THE GOLDEN CORRAL FRANCHISING SYSTEMS, INC.
AREA DEVELOPMENT AGREEMENT
FRISCH'S RESTAURANTS, INC.
THE GOLDEN CORRAL FRANCHISING SYSTEMS, INC.
AREA DEVELOPMENT AGREEMENT
I. GRANT 2 II. DEVELOPMENT FEE 3 III. DEVELOPMENT OBLIGATIONS 4 IV. TERM 6 V. DUTIES OF THE PARTIES 6 VI. DEFAULT 8 VII. TRANSFERS 9 VIII. COVENANTS 13 IX. NOTICES 16 X. INDEPENDENT CONTRACTOR AND
INDEMNIFICATION 16 XI. APPROVALS AND WAIVERS 17 XII. SEVERABILITY AND CONSTRUCTION 18 XIII. ENTIRE AGREEMENT 18 XIV. APPLICABLE LAW 18 XV. ACKNOWLEDGEMENTS 20
EXHIBIT A (DEVELOPMENT SCHEDULE)
EXHIBIT B-1 (ADDENDUM FOR GC-11S RESTAURANTS)
EXHIBIT B-2 (ADDENDUM FOR GC-11M RESTAURANTS)
EXHIBIT C (FRANCHISE AGREEMENT)
THE GOLDEN CORRAL FRANCHISING SYSTEMS, INC.
AREA DEVELOPMENT AGREEMENT
This Area Development Agreement is entered into this 6th day of July, 2000 by and between Golden Corral Franchising Systems, Inc., a Delaware corporation (hereinafter referred to as "Franchisor"), and Frisch's Restaurants, Inc., an Ohio corporation (hereinafter referred to as "Area Developer").
WHEREAS, Golden Corral Corporation, a North Carolina corporation, as the result of the expenditure of time, skill, effort, and money, has developed and owns a unique system (hereinafter "System") for opening and operating family steakhouse restaurants;
WHEREAS, the distinguishing characteristics of the System include, without limitation, the establishment, development, and operation of a family restaurant which features steak, seafood, chicken, salad bars, food buffet, in-store display bakery and other food and beverage items for lunch, dinner, weekend breakfast and snacks; emphasis on prompt, courteous service in a clean, wholesome, family-oriented atmosphere; distinctive exterior and interior design and trade dress; standards and specifications for materials, equipment, furnishings, fixtures, supplies, signage and food and beverage items (including special quality and quantity standards); operating procedures for sanitation and maintenance; special procedures for food and beverage preparation and service; training and assistance; and methods and techniques for inventory and cost controls, record keeping and reporting, purchasing, customer service, sales promotion, and advertising; all of which may be changed, improved, and further developed by Franchisor from time to time;
WHEREAS, the System is identified by means of certain trade names, service marks, trademarks, logos, emblems, and indicia of origin, including but not limited to the mark "GOLDEN CORRAL" and such other trade names, service marks, and trademarks as are now or hereafter designated by Franchisor (in the Confidential Operations Manuals or otherwise in writing) for use in connection with the System (hereinafter referred to as "Proprietary Marks");
WHEREAS, Franchisor continues to develop, use, and control the use of the Proprietary Marks in order to identify for the public the source of products and services marketed thereunder and under the System, and to represent the System's high standards of quality, appearance, and service;
WHEREAS, Golden Corral Corporation has granted Franchisor the non-exclusive right to franchise others to operate restaurants using the System, including the Proprietary Marks; and
WHEREAS, Area Developer wishes to obtain certain development rights to operate Golden Corral restaurants under the System, to be identified with the Proprietary Marks in the territory described in this Development Agreement, and to be trained by Franchisor to establish and operate Golden Corral restaurants;
NOW, THEREFORE, the parties, in consideration of the under takings and commitments of each party to the other party set forth herein, hereby mutually agree as follows:
A. Franchisor hereby grants the right to Area Developer, and Area Developer accepts the obligation, pursuant to the terms and conditions of this Development Agreement, to establish and operate four (4) restaurants using a GC-11S building design, eleven (11) restaurants using a GC-llM building design, and none (n/a) restaurants using a Metro Market (a/k/a GC-10) building design for a total of fifteen (15) restaurants(hereinafter "restaurants" or "franchised businesses") and to use the Proprietary Marks and the System solely in connection therewith. Area Developer shall establish and operate such restaurants at specific locations to be designated in separate Golden Corral Franchise Agreements (hereinafter "Franchise Agreements") executed as provided in Section III.A hereof, and pursuant to the development schedule set forth in Exhibit A, attached hereto (hereinafter the "Development Schedule"). Each restaurant developed hereunder shall be located in the area described in Exhibit A, attached hereto (hereinafter the "Development Area") which Development Area may be further defined by sub-markets established by mutually approved segmentation map(s).
