| (a) |
the
accuracy and completeness of such submissions as of the respective
dates
of the documents and the date hereof;
and
|
| (b) |
that
such submissions do not omit the statement of any material fact necessary
to make them not misleading.
|
| (a) |
Written
guidelines for site selection (if applicable) upon
request;
|
| (b) |
As-Built
Survey site plans, construction plans, drawings and specifications
for the
Restaurants and related facilities;
|
| (c) |
Layouts
and specifications for fixtures, furnishings, interior design and
decor,
signs and equipment required as elements of the
System;
|
| (d) |
Such
training at such locations and for such periods as may be designated
by
the Company from time to time in the Operating Standards Manual or
otherwise in writing, subject to
Section
5.03
of
this Agreement;
|
| (e) |
Such
assistance as the Company may determine is required in connection
with the
Restaurant operation by Franchisee;
|
| (f) |
One
(1) copy each of the Company's Operating Standards Manual and other
applicable manuals, publications or materials issued by the Company,
copies of which are, concurrently with the execution hereof, delivered
and
loaned to Franchisee for the term hereof. Any additions and modifications
thereto as the Company may issue from time to time, in its discretion,
to
incorporate new developments or other changes in System standards,
specifications, procedures, and techniques will be provided to the
Franchisee. Franchisee must pay then-current replacement fee as
established by the Company for replacing copies of the Operating
Standards
Manual or other materials;
|
| (g) |
A
sample of the Company's standardized chart of accounts, statement
of
earnings, balance sheet and other report formats to be used by Franchisee
for purposes of reporting to the
Company;
|
| (h) |
The
Company's regular and continuing consulting services and periodic
inspections and evaluations of Franchisee's operations pursuant to
Section
5.04
;
and
|
| (i) |
The
STEAK N SHAKE advertising/marketing program(s) as developed and issued
from time to time by the Company under
Sections
6.02 and 7.01.
|
| (a) |
Franchisee
gives the Company written notice of its intention to renew this Franchise
not less than six (6) months, nor more than twelve (12) months, prior
to
the end of the then-current term.
|
| (b) |
Franchisee
is not, when notice is given and when the franchise is renewed, in
material default of any provision of this Agreement, any amendment
hereof
or successor hereto, or any other Unit Franchise Agreement, and has
complied with all such agreements during the term of this
Agreement.
|
| (c) |
All
monetary obligations owed by Franchisee to the Company are current
and
have been paid throughout the initial and all prior renewal terms
of this
Agreement in a timely manner.
|
| (d) |
Franchisee
executes the Company's standard Unit Franchise Agreement in the form
in
which it exists on the renewal date, which may contain certain terms
and
conditions substantially different from those set forth herein, including
without limitation a different royalty fee, a different term or different
national and local advertising and marketing expenditure requirements
(or
new methods of computing same), if
any.
|
| (e) |
Franchisee,
its managers and any other employee of the Franchisee attend and
satisfactorily complete such retraining or refresher training program
as
the Company may require, in its sole discretion, at such time and
place as
the Company may reasonably
designate.
|
| (f) |
Franchisee
performs such remodeling, repairs, replacements and redecoration
as the
Company may require to cause the Restaurant, equipment, electronic
point
of sale systems, computer systems, fixtures, furnishings and furniture
to
conform to the plans and specifications being used for new or remodeled
STEAK N SHAKE Restaurants on the renewal
date.
|
| (g) |
Franchisee
pays to Company a renewal fee equal to fifty percent (50%) of the
Initial
Fee payable by franchisees prevailing at the renewal date, payable
at
least thirty (30) days prior to the renewal
date.
|
| (h) |
Franchisee
executes an agreement with the Company agreeing to release any claims,
known or unknown, Franchisee may have against the Company at the
time of
the renewal.
|
| 3.01. |
Transfer
of Personal and Real Property Interests
.
