Area Development Agreement

Sample Area Development Agreement

EXHIBIT D

AREA DEVELOPMENT AGREEMENT

JOHNNY ROCKETS LICENSING CORPORATION

AREA DEVELOPMENT AGREEMENT

with

[ENTITY]

for

[CITY, STATE]

DEVELOPMENT AREA

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JOHNNY ROCKETS LICENSING CORPORATION

AREA DEVELOPMENT AGREEMENT

TABLE OF CONTENTS

Page

1. INCORPORATION OF RECITALS, WARRANTIES AND REPRESENTATIONS BY DEVELOPER......................................................................................................................................................................................................2

2. DEFINITIONS.............................................................................................................................................................................................__.2

3. GRANT OF RIGHTS; ORGANIZATION OF DEVELOPER........................................................................ ___4

4. TERM......................................................._______....._____......................................................................................._____................6

5. FEES............................................................................................................_______.................................._______....................................6

6. SELECTION OF RESTAURANT VENUES..................................................................................... ........................6

7. DEVELOPMENT OBLIGATIONS............................................................_.._............. ..........................................................9

8. INDEMNIFICATION....................................................___...................................................................................................................10

9. TRANSFER.....................................................................................................................................___.........................................................10

10. NON-COMPETITION, NON-SOLICITATION, TRADE SECRETS................................................... .15

11. RELATIONSHIP OF THE PARTIES.................................................................................................................................... 17

12. TERMINATION.............................................................................................................................................................................................18

13. ENFORCEMENT......................................................................................................................................................................................20

14. NOTICES............................................................................................................................................................................................................22

15. MISCELLANEOUS..........................________.................................................................................................................................22

Exhibit "1" - Development Area Exhibit "2" - Development Schedule

Exhibit "3" - Guaranty and Subordination Agreement

Exhibit "4" - Current Form of License Agreement

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JOHNNY ROCKETS LICENSING CORPORATION AREA DEVELOPMENT AGREEMENT

THIS AREA DEVELOPMENT AGREEMENT ("Agreement") is made and entered into this dav of _______ ("Effective Date"! bv and between JOHNNY ROCKETS

LICENSING CORPORATION, a California corporation^A ("LICENSOR")* and___________________,

^A3____________________________("DEVELOPER^A").

RECITALS:

A. LICENSOR has acquired and developed a system for the establishment and operation of restaurants operating under the Marks (as defined below) and in accordance with the System (as defined below) and featuring the sale of hamburgers, chili, malts and related products to the general public, and which may feature certain ancillary branded merchandise such as clothing, souvenirs and novelty items ("JOHNNY ROCKETS Restaurant(s)").

B. The Johnny Rockets System consists of a general restaurant layout and design, equipment, interior and exterior decorations, signage specifications, menus of standard appearance and design, recipes, formulas, specially designed paper goods and other items used in serving and dispensing food products, clothing, souvenirs and novelty items, advertising, trade practices, operating methods, various business forms, training materials, manuals, including the Manuals, sales techniques, personnel management and management control systems as specified by LICENSOR from time to time for use in connection with the operation of JOHNNY ROCKETS Restaurants ("Johnny Rockets System" or "System").

C. LICENSOR has acquired and owns the trade name and service mark JOHNNY ROCKETS and certain designs, phrases, logos, trademarks, service marks, copyrights and other items now or hereafter owned, used or provided by LICENSOR and designated in writing by LICENSOR for the continued use by DEVELOPER in connection with the operation of JOHNNY ROCKETS Restaurants under the Johnny Rockets System pursuant to the terms of this Agreement and any executed License Agreement executed by and between LICENSOR and DEVELOPER pursuant to the terms of this Agreement ("Marks").

D. DEVELOPER desires to acquire the limited license to develop and operate JOHNNY ROCKETS Restaurants within the Development Area set forth in Exhibit "1" and within the Development Periods as more fully described in the Development Schedule set forth in Exhibit "2". attached hereto and LICENSOR desires to grant DEVELOPER a license on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in reliance upon and in consideration of the above facts and the terms and conditions set forth below, the parties agree as follows:

1. INCORPORATION OF RECITALS, WARRANTIES AND REPRESENTATIONS BY

DEVELOPER

The recitals set forth in Paragraphs A, B, C and D above are true and correct and are hereby incorporated by reference into this Agreement. DEVELOPER hereby warrants, represents, covenants, and acknowledges to LICENSOR that:

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A. DEVELOPER has had no part in the creation or development of the System, the Marks, the Manuals or any other proprietary information provided by LICENSOR;

B. DEVELOPER is entering into this Agreement after having made an independent investigation of LICENSOR'S operations, and not upon any representation as to the sales, profits, or earnings which DEVELOPER might realize;

C. LICENSOR has not made any representations or promises to DEVELOPER which are not contained in this Agreement and DEVELOPER has not relied upon, nor has LICENSOR made, any warranties, expressed or implied, as to the potential success of the business contemplated herein; and

D. DEVELOPER understands that the System and Manuals are continually evolving and that LICENSOR has the right in its sole and absolute discretion to make changes therein from time to time as it may deem appropriate.

LICENSOR'S obligations and DEVELOPER'S rights pursuant to this Agreement are expressly conditioned upon the truth of the warranties and representations set forth above at the time of execution of this Agreement and their continued truth throughout the Term of this Agreement.

2. DEFINITIONS

"Applicable Law" means and includes applicable common law and all applicable statutes, laws, rules, regulations, ordinances, policies and procedures established by any Governmental Authority, governing the development or operation of DEVELOPER'S JOHNNY ROCKETS Restaurant(s), including all immigration, labor, disability, food and drug laws, health and safety regulations, and Americans With Disabilities Act requirements, as in effect on the Effective Date hereof, and as may be amended, supplemented or enacted from time to time.

"Business Entity" means any corporation, limited liability company, partnership, association, trust, or other entity, that is not an individual.

"Development Area" means the geographic area described or identified in Exhibit "l" attached to this Agreement and incorporated herein by this reference.

"Development Period" means each of the time periods during which DEVELOPER shall have the right and obligation to construct, equip, open and thereafter continue to operate JOHNNY ROCKETS Restaurant(s) in accordance with the Development Schedule.

"Development Schedule" means the schedule by which DEVELOPER must develop and open JOHNNY ROCKETS Restaurants in the Development Area as set forth in Exhibit "2" and attached to this Agreement and incorporated herein by this reference.

"Governmental Authority" means and includes all federal, state, county, municipal and local governmental and quasi-governmental agencies, commissions and authorities.

"Internet" means collectively the myriad of computer and telecommunications facilities, including equipment and software, which comprise the interconnected worldwide network of networks that employ

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the TCP/IP [Transmission Control Protocol/Internet Protocol], or any predecessor or successor protocols to such protocol, to communicate information of all kinds by fiber optics, wire, radio, or other methods of transmission.

"Lease" means the lease or sublease or other agreement or instrument pursuant to which DEVELOPER obtains the right to occupy a site.

"License Agreement" means the then-current form of agreement used by LICENSOR to grant to its developers the right to own and operate a single JOHNNY ROCKETS Restaurant, including all exhibits, riders, guarantees or other related instruments.

"Manuals" shall have the meaning set forth in Recital B.

"Marks" shall have the meaning set forth in Recital A.

"Minimum Development Quota" shall have the meaning set forth in Section 3.A.

"Non-Traditional Venue" means and includes institutional settings, including airports and other transportation facilities, colleges and universities, schools, hospitals, military and other governmental/municipal facilities, office or in-plant food service facilities, shopping mall food courts, hotels, resorts, theme parks, stadiums, arenas, convention centers, Indian reservations, casinos, food courts operated by a master concessionaire, and any venue in which food service is or may be provided by a master concessionaire or contract food service provider.

"Offering Circular" means the Uniform Franchise Offering Circular or its equivalent as may be required by Applicable Law.

"Owner" means any and all direct and indirect shareholders, members, partners, trustees, or other equity owners of a Business Entity; except that if LICENSOR has any ownership interest in DEVELOPER, the term "Owner" shall not include or refer to LICENSOR or its Owners or affiliates, and no obligation or restriction upon the "DEVELOPER", or its Owners, directors or officers shall bind LICENSOR, its Owners or affiliates, or their respective Owners, directors or officers.

"Partnership" means any general partnership, limited partnership or limited liability partnership.

"Partnership Rights" means voting power, property, profits or losses, or partnership interests of a Partner.

"Term" shall have the meaning set forth in Section 4 including any extensions thereof.

"Then-current" as used in this Agreement and applied to the Offering Circular, License Agreement, or Area Development Agreement means the form then currently provided to any prospective franchisees or area developer, or if not then being so provided, then such form selected by LICENSOR which previously shall have been delivered to and executed by a franchisee or area developer of LICENSOR.

"Trade Secrets" shall have the meaning set forth in Section 10.E.

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"Transfer" means any direct or indirect sale, assignment, transfer, conveyance, gift, declaration of trust, pledge, mortgage or other encumbrance, voluntarily or involuntarily, by operation of law or otherwise of any interest in DEVELOPER or this Agreement.