B. Each restaurant shall be established and operated pursuant to a separate Franchise Agreement to be entered into between Area Developer and Franchisor in accordance with Section III.A. hereof.
C. Except as otherwise provided in this Agreement, Franchisor shall not establish and operate, nor license anyone other than Area Developer to establish and operate, any restaurant under the Proprietary Marks and the System in the Development Area during the term of this Agreement; provided, however, that Franchisor retains the right, among other rights, both within and outside of the Development Area, and without offering Developer any rights therein, (i) to establish and operate, and to license others to establish and operate, restaurant businesses utilizing the Proprietary Marks and/or the System at or from educational institutions (including, without limitation, colleges and universities); hospitals; airports; food courts; manufacturing, industrial or research facilities; office buildings; convention centers; supermarkets; gasoline stations; department stores; contract food services; theaters; convenience stores; vending machines; fixed/mobile modular units; any casino or other gambling facility; hotels; kiosks; any sports facility, public transportation facility, or public entertainment facility; or any facility which is owned by, or operated by or under contract with, any military or other government entity; (ii) to own, acquire, establish and/or operate, and franchise others to establish and operate, other restaurant concepts now or hereinafter offered by Franchisor, as well as businesses under proprietary marks other than the Proprietary Marks or other systems, whether such restaurant concepts or businesses are similar to or different from the restaurant, at any location within or outside the Development Area; and (iii) to sell or distribute, at retail or wholesale, directly or indirectly, or license others to sell or distribute, any products under any proprietary marks, including the Proprietary Marks. In the event that Area Developer is granted the right to develop Metro Market restaurants, the Development Area to be developed for such Metro Market restaurants shall be deemed not to include those smaller towns and unincorporated municipal areas and rural areas which, because of population density, demographic factors, and other characteristics, would not satisfy the development criteria as created by Franchisor from time to time for a Metro Market design restaurant. Also excluded from the Development Area is any location within three (3) miles of an existing Golden Corral restaurant. Franchisor retains the right to establish and operate, and to license others to establish and operate at such existing restaurant facility or any other restaurant location within such three (3) mile excluded territory, except to the extent, if any, where a Franchise Agreement's Protected Territory grants exclusive rights for a prescribed distance from an existing franchise restaurant that would specifically limit such rights. Upon the execution of a Franchise Agreement for an approved site in a specific submarket identified by a segmentation map or otherwise within the Development Area, any rights Area Developer may have to exclusivity for future additional development in that submarket shall cease and the territorial protection for that submarket, if any, shall be determined by the applicable Franchise Agreement for the approved location.
D. This Agreement is not a franchise agreement, and does not grant to Area Developer any right to use in any manner Franchisor's Proprietary Marks or System.
E. Area Developer shall have no right under this Agreement to license others to use in any manner the Proprietary Marks or System.
II. DEVELOPMENT FEE
A. In consideration of the development rights granted herein, Area Developer shall pay to Franchisor upon execution of this Agreement a development fee of One Hundred Fifty Thousand Dollars ($150,000) which is the sum of Ten Thousand Dollars ($10,000) multiplied by fifteen (15) restaurant locations to be developed hereunder, receipt of which is hereby acknowledged by Franchisor, and which shall be deemed fully earned and non-refundable upon execution of this Agreement in consideration of administrative and other expenses incurred by Franchisor and for the development opportunities lost or deferred as a result of the rights granted Area Developer herein.