Franchisee desires to assume operation of the Restaurants and the
Company
agrees to transfer its interest in the Restaurants on the Franchise
Date
as follows:
|
| (a) |
All
of the Company’s right, title and interest in and to the Knoxville
Restaurant shall be conveyed pursuant to that Contract for Purchase
and
Sale of Real Estate of even date herewith, attached hereto as Exhibit
A,
and incorporated herein by this reference (the "Contract"). It being
acknowledged and agreed by the parties that if the Contract is terminated
for any reason, this Agreement shall terminate immediately and the
parties
shall have no further obligations to each other hereunder.
|
| (b) |
All
of the Company’s right, title and interest in and to the Powell Restaurant
shall be conveyed pursuant to that Assignment and Assumption of Lease
Agreement of even date herewith attached hereto as Exhibit B and
incorporated herein by this reference. It being acknowledged and
agreed
that if the Assignment and Assumption Agreement is terminated for
any
reason, this Agreement shall terminate immediately and the parties
shall
have no further obligations to each other
hereunder.
|
| (c) |
All
of the Company’s right, title and interest in and to the good will,
inventory, equipment, furniture and fixture located at the Restaurants
as
of the date hereof shall be conveyed pursuant to that Personal Property
Sales of even date herewith and attached hereto as Exhibit C. It
being
acknowledged and agreed that if the Personal Property Sale Agreement
is
terminated for any reason, this Agreement shall terminate immediately
and
the parties shall have no further obligation to each other
hereunder.
|
| (a) |
install
and use in and about the Restaurant only such equipment (including,
but
not limited to, food and beverage preparation equipment, fixtures,
furnishings, point of sale equipment, computer hardware and software,
interior and/or exterior signage and air handling equipment) and
other
personal property which strictly conforms to the appearance, uniform
standards, specifications and procedures of the Company and the System.
Such equipment is sometimes referred to herein collectively as "Equipment
and Furnishings." Franchisee shall purchase and install all Equipment
and
Furnishings listed on the equipment and furnishings list, and not
currently installed in the Restaurants, in the New Store Construction
Manual from approved suppliers. The Company shall have the right
to
inspect and approve all Equipment and Furnishings and their installation
to ensure Franchisee's compliance with the Company's standards and
specifications; and
|
| (b) |
install
no vending machine on or about the Restaurant property, in addition
to any
vending machine currently installed, other than pay telephones and
newspaper vending machines, without the Company's prior written
consent.
|
| (a) |
Franchisee
agrees to maintain the condition and appearance of the Restaurant
in
compliance with the Company's prescribed standards of quality, service
and
cleanliness. If at any time, in the Company's reasonable judgment,
the
general state of repair, appearance or cleanliness of the Restaurant
property or its Equipment and Furnishings do not meet the Company's
standards, the Company will so notify the Franchisee in writing,
specifying the action to be taken by the Franchisee to correct such
deficiency, and the Franchisee will promptly comply with the Company's
requirements.
|
| (b) |
If
the Company changes the design, decor, layout or other elements of
the
System, the Franchisee agrees to remodel its Restaurant, at Franchisee's
expense, to conform with the Company's new standards. Such changes
will be
made by Franchisee by the time the Company completes such changes
to
substantially all of the Company
Restaurants.
|
| (c) |
If
the Company changes or modifies its electronic point of sale system
or
computer system used in the Company Restaurants, the Franchisee agrees
to
change or modify its electronic point of sale system or computer
system to
conform with the Company's new standards. Such changes and modifications
will be made by the Franchisee, at the Franchisee's expense, by the
time
the Company completes such changes and modifications to substantially
all
of the Company Restaurants.
|
| (d) |
If
the Company changes or modifies any item or items of equipment used
in the
Company Restaurants, the Franchisee agrees to change or modify such
item
or items of equipment in the franchised Restaurant to conform with
the
Company's new standards. Such changes and modifications will be made
by
the Franchisee, at the Franchisee's expense, by the time the Company
completes such changes and modifications to substantially all of
the
Company Restaurants.