"System" shall have the meaning set forth in Recital B.

"Venue" means any location or site, which is not a Non-Traditional Venue.

3. GRANT OF RIGHTS; ORGANIZATION OF DEVELOPER

A. Grant. Subject to and in accordance with the terms and conditions of this Agreement and all other agreements between LICENSOR and DEVELOPER, DEVELOPER shall construct, equip, open and thereafter continue to operate at Venues within the Development Area not less than the cumulative number of JOHNNY ROCKETS Restaurants set forth in the Development Schedule and within each of the Development Periods specified therein ("Minimum Development Quota")-

B. Exclusivity. During the Term, subject to Section 3.C., LICENSOR shall not operate or grant a license or franchise to any other person to operate a JOHNNY ROCKETS Restaurant at any Venue within the Development Area.

C. Reservation of Rights. Notwithstanding anything set forth herein to the contrary, and subject to the terms of any License Agreement(s) executed by and between DEVELOPER and LICENSOR, LICENSOR expressly reserves the exclusive, unrestricted right, in its sole and absolute discretion, directly and indirectly, through its employees, affiliates, representatives, licensees, assigns, agents and others (which may include its affiliates and joint ventures in which it or its affiliates are participants), to:

(1) own, operate or license others to operate JOHNNY ROCKETS Restaurants at any location outside the Development Area, including immediately adjacent to the Development Area;

(2) own, operate or license others to operate JOHNNY ROCKETS Restaurants at any site or location which is a Non-Traditional Venue, even if located within the Development Area, and regardless of the proximity to any JOHNNY ROCKETS Restaurant developed or under development or consideration by DEVELOPER;

(3) own, operate or license others to operate restaurants and other businesses which operate under names other than JOHNNY ROCKETS at any location, whether within or outside the Development Area, and regardless of the proximity to any JOHNNY ROCKETS Restaurant developed or under development or consideration by DEVELOPER; and

(4) manufacture and sell, or cause to be manufactured and sold, food, goods, wares, merchandise, services and/or products, whether or not authorized for sale at JOHNNY ROCKETS Restaurants, under the Marks or other trademarks, service marks, logos or commercial symbols, at wholesale or retail, through any distribution channel, including by means of mail order catalogs, direct mail advertising, the Internet, and other distribution methods, without geographic limitation, whether within or without the Development Area.

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D. No Trademark License. No right or license is granted to DEVELOPER hereunder to use the Marks or the System or any other trademarks, trade names, service marks, logotypes, insignias, trade dress or designs owned by LICENSOR, such right and license being granted solely pursuant to License Agreements) executed pursuant to Section 6.B. below, and such use shall be limited to the business operations of DEVELOPER'S JOHNNY ROCKETS Restaurants as described in such License Agreement(s). DEVELOPER acknowledges LICENSOR'S right, title and interest in and to the Marks and shall not impede or challenge the registration by LICENSOR of its Marks. Except for the limited license granted under the License Agreement(s), DEVELOPER shall acquire no right, title or interest in the Marks, and shall not at any time during or after the Term of this Agreement assert any claim of ownership therein, and any and all goodwill associated with the System and the Marks shall inure exclusively to LICENSOR'S benefit. Upon the expiration or termination of this Agreement, no monetary amount shall be assigned as attributable to any goodwill associated with DEVELOPER'S use of the System or the Marks.

E. No Sub-franchising to Third Parties. DEVELOPER shall not offer, sell or negotiate the sale of Johnny Rockets franchises to any third party, either in DEVELOPER'S own name or on behalf of LICENSOR, or otherwise subfranchise, share, divide or partition this Agreement, and nothing in this Agreement will be construed as granting DEVELOPER the right to do so.

F. Business Entities. If DEVELOPER is a Business Entity, or if this Agreement is assigned to a Business Entity, such entity shall conduct no business other than the business contemplated hereunder and under any executed License Agreement. All Owners of such Business Entity shall represent and warrant their percentage ownership interest in DEVELOPER. The articles of incorporation, articles of organization, articles of partnership, partnership agreement, articles of association, memorandum of association, and other organizational documents of such Business Entity shall recite that the issuance and transfer of any interest therein is subject to the restrictions set forth in this Agreement. All issued and outstanding stock or share certificates, if any, of such Business Entity shall bear a legend referring to the restrictions in this Agreement. DEVELOPER shall not conduct any public offering of its securities unless LICENSOR in its sole and absolute discretion consents in writing to such offering.

G. Guaranty. If DEVELOPER is a Business Entity, all of DEVELOPER'S Owners shall execute the Guaranty and Subordination Agreement attached to this Agreement as Exhibit "3" and thereby guaranty the full, faithful and timely performance by DEVELOPER of all of the payments, covenants and other obligations of DEVELOPER under this Agreement. The guarantors under such Guaranty have waived all requirements of notice, demand and presentment, as well as the right to require LICENSOR to first pursue any other remedy in LICENSOR'S power and other similar procedural and substantive rights. The Guaranty is an absolute and unconditional obligation and survives the termination of this Agreement, including upon DEVELOPER'S bankruptcy or insolvency.

H. Affiliated Entities. At DEVELOPER'S request, LICENSOR will permit the License Agreement for any JOHNNY ROCKETS Restaurant in the Development Area to be executed by a .Business Entity formed by DEVELOPER to develop and operate the JOHNNY ROCKETS Restaurant ("Affiliated Entity"), provided all of the following conditions are met: (1) DEVELOPER or its Owners own at least 51% of the voting securities of a corporate Affiliated Entity, at least 51% of the membership interests in a limited liability company, Affiliated Entity or all of the general partnership interests of a

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partnership Affiliated Entity; (2) the Affiliated Entity conducts no business other than the operation of the JOHNNY ROCKETS Restaurant; (3) DEVELOPER and its Owners agree to assume full and unconditional liability for, and agree to perform all obligations, covenants and agreements contained in the License Agreement; and (4) all owners of voting securities of a corporate Affiliated Entity, membership interests of a limited liability company Affiliated Entity or partnership interests of a partnership Affiliated Entity possess a good moral character, as determined by LICENSOR in its sole discretion, and DEVELOPER provides LICENSOR all reasonably requested information to permit LICENSOR to make such a determination.

4. TERM

The term of this Agreement ("Term") shall commence on the Effective Date and, unless sooner terminated pursuant to its terms, shall expire at 11:59 p.m. on the day preceding the ^A f^A ~l

anniversary of the Effective Date. There is no renewal term for this Agreement.

5. FEES

DEVELOPER shall pay to LICENSOR in cash or by certified check concurrently with the

execution of this Agreement the sum of______________($________) representing $24,500 multiplied

by the number of JOHNNY ROCKETS Restaurants required to be opened during the Term, as set forth in the Development Schedule ("Area Development Fee"). The Area Development Fee shall be nonrefundable, but shall be credited against DEVELOPER'S initial license fee(s), payable pursuant to each License Agreement executed pursuant to the terms hereof, at the rate of $24,500 for each JOHNNY ROCKETS Restaurant opened pursuant to this Agreement, the aggregate amount of such credits not to exceed the Area Development Fee.

6. SELECTION OF RESTAURANT VENUES

A. Site Approval. After DEVELOPER has located a site for construction of a JOHNNY ROCKETS Restaurant, DEVELOPER shall submit to LICENSOR a "Location Report" containing such information regarding the proposed site as LICENSOR shall require, in the form which LICENSOR shall from time to time require, together with a copy of an executed letter of intent containing the terms of the proposed lease for such site. LICENSOR may seek such additional information as it deems necessary within 60 days after DEVELOPER'S submission of the letter of intent and required site information, and DEVELOPER shall respond promptly, accurately and completely to such request for additional information. If LICENSOR shall not reject the proposed site in writing within 60 days, or within 60 days after a receipt of such additional information, whichever is later, the proposed site shall be deemed preliminarily accepted by LICENSOR. LICENSOR'S acceptance of a site proposed by DEVELOPER will not be unreasonably withheld or delayed.

B. Offering Circular, Lease and License Agreement. Promptly after LICENSOR'S preliminary acceptance of each site:

(1) LICENSOR shall, if required by Applicable Law and if it has not done so already, transmit to DEVELOPER an Offering Circular and two execution copies of the License Agreement pertaining to the preliminarily accepted site. Immediately upon receipt of the Offering

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Circular, DEVELOPER shall return to LICENSOR a signed copy of the Acknowledgment of Receipt of the Offering Circular.

(2) DEVELOPER shall proceed promptly to negotiate a lease for the site (which shall comply with Section 6.D.) and shall submit the proposed lease to LICENSOR at least 15 days prior to execution thereof for review and approval by LICENSOR. DEVELOPER shall not execute the lease for the site until it has been reviewed and accepted by LICENSOR. DEVELOPER shall deliver a fully executed copy of the lease to LICENSOR promptly following the execution of the lease, which shall be, in all material respects, identical to the form approved by LICENSOR. LICENSOR'S acceptance of such lease shall not be a representation or warranty by LICENSOR of any matter with respect to said lease, including, the adequacy of the protection of DEVELOPER and economic fairness.

