Area Development Agreement
Sample Area Development Agreement
BLENDZ FRANCHISE SYSTEM, INC.
AREA DEVELOPER AGREEMENT
TABLE OF CONTENTS Section Page
2. TERM..........................................................:............................................ C-4
3. FRANCHISE AGREEMENT, INITIAL FRANCHISE FEE, AREA
DEVELOPMENT FEE AND INITIAL TRAINING............................................... C-4
4. DEVELOPMENT SCHEDULE AND MANNER FOR EXERCISING DEVELOPMENT RIGHTS............................................................................C-5
5. LOCATION OF BLENDZ® STORES..............................................................C-7
6. FRANCHISE AGREEMENT........................................................................ C-7
7. DEFAULT AND TERMINATION.................................................................. C-7
9. FORCE MAJEURE.....................................................................................C-ll
11. NONCOMPETITION.................................................................................. C-12
12. ENTIRE AGREEMENT...............................................................................C-13
13. MONTHLY REPORTS................................................................................ C-14
14. INDEPENDENT CONTRACTOR AND INDEMNIFICATION................................ C-14
15. COMPLIANCE WITH APPLICABLE LAWS.....................................................C-14
16. CHANGE IN DEVELOPMENT TERRITORY.................................................... C-14
17. SUCCESSORS AND ASSIGNS...................................................................... C-15
18. APPLICABLE LAW....................................................................................C-15
19. RECEIPT OF DOCUMENTS..........................................................................C-15
22. MODIFICATION BY BLENDZ.......................................................................C-16
Attachment A: Description of Development Territory
Attachment B: Development Schedule
Attachment C: Personal Guaranty
Attachment D: Statement of Shareholders/Members/Partners
BLENDZ FRANCHISE SYSTEM, INC. AREA DEVELOPMENT AGREEMENT
THIS AGREEMENT* is made and entered into this____day of____________, 20___,
("Effective Date") by and between Blendz Franchise System, Inc., a California corporation, with a business address at 267 E. Campbell Avenue, Suite 200, Campbell, California 95008
("Blendz") and____________________________________________, with its business address
WHEREAS, Blendz holds the exclusive franchise rights to a proprietary system which has been developed through significant expenditures of time, skill, effort and money ("System") relating to the establishment, development and operation of a quick service restaurant specializing in to ssed-to-order salads, grilled Panini sandwiches, blended smoothies, gourmet soups and specialty coffees and espresso under the trademark Blendz® ("Blendz® Stores"); and
WHEREAS, the System features use of the Marks (defined below), a distinctive exterior and interior design, decor, color scheme, fixtures and furnishings for the Blendz® Store, as well as uniform standards, specifications, methods, policies and procedures for store operations, proprietary menu items and food preparation methods, proprietary inventory and management control, training and assistance, and advertising and promotional programs (all as further defined in the Operations Manual), all of which may be changed, improved upon, and further developed occasionally by Blendz;
WHEREAS, Blendz, through its dedicated operations, marketing methods, and merchandising policies, has developed the reputation, public image and good will of its System and established a firm foundation for its franchised restaurant operations consisting of the highest standards of training, management, supervision, appearance, services and quality of products;
WHEREAS, the System is identified by means of certain trademarks, including the mark BLENDZ® and logo, and any other trade names, service marks, and trademarks as are now, and may hereafter be, designated for use in connection with the System ("Marks");
WHEREAS, Blendz continues to develop, expand, use, control and add to the Marks and the System for the benefit of and exclusive use by Blendz and its franchisees in order to identify for the public the source of the products and services marketed thereunder and to represent the System's high standards of quality and service;
WHEREAS, Area Developer desires to obtain the exclusive right to develop, construct, manage and operate a series of Blendz® Stores under the development schedule described in Attachment B attached hereto ("Development Schedule") and within the territory described in Attachment A attached hereto ("Development Territory"), under the System and Marks, as well as to receive the training and other assistance provided by Blendz in connection therewith;
WHEREAS, the Area Developer hereby acknowledges that it has read this Agreement and Blendz's Uniform Franchise Offering Circular ("Offering Circular"), and that it has no knowledge of any representations about the System or about Blendz or its franchising program or policies made by Blendz or by its officers, directors, shareholders, employees or agents which are contrary to the statements in Blendz's Offering Circular or to the terms of this Agreement, and that it understands and accepts the terms, conditions and covenants contained in this Agreement as being reasonably necessary to maintain Blendz's high standards of quality and service and the uniformity of those standards at all facilities which operate pursuant to the System and thereby to protect and preserve the goodwill of the System and the Marks; and
WHEREAS, Area Developer understands and acknowledges the importance of Blendz's uniformly high standards of quality and service and the necessity of operating the System in strict conformity with Blendz's quality control standards and specifications.
NOW, THEREFORE, the parties, in consideration of the promises, undertakings and commitments of each party to the other party set forth herein, hereby mutually agree as follows:
1.1 Blendz hereby grants to Area Developer the right and license to develop,
construct, operate and manage_____________L (___) Blendz® Stores in strict accordance
with the System and under the Marks within the Development Territory described in Attachment A. Each Blendz® Store shall be operated according to the terms of the individual franchise agreement ("Franchise Agreement") with respect thereto.
1.2 If the Area Developer is developing Blendz® Stores, and complies with the terms of this Agreement, the Development Schedule, and the individual Franchise Agreement for each Blendz® Store, then Blendz will not franchise or license others, nor will it itself directly or indirectly develop, own, lease, construct or operate in any manner, any Blendz® Stores in the Development Territory during the term hereof; however, Blendz reserves the rights set forth in Section 1.3. Upon the expiration or termination of this Agreement, the Area Developer will no longer have an exclusive Development Territory and each Blendz® Store will be limited to operating solely at the franchised location ("Franchisee! Location") described in the individual Franchise Agreement. Area Developer understands, acknowledges and agrees that as a Franchisee, Area Developer will not receive any exclusive or protected territorial rights other than the exclusive rights set out in each individual Franchise Agreement.