B. If Area Developer is in full compliance with the Development Schedule described in Section I.A hereof and set forth in Exhibit A, attached hereto, Ten Thousand Dollars ($10,000) of the development fee for each restaurant shall be credited toward the initial franchise fee payable at the time each Franchise Agreement is executed pursuant to the Development Schedule, which initial franchise fee payment credit shall be fully earned when credited and non-refundable.
III. DEVELOPMENT OBLIGATIONS
A. Area Developer shall execute the then current form of Franchise Agreement for each restaurant site approved by Franchisor in the Development Area as hereinafter provided. The Franchise Agreement for each restaurant
developed hereunder shall be the then current form of Franchise Agreement and the amendment(s) thereto, if any, being offered generally by Franchisor for such restaurant design at the time each such Franchise Agreement is executed; provided, however, that if such restaurant utilizes a GC-11S design or GC-11M design, such Franchise Agreement shall be amended by the respective form of Addendum for GC-11S Restaurants or Addendum for GC-11M Restaurants being offered generally by Franchisor at such time, the current forms of which are attached as Exhibits B-1 and B-2 hereto. The current form of Franchise Agreement being offered by Franchisor as of the date hereof is the Franchise Agreement attached hereto as Exhibit C. The Franchise Agreement and amendment, if applicable, for each restaurant shall be executed by Area Developer and submitted to Franchisor within the later of fifteen (15) days of: (1) receipt of Franchisor's notice of Phase I site approval, as provided in Section III.B hereof, or (2) receipt of the applicable Franchise Agreement.
B. Prior to Area Developer's acquisition by lease or purchase of any site for a restaurant, Area Developer shall submit to Franchisor, in the form specified by Franchisor, a completed Site Evaluation Questionnaire, the description of the proposed site and such information or materials as Franchisor may reasonably require, together with a letter of intent or other evidence satisfactory to Franchisor which confirms Area Developer's favorable prospects for obtaining the site. Franchisor shall have sixty (60) days after receipt of such Site Evaluation Questionnaire, the description of the proposed site and other information and materials to approve or disapprove, in its sole discretion, each proposed site for a restaurant. Area Developer must submit to the Franchisor the aforementioned Site Evaluation Questionnaire and other required information regarding the first site to be developed pursuant to this Agreement within ninety (90) days after the execution of this Agreement. Notwithstanding anything contained in this Agreement to the contrary, Area Developer must acquire by lease or purchase a location approved by Franchisor at the earlier of 180 days after the execution of this Agreement or six months before the scheduled opening date of the first restaurant as set forth in the attached Exhibit A, and thereafter must acquire a location approved by Franchisor not less than six months prior to the date each respective restaurant is required to be opened pursuant to the development schedule.
C. If Area Developer will occupy the premises at which a restaurant is operated under a lease, Area Developer shall, prior to the execution thereof, submit such lease to Franchisor, for its written approval. Franchisor's approval of the lease may be conditioned upon the inclusion in the lease of such provisions as Franchisor may reasonably require, including, without limitation:
1. A provision which restricts the use of the premises during the term of the Franchise Agreement solely to the operation of the business franchised under the Franchise Agreement.
2. A provision which prohibits Area Developer from subleasing or assigning all or any part of its occupancy rights or extending the term of or renewing the lease, without Franchisor's prior written consent.
3. A provision that the landlord consents to Area Developer's use of such Proprietary Marks and signage as Franchisor may prescribe for the franchised business;
4. A provision giving Franchisor the right to enter the premises without assuming the lease to make modifications necessary to protect the Proprietary Marks and the System or cure any default under the Franchise Agreement;
5. A provision that the initial term of the lease, or the initial term together with any renewal terms (for which the rent shall be set forth in the lease), shall be for not less than fifteen (l5) years;
6. A provision which requires the landlord concurrently to provide Franchisor with a copy of any written notice of breach or default under the lease sent to Area Developer; and which grants to Franchisor, in its sole discretion, the right (but not the obligation) to cure any breach or default under the lease, should Area Developer fail to do so, within fifteen (l5) days after the expiration of the period in which Area Developer may cure the breach or default; and
7. A provision that provides that upon Area Developer's default under the lease or under the Franchise Agreement, Franchisor shall without the landlord's further consent have a continuing right of entry into the premises, the right to operate a Golden Corral restaurant therein, the right but not the obligation to assume Area Developer's interests under the existing terms, conditions and covenants of the lease, and should Franchisor assume Area Developer's position under the lease, the right to assign the lease or sublet the premises to a third party which will operate on the premises a Golden Corral restaurant.
