee involved
(annualized, if appropriate, to reflect the rate of compensation for a full
year's employment), plus reimbursement of all costs and attorneys' fees
incurred. For purposes of this Section 13, "managerial position" means all
employees at the pay grade of assistant restaurant manager and above.
14. TRANSFERS
14.1. Transfers by BRAII. BRAII may Transfer its rights and obligations under
this Agreement without the consent of, or notice to, Franchisee. This Agreement
will inure to the benefit of, and be binding upon, the successors and assigns of
BRAII.
14.2. Transfers by Franchisee. Except as otherwise permitted by this Section 14
and Section 15, neither Franchisee nor any Person with an interest in Franchisee
may, without BRAII's prior written consent, directly or indirectly Transfer any
Interest in this Agreement or any Interest in Franchisee. Any purported Transfer
without BRAII's prior, written consent will have no effect, except to cause a
default under this Agreement.
14.3. Transfer of Assets. Franchisee may not, without BRAII's prior written
consent, Transfer or offer to Transfer any assets that bear any of the Pizzeria
Regina Marks, except (a) to BRAII or a subsidiary or franchisee of BRAII, or (b)
to an established salvage dealer, who destroys or disables the assets
transferred under Franchisee's direct supervision.
In addition, Franchisee may not, without BRAII's prior written consent
offer to Transfer by public or private auction, or advertise publicly for
Transfer, any of the furnishings, interior and exterior decor items, supplies,
inventory, fixtures, equipment, small wares, or other personal property used in
connection with Franchisee's System Restaurants.
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14.4. Consent to Transfers. BRAII may withhold its consent to any proposed
Transfer unless, in addition to the other requirements of this Section 14 and
the requirements of Section 15, the following conditions are met, to BRAII's
satisfaction, before the effective date of the proposed Transfer:
A. No Default. Franchisee is not in default under this Agreement or any other
agreement with BRAII, and Franchisee and its Related Persons have satisfied all
accrued monetary and other obligations to BRAII and its Affiliates.
B. Release. Franchisee and the transferor have each executed a general release,
in a form prescribed by BRAII, of all accrued claims against BRAII, its
Affiliates, and their respective officers, directors, and employees.
C. Transfer Standards. The proposed transferee has demonstrated to BRAII's
satisfaction that the proposed transferee is, in all respects, acceptable to
BRAII (including, if the proposed transferee is already a franchisee of BRAII,
that it is in Good Standing under its franchise agreements with BRAII), and that
the proposed transferee meets all of BRAII's then current requirements for new
franchisees (or for holders of an interest in a franchisee, as the case may be)
including possession of good moral character and reputation, work experience,
aptitude, financial background and condition, credit rating, absence of
conflicting interests, and ability to comply fully with the terms of this
Agreement.
D. Assumption of Obligations. The proposed transferee has entered into a written
Assumption Agreement, in a form prescribed by BRAII, assuming and agreeing to
discharge all of transferor's obligations relating to this Agreement and to the
System Restaurants covered by this Agreement (including all obligations owing to
third parties not related to BRAII).
E. Training. If not previously trained, the proposed transferee, its manager,
and its other employees responsible for the operation of all System Restaurants,
have satisfactorily completed the training BRAII then requires under Section
4.1. The proposed transferee shall also have paid any training fees pursuant to
Section 9.5.
F. Transfer Fee. The transfer fee required by Section 9.5 has been paid.
G. Acknowledgment. If Franchisee or any owner of an Interest in Franchisee is
transferring all of its Interest in this Agreement or in Franchisee, the
proposed transferor has signed an acknowledgment that the covenants contained in
Section 12 will continue to apply to the proposed transferor after the Transfer.
14.5. Death or Incapacity. Upon the death or permanent incapacity of Franchisee
or any individual with an Interest in Franchisee, the executor, administrator,
or personal representative of the affected individual will Transfer all of the
individual's Interest to a third party approved by BRAII within 6 months. All
Transfers pursuant to this Section 14.5, including Transfers by devise or
inheritance, will be subject to the same conditions as any other Transfer
(including the conditions set forth in Sections 14.4 and 14.6). Nevertheless, in
the case of a Transfer by devise
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or inheritance, if the heirs or devisees of the deceased are unable to meet the
conditions in Section 14.4, the personal representative of the deceased will
have a reasonable time (not more than 12 months after the date of death) to
dispose of the decedent's Interest in this Agreement or in Franchisee, subject
to all applicable terms and conditions for Transfers contained in this
Agreement. In the case of permanent incapacity of an individual owner of an
Interest in Franchisee or in this Agreement, the incapacitated individual may,
with BRAII's written consent, retain a non-controlling ownership Interest in
Franchisee.
14.6. Right of First Refusal. If Franchisee or any owner of an Interest in
Franchisee receives and desires to accept any bona fide offer to Transfer all or
any part of his, her, or its Interest in this Agreement or in Franchisee, and if
the Transfer of such Interest would either (1) result in a change in control of
the Franchisee, or (2) constitute a Transfer of any Interest by a Person holding
a 10% or greater Interest in Franchisee, Franchisee or the proposed transferor
will submit to BRAII an executed copy of the agreement for Transfer (which will
be conditioned on this right of first refusal). BRAII may, within 30 days after
receipt of a signed copy of the agreement (or if BRAII shall request additional
information, within 30 days after receipt of such additional information) and
all necessary supporting documentation (including financial statements), send
written notice to the transferor that BRAII (or a Person designated by BRAII)
intends to purchase the Interest which is proposed to be Transferred on the same
terms and conditions (or, at BRAII's election, the reasonable cash equivalent,
not including the value of any tax benefits, of any non-cash consideration)
offered by the third party. Any material change in the terms of an agreement
before closing will constitute a new agreement, subject to the same right of
first refusal by BRAII (or its designee) as in the case of the initial
agreement. Additionally, if more than 90 days pass without such Transfer
occurring, such lapse of time shall be deemed a new proposal and BRAII shall
again have such right of first refusal with respect thereto. BRAII's failure to
exercise its right of first refusal will not constitute a waiver of any other
provision of this Agreement, including any of the requirements of this Section
14 with respect to approval of the proposed transferee.
15. NON-INDIVIDUAL FRANCHISEES
If Franchisee, any owner of an Interest in Franchisee, or any successor
thereof, is not an individual, then each of the following provisions will apply:
15.1. List of Individual Owners. Upon execution of this Agreement, upon each
Transfer of an Interest in Franchisee and at any other time upon BRAII's
request, Franchisee will furnish BRAII a list of all Persons having an Interest
in Franchisee, an indication of the voting rights and percentage Interest of
each of those Persons, and a list of all officers, directors and similar
officials of Franchisee, in the form of Appendix B. BRAII may require the same
information regarding all Persons having an Interest in Franchisee.
15.2. Organizational Documents. All of Franchisee's organizational documents
(including articles of partnership, partnership agreements, articles of
incorporation, by-laws, shareholders agreements, and trust instruments) will
recite that the issuance and Transfer of any Interest in Franchisee is
restricted by the terms of this Agreement, and that the sole purpose for which
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Franchisee is formed (and the sole activity in which Franchisee is or will be
engaged) is the conduct of a retail food business pursuant to one or more
franchise agreements from BRAII. Franchisee will submit to BRAII, upon the
execution of this Agreement, a resolution of Franchisee (or its governing body)
in the form of Appendix D.
15.3. Transfer Restrictions. Franchisee will maintain stop instructions against
the Transfer on its records of any securities or other ownership Interests, and
will not issue securities or other evidences of ownership without the following
legend printed legibly and conspicuously on the face of the security or other
evidence of ownership:
The transfer of this certificate and the interests it represents are
subject to the terms and conditions of one or more Franchise Agreements
with Boston Restaurant Associates International, Inc., and to the
restrictive provisions of the organizational documents of the issuer.
Please refer to those documents for the terms of the restrictions.
15.4. Permitted Assignments. Franchisee may assign not more than an aggregate
total of 20% of the Interests in Franchisee to employees of Franchisee who are
actively engaged in the operation of Franchisee's business under this Agreement,
as long as the proposed transferee submits to BRAII a franchise application in
the form prescribed by BRAII from time to time. Transfers under this provision
may be made without complying with the other terms of this Section 15. Once
created, those ownership Interests will be subject to all terms and conditions
of this Agreement, including the restrictions on Transfers, the requirements of
shareholder guaranties and agreements, and the covenants of confidentiality and
against competition.
15.5. No Publicly Traded Ownership Interests. Franchisee and its Related Persons
may not offer, solicit, engage in, or effect any transaction, whether financial
or otherwise, that could foreseeably result, directly or indirectly, in "public
trading" or "public ownership" (as those terms are commonly understood for
purposes of federal and state securities laws in the United States) of any
securities or other Interests in: (a) Franchisee, (b) any parent company of
Franchisee, (c) this Agreement, or (d) the System Restaurants operated by
Franchisee or any assets used by Franchisee in connection with those System
Restaurants.
15.6. Changes in Ownership or Organization. Franchisee and its Related Persons
will not reorganize or otherwise change the ownership or organizational
structure of Franchisee or its Related Persons in any manner that is
inconsistent with the provisions of Sections 14 and 15.
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16. INSURANCE AND INDEMNIFICATION
16.1. Property Insurance. Franchisee will obtain and maintain throughout the
Term, at its own expense, property insurance on an all-risk basis including
flood coverage up to the limits available in the National Flood Insurance
program, from financially-responsible insurance companies, insuring Franchisee's
System Restaurants and their respective contents (whether those System
Restaurants are completed or under construction) for the full replacement value
of the System Restaurants. In the event of damage covered by insurance, the
proceeds of the insurance will be used to restore the System Restaurants to
their original condition within 120 days, unless restoration is prohibited by
the appropriate lease or applicable law, or BRAII has otherwise consented in
writing.
16.2. Liability Insurance. Franchisee will obtain and maintain throughout the
Term, at its own expense, with a financially-responsible insurance company,
comprehensive general liability insurance (including products liability and
completed operations coverage), comprehensive automobile liability insurance
(including coverage for all owned, non-owned, leased, or hired vehicles), and
liquor liability (dram shop) insurance, all in amounts at least equal to
$3,000,000 combined single limit for death, personal injury, and property
damage, as well as workers' compensation insurance (coverage B). All liability
insurance maintained by Franchisee will designate BRAII as an additional
insured, as its interests may appear, and will insure against BRAII's vicarious
liability for actual and (unless prohibited by applicable law) punitive damages
assessed against Franchisee.
16.3. Proof of Insurance. Franchisee will file with BRAII certificates of
insurance showing all coverages required by this Section 16, and will promptly
pay all premiums on the policies as and when those premiums become due. In
addition, all policies will contain a provision requiring 30 days' prior,
written notice to BRAII, by certified or registered mail, of any proposed
cancellation or modification of the policies. If Franchisee fails to obtain or
maintain the insurance required by this Section 16, BRAII may, in addition to
any other rights it may have, procure insurance for Franchisee without notice,
and Franchisee will pay the premiums for, and BRAII's cost of acquiring, that
insurance immediately upon demand for those amounts.
16.4. Indemnification and Waiver. Franchisee will indemnify BRAII, its
Affiliates, and their respective employees, officers, and directors against all
loss, damage, or liability (including attorneys' fees and costs) incurred by any
of them owing to claims that arise directly or indirectly from or in connection
with Franchisee's operations under this Agreement. If Franchisee fails to
maintain the insurance required by this Section 16, or fails to name BRAII as an
additional insured under that policy, then Franchisee's obligations of indemnity
under this Section 16.4 will also extend to all liability that would have been
insured by an appropriate policy (including liability arising from BRAII's own
negligence). The insufficiency of the insurance required to be maintained by
Franchisee under the terms of this Section 16 will not be a defense to liability
under this Section 16.4.
Franchisee waives all claims it may have against BRAII, its Affiliates, and
their respective officers, directors, and employees (including claims arising
from training,
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establishment of procedures, and food and other products distributed but not
manufactured by BRAII or its Affiliates), except for claims arising from those
parties' intentional misconduct or gross negligence.
17. REQUESTS FOR WAIVERS AND CONSENTS
17.1. Requests for Waivers or Consents. Whenever Franchisee desires BRAII's
waiver of any obligation in this Agreement, and whenever this Agreement requires
Franchisee to obtain BRAII's prior, written consent, Franchisee will address its
written request for such waiver or consent to BRAII's President (unless BRAII'
specifies another individual or department in writing). The request will specify
the provision of this Agreement for which a waiver or consent is sought, and
will set forth the basis for the request. BRAII's failure to advise Franchisee
within 45 days after receipt of the request that a request is denied constitutes
BRAII's consent to the request (except that, if BRAII gives Franchisee written
notice within the 45-day period that BRAII requires additional information or
documentation from Franchisee, the 45 days will not begin until Franchisee has
provided BRAII with all relevant information and documentation requested).
17.2. Effect of Waivers and Consents. All requests for waivers and consents will
be considered on a case-by-case basis, and nothing requires BRAII to grant any
waiver or consent. BRAII may condition the grant of a waiver or consent as it
considers appropriate, without regard to any prior acts or decisions of BRAII..
17.3. No Implied Waivers. Except as provided in Section 17.1, no other action or
inaction by BRAII will constitute a waiver, or impair any right, power, or
option reserved to BRAII by this Agreement. No waivers can be inferred from
BRAII's failure to respond to a situation with respect to which Franchisee has
not requested a waiver in accordance with Section 17.1.