1.3 The Area Developer acknowledges that the rights granted hereunder are nonexclusive and that Blendz and its affiliates retain the exclusive right among other:
(i) Advertise and promote the System in the Development Territory and any Authorized Territory defined in any individual Franchise Agreement and fill customer orders, or grant others the right to fill customer orders, by providing catering, take-out and delivery services to customers who reside or work in the Development Territory and any Authorized Territory defined in any individual Franchise Agreement;
(ii) Market ancillary products, gift cards and other merchandise via the Internet, catalogues, phone solicitation and other direct-selling techniques to customers who reside in the Development Territory and any Authorized Territory identified in any individual Franchise Agreement;
(iii) Offer and sell, or grant others the right to offer or sell products under the Marks, that are the same as or similar to those products sold at a Blendz® Store, through alternative channels of distribution, including without limitation, at sports and entertainment facilities, events, supermarkets, transportation facilities, kiosks, food concessions, hospitals and schools;
(iv) Offer and sell, or grant others the right to offer or sell, products and services under the Marks in the Development Territory and any Authorized Territory identified in any individual Franchise Agreement through Express Units;
(v) Offer and sell any products and services, that are the same as or similar to the products and services offered at Blendz® Stores, under any names and marks other than the Marks;
(vi) Use or license others to use the Marks and System for operation of a Blendz® Store at any location outside the Development Territory and any Authorized Territory identified in any individual Franchise Agreement regardless of proximity to the Development Territory and any Authorized Territory identified in any individual Franchise Agreement;
(vii) Purchase, be purchased by, merge or combine with any other business, including a business that competes directly with Area Developer's Blendz® Stores, wherever located;
(viii) Establish any websites utilizing a domain name incorporating the words "Blendz" or similar derivatives thereof. The Franchisor retains the sole right to market on the Internet and use the Marks on the Internet, including all use of websites, domain names, URL's, directory addresses, metatags, linking, advertising, and co-branding and other arrangements. The Franchisee may not independently market on the Internet, or use any domain name, address, locator, link, metatag, or search technique, with words or symbols similar to the Marks or otherwise establish any presence on the Internet; and
(ix) Implement multi-area marketing programs which may allow Blendz or others to solicit or sell to customers anywhere, and to issue mandatory policies to coordinate these multi-area marketing programs.
1.4 This Agreement is not a franchise agreement and Area Developer shall have no right to use in any manner the Marks or System by virtue hereof. Each Blendz® Store will be governed by the individual Franchise Agreement signed by Blendz® and Area Developer for each Blendz® Store.
1.5 The Area Developer must contribute some amount of its personal capital to the development of each Blendz® Store and must own at least a fifty-one percent (51%) equity interest in each Blendz® Store developed hereunder. In addition, Franchisee shall ensure that a either a person having at least a ten percent (10%) beneficial equity interest in the Franchisee ("Operating Partner") shall at all times devote his or her full time and attention to managing, supervising, and developing each Blendz® Store and that the person is at all times identified to Blendz or that Franchisee has identified a Designated Store Manager to devote his or her full time and attention to managing, supervising and developing each Blendz® Store as set forth in the individual Franchise Agreement. Area Developer shall identify all equity owners of Area Developer by completing the Statement of Shareholders/Members/Partners attached to this Agreement as Attachment D. Area Developer shall provide Blendz with an updated form of Attachment D within ten (10) business days of any change in the equity ownership of Area Developer. The failure of Area Developer to provide Blendz with an updated Attachment D within the time frame specified in this Section 1.5 shall constitute a material default of this Agreement.
Unless sooner terminated pursuant to the provisions of Section 7, the term of this
Agreement shall expire upon the earlier of (a)______years from the Effective Date, or (b)
completion of the term of the Development Schedule. Blendz, in its sole discretion, may permit Area Developer to renew this Agreement for an additional term; provided that, without limiting the foregoing, the Area Developer has not defaulted in its obligations under this Agreement, any individual Franchise Agreement or any other agreement with Blendz or any affiliate of Blendz, and the parties agree in writing to an extension of the Development Schedule.
3. FRANCHISE AGREEMENT, INITIAL FRANCHISE FEE, AREA DEVELOPMENT FEE AND INITIAL TRAINING
3.1 The Area Developer shall pay upon execution of this Agreement an area development fee ("Area Development Fee") equal to the number of Blendz® Stores to be opened under this Agreement multiplied by Ten Thousand Dollars ($10,000) for each Blendz® Store to be opened. The Area Development Fee is set forth in Attachment A.
3.2 The Area Developer shall also pay an initial franchise fee ("Initial Franchise Fee") for each Blendz® Store to be developed hereunder. The Area Developer will pay the then-current Initial Franchise Fee being charged by Blendz at the time the Area Developer signs the individual Franchise Agreement for its first Blendz® Store pursuant to the terms of the individual Franchise Agreement. The Area Developer will pay the Initial Franchise Fee for each additional Blendz® Store ("Additional Initial Franchise Fee") opened pursuant to this Agreement charged by Blendz at the time the parties mutually execute this Agreement. The Additional Initial Franchise Fee will be paid for each additional Blendz® Store opened by the Area Developer pursuant to this Agreement at the time the Area Developer signs the individual Franchise Agreement for such additional Blendz® Stores. The Additional Initial Franchise Fee is set forth in Attachment A.
3.3 If the Area Developer is developing between three (3) and five (5) Blendz® Stores (after the first Blendz® Store) the Additional Initial Franchise Fee for each additional Blendz® Stores will be reduced by Twenty-Five Percent (25%). If the Area Developer is developing six (6) or more Blendz® Stores (after the first Blendz® Store) the Additional Initial Franchise Fee for each additional Blendz® Store will be reduced by Forty Percent (40%).
3.4 The Area Developer shall also pay the for initial training, site development and market ("Initial Training, Site Development and Architectural Design and Marketing Fee") for each Blendz® Store it opens pursuant to this Agreement. The then-current Initial Training, Site Development and Architectural Design and Marketing Fee is due for each Blendz® Store is due upon the mutual execution of the individual Franchise Agreement.
3.5 The Area Developer shall receive a credit of $5,000, ("Development Fee Credit") towards the Additional Initial Franchise Fee for each subsequent Blendz® Store opened under the Development Schedule. The Development Fee Credit will be applied towards the Additional Initial Franchise Fee at the time the Area Developer and Blendz sign the individual Franchise Agreement for each subsequent Blendz® Store.
