Area Development Agreement
Sample Area Development Agreement
EXHIBITE AREA DEVELOPMENT AGREEMENT
4720045.4 UFOC-SUTEKI EXPRESS
082805
MANCHU WOK FRANCHISING USA INC.
AREA DEVELOPMENT AGREEMENT
with
SUTEKI EXPRESS RESTAURANTS
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SUTEKI EXPRESS Area Development Agreement
082805
TABLE OF CONTENTS
Page
RECITALS..........................................................................................................................1
1. GRANT................................................................................................................................2
1.1 Grant..............'..........................................................................................................2
1.2 Protected Development Area...................................................................................3
1.3 No Right to Use Proprietary Marks or System........................................................3
2. DEVELOPMENT FEE........................................................................................................3
2.1 Development Fee.....................................................................................................3
2.2 Development Fee Credit..........................................................................................3
3. DEVELOPMENT OBLIGATIONS....................................................................................4
3.1 Execution of Franchise Agreements........................................................................4
3.2 Development Schedule............................................................................................4
4. TERM..................................................................................................................................4
4.1 Term.........................................................................................................................4
5. DEVELOPER'S CONFIDENTIALITY AND NON-COMPETITION COVENANTS.....4
5.1 Confidentiality of Information.................................................................................4
5.2 Non-Competition During Term of Agreement........................................................4
5.3 Non-Competition After Expiration or Termination of Agreement..........................5
5.4 Exceptions to Non-Compete Covenants..................................................................6
5.5 Reducing Scope of Covenants.................................................................................6
5.6 Enforceability of Covenants Not Affected by Developer Claims...........................6
5.7 Breach of Covenants Causing Irreparable Injury to Company................................6
5.8 Covenants From Individuals....................................................................................6
6. TRANSFER OF INTEREST...............................................................................................6
6.1 Transfer by Company..............................................................................................6
6.2 Transfer By Developer.............................................................................................7
6.3 No Waiver of Claims...............................................................................................7
6.4 Transfer by Developer - Bankruptcy- Right of First Refusal..................................7
7. DEFAULT AND TERMINATION.....................................................................................7
7.1 Termination Without Opportunity to Cure..............................................................7
7.2 Termination With Notice and Opportunity to Cure.................................................8
7.3 Cross Defaults..........................................................................................................9
8. OBLIGATIONS UPON TERMINATION OR EXPIRATION..........................................9
8.1 No Right to Open Additional Restaurants...............................................................9
8.2 Company's Right to Establish Restaurants..............................................................9
8.3 Company's Right to Purchase Assets on Termination............................................9
8.4 Irreparable Injury to Company.................................................................................9
8.5 Return of Materials and Other Confidential Information........................................9
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SUTEK1 EXPRESS Area Development Agreement
9. INDEPENDENT CONTRACTOR AND INDEMNIFICATION.....................................10
9.1 No Fiduciary Relationship.....................................................................................10
9.2 Independent Contractor..........................................................................................10
9.3 Indemnity...............................................................................................................10
10. NOTICES...........................................................................................................................11
10.1 Notices...................................................................................................................11
11. ENTIRE AGREEMENT....................................................................................................11
11.1 Entire Agreement...................................................................................................11
12. DISPUTE RESOLUTION.................................................................................................11
12.1 Meeting to Resolve Disputes.................................................................................11
12.2 Mediation...............................................................................................................12
12.3 Injunctive Relief.....................................................................................................12
12.4 Exclusions From Meeting and Mediation..............................................................13
12.5 Waiver of Punitive Damages Claims.....................................................................13
12.6 Waiver of Jury Trial...............................................................................................13
13. PERSONAL GUARANTEE OF DEVELOPER OBLIGATIONS...................................13
13.1 Independent Advice...............................................................................................14
14. MISCELLANEOUS PROVISIONS..................................................................................14
14.1 Obtaining Approvals..............................................................................................14
14.2 No Waiver..............................................................................................................15
14.3 Severability and Construction................................................................................15
14.4 Survival of Obligations After Expiration or Termination of
Agreement..............................................................................................................15
14.5 Enforceability of Modified Provisions...................................................................15
14.6 Captions.................................................................................................................15
14.7 Atypical Arrangements..........................................................................................15
14.8 Receipt of Franchise Offering Materials................................................................15
14.9 Recognition of Business Risks...............................................................................16
ATTACHMENT A: DEVELOPMENT SCHEDULE
ATTACHMENT B: DEVELOPMENT AREA
ATTACHMENT C: CURRENT FORM OF FRANCHISE AGREEMENT
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SUTEKI EXPRESS Area Development Agreement
SUTEKI EXPRESS RESTAURANTS AREA DEVELOPMENT AGREEMENT
This Area Development Agreement, made and entered into on _________________,
200__, by and between:
MANCHU WOK FRANCHISING USA INC.
a Delaware corporation with its principal place of business at 85 Citizen Court, Unit 9, Markham, ON L6G 1A8 (hereinafter, "Company")
and______________________________________________, a___________________________with
its principal place of business at____________________________________________(hereinafter,
"Developer")
AND _____________________________________________ an individual residing at
___________________________________________________in the city of__________in the state
of____________________, (hereinafter "Guarantor").
RECITALS:
A. Through the expenditure of time, effort and money by Company and its predecessors and affiliated/associated entities, Company has acquired experience and skill in the development, opening and operating of fast food restaurants utilizing the SUTEKI EXPRESS Restaurant System (as hereinafter defined) specializing in the preparation, sale and merchandising of Japanese-style quick-serve food and other related products.