(3) After LICENSOR'S approval of the lease for the site and following LICENSOR'S delivery of any such required Offering Circular and any waiting period required by Applicable Law:

(a) DEVELOPER shall execute and deliver to LICENSOR two copies of said License Agreement;

(b) DEVELOPER and each of its affiliates who then has a currently effective License Agreement or Area Development Agreement with LICENSOR shall execute and deliver two copies of a general release on a form prescribed by LICENSOR;

(c) DEVELOPER shall pay to LICENSOR the initial license fee therefor as provided in the then current License Agreement (in the event the Initial License Fee is increased during the Term of this Agreement, DEVELOPER shall be required to pay the then current Initial License Fee, less a credit as described in Section 5 above, upon execution of the then current License Agreement); and

(d) LICENSOR shall, promptly upon receipt of said documents and initial license fee, execute and return to DEVELOPER one copy of the License Agreement. DEVELOPER shall then procure the site by purchase or lease, and return one copy of the fully executed lease (which shall conform to the terms approved by LICENSOR) or, if purchased, the deed evidencing DEVELOPER'S right to occupy the approved site. DEVELOPER shall then commence construction and operation of the JOHNNY ROCKETS Restaurant pursuant to the terms of the License Agreement.

(4) Notwithstanding the foregoing, LICENSOR'S obligation to deliver License Agreements shall be subject to LICENSOR'S legal authority to do so, and if LICENSOR is not legally able to deliver an Offering Circular to DEVELOPER by reason of any lapse or expiration of its franchise registration, or because LICENSOR is in the process of amending any such registration, or for any reason beyond LICENSOR'S reasonable control, LICENSOR may delay approval of the site for DEVELOPER'S proposed JOHNNY ROCKETS Restaurant and delivery of its Offering Circular until such time as LICENSOR is legally able to deliver an Offering Circular. In no event shall LICENSOR be liable to DEVELOPER for any loss, cost or expense occasioned by such delays.

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C. Condition Precedent to LICENSOR'S Obligations. It shall be a condition precedent to LICENSOR'S obligations pursuant to Section 6.B., that DEVELOPER shall have performed all of his obligations under and pursuant to all agreements between DEVELOPER and LICENSOR.

D. Lease Terms. DEVELOPER shall consult its own attorneys and other advisors to determine the adequacy of such lease as it relates to DEVELOPER. As a condition of its approval of the lease but not by way of limitation, LICENSOR may require that the lease contain language satisfactory to LICENSOR providing for the following:

(1) The term of the lease shall be for a period of at least ten (10) years, unless LICENSOR shall approve, in writing, a shorter term.

(2) The lease shall obligate the landlord to notify LICENSOR in writing at least fifteen (15) days prior to its termination or non-renewal of the lease. LICENSOR shall have the option, without cost or expense to LICENSOR, to assume the lease in the event of termination or expiration of this Agreement for any reason. In the case of a default by DEVELOPER, LICENSOR shall have the right, but not the obligation, to cure the breach and to succeed to DEVELOPER'S rights under the lease by giving written notice of its election to DEVELOPER and the landlord. DEVELOPER hereby appoints LICENSOR as its attorney-in-fact to execute an assignment and all other documents and instruments which LICENSOR deems necessary or appropriate to effectuate the foregoing.

(3) The lease may not be assigned, subleased, modified or amended without LICENSOR'S prior written consent. LICENSOR shall be provided with copies of all such assignments, subleases, modifications and amendments. The landlord shall consent in advance to any assignment or sublease to LICENSOR or a franchisee or licensee of LICENSOR (or its affiliates), approved by LICENSOR during the initial term or any renewal term of the lease.

(4) The lease shall neither create nor purport to create any obligations on behalf of LICENSOR, nor grant or purport to grant to the landlord any rights against LICENSOR, nor agree to any other term, condition, or covenant which is inconsistent with any provision of this Agreement.

(5) Upon expiration or termination of the lease for any reason, DEVELOPER shall, upon LICENSOR'S demand, remove all of the Marks from the site and modify the decor of the site so that it no longer resembles, in whole or in part, a JOHNNY ROCKETS Restaurant. If DEVELOPER shall fail do so, LICENSOR will be given written notice and the right to enter the site to make such alterations, in which event DEVELOPER shall reimburse LICENSOR for all direct and indirect costs and expenses it may incur in connection therewith, including attorneys' fees.

(6) DEVELOPER shall duly and timely perform all of the terms, conditions, covenants and obligations imposed upon him under the lease.

(7) The JOHNNY ROCKETS Restaurant at the site shall be constructed and improved pursuant to the provisions of this Agreement.

(8) The lease may not contain a non-competition covenant which purports to restrict LICENSOR, or any developer or licensee of LICENSOR (or its affiliates), from owing or operating a

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8. INDEMNIFICATION

A. DEVELOPER and all guarantors of DEVELOPER'S obligations under this Agreement shall, at all times, indemnify, defend (with counsel reasonably acceptable to LICENSOR), and hold harmless (to the fullest extent permitted by law) LICENSOR and its affiliates, and their respective successors, assigns, past and present stockholders, directors, officers, employees, agents and representatives (collectively "Indemnitees") from and against all "losses and expenses" (as defined below) incurred in connection with any action, suit, proceeding, claim, demand, investigation, inquiry (formal or informal), judgment or appeal thereof by or against Indemnitees or any settlement thereof (whether or not a formal proceeding or action had been instituted), arising out of or resulting from or connected with DEVELOPER'S activities under this Agreement. DEVELOPER promptly shall give LICENSOR written notice of any such action, suit, proceeding, claim, demand, inquiry or investigation filed or instituted against DEVELOPER and, upon request, shall furnish LICENSOR with copies of any documents from such matters as LICENSOR may request.

At DEVELOPER'S expense and risk, LICENSOR may elect to assume (but under no circumstances will LICENSOR be obligated to undertake), the defense and/or settlement of any action, suit, proceeding, claim, demand, investigation, inquiry, judgment or appeal thereof subject to this indemnification. Such an undertaking shall, in no manner or form, diminish DEVELOPER'S obligation to indemnify and hold harmless LICENSOR and Indemnitees. LICENSOR shall not be obligated to seek recoveries from third parties or otherwise mitigate losses.

B. As used in this Section, the phrase "losses and expenses" shall include, but not be limited to: all losses; compensatory, exemplary and punitive damages; fines; charges; costs; expenses; lost profits; reasonable attorneys' fees; expert witness fees; court costs; settlement amounts; judgments; compensation for damages to LICENSOR' reputation and goodwill; costs of or resulting from delays; financing; costs of advertising material and media time/space and the costs of changing, substituting or replacing the same; and any and all expenses of recall, refunds, compensation, public notices and other such amounts incurred in connection with the matters described.

9. TRANSFER

A. Transfer by LICENSOR

This Agreement is fully assignable by LICENSOR and inures to the benefit of any assignee or any other legal successor to the interest of LICENSOR. DEVELOPER agrees to execute any forms that LICENSOR may reasonably request to effectuate any such transfer or assignment by LICENSOR.

B. Transfer by DEVELOPER

(1) Restrictions on Transfer

(a) This Agreement has been entered into by LICENSOR in reliance upon and in consideration of the individual or collective character, reputation, skill, attitude, business ability, and financial capacity of DEVELOPER or, if applicable, its Owners who will actively and substantially participate in the development, ownership and operation of the JOHNNY ROCKETS Restaurants. Accordingly, except as permitted by Section 9.B.(3) neither DEVELOPER nor any of DEVELOPER'S

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Owners shall cause or allow any Transfer of this Agreement without (1) LICENSOR'S prior written consent, which consent LICENSOR shall not unreasonably withhold (subject to conditions imposed pursuant to Section 9.B.(2) below), and (2) giving LICENSOR an opportunity to exercise its right of first refusal as described in Section 9.C. below. Any attempt at such a Transfer without LICENSOR'S approval and opportunity to exercise its right of first refusal shall constitute a breach of this Agreement and shall convey no right or interest in this Agreement.

(b) As used in this Agreement the term "Transfer" shall also mean and include each of the following: (1) the Transfer by DEVELOPER or its Owner(s) of more than 25% in the aggregate, whether in one or more transactions, of the assets, capital stock, membership interests or voting power of DEVELOPER; (2) the issuance of any securities by DEVELOPER, which itself or in combination with any other transaction(s), results in the Owners existing as of the Effective Date, owning less than 75% of the outstanding shares, membership interests or voting power of DEVELOPER as constituted as of the Effective Date; (3) if DEVELOPER is a Partnership, the withdrawal, death or legal incapacity of a general partner or limited partner (each a "Parmer") owning more than 25% of the voting power, property, profits or losses, or partnership interests of a Partner ("Partnership Rights"), or the admission of any additional general partner or the Transfer by any general partner of any of its Partnership Rights in the Partnership; (4) the death or legal incapacity of any Owner owning more than 25% of the capital stock, voting power of DEVELOPER; or (5) any merger, stock redemption, consolidation, reorganization, recapitalization or other transfer of control of the DEVELOPER, however effected.