D. Recognizing that time is of the essence, Area Developer agrees to satisfy the development schedule for the restaurant design described therein ("development schedule") set forth in Exhibit A, attached hereto. Failure by Area Developer to adhere to the development schedule shall constitute a default under this Agreement as provided in Section VI.B. hereof.
Unless sooner terminated in accordance with the terms of this Agreement, the term of this Agreement and all present and future rights granted hereunder to develop restaurants in the Development Area shall expire on the earlier of the date when Area Developer has open and in operation all of the restaurants required by the development schedule set forth in Exhibit A hereto, or December 31, 2007, notwithstanding the fact that all of the restaurants to be developed pursuant to this Agreement are not opened and in operation.
V. DUTIES OF THE PARTIES
A. For each restaurant developed hereunder Franchisor shall furnish to Area Developer the following:
1. Such site selection guidelines and consultation as Franchisor may deem advisable; and
2. Such on-site evaluation as Franchisor may deem advisable as part of its evaluation of Area Developer's request for site approval; provided, however, that Franchisor shall not provide on-site evaluation for any proposed site prior to Franchisor's receipt of a complete response to Franchisor's Site Evaluation Questionnaire, a description of the proposed site and a letter of intent or other evidence satisfactory to the Franchisor which confirm Area Developer's favorable prospects for obtaining the proposed site, pursuant to Section III.B hereof. If on-site evaluation is deemed necessary and appropriate by Franchisor, Franchisor shall conduct up to two (2) on-site evaluations for each restaurant at Franchisor's cost; for each additional on-site evaluation (if any) Area Developer shall reimburse Franchisor for Franchisor's reasonable expenses, including, without limitation, the costs of travel, lodging, and food.
B. Area Developer accepts the following obligations:
1. An Area Developer which is a corporation shall comply, except as otherwise approved in writing by Franchisor, with the following requirements throughout the term of this Agreement:
a. Area Developer shall furnish Franchisor with its Articles of Incorporation, Bylaws, other governing documents, any other documents Franchisor may reasonably request, and any amendments thereto.
b. Area Developer shall confine its activities, and its governing documents, if any, shall at all times provide that its activities are confined, exclusively to the management and operation of the business contemplated hereunder, including the establishment and operation of the restaurants to be developed hereunder.
c. Area Developer shall maintain stop transfer instructions against the transfer on its records of any voting securities; and shall issue no certificates for voting securities upon the face of which the following printed legend does not legibly and conspicuously appear:
The transfer of this stock is subject to the terms and
conditions of a Development Agreement with GOLDEN CORRAL
FRANCHISING SYSTEMS, INC. dated ________. Reference is made to the
provisions of the said Development Agreement and to the
Articles and Bylaws of this Corporation.
d. Area Developer shall maintain a current list of all owners of record and all beneficial owners of any class of voting stock of Area Developer and shall furnish the list to Franchisor upon request. Such lists shall also include the percentage of ownership of each such owner.
2. If Area Developer is a corporation, each proposed holder of an interest in Area Developer shall submit a franchise application to Franchisor, shall be approved by Franchisor, and shall, upon Franchisor's request, execute a guarantee of Area Developer's obligations under this Agreement in a form prescribed by Franchisor; provided, however, that the requirements of this Section V.B. shall not apply to a holder of any corporation registered under the Securities and Exchange Act of 1934.
3. An Area Developer which is a partnership shall comply, except as otherwise approved in writing by Franchisor, with the following requirements throughout the term of this Agreement:
a. Area Developer shall furnish Franchisor with its partnership agreement as well as such other documents as Franchisor may reasonably request, and any amendments thereto.
b. Area Developer shall prepare and furnish to Franchisor, upon request, a list of all general and limited partners in Area Developer.
4. If Area Developer is a limited liability company, it shall: (i) furnish Franchisor with its articles of organization and operating agreement, as well as such other documents as Franchisor may reasonably request, and any amendments thereto; (ii) prepare and furnish to Franchisor, upon request, a current list of all members and managers in Area Developer; and (iii) maintain stop transfer instructions on its records against the transfer of any equity securities and shall only issue securities which bear a legend, in a form satisfactory to Franchisor, which references the transfer restrictions imposed by this Agreement.