18. DEFAULT AND TERMINATION
18.1. Defaults Without Cure Right. Franchisee will be in default and, in
addition to all other remedies BRAII has at law or in equity, including money
damages, injunctive relief, and attorney's fees, BRAII may, upon written notice
to Franchisee, terminate this Agreement without affording Franchisee any
opportunity to cure the default upon the occurrence of any of the following
events or conditions:
A. Financial Performance. If the total of Franchisee's debts is greater than the
fair value of Franchisee's assets, or if Franchisee commits an act of
bankruptcy, is declared bankrupt or insolvent according to law or admits in
writing its inability to pay debts generally as they become due, or an
assignment of Franchisee's property is made for the benefit of creditors or a
receiver, guardian, conservator, trustee or assignee, or any other similar
officer or person is appointed to take charge of any part of Franchisee's
property; or any reorganization or similar proceedings are commenced by or
against Franchisee under any bankruptcy or insolvency law and not dismissed
within 30 days from its commencement; or any court enters an order providing for
the modification of rights of Franchisee's creditors.
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B. Improper Transfer. If, without the prior, written consent of BRAII, or in any
other manner inconsistent with the terms of this Agreement, (i) Franchisee
Transfers or attempts to Transfer an Interest in this Agreement, (ii) any owner
of an Interest in Franchisee Transfers or attempts to Transfer any portion of
that Interest, (iii) Franchisee or any of its Related Persons violates Section
15.6, or (iv) Franchisee dissolves or liquidates.
C. Failure to Allow Inspection. If Franchisee does not allow BRAII or its
employees or agents access to any System Restaurant or to any of Franchisee's
records, or if Franchisee otherwise impairs BRAII's rights of inspection and
audit under this Agreement.
D. Criminal Conviction. If Franchisee (or any of its Related Persons actively
involved in the operation, supervision, or management of any System Restaurant)
is convicted of a felony or other crime involving moral turpitude.
E. Disclosure of Secrets. If Franchisee or any of its Related Persons discloses,
permits the disclosure of, or uses, the contents of the Operating Manual or any
other trade secrets or Confidential and Proprietary Information provided to
Franchisee by BRAII, contrary to the provisions of this Agreement or any
non-disclosure agreement signed contemporaneously herewith or otherwise
discloses confidential information to the detriment of BRAII.
F. Falsification of Records. If Franchisee knowingly or through gross negligence
maintains false books or records, or knowingly or through gross negligence
submits any false report to BRAII.
G. Habitual Default. If Franchisee defaults under Section 18.2 on 3 or more
occasions in any 12-month period, or on 5 or more occasions in any 36-month
period, even if Franchisee would otherwise be given an opportunity under Section
18.2 to cure the particular default involved.
H. Endangerment. If Franchisee conducts the business licensed by this Agreement
so contrary to this Agreement and the Operating Manual as to constitute an
imminent danger to the public health.
I. Material Misrepresentation. If Franchisee (or any Person having a 10% or
greater Interest in Franchisee) made a material misrepresentation about any
material fact in a franchise application given to BRAII.
J. Unauthorized Closure or Loss of Occupancy Right. If any System Restaurant is
closed for business for more than 15 consecutive days, for reasons other than a
casualty loss, without BRAII's prior written consent, or Franchisee permanently
loses its right to occupy a Location.
18.2. Defaults Subject to Cure Rights. Franchisee will be in default and, in
addition to all other remedies BRAII has at law or in equity, including damages,
injunctive relief, and attorney's fees, BRAII may, subject to the notice and
cure provisions described below, terminate this Agreement if: (a) Franchisee
does not promptly pay when due any moneys owing to BRAII or its Affiliates
(including any events of insufficient funds with respect to automatic withdrawal
of payments), (b) Franchisee unilaterally terminates its consent for automatic
withdrawal of payment, (c) Franchisee breaches any term, covenant, duty, or
condition of this Agreement not otherwise listed in Section 18.1, or (d)
Franchisee is in breach of the lease for the Location and such breach is not
cured within the time specified by such lease.
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BRAII FRANCHISE AGREEMENT
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<PAGE>
BRAII will not terminate this Agreement for any default under Section 18.2
(a) or (b) until BRAII first gives Franchisee written notice of, and an
opportunity to cure, the default. Except as provided below, BRAII will give
Franchisee 30 days after the effective date of notice to cure any such default.
If Franchisee's current default involves a failure to timely pay amounts owing
BRAII, its Affiliates, or the lessor of a Location, BRAII will only be required
to give Franchisee 10 days to cure Franchisee's current default. BRAII may
terminate this Agreement for any default under Section 18.2(d) upon five (5)
days notice.
18.3. Non-Termination Remedies. If Franchisee defaults under Section 18.1, or
does not timely cure a default (if applicable under Section 18.2), BRAII may, in
its sole discretion, and in lieu of terminating this Agreement, refuse to allow
Franchisee to relocate any existing System Restaurant or to develop any
additional System Restaurant. BRAII will give Franchisee written notice if BRAII
elects this option. Any action taken by BRAII in accordance with this Section
will be in addition to any other right or remedy BRAII may have at law or in
equity, including a civil action for legal or equitable relief.
19. POST-TERMINATION PROVISIONS
19.1. Use of Pizzeria Regina Marks and Systems. Upon expiration or termination
of this Agreement, Franchisee will immediately discontinue use of the Pizzeria
Regina Marks and of the System Restaurant Concepts. In addition, upon notice
from BRAII, Franchisee will immediately discontinue use of BRAII's color scheme
(by repainting, if necessary) and will immediately remove all identifying
architectural superstructure and other distinguishing structures, decor items,
furniture, and equipment from all former System Restaurants and other facilities
as BRAII may direct, in order to effectively distinguish Franchisee's former
System Restaurants and other facilities from BRAII's proprietary design(s) and
trade dress. If Franchisee does not make all required changes within 7 days
after written notice, then BRAII, in addition to any other remedy it has, may
enter upon the premises of any former System Restaurant owned or leased by
Franchisee, and make or cause to be made all necessary changes at the expense of
Franchisee (without being liable for trespass or any other tort), which expense
Franchisee will pay upon demand.
19.2. Cessation of Rights. All obligations of BRAII to Franchisee under this
Agreement, and all rights of Franchisee under this Agreement, will immediately
terminate upon termination of this Agreement.
19.3. Effect on Other Duties. In no event will a termination of this Agreement
affect the obligations of Franchisee and its Related Persons to pay their
accrued monetary obligations to BRAII and to comply with their various post-term
obligations, including the covenants in Section 12.
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BRAII FRANCHISE AGREEMENT
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<PAGE>
19.4. Trade Secret Items. Franchisee will sell and BRAII will at its option,
buy, at Franchisee's cost, all quantities of the BRAII approved Supplier items
and any other trade secret items that Franchisee has in stock upon termination
or non-renewal of this Agreement.
19.5. Trademarked Items. BRAII may, by written notice within 30 days after
expiration or other termination of this Agreement, purchase from Franchisee all
items bearing any of the Pizzeria Regina Marks. If BRAII exercises this option,
the purchase price for the items will be the lowest of the fair market value of
the items, Franchisee's purchase price for the items, or Franchisee's book value
for the items.
19.6. Telephone Numbers. BRAII may, upon written notice within 30 days after
expiration or other termination of this Agreement, take an assignment of all
telephone numbers (and associated listings) for Franchisee's System Restaurants.
19.7. Right of Assignment - Lease. Franchisee shall provide BRAII with a copy of
any proposed lease agreement prior to executing same, the form and substance of
which shall be subject to Franchisee's approval, not to be unreasonable
withheld. Franchisee shall, in connection with such lease, deliver to BRAII,
which must be approved by BRAII, a "Fee Owner Certificate" in the form attached
hereto as Exhibit A which Fee Owner Certificate provides, among other things,
for notice to BRAII in the event of a default. If BRAII elects to exercise its
right to operate the System Restaurant under the Fee Owner Certificate, BRAII
shall have the option to acquire all fixtures, equipment and other unamortized
leasehold improvements constructed by or paid for by Franchisee at fair market
value), or the right to act as prime lessee under the lease and to sub-lease
such site to Franchisee. Any lease of the Premises shall be for a term which,
with renewal options exercisable by Franchisee, is not less than the Initial
Term of this Agreement.
20. DISPUTE RESOLUTION
20.1. Jurisdiction and Governing Law Domestic Franchisees. This Agreement takes
effect upon its acceptance and execution by BRAII. This Agreement is governed
by, and should be construed in accordance with, the internal laws of the
Commonwealth of Massachusetts (without giving effect to Massachusetts choice of
law rules). Franchisee acknowledges the importance to the System Restaurant
Concepts of uniformity of interpretation, and therefore consents and waives any
objections Franchisee might otherwise have to the jurisdiction and venue of any
state or federal court of general jurisdiction in Suffolk County, Massachusetts,
or any other county or district in which BRAII then has its principal place of
business, with respect to any proceedings arising out of this Agreement or the
relationship between the parties. Franchisee further agrees that it will bring
any legal proceedings arising out of this Agreement or the relationship between
the parties only in such courts. Franchisee agrees that mailing of any process
to Franchisee's appropriate address pursuant to Section 21.5, by registered or
certified mail or reputable private delivery service, will constitute lawful and
valid process.
20.2. Remedies Cumulative. All remedies provided in this Agreement are
cumulative and non-exclusive. BRAII may simultaneously seek relief specifically
provided for by this Agreement
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BRAII FRANCHISE AGREEMENT
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<PAGE>
and relief not so provided, and may also seek two or more forms of relief
otherwise inconsistent, and that could not be granted simultaneously. A request
by BRAII for interim damages for a particular violation will not constitute an
admission that the continuation of the violation would not cause irreparable
harm to BRAII.
20.3. Mediation. Any controversy or claim arising out of or relating to this
Agreement, or the breach hereof, which the parties fail to resolve by agreement,
shall be settled by binding arbitration in the Commonwealth of Massachusetts,
U.S.A. in accordance with the commercial arbitration rules of the American
Arbitration Association, applying the laws of the Commonwealth of Massachusetts
as provided in Section 20.1 above. This arbitration provision shall be deemed to
be self-executing, and in the event that either party fails to appear at any
properly noticed arbitration proceeding, an award may be entered against such
party notwithstanding said failure to appear. If the laws of the country in
which Developer is domiciled do not permit arbitration in the Commonwealth of
Massachusetts, then the arbitration shall take place in England (United Kingdom)
with the rules of the International Chamber of Commerce applying the laws of the
Commonwealth of Massachusetts or, if the application of such laws shall be
prohibited by the country in which the Developer is domiciled, then applying the
laws of England. Notwithstanding the foregoing, if the application of the laws
of England in arbitration proceedings is prohibited by the country in which
Developer is domiciled, then any disputes arising hereunder shall be submitted
to the courts of England, to whose jurisdiction the parties hereby consent, for
settlement under the laws of England.
20.4. Injunctive Relief. In case of a breach or a threatened breach of any
provision of this Agreement by Franchisee, BRAII will, in addition to any other
remedy it has, and notwithstanding any other provision of this Agreement
(including Section 20.3), be entitled to an injunction restraining Franchisee
from committing or continuing to commit any breach or threatened breach of this
Agreement, without showing or proving any actual damage sustained by BRAII, and
without posting bond or other security. No action for a preliminary or temporary
injunction by BRAII may be stayed pending mediation, but once a temporary
injunction (pending outcome of the dispute) is granted, the issues underlying
the dispute will be submitted to mediation in accordance with Section 20.3.
20.5. Attorneys' Fees. If BRAII and Franchisee become involved in litigation,
the losing party will reimburse the prevailing party's outside attorneys' fees
and all expenses. This provision will not apply to attorneys' fees incurred by
the parties in connection with mediation conducted pursuant to Section 20.3.
21. MISCELLANEOUS
21.1. Relation of Parties. BRAII and Franchisee are not and will not be
considered as joint venturers, partners, or agents of each other. Neither
Franchisee nor BRAII will have the power to bind or obligate the other except as
set forth in this Agreement.
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BRAII FRANCHISE AGREEMENT
Page 29
<PAGE>
Franchisee specifically acknowledges that the relationship created by
this Agreement is not a fiduciary, special, or any other similar relationship,
but rather is an arm's-length business relationship. BRAII owes Franchisee no
duties except as expressly provided in this Agreement.
21.2. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered, will be deemed an
original, but all counterparts together will constitute but one and the same
instrument.
21.3. Third-Party Beneficiaries. The other franchisees of BRAII are intended
beneficiaries of Section 13 of this Agreement; the Affiliates of BRAII, and the
employees, officers, and directors of BRAII and its Affiliates are intended
third-party beneficiaries of Section 16.4 of this Agreement. Nothing else in
this Agreement is intended to confer any rights or remedies upon any Person or
legal entity not a party to this Agreement.
21.4. Severability. The portions of this Agreement relating to the payment of
fees to BRAII, and the portions relating to the protection and preservation of
the Pizzeria Regina Marks, the System Restaurant Concepts, and BRAII's trade
secrets are critical to this Agreement; if any portion of them is declared
invalid or unenforceable for any reason, BRAII will have the option to terminate
this Agreement immediately, upon written notice to Franchisee. All other terms
and conditions of this Agreement, and every portion of those other terms and
conditions, will be considered severable. If, for any reason, any portion of
this Agreement (other than the nonseverable portions, as defined in the first
sentence of this Section 21.4) is determined to be invalid or contrary to or in
conflict with any applicable present or future law, rule, or regulation, in a
final, unappealable ruling issued by any court, agency, or tribunal with valid
jurisdiction in a proceeding to which BRAII is a party, that ruling will not
impair the operation of, or have any other effect upon, any other portion of
this Agreement, each of which will remain binding upon the parties and continue
to be given full force and effect. Any invalid portion will be deemed removed
from this Agreement as of the date upon which the ruling becomes final (if
Franchisee is a party to such proceedings) or upon Franchisee's receipt of
notice of non-enforcement from BRAII, and will further be deemed replaced by the
closest enforceable provision.