B. The SUTEKI EXPRESS Restaurant System, which Company has developed and continues to develop, includes, without limitation, standards and specifications for buildings, decor, equipment, equipment layouts, supplies and menus, quality and quantity standards, operating procedures for sanitation, maintenance, food and beverage storage, preparation and service, methods and techniques for inventory and cost controls, record keeping and reporting, personnel management, purchasing sales, promotions and advertising ("System").
C. The System uses trademarks, trade names, logo types, trade symbols, emblems, slogans, insignia, designs, logos, and other commercial symbols (including, to the extent so used, telephone numbers) including the mark "SUTEKI EXPRESS" and all associated marks whether registered or unregistered all of which have been adopted and used to identify restaurants using the SUTEKI EXPRESS Restaurant System and the services, food, beverages and other products sold or used in connection therewith (collectively, "Proprietary Marks").
D. Company is in the business, among other things, of operating restaurants and franchising restaurants through i) Area Development Agreements to experienced multi-unit
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operators and ii) to other individuals using in either circumstance various Proprietary Marks and/or restaurant systems that are opened or are to be opened and operated pursuant to franchise agreements.
E. Developer desires to obtain certain development rights to operate restaurants at shopping mall food courts and non traditional locations under the System which use the Proprietary Marks ("Restaurant"), and wishes to obtain franchises from Company for that
purpose.
F. Developer has represented to Company that it is a successful multi-unit operator of franchised restaurants in at least one other non-competing restaurant system;
G. Company has determined, based on the information provided by Developer to Company to grant certain area development rights to Developer to establish and operate Restaurants, pursuant to the terms and conditions set forth in this SUTEKI EXPRESS RESTAURANT Development Agreement ("Agreement").
H. AS AN INDUCEMENT TO Company to enter into this Agreement and to grant the Development Rights referred to herein to Developer , the Guarantor has agreed to enter into this Agreement to among other things, unconditionally guarantee the performance and observance of the duties and obligations of the Developer.
I. FOR PURPOSES OF THIS AGREEMENT, the term "Affiliate" shall mean any
person or legal entity that directly or indirectly controls, is controlled by, or is under common control with the specified person or legal entity, and the term "Principal" shall mean a shareholder of a corporation, a general or limited partner of a partnership, or a member of a limited liability company.
J. UNLESS OTHERWISE SPECIFICALLY INDICATED, all terms used in this
Agreement shall have the same meaning attributed to those same terms in the Franchise Agreement attached hereto as Attachment C.
The parties agree as follows:
1. GRANT
1-1 Grant: Company hereby grants to Developer the right, and Developer accepts the obligation, pursuant to the terms and conditions of this Agreement, to establish and operate SUTEKI EXPRESS Restaurants pursuant to the development schedule set forth in Attachment A hereto ("Development Schedule"). Each SUTEKI EXPRESS Restaurant shall be located in the area described in Attachment B ("Development Area"), at a specific site approved by Company within the Development Area, and shall be established and operated pursuant to a separate franchise agreement to be entered into between Developer and Company in accordance with Section 3.1 hereof in form generally as set out in Attachment C ("Franchise Agreement"). Company reserves unto itself at all times and from time to time before execution of any Franchise Agreement with Developer or its Affiliate, the right to amend any term or terms contained in the Franchise Agreement. Each SUTEKI EXPRESS Restaurant to be developed
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pursuant to this Agreement shall be established and operated by Developer or by an Affiliate of Developer which Aiflliate(s) shall be at all times controlled by the Developer.
1.2 Protected Development Area: During the term of this Agreement, Company shall not establish or operate, or franchise anyone else to establish or operate, a SUTEKI EXPRESS Restaurant which is located within the Development Area. Except as specifically provided in this Agreement, Developer's rights under this Agreement are not exclusive, and Company retains the right, among others, in any manner and on any terms and conditions that Company deems advisable, and regardless of the proximity to or financial impact on Developer, the Development Area, and/or any Restaurant established or to be established pursuant to this Agreement, and without granting Developer any rights therein:
(a) to own, acquire, establish and/or operate, and license others to establish and operate, Restaurants at any location outside the Development Area, or within the Development Area at Street-Front locations;
(b) to own, acquire, establish and/or operate, and license others to establish and operate, businesses under proprietary marks other than SUTEKJ EXPRESS or other systems, whether such businesses are the same, similar, or different from developers' SUTEKI EXPRESS Restaurants, at any location within or outside the Development Area; and
(c) to sell or distribute, at retail or wholesale, directly or indirectly, or license others to sell or distribute, any products which bear any proprietary marks, including the Proprietary Marks, whether within or outside the Development Area.
1.3 No Right to Use Proprietary Marks or System: This Agreement is not a franchise agreement, and does not grant Developer any right either to use or to franchise the use of the
Proprietary Marks or the System.
j
2. DEVELOPMENT FEE
2.1 Development Fee: Upon execution of this Agreement, Developer shall pay
Company a development fee of $______________, which amount includes the Franchise Fee of
$30,000.00 for the first SUTEKI EXPRESS Restaurant to be developed pursuant to this Agreement and the sum of $15,000.00 towards the Franchise Fee for each additional SUTEKI EXPRESS Restaurant to be developed pursuant to this Agreement. Developer acknowledges and agrees that this fee has been fully earned and is non-refundable, in consideration of administrative and other expenses incurred by Company and for the development opportunities lost or deferred as a result of the rights granted Developer herein.
2.2 Development Fee Credit: For each SUTEKI EXPRESS Restaurant (after the Developer's initial SUTEKI EXPRESS Restaurant has been opened pursuant to this Agreement) which Developer opens pursuant to this Agreement, Developer shall receive a credit in the amount of $15,000 in reduction of the Franchise Fee otherwise then payable, provided that at the time that Franchise Agreement is executed Developer is in full compliance with all of its obligations under this Agreement and any other Agreement(s) with Developer including without limitation, other Franchise Agreement(s).