(2) Conditions of Transfer. LICENSOR shall not unreasonably withhold its consent to any Transfer, provided, however, that prior to the time of Transfer, LICENSOR may, in its sole discretion, require that the conditions specified below are met:

(a) All of DEVELOPER'S accrued monetary obligations to LICENSOR and all other outstanding obligations related to the development of JOHNNY ROCKETS Restaurants by DEVELOPER shall have been satisfied;

(b) DEVELOPER'S right to receive compensation pursuant to any agreement or agreements for the purchase of any interest in DEVELOPER or in its JOHNNY ROCKETS Restaurants shall be subordinated and secondary to LICENSOR'S rights to receive any outstanding monetary obligations or other outstanding obligations due from DEVELOPER pursuant to this Agreement or any other agreement between LICENSOR, its parent or any affiliate, and DEVELOPER, whether arising before or after said Transfer;

(c) DEVELOPER shall have executed a general release in a form satisfactory to LICENSOR and its parent and affiliates, effective as of the date of Transfer, of any and all claims against LICENSOR, and its parent and affiliates, and their respective officers, directors, shareholders, and employees, in their corporate and individual capacities, including claims arising under federal, state, and local laws, rules, and ordinances;

(d) The transferee licensee shall enter into a written assumption agreement in a form satisfactory to LICENSOR, assuming and agreeing to discharge all of DEVELOPER'S obligations under this Agreement prior to and after the date of the assumption;

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(e) The transferee licensee (and its Owners) shall demonstrate to LICENSOR'S satisfaction that it meets LICENSOR'S reasonable educational, managerial and business standards; possesses a good moral character, business reputation and credit rating; has the aptitude and ability to conduct the business licensed herein (as may be evidenced by prior related business experience or otherwise); and has adequate financial resources and capital to operate any JOHNNY ROCKETS Restaurants proposed to be transferred;

(f) DEVELOPER.shall simultaneously assign to the same transferee and such transferee shall assume all License Agreements executed by DEVELOPER and all of DEVELOPER'S rights and obligations thereunder, or at LICENSOR'S election, such transferee shall execute new License Agreements on LICENSOR'S then-current form, for all JOHNNY ROCKETS Restaurants for which License Agreements have been signed pursuant to this Agreement, and in either case, DEVELOPER shall also assign and transfer to such transferee all or substantially all of the assets relating to the operation of such JOHNNY ROCKETS Restaurant(s);

(g) LICENSOR shall have the right, without limitation to consider whether the price and terms of payment are so burdensome as to adversely affect the future development and operations of the Development Area and the JOHNNY ROCKETS Restaurants located therein. It shall be reasonable for LICENSOR to disapprove any proposed Transfer if, as a result thereof, the ownership interests in DEVELOPER will be, in LICENSOR'S reasonable business judgment, so widely held by different persons as to materially compromise the financial stake and dedication of those person(s) in whose individual or collective character, skill, attitude, and business ability, LICENSOR has placed reliance in entering into this Agreement or is willing to place reliance in approving such Transfer;

(h) At transferee licensee's expense and upon such other terms and conditions as LICENSOR may reasonably require, the transferee licensee and its Manager shall complete the training course then in effect for licensees;

(i) Either DEVELOPER or the transferee licensee shall pay to LICENSOR

a transfer fee of Ten Thousand Dollars ($10,000) ("Transfer Fee") to cover LICENSOR'S administrative and other expenses in connection with the Transfer; provided, however, that the Transfer Fee shall not be required in case of: (1) a Transfer by DEVELOPER upon the death of DEVELOPER as described in Section 9.D. below; or (2) a Transfer by DEVELOPER to a corporation formed by DEVELOPER solely for the convenience of ownership as described in Section 9.B.(3) below;

(j) The name of neither the transferor nor the transferee licensee shall consist of or contain the Marks or any colorable variation thereof or any other mark in which LICENSOR has or claims a proprietary interest without LICENSOR'S prior written approval; and

(k) If the proposed transferee licensee is a corporation, the corporation's performance of its obligations shall be guaranteed by all of its shareholders as from time to time constituted and the transferee licensee shall place upon the certificates representing its voting shares of stock, the form of the legend set forth in Section 9.B.(3)(d) below.

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Notwithstanding the foregoing, except in the case where DEVELOPER is a publicly-held corporation at the time it executes this Agreement, LICENSOR may, in its sole discretion, withhold its consent to any public offering of stock or other securities to be issued by DEVELOPER.

(3) Assignment to a Controlled Corporation or Limited Liability Company. If

DEVELOPER is an individual and in the event that DEVELOPER proposes to Transfer all of its interest to a corporation or limited liability company formed by DEVELOPER solely for the convenience of ownership, LICENSOR'S consent to such Transfer may be conditioned on the following requirements:

(a) The transferee corporation or limited liability company shall be newly organized and its articles, bylaws, and operating agreement, as applicable, shall provide that its activities are confined exclusively to developing and operating JOHNNY ROCKETS Restaurants;

(b) DEVELOPER shall own not less than seventy-five percent (75%) of the voting stock and shall not diminish its proportionate interest in the transferee corporation, except as may be required by law, and its Owner shall act as its principal executive and operating officer;

(c) DEVELOPER shall enter into an agreement, in a form satisfactory to LICENSOR, unconditionally guaranteeing the full payment and performance of the transferee corporation's obligations to LICENSOR;

(d) Each stock certificate or other evidence of ownership of the transferee corporation or limited liability company, as applicable, shall have conspicuously endorsed upon its face the substantially following legend (amended accordingly if a limited liability company):

"The transfer of this stock certificate is subject to the terms and conditions of one or more area development agreements or license agreements entered into with Johnny Rockets Licensing Corporation. Reference is made to the provisions of said agreements and to the articles and bylaws of this corporation."

(e) Copies of transferee corporation's articles of incorporation or organization, as applicable, bylaws, operating agreement and other governing documents, as applicable, including the resolutions of the Board of Directors or Manger(s), as applicable, authorizing entry into or assumption of this Agreement, shall be promptly furnished to LICENSOR; and

(f) The name of transferee corporation or limited liability company shall not consist of or contain the Marks or any colorable variation thereof or any other mark in which LICENSOR, its parent or affiliates has or claims a proprietary interest, without LICENSOR'S prior written approval.

(4) Other Agreements. If LICENSOR consents to the Transfer of this Agreement, it shall also consent to the Transfer of any and all other agreements between LICENSOR and/or its parent and affiliates, and DEVELOPER to the same transferee. In the event of Transfer of this Agreement, DEVELOPER shall also assign all of its right, title and interest in and to all other agreements between DEVELOPER and LICENSOR, its parent and affiliates, to the same transferee.

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C. LICENSOR'S Right of First Refusal

(1) If DEVELOPER or its owners shall at any time decide to undertake any Transfer requiring LICENSOR'S consent pursuant to Section 9.B., DEVELOPER or its owners shall first obtain a bona fide, executed, written offer from a responsible and fully disclosed purchaser and shall submit an exact copy of such offer to LICENSOR. LICENSOR shall have the option, exercisable within thirty (30) days after receipt of such offer, or if LICENSOR requires further information, within thirty (30) days after LICENSOR receives such further information from DEVELOPER, to purchase the same interests for the price and on the terms and conditions of the proposed sale as set forth in the offer submitted. If the offer received by DEVELOPER involves assets in addition to this Agreement, DEVELOPER'S JOHNNY ROCKETS Restaurants, and DEVELOPER'S License Agreements for licensed JOHNNY ROCKETS Restaurants, the offer to LICENSOR shall state the cash value of that portion of the offer received by DEVELOPER related to those agreements and restaurants and LICENSOR or its designee may exercise its purchase option by paying that cash value. The written offer shall specify the name and address of the proposed transferee, shall enclose a completed license application form from the proposed transferee, shall enclose proof of the proposed transferee's financial ability to complete the purchase, shall set forth the price, terms, conditions and date and place of closing of the proposed sale and shall enclose copies of all offer and/or sales documents reflecting the terms of such proposed sale.

(2) If the offer received by DEVELOPER provides for payment of consideration other than cash or it involves intangible benefits, LICENSOR or its designee may elect to purchase the interest proposed to be sold for the reasonable equivalent in cash. If the parties are unable to agree within 30 days on the reasonable equivalent in cash of the non-cash part of the offer received by DEVELOPER or the cash value of that portion of the offer received by DEVELOPER relating to this Agreement and DEVELOPER'S JOHNNY ROCKETS Restaurants, this amount shall be determined by two professionally certified appraisers, DEVELOPER selecting one and LICENSOR or its designee selecting one. If the amounts set by the two appraisers differ by more than 10%, the two appraisers shall select a third professionally certified appraiser who also shall determine the reasonable equivalent in cash of the non-cash part of the offer received by DEVELOPER. The average value set by the appraisers (whether two or three appraisers as the case may be) shall be conclusive and LICENSOR or its designee may exercise its right of first refusal within 60 days after being advised in writing of the decision of the appraisers. The cost of the appraisers shall be shared equally by the parties.