21.5. Protests, Requests and Notices. All protests, requests and notices
required or permitted by the terms of this Agreement will be in writing and sent
either by certified or registered mail (return receipt requested), by reputable
private delivery service, or by hand delivery. All notices will be sent to the
respective address of BRAII (marked, except as otherwise required by this
Agreement, "Attention: Vice President-Franchising") or Franchisee shown on page
1 of this Agreement, until BRAII or Franchisee (as the case may be) gives
notice, in writing, of a new address. Neither BRAII nor Franchisee must send
multiple notices; a single notice to the specified address will suffice, and if
multiple addresses are specified by either party, the sending party may send
notices to any single address chosen in good faith. Notices will be effective on
the day delivery is made or first attempted at the specified address during
normal business hours (8 a.m. to 5 p.m., Monday through Friday, except national
or state holidays), except that notices of change of address will be effective
10 days after that date.
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BRAII FRANCHISE AGREEMENT
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<PAGE>
21.6. Time of Essence. Time is of the essence of this Agreement and of each
provision of this Agreement.
21.7. Rules of Construction. The following rules were used in drafting this
Agreement, and should be used in construing it:
A. Auxiliary Verbs. The auxiliary verbs "will" and "shall" are used in a
mandatory fashion. Any time this Agreement provides that a party will or shall
do something, the statement is obligatory, and is intended to apply throughout
the life of this Agreement. By contrast, the auxiliary verb "may" is permissive
when stated affirmatively ("a party may do something" means that the party is
permitted, but not required, to take the action), and by extension, prohibitive
when stated negatively (that is, the statement that "a party may not do
something" is a denial of permission, and therefore means not only that the
action is not required, but also that it is not permitted).
B. Includes. The word "includes" (in all its tenses and variations) is always
used in the non-exclusive sense. As a result, the words "including" or
"includes" can always be read as if followed by the phrase, "but [is] not
limited to" or the phrase, "without limitation".
C. Accounting Periods. Any time that this Agreement calls for a party to take an
action "monthly", the party may instead use regular accounting periods that are
no longer than 35 days long. For example, a party may use 13 accounting periods
of 4 weeks each (a "52/53 week fiscal year") or may use 12 accounting periods
arranged so that there are two 4-week and one 5-week accounting period each
fiscal quarter. BRAII currently uses 13, 4-week periods, ending on the last
Sunday in April of each year; BRAII may change its accounting cycle on 30 days'
written notice to Franchisee. If Franchisee chooses to use one of these methods
of accounting, Franchisee will notify BRAII of the method chosen and the fiscal
year-end used, and may not switch accounting years without consent from BRAII.
D. Locations, Boundaries and Measurements. The sites of the Locations are based
on the physical location of the references used to describe the Locations or the
boundaries on the date of this Agreement. If a street address is used to
describe a Location, the renumbering of the addresses will not serve to move the
Location.
For all calculations based upon a distance (for example, the limitation
on opening a System Restaurant within 500 yards of a location), the measurement
will be made in a straight line between the nearest points; if any portion of an
object is within the prescribed distance from a point, the entire object is
considered to be within that distance.
21.8. Merger. This Agreement (together with the Operating Manual, which is
incorporated by reference into this Agreement) contains the entire agreement of
the parties with respect to the subject matter discussed in this Agreement.
All prior discussions or negotiations (written or oral), including those
included in BRAII's offering circular, are merged into this Agreement, and no
representations, inducements,
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BRAII FRANCHISE AGREEMENT
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<PAGE>
promises, or agreements not embodied in this Agreement will survive the
execution of this Agreement. This Agreement may not be modified or amended
except (i) pursuant to Section 17, (ii) by a modification, supplement, or
revision to the Operating Manual issued by BRAII in accordance with the terms of
this Agreement, or (iii) by a written document, signed by both parties,
specifically referring to the portion of this Agreement being modified or
amended.
ATTEST: BOSTON RESTAURANT ASSOCIATES
INTERNATIONAL, INC.
- -----------------------------------
Secretary/Assistant Secretary By: _________________________________
Chief Executive Officer
ATTEST: _____________________________________
____________________________________ By: _________________________________
[Secretary/Assistant Secretary]
Title: ________________________
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BRAII FRANCHISE AGREEMENT
Page 32
REGINA VENTURES, LLC
DEVELOPMENT AGREEMENT
DATED: December 19, 1998
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DEVELOPMENT AGREEMENT
12/23/98
<PAGE>
TABLE OF CONTENTS
1. COMPANY ORGANIZATION AND GOVERNANCE ................................... 1
2. DEVELOPMENT OF BISTRO CONCEPT ......................................... 3
3. SITE SELECTION AND DEVELOPMENT ........................................ 7
4. ROLL-UP RIGHTS ........................................................ 10
5. SINGLE RESTAURANT PURCHASES ........................................... 17
6. COMPLIANCE WITH LAWS .................................................. 18
7. ADVERTISING AND MARKETING ............................................. 18
8. CONFIDENTIAL INFORMATION .............................................. 18
9. CORPORATE REQUIREMENTS ................................................ 20
10. COVENANTS ............................................................. 20
11. NOTICES ............................................................... 22
12. INDEPENDENT CONTRACTOR ................................................ 23
13. APPROVALS AND WAIVERS ................................................. 24
14. SEVERABILITY AND CONSTRUCTION ......................................... 24
15. APPLICABLE LAW; REMEDIES .............................................. 25
16. MEDIATION AND ARBITRATION PROVISIONS .................................. 25
18. ENTIRE AGREEMENT ...................................................... 28
19. PURSUANT TO OTHER INTERESTS ........................................... 28
20. ACKNOWLEDGMENTS ....................................................... 28
EXHIBIT A-CERTIFICATE OF FORMATION .................................. 25
EXHIBIT B-OPERATING AGREEMENT ....................................... 26
EXHIBIT C-PROPRIETARY MARKS ......................................... 27
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DEVELOPMENT AGREEMENT Page i
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<PAGE>
REGINA BISTRO
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT ("Agreement") is entered into on December 19,
1998, between Boston Restaurant Associates, Inc., a Delaware corporation
("BRA"), and Italian Ventures, LLC, a Kentucky limited liability company
("Ventures").
WHEREAS, BRA and its affiliates currently operate both food court kiosks
specializing in the sale of high-quality pizza under the name "Pizzeria Regina"
and full service, casual restaurants specializing in Italian cuisine under the
name "Polcari's"; and
WHEREAS, BRA desires to develop and introduce a new concept which
incorporates both its high quality "Pizzeria Regina" pizza and its broader
"Polcari's" menu items in a full-service bistro environment (the "Bistro
Concept") within North America (the "Development Areas"); and
WHEREAS, Ventures wishes to assist BRA in the development of the Bistro
Concept and the implementation and operation of restaurants under the Bistro
Concept ("Bistro Restaurants"); and
WHEREAS, BRA and Ventures desire to pursue a business arrangement
through shared ownership in a to-be-formed Massachusetts limited liability
company to be known as "Regina Ventures, LLC" (the "LLC") for the purpose of
developing, promoting and implementing the Bistro Concept in North America.
NOW, THEREFORE, the parties agree as follows:
1. COMPANY ORGANIZATION AND GOVERNANCE
------------------------------------
1.1. Upon execution of this Agreement BRA and Ventures shall form the
LLC as a limited liability company pursuant to the laws of the Commonwealth of
Massachusetts under the name "Regina Ventures, LLC". Formation of the LLC shall
be effectuated by filing the Certificate of Organization attached as Exhibit A
hereto with the Massachusetts Secretary of State.
1.2. BRA shall subscribe to a 51% voting membership interest in the LLC
for an initial capital contribution of $102,000 in cash, and Ventures shall
subscribe to a 49% voting membership interest in the LLC for an initial capital
contribution of $98,000 in cash. Additional capital contributions shall be made
by BRA and Ventures on an as-needed basis in proportion to their respective
ownership interests in the LLC, all in accordance with and subject to the terms
and conditions of the Operating Agreement (as hereinafter defined).
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<PAGE>
1.3 The regulations governing the operation and management of the LLC
shall be as provided in the Operating Agreement attached as Exhibit B hereto, as
it may be amended from time to time by mutual agreement of BRA and Ventures (the
"Operating Agreement"). Ventures shall provide general board-level supervision
of (i) the design and establishment of the LLC's management and operational
systems and (ii) the monitoring of their implementation, applying its
full-service restaurant experience for the benefit of the LLC for no
compensation (other than reimbursement of out-of-pocket expenses as provided in
Section 2.4 hereof); provided, however, the parties acknowledge that, except as
provided in this Agreement as to the services of Richard Reeves and BRA, all
management and operational activities of the LLC will be conducted by employees
or agents of the LLC at the LLC's expense. Richard Reeves, the president of
Ventures, shall provide, as reasonably necessary to fulfill Ventures duties
hereunder, his personal services to the LLC in his capacity as an officer of
Ventures and as an officer of the LLC, for no compensation, provided that it is
expressly acknowledged that Ventures, the LLC, the Bistro Concept, and the
Bistro Restaurants, in the aggregate, represent only one aspect of Richard
Reeves' business activities and Richard Reeves will not in any event devote his
full time or attention to the business of Ventures and/or the LLC or to the
development or management of the Bistro Concept and/or the Bistro Restaurants.
Ventures and Richard Reeves shall perform such services at the direction and
subject to the general supervision of the LLC. In the event George R.
Chapdelaine is terminated as the chief executive officer of BRA or any successor
thereof, by a vote of BRA's (or such successor's) Board of Directors which
includes the vote to do so by a majority of those members of BRA's (or such
successor's) Board of Directors who are neither a member or affiliate of
Ventures or the LLC, Ventures shall have the immediate and continuous right to
exercise its Put option in accordance with Article 4 hereof; provided, however,
that Venture's right to exercise its Put option by reason of such event (but not
by reason of any other event as provided under Article 4) shall terminate sixty
(60) days after written notice is given by BRA to Ventures advising Ventures of
the appointment of a successor chief executive officer of BRA. In the event
Richard Reeves at any time ceases to be the president of Ventures, BRA shall
have the immediate and continuous right to exercise its Call option in
accordance with Article 4 hereof; provided, however, that BRA's right to
exercise its Put option by reason of such event (but not by reason of any other
event as provided under Article 4) shall terminate sixty (60) days after written
notice is given by Ventures to BRA advising BRA of the appointment of a
successor president of Ventures.
1.3 Ventures shall have immediate and continuous right to exercise its
Put option in accordance with Article 4 hereof in the event of George R.
Chapdelaine at any time ceases to be the chief executive officer of BRA or any
successor thereof for any reason, including, but not limited to, his death,
Disability (as defined in Section 4.5) or termination of employment or other
cessation as chief executive officer implemented by a vote (or written action
in lieu of a vote) by BRA's (or any successor's) Board of Directors unless such
vote (or written action in lieu of a vote) includes votes cast in favor of (or
the written consent to) such cessation by a majority of those members of BRA's
(or such successor's) Board of Directors who are neither a member or affiliate
of Ventures or the LLC; provided, however, that Venture's right to exercise its
Put option by reason of such event (but not by reason of any other event as
provided under Article 4) shall terminate sixty (60) days after written notice
is given by BRA to Ventures advising Ventures of the appointment of a successor
chief executive officer of BRA. In the event Richard Reeves at
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DEVELOPMENT AGREEMENT Page 2
12/23/98
<PAGE>
any time ceases to be the president of Ventures for any reason, including, but
not limited to, his death, Disability, or termination of employment, BRA shall
have the immediate and continuous right to exercise its Call option in
accordance with Article 4 hereof; provided, however, that BRA's right to
exercise its Put option by reason of such event (but not by reason of any other
event as provided under Article 4) shall terminate sixty (60) days after written
notice is given by Ventures to BRA advising BRA of the appointment of a
successor president of Ventures.
1.4. The purpose of the LLC shall be to develop, implement, operate,
franchise, license, market and promote the Bistro Concept within the Development
Area. All activities in connection with such purpose shall be subject to the
terms and conditions of the Operating Agreement and this Agreement and shall be
conducted through the LLC except as expressly provided herein. Further, except
as expressly provided herein or under the Operating Agreement, neither BRA nor
Ventures shall have any authority to bind or act for, or assume any obligations
or responsibilities on behalf of, the LLC or the other party. The LLC shall not
be responsible or liable for any indebtedness or obligation of BRA or Ventures
or otherwise relating to the Bistro Concept incurred or arising either before or
after the execution of this Agreement except as to those responsibilities,
liabilities, indebtedness or obligations incurred after the date of this
Agreement pursuant to and as limited by this Agreement and the Operating
Agreement. This Agreement shall not be deemed to create a general partnership
between BRA and Ventures with respect to any activities within the scope and
purposes of the LLC or any other activities.
1.5. TERM OF THE AGREEMENT
---------------------
1.5.1. The Initial Term of this agreement shall be twenty (20) years
commencing on the date hereof (the "Initial Term").