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3. DEVELOPMENT OBLIGATIONS
3.1 Execution of Franchise Agreements: Developer shall execute a Franchise Agreement for each Restaurant to be franchised, the form of which shall be that which is then being offered by Company to new franchisees for SUTEKI EXPRESS Restaurants. The current form of Franchise Agreement is attached as Attachment C hereto.
3.2 Development Schedule: Recognizing that time is of the essence, Developer agrees to satisfy the Development Schedule by executing Franchise Agreements and opening Restaurants within the timeframes established in the Development Schedule. Failure by Developer to adhere to any date set forth in the Development Schedule shall constitute a default under this Agreement, as provided in Section 7.1.2.
4. TERM
4.1 Term: Unless sooner terminated as hereinafter provided, the term of this Agreement, and all rights granted hereunder, shall expire on the date set forth in the Development Schedule as the date by which the Developer's final SUTEKI EXPRESS® Restaurant referred to in this Agreement shall have been required to be opened.
5. DEVELOPER'S CONFIDENTIALITY AND NON-COMPETITION COVENANTS
5.1 Confidentiality of Information: Developer shall not, during the term of this Agreement or thereafter, communicate, divulge, or use for the benefit of anyone else, any confidential information, knowledge, or know-how concerning the methods of operation of the business or a SUTEKI EXPRESS Restaurant which may be communicated to Developer, or of which Developer may be apprised, pursuant to this Agreement or any other agreement entered into as a consequence of this Agreement. Developer shall divulge confidential information only to those Principals and employees who are required to have access to it in order to perform their employment responsibilities. Any and all matters, information, knowledge, know-how, and techniques which Company designates as confidential shall be deemed confidential for purposes of this Agreement (which information shall include but not be limited to the Manual, recipes, and marketing, management, and operations plans), unless and until Developer shall demonstrate that the information has become public knowledge. Developer acknowledges that any failure to comply with the requirements of this Section 5.1 will result in irreparable injury to Company for which no adequate remedy at law may be available. Any Principal or employee of Developer who may have access to any confidential information regarding Company, or a SUTEKI EXPRESS Restaurant shall execute covenants that they will maintain the confidentiality of information they receive in connection with their association with Developer. Such covenants shall be on a form provided by Company which form shall, among other things, designate Company as a third party beneficiary of such covenants with the independent right to enforce them.
5.2 Non-Competition During Term of Agreement: Developer specifically acknowledges that, pursuant to this Agreement, Developer and its Principals will receive valuable specialized training and confidential information including, without limitation,
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information regarding the operational, sales, promotional, and marketing methods and techniques of the Company and the System. Developer covenants that during the term of this Agreement, except for SUTEKI EXPRESS Restaurants operated pursuant to a Franchise Agreement with Company, Developer shall not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with, any person or legal entity or any other person or legal entity affiliated with Developer:
5.2.1 divert or attempt to divert any present or prospective business or customer of a SUTEKI EXPRESS Restaurant to any competitor, by inducement or otherwise, or do or perform any other act injurious or prejudicial to the goodwill associated with the Proprietary Marks and the System;
5.2.2 own, maintain, advise, operate, engage in, be employed by, make loans to, invest in, provide any assistance to, or have any interest in (as owner or otherwise) or relationship or association with, any restaurant or retail food outlet whose sales involve Japanese or other oriental-style food or any other products or services that are deemed by Company (acting reasonably) to be similar to a SUTEKI EXPRESS Restaurant or to the System; nor
5.2.3 employ or seek to employ, directly or indirectly, any person serving in a managerial or supervisory position who is at the time or was at any time during the prior six months employed by (i) Company or its affiliates; or (ii) any other SUTEKI EXPRESS area developer or SUTEKI EXPRESS franchisee, or of any other restaurant system owned/franchised by the Franchisor or its affiliates without the prior written consent of the then-current or prior employer. Violations of this Section shall entitle the then-current or prior employer to liquidated damages equal to 50% of each such employee's annual salary at the time the employee terminated his or her employment with the then-current or prior employer, plus reimbursement of all costs of training a replacement employee, and all attorneys' fees and other costs incurred by Company in enforcing this Section. A then-current or prior employer shall be deemed to be a third party beneficiary of this Section, with an independent right to bring an action based upon a violation hereof.
5.3 Non-Competition After Expiration or Termination of Agreement: Commencing upon the date of: (a) a transfer permitted under Section 6,2 of this Agreement; (b) expiration of this Agreement; (c) termination of this Agreement (regardless of the cause for termination); or (d) a final court order (after all appeals have been taken) with respect to any of the foregoing events or with respect to enforcement of this Section 5.3, and continuing for an uninterrupted period of 1 year thereafter, Developer shall not, without Company's prior written consent, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, persons, or legal entity, or any other person or legal entity affiliated with Developer, own, maintain, advise, operate, engage in, be employed by, make loans to, or have any interest in or relationship or association with a business which operates a restaurant or retail food outlet whose sales involve Japanese or other oriental-style food or any other products or services that are deemed by Company (acting reasonably) to be similar to a SUTEKI EXPRESS Restaurant or to the System, and which is located (i) within the Development Area; or ii) within three (3) miles from any SUTEKI EXPRESS® Restaurant which is open and operating on the date that the obligations under this Section 5.3 commence.
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5.4 Exceptions to Non-Compete Covenants: Sections 5.2 and 5.3 shall not apply to the ownership by Developer or an affiliate of Developer of (i) a less than five percent (5%) beneficial interest in the outstanding equity securities of any company registered under the Securities Act of 1933 or the Securities Exchange Act of 1934 (i.e. a "public company"); or (ii) to any SUTEKI EXPRESS Restaurant or other restaurant,, then operated pursuant to a Franchise Agreement with Company or its affiliates.