(3) Should LICENSOR not exercise this right and should the contemplated sale not be completed within one hundred twenty (120) days after LICENSOR has failed to exercise its option, or should the terms and conditions thereof be altered in any way, this right of first refusal shall be reinstated and any subsequent proposed sale, or the altered terms and conditions of the current transaction, must again be offered to LICENSOR in accordance with this Section 9.C.

(4) If a contemplated Transfer would have the effect of assigning more than twenty-five percent (25%) of the capital stock of a corporate licensee, more than twenty-five percent (25%) of the membership interests of a limited liability company licensee, or more than twenty-five percent (25%) of partnership interests of a partnership licensee, LICENSOR shall have the option to purchase not only the interests being transferred but also the remaining interests so that its ownership will be one hundred percent (100%) of such capital stock, membership interests, or partnership interests. Any purchase of

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such remaining interests shall be valued on a basis proportionate to the price of the interests initially being offered.

D. Death or Disability of Developer

(1) Notwithstanding Sections 9.B. and 9.C. of this Agreement, a Transfer to the heirs, surviving spouse, conservators or personal or other legal representative of DEVELOPER (collectively, "Successor Transferees") upon the death or permanent disability of DEVELOPER or of a partner or shareholder owning more than twenty-five percent (25%) equity interest in DEVELOPER shall not be subject to LICENSOR'S right of first refusal or right to terminate for failure to obtain written approval, so long as the Successor Transferee: (a) within thirty (30) days of such death or permanent disability, satisfies LICENSOR, that he is qualified to act as a developer pursuant to this Section 9 and is approved in writing by LICENSOR, or retains an individual or entity to develop the JOHNNY ROCKETS Restaurants who is so qualified and who is approved in writing by LICENSOR; and (b) performs all other applicable acts required under Section 9.B.

(2) Any subsequent sale or other Transfer by a Successor Transferee shall be subject to LICENSOR's right of written approval set forth in Section 9 .B. and the right of first refusal in favor of LICENSOR set forth in Section 9.C. A Transfer to a Successor Transferee shall not require the payment of the Transfer Fee.

(3) In the event LICENSOR does not approve the qualifications of any heir or beneficiary of DEVELOPER to develop JOHNNY ROCKETS Restaurants, the executor or administrator of DEVELOPER'S estate shall have a period of ninety (90) days following the date of such written disapproval to Transfer this Agreement to a Successor Transferee acceptable to LICENSOR, subject to the provisions of Section 9.C. of this Agreement. If such a sale is not concluded within that period, LICENSOR may terminate this Agreement.

10. NON-COMPETITION, NON-SOLICITATION, TRADE SECRETS

A. In Term Competition

During the Term of this Agreement, neither DEVELOPER nor any of its Owners, officers, or directors (or similar executives) shall directly or indirectly engage or be financially involved in (except for operation by DEVELOPER of JOHNNY ROCKETS Restaurants or ownership of not more than five percent (5%) of the outstanding stock, voting and nonvoting, of a corporation, the stock of which is traded on a national securities exchange), or be employed by any business which sells hamburgers, chili, malts or related products as a significant aspect of its operation.

B. Post-Term Competition

For two (2) years following the termination or expiration of this Agreement, or upon the Transfer of this Agreement, neither DEVELOPER nor its Owners, officers or directors (or similar executives) shall directly or indirectly engage or be financially involved in (except for operation by DEVELOPER of JOHNNY ROCKETS Restaurants or ownership of not more than five percent (5%) of the outstanding stock, voting and non-voting, of a corporation, the stock of which is traded on a national securities exchange), or be employed by any business which sells hamburgers, chili, malts or related products as a

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significant aspect of its operation: (1) within the Development Area; (2) within the county in which any JOHNNY ROCKETS Restaurant operated by DEVELOPER is located, or (3) within an area within 10 miles from the location of any then existing JOHNNY ROCKETS Restaurant, without LICENSOR'S prior written consent. In applying for such consent, DEVELOPER will have the burden of establishing that any such activity by it will not involve the use of benefits provided under this Agreement or constitute unfair competition with LICENSOR or other franchisees or area developers of LICENSOR.

C. Modification

The parties have attempted in Section 10.B. above to limit DEVELOPER'S right to compete only to the extent necessary to protect LICENSOR from unfair competition. The parties hereby expressly agree that if the scope or enforceability of Section 10.B. is disputed at any time by DEVELOPER, a court or arbitrator, as the case may be, may modify either or both of such provisions to the extent that it deems necessary to make such provision(s) enforceable under applicable law. In addition, LICENSOR reserves the right to reduce the scope of either, or both, of said provisions without DEVELOPER'S consent, at any time or times, effective immediately upon notice to DEVELOPER.

D. Employees of LICENSOR

DEVELOPER shall not interfere with the employees and agents of LICENSOR in the performance of such employees' and agents' duties. DEVELOPER further agrees that during the Term of this Agreement, and for one (1) year thereafter, it will not employ or seek to employ any of LICENSOR'S employees or agents, any employees or agents of LICENSOR'S parent or affiliates, or any of LICENSOR'S licensees, for a period of at least one (1) year following the separation of any such employee from employment by LICENSOR or its parent or affiliates or the termination of an agency relationship with LICENSOR, its parent or affiliate, nor shall DEVELOPER induce, contract or solicit in any manner whatsoever any such employee or agent during such period to leave such employment or affiliation.

In addition to the other rights and remedies provided herein and at law or in equity, and not in lieu thereof, in the event DEVELOPER violates the provisions of this Section 10.D., DEVELOPER shall pay to LICENSOR the sum of One Hundred Thousand Dollars ($100,000). Said payment shall be required only if DEVELOPER knew that the employee was or had been employed by LICENSOR, LICENSOR'S parent or affiliates, or one of LICENSOR'S licensees. DEVELOPER acknowledges that LICENSOR, LICENSOR'S parent, affiliates and other licensees have expended a substantial amount of time and money in the selection and training of their respective employees and agents and that LICENSOR, LICENSOR'S parent, affiliates or other licensees would suffer substantial loss and damage in the event DEVELOPER violates such provisions. DEVELOPER further agrees and acknowledges that this provision and the payment described herein is therefore reasonable under the circumstances existing as of the date of this Agreement.

E. Trade Secrets

(1) LICENSOR possesses and continues to develop, and during the course of the relationship established hereunder, DEVELOPER shall have access to, proprietary and confidential information, including, recipes, secret ingredients, specifications, procedures, concepts and methods and techniques of developing, marketing and operating JOHNNY ROCKETS Restaurants, restaurants and

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other retail outlets featuring the sale of hamburgers, chili, malts, and related products ("Trade Secrets"). Certain of the Trade Secrets may be disclosed to DEVELOPER in the Manuals, bulletins, supplements, confidential correspondence, or other confidential communications, and through LICENSOR'S training program and other guidance and management assistance, and in performing LICENSOR'S other obligations and exercising LICENSOR'S rights under this Agreement. "Trade Secrets" shall not include information which: (a) has entered the public domain or was known to DEVELOPER prior to LICENSOR'S disclosure of such information to DEVELOPER, other than by the breach of an obligation of confidentiality owed (by anyone) to LICENSOR; (b) becomes known to DEVELOPER from a source other than LICENSOR and other than by the breach of an obligation of confidentiality owed (by anyone) to LICENSOR; or (c) was independently developed by DEVELOPER without the use or benefit of LICENSOR'S Trade Secrets. The burden of proving the applicability of the foregoing will reside with DEVELOPER.

(2) DEVELOPER shall acquire no interest in the Trade Secrets other than the right to use them in connection with the development of JOHNNY ROCKETS Restaurants pursuant to this Agreement. DEVELOPER'S duplication or use of the Trade Secrets in any other endeavor or business shall constitute an unfair method of competition. DEVELOPER shall: (a) not use the Trade Secrets in any business or other endeavor other than in connection with such JOHNNY ROCKETS Restaurants;

(b) maintain absolute confidentiality of the Trade Secrets during and after this Agreement's term;

(c) make no unauthorized copy of any portion of the Trade Secrets, including all or any part of the Manuals, bulletins, supplements, confidential correspondence, or other confidential communications, whether written or oral; and (d) operate and implement all reasonable procedures prescribed from time to time by LICENSOR to prevent unauthorized use and disclosure of the Trade Secrets, including restrictions limiting disclosure to certain employees and use of non-disclosure and non-competition provisions as LICENSOR prescribes in employment agreements with employees who may have access to the Trade Secrets. Promptly upon LICENSOR'S request, DEVELOPER shall deliver executed copies of such agreements to LICENSOR. The provisions of this Section 10.E. shall be in addition to and not in lieu of any other confidentiality obligation of DEVELOPER, or any other person, whether pursuant to another agreement, or pursuant to applicable law.

(3) For purposes of this Section 10.E. only, "DEVELOPER" shall mean and include the individual DEVELOPER, DEVELOPER'S spouse and minor children and its Owners, officers and directors if DEVELOPER is a Business Entity, and DEVELOPER shall, except as LICENSOR may otherwise agree, cause each such person to acknowledge and agree to be bound by the provisions this Section 10.E. The provisions of this Section 10.E. shall not limit, restrain or otherwise affect any right or cause of action which may accrue to LICENSOR for any infringement of, violation of, or interference with, this Agreement, or LICENSOR'S Marks, System, trade secrets, or any other proprietary aspects of LICENSOR'S business.