1.5.2. Either party may elect to extend the Initial Term and the then
prevailing terms of this Agreement or to renegotiate the terms of this Agreement
pursuant to written notice thereof to the other party at least one hundred
eighty (180) days prior to the end of the Initial Term (a "Renegotiation
Notice"). If the parties do not agree to extend and are unable to renegotiate
the terms of this Agreement on mutually satisfactory terms within one hundred
twenty (120) days thereafter (the "Negotiation Period"), BRA shall buy the
equity interest of Ventures in the LLC together with the assets of Ventures and
its affiliates (excluding any cash, accounts receivable or other cash
equivalent) used in any Bistro Restaurant or full-service sit-down restaurant
developed by Ventures, or any affiliate of Ventures, in accordance with Sections
4.1.1, 4.1.2, 4.1.3, 4.2, 4.3, 4.4, and 4.7.
2. DEVELOPMENT OF BISTRO CONCEPT.
------------------------------
2.1. BRA and Ventures, acting through and on behalf of the LLC, shall
assume joint responsibility for the development and design of the Bistro Concept
within the Development Area. BRA shall further provide assistance to the LLC
with respect to food ingredients, menu items and menu design. The Bistro Concept
shall be based on a casual dining, full-service approach and shall include, to
the extent deemed advisable by the LLC, menu items which incorporate certain of
BRA's Proprietary Products (as defined in BRA's Uniform Franchise Offering
Circular), including without limitation BRA's proprietary dough, sauce, cheese,
tomato
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DEVELOPMENT AGREEMENT Page 3
12/23/98
<PAGE>
and spice packs, and proprietary brick ovens, which shall be purchased, in the
case of Proprietary Products, or leased, in the case of ovens, by the LLC from
BRA in accordance with BRA's standard intercompany costing methods (which
methods are designed so as to result in a breakeven or very low profit to BRA
from such commissary or supply activities). The Bistro Concept may also include,
to the extent deemed advisable by the LLC, use of certain proprietary marks
owned by BRA, which marks are identified on Exhibit C hereto, and any future
proprietary marks created for the Bistro Concept which are based on, or derived
from, any of the proprietary marks owned by BRA (the "Proprietary Marks"). In
addition, BRA hereby licenses to the LLC and will make available for the LLC's
use in connection with the development and operation of the Bistro Concept and
the Bistro Restaurants, to the extent deemed advisable by the LLC, all of BRA's
menu descriptions, and other confidential information, systems, trade secrets,
proprietary technology and know-how regarding the "Pizzeria Regina" concept and
operations and the "Polcari's" concept and operations, but expressly excluding
BRA's recipes for Proprietary Products. Ventures and the LLC shall maintain the
confidentiality of all such information in accordance with the provisions of
Section 8 hereof.
2.2. Following development of the Bistro Concept, Ventures shall use its
reasonable best efforts to implement the Bistro Concept within the Development
Area, but without any obligation to build a specific number of restaurants,
unless specified in a writing, fully executed by both BRA and Ventures; provided
that, it is expressly acknowledged that Ventures, the LLC, the Bistro Concept,
and the Bistro Restaurants, in the aggregate, represent only one aspect of
Richard Reeves' business activities and Richard Reeves will not in any event
devote his full time or attention to the business of Ventures and/or the LLC or
to the development or management of the Bistro Concept and/or the Bistro
Restaurants. In furtherance thereof and in accordance with the other terms and
conditions of this Agreement, Ventures shall, on behalf of the LLC and at the
LLC's expense: (i) identify and select site locations for Bistro Restaurants,
subject to BRA's approval; (ii) negotiate with landlords for site locations;
(iii) supervise restaurant build-outs; (iv) develop promotional and marketing
materials; (v) recruit, hire and train Bistro Restaurant employees; (vi) develop
and implement ongoing quality assurance programs; (vii) select, secure and
maintain an office in Louisville, Kentucky, which is reasonably satisfactory to
BRA and from which the LLC's operations will be conducted, it being acknowledged
that Ventures' current office identified in Section 11 below is satisfactory;
and (viii) perform other duties ancillary to the foregoing or as otherwise
specified herein, in each case in a manner which conforms with the standard
practices of BRA as in effect from time to time (as such standard practices
shall be communicated to Ventures). Subject to the other terms and provisions of
this Agreement (including those which may be restrictive), Ventures, as an
authorized representative of the LLC, and Richard Reeves, as an officer of the
LLC, shall be delegated by the Manager of the LLC such power and authority to
act for and in the name of, and to bind and obligate, the LLC as are reasonably
necessary to enable them to carry out the foregoing duties and obligations;
provided that Ventures and Richard Reeves shall consult with the Manager prior
to undertaking any of the foregoing actions which Ventures or Richard Reeves,
acting reasonably and in good faith, deems to be significant and material from a
financial or operational standpoint and shall consider the Manager's input with
respect thereto; and further provided that, the decisions and actions of
Ventures and/or Richard Reeves shall be subject to the Mediation and Arbitration
Provisions set forth in Section 16 hereof. Ventures agrees to refrain from any
business or advertising practiced
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which it should reasonably anticipate might be injurious to the business of BRA,
the Bistro Concept, the Bistro Restaurants, the Proprietary Marks or the good
will of any of the foregoing and shall immediately cease any advertising
practice at the request of BRA which BRA believes is injurious to the business
or goodwill of BRA, the Bistro Concept, the Bistro Restaurants or the
Proprietary Marks. To the extent that Ventures, Richard Reeves, or any affiliate
of theirs may incur costs or expenses which relate to more than merely the
business activities of the LLC or the development of the Bistro Concept and the
Bistro Restaurants, such as overhead or administrative costs, they shall
equitably allocate such costs and expenses among the LLC and the other
businesses benefited thereby; provided, however, that any relocation expenses
incurred by Ventures upon its relocation from its current office location shall
be borne by Ventures or other businesses benefited thereby and not by the LLC,
except to the extent of any relocation expenses directly attributable to the
relocation of employees, furniture, or equipment of the LLC located in the same
offices as those of Ventures.
2.3. The LLC shall serve as the entity through which BRA and Ventures
shall co-develop and co-finance Bistro Restaurants in the Development Area. All
revenues (other than reimbursements of costs and expenses) derived by Ventures
or BRA in connection with the codevelopment of Bistro Restaurants through the
LLC (as opposed to revenues derived from the development of Bistro Restaurants
independently by either Ventures or BRA as provided under Section 3 of this
Agreement) shall be attributed to and paid over to the LLC. All related expenses
incurred directly by the LLC or by Ventures or BRA with respect to the
development of the LLC's Bistro Restaurants shall be charged to and paid by the
LLC; provided that, without the consent of a Majority-in-Interest of the Members
of the LLC (as defined in the Operating Agreement of the LLC), neither Ventures
nor BRA shall incur any single cost or expense, or group of related costs or
expenses, in the aggregate, during any budget period in excess of $500 in the
name or on behalf of the LLC if the incurrence of such cost or expense would
result in the aggregate amount incurred by the LLC for all similar expenses
exceeding the amount provided for in the approved budget contemplated by Section
2.4 hereof for such expenses during such budget period. To the extent Bistro
Restaurants are developed independently by BRA or Ventures as provided in
Section 3 hereof, such restaurants shall be subject to BRA's standard franchise
agreements and procedures set forth therein and the payment of territorial and
other fees as specified in Section 3 hereof. All revenues from the operation of
Bistro Restaurants developed independently by BRA or Ventures shall be realized
by and be the sole property of, and all expenses with respect to the
development, opening and operation of such restaurants (including, but not
limited to, any applicable territorial, franchise or other fees and royalties)
shall be borne by, BRA or Ventures, as applicable, depending upon which entity
develops such restaurants. No fees or other amounts shall be paid by the LLC to
BRA except as expressly contemplated by this Agreement.
2.4. BRA shall prepare an initial six (6) month budget for the Bistro
Concept within a reasonable time after formation of the LLC, which budget shall
be submitted to and subject to the approval of the Manager and Members of the
LLC. Thereafter, BRA shall prepare a budget for each Bistro Restaurant opening
and, after the first year of the LLC's operations, annual budgets for the LLC,
all of which budgets shall be similarly submitted to and subject to the approval
of the Manager and Members of the LLC. BRA shall also provide to the LLC all
necessary cash
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management and accounting/bookkeeping services with respect to the operation of
the LLC and the operation of its Bistro Restaurants. BRA shall charge the LLC
$1,000 per restaurant per month for such services (the "Monthly Fee"). BRA shall
also charge the LLC for all travel expenses reasonably incurred in connection
with such services. An annual audit of the LLC shall be performed by BRA's
nationally recognized, independent certified public accountants (the
"Accountants") in accordance with generally accepted accounting principles in
effect in the United States ("GAAP"). The cost of such audits shall be borne by
the LLC and shall be independent of the Monthly Fee. To the extent that BRA or
any affiliate of BRA may incur out-of-pocket costs or expenses (other than for
outside bookkeeping expenses, all of which expenses shall be borne solely by BRA
without right of reimbursement) which relate to more than merely the business
activities of the LLC and the development of the Bistro Concept and the Bistro
Restaurants (such as travel or other costs incurred with respect to both the
Bistro Concept and Bistro Restaurants, on the one hand, and the Pizzeria
Regina's concept and restaurants, on the other hand), they shall equitably
allocate such costs and expenses among the LLC and the other businesses
benefited thereby (provided, however, that any relocation expenses incurred by
BRA upon its relocation from its current office location shall be borne by BRA
or other businesses benefited thereby and not by the LLC, except to the extent
of any relocation expenses directly attributable to the relocation of employees,
furniture, or equipment of the LLC located in the same offices as those of BRA).
2.5. Notwithstanding anything herein to the contrary, except to the
extent such expense is authorized under a budget in accordance with Section 2.4
hereof, any single direct out-of-pocket expense to be incurred by Ventures or
BRA, or any group of related expenses to contemporaneously incurred by Ventures
or BRA, in the aggregate, in excess of $500 for which reimbursement will be
sought from the LLC must be submitted to the Members of the LLC for approval by
a Majority-in-Interest (as defined in the Operating Agreement of the LLC) of the
Members prior to the incurring of such expense. Any such expense which is not so
approved by the Members or authorized by an approved budget shall be borne by
the party incurring such expense. Any approved direct out-of-pocket expense
shall be promptly reimbursed by the LLC upon submission of appropriate
supporting documentation to the LLC.
2.6. In the event BRA or Ventures, with the consent of a
Majority-in-Interest of the Members of the LLC, seeks financing for the purpose
of funding the operations of the LLC and the development of the Bistro Concept
and/or any Bistro Restaurant owned and operated by the LLC, such financing shall
be obtained by the LLC for the benefit and burden of the Members in accordance
with their respective equity interests in the LLC. In the event BRA or Ventures
seeks financing for any purpose other than the foregoing, including the
development and operation of any Bistro Restaurant not developed and owned by
the LLC, either BRA or Ventures, as the case may be depending on whether BRA or
Ventures is seeking such financing, shall obtain such financing in its own name
and on its own behalf and neither the other party nor the LLC shall have any
liability with respect thereto nor shall the equity interests or Capital
Accounts in the LLC be affected by such financing.
2.7. This Agreement does not grant Ventures any right to use the
Proprietary Marks or the Bistro Concept except in connection with the
fulfillment of Ventures' express obligations
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hereunder or the independent development of Bistro Restaurants by Ventures in
accordance with the provisions of Section 3 hereof and BRA's standard form
franchise agreement. Ventures acknowledges that it will have no right under this
Agreement to franchise any person or legal entity to use the Proprietary Marks
or the Bistro Concept.
3. SITE SELECTION AND DEVELOPMENT.
-------------------------------
3.1. BRA shall approve each site proposed by Ventures for each Bistro
Restaurant to be developed hereunder in the Development Area subject to
standards approved by BRA. Before committing to a site, Ventures shall submit to
BRA such information and materials as BRA may reasonably request to evaluate the
site. After receipt of such information and materials, BRA, in its sole
discretion, shall approve or refuse to approve the proposed site. BRA shall
either approve or reject a proposed site not later than ten (10) days after
receipt of all information and materials requested pursuant to this Section 3
and after expiration of the period specified in Section 3.2, if applicable. No
site shall be deemed to have received BRA's approval unless it has been approved
in writing by BRA.
3.1.1. If BRA approves a site proposed by Ventures, the Bistro
Restaurant on the proposed site shall be developed by the LLC with all economic
benefits and burdens of such restaurant inuring and accruing to the LLC. No
territorial, franchise, site, license, royalty or other such fees shall be
payable to BRA with respect to such restaurant.
3.1.2. If BRA does not approve a site proposed by Ventures,
Ventures may, at its option, develop a Bistro Restaurant on the proposed site,
subject to (i) executing and delivering to BRA BRA's standard form franchise
agreement for the Bistro Restaurant to be developed on the proposed site and
(ii) paying the LLC $5,000 (or the then prevailing amount if different) per
Bistro Restaurant to be opened as an initial installment of the total $10,000
territorial fee (or the then prevailing total standard territorial fee if
different) to be paid with respect to each Bistro Restaurant.
3.1.3. If BRA sells a territory within the Development Area to a
third party, upon sale of such territory, BRA shall credit and pay upon receipt
of funds to the LLC's account for each Bistro Restaurant site to be opened in
the territory, the initial installment of the territorial fee equal to $5,000
(or the then prevailing amount if different) per Bistro Restaurant to be opened
as an initial installment of the total $10,000 territorial fee (or the then
prevailing total standard territorial fee if different) to be paid with respect
to each Bistro Restaurant. Each such Bistro Restaurant shall pay a royalty to be
determined by BRA of not less than 5% of sales to BRA, and the entire royalty
fee paid by such Bistro Restaurant shall be paid over by BRA to the LLC by the
10th day of the calendar month following receipt by BRA of such royalty. Any
franchisee who proposes to open a Bistro Restaurant within a territory shall be
subject to the prior written approval of the LLC, which approval shall be
granted or withheld in writing within ten (10) days of the request for approval.