5.5 Reducing Scope of Covenants: Developer understands and acknowledges that Company shall have the right, in its sole discretion, to reduce the scope of any covenant set forth in Sections 5.2 and 5.3, or any portion thereof, without Developer's consent, effective immediately upon receipt by Developer of written notice thereof, and Developer agrees that it shall comply forthwith with any covenant as so modified, which shall be fully enforceable notwithstanding the provisions of Section 11.1 hereof.
5.6 Enforceability of Covenants Not Affected by Developer Claims: Developer expressly agrees that the existence of any claims it may have against Company whether or not arising hereunder, shall not constitute a defense to the enforcement by Company of the covenants
in this Section 5.
5.7 Breach of Covenants Causing Irreparable Injury to Company: Developer acknowledges that Developer's violation of any covenant of this Section 5 would result in irreparable injury to Company for which no adequate remedy at law may be available, and Developer consents to the issuance of, and agrees to pay all court costs and reasonable attorneys' fees incurred by Company in obtaining, an injunction prohibiting any conduct by Developer in violation of any covenant contained in this Section 5, or otherwise incurred by Company in seeking any remedy relating to Developer's breach.
5.8 Covenants From Individuals: Developer shall obtain and furnish to Company executed covenants similar in substance to those set forth in this Section 5 (including covenants applicable upon the termination of a person's relationship with Developer) from all persons who are shareholders of Developer or any Affiliate or who are otherwise involved or engaged in the operations of Developer or of any individual Franchisee established pursuant to this Agreement (Principals). Every covenant required of Principal(s) by this Section 5.8 shall be on a form provided by Company which form shall among other things, designate Company as a third party beneficiary of such covenants with the independent right to enforce them.
6. TRANSFER OF INTEREST
6.1 Transfer by Company: Company shall have the right to transfer or assign all or any part of its rights or obligations under this Agreement to any person or legal entity. With respect to any assignment which results in the subsequent performance by the assignee of all of Company's obligations under this Agreement, the assignee shall expressly assume and agree to perform such obligations, and shall become solely responsible for all obligations of Company under this Agreement from the date of assignment. In addition, and without limitation to the foregoing, Developer expressly acknowledges and agrees that Company shall have the right at any time and from time to time as Company may itself determine to: a) sell any of its assets, its Proprietary Marks or its System; b) sell its securities in a public offering or in a private
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placement; c) merge, acquire other corporations, or be acquired by another corporation; and d) undertake a refinancing, recapitalization, leveraged buy-out, or other economic or financial restructuring, all without affecting Developer's rights and obligations pursuant to this Agreement or pursuant to any Franchise Agreement.
6.2 Transfer By Developer: The rights granted to Developer are personal to Developer; therefore, Developer shall not transfer or assign all or any part of its rights or obligations under this Agreement to any person or legal entity without Company's prior written consent which consent may be refused by Company in its sole and absolute discretion and Company shall incur no obligation to Developer or any purchaser.
6.3 No Waiver of Claims: Company's consent to a transfer shall not constitute a waiver of any claims it may have against the transferring party, nor shall such consent be deemed a waiver of Company's right to demand exact compliance with any of the terms of this Agreement by the transferor or transferee.
6.4 Transfer by Developer - Bankruptcy- Right of First Refusal: If, for any reason, this Agreement is not terminated pursuant to Section 7.1.6 and this Agreement is assumed, or assignment of the same to any person or entity who has made a bona fide offer to accept an assignment of this Agreement is contemplated pursuant to the United States Bankruptcy Code, then notice of such proposed assignment or assumption, setting forth (a) the name and address of the proposed assignee, (b) all of the terms and conditions of the proposed assignment and assumption, and (c) the adequate assurance of the proposed assignee's future performance of the Agreement referred to in Section 3.65(b)(3) of the Bankruptcy Code, shall be given to Company within twenty (20) days after receipt of such proposed assignee's offer to accept assignment of this Agreement, and in any event within ten (10) days prior to the date any application is made to a court of competent jurisdiction for authority and approval to enter into such assignment and assumption. Company shall thereupon have the prior right and option to be exercised by Company by notice given at any time prior to the effective date of such proposed assignment and assumption, to accept an assignment of this Agreement to Company itself upon the same terms and conditions and for the same consideration, if any, as in the bona fide offer made by the proposed assignee, less any brokerage fees or commissions which might otherwise be incurred by Developer out of the consideration to be paid by such assignee for the assignment of this Agreement.
7. DEFAULT AND TERMINATION
7.1 Termination Without Opportunity to Cure: Developer shall be in default hereunder, and Company shall have the right at its option to terminate this Agreement and all rights granted hereunder, without affording Developer any opportunity to cure the default, effective immediately upon receipt of notice delivered by Company to Developer upon the occurrence of any of the following events:
7.1.1 If Developer or any Principal: (i) is convicted of a felony, a crime or offense involving moral turpitude, or any other crime or offense that Company reasonably believes is likely to have an adverse effect on the System, the Proprietary Marks, the goodwill
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associated therewith, or Company's interest therein; or (ii) engages in any other activity which, in Company's reasonable judgment, is morally offensive to community standards;
7.1.2 If Developer fails to comply with any obligation set forth in the Development Schedule;
7.1.3 If any Franchise Agreement executed pursuant to this Agreement or any other agreement between Developer and Company or its Affiliates is terminated due to a breach or default by the franchisee;
7.1.4 If any purported assignment or transfer of any direct or indirect interest in this Agreement, in Developer, or in all or substantially all of Developer's assets is made to any third party without Company's prior written consent, contrary to the terms of Section 6.2 hereof;
7.1.5 If, contrary to the terms of Section 5.1 of this Agreement, Developer or any Principal or employee of Developer discloses or divulges trade secrets or confidential information of Company or of the System;
7.1.6 If Developer (or any Affiliate engaged in the operation of any SUTEKI EXPRESS® Restaurant pursuant to this Agreement or any Franchise Agreement) becomes insolvent, makes a general assignment for the benefit of creditors, or a petition in bankruptcy is filed by Developer or such Affiliate, or such petition is filed against and not opposed by Developer or such Affiliate;
7.1.7 If Developer or any Principal or any Affiliate (or Principal of an Affiliate) fails to comply with the covenants in Section 5 hereof or fails to deliver to Company the executed covenants required under Section 5.8 hereof;
7.1.8 If Developer or a Principal has made any misrepresentation to Company prior to the execution of this Agreement or at any time thereafter; or
7.1.9 If Developer, within 12 months after curing any default pursuant to Section 7.2 hereof, commits the same, similar, or different default, whether or not cured after notice.