11. RELATIONSHIP OF THE PARTIES

DEVELOPER is and shall be an independent contractor. Neither DEVELOPER nor any employee or agent of DEVELOPER shall be deemed to be an employee, commercial agent or agent of any kind, of LICENSOR. Nothing contained in this Agreement shall be construed so as to create a partnership, joint venture, commercial or other agency, and neither party to this Agreement shall be liable for the debts or obligations of the other. Since DEVELOPER acknowledges that it is an independent contractor and not an agent, DEVELOPER shall not at any time attempt in any way to register this

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Agreement as agency contracts or itself as a commercial or other agent with a federal or municipal authority without the prior written consent of LICENSOR.

12. TERMINATION

A. Termination Without Cure Period

In addition to the grounds for termination that may be stated elsewhere in this Agreement, LICENSOR may terminate this Agreement, and the rights granted by this Agreement, upon notice to DEVELOPER without opportunity to cure upon the occurrence of any of the following:

(1) The termination or nonrenewal of any License Agreement in accordance with that License Agreement's terms;

(2) Any attempted Transfer in violation of Section 9 of this Agreement;

(3) The attachment of any involuntary lien in the sum of $15,000 or more upon any of the business assets or property of DEVELOPER, which lien is not promptly removed or bonded in full;

(4) There is a material breach of any obligation under Section 10 of this Agreement;

(5) Any material misrepresentation by DEVELOPER relating to its application to enter into this Agreement or conduct by DEVELOPER which reflects materially and unfavorably upon the operation and reputation of LICENSOR or the Johnny Rockets System;

(6) Any seizure, take over or foreclosure of DEVELOPER'S business by a government official in the exercise of his duties, or by a creditor, lienholder or lessor, as a final judgment against DEVELOPER remains unsatisfied for thirty (30) days (unless a superseder or other appeal bond has been filed); or a levy of execution has been made upon the license granted by this Agreement or upon any property used in the licensed business and it is not discharged within five (5) days of such levy;

(7) DEVELOPER, or any of its Owners, is convicted of, or pleads nolo contendere to, a felony or any other criminal misconduct, or any offense involving moral turpitude, which LICENSOR deems relevant to the development and operation of JOHNNY ROCKETS Restaurants;

(8) The failure to satisfy the Minimum Development Quota; or

(9) DEVELOPER or any Owner remains in default beyond the applicable cure period under any other agreement with LICENSOR or its affiliates (provided that, if the default is not by DEVELOPER, DEVELOPER is given written notice of the default and a thirty (30) day period to cure the default).

B. Termination Following Expiration of Cure Period

(1) Except for those items listed in preceding Section 12.A., DEVELOPER shall have thirty (30) days (five (5) business days for monetary defaults) after receipt of written notice of default from LICENSOR in which to remedy the default and provide evidence of that remedy to

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LICENSOR. If any such default is not cured within that time, this Agreement shall terminate without further notice to DEVELOPER effective immediately upon expiration of that time, unless LICENSOR notifies DEVELOPER otherwise in writing.

(2) Notwithstanding the foregoing, if any breach or defect cannot be cured within the applicable time period, this Agreement shall not be deemed terminated if DEVELOPER shall give LICENSOR written notice of such fact and commence the cure of such breach or defect within the applicable time period and diligently prosecute such cure to completion. LICENSOR shall have the right to reject any such notice if, in LICENSOR'S reasonable judgment, the breach or defect specified is capable of being cured within the applicable period.

(3) DEVELOPER acknowledges and agrees that complete performance of all the terms of this Agreement is necessary for the protection of LICENSOR, the System and the Marks and that complete and exact performance by DEVELOPER of each of his promises contained herein is a condition to the continuance of this license. If DEVELOPER has received 2 or more notices of default within the previous 12 months, LICENSOR shall be entitled to send DEVELOPER a notice of termination upon DEVELOPER'S next default within that 12 month period under this Section 12.B. without providing DEVELOPER an opportunity to remedy the default.

C. Notwithstanding the provisions described in this Section 12, if any valid, applicable law or regulation of a competent governmental authority having jurisdiction over the Development Area and/or the parties to this Agreement limits LICENSOR'S rights of termination under this Agreement or requires different or longer notice periods than those set forth herein, Section 12 is deemed amended to conform to the minimum notice periods or restrictions upon termination required by such rules and regulations. LICENSOR shall not however, be precluded from contesting the validity, enforceability or application of such laws or regulations in any action, arbitration, hearing or dispute relating to this Agreement or the termination of this Agreement.

D. Obligations upon Termination

Upon termination or expiration of this Agreement:

(1) DEVELOPER shall immediately pay LICENSOR and its affiliates all sums due and owing LICENSOR or its affiliates pursuant to this Agreement;

(2) DEVELOPER shall have no further right to develop or open JOHNNY ROCKETS Restaurants in the Development Area;

(3) DEVELOPER shall turn over to LICENSOR the Manuals and all copies of all reports, records, files, instructions, correspondence, agreements and any and all other materials relating to JOHNNY ROCKETS Restaurants developed under this Agreement in DEVELOPER'S possession and all copies thereof (all of which are hereby acknowledged to be LICENSOR'S sole property);

(4) DEVELOPER and all persons and entities subject to the covenants contained in Section 10 of this Agreement shall continue to abide by those covenants and shall not, directly or indirectly, take any action that violates those covenants;

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(5) LICENSOR may retain all fees paid pursuant to this Agreement;

(6) All obligations of LICENSOR to DEVELOPER and all rights of DEVELOPER under this Agreement shall automatically terminate. However, any obligations of DEVELOPER to take, or abstain from taking, any action upon termination pursuant to this Agreement shall not be affected by such termination, including the payment to LICENSOR of all sums due from DEVELOPER at the time of termination; and

(7) DEVELOPER shall not, except with respect to a restaurant franchised by LICENSOR or its affiliates which is then open and operating pursuant to an effective License Agreement: (a) operate or do business under any name or in any manner that might tend to give the public the impression that DEVELOPER is connected in any way with LICENSOR or its affiliates or has any right to use the System or the Marks; (b) make, use or avail itself of any of the materials or information furnished or disclosed by LICENSOR or its affiliates under this Agreement or disclose or reveal-any such materials or information or any portion thereof to anyone else; or (c) assist anyone not licensed by LICENSOR or its affiliates to construct or equip a foodservice outlet substantially similar to a JOHNNY ROCKETS Restaurant.

13. ENFORCEMENT

A. Injunction

LICENSOR shall be entitled, without bond, to the entry of temporary and permanent injunctions and orders of specific performance enforcing the provisions of this Agreement relating to: (a) the development of JOHNNY ROCKETS Restaurants by DEVELOPER; (b) the obligations of DEVELOPER upon termination or expiration of this Agreement; (c) a Transfer of this Agreement; (d) as necessary to prohibit any act or omission by DEVELOPER or its employees that would constitute a violation of any applicable law, ordinance, or regulation, or which is dishonest or misleading to LICENSOR and/or LICENSOR'S other licensees; and (e) enforcement of the provisions of Section 10.E.

B. Arbitration

Except as otherwise provided in this Agreement, and except for claims of promissory fraud, DEVELOPER and LICENSOR agree that any claim, controversy or dispute arising out of or relating to this Agreement (and exhibits) including those occurring subsequent to the termination or expiration of this Agreement shall, except as specifically set forth herein and in Section 13.A be referred to arbitration in accordance with the rules of arbitration of the American Arbitration Association (or any successor thereto), as amended and The Federal Arbitration Act, 9 U.S.C.A. Section 1-14 shall apply. If such rules are in any way contrary to or in conflict with this Agreement, the terms of this Agreement shall control.

(1) Selection of Panel. Each party shall select one (1) qualified arbitrator and the two (2) arbitrators shall select a third qualified arbitrator. Failing selection of an arbitrator by either party, or by the two (2) selected by the parties, the additional arbitrator(s) who have not yet been selected shall be selected by the American Arbitration Association or any successor thereof.

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(2) Qualifications of Arbitrators. Each arbitrator must meet or exceed each of the following criteria, or in the event no such arbitrator is available, the parties shall select an arbitrator that meets or exceeds as many of the following criteria as possible:

(a) (i) forty (40) years of age; (ii) five (5) years experience as corporate officer or area supervisor (or similar position) for a multi-unit restaurant or chain having annual system wide gross sales in excess of One Hundred Million Dollars ($100,000,000) for its past two (2) fiscal years, ("Qualified JOHNNY ROCKETS Restaurant Position"); and (iii) employed in a Qualified JOHNNY ROCKETS Restaurant Position within last twenty-four (24) months; or

(b) fifteen (15) years of legal practice in franchise law.