3.1.4. For any site on which a store will be opened in a
territory within the Development Area which has not yet been designated as a
Bistro Restaurant or otherwise, BRA
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<PAGE>
shall pay $5,000 (or the then prevailing amount if different) into an escrow
account held by the LLC until such designation has been made, at which point
such amount shall be credited to the LLC or returned to BRA as appropriate
depending upon whether the site is ultimately designated a Bistro Restaurant or
otherwise. The payment of $5,000 (or the then prevailing amount if different)
per Bistro Restaurant to be opened shall represent the first installment of the
total $10,000 territorial fee (or the prevailing total standard territorial fee,
if different) to be paid with respect to each Bistro Restaurant to be opened.
Any Bistro Restaurant developed pursuant to Sections 3.1.1, 3.1.2, 3.1.3, this
3.1.4, 3.2 and 3.3 shall be included in the Roll-Up Transaction (as hereinafter
defined) when either the Put or the Call is exercised as provided in Section 4
hereof.
3.1.5. In the event BRA proposes a site for a Bistro Restaurant
and Ventures declines to participate with BRA by having the LLC develop such
site, BRA shall have the right to sell a franchise for a Bistro Restaurant at
the proposed site in conjunction with its sale of Pizzeria Regina franchises (a
"Bistro Franchise") or BRA may elect to develop the site itself. Ventures shall
indicate its desire to have the LLC develop or decline the right to participate
in the development of the Bistro Restaurant on a proposed site not later than
ten (10) days after such proposal by BRA. If BRA develops the site itself, BRA
shall pay to the LLC $5,000 (or the then prevailing amount if different) as an
initial installment of the total $10,000 territorial fee (or the then prevailing
total standard territorial fee, if different) with respect to such Bistro
Restaurant. The balance of the territorial fee will be paid by BRA to the LLC as
provided in BRA's standard form franchise agreement. If BRA sells a Bistro
Franchise or a territory to a franchisee, upon sale of such territory, BRA shall
charge such franchisee, depending upon whether the site is ultimately designated
a Bistro Restaurant or otherwise, $5,000 (or the then prevailing amount if
different) per Bistro Franchise or Bistro Restaurant to be opened in the
applicable territory as an initial installment of the total territorial fee per
site. For any site on which a store will be opened in a territory which has not
yet been designated as a Bistro Restaurant, BRA shall pay $5,000 (or the then
prevailing amount if different) into an escrow account held by the LLC until
such designation has been made, at which point such fee shall be credited to the
LLC or returned to BRA as appropriate, depending upon whether the site is
ultimately designated a Bistro Restaurant or otherwise. Such $5,000 (or the then
prevailing amount if different) shall represent the first installment of the
total $10,000 (or the then prevailing total standard territorial fee if
different) to be paid with respect to each Bistro Restaurant. BRA shall account
to the LLC for such territorial fees, and upon receipt, shall immediately remit
such amounts to the LLC. BRA shall further account to the LLC for, and upon
receipt, shall immediately remit to the LLC, all site and royalty fees
thereafter paid by such franchisee on account of such Bistro Restaurants. The
proportionate share of territorial, site and royalty fees paid by such
franchisee that relate to the Pizzeria Regina concept shall be retained by BRA.
3.1.6. In the event BRA proposes a site for a Bistro Restaurant
which is agreeable to Ventures, the Bistro Restaurant developed on such site
shall be developed through the LLC with all economic benefits and burdens of
such restaurant inuring and accruing to the LLC. No territory, franchise, site,
license, royalty or other such fees shall be payable with respect to such
restaurant.
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<PAGE>
3.2. In the event Ventures proposes to develop a Bistro Restaurant at a
site within a territory which BRA has previously sold to a franchisee, such
franchisee shall have a right of first refusal with respect to such Bistro
Restaurant as hereafter provided. If the site for the proposed Bistro Restaurant
is located in a mall, such franchisee shall have the right to develop, own and
operate a Bistro Restaurant at the specifically proposed site. If the site for
the proposed Bistro Restaurant is not located in a mall, such franchisee shall
have the right to develop, own and operate a Bistro Restaurant on the proposed
site or other similar site located within a one-half mile radius of the site
proposed by Ventures. In either case, development and operation shall be in
accordance with the applicable franchise agreement. Following written notice of
a proposed site from Ventures, BRA shall notify the franchisee, if any, who
holds a franchise for the applicable territory of such proposal, which notice
shall give such franchisee twenty (20) days within which to notify BRA of such
franchisee's election to exercise its right of first refusal with respect to the
proposed site. If such franchisee elects to exercise such right to develop a
Bistro Restaurant on the proposed site approved by BRA,
(i) the active design and planning aspects of such development must
commence within three (3) months after such exercise and be
diligently pursued thereafter,
(ii) construction of the Bistro Restaurant must be commenced within
six (6) months after such exercise and be diligently pursued
thereafter, and
(iii) the Bistro Restaurant must be open and actively conducting
business within twelve (12) months after such exercise. If
development or construction has not commenced or if such Bistro
Restaurant has not opened within such time frame, the LLC or, if
declined by the LLC, Ventures, shall have the right to develop a
Bistro Restaurant on the proposed site or other site approved by
BRA. If such franchisee declines to exercise its right of first
refusal, such franchisee shall have no further rights of first
refusal to develop Bistro Restaurants within the territory,
provided, that such franchisee may continue to develop other
concept fast-food restaurants in accordance with BRA's Uniform
Franchise Offering Circular.
3.3. In the event BRA proposes to develop a "Polcari's" restaurant
within the Development Area, the LLC shall have a right of first refusal to
develop, own and operate such restaurant. Ventures shall have the exclusive
right to determine whether the LLC will exercise such right of first refusal.
The LLC shall indicate in writing whether it desires to develop such restaurant
not later than ten (10) days after such written proposal by BRA. If the LLC
elects to develop such restaurant, no territory, franchise, site, license,
royalty or other such fees shall be payable with respect thereto. If the LLC
does not elect to develop such restaurant site, BRA may, in its sole discretion
without seeking the approval of the LLC or Ventures, develop such restaurant
site as a Polcari's Restaurant subject to payment to the LLC of a monthly fee
equal to five percent (5%) of gross revenues generated by such restaurants.
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<PAGE>
3.3.1. Notwithstanding the foregoing, without prior written consent of
Ventures, which consent may be withheld with or without reason, BRA shall not,
in any part of the Development Area other than in the Boston Metropolitan area,
develop, acquire, own, operate, maintain, engage in, be employed by, or
otherwise become actively involved with, directly or indirectly, for itself or
through, on behalf of or in conjunction with any person or legal entity, any
"Polcari's" concept or other full-service Italian restaurants whose sales of
pizza or Italian food exceed, or are likely to exceed, fifteen percent (15%) of
its total sales by annual dollar volume or which use brick ovens, so long as
either
(i) Ventures is a Member of the LLC or
(ii) Ventures, or any affiliate of Ventures, owns, operates,
or manages any Bistro Restaurants. The limitation set
forth in the immediately preceding sentence shall not
apply to ownership by BRA of a less than five percent
(5%) beneficial interest in the outstanding equity
securities or any corporation.
3.4. Subject to Section 3.5 hereof, BRA shall furnish to Ventures the
following:
3.4.1. Site selection guidelines and criteria, and such site
selection counseling and assistance as BRA, the LLC, and/or Ventures may
deem advisable;
3.4.2. Such on-site evaluations, if any, as BRA may deem
advisable in response to Ventures' request for BRA's approval of a
proposed site; and
3.4.3. Preliminary plans and specifications for construction of
a prototype Bistro Restaurant including exterior and interior design and
layout plans, which plans shall be detailed but shall not be certified
architectural drawings.
3.5. Ventures shall use its reasonable best efforts to identify sites
which it believes will be acceptable to BRA with the objective of operating
through the LLC as many Bistro Restaurants in the Development Area as is
reasonably feasible from an operations, logistics, financial and strategic
planning standpoint.
3.6. All out-of-pocket costs and expenses incurred by BRA or Ventures in
connection with the development and operation of the Bistro Concept and the
LLC's Bistro Restaurants, including without limitation, those related to concept
design, menu design, logo design, legal, accounting, marketing, site selection,
site development, management, supervision and operations, but excluding the
costs of its executive employees and its overhead, shall be deemed to be
expenses of the LLC and, subject to Section 2.4 hereof, shall be charged by BRA
and Ventures to the LLC.
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<PAGE>
4. ROLL-UP RIGHTS
--------------
4.1. BRA shall have the perpetual right at any time after thirty-six
(36) months, to buy (the "Call"), and Ventures shall have the perpetual right at
any time after sixty (60) months to cause BRA to buy (the "Put" and together
with the Call, the "Roll-Up Rights") the equity interest in the LLC owned by
Ventures together with the assets of Ventures and its affiliates (excluding any
cash, accounts receivable or other cash equivalents) used in any Bistro
Restaurants or full service, sit down restaurants developed by Ventures or any
affiliates of Ventures as provided herein (the "Ventures Locations").
4.1.1. Either party may exercise their respective Roll-Up Rights
pursuant to this Section 4.1 by written notice to the other party. In either
case, BRA shall pay to Ventures and/or Ventures' affiliates, as applicable, the
following consideration (in the aggregate, the "Roll-Up Amount"):
(a) BRA shall pay to Ventures, in consideration of Ventures'
equity interest in the LLC, a purchase price equal to 49% of the sum of:
(i) the product of:
(A) the aggregate Adjusted After-Tax Net
Earnings (as hereinafter defined) of all
of the restaurants of the LLC except
those retained or excluded pursuant to
the provisions of Section 4.2 hereof,
times
(B) a multiple (the "Multiple") equal to
two-thirds of the price/earnings
multiple (based on BRA's earnings for
its most recent past fiscal year and
provided that in no event shall the
Multiple be greater than 22 or less than
13) that BRA's common stock is then
trading at on the National Association
of Securities Dealers Automated
Quotation System, or other national
securities exchange, on average, for the
twenty (20) consecutive trading days
immediately preceding the Call or Put as
the case may be,
minus
(ii) the aggregate amount of all outstanding debt of
the LLC (all of which debt shall either be
assumed by BRA or remain in the LLC provided
that Ventures shall have no further liability
with respect thereto),
plus
(iii) the aggregate amount of all cash, cash
equivalents, accounts receivable, prepaid
expenses, and similar current liquid
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<PAGE>
assets of the LLC, but not of any Ventures
locations, acquired by BRA at the closing (the
"Closing") of the purchase and sale transaction
consummated pursuant to exercise of the Roll-Up
Rights (the "Roll-Up Transaction"),
(b) BRA shall pay to Ventures or Ventures' affiliates, as
applicable, in consideration of each Ventures Location acquired by BRA, a
purchase price equal to the sum of:
(i) the product of:
(A) the aggregate Adjusted After-Tax Net
Earnings generated by such Ventures
Location, times
(B) the Multiple,
plus
(ii) file aggregate amount of all prepaid expenses
and similar current liquid assets of Ventures
and/or Ventures' affiliates, as applicable, used
in such Ventures Location, but not including any
cash, accounts receivable, cash equivalents or
similar liquid assets which are retained by
Ventures or the Ventures' affiliates in
accordance with the terms and conditions of this
agreement.
4.1.2. For all purposes of this Agreement, the term "Adjusted After-Tax
Net Earnings" shall mean
(a) the sum of:
(i) with respect to each restaurant of the LLC, Ventures or
any affiliate of Ventures included in a Roll-Up
Transaction (but excluding those restaurants of the LLC,
Ventures or any affiliate of Ventures retained or
excluded pursuant to the provisions of Section 4.2
hereof) an amount equal to the net earnings of such
restaurant during the trailing four (4) fiscal quarters
of the LLC, Ventures or the affiliate of Ventures, as
applicable, immediately preceding the "Determination
Date" (which is the date on which the Put or Call is
exercised) with respect to the Roll-Up Transaction,
determined after allocating the general and
administrative expenses of the LLC, Ventures or the
affiliate of Ventures, as applicable, on a pro rata
basis among all of the restaurants of the LLC, Ventures
or the affiliate of Ventures, as applicable (whether
such restaurants are
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<PAGE>
included in the Roll-Up Transaction or are excluded or
retained pursuant to the provisions of Section 4.2
hereof) based on the number of such restaurants open and
owned by such entity during such period,
plus
(ii) with respect to the franchising and licensing of the
Bistro Concept and Bistro Restaurants, all development,
territorial, license and similar fees (all of which
shall be taken into income and be deemed fully earned
when received by the LLC or by BRA subject to the
obligation to remit such amounts to the LLC pursuant to
this Agreement) and all royalties and similar amounts
based upon a percentage of sales with respect to each
franchised or licensed bistro restaurant that have been
or should have been paid over by BRA to the LLC during
the trailing four (4) fiscal quarters of the LLC
immediately preceding the Determination Date with
respect to the Roll-Up Transaction, determined after
allocating the general and administrative expenses
associated with such franchise revenues,
reduced in each case by
(b) a tax amount based on the applicable combined Federal, state and
local tax rate which would have been applied with respect to
such earnings if they had been the only net earnings of BRA
during such fiscal year, exclusive, however, of any loss carry
forwards; provided, however, that (x) the net earnings of any
restaurant of the LLC or Ventures which was open for fewer than
fifteen (15) months by the end of such four (4) fiscal quarters
shall be determined by excluding the net earnings of such
restaurant for any of its first three (3) months of operation
which are included in such four (4) fiscal quarters and
annualizing its net earnings based on the remaining months of
its operation which are included in such four (4) fiscal
quarters (based on the product of the restaurant's average
monthly net earnings during such remaining months times 12) and
(y) any territory, franchise, site, license, royalty or other
such fees paid by the LLC or Ventures to BRA, or by Ventures to
the LLC, as the case may be, shall be disregarded in determining
the net earnings of such restaurant; further provided, however,
that in calculating Adjusted After Tax Net Earnings, there shall
be no deduction for interest paid by the LLC on its debts or by
Ventures or its affiliates with respect to the debt on its and
its affiliates' restaurants (nor shall such interest be deducted
for income tax
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<PAGE>
purposes), (x) inasmuch as the outstanding debt of the LLC and
that on the restaurants of Ventures and its affiliates will be
deducted (as to the LLC), or not taken into account (as to
restaurants of Ventures or its affiliates), in computing the
Roll-Up Amount.