7.2 Termination With Notice and Opportunity to Cure: Except as expressly provided in Section 7.1 herein, Developer shall have 30 days after its receipt from Company of a written Notice of Termination within which to (i) remedy any default under this Agreement or (ii) comply with any federal, state or local law or regulation, and to provide evidence thereof to Company. If any such default is not cured within the specified time, or such longer period as applicable law may permit, this Agreement shall terminate without further notice to Developer effective immediately upon expiration of the 30 day period or such longer period as applicable law may require. Developer shall be in default pursuant to this Section 7.2 if it fails to substantially comply with any of the requirements imposed by this Agreement or any Franchise Agreement or fails to perform its obligations under this Agreement or any Franchise Agreement in good faith.
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7.3 Cross Defaults: Default by Developer with respect to any term or provision of any Franchise Agreement entered into by Developer or Affiliate shall constitute as well a default under this Agreement and any default under this Agreement shall constitute default under any such Franchise Agreement.
8. OBLIGATIONS UPON TERMINATION OR EXPIRATION
Upon termination or expiration of this Agreement, all rights granted hereunder to Developer shall forthwith terminate; without limiting the generality of the foregoing:
8.1 No Right to Open Additional Restaurants: Developer shall have no further right to establish or operate any Restaurant for which a Franchise Agreement has not yet been executed by Company at the time of termination;
8.2 Company's Right to Establish Restaurants: Company shall have the right to establish, and to franchise others to establish Restaurants in the Development Area except as may be otherwise provided under any Franchise Agreement in effect between Company and Developer or its Affiliate which has not been terminated by the Company pursuant to section 8.3;
8.3 Company's Right to Purchase Assets on Termination: In the event of termination for any default by Developer, Company shall have the right but not the obligation to be exercised within ninety (90) days after this Agreement is terminated, to terminate any Franchise Agreement executed pursuant to this Agreement and/or purchase Developer's interest in any or all Restaurants, ("Interest") regardless of whether such Restaurant(s) are under construction or are open and operating, and all of the construction materials, furnishings, equipment, signs, fixtures, supplies, inventory, or other tangible personal property of Developer related to such Restaurant(s) ("Restaurant Assets") for an amount equal to the lesser of Developer's net book value or fair market value of such Interest or Restaurant Assets. If the parties cannot agree on the purchase price pursuant to this section within forty-five (45) days after Company notifies Developer of its intention to purchase as set out in this section, a qualified independent appraiser shall be designated by Company to determine the purchase price, and the appraiser's determination of the appropriate purchase price shall be final and binding on the parties. If Company elects to exercise its right to purchase as set out in this section, it shall have the right to set off any and all amounts due from Developer and the cost of the appraisal (if any) against any payment otherwise due Developer.
8.4 Irreparable Injury to Company: Developer acknowledges and agrees that Developer's failure to strictly comply with the provisions of this Section 8 will result in irreparable harm to Company and to the Proprietary Marks; Developer agrees to pay on demand all damages, expenses, court costs and reasonable attorneys' fees incurred by Company in pursuance of its rights under this section including without limitation, specific performance of or an injunction restraining violation of, and/or damages resulting from a violation of any of the provisions of this Section 8.
8.5 Return of Materials and Other Confidential Information: Developer shall immediately return and re-deliver to Company any and all manuals, records, correspondence, files, and any instructions containing confidential information relating to the operation of
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Developer's SUTEKI EXPRESS® Restaurant business which are in Developer's possession; and all copies thereof (all of which are acknowledged by the Developer to be the property of Company).
9. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
9.1 No Fiduciary Relationship: This Agreement does not create a fiduciary relationship between the parties hereto. Developer is and shall be an independent contractor; and nothing in this Agreement is intended to constitute or appoint either party an agent, legal representative, subsidiary, joint venturer, partner, employee, or servant of the other for any purpose whatsoever.
9.2 Independent Contractor: Developer acknowledges and agrees: a) that it is not authorized to make any contract, agreement, warranty, or representation on behalf of Company nor b) shall it incur any debt or other obligations in the name of Company, nor c) shall Company in any event assume liability for or be deemed liable for (whether under this Agreement or any Franchise Agreement or otherwise) any actions (acts) or failure(s) to act (omissions) of Developer or Affiliate or for any claim or judgment arising in any manner whatsoever against Developer or any Affiliate.