(3) Rules. The arbitration proceeding shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association where such rules are not inconsistent with the provisions of this Section and the following supplemental rules:

(a) Location of Arbitration: The arbitration shall be administered by the American Arbitration Association office nearest to LICENSOR'S principal offices at the time the demand for arbitration is filed and all hearings shall take place in the county in which LICENSOR'S principal offices are located at that time.

(b) Time Periods:

1. Appointment Of Arbitrators By Parties: Thirty (30) days from Notice of Arbitration.

2. Appointment Of Third Arbitrator: Thirty (30) days from appointment of'first two (2) arbitrators by the parties.

3. Initial Hearing: Thirty (30) days from appointment of third arbitrator.

4. Deadline For Decision Of Arbitrators: Thirty (30) days from conclusion of hearing.

(c) Discovery. There shall be no discovery except as follows. Each side may take five (5) depositions. At least thirty (30) days before the arbitration, the parties must exchange lists of witnesses, including any expert witnesses, and copies of all exhibits intended to be used at the arbitration. Each party is responsible for the expenses of any witnesses that it calls. Each party shall have the right to subpoena witnesses and documents for the arbitration.

(d) Expenses. The expenses of the arbitration proceeding shall be borne by the losing party.

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(e) Binding Effect of Award. The arbitration shall be final and binding upon the parties and judgment upon an award rendered by the Arbitrator may be entered in any court of competent jurisdiction.

(f) Prosecution of Claims: All arbitration proceedings and claims shall be filed and prosecuted separately and individually in the name of DEVELOPER and LICENSOR, and not in any representative capacity, and shall not be consolidated with claims asserted by or against any other developer.

(g) Limitation on Damages: The arbitrators shall have no power or authority to grant punitive or exemplary damages as part of its award.

14. NOTICES

No notice, demand, request or other communication to the parties shall be binding upon the parties unless the notice is in writing, refers specifically to this Agreement and is addressed to:

LICENSOR: Johnny Rockets Licensing Corporation

imercenti'e Drive. Suite 200 rest. California 92630-8R55 Attn: Vice President, Franchise Operations Facsimile Number: (949) 643-6200

DEVELOPER: Entity Address City, State, Zip Attn: Contact Facsimile Number: (___) -

Any party may designate a new address for notices by giving written notice of the new address pursuant to this Section. Notices shall be effective upon receipt or first rejection and may be: (1) delivered personally; (2) transmitted by facsimile to the number(s) set forth above with electronic confirmation of receipt; (3) mailed in the United States mail postage prepaid, certified mail, return receipt requested; or (4) mailed via overnight courier.

15. MISCELLANEOUS

A. Further Acts

The parties agree to execute such other documents and perform such further acts as may be necessary or desirable to carry out the purposes of this Agreement.

B. Heirs and Successors

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This Agreement shall be binding upon and inure to the benefit of the parties, their heirs, successors and assigns.

C. Entire Agreement

DEVELOPER and LICENSOR acknowledge that eacb element of this Agreement is essential and material and that, except as otherwise provided in this Agreement, the parties shall deal with each other in good faith. This Agreement represents the entire understanding between the parties and supersedes any and all other prior or contemporaneous negotiations, agreements, representations and covenants, oral or written, other than information contained in LICENSOR'S Offering Circular, the Manuals and any other agreements executed by LICENSOR, its parent or affiliates, and DEVELOPER in connection herewith. This Agreement may not be modified except by a written instrument signed by the parties to this Agreement. DEVELOPER acknowledges and agrees that LICENSOR has made no promises or warranties to DEVELOPER concerning the profitability or likelihood of success of JOHNNY ROCKETS Restaurants other than as may be set forth herein, that it has been informed by LICENSOR that there can be no guarantee of success in developing JOHNNY ROCKETS Restaurants and that DEVELOPER'S business ability and aptitude is primary in determining his success. The parties intend this Agreement to be the entire integration of all of their agreements of any nature but shall in no way affect DEVELOPER'S obligations to comply with specifications of LICENSOR as determined from time to time. No other agreements, representations, promises, commitments or the like, of any nature exist between the parties, except as set forth or otherwise referenced herein.

D. Waiver

Failure by either party to enforce any rights under this Agreement shall not be construed as waiver of such rights. Any waiver, including waiver of default, in any one instance shall not constitute a . continuing waiver or a waiver in any other instance. Any acceptance of money or other performance by LICENSOR from DEVELOPER shall not constitute a waiver of any default except as to the payment of the particular payment or performance so received.

E. Headings and Table of Contents

The headings and table of contents used herein are for purposes of convenience only and shall not be used in construing the provisions of this Agreement.

F. Effectiveness

The submission of this Agreement does not constitute an offer of a franchise and this Agreement shall become effective only upon execution thereof by LICENSOR and DEVELOPER. Each of the parties hereto represents to the other that it has the power and authority to enter into this Agreement and perform its obligations hereunder.

G. Third Parties

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The parties intend to confer no benefit or right on any person or entity not a party to this Agreement and no third party shall have the right to claim the benefit of any provision of this Agreement as a third party beneficiary of any such provision.

H. Attorneys' Fees, Costs and Expenses

If either party commences any legal action or arbitration against the other party arising out of or in connection with this Agreement, the prevailing party, as determined by the court or arbitrator(s) having jurisdiction over such action or arbitration, shall be entitled to have and recover from the other party its costs and expenses, including, but not limited to reasonable accountants', attorneys', attorneys' assistants' and expert witness fees, the cost of investigation and proof of facts, court and arbitration costs, litigation and arbitration expenses, and travel and living expenses, whether incurred prior to, in preparation for, or in contemplation of the filing of the proceeding. If LICENSOR utilizes legal counsel (including in-house counsel employed by LICENSOR) in connection with any failure by DEVELOPER to comply with this Agreement, DEVELOPER shall reimburse LICENSOR for any of the above-listed costs and expenses incurred by LICENSOR. In any judicial proceeding, the amount of these costs and expenses will be determined by the court and not by a jury.

I. Governing Law

Except to the extent governed by the U.S. Trademark Act of 1946, this Agreement shall be governed by and construed in accordance with the internal laws of the State of California without regard to conflicts of laws principles; provided, however, that the provisions of Section 10 shall be interpreted and construed under the laws of the jurisdiction in which the Development Area is located, or if in more than one (1) state, the state in which the majority of the Development Area is located. Nothing in this section is intended, or shall be deemed, to make any California law regulating the offer or sale of franchises or the franchise relationship applicable to this Agreement if such law would not otherwise be applicable. Any provision of this Agreement that may be determined by competent authority to be prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of the prohibition or unenforceability without invalidating the remaining provisions of this Agreement. Any invalidity of any portion of this Agreement shall not affect the validity of the remaining portion and unless substantial performance of this Agreement is frustrated by any such invalidity, this Agreement shall continue in effect. Any prohibition against or unenforceability of any provision of this Agreement in any jurisdiction, including the state whose law governs this Agreement, shall not invalidate the provision or render it unenforceable in any other jurisdiction. To the extent permitted by applicable law, DEVELOPER waives any provision of law that renders any provision of this Agreement prohibited or unenforceable in any respect.

J. Counterparts

This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument,

K. Severability

In the event that any term or provision in this Agreement is held to be invalid, void, illegal or unenforceable in any respect, the Agreement shall not fail, but shall be deemed amended to delete the

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void or unenforceable term or provision and the remainder of this Agreement shall be enforced in accordance with its terms and shall not in any way be affected or impaired thereby. In the event that any term or provision of this Agreement is held to be unreasonable, the same shall not fail, but shall be deemed amended only to the extent necessary to render it reasonable and the parties agree to be bound by the same as thus amended.

L. Force Majeure

Provided that the parties hereto are making reasonable efforts in good faith to comply with the terms of this Agreement, each party hereby agrees to excuse the other's performance hereunder upon the occurrence of an act of God, accident, fire, labor controversy, riot or civil commotion, act of public enemy, law, enactment, rule, order, act of government or governmental instrumentality, failure of technical facilities, failure or delay of transportation facilities or other cause of a similar or dissimilar nature not within such party's control or which such party cannot be reasonable diligence avoid (collectively, a "Force Majeure"). Upon the occurrence of a Force Majeure, the party so affected shall continue to make all reasonable efforts in good faith to comply with the terms of this Agreement and shall be in full compliance hereof as soon as is reasonably practicable.

M. Approvals and Interpretation

Whenever in this Agreement a right of approval, an option or any other discretionary right is reserved to LICENSOR, and any consent, approval or authorization of LICENSOR which DEVELOPER may be required to obtain hereunder, LICENSOR may exercise such right or grant or withhold its approval in its sole and absolute discretion, and on any occasion where LICENSOR is required or permitted hereunder to make any judgment or determination, including any decision as to whether any condition or circumstance meets LICENSOR'S standards or satisfaction, LICENSOR may do so in its sole subjective judgment, unless its right is expressly circumscribed by a contrary provision in the text applicable thereto. All terms used in any one number or gender shall extend to mean and include any other number and gender as the facts, context, or sense of this Agreement or any article or Section of this Agreement may require. As used in this Agreement, the words "include," "includes" or "including" are used in a non-exclusive sense and without limitation.