4.1.3. For all purposes of this Agreement, all liability for
future payments due under any lease of the LLC (whether with respect to real or
personal assets and whether accounted for as a "true" lease or as a "capital" or
"finance" lease)
(i) shall either be assumed by BRA at the Closing of the
Roll-Up Transaction or shall remain in the LLC provided
that Ventures shall have no further liability with
respect thereto, and
(ii) shall not be commuted, discounted, or otherwise taken
into account in any way in determining the debt of the
LLC, Ventures, or any affiliate of Ventures for purposes
of calculating the Roll-Up Amount.
4.2. The Roll-Up Amount may be paid by BRA in cash, common stock of BRA
("Roll-Up Shares"), or a combination of both, at the discretion of BRA; provided
that BRA shall pay to Ventures as part of the Roll-Up Amount at least that much
cash which is sufficient to cover all tax liabilities which will be incurred by
Ventures and/or its Members by reason of the Roll-Up Transaction assuming
maximum Federal, state and local tax brackets and no offsetting losses from
unrelated activities (the "Tax-Related Portion"). The Closing of any Roll-Up
Transaction pursuant to exercise of the Roll-Up Rights shall take place within
one hundred and eighty (180) days after the date that the Put or Call is
exercised (the "Closing Date") and BRA shall notify Ventures in writing within
one hundred and twenty (120) days after the Determination Date whether BRA will
pay the Roll-Up Amount in cash and/or Roll-Up Shares or a combination of both.
All calculations pursuant to this Section 4 shall be determined by the
Accountants in accordance with GAAP and FASB within ninety (90) days after the
Determination Date. Such calculations shall be made by the Accountants with the
assistance and cooperation of Ventures and BRA. In addition, Ventures shall
furnish the Accountants with any necessary financial information concerning any
Ventures Locations included in the Roll-Up Transaction and any information
reasonably necessary to calculate the Tax Related Portion. If any restaurant of
the LLC or Ventures is operating at a loss or on a break-even basis, or if the
portion of the Roll-Up Amount based on such restaurant's Adjusted After-Tax Net
Earnings would equal an amount which is less than the total investment by the
LLC or Ventures, as the case may be, in such restaurant, then Ventures or its
Members shall have the right to retain, or obtain from the LLC, ownership of
such restaurant (for no consideration to the LLC other than the assumption of
all debt, leases, accrued payables and accrued employee obligations associated
with such restaurant plus the payment to the LLC of fifty-one percent (51%) of
any amounts the LLC invested in such restaurant) and withhold it from the
Roll-Up Transaction (through a spin-off, split-off, or distribution-in-kind by
the LLC, or otherwise, as Ventures and BRA may reasonably deem advisable);
provided that Ventures shall reimburse the LLC for any costs, including tax
liabilities, directly related to such spin-off, split-off or
distribution-in-kind and Ventures and/or its Members shall operate such
restaurants after the Closing subject to BRA's standard form franchise
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<PAGE>
agreement. At the Closing, Ventures shall transfer its equity interests in the
LLC, and Ventures and its affiliates shall transfer their ownership interests in
the assets of any Bistro Restaurants owned by Ventures or its affiliates which
are included in the Roll-Up Transaction to BRA free and clear of any security
interests, mortgages, liens, claims, charges or other encumbrances, and this
Agreement shall cease to be of any further effect except with respect to Bistro
Restaurants which were retained, or obtained from the LLC, by Ventures or any of
its affiliates and except for the provisions of Sections 4.7, 8, 10, 11, 14, 15,
16 and 18. During the period from the Determination Date through the Closing
Date, the LLC shall continue to operate in a manner consistent with the manner
in which it generally operated prior to the Determination Date.
4.3. In the event BRA elects to pay the Roll-Up Amount in Roll-Up Shares
or a combination of Roll-Up Shares and cash, the Roll-Up Amount shall be paid on
the Closing Date pursuant to section 4.2. In the event BRA elects to pay all or
a portion of the Roll-Up Amount in the form of Roll-Up Shares, the number of
Roll-Up Shares subject to the Roll-Up Amount shall be determined based on the
current market price per share of BRA's common stock. The current market price
per share, if traded on a national securities exchange, on any date shall be the
average of the closing bid prices on such exchange (as adjusted for any stock
dividend, split combination or reclassification that takes effect after the date
hereof) for the twenty (20) consecutive trading days immediately prior to the
Determination Date or, if a weekend or holiday, on the last day the principal
national securities exchange on which the BRA's common stock is listed or
admitted to trading was open. If not traded on a national securities exchange,
the current market price per share shall be determined by appraisal paid for
equally by BRA and Ventures. The Roll-Up Amount shall be paid by BRA as provided
in Section 4.2 above. Notwithstanding the foregoing, BRA may elect to pay any
cash portion of the Roll-Up Amount (other than the Tax Related Portion) over a
period of five (5) years in equal installments bearing interest at the then
prevailing applicable Federal rate, adjusted annually, as defined in Section
1274(d) of the Internal Revenue Code; provided that BRA posts collateral for
such obligation which is reasonable in light of the obligation and is reasonably
acceptable to BRA and Ventures.
4.4. In the event Ventures receives any Roll-Up Shares and BRA
subsequently determines to register any shares of its common stock under the Act
and, in connection therewith, BRA may lawfully register any of the Roll-Up
Shares, other than pursuant to a registration statement on Form S-4, S-8 or any
comparable form or filed in connection with an exchange offering of securities
solely to BRA's existing shareholders, BRA will promptly give written notice
thereof to Ventures. Upon the written request of Ventures within thirty (30)
days after receipt of any such notice from BRA, BRA will, except as herein
provided, cause all of the Roll-Up Shares which Ventures has requested to be
registered to be included in such registration statement, all to the extent
requisite to permit the sale or other disposition of the Roll-Up Shares on the
exchange or system on which BRA shares are regularly traded. However, nothing
herein shall prevent BRA from at any time abandoning or delaying any
registration in its entirety. If any Roll-Up Shares registered pursuant to this
Section 4.4 shall be included in an underwritten public offering in whole or in
part, BRA may require that the Roll-Up Shares requested for inclusion thereunder
be included in the underwriting on the same terms and conditions as the
securities otherwise being sold, through the underwriters are being sold. If and
in the event that the managing underwriter of such public offering shall be of
the good faith opinion that inclusion of all of the Roll-Up
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<PAGE>
Shares would adversely affect the marketing of the securities to be sold by BRA
therein, then the number of Roll-Up Shares otherwise to be included in the
underwritten public offering may be reduced on a pro rata basis with the shares
proposed to be included in such offering by any other selling shareholder
(exclusive of BRA); provided, however, that the number of Roll-Up Shares which
would otherwise be included in the underwritten public offering shall not be
reduced below 15% of the total number of shares included in such public offering
(through BRA or otherwise) pursuant to the foregoing limitation unless the
managing underwriter of such public offering shall be of the good faith opinion
that inclusion of even such amount of the Roll-Up Shares would materially and
adversely affect the marketing of the securities to be sold by BRA therein. In
the event any Roll-Up Shares are included in a public offering, Ventures and its
officers, directors and members shall enter into such so-called "lock-up"
agreements as the managing underwriters shall reasonably in good faith require.
Anything herein to the contrary notwithstanding, BRA shall not be obligated to
provide the foregoing so-called "piggyback" registration rights on more than
four (4) separate occasions (provided, however, that if the number of Roll-Up
Shares included in an underwritten public offering has been limited in
accordance with the terms and conditions set forth in the immediately preceding
sentence hereof, such that less than 75% of the Roll-Up Shares requested to be
included in a public offering are included, or if BRA does not complete and "go
effective" with such registration such public offering or notice by BRA to
Ventures shall not constitute one of such four (4) occasions).
4.5. BRA may exercise its Call right within the first thirty-six (36)
months after the date of this agreement in the event of the death or Disability
(as hereinafter defined) of Richard Reeves during such thirty-six (36) month
period or in the event that, during such thirty-six (36) month period, Richard
Reeves ceases to own at least ten percent (10%) of the equity interests of
Ventures or ceases to be the chief executive officer or managing member of
Ventures; provided that Richard Reeves shall have the right to transfer his
ownership interest in Ventures to an irrevocable trust of which any one or more
of his spouse and/or children are the sole beneficiaries during their lives. In
the event of such exercise, the Roll-Up Amount shall be an equal to the greater
of
(i) an amount equal to the Roll-Up Amount as computed pursuant to
the foregoing provisions of this Section 4 or
(ii) an amount equal to the total amount invested, in the aggregate,
by Ventures and its affiliates in the LLC and the Ventures
Locations.
For purposes hereof, "Disability' shall mean the inability of Richard Reeves to
perform his duties on behalf of himself and Ventures as required hereunder, as
determined by a physician mutually selected by BRA and Richard Reeves, for a
period of ninety (90) consecutive days or one hundred and twenty (120) days
during any twelve (12) month period.
4.6. Ventures and its affiliates may exercise their Put Right within the
first sixty (60) months after the date of this Agreement in the event of
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<PAGE>
(i) the sale or other transfer of all or substantially all
of operating assets of BRA (without regard to BRA's
interests in the LLC) to any party other than a
wholly-owned subsidiary of BRA,
(ii) if any one person or entity and their affiliates and
associates in the aggregate acquire more than 50% of the
current equity interests of BRA,
(iii) the merger or consolidation of BRA with any entity, in
which BRA is not the surviving entity, other than a
wholly-owned subsidiary of BRA, or
(iv) the discontinuance of George R. Chapdelaine as the chief
executive officer of BRA for any reason (subject,
however, to the provisions of Section 1.3 with respect
to any such discontinuance implemented by vote of BRA's
(or any successor's) Board of Directors), including, but
not limited to, his death, disability (as defined in
Section 4.5) or termination of employment (subject to
Section 1.3). In the event of such exercise, the Roll-Up
Amount shall be an equal to the greater of (i) the
Roll-Up Fee as computed pursuant to the foregoing
provisions of this Section 4 or (ii) an amount equal to
the total amount invested, in the aggregate, by Ventures
and its affiliates in the LLC and the Ventures
Locations.
4.7. At the Closing of the Roll-Up Transaction, BRA shall agree to
indemnify Ventures and its principals from and against all liabilities, leases,
claims, actions, obligations, payables, lawsuits, damages, losses, and the like
including attorneys fees (collectively, "Damages") relating to the post-closing
operation of the business and operations of the LLC, and of or pertaining to the
post-closing business and operations of the Ventures' Locations acquired by BRA,
except to the extent resulting from the gross negligence or misconduct of
Ventures or any of its employees, officers, directors or members. Similarly, at
the Closing of the Roll-Up Transaction, Ventures shall agree to indemnify BRA,
the LLC and their respective officers, directors, and Members from and against
all Damages relating to the pre-closing operations of the Ventures Locations
acquired by BRA and the pre and post-closing operations of any Ventures
Locations retained by Ventures. Except to the extent resulting from the gross
negligence or misconduct of BRA or any of its employees, officers, directors or
members or any post-Closing operations of the LLC. Such indemnification shall be
pursuant to an Indemnification Agreement, in form and substance reasonably
satisfactory to Ventures' and BRA's counsel, to be executed and delivered by BRA
and Ventures at the Closing of the Roll-Up Transaction.
5. SINGLE RESTAURANT PURCHASES
---------------------------
BRA shall have the right to cause the LLC or Ventures, as applicable, to
sell any Bistro Restaurant operated by the LLC or independently by Ventures as a
franchisee, in connection with BRA's sale of a franchise for the territory in
which such restaurant is located. The purchase price for such restaurant shall
be determined and payable in the same way as the Roll-Up Amount would be
determined and paid under Section 4 hereof; provided, however, that neither
Ventures nor its members shall have the right to retain, or obtain from the LLC,
ownership of such
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<PAGE>
restaurant as otherwise provided under Section 4.2 hereof, but in the event such
restaurant is operating at a loss or on a break-even basis, or if the purchase
price which would be paid with respect to such restaurant pursuant to this
Section 5 would equal an amount which is less than the investment by the LLC or
Ventures, as the case may be, in such restaurant, then the Adjusted After-Tax
Net Earnings of such restaurant shall be conclusively deemed to be, for the
purpose of computing the Roll-Up Amount of such restaurant, an amount equal to
the average Adjusted After-Tax Net Earnings of all of the restaurants of the LLC
and Ventures which have been open for more than fifteen (15) months by the end
of the last of the four (4) fiscal quarters with respect to which the Roll-Up
Amount is calculated.