9.3 Indemnity: Developer shall indemnify and hold harmless to the fullest extent permitted by law, Company and its Affiliates and its and their respective directors, officers, employees, shareholders, and agents, (collectively, "Indemnitees") from any and all losses and expenses (as hereinafter defined) incurred in connection with any litigation or other form of adjudicatory procedure, claim, demand, investigation, or formal or informal inquiry (regardless of whether same is reduced to judgment) or any settlement thereof which arises directly or indirectly from, as a result of, or in connection with, Developer's (or its Affiliates') performance (or failure to perform) under this Agreement (collectively "Event")? and regardless of whether same resulted from any strict or vicarious liability imposed by law on the Indemnitees, provided, however, that this indemnity shall apply to any liability arising from the negligence of Indemnitees but not to gross negligence of Indemnities (except to the extent that joint liability is involved, in which event the indemnification provided herein shall extend to any finding of comparative negligence or contributory negligence attributable to Developer or its Affiliates). For the purpose of this Section 9.3, the term "Losses and Expenses" shall be deemed to include compensatory, exemplary, or punitive damages; fines and penalties; attorneys' fees; experts' fees; court costs; costs associated with investigating and defending against claims; settlement amounts; judgments; compensation for damages to the reputation and goodwill of the Indemnitees; and all other costs associated with any of the foregoing losses and expenses. Developer shall deliver to Company prompt notice of any event of which it becomes aware for which indemnification is required by this section; in such event and at the expense and risk of Developer, Company shall have the right but not the obligation to assume (in its sole discretion) the defense and/or settlement thereof, provided that Company will seek the advice and counsel of Developer in connection with any defense. Any assumption of such defense and/or settlement by Company shall not modify Developer's indemnification obligation. Company shall have the right in its sole discretion to take such actions as it deems necessary and appropriate to investigate, defend, or settle any Event or take other remedial or corrective actions with respect
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thereof as may be, in the sole discretion of Company, necessary for the protection of the Indemnitees or the System.
10. NOTICES
10.1 Notices: Any and all notices furnished pursuant to this Agreement shall be in writing and shall be personally delivered, sent by telecopier, or dispatched by overnight delivery envelope (Courier) to the respective parties at the addresses set forth on the signature page of this Agreement, unless and until a different address has been designated by written notice to the other party. Notices shall be deemed to have been received as follows: a) by personal delivery or telecopier - at time of delivery; and b) if by Courier on the second business day following the date on which the Notice was delivered by the notifying party to such Courier. Notices furnished by telecopier shall be confirmed by Courier delivery.
11. ENTIRE AGREEMENT
11.1 Entire Agreement: This Agreement and any attachments hereto constitutes the entire and complete agreement between Company and Developer concerning the subject matter thereof, and supersedes all prior agreements. Developer acknowledges that it is entering into this Agreement as a result of its own independent investigation and not as a result of any representation made by Company or persons associated with Company which are contrary to the terms herein set forth or which are contrary to the terms of any offering circular or other similar document required or permitted to be given to Developer pursuant to applicable law. Except for those permitted hereunder to be made unilaterally by Company, no amendment, change, or variation from this Agreement shall be binding on either party unless mutually agreed to by the parties and executed by their authorized officers or agents in writing.
12. DISPUTE RESOLUTION
12.1 Meeting to Resolve Disputes: If a dispute arises in any way related to, arising out of, or in connection with this Agreement, including without limitation, the making, performance, breach, or interpretation thereof, or the relationship between the parties, the parties must attempt in good faith to resolve the dispute. To do so, they must first meet in person at Company's principal offices at a time to be determined by the Company to discuss the dispute and attempt to settle it. At such meeting, each party shall be represented by a person who is authorized to conclusively resolve the dispute on that party's behalf and to bind that party to any agreed-upon resolution. Each party shall outline in detail what it believes to be the nature of the dispute including the objective facts and the provisions in this Agreement upon which it relies and upon which the dispute is based, and how (in that party's view) the dispute may be satisfactorily resolved. If the parties resolve the dispute at the meeting, they shall immediately formalize that resolution by an agreement executed by all parties at that time. Discussions and exchanges of information and materials, if any, at the meeting shall be deemed to be confidential, and treated as part of compromise and settlement negotiations for purposes of applicable rules of evidence. Any party which fails to attend or participate in any meeting within 30 days of written request made in accordance with this section 12.1 shall not have the right of access to mediation to resolve the underlying dispute as provided by Section 12.2 unless the other party shall agree to waive the holding of a meeting.
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12.2 Mediation:
12.2.1 Except as otherwise provided in Section 12.4 hereof, in connection with any dispute described in Section 12.1, before the date of filing any complaint or engaging in any other litigation relating thereto, the parties shall and either party shall have the right to submit the controversy or claim to non-binding mediation before the CPR Institute for Dispute Resolution ("CPR") under its National Franchise Mediation Program or if the CPR is unable to conduct the mediation, to the American Arbitration Association or other mutually agreeable mediator. The parties shall attend mediation within 60 days of written notice of submission to mediation. Each party shall bear its own costs with respect to the mediation, except the fees for the mediator and CPR (or other agreed upon agency) will be shared equally. Mediation shall be conducted in the Washington DC metropolitan area
12.2.2 Pending final resolution of any dispute arising out of or relating to this Agreement, each party shall continue to perform its obligations under this Agreement. The requirements of this Section 12 shall not be deemed a waiver of any right of termination under this Agreement. All applicable statutes of limitation and defenses based upon the passage of time with respect to matters in dispute shall be tolled while the procedures specified in this Section are pending. The parties will take such action, if any, required to effectuate such tolling. Any mediation between the Company and the Developer shall include ONLY those claims arising between Company and Developer. None of the Developer's claims may be mediated on a class-wide basis. All pre-mediation and mediation requirements in this Section are subject to the rights of the Company to seek injunctive relief in accordance with this Agreement as Company may deem advisable, and to the full extent permitted by law or equity.