3.6 All amounts collected shall be deemed fully earned immediately upon receipt and shall be non-refundable, regardless of whether Area Developer opens any of the Blendz® Stores it is obligated to open in the Development Territory.
4. DEVELOPMENT SCHEDULE AND MANNER FOR EXERCISING
4.1 Developer shall exercise the development rights granted under this Agreement only by entering into a separate Franchise Agreement with Blendz for each Blendz® Store for which a development right is granted. The Franchise Agreement to be executed for the first Blendz® Store to be developed by Area Developer under this Agreement shall be executed and delivered to Blendz concurrently with the execution and delivery of this Agreement. All subsequent Blendz® Stores developed under this Agreement shall be established and operated pursuant to the form of Franchise Agreement then being used by Blendz for Blendz® Stores. Area Developer acknowledges that the then current form of Franchise Agreement may differ from the form attached, and may include different economic terms, including, but not limited to, higher royalty rates and advertising contributions.
4.2 Development Schedule.
(a) Acknowledging that time is of the essence, Area Developer agrees to exercise its development rights according to Section 3.1 and according to the Development Schedule set forth on Attachment B, which schedule designates the number of Blendz® Stores in the Development Territory to be established and in operation by Area Developer upon the expiration of each of the designated development periods ("Development Periods").
(b) During any Development Period, Area Developer may, with Blendz's prior written consent, develop more than the number of Blendz® Stores that Area Developer is
required to develop during that Development Period. Any Blendz® Stores developed during a Development Period in excess of the minimum number of Blendz® Stores required to be developed upon expiration of that Development Period shall be applied to satisfy Area Developer's development obligation during the next succeeding Development Period. Area Developer shall not open more than the cumulative total number of Blendz® Stores Area Developer is obligated to develop under this Agreement, as set forth above in the Development Schedule; provided, however, that Area Developer may be permitted to open Blendz® Stores in excess of the number permitted by the Development Schedule if, in Blendz's sole discretion, Blendz determines that the Development Territory can support additional Blendz® Stores and Area Developer receives Blendz's advanced written permission to develop more Blendz® Stores. Area Developer shall pay Blendz the then-current Initial Franchise Fee applicable at the time Area Developer signs a Franchise Agreement for any additional Blendz® Stores over the of the number permitted by the Development Schedule.
(c) If during the term of this Agreement, Area Developer ceases to operate any Blendz® Store developed under this Agreement for any reason, Area Developer shall develop a replacement Blendz® Store to fulfill Area Developer's obligation to have open and in operation the required number of Blendz® Stores upon the expiration of each Development Period. The replacement Blendz® Store shall be developed within a reasonable time to be agreed upon by the parties after Area Developer ceases to operate the Blendz® Store to be replaced. If during the term of this Agreement, Area Developer, in accordance with the terms of any Franchise Agreement for a Blendz® Store developed under this Agreement, transfers its interest in such Blendz® Store, the transferred Blendz® Store shall continue to be counted in determining whether Area Developer has complied with the Development Schedule so long as it continues to be operated as a Blendz® Store. If the transferred Blendz® Store ceases to be operated as a Blendz® Store during the term of this Agreement, Area Developer shall develop a replacement Blendz® Store within a reasonable time after the transferred Blendz® Store ceases to be operated as a Blendz® Store. In either case, the reasonable time period shall apply to the development of the replacement Blendz® Store only and, in Blendz's sole discretion, extend the term of the applicable Development Period to the end of the mutually agreed upon time period; provided that in no event shall such time period exceed 1 year.
(d) Opening Schedule.
(i) Area Developer shall open each Blendz® Store and shall commence business in accordance with the Development Schedule set forth on Attachment B, unless, subject to Blendz's approval, Area Developer obtains an extension of the Development Period from Blendz to complete construction and commence operation of a particular Blendz® Store. Each extension shall be for an additional period determined by Blendz commencing upon the expiration of the applicable Development Period, including any previous extensions thereof ("Extension Date"). If an extension of a Development Period is granted by Blendz, the Opening Date for the Blendz® Store (as defined in the Franchise Agreement) shall be extended to the Extension Date. No extension of any Development Period shall affect the duration of any other Development Period or any of Area Developer's other development obligations. If an extension is requested in the final Development Period, the term of this Agreement shall be extended to the Extension Date and thereafter, Area Developer shall have no further rights under this Agreement
except as provided in Section 2. The provisions of this Section 4.2(d)(i) do not apply to the development of a replacement Blendz® Store under Section 4.2(c).
(ii) Area Developer shall notify Blendz in writing at least 30 days prior to the Projected Opening Date (defined below) for a Blendz® Store if Area Developer will be unable to complete construction and commence operation of the Blendz® Store by the expiration date of the Development Period in which such Blendz® Store was to have been opened. In such notice Area Developer shall request that Blendz consider its request for an extension and shall include a description of the reasons for its failure to develop the Blendz® Store in a timely manner and the expected date of completion of construction and opening, if the extension were to be granted.
(e) Failure by Area Developer to adhere to the Development Schedule (including any extensions approved by Blendz) or to adhere to any time period for the development of replacement Blendz® Stores as set forth in Section 4.2(c) shall constitute a material event of default under this Agreement.
4.3 Area Developer acknowledges that the projected opening dates ("Projected Opening Dates") for each Blendz® Store set forth on Attachment B are reasonable and consistent with the requirements of the Development Schedule. Area Developer shall execute a Franchise Agreement for each Blendz® Store at or prior to the applicable execution deadline ("Execution Deadline") set forth on Attachment B.
5. LOCATION OF BLENDZ® STORES
The location of each Blendz® Store shall be selected by the Area Developer, within the Development Territory, subject to Blendz's prior approval as set forth in the individual Franchise Agreement. The establishment of any proposed site by Area Developer before approval of Blendz shall be the sole risk and responsibility of Area Developer and shall not obligate Blendz in any way to approve the same. The approval of a proposed site by Blendz does not in any way constitute a warranty or representation by Blendz as to the suitability of the site for location of a Blendz® Store.