6. COMPLIANCE WITH LAWS
-------------------
Each of Ventures and BRA shall use its reasonable best efforts to
secure, maintain, enforce and comply in all material respects with, and cause
the LLC to secure, maintain, enforce and comply in all material respects with,
all applicable laws and all required licenses, permits, franchises and
certificates relating to the marketing, promotion, sale and implementation of
each Bistro Restaurant or full-service restaurant developed by Ventures, BRA or
the LLC, as applicable, including, without limitation, all government
regulations relating to food service businesses, franchising, licensing,
withholding of income taxes, social security taxes, sales taxes, value added
taxes, and other taxes.
7. ADVERTISING AND MARKETING
-------------------------
Ventures and BRA shall together, on behalf of, in the name of, and at
the expense of, the LLC, develop marketing and promotional materials for use in
the marketing and promotion of the Bistro Concept and the Bistro Restaurants.
All advertising and promotion by Ventures, BRA and the LLC shall be subject to
Section 2.4 hereof, shall be completely factual and shall conform to
commercially acceptable standards of ethical advertising. None of Ventures, BRA
or the LLC will incur any liability on behalf of any other of them, nor make any
claims, warranties or representations with respect to the Bistro Concept or the
Bistro Restaurants, except for those which have been previously approved in
writing by BRA and Ventures. If BRA or Ventures reasonably disapproves of any
such advertising or promotion, Ventures, BRA and the LLC shall cease the use or
authorization of such advertising.
8. CONFIDENTIAL INFORMATION
------------------------
8.1. Except in connection with their development and operation of Bistro
Restaurants solely in accordance with this Agreement, neither Ventures nor the
LLC shall, during the term of this Agreement or at any time thereafter,
communicate, divulge, or use for the benefit of itself or any other person or
entity any confidential information, knowledge, criteria analysis and systems,
trade secrets, proprietary technology or know-how of BRA or the LLC which may be
communicated to Ventures or the LLC or of which Ventures or the LLC may be
apprised by virtue of Ventures' or the LLC's activities under this Agreement
("BRA Confidential Information"). Furthermore, in connection with their
development and operation of Bistro Restaurants, Ventures and the LLC may only
divulge such BRA Confidential Information to
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<PAGE>
employees, agents or independent contractors of Ventures or the LLC on a
need-to-know basis. At BRA's request, prior to any disclosure, Ventures and the
LLC shall inform BRA as to whom they wish to disclose any BRA Confidential
Information and require its employees and any other similar person to whom
Ventures or the LLC wishes to disclose any confidential information of BRA to
execute covenants that they will maintain the confidentiality of such
information. Such covenants shall be in a form reasonably satisfactory to BRA,
including, without limitation, specific identification of BRA as a third-party
beneficiary with the independent right to enforce the covenants. All
information, knowledge, trade secrets, know-how, techniques, and other data
which BRA designates as confidential shall be deemed BRA Confidential
Information for purposes of this Agreement except information which Ventures or
the LLC can demonstrate came to its attention by lawful means prior to
disclosure thereof by BRA, or which, at or after the time of disclosure by BRA
to Ventures or the LLC, had become or later becomes a part of the public domain,
through publication or communication by others. The foregoing limitations shall
not prevent Ventures or the LLC, or any of their employees, agents, or
independent contractors, from disclosing BRA Confidential Information pursuant
to any court order or judicial or administration summons or subpoena; provided,
however, that in such event notice shall be given to BRA as to the required
disclosure so as to allow BRA, at BRA's expense, to seek any desired protective
order.
8.2. Except in connection with their development and operation of Bistro
Restaurants in accordance with this Agreement, neither BRA nor the LLC shall,
during the term of this Agreement or at any time thereafter, communicate,
divulge, or use for the benefit of itself or any other person or entity any
confidential information, knowledge, criteria analysis and systems, trade
secrets, proprietary technology or know-how of Ventures, Richard Reeves, or the
LLC which may be communicated to BRA or the LLC or of which BRA or the LLC may
be apprised by virtue of BRA's or the LLC's activities under this Agreement
("Ventures Confidential Information"). Furthermore, in connection with their
development and operation of Bistro Restaurants, BRA and the LLC may only
divulge such Ventures Confidential Information to employees, agents or
independent contractors of BRA or the LLC on a need-to-know basis. At Venture's
request, BRA and the LLC shall require its employees and any other person to
whom BRA or the LLC wishes to disclose any Confidential Information of Ventures
or Richard Reeves to execute covenants that they will maintain the
confidentiality of such information. Such covenants shall be in a form
reasonably satisfactory to Ventures, including, without limitation, specific
identification of Ventures and Richard Reeves as third-party beneficiaries, each
with the independent right to enforce the covenants. All information, knowledge,
trade secrets, know-how, techniques, and other data which Ventures or Richard
Reeves designates as confidential shall be deemed Ventures Confidential
Information for purposes of this Agreement except information which BRA or the
LLC can demonstrate came to its attention by lawful means prior to disclosure
thereof by Ventures or Richard Reeves, or which, at or after the time of
disclosure by Ventures or Richard Reeves to BRA or the LLC, had become or later
becomes a part of the public domain, through publication or communication by
others. The foregoing limitations shall not prevent BRA or any of its employees,
agents, or independent contractors, from disclosing Ventures Confidential
Information pursuant to any court order or judicial or administration summons or
subpoena; provided, however, that in such event notice shall be given to
Ventures as to the required disclosure so as to allow Ventures, at Ventures's
expense, to seek any desired protective order.
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<PAGE>
9. CORPORATE REQUIREMENTS
----------------------
If Ventures is a corporation, limited liability company or partnership
during the term of this Agreement, Ventures shall furnish BRA with a copy of its
charter documents, memoranda of association, Bylaws, and any other corporate
governing documents.
10. COVENANTS
----------
10.1. Each of BRA and Ventures covenants that during the term of this
Agreement, it shall not either directly or indirectly, for itself or through, on
behalf of or in conjunction with any person or legal entity, divert or attempt
to divert any present or prospective franchisee or customer of a Bistro
Restaurant to any other casual full-service Italian dining concept by direct or
indirect inducement or otherwise, or do or perform, directly or indirectly, any
other act injurious or prejudicial to the goodwill associated with BRA's
Proprietary Marks and the Bistro Concept.
10.2. Ventures hereby covenants that, except for Bistro Restaurants or
as otherwise approved in writing by BRA, Ventures shall not, during the term of
this Agreement and, during a period of two (2) years following the expiration or
termination of this Agreement or the Closing of a Roll-Up Transaction, either
directly or indirectly, for itself or through, on behalf or in conjunction with
any person or legal entity, own, maintain, operate, engage in, be employed by,
provide assistance to, or have any interest in any business whose sales of pizza
or Italian food exceed fifteen percent (15%) of its total sales by annual dollar
volume, and further, that Ventures shall not use brick ovens, including without
limitation, the proprietary ovens of the LLC or BRA or any derivations thereof
in connection with its business. This Section 10.2 shall not apply to Oldenberg
Brewery Company provided Oldenberg Brewery Company primarily serves American
food and that the combination of Italian food and/or pizza does not account for
more than twenty percent (20%) of Oldenberg Brewery Company's total sales by
annual dollar value.
10.3. Section 10.2 shall not apply to ownership by Ventures of a less
than five percent (5%) beneficial interest in the outstanding equity securities
of any publicly held corporation.
10.4. Ventures understands and acknowledges that BRA shall have the
right at its option, to reduce the scope of any covenant of Ventures set forth
in Section 10.1 and/or 10.2 of this Agreement effective immediately upon receipt
by Ventures of written notice thereof such that thereafter Ventures shall no
longer be prohibited from engaging in the identified activity; provided that,
Ventures agrees that the balance of the covenants contained in said Sections
shall be fully enforceable notwithstanding anything to the contrary contained in
this Agreement. BRA understands and acknowledges that Ventures shall have the
right at its option, to reduce the scope of any covenant of BRA set forth in
Section 3.3 and/or Section 10.1 of this Agreement effective immediately upon
receipt by BRA of written notice thereof such that thereafter BRA shall no
longer be prohibited from engaging in the identified activity; provided that,
BRA agrees that the balance of the covenants contained in said Sections shall be
fully enforceable notwithstanding anything to the contrary contained in this
Agreement.
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<PAGE>
10.5. Ventures agrees that the existence of any claims it may have
against BRA, whether or not arising from or under this Agreement, shall not
constitute a defense to the enforcement by BRA of the covenants of Ventures set
forth in this Section 10.
10.6. BRA agrees that the existence of any claims it may have against
Ventures, whether or not arising from or under this Agreement, shall not
constitute a defense to the enforcement by Ventures of the covenants of BRA set
forth in this Section 10.
10.7. Ventures acknowledges that Venture's violation of the terms of its
covenants under this Section 10 would result in irreparable injury to BRA for
which no adequate remedy at law may be available, and Ventures accordingly
consents to the issuance of an injunction prohibiting any conduct by Ventures in
violation of the terms of this Section 10. Such injunctive relief shall be in
addition to any other remedies BRA may have.
10.8. BRA acknowledges that BRA's violation of the terms of its
covenants under Section 3.3 or this Section 10 would result in irreparable
injury to Ventures for which no adequate remedy at law may be available, and BRA
accordingly consents to the issuance of an injunction prohibiting any conduct by
BRA in violation of the terms of Section 3.3 or this Section 10. Such injunctive
relief shall be in addition to any other remedies Ventures may have.
10.9. At BRA's request Ventures shall obtain and furnish to BRA executed
covenants similar in substance to those set forth in this Section 10 (including
covenants applicable upon the termination of an individual's relationship with
Ventures) from any or all executive management (above the unit level including
area managers), officers and holders of a direct or indirect beneficial interest
of five percent (5%) or more of the securities of Ventures. Every covenant
required by this Section 10.9 shall be in a form reasonably satisfactory to BRA,
including, without limitation, specific identification of BRA as a third party
beneficiary with the independent right to enforce the covenant.
10.10. At Ventures' request BRA shall obtain and furnish to Ventures
executed covenants similar in substance to those set forth in Section 3.3 or
this Section 10 (including covenants applicable upon the termination of an
individual's relationship with BRA) from any or all executive management (above
the unit level including area managers), officers and holders of a direct or
indirect beneficial interest of five percent (5%) or more of the securities of
BRA. Every covenant required by this Section 10.10 shall be in a form reasonably
satisfactory to Ventures, including, without limitation, specific identification
of Ventures as a third party beneficiary with the independent right to enforce
the covenant.
10.11. Ventures understands, covenants and agrees that the brick ovens
used in the Bistro Restaurants contain proprietary technology which Ventures
shall have no right to use, sell or divulge except in connection with the Bistro
Restaurants in accordance with this Agreement. Ventures fully agrees that such
brick ovens will be leased to the LLC and Ventures, in accordance with BRA's
standard costing methods, and title to the brick ovens will be returned to BRA
upon termination of the applicable lease.
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<PAGE>
11. NOTICES
-------
All notices pursuant to this Agreement shall be in writing and shall be
personally delivered, sent by registered mail, or delivered or sent by another
method which affords the sender evidence of receipt or attempted delivery, to
the respective parties at the following addresses, unless and until a different
address has been designated by written notice to the other party:
Notices to BRA:
Boston Restaurant Associates, Inc.
Stonehill Corporate Center
999 Broadway, Suite 400
Saugus, MA 01906
Attn: Chief Executive Officer
Tel: 781 231-7575
Fax: 781 231-5225
with a copy to:
Brown, Rudnick Freed & Gesmer, P.C.
One Financial Center
Boston, MA 02111
Attn: Gordon R. Penman, Esquire
Tel: 617 856-8200
Fax: 617 856-8201
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<PAGE>
Notices to Ventures:
Richard Reeves
Italian Ventures, LLC
1230 Liberty Bank Lane - Suite 220
Louisville, KY 40222
Tel: 502426-4084
Fax: 502 425-5744
with a copy to:
Michael Fleishman, Esquire
Greenebaum Doll & McDonald PLLC
3300 National City Tower
101 South Fifth Street
Louisville, KY 40202-3197
Tel: 502 587-3530
Fax: 502 587-3695
and:
David M. Roth
Roth Foley Bryant & Cooper
First Trust Centre, Suite 300 South
200 S. Fifth Street
Louisville, KY 40202-3236
Tel: 502 569-7550
Fax: 502 540-0123 (with an additional copy faxed to 502-451-1805)
Any notice sent or delivered which affords the sender evidence of
receipt or attempted delivery shall be deemed to have been given and received at
the date and time of receipt or attempted delivery.
12. INDEPENDENT CONTRACTOR
----------------------
12.1. It is understood and agreed by the parties that this Agreement
does not create a fiduciary relationship between them; that each of Ventures and
BRA is an independent contractor; and that nothing in this Agreement is intended
to make either party an agent legal representative, subsidiary, joint venturer,
partner, employee, or servant of the other for any purpose whatsoever.
12.2. Each of Ventures and BRA shall hold itself out to the public to be
an independent contractor operating pursuant to this Agreement, except when they
are specifically acting on behalf of the LLC in accordance with the terms and
provisions of this Agreement and of the
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<PAGE>
Operating Agreement of the LLC. Each of Ventures and BRA agrees to take such
actions as shall be necessary to that end.
13. APPROVALS AND WAIVERS
---------------------
13.1. Whenever this Agreement requires the prior approval or consent of
any party, the party seeking such approval or consent shall make a timely
written request to the party from whom such approval or consent is sought, and,
except as may be otherwise expressly provided herein, such approval or consent
must be given or refused in writing and signed by an officer or other duly
authorized representative of the party from whom such approval or consent is
sought within seven (7) days of being received.