12.3 Injunctive Relief: Nothing contained in this Agreement shall bar or delay Company's right to seek and obtain injunctive relief against threatened or actual conduct that may cause it loss or damages under the usual equity rules, including the applicable rules for obtaining restraining orders and preliminary injunctions. Company need not prove actual or irreparable damages. No bond or other security is required to be posted (or if required, the sum of one thousand dollars [$1,000.00] shall be deemed sufficient). Nothing contained in this Agreement shall be construed to limit or to preclude Company from joining with any action for injunctive or provisional relief any monetary claims that Company may have against the Developer that arise out of the acts or omissions to act giving rise to the action for injunctive or provisional relief. Notwithstanding anything to the contrary in this Agreement, Company shall have the right in its discretion to seek legal or equitable relief directly in the jurisdiction of the Developer's offices or in any other court that may exercise jurisdiction over the dispute and the parties, if Company considers such action necessary or advisable to expedite and/or more fully enforce its rights under this Agreement. Without limiting the generality of the foregoing, Developer agrees that Company shall have the right to obtain injunctive relief in addition to such other relief as may be available to it at equity, or at law, for any dispute involving the unauthorized use of the Proprietary Marks, termination of this Agreement, or enforcement of the confidentiality provisions set forth in this Agreement, and any dispute involving enforcement of the covenants set out in Section 5 of this Agreement. The Developer's sole remedy if an injunction is entered against it, shall limited be the dissolution of that injunction, if warranted,
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upon due hearing (all claims for damages by reason of the wrongful issuance of such injunction being expressly waived hereby).
12.4 Exclusions From Meeting and Mediation: Notwithstanding anything to the contrary in Sections 12.1 or 12.2, no dispute relating to the termination of this Agreement by Company pursuant to Sections 7.1.1, 7.1.6, and 7.1.9 of this Agreement shall be susceptible of being submitted to the dispute-resolution procedures set forth in Sections 12.1 and 12.2 hereof unless Company in its sole discretion, a) consents thereto in writing or b) itself initiates such proceeding.
12.5 Waiver of Punitive Damages Claims: The parties mutually and willingly waive, to the fullest extent permitted by law, any right to or claim for any punitive or exemplary damages against the other and agree that in the event of a dispute between them, recovery shall be limited to actual damages sustained by the other of them.
12.6 Waiver of Jury Trial: The parties mutually and willingly waive the right to a trial by jury of any and all claims made between them whether now existing or arising in the future, including any and all claims, defenses, counterclaims, cross claims, third party claims and intervener's claims whether arising from or related to the sale, negotiation, execution, or performance of the transactions to which this Agreement relates.
13. PERSONAL GUARANTEE OF DEVELOPER OBLIGATIONS
(a) In consideration of the Company entering into this Agreement and the sum of ten dollars ($10.00), the receipt of which is hereby acknowledged by the Guarantor, the Guarantor does hereby jointly and severally, irrevocably and unconditionally guarantee payment, observance and performance to the Company of all present and future obligations of any nature at any time owing by the Developer to the Company, whether owing under this Agreement or otherwise, and whether direct or indirect, absolute or contingent, matured or unmatured, extended or renewed, wherever and however incurred, and whether the Developer is bound alone or with others and whether as principal or as surety (such obligations being herein after called the "Obligations"). This guarantee is a continuing guarantee of all of the Obligations and is a guaranty of payment, not collection. The Franchisor shall not be bound to exercise or exhaust its recourse against the Developer or any other person, or against any other guaranties or any security it may at any time hold, before being entitled to full payment, observance and performance from the Guarantors of the Obligations. The Guarantors' liability to make payment, observance and performance of the Obligations under this guarantee shall arise upon Company making demand in writing of any Guarantor, and such demand shall be deemed to have been effectively made when an envelope containing such demand addressed to a Guarantor at his address last known to Company is posted, postage prepaid.
(b) Without in any way lessening the liability of the under this guarantee, and without obtaining the consent of or giving notice to the Guarantor, Company may discontinue, reduce, increase or otherwise vary the credit of the Developer, may grant renewals, extensions, indulgences and releases to, and may accept compromises from or otherwise deal with the Developer and others in such manner as Company may see fit, and Company may apply all monies received from the Developer or others or from securities or guaranties toward such part
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of the obligations as Company may see fit. The obligations of the Guarantor under this guarantee shall not be released, discharged or in any way be affected by any change, alteration or modification of this or any other agreement, or by the bankruptcy or insolvency of the Developer or of any Guarantor, or by any other loss of capacity of the Developer or any other Guarantor, or by any other act or proceeding in relation to the Developer or this or any other agreement, or by any other thing whereby the Guarantor might otherwise be released.
(c) Until payment, observance and performance in full of the Obligations, the Guarantor shall not claim any set-off or counterclaim against the Developer in respect of any liability of the Developer to the Guarantor, nor claim or prove in any bankruptcy or insolvency of the Developer in competition with Company, nor have any right to be subrogated to Company. All present and future debts and liabilities of the Developer to the Guarantor are hereby postponed to the Obligations, and all monies received by any Guarantor in respect thereof shall be received in trust for Company and shall be paid over to Company upon demand, the whole without in any way lessening or limiting the liability of the Guarantor under this guarantee. This postponement is independent of the guarantee herein and shall remain in full force and effect until payment, observance and performance in full to Company of all of the Obligations is made, notwithstanding that the liability of the Guarantor under this guarantee may have been terminated.
(d) Company is not bound by any representations, warranties, promises or other inducements made by the Developer to the Guarantor or any of them and execution of this agreement by the Guarantor shall be conclusive evidence against the Guarantor that this agreement was not delivered in escrow or pursuant to any agreement that it should not be effective until any condition precedent or subsequent has been met. This guarantee shall not be discharged or affected by the death, disability, insolvency, or bankruptcy of any Guarantor.