6. FRANCHISE AGREEMENT
Area Developer shall not commence construction on, or open any Blendz® Store until, among other things, the entire Initial Franchise Fee or Additional Initial Franchise Fee, as the case may be, and Initial Training, Site Selection, Architectural Development and Marketing Fee, for said Blendz® Store has been paid in full and the individual Franchise Agreement for said Blendz® Store has been signed by both the Area Developer and Blendz.
7. DEFAULT AND TERMINATION
7.1 Area Developer shall be in default under this Agreement should Area Developer (or its affiliate): (a) fail to comply with the Development Schedule; (b) fail to perform any of its obligations under this Agreement, any individual Franchise Agreement or any other agreement
between Area Developer and Blendz or its affiliates; (c) cease to be a franchisee of Blendz in good standing; or (d) fail to comply with the provisions on transfer contained herein.
7.2 Upon a default, Blendz shall have the right, at its option, and in its sole discretion, to do any or all of the following:
(a) terminate this Agreement;
(b) terminate the territorial exclusivity granted to Area Developer in the individual Franchise Agreements and in this Agreement;
(c) reduce the size of the Area Developer's Development Territory or the number of Blendz® Stores Area Developer may develop in the Development Territory; or
(d) accelerate the Development Schedule on immediate written notice.
7.3 In addition, if any individual Franchise Agreement issued to Area Developer or an approved affiliate of Area Developer, whether or not issued pursuant to this Agreement, is terminated for any reason, Blendz shall have the right to terminate this Agreement on immediate written notice to Area Developer. Upon termination or expiration of the term of this Agreement, this Agreement shall be of no further effect, and Blendz shall have the right to itself open, or license others to open, Blendz® Stores within the Development Territory. For purposes of this Section 7, any Franchise Agreement issued by Blendz to Area Developer or its approved affiliates, or any corporation, partnership or joint venture, or their affiliates, in which Area Developer or any stockholder, partner or joint venturer of Area Developer, has any direct or indirect ownership or participation interest, shall be deemed a Franchise Agreement issued to Area Developer.
8.1 By Blendz. Blendz shall have the absolute right to transfer or assign all or any part of its rights or obligations hereunder to any person or legal entity which assumes its obligation under this Agreement and Blendz shall thereby be released from any and all further liability to Area Developer.
8.2 By Area Developer.
(a) Area Developer understands and acknowledges that the rights and duties set forth in this Agreement are personal to Area Developer and are granted in reliance upon the personal qualifications of Area Developer or Area Developer's principals. Area Developer has represented to Blendz that Area Developer is entering into this Agreement with the intention of complying with its terms and conditions and not for the purpose of transferring the development and option rights hereunder.
(b) Neither Area Developer nor any partner, member, or shareholder thereof shall, without Blendz's prior written consent, directly or indirectly assign, transfer, convey, give
away, pledge, mortgage or otherwise encumber any interest in this Agreement or in Area Developer. Any proposed assignment occurring by operation of law or otherwise, including any assignment by a trustee in bankruptcy, without Blendz's prior written consent, shall be a material default of this Agreement.
(c) Any assignment, transfer or other disposition by the Area Developer of a single-unit Blendz® Store within the Development Territory will be governed by the Franchise Agreement to which the single-unit Blendz® Store is bound.
(d) Subject to the other provisions of Section 8 herein, including Section 8.2(c) above and Section 8.2(e) below, if Area Developer wishes to sell, transfer or otherwise assign any portion, or all, of the Development Territory, the Area Developer shall notify Blendz which may approve or disapprove the same in its sole discretion, and in addition Blendz may require any or all of the following as conditions of its approval:
(i) All of the Area Developer's accrued monetary obligations and all other outstanding obligations to Blendz, its affiliates and suppliers must be fully paid and satisfied;
(ii) The Area Developer must not be in default of any provision of its Franchise Agreements, any amendments thereof or successors thereto, or any other agreement between the Area Developer and Blendz, its subsidiaries or affiliates;
(iii) The Area Developer and each of its affiliates, shareholders, members, partners, officers and directors must sign a general release, under seal, the consideration for which shall be the approval of the transfer, in a form satisfactory to Blendz, of any and all claims against Blendz and its affiliates, officers, directors, shareholders and employees, in their corporate and individual capacities, including, without limitation, claims arising under federal, state and local laws, rules and ordinances;
(iv) The transferee must enter into a written assignment, under seal and in a form satisfactory to Blendz, assuming and agreeing to discharge all of the Area Developer's obligations under the relevant Franchise Agreements and, if deemed necessary by Blendz, the transferee's principals, individually, shall guarantee the performance of all these obligations in writing in a form satisfactory to Blendz;
(v) The transferee must demonstrate to Blendz's satisfaction that the transferee meets Blendz's educational, managerial and business standards; possesses a good moral character, business reputation and credit rating; has the aptitude and ability to operate the Blendz Stores (as may be evidenced by prior related experience or otherwise); has at least the same managerial and financial acumen required of new Area Developers and shall have sufficient equity capital, as determined by Blendz in Blendz's sole discretion, to operate the Blendz® Stores;
(vi) At Blendz's option, the transferee must sign (and, upon Blendz's request, shall cause all interested parties to sign), for a term ending on the expiration date of the
Franchise Agreement(s) and with the renewal term as may be provided by the Franchise Agreement(s), the standard form of Franchise Agreement and Area Development Agreement then being offered to new Area Developers and any other ancillary agreements as Blendz may require for the Blendz® Stores, which agreements shall supersede the Franchise Agreements and the Area Development Agreement between the Area Developer and Blendz in all respects and the terms of which agreements may differ from the terms of the Franchise Agreements and Area Development Agreement, including, without limitation, the implementation of other fees and different royalty rates;
(vii) The Area Developer and its principals must remain liable for all direct and indirect obligations to Blendz in connection with the Blendz® Stores before the effective date of transfer and will continue to remain responsible for their obligations of nondisclosure, noncompetition and indemnification as provided in the Franchise Agreements and Personal Guaranty, attached to this Agreement as Attachment C, and shall sign any and all instruments reasonably requested by Blendz to further evidence this liability; and
(viii) Area Developer or its approved transferee shall pay to Blendz, at the time it submits a request to transfer to Blendz, a transfer fee ("Development Transfer Fee") equal to $5,000 multiplied by the number of unopened Blendz® Stores the Area Developer is obligated to open at the time of such transfer request pursuant to the Development Schedule and the amount of any Transfer Fee set out in the individual Franchise Agreements for any open and operating Blendz® Stores that Area Developer requests to transfer at the time Area Developer notifies Blendz of its intent to transfer or assign this Agreement (which transfer or assignment shall be in compliance with the terms of each open Blendz® Store's individual Franchise Agreement), to cover Blendz's administrative and other expenses in connection with the transfer of the Blendz® Stores by the Area Developer.