|
| (a) |
to
serve, sell or offer for sale all of the (and only the) food and
beverage
products that: (i) are listed in the then-current standard menu or
menus
specified by the Company, (ii) meet the Company's uniform standards
of
quality and portions, and (iii) have been prepared in accordance
with the
recipes and food handling and preparation methods and procedures
designated from time to time in the Operating Standards Manual or
otherwise in writing;
|
| (b) |
to
maintain in sufficient supply all of the food, beverage and other
items
served;
|
| (c) |
not
to deviate from the Company's standards, specifications and procedures
for
serving or selling the same without the Company's prior written consent;
and
|
| (d) |
to
discontinue serving, selling or offering for sale any such items
as the
Company may, in its discretion, disapprove in writing at any
time.
|
| (a) |
The
Company will loan to Franchisee during the term of the Franchise
one copy
each of the Operating Standards Manual, and other applicable manuals
and
publications of the Company for STEAK N SHAKE Restaurants, containing
mandatory and suggested specifications, standards and operating procedures
prescribed from time to time by the Company for STEAK N SHAKE Restaurants
and information relative to other obligations of Franchisee hereunder
for
the operation of a STEAK N SHAKE Restaurant. The Company shall have
the
right to modify the Operating Standards Manual and other manuals
and
publications from time to time to reflect changes in authorized products
and services, standards of product quality and services for the operation
of a STEAK N SHAKE Restaurant.
|
| (b) |
Franchisee
shall keep current all copies of the Operating Standards Manual and
other
manuals. The master copies maintained by the Company at its principal
office shall control in the event of a dispute relative to the contents
thereof.
|
| (c) |
Franchisee
shall comply with all federal, state and local laws, rules and regulations
and shall timely obtain any and all permits, certificates or licenses
necessary for the full and proper conduct of the business franchised
under
this Agreement, including, without limitation, building and other
required
construction and occupancy permits, licenses to do business, fictitious
name registration, sales tax permits, health and sanitation permits
and
ratings and fire code clearances. Copies of all inspection reports,
warnings, certificates and ratings issued by any governmental entity
during the term of this Agreement in connection with the conduct
of the
franchised business which cites or indicates Franchisee's failure
to meet
or maintain the highest governmental standards or failure to fully
comply
with any applicable law, rule or regulation, shall be forwarded to
the
Company within five (5) days of Franchisee's receipt thereof. Franchisee
shall remedy such failure within the required time period as specified
in
the respective citation, report or other notices, or within ten (10)
days
if no time period is so specified.
|
|
(a)
|
The
Company employs qualified food service workers and, when needed,
provides
the services of those workers on a temporary basis to recipient companies,
and it is acknowledged that as of the Effective Date Franchisee has
need
of food service workers in conjunction with its operation of the
Restaurant.
|
|
The
Company has agreed to provide Franchisee with the services of food
service
workers (hereinafter "Temporary Employees"), as needed, on a temporary
basis for a period commencing on the Franchise Date and ending on
November
23, 2005 (the "Term") unless otherwise terminated by either party
upon the
provision of three (3) business days written notice to the other
party of
the intent to terminate the
Agreement.
|
| (d) |
For
purposes of this Agreement and otherwise, the Company shall be the
employer of Temporary Employees and, as employer, the Company shall
be
responsible for such duties and responsibilities that include, but
are not
limited to the following:
|
| i. |
Recruiting,
hiring, disciplining, terminating and reassigning Temporary Employees.
The
Company reserves a non-operational right of direction and control
over
Temporary Employees as is necessary to carry out its obligations
as the
employer of such Temporary
Employees.
|
| ii. |
The
Company shall be responsible for establishing, calculating, paying,
processing and issuing wages to Temporary Employees as calculated
from
data as to hours worked provided by Franchisee, such wages to be
paid from
the Company’s own accounts and without regard to the Employee Fee.
|
| iii. |
The
Company shall be responsible for the withholding, collection, reporting
and payment of all applicable payroll taxes including, but not limited
to,
federal, state and local income tax, Social Security tax, unemployment
contributions and other payroll taxes with respect to Temporary
Employees.