5. Area Developer shall at all times preserve in confidence any and all materials and information furnished or disclosed to Area Developer by Franchisor and shall disclose such information or materials only to such of Area Developer's employees or agents who must have access to it in connection with their employment. Area Developer shall not at any time, without Franchisor's prior written consent, copy, duplicate, record, or otherwise reproduce such materials or information, in whole or in part, nor otherwise make the same available to any unauthorized person.
6. Area Developer shall comply with all requirements of federal, state, and local laws, rules, and regulations.
7. Except as otherwise specifically stated in this Agreement as to be performed by Franchisor, it is the Area Developer's responsibility to undertake all actions necessary to develop and open each and every restaurant at Area Developer's sole cost and expense, which responsibility includes but is not limited to: (a) identify potential sites to be developed; (b) to negotiate for the acquisition of such sites by lease or purchase; (c) to obtain necessary and appropriate governmental approvals; (d) to select a general contractor and obtain construction bids; (e) to adapt the generic building plans and specifications as provided by Franchisor to each selected site and have such plans sealed by Area Developer's architect/engineer; (f) obtain financing as needed for acquisition and construction of the building(s) and the purchase of all furniture, fixtures and equipment; and (g) to construct each restaurant to be developed pursuant to this Agreement.
A. Area Developer shall be deemed in default under this Agreement, and all rights granted herein shall automatically terminate, without notice to Area Developer, if Area Developer shall become insolvent or makes a general assignment for the benefit of creditors; if a petition in bankruptcy is filed by Area Developer or such a petition is filed against and not opposed by Area Developer; or if Area Developer is adjudicated a bankrupt, or insolvent; if a bill in equity or other proceeding for the appointment of a receiver of Area Developer or other custodian for Area Developer's business or assets is filed and consented to by Area Developer; if a receiver or other custodian (permanent or temporary) of Area Developer's business or assets or any part thereof is appointed by any court of competent jurisdiction; if proceedings for a composition with creditors under any state or federal law should be instituted by or against Area Developer; if a final judgment remains unsatisfied or of record for thirty (30) days or longer (unless a supersedeas bond is filed); or if execution is levied against Area Developer's business or assets, or if suit to foreclose any lien or mortgage against the premises or equipment is instituted against Area Developer and not dismissed within thirty (30) days; or if the real or personal property of any of Area Developer's restaurants shall be sold after levy thereupon by any sheriff, marshall or constable.
B. If Area Developer fails to comply with the development schedule set forth in Exhibit A attached hereto, such action shall constitute a default under this Agreement, upon which Franchisor, in its discretion, may (1) terminate the credit granted in Section II.B. hereof and/or (2) terminate this Agreement and all rights granted hereunder without affording Area Developer any opportunity to cure the default, effective immediately upon receipt by Area Developer of written notice. If Area Developer fails to comply with the terms and conditions of any franchise agreement or development agreement between Area Developer and Franchisor, or makes or attempts to make a transfer or assignment in violation of Section VII.B. hereof, such action shall constitute a default under this Agreement. Upon such default, Franchisor, in its discretion, may terminate this Agreement and all rights granted hereunder without affording Area Developer any opportunity to cure the default, effective immediately upon receipt by Area Developer of written notice.
C. Upon termination of the Agreement, Area Developer shall have no right to establish or operate any Golden Corral restaurants for which a Franchise Agreement has not been executed by Franchisor at the time of termination. Franchisor shall be entitled to establish, and to license others to establish, Golden Corral restaurants in the Development Area except as may be otherwise provided under any Franchise Agreement which has been executed between Franchisor and Area Developer.
D. No default under this Development Agreement shall constitute a default under any Franchise Agreement between the parties hereto. Default under this Development Agreement shall constitute default under any other Development Agreement between the parties hereto.
E. No right or remedy herein conferred upon or reserved to Franchisor is exclusive of any other right or remedy provided or permitted by law or equity.
A. Transfer by Franchisor:
Franchisor shall have the right to transfer or assign all or any part of its rights or