(e) If Area Developer or its principals shall at any time determine to sell, transfer or otherwise dispose of all or part of the rights under this Agreement or an ownership interest in Area Developer, and Area Developer or its principals shall obtain a bona fide, signed written offer from a responsible and fully disclosed purchaser, Area Developer shall notify Blendz in writing of each offer, and Blendz shall have the right and option, exercisable within a period of thirty (30) days from the date of delivery of this offer, by written notice to Area Developer or its owners, to purchase the rights under this Agreement or this ownership interest for the price and on the terms and conditions contained in said purchaser's offer. If Blendz does not exercise its right of first refusal, Area Developer or its principals may complete the sale of Area Developer or this ownership interest, subject to Blendz's approval of the purchaser and all other conditions set forth in this Section 8.2, provided that if this sale is not completed within one hundred twenty (120) days after delivery of this offer to Blendz, Blendz shall again have the right of first refusal herein provided. In the event that the Area Developer wishes to publicly offer its shares in any partnership or corporation which has an ownership interest in the Area Developer, said public offering shall be subject to the approval of Blendz, this approval to not be unreasonably withheld.
8.3 Entity Ownership. Each shareholder, member, or partner of the corporation, corporation, or partnership which is granted the rights to serve as the Area Developer hereunder
shall be a party to a shareholders' agreement, operating agreement, or partnership agreement which shall provide, inter alia, that upon any dissolution of the corporation, limited liability company, or partnership, or upon any divorce decree among the parties who are also shareholders, members, or partners, that ownership of the shares, membership interest, or partnership interest shall be transferred to the shareholder, member, or partner for agreed upon consideration, that is the Controlling Principal as set out in the individual Franchise Agreements and as approved by Blendz, following any dissolution or decree. The form and content of the shareholders' agreement, operating agreement, or partnership agreement must be approved by Blendz before execution. Area Developer's failure to comply with this Section 8.3 shall constitute a material default of this Agreement.
9. FORCE MAJEURE
In the event that Area Developer is unable to comply with the Development Schedule due to strike, riot, civil disorder, war, failure to supply, fire, natural catastrophe or other similar events beyond its control, and upon notice to Blendz, the Development Schedule and this Agreement shall be extended for a corresponding period, not to exceed 90 days; provided, however, that this Section 9 shall not extend the time for payment of any monetary obligations owed to Blendz.
10.1 Nothing contained in this Agreement shall be construed to require Blendz to divulge to Area Developer any trade secrets, techniques, methods or processes except the material contained in Blendz's Operations Manuals and training materials, and then only pursuant to the terms, conditions and restrictions contained in the applicable Franchise Agreement. Area Developer acknowledges that its knowledge of Blendz's know how, processes, techniques, information and other proprietary data is derived entirely from information disclosed to it by Blendz and that the information is proprietary, confidential and a trade secret of Blendz. Area Developer agrees to adhere fully and strictly to the confidentiality of the information and to exercise the highest degree of diligence in safeguarding Blendz's trade secrets during and after the term of this Agreement. Area Developer shall divulge the material only to its employees and agents and only to the extent necessary to permit the efficient operation of the Blendz® Stores and only pursuant to the terms of the individual Franchise Agreements. It is expressly agreed that the ownership of all the items and property is and shall remain vested solely in Blendz.
10.2 The Area Developer agrees that all terms of this Agreement shall remain confidential and shall not make any public announcement, issue any press release or publicity, make any confirmation of statements made by third parties concerning the terms of this Agreement, or make any other disclosures other than the existence of this Agreement without the prior written consent of Blendz unless compelled by law or ordered to do so by a court of competent jurisdiction. It is agreed and understood that Area Developer may disclose the terms of this Agreement to its professional advisors and lenders. Blendz shall be free to make the disclosure of the terms of this Agreement as it determines, in its sole discretion, to be in the best interest of Blendz or the System.
11.1 Area Developer has heretofore specifically acknowledged that, pursuant to this Agreement, Area Developer will receive valuable specialized Confidential Information and information regarding the business of Blendz, and its System. Area Developer covenants that during the term of this Agreement and subject to the post term provisions contained herein, except as otherwise approved in writing by Blendz, Area Developer shall not, either directly or indirectly, for itself or through, on behalf of or in conjunction with any person, persons, partners or corporations:
(a) Divert or attempt to divert any business or customer of the Blendz® Stores to any competitor, 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 Blendz's Marks or the System;
(b) Employ or seek to employ any person who is at that time employed by Blendz or by Area Developer or any other Area Developer or franchisee of Blendz, or otherwise directly or indirectly induce this person to leave his or her employment; or
(c) Own, maintain, engage in, be employed by, advise, assist, invest in, franchise, make loans to or have any interest in any business which is the same as or substantially similar to the Blendz® Stores.
11.2 Area Developer covenants that, except as otherwise approved in writing by Blendz, Area Developer shall not, for a continuous uninterrupted period commencing upon the expiration or termination of this Agreement, regardless of the cause for termination, and continuing for two (2) years thereafter, either directly or indirectly, for itself or through, on behalf of or in conjunction with any person, persons, partnership or corporation, own, maintain, engage in, be employed by, advise, assist, invest in, franchise, make loans to, or have any interest in any business which is the same as or substantially similar to the Blendz® Store and which is located within a radius of fifty (50) miles of the Development Territory hereunder or the location of any area developer, company-owned restaurant, or Blendz® Store under the System which is in existence on the date of expiration or termination of this Agreement.