|
| iv. |
The
Company shall obtain and pay the costs of providing workers’ compensation
insurance and shall manage workers' compensation claims relating
to
Temporary Employees. Upon request, the Company shall furnish to Franchisee
a certificate of insurance evidencing the issuance to the Company
of
policies providing such coverage. The Company and Franchisee shall
be
joint employers of Temporary Employees for purposes of exclusive
remedy
provisions of applicable workers' compensation laws. The Company
hereby
agrees to indemnify and hold Franchisee harmless from and against
all
workers’ compensation claims brought against Franchisee by Temporary
Employees.
|
| v. |
The
Company shall comply with the Immigration Reform and Control
Act.
|
| vi. |
The
Company shall be responsible for maintenance of personnel and payroll
records for Temporary Employees.
|
| (e) |
Franchisee
shall retain sufficient responsibility for the operational direction
and
control of Temporary Employees, as is necessary to conduct Franchisee’s
business and without which Franchisee would be unable to conduct
its
business. In accordance with this responsibility, Franchisee shall
also
retain the following duties and
responsibilities:
|
| i. |
Franchisee
must verify skills, competency and fitness of each Temporary Employee
necessary to perform the duties pursuant to Franchisee’s qualification
requirements and Franchisee agrees that the acceptance of a Temporary
Employee relieves the Company of any liability to Franchisee for
losses,
claims or damages arising as a result of Temporary Employee's negligence,
theft, embezzlement, fraud, or other unlawful or willful acts committed
by
such Temporary Employee.
|
| ii. |
Franchisee
retains the right to request that a Temporary Employee no longer
perform
services at Franchisee’s worksite, but Franchisee may not unilaterally
terminate any Temporary Employee and, when any such action is requested,
Franchisee agrees to abide by all applicable federal, state and local
employment laws. Franchisee agrees to notify the Company as soon
as
practicable, but in no event more than 24 hours from any Temporary
Employee's failure to report to Franchisee’s worksite, either because
Temporary Employee has voluntarily chosen not to continue to perform
services for Franchisee or because Franchisee has determined that
it no
longer wishes Temporary Employee to perform such
services.
|
| iii. |
Franchisee
shall be responsible for providing adequate work performance instruction,
supervision and assistance to Temporary Employees necessary to perform
tasks assigned by Franchisee and Franchisee shall be responsible
for the
work performed by Temporary Employees as well as any risks or liabilities
associate therewith.
|
| iv. |
Franchisee
agrees to maintain records of actual time worked by Temporary Employees
and shall not pay Temporary Employees any wages or salaries or any
forms
of direct or indirect compensation, including employee
benefits.
|
| v. |
Franchisee
agrees to maintain a safe, healthy and legally compliant worksite
for
Temporary Employees and shall comply, at Franchisee’s sole expense, with
all safety, health and work laws, including, but not limited to federal
and state OSHA regulations and rules (including applicable recording
keeping requirements under federal, state and local
laws).
|
| vi. |
Franchisee
shall be responsible for the products and/or services of its operation
at
the Restaurants and any liability or other loss incurred as a result
of
improper supervision, safeguards or other controls relating to its
products or services.
|
|
(f)
|
With
respect to this Section 5.03, each party shall bear those risks and
responsibilities inherent to their respective businesses and, as
allowed
under applicable law, shall be obligated to only pay or indemnify
the
other party for liability, claims, penalties, damages or losses of
whatever nature to the extent that such losses arise from risks,
duties
and responsibilities in connection with each parties’ business pursuant to
this Agreement, including, but not limited to court costs and attorney
fees associated therewith. Liabilities with respect to the following
shall
be born by each party in proportion to their responsibility, action
or
failure to act. Neither the Company nor Franchisee, nor their officers,
directors, employees and agents shall take or fail to take any action
that, with respect to Temporary Employees, would cause or result
in the
filing of a claim under Title VII of the Civil Rights Act of 1964,
the
Americans with Disabilities Act ("ADA"), the Age Discrimination and
Employment Act, the Fair Labor Standards Act, the Immigration Reform
and
Control Act, the Vietnam Era Veteran’s Readjustment Act of 1974, the
Family and Medical Leave Act, or any other such similar law, rule
or
regulation governing employment relationships generally, as amended,
enacted now or later by any federal, state or local governmental
entity
|
| (a) |
All
of the Franchisee's managerial employees are required to successfully
complete the management training program prescribed by the Company
at such
place and time as the Company may designate, but prior to performing
duties in or related to the Restaurant. At the Company's option,
such
training may take place at a STEAK N SHAKE Restaurant(s) operated
by
Franchisee and may be conducted by properly trained Franchisee personnel.