N. Time

Whenever a time is given in this Agreement for the performance of an act, such time is of the essence of this Agreement and may not be extended without the written agreement of the party who is entitled to receive the performance specified, which extension it may grant or withhold in its sole and absolute discretion.

[signature page follows]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date first; set forfo above on Page 1 of this At

LICENSOR:

JOHNNY ROCKETS LICENSING CORPORATION, a California corporation

By:

Name: MICHAEL R. SHUMSKY

Its: Chairman & Chief Executive Officer

By:

Name: STEVEN J. DEVINE

Its: Vice President, Franchise Operations

DEVELOPER:

Name: Its: _

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EXHIBIT "1"

DEVELOPMENT AREA

The Development Area referred to in Section 3.A of the Area Development Agreement by and between JOHNNY ROCKETS LICENSING CORPORATION and___________________shall be:

County limits of_____________including the metro city of___________in the State of____________

DEVELOPER'S rights in the Development Area shall be subject to the limitations described in Section 3. Any political boundaries contained in the description of the Development Area shall be considered fixed as of the date of this Agreement and shall not change notwithstanding a political reorganization or a change in those boundaries. Unless otherwise specified, all street boundaries shall be deemed to include both sides of the street.

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EXHIBIT "2"

DEVELOPMENT SCHEDULE

The Minimum Development Quota referred to in Section 7 of the Area Development Agreement by and between Johnny Rockets Licensing Corporation and__________shall be as follows:

__________________, guarantees to have a minimum of _ (____)

JOHNNY ROCKETS Restaurants in operation per the Development Schedule by each anniversary of the Effective Date of this Agreement as outlined below:

Development Cumulative Number of JOHNNY ROCKETS

Period Ending Restaurants to be in Operation

___,20.

EXHIBIT 2

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EXHIBIT "3"

GUARANTY

AND

SUBORDINATION AGREEMENT

In order to induce JOHNNY ROCKETS LICENSING CORPORATION ("Licensor") to enter

into an Area Development Agreement ("Area Development Agreement"), dated the ______day of

__________20__ with ________________________ ("Developer"), the undersigned ("Guarantors"),

each of whom is a direct or indirect shareholder, member, partner, or trustee of Developer ("Owner") hereby personally and unconditionally: (1) guarantee to Licensor and its successors and assigns, for the term of the Agreement and thereafter as provided in the Area Development Agreement, that Developer shall punctually pay and perform each and every undertaking, agreement and covenant set forth in the Area Development Agreement and any other agreement (whether or not in effect on the date of this Agreement) between Developer and Licensor, or any of its affiliates, including but not limited to any area development agreement, license agreement, security agreement, purchase agreement, sublease or promissory note, and all extensions or renewals thereof (collectively, "Agreements"); (2) agree personally to be bound by each and every provision in the Agreements, including, without limitation, the provisions of Sections 8 and 10 of the Area Development Agreement; and (3) agree personally to be liable for the breach of each and every provision in the Agreements, including, without limitation, Section 10 of the Area Development Agreement.

Each of the undersigned waives: (a) acceptance and notice of acceptance by Licensor of the foregoing undertakings; (b) notice of demand for payment of any indebtedness or nonperformance of any obligations hereby guaranteed; (c) protest and notice of default to any party with respect to the indebtedness or nonperformance of any obligations hereby guaranteed; (d) any right he may have to require that an action be brought against Developer or any other person as a condition of liability; (e) all rights to payments and claims for reimbursement or subrogation which any of the undersigned may have against Developer arising as a result of the execution of and performance under this Guaranty by the undersigned; (f) any law or statute which requires that Licensor make demand upon, assert claims against or collect from Developer or any others, foreclose any security interest, sell collateral, exhaust any remedies or take any other action against Developer or any others prior to making any demand upon, collecting from or taking any action against the undersigned with respect to this Guaranty; (g) any and all other notices and legal or equitable defenses to which he may be entitled; and (h) any and all right to have any legal action under this Guaranty decided by a jury.

Each of the undersigned consents and agrees that: (i) his direct and immediate liability under this Guaranty shall be joint and several; (ii) he shall render any payment or performance required under the Agreements upon demand if Developer fails or refuses punctually to do so; (iii) such liability shall not be contingent or conditioned upon pursuit by Licensor of any remedies against Developer or any other person; (iv) such liability shall not be diminished, relieved or otherwise affected by any amendment of the Agreements, any extension of time, credit or other indulgence which Licensor may from time to time grant to Developer or to any other person including, without limitation, the acceptance of any partial payment or performance or the compromise or release of any claims, none of which shall in any way modify or amend this Guaranty, which shall be continuing and irrevocable during the term of the Agreements and for so long thereafter as there are monies or obligations owing from Developer to

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Licensor or its affiliates under the Agreements; (v) any indebtedness by Developer to the undersigned, for any reason, currently existing, or which might hereafter arise, shall at all times be inferior and subordinate to any indebtedness owed by Developer to Licensor; (vi) as long as Developer owes any monies to Licensor (other than royalty and advertising and payments that are not past due) Developer will not pay and the undersigned will not accept payment of any part of any indebtedness owed by Developer to any one of the undersigned, either directly or indirectly, without the consent of Licensor; and (vii) monies received from any source by Licensor for application toward payment of the obligations under the Agreements and under this Guaranty may be applied in any manner or order deemed appropriate by Licensor. In addition, if any of the undersigned ceases to own any interest in Developer prior to termination or expiration of the Agreements, that person agrees that his obligations under this Guaranty shall continue to remain in force and effect unless Licensor in its sole discretion, in writing, releases that person from this Guaranty. Notwithstanding the provisions of the previous sentence, unless prohibited by applicable law, the obligations contained in Section 10.B. of the Area Development Agreement shall remain in force and effect for a period of 2 years after any such release by Licensor. A release by Licensor of any of the undersigned shall not affect the obligations of any other Guarantor.

If Licensor brings an action to enforce this Guaranty in a judicial or arbitration proceeding, the prevailing party in such proceeding shall be entitled to reimbursement of its costs and expenses, including, but not limited to, reasonable accountants', attorneys', attorneys' assistants' and expert witness fees, cost of investigation and proof of facts, court costs, other litigation expenses and travel and living expenses, whether incurred prior to, in preparation for or in contemplation of the filing of any such proceeding. In any judicial proceeding, these costs and expenses shall be determined by the court and not by a jury.

If Licensor utilizes legal counsel (including in-house counsel employed by Licensor or its affiliates) in connection with any failure by the undersigned to comply with this Guaranty, the undersigned shall reimburse Licensor for any of the above-listed costs and expenses incurred by it.

This Guaranty shall not be affected by the modification, amendment, extension, release or renewal of any agreement between Licensor and Developer, the taking of a note or other obligation from Developer or others, the taking of security for payment, the granting of extension of time for payment, the filing by or against Developer of bankruptcy, insolvency, reorganization of other debtor's relief afforded by the Federal Bankruptcy Act or any other state or federal statute or by the decision of any court, or any other matter, whether similar or dissimilar to any of the foregoing; and this Guaranty shall cover the terms and obligations of any such modifications, notes, security agreements, extensions, or renewals. The obligations of the undersigned shall be unconditional notwithstanding any defect in the genuineness, validity, regularity, or enforceability of Developer's obligations or liability to Licensor, or any other circumstances whether or not referred to herein which might otherwise constitute a legal or equitable discharge of a surety or guarantor.

This Guaranty shall remain in full force and effect until all obligations arising out of and pursuant to the Agreements including all renewals, modifications, amendments and extensions thereof, are fully paid and satisfied, provided that this Guaranty shall automatically terminate on the second . anniversary of the effective date of any Transfer of the Area Development Agreement (as defined in the Area Development Agreement) and provided further that neither the Area Development Agreement nor any other agreement between Licensor and the transferee of such Transfer shall be in default on such effective date nor has been in default (whether or not cured) during such two year period.

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If any of the following events occur, a default ("Default") under this Guaranty shall exist: (a) failure of timely payment or performance of the obligations under this Guaranty; (b) breach of any agreement or representation contained or referred to in this Guaranty; (c) the death of, appointment of a guardian for, dissolution of, termination of existence of, loss of good standing status by, appointment of a receiver for, assignment for the benefit of creditors of, or the commencement of any insolvency or bankruptcy proceeding by or against, any of the undersigned; and/or (d) the entry of any monetary judgment or the assessment against, the filing of any tax lien against, or the issuance of any writ of garnishment or attachment against any property of or debts due any of the undersigned. If a Default occurs, the obligations of the undersigned shall be due immediately and payable without notice.

Section 13 of the Area Development Agreement is incorporated by reference into this Guaranty and all capitalized terms that are not defined in this Guaranty shall have the meaning given them in the Area Development Agreement.

IN WITNESS THEREOF, the undersigned have constituted this Agreement on the date set forth below.

Dated: _________________, 20__ ______________________________, Guarantor

Name:___________ ______

, Guarantor

Name:

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The Free Franchise Resource Center

Area Development Agreement

Sample Area Development Agreement