11.3 Sections 11.1 and 11.2 shall not apply to ownership by Area Developer of less than a five percent (5%) beneficial interest in the outstanding equity securities of any publicly held corporation.
11.4 The parties agree that each of the foregoing covenants shall be construed as independent of any other covenant or provision of this Agreement. If any or all portions of the covenants in this Section 11 are held unreasonable or unenforceable by a court or agency having valid jurisdiction in an unappealed final decision to which Blendz is a party, Area Developer expressly agrees to be bound by any lesser covenant subsumed within the terms of this covenant that imposes the maximum duty permitted by law, as if the resulting covenant were separately stated in and made a part of this Section 11.
11.5 Area Developer understands and acknowledges that Blendz shall have the right, in its sole discretion, to reduce the scope of any covenant set forth in Sections 11.1 and 11.2 in this Agreement, or any portion thereof, without Area Developer's consent, effective immediately upon receipt by Area Developer of written notice thereof, and Area Developer agrees that it shall forthwith comply with any covenant as so modified, which shall be fully enforceable.
11.6 Area Developer expressly agrees that the existence of any claims it may have against Blendz, whether or not arising from this Agreement, shall not constitute a defense to the enforcement by Blendz of the covenants in this Section 11. Area Developer agrees to pay all costs and expenses (including reasonable attorneys' fees) incurred by Blendz in connection with the enforcement of this Section 11 provided Blendz prevails in any or all of its claims against Area Developer.
11.7 Area Developer acknowledges that Area Developer's violation of the terms of this Section 11 would result in irreparable injury to Blendz for which no adequate remedy at law may be available, and Area Developer accordingly consents to the issuance of an injunction by any court of competent jurisdiction or arbitrator having jurisdiction over the Agreement prohibiting any conduct by Area Developer in violation of the terms of this Section 11.
11.8 At Blendz's request, Area Developer shall require and obtain execution of covenants similar to those set forth in this Section 11 (including covenants applicable upon the termination of a person's relationship with Area Developer) from any or all of the following persons: (a) all directors, Operating Principals and Designated Store Managers of each Blendz® Store; (b) all officers, directors and holders of a beneficial interest of five percent (5%) or more of the securities of Area Developer and of any corporation directly or indirectly controlling Area Developer if Area Developer is a corporation; and (c) the members or general partners and any limited partners (including any corporation, and the officers, directors and holders of a beneficial interest of five percent (5%) or more of the securities of any corporation which controls, directly or indirectly, any general or limited partner) if Area Developer is a limited liability company or partnership. All covenants required by this Section 11 shall be in forms satisfactory to Blendz, including, without limitation, specific identification of Blendz as a third party beneficiary of these covenants with the independent right to enforce them. Failure by Area Developer to obtain execution of a covenant required by this Section 11 shall constitute a material default under Section 7 hereunder.
12. ENTIRE AGREEMENT
This Agreement constitutes the entire understanding of the parties with respect to the development of the Development Territory, and shall not be modified except by a written agreement signed by the parties hereto. Under no circumstances do the parties intend that this Agreement be interpreted in a way as to grant Area Developer any rights to grant sub-franchises in the Development Territory.
13. MONTHLY REPORTS
Area Developer agrees that it shall provide to Blendz a monthly report of its activities and progress in developing and establishing Blendz® Stores as provided herein. The monthly reports shall be submitted no later than the fifth (5th) day following the end of the preceding month during the term of this Agreement.
14. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
14.1 It is acknowledged and agreed that Area Developer and Blendz are independent contractors and nothing contained herein shall be construed as constituting Area Developer as the agent, partner or legal representative of Blendz for any purpose whatsoever. Area Developer shall enter into contracts for the development of the Development Territory contemplated by this Agreement at its sole risk and expense and shall be solely responsible for the direction, control and management of its agents and employees. Area Developer acknowledges that it does not have authority to incur any obligations, responsibilities or liabilities on behalf of Blendz, or to bind Blendz by any representations or warranties, and agrees not to hold itself out as having this authority.
14.2 Area Developer agrees to protect, defend, indemnify and hold Blendz harmless from and against all claims, actions, proceedings, damages, costs, expenses and other losses and liabilities, directly or indirectly incurred as a result of, arising from, out of, or in connection with Area Developer's carrying out its obligations hereunder.
15. COMPLIANCE WITH APPLICABLE LAWS
Area Developer shall develop all Blendz® Stores in the Development Territory in accordance and compliance with all applicable federal, state and local statutes, laws, ordinances and regulations and agrees to promptly pay all financial obligations incurred in connection therewith.
16. CHANGE IN DEVELOPMENT TERRITORY
The parties acknowledge that the development of the Development Territory as anticipated hereunder has been determined according to the needs of the Area Developer's targeted market in the Development Territory, as determined by Blendz, as of the date of execution of this Agreement. The Area Developer understands that, if there is an increased public demand for the products and services offered by Blendz due to an increase in the number of individuals or corporations in the Development Territory, Blendz will expect the Area Developer to establish additional Blendz® Stores within the Development Territory. While Blendz will not require the Area Developer to establish the additional Blendz® Stores, Blendz will strongly encourage Area Developer to do so. If the Area Developer does not agree to open additional Blendz® Stores, Blendz has the right to open and operate additional Blendz® Stores in the Development Territory or franchise, license or otherwise authorize third parties to open additional Blendz® Stores in the Development Territory pursuant to this Section 16. Any
additional Blendz® Stores opened by the Area Developer shall be governed by Blendz's then-current form of individual Franchise Agreement.
17. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of each of the parties hereto and their heirs, successors, permitted assigns and personal representatives.
18. APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with the laws of the State of California which laws shall govern in the event of any conflict of laws, except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. Sections 1051 et. seq.). The parties expressly consent to personal jurisdiction in the State of California and agree that, except as set forth in Section 21, the state and federal court(s) located in San Jose, California will have exclusive jurisdiction for the purposes of carrying out this provision.
19. RECEIPT OF DOCUMENTS
Area Developer acknowledges receipt of the Offering Circular, Franchise Agreement, financial statements and other contracts for the Blendz® Store at least ten (10) business days before execution hereof or payment of any monies.