Franchisee shall be solely responsible for the compensation of trainees
and their travel, lodging and living expenses incurred in connection
with
the attendance at such programs.
|
| (b) |
In
addition to the required management training, all other employees
of
Franchisee must undergo such on-the-job and instructional training
as the
Company may from time to time
require.
|
| (c) |
Franchisee,
and/or such executive, managerial, supervisory and other employees
of
Franchisee shall attend and successfully complete all subsequent
training,
refresher and retraining programs which the Company may conduct and
require Franchisee and/or designated employees to attend, in its
reasonable discretion.
|
| (d) |
Upon
failure of Franchisee or any manager or employee of Franchisee to
complete
successfully, for any reason, any training, retraining or refresher
program required by the Company, Franchisee shall require some other
trainee to attend and successfully complete the program, and to operate
the franchised business thereafter as its manager or otherwise perform
the
functions of the category of employee for which the training program
was
offered, if the Company, at its option, so
directs.
|
| (e) |
There
shall be no tuition charge for the training required by subsections
(a),
(b), (c) and (d) of this
Section
5.03
,
but Franchisee shall pay all expenses of travel, room, board, training
supplies and materials and salaries or wages of its employees while
in
training. Additional training provided by the
Company.
|
| (f) |
The
Company will furnish representatives who provide guidance and assistance
in the hiring and training of new employees for a minimum of 54 eight-hour
work days. Upon request by Franchisee or if the Company deems additional
assistance necessary, a representative or representatives shall remain
for
an additional period determined by the Company, and Franchisee shall
reimburse the Company for its reasonable expenses (including salary)
in
providing the representative(s) for such additional period. Franchisee's
management staff shall be at work and on duty during the hours of
assistance by the Company's
representatives.
|
| (g) |
Franchisee
shall replace any manager who the Company determines is not qualified
to
manage a Restaurant in accordance with the System and its
standards.
|
| (h) |
The
Company will provide the initial training materials and supplies,
which
are part of the System. Franchisee will purchase any additional or
replacement training materials and supplies, as may be specified
by the
Company, to properly conduct such training as is established and
published
from time to time in the Operating Standards Manual.
|
| (a) |
furnish
to Franchisee, from time to time, such merchandising and operating
aids
and services, bulletins, newsletters, reports and other printed material
in connection therewith, as are generally furnished to its other
STEAK N
SHAKE Franchisees.
|
| (b) |
from
time to time, at its discretion, provide written or verbal consultation
and advice or send representatives to Franchisee's premises to consult
with Franchisee or its management representative relative to the
operation
of the Restaurant; and shall periodically inspect the premises of
the
Restaurant (with or without prior notice) and the Equipment and
Furnishings thereon and the products served by Franchisee therein
to
determine the efficiency and quality of the operation and the faithfulness
of compliance with the System.
|
| (c) |
on
reasonable written request by Franchisee as determined by the Company,
furnish services to Franchisee to aid in the solution of specific
problems
encountered by Franchisee which are beyond the scope of the Company's
obligations in
subsection
(b)
above. Franchisee shall reimburse the Company promptly for its actual
time
and actual expenses incurred in aiding Franchisee with such
problems.
|
| (a) |
On
or before the Franchise Date, Franchisee shall pay to the Company
an
initial nonrecurring franchise fee payable on the execution of this
Agreement in the amount of Forty Thousand Dollars and 00/100 ($40,000.00)
(the "Initial Fee"). Nothing herein is intended to represent or guarantee
the amount of the Initial Fee for any Restaurant other than the two
franchised by the terms of this Agreement. The Initial Fee is
nonrefundable.