13.1 Independent Advice: Developer and the Guarantor acknowledge that they have received, have had an ample time to read and have read this Agreement and fully understand its provisions. The Developer and the Guarantor further acknowledge that they have had an adequate opportunity to be advised by advisors of their own choosing (including without limitation their own lawyers, accountants, and bankers) regarding all pertinent aspects of this franchise and the franchise relationship created hereby and that they have done so with the full understanding and knowledge of all of the terms hereof.
14. MISCELLANEOUS PROVISIONS
14.1 Obtaining Approvals:
Whenever this Agreement requires the prior approval or consent of Company, Developer shall make a timely written request to Company therefor, and such approval or consent shall only be effective when delivered or obtained in writing. Company makes no warranties or guarantees upon which Developer may rely, and assumes no liability or obligation to Developer by providing any waiver, approval, consent, or suggestion to Developer in connection with this Agreement, or by reason of any neglect, delay, or denial of any request therefor.
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14.2 No Waiver: No delay, waiver, omission, or forbearance on the part of Company to exercise any right, option, duty, or power arising out of this Agreement or any similar agreement with other developers, or any breach or default by Developer, or by any other developer, of any of the terms, provisions, or covenants thereof, and no custom or practice by the parties at variance with the terms hereof, shall constitute a waiver by Company to subsequently enforce any such right, option, or power as against Developer or as to a subsequent breach or default by Developer.
14.3 Severability and Construction: Except as expressly provided to the contrary herein, each section, part, term, and provision of this Agreement shall be considered severable; and if, for any reason, any section, part, term, provision, and/or covenant herein is determined to be invalid and contrary to, or in conflict with, any existing or future law or regulation by a court or agency having valid jurisdiction, such shall not impair the operation of, or have any other effect upon, such other portions, sections, parts, terms, provisions, and/or covenants of this Agreement as may remain (Remaining Provisions); the Remaining Provisions shall continue to be given full force and effect and bind the parties hereto; and any invalid portions, sections, parts, terms, provisions, and/or covenants shall be deemed not to be a part of this Agreement.
14.4 Survival of Obligations After Expiration or Termination of Agreement: Any provision or covenant of this Agreement which expressly or by its nature imposes obligations beyond the expiration or termination of this Agreement shall survive such expiration or termination.
14.5 Enforceability of Modified Provisions: Developer expressly agrees to be bound by any promise or covenant imposing the maximum duty permitted by law which is subsumed within the terms of any provision hereof (as though it were separately articulated in and made a part of this Agreement) that may result from striking from any of the provisions hereof any portion or portions which a court or agency having valid jurisdiction may hold to be unreasonable and unenforceable in an unappealed final decision to which Company is a party, or from reducing the scope of any promise or covenant to the extent required to comply with such a court or agency order.
14.6 Captions: All captions in this Agreement are intended for the convenience of the parties, and none shall be deemed to affect the meaning or construction of any provision hereof.
14.7 Atypical Arrangements: Developer acknowledges and agrees that Company may modify the offer of its development rights to other developers, or its ongoing relationship with such other developers in any manner and at any time, which offers, agreements, or modifications have or may have terms, conditions, and obligations which may differ from the terms, conditions, and obligations in this Agreement.
14.8 Receipt of Franchise Offering Materials: Developer acknowledges that Developer has received a copy of the complete Company SUTEKI EXPRESS Development Agreement, the attachments thereto, and agreements relating thereto if any, at least five (5) business days prior to the date on which this Agreement was executed. Developer further acknowledges that it has received the SUTEKI EXPRESS disclosure document required by the Trade Regulation Rule of the Federal Trade Commission entitled "Disclosure Requirements and
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Prohibitions Concerning Franchising and Business Opportunity Ventures" ("UFOC")> and which contains a copy of this Development Agreement, at least ten (10) business days prior to the date on which this Agreement was executed.
14.9 Recognition of Business Risks: Developer acknowledges that it has conducted an independent investigation of the proposed development rights, and recognizes that the business venture(s) contemplated by this Agreement and the Franchise Agreement(s) involves business risks and that Developer's success will be largely dependent upon the ability of Developer as an independent businessperson or business. Except as may appear in the UFOC, Company expressly disclaims the making of, and Developer acknowledges that it has not received, any representation, express or implied, as to the past, current, or potential sales, income, profits, or success of the business venture contemplated by this Agreement, or of other Restaurants.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement on the day and year first above written.
MANCHU WOK FRANCHISING USA INC. DEVELOPER
By:__________________________ By:_______
Mike Craig, President and CEO
Print Name:
By:_____________________________ Title:
Paul LcBlanc, Vice President-Finance
Guarantor
Addresses for Notices Sent Pursuant to Section 10,1
Notices to Manchu Wok: Manchu Wok Franchising USA Inc.
85 Citizen Court, Unit 9 Markham,ONL6GlA8 Attn: President
Developer: ____________________________
Guarantor:
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Attachment A to Development Agreement
DEVELOPMENT SCHEDULE
Date by Which Suteki Date for Executing Suteki Express Restaurant
Express Franchise Agreement Shall Be Opened
__________, 200_
__________, 200_
__________,200_
__________, 200_
__________,200
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1. |
,200 |
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2. |
,200 |
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3. |
,200 |
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4. |
,200 |
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5. |
,200 |
Company's Initials Developer's Initials
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Attachment B to Development Agreement
DEVELOPMENT AREA
Company's Initials Developer's Initials
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Attachment C to Development Agreement
CURRENT FORM OF MANCHU WOK FRANCfflSING USA INC.
FRANCHISE AGREEMENT FOR SUTEKI EXPRESS RESTAURANTS
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