Whenever this Agreement requires notice, it shall be in writing and shall be sent by registered or certified mail, return receipt requested, to the other party at the addresses set forth below, unless written notice is given of a change of address.
All notices to Area Developer shall be conclusively deemed to have been received by Area Developer upon the delivery or attempted delivery of this notice to Area Developer's address listed herein, or the changed address.
Notices to Blendz: Blendz Franchise System, Inc.
267 E. Campbell Avenue, Suite 200 Campbell, California 95008 Attention: Matt Phipps
With a Copy to: Jennifer F. Wisniewski, Esq.
(which shall not constitute notice) Snell & Wilmer LLP
1200 Seventeenth Street, Suite 1900 Denver, Colorado 80202
Notices to Area Developer: __________________________________
21.1 The parties agree that all controversies, claims and disputes between them arising out of or relating to this Agreement, the rights and obligations of the parties hereto, or any other claims or causes of action relating to the performance of either party, and/or the purchase of the franchise by Area Developer shall be finally resolved by submitting this matter to binding arbitration under the commercial arbitration rules of the American Arbitration Association in effect as of the date the demand for arbitration is filed. Each party shall agree on one arbitrator selected from a panel of neutral arbitrators provided by the National Franchise Mediation Program of the CPR Institute for Dispute Resolution (located in New York, NY), or such other arbitration body as the parties mutually agree, and the arbitrator shall be chosen by the striking method. In accordance with the terms of the Federal Arbitration Act, the Arbitrator shall hear the dispute in San Jose, California. Each party shall bear its own costs and attorney fees and one-half of the arbitrator's expenses. The arbitrator shall have no authority to amend or modify the terms of this Agreement. Each party further agrees that, unless a limitation is prohibited by applicable law, the other party shall not be liable for punitive or exemplary damages and the arbitrator shall have no authority to award the same. The decision of the arbitrator shall be final and binding. The Area Developer knows, understands, and agrees that it is the intent of the parties that any arbitration between Blendz and the Area Developer shall be of the Area Developer's individual claims and that the claims subject to arbitration shall not be arbitrated in conjunction with the claims of other area developers or franchisees or on a class-wide basis, and Area Developer hereby waives any right it may assert to have its claims arbitrated in conjunction with the claims of other area developers or franchisees or on a class-wide basis.
21.2 Notwithstanding any provision contained in this Section 21, Blendz may, at its sole option, institute an action or actions for temporary or preliminary injunctive relief or seeking any other temporary or permanent equitable relief against the Area Developer that may be necessary to protect its trademarks or other rights or property. However, in Blendz's sole discretion, the final right of determination of the ultimate controversy, claim or dispute shall be decided by arbitration as aforesaid and recourse to the courts shall thereafter be limited to seeking an order to enforce an arbitral award. In no event shall the Area Developer be entitled to make, the Area Developer shall not make, and the Area Developer hereby waives, any claim for money damages by way of set off, counterclaim, defense or otherwise based upon any claim or assertion by the Area Developer that Blendz has unreasonably withheld or unreasonably delayed any consent or approval to a proposed act by the Area Developer under any of the terms of this Agreement. The Area Developer's sole remedy for any claim shall be an action or proceeding to enforce any provisions, for specific performance or declaratory judgment.
22. MODIFICATION BY BLENDZ
Blendz may modify and update its Operations Manual, the Marks and the System unilaterally under any conditions and to any extent which Blendz, in the exercise of its sole discretion, deems necessary to meet competition, protect trademarks or trade name, or improve the quality of the products or services provided through the Blendz® Stores, and Area Developer shall exclusively incur the costs of any change in the Blendz® Store or the System which has been caused by this modification. In the event that any improvement or addition to the
Operations Manual, the System or the Marks is developed by Area Developer, then Area Developer agrees to grant to Blendz an irrevocable, world wide, exclusive, royalty free license, with the right to sub license the improvement or addition.
23.1 Area Developer acknowledges and recognizes that different terms and conditions, including different fee structures, may pertain to different area development agreements and franchise agreements offered in the past, contemporaneously herewith, or in the future, and that Blendz does not represent that all area development agreements or franchise agreements are or will be identical.
23.2 Area Developer acknowledges that it is not, nor is it intended to be, a third party beneficiary of this Agreement or any other agreement to which Blendz is a party.
23.3 Area Developer represents to Blendz that it has the business acumen, corporate authority, and financial wherewithal to enter into this Agreement and to perform all of its obligations hereunder and furthermore that the execution of this Agreement is not in contravention of any other written or oral obligation of the Area Developer.
23.4 Area Developer acknowledges that it received from Blendz this Agreement with all blanks filled in at least five (5) business days before the execution of this Agreement.
23.5 Area Developer acknowledges and accepts the following:
THE SUCCESS OF THE AREA DEVELOPER IN MANAGING AND OPERATING MULTIPLE BLENDZ® STORES IS SPECULATIVE AND WILL DEPEND ON MANY FACTORS INCLUDING, TO A LARGE EXTENT, AREA DEVELOPER'S INDEPENDENT BUSINESS ABILITY. AREA DEVELOPER HAS BEEN GIVEN THE OPPORTUNITY AND BEEN ENCOURAGED TO OBTAIN INDEPENDENT ADVICE FROM LEGAL AND OTHER PROFESSIONALS BEFORE ENTERING INTO THIS AGREEMENT. THIS OFFERING IS NOT A SECURITY AS THAT TERM IS DEFINED UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS. THE OBLIGATION TO TRAIN, MANAGE, PAY, RECRUIT AND SUPERVISE EMPLOYEES OF THE BLENDZ® STORES RESTS SOLELY WITH AREA DEVELOPER. AREA DEVELOPER HAS NOT RELIED ON ANY WARRANTY OR REPRESENTATION, EXPRESSED OR IMPLIED, AS TO THE POTENTIAL SUCCESS OR PROJECTED INCOME OF THE BUSINESS VENTURE CONTEMPLATED HEREBY. NO REPRESENTATIONS OR PROMISES HAVE BEEN MADE BY BLENDZ TO INDUCE AREA DEVELOPER TO ENTER INTO THIS AGREEMENT EXCEPT AS SPECIFICALLY INCLUDED HEREIN. BLENDZ HAS NOT MADE ANY REPRESENTATION, WARRANTY OR GUARANTY, EXPRESS OR IMPLIED, AS TO THE POTENTIAL REVENUES, PROFITS OR SERVICES OF THE BUSINESS VENTURE TO AREA DEVELOPER AND CANNOT, EXCEPT UNDER THE TERMS OF THIS AGREEMENT, EXERCISE CONTROL OVER AREA DEVELOPER'S BUSINESS. AREA DEVELOPER ACKNOWLEDGES AND AGREES THAT IT HAS NO KNOWLEDGE OF ANY REPRESENTATION MADE BY BLENDZ OR ITS
REPRESENTATIVES OF ANY INFORMATION THAT IS CONTRARY TO THE TERMS CONTAINED HEREIN.