|
| (b) |
On
or before the Franchise Date, Franchisee shall pay to the Company
as a
royalty fee, a sum equal to four percent (4%) of Franchisee's "Gross
Receipts" (as defined in
Section
6.03
hereof) from the operation of each Restaurant, payable by the seventh
(7th) day after the end of each four week accounting period, or,
at the
Company's option, by the seventh (7th) day after the end of each
week for
the preceding week's receipts. Provided however, payment of that
portion
of the royalty fee reflecting Gross Receipts generated by the Powell
Restaurant required by this Section 6.02(b),
shall
be deferred
during the time period commencing on the date of last day of the
four-week
accounting period
during which television advertising purchased by Franchisee first
airs on
television stations serving the Knoxville, Tennessee Designated Market
Area ("Initial Period") and ending on the last day of the thirteenth
(13
th
)
four-week
accounting period following the Initial Period (the entire time period
discussed in the preceding sentence referred to as the "Initial TV
Advertising Period")
;
and provided further that Franchisee’s proposed television advertising
plan for the Initial TV Advertising Period be approved in writing
by the
Company’s Chief Marketing Officer, prior to the Initial Period, which
approval shall not be unreasonably
withheld.
|
| (c) |
Within
ten (10) days of the end of the Initial TV Advertising Period, the
Company
shall provide Franchisee with notice setting forth the amount of
the
royalty fees deferred during the Initial TV Advertising Period ("Deferred
Royalty Fee"). Franchisee
shall
make payments toward the
Deferred
Royalty Fee
by
remitting an amount equal to one percent (1%) of Gross Receipts for
the
Powell Restaurant within twenty (20) days from the end of each four-week
accounting period commencing on the end of the first full month following
the end of the Initial TV Advertising Period until the Deferred Royalty
Fee is reimbursed in full.
|
| (a) |
Franchisee
will expend a reasonable amount annually, but in no event less than
five
percent (5%) of its Gross Receipts for advertising and marketing.
Price
discounts on products will not be included in calculating compliance
with
this requirement. Included in the required advertising and marketing
expenditures will be a payment to the Company of one percent (1%)
of Gross
Receipts which will be used by the Company, at its sole discretion,
for
expenditures reasonably related to the creation, development,
administration and supervision of marketing and advertising programs
and
menu development for all STEAK N SHAKE
restaurants.
|
| (b) |
At
the Company's option, Franchisee will pay to the Company or its designee
five percent (5%) of Franchisee's Gross Receipts from the operation
of the
franchised business to be credited to an advertising account for
Franchisee payable by the seventh (7th) day after the end of each
four
week accounting period, or, at the Company's option, by the seventh
(7th)
day after the end of each week for the preceding week's receipts.
The
monies in the advertising account will be used by the Company, at
its sole
discretion, for the implementation of local and/or regional and/or
national marketing and advertising programs intended to increase
general
public recognition and acceptance of STEAK N SHAKE Restaurants in
the
Franchisee’s Market area, with one percent (1%) of the account being used
by the Company for creation and development of marketing as set forth
in
subsection (a) above. These marketing and advertising expenditures
will be
credited toward the advertising and marketing expenditure requirements
described in subparagraph (a) of this Section. The Company will administer
the advertising account, which will not be subject to audit by the
Franchisee. The Company will create a periodic statement of monies
collected and costs incurred for the implementation portion of the
advertising account, and will provide such periodic statement to
Franchisee not less frequently than semi-annually. No monies in such
advertising account are refundable upon the termination or expiration
of
this Agreement, as such monies are to be used by the Company to further
the goodwill and public image of the Marks and the STEAK N SHAKE
brand.
|
| (a) |
Recognizing
the value of advertising and the importance of the standardization
of
advertising to the furtherance of the goodwill and public image of
the
STEAK N SHAKE System, Franchisee agrees that the Company or its designee
shall have the right to conduct, determine, maintain and administer
all
national, regional, local and other advertising and marketing as
may be
instituted by the Company from time to time, and to direct all such
advertising and marketing with sole discretion over the concepts,
materials, form, copy, layout and content used
therein.