13.2. No failure of any party to exercise any right reserved to it in
this Agreement or to insist upon strict compliance by any other party with 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 any
party's right to exercise its right or to demand exact compliance with any of
the terms of this Agreement. Waiver by any party of any particular default by
any other party shall not affect or impair the waiving party's rights with
respect to any subsequent default of the same, similar, or different nature; nor
shall any delay, forbearance, or omission of any party to exercise any power or
right arising out of any breach or default by any other party of any of the
terms, provisions, or covenants of this Agreement affect or impair such party's
right to exercise the same; nor shall such constitute a waiver by such party of
any rights hereunder or rights to declare any subsequent breach or default and
to terminate this Agreement prior to the expiration of its term.
14. SEVERABILITY AND CONSTRUCTION
-----------------------------
14.1. If for any reason, any provision of this Agreement is determined
to be invalid and contrary to, or in conflict with, any existing or future law
or regulation by a court or agency having valid jurisdiction, such invalidity
shall only apply in the jurisdiction holding such provision invalid and shall
not impair the operation of or have any other effect upon, such other provisions
of this Agreement as may remain otherwise intelligible. The latter shall
continue to be given full force and effect and bind the parties hereto, and the
invalid provision(s) shall be deemed not to be a part of this Agreement.
14.2. Except as expressly provided to the contrary herein, nothing in
this Agreement is intended, nor shall be deemed, to confer upon any person or
legal entity other than Ventures and BRA (and the LLC upon adoption of this
Agreement), any rights or remedies under or by reason of this Agreement.
14.3. Any provision or covenant of this Agreement which expressly or by
reasonable implication imposes obligations after the expiration or termination
of this Agreement shall survive such expiration or termination.
14.4. Each party agrees to be bound by any promise or covenant imposing
the maximum duty permitted by law which is subsumed within the terms of any
provision of this Agreement as
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<PAGE>
though it were separately articulated in and made a part of this Agreement that
may result (i) from striking from any of the provisions hereof any portion or
portions which a court or agency having valid jurisdiction may hold to be
unreasonable and unenforceable in an unappealed final decision in a court of
competent jurisdiction, or (ii) from reducing the scope of any promise or
covenant to the extent required to comply with such a court or agency order.
15. APPLICABLE LAW; REMEDIES
------------------------
15.1. This Agreement shall be executed and accepted on behalf of BRA in
the Commonwealth of Massachusetts by a duly authorized officer, only following
signature by a duly authorized representative of Ventures, and shall be governed
by the laws of the Commonwealth of Massachusetts. BRA and Ventures consent to be
bound by the provisions of such laws.
15.2. Subject to the Mediation and Arbitration Provisions (as
hereinafter defined), no right or remedy conferred upon or reserved to BRA or
Ventures by this Agreement is intended to be, nor shall be deemed, exclusive of
any other right or remedy herein or by law or equity provided or permitted, but
each shall be cumulative of every other right or remedy.
15.3. Nothing herein contained shall bar any party's right to obtain
emergency temporary injunctive relief against threatened conduct that will cause
it loss or damages, under the usual equity rules, including the applicable rules
for obtaining temporary restraining orders and preliminary injunctions, pending
implementation of the Mediation and Arbitration Provisions to address such issue
and determine what temporary or permanent relief is in order.
16. MEDIATION AND ARBITRATION PROVISIONS
------------------------------------
16.1. Actions and Disputes Subject to the Mediation and Arbitration
Provisions.
(a) Notwithstanding any other provision of this Agreement which
might be construed to the contrary, BRA, Ventures, the LLC, or any of their
affiliates may require that any claims, demands, disputes, controversies,
differences, issues or other matters that arise between or among any of them
concerning any issue relating to (i) the interpretation or enforcement of this
Agreement, or (ii) the rights, privileges, duties, or liabilities of any of them
under this Agreement or under any management, employment, engagement, license,
development, franchise, or cross-indemnification agreement with any one or more
of them, or (iii) the reasonability of any refusal by a party to this Agreement
to consent or approve, or of any delay in such party's granting consent or
approval of, any action which is made subject to the approval or consent of any
party under this Agreement or under the LLC's Operating Agreement (unless such
approval or consent is expressly permitted under this Agreement or under the
LLC's Operating Agreement to be withheld with or without reason), be submitted
to, and controlled by, the mediation and arbitration provisions hereafter set
forth in this Section 16 (the "Mediation and Arbitration Provisions")
(b) For all purposes of this Agreement, (A) any claim, demand,
dispute, controversy, difference, issue, or other matter which may be submitted
to, and controlled by, the
- --------------------------------------------------------------------------------
DEVELOPMENT AGREEMENT Page 25
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<PAGE>
Mediation and Arbitration Provisions pursuant to this Section 16.1 shall
constitute and is hereinafter be referred to as an "Arbitratable Matter," (B)
the person or persons submitting such Arbitratable Matter to the Mediation and
Arbitration Provisions is hereinafter referred to, collectively, as the
"Petitioner," and (C) the person or persons who have proposed or implemented
(wholly or partially) the action which constitutes the Arbitratable Matter in
issue, or against whom the claim, demand, dispute, controversy, difference,
issue or other matter exists which constitutes the Arbitratable Matter in issue,
as the case may be, is hereinafter referred to, collectively, as the
"Defendant." If more than one person constitutes the Petitioner or Defendant as
to any Arbitratable Matter, as the case may be, they shall act in accordance
with the vote of a majority-in-number of such persons, unless all of such
persons in such group are Members of the LLC, in which case they shall act in
accordance with the vote of a Majority-in-Interest of such persons (as defined
in the LLC's Operating Agreement) held by all of those constituting such group.
16.2. Mediation and Arbitration Provisions as to Arbitratable Matters.
For all purposes of this Agreement, the term "Mediation and Arbitration
Provisions" shall mean the following provisions:
(a) The Petitioner as to any Arbitratable Matter shall, by
written notice to the Defendant with respect to such Arbitratable Matter, demand
that such Arbitratable Matter be submitted within 15 days to nonbinding
mediation proceedings in either Boston, Massachusetts, or Louisville, Kentucky.
Such notice shall state the name and address of the mediator proposed by the
Petitioner. The Defendant may, by written notice to the Petitioner within ten
(10) days after the notice from Petitioner, object to either or both of the
proposed location of the mediation or the proposed mediator to be used for the
mediation. If the Defendant objects to the location proposed by the Petitioner
for such mediation, such mediation shall be held in Washington, D.C. If the
Defendant objects to the mediator for such mediation, the Petitioner and
Defendant shall attempt to agree on a mutually acceptable mediator.
(b) Upon the giving of notice by the Petitioner demanding
mediation, the Defendant shall, to the fullest extent possible, cease and desist
the action or proposed action, or other activities or matters, which are the
subject of the Arbitratable Matter in issue and exercise its reasonable best
efforts to maintain the status quo pending the consideration and resolution of
the Arbitratable Matter pursuant to these Mediation and Arbitration Provisions.
(c) If (A) the parties fail to agree upon a mediator within
ten (10) days after the Defendant's objection to the Petitioner's proposed
mediator, or (B) the mediation does not result in a written agreement between or
among the parties resolving the Arbitratable Matter within thirty (30) days
following the Petitioner's initial notice to the Defendant demanding such
mediation, then the Petitioner may, by written notice to the Defendant with
respect to such Arbitratable Matter, appoint an arbitrator who shall be a person
experienced in serving as an arbitrator under the rules of the American
Arbitration Association ("AAA"). The Defendant as to such Arbitratable Matter
shall, by written notice, within 10 days after receipt of such notice by the
first party, appoint another arbitrator who shall have the same qualifications
as the first arbitrator and, in default of any such appointment by any of such
other parties, the first arbitrator
- --------------------------------------------------------------------------------
DEVELOPMENT AGREEMENT Page 26
12/23/98
<PAGE>
appointed shall be the sole arbitrator. In lieu of the foregoing, the parties to
the Arbitratable Matter may agree upon a single arbitrator, in which case such
arbitrator shall serve as the sole arbitrator. The arbitration hearing(s) shall
take place in the same jurisdiction as was established for the mediation
pursuant to these Mediation and Arbitration Provisions whether or not such
medication was, in fact, conducted (the "Arbitration Jurisdiction").
(d) If two arbitrators have been appointed in accordance with
subsection (c) above, such arbitrators shall, if possible, agree upon one more
arbitrator with the same qualifications as the first and second arbitrator and
shall appoint him or her by written notice signed by each of the initial
arbitrators with a copy mailed to each party to the claim, demand, dispute,
controversy, or difference within 10 days after the appointment of the last of
the initial arbitrators to be appointed. If such 10 day period has elapsed
without notice of appointment of the additional odd-numbered arbitrator, then
any one or more parties to the Arbitratable Matter may, in writing, request any
judge of a state court located in the Arbitration Jurisdiction to appoint a
third arbitrator which appointment shall be conclusively binding.
(e) Within 30 days after the multiple arbitrators or single
arbitrator are appointed as provided for above, such arbitrators or arbitrator
shall hold an arbitration hearing in the Arbitration Jurisdiction and shall
establish from time to time such rules and procedures for such hearing as the
arbitrator(s), in their sole discretion, may deem advisable. At the hearing, the
arbitrator(s) shall allow each party to present that party's case, evidence and
witnesses, if any, in the presence of the other party, and shall render such
decision and award as the arbitrator(s), (by vote of a majority of the
arbitrators if there is more than one), in their sole discretion, may deem just.
(f) The parties request that the arbitrator(s) include in the
decision and award explicit provision for the payment by one or both of the
parties of all arbitration fees and costs and all fees and costs incurred by the
parties in connection therewith, including, but not limited to, attorneys' fees
and other expenses incurred by each of the parties and the arbitrator(s), on
such terms as the arbitrator(s), in their sole discretion, may deem just. If the
decision and award does not include a complete determination with respect to
such fees and costs for any reason, then except to the extent otherwise provided
by the decision and award, (i) the arbitration fees and costs with respect to
any arbitrator shall be borne by the party appointing that arbitrator, (ii) the
arbitration fees and costs with respect to any arbitrator appointed by the two
arbitrators who were appointed by the parties or with respect to the single
arbitrator if there shall be only one arbitrator, as the case may be, shall be
evenly divided between the Petitioner and the Defendant, and (iii) each party
shall otherwise bear such party's own fees and costs, including, but not limited
to, attorneys' fees.
(g) The decision and award of the majority of the multiple
arbitrators, or the decision and award of the sole arbitrator, as the case may
be, shall be binding upon all of the parties to this Agreement, with no right to
appeal with respect to any questions of law or any other issue to any court, and
judgment may be entered on such decision and award in any court having
jurisdiction over any party.
- --------------------------------------------------------------------------------
DEVELOPMENT AGREEMENT Page 27
12/23/98
<PAGE>
(h) Except where in conflict with the terms of this Section
16, the rules and procedures of AAA shall govern the arbitration proceedings.
18. ENTIRE AGREEMENT
----------------
This Agreement the documents referred to herein, and the Exhibits
attached hereto constitute the entire agreement between BRA and Ventures
concerning the subject matter hereof and supersede all prior agreements,
negotiations, representations, and correspondence concerning the same subject
matter. Except for those expressly permitted to be made unilaterally by a party
hereunder, no amendment change, or variance from this Agreement shall be binding
on either party unless agreed to in writing by the parties and executed by their
authorized officers or agents.
19. PURSUIT OF OTHER INTERESTS
--------------------------
Except as otherwise provided in this Agreement or in the LLC's Operating
Agreement, each of BRA and Ventures and their respective affiliates may engage
in, or possess an interest in, other business ventures of any nature or
description, independently or with others, including those which may be
considered competitive with the activities of the LLC, and neither the LLC nor
the other of BRA and Ventures, shall have any rights by virtue of this Agreement
or the Operating Agreement of the LLC, in and to such independent ventures, or
to the income or profits derived therefrom. Neither BRA nor Ventures or any of
their respective affiliates, shall be obligated to present any particular
business opportunity of a character which, if presented to the LLC, could be
taken by the LLC, and each of BRA and Ventures shall have the right to take for
its own account or its affiliates' account or to recommend to others any such
particular business opportunity to the exclusion of the LLC and the other.
20. ACKNOWLEDGMENTS
---------------
20.1. Each party acknowledges that the success of the business venture
contemplated by this Agreement involves substantial business risks and is
largely dependent upon the LLC's business skills and financial and other
resources. Each of BRA and Ventures expressly disclaims the making of, and the
other of them acknowledges not having received, any warranty or guarantee,
express or implied, as to the potential volume, profits, or success of the
business venture contemplated by this Agreement.
20.2. Each of BRA and Ventures acknowledges that it has received, read,
and understood this Agreement and the attached Exhibits, and that it has had
ample time and opportunity to consult with advisors of such party's own choosing
about the potential benefits and risks of entering into this Agreement.
21. This document may be executed in multiple counterparts of which
together shall constitute one and the same document. This document is effective
as of the date set forth below.
- --------------------------------------------------------------------------------
DEVELOPMENT AGREEMENT Page 28
12/23/98
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
day and year first above written.
BOSTON RESTAURANT ASSOCIATES, INC. ITALIAN VENTURES LLC
By: /s/ George R. Chapdelaine By: /s/ Richard Reeves
------------------------------- ----------------------------
Title: President Title: Manager
------------------------------- ----------------------------
- --------------------------------------------------------------------------------
DEVELOPMENT AGREEMENT Page 29
12/23/98
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
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