IN WITNESS WHEREOF, the parties Agreement on the day and year first written above.
hereto have duly signed and delivered this
BLENDZ FRANCHISE SYSTEM, INC., a California corporation
Matt Phipps, President
By:_ Name: Title:
AREA DEVELOPMENT AGREEMENT
DESCRIPTION OF DEVELOPMENT TERRITORY
DESCRIPTION OF THE DEVELOPMENT TERRITORY
AREA DEVELOPMENT FEE
Number of Blendz® Stores multiplied by $10,000:
Total Area Development Fee: $
ADDITIONAL INITIAL FRANCHISE FEE
Additional Initial Franchise Fee: $
AREA DEVELOPMENT AGREEMENT
Development Period to
Projected Opening Date
AREA DEVELOPMENT AGREEMENT
In consideration of, and as an inducement to, the execution of that certain Area Development
Agreement, and any revisions, modifications, addenda and amendments thereto,
(hereinafter collectively the "Agreement") dated____________, 20___, by and between Blendz
Franchise System, Inc. a California corporation, ("Blendz") and ___________________________________________________________ ("Area Developer"),
each of the undersigned Personal Guarantors agrees as follows:
1. The Personal Guarantors do hereby jointly and severally unconditionally guaranty the full, prompt and complete performance of the Area Developer under the terms, covenants and conditions of the Agreement, including without limitation, compliance with all confidentiality requirements, protection and preservation of confidential information, compliance with all noncompete provisions, compliance with the terms of any and all other agreements signed by Area Developer in order to open and operate the Blendz® Stores (as defined in the Agreement), and the complete and prompt payment of all indebtedness to Blendz under the Agreement. The word "indebtedness" is used herein in its most comprehensive sense and includes without limitation any and all advances, debts, obligations and liabilities of the Area Developer, now or hereafter incurred, either voluntarily or involuntarily, and whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, or whether recovery thereof may be now or hereafter barred by any statute of limitation or is otherwise unenforceable.
2. The obligations of the Personal Guarantors are independent of the obligations of the Area Developer and a separate action or actions may be brought and prosecuted against any or all of the Personal Guarantors, whether or not actions are brought against the Area Developer or whether the Area Developer is joined in any action.
3. Blendz shall not be obligated to inquire into the power or authority of the Area Developer or its partners or the officers, directors, agents, members or managers acting or purporting to act on the Area Developer's behalf and any obligation or indebtedness made or created in reliance upon the exercise of this power and authority shall be guaranteed hereunder. Where the Personal Guarantors are corporations, limited liability companies, or partnerships it shall be conclusively presumed that the Personal Guarantors and the shareholders, members, partners, agents, officers and directors acting on their behalf have the express authority to bind these corporations, limited liability companies, or partnerships and that these corporations, limited liability companies, or partnerships have the express power to act as the Personal Guarantors pursuant to this Personal Guaranty and that this action directly promotes the business and is in the interest of these corporations, limited liability companies, or partnerships.
4. Blendz, its successors and assigns, may occasionally, without notice to the undersigned: (a) resort to the undersigned for payment of any of the indebtedness, whether or not it or its successors have resorted to any property securing any of the indebtedness or proceeded
against any other of the undersigned or any party primarily or secondarily liable on any of the indebtedness; (b) release or compromise any indebtedness of any of the undersigned hereunder or any indebtedness of any party or parties primarily or secondarily liable on any of the indebtedness; (c) extend, renew or credit any of the indebtedness for any period (whether or not longer than the original period); (d) alter, amend or exchange any of the indebtedness; or (e) give any other form of indulgence, whether under the Agreement or otherwise.
5. The undersigned further waive presentment, demand, notice of dishonor, protest, nonpayment and all other notices whatsoever, including without limitation: notice of acceptance hereof; notice of all contracts and commitments; notice of the existence or creation of any liabilities under the Agreement and of the amount and terms thereof; and notice of all defaults, disputes or controversies between the Area Developer and Blendz resulting from the Agreement or otherwise, and the settlement, compromise or adjustment thereof.
6. This Personal Guaranty shall be enforceable by and against the respective administrators, executors, successors and assigns of the Personal Guarantors and the death of any Personal Guarantor shall not terminate the liability of the Personal Guarantor or limit the liability of the other Personal Guarantors hereunder.
7. If more than one person has signed this Personal Guaranty, the term "the undersigned," as used herein shall refer to each person, and the liability of each of the undersigned hereunder shall be joint and several and primary as sureties.
IN WITNESS WHEREOF, each of the undersigned has signed this Personal Guaranty under seal effective as of the_____day of_______________, 20___.
[Printed Name] [Printed Name]
Home Address Home Address
Home Telephone Home Telephone
Business Telephone Business Telephone
[Printed Name] [Printed Name]
Home Address Home Address
Home Telephone Home Telephone
Business Telephone Business Telephone
AREA DEVELOPMENT AGREEMENT
STATEMENT OF SHAREHOLDERS/ MEMBERS/PARTNERS
STATEMENT OF SHAREHOLDERS/MEMBERS/PARTNERS
The shareholders, members, or partners (collectively the "Shareholders") of the Area Developer and their respective shareholdings are as follows:
NAME OF SHAREHOLDER NUMBER AND OWNERSHIP PERCENTAGE
DESIGNATION OF SHARES