|
| (b) |
Franchisee
understands and acknowledges that advertising expenditures are intended
to
maximize general public recognition and acceptance of all STEAK N
SHAKE
Restaurants, and the Company and its designee(s) make no representation
or
warranty that any particular STEAK N SHAKE Restaurant, including
the
Restaurant operated under this Agreement, will benefit directly or
pro
rata from such advertising.
|
| (c) |
Franchisee
shall be free to conduct, at its separate expense, supplemental
advertising in addition to the advertising received for the expenditures
specified in
Section
6.02
herein, to promote and increase the demand for the products and services
of its own STEAK N SHAKE Restaurant. All such supplemental advertising
shall either have been prepared or previously approved in writing
by the
Company.
|
| (a) |
The
Company shall have the right to examine and audit Franchisee's records,
accounts and books, federal and state income tax returns and state
sales
tax returns at reasonable times and places (including, without limitation,
Franchisee's principal place of business). Franchisee shall pay the
Company's audit fees, charges and expenses (including, without limitation,
travel expenses and reasonable accounting and legal fees) with respect
to
any periodic or annual audit which reveals an understatement of Gross
Receipts by Franchisee to the Company, if such understatement is
in excess
of two percent (2%) of Gross Receipts during such periodic or annual
audit
period.
|
| (b) |
If
required payments are delinquent or if an inspection should reveal
that
the Gross Receipts reported by Franchisee to the Company have been
understated, Franchisee shall immediately pay to the Company the
amount
overdue, unreported or understated, in addition to interest thereon
from
the date due at the rate required under
Section
6.04
hereof. The foregoing shall be in addition to any other rights the
Company
may have.
|
|
(a)
|
All
receipts from the operation of the Restaurants, net of refunds, all
of
which shall be documented as agreed between the parties hereto (the
"Deposits"), shall be deposited with a banking institution acceptable
to
the Company, in the Company’s sole discretion, in accounts upon which the
Company may draw (the "Accounts).
|
|
(b)
|
The
Company shall provide the following accounting
services:
|
|
i.
|
Preparation
of financial statements for each 4-week accounting cycle and fiscal
year
periods, including a statement of earnings for the Restaurants, general
and administrative expenses and distribution center. In addition,
the
Company shall provide a statement of financial position, statement
of cash
flows, and a consolidated or combined statement of earnings. Financial
statements shall be prepared on an accrual basis of accounting in
accordance with generally accepted accounting principles from the
date
provided by Franchisee;
|
|
ii.
|
Processing
and payment of approved invoices for operating costs, merchandize
and
services and copies of check registers shall be provided to Franchisee
while supporting documents shall be kept on file in the Company’s
accounting office and available for
inspection;
|
|
iii.
|
Processing
and payment of Franchisee’s bi-weekly payroll. Payroll services shall
include all normal payroll deductions, garnishments, vacation, and
end-of-year W-2 processing.
|
|
iv.
|
Preparation
and filing of payroll related tax returns (federal, state, local,
SUTA and
FUTA), sales and use tax returns and personal property tax
returns.
|
|
v.
|
Provide
copies of reconciliations on the Accounts for each accounting
period.
|
|
vi.
|
The
accounting and administrative services provided by the Company shall
not
include the administration of any group employee benefit plans or
formulation of budgeted financial data. The Company shall not be
responsible for computation or payment of federal, state or local
income
tax liabilities nor filing of related returns for Franchisee.
(Collectively, #i-vi, the
"Services")
|
| (c) |
As
payment for the Services provided by the Company as set forth above,
Franchisee shall pay an Accounting Services Fee of Twelve Thousand
Dollars
($12,000) for each of the Restaurants per annum, payable in thirteen
(13)
equal installments, which sum shall be deducted by the Company from
the
Accounts within twenty (20) days from the end of the first four-week
accounting period following the Franchise Date and within twenty
(20) days
from the end of each four-week accounting period thereafter. The
Accounting Service Fee hereunder may be adjusted, as appropriate,
to
equitably reflect any increase or decrease in the actual costs incurred
by
the Company in performing the Services. Franchisee shall not be charged
a
greater amount for such services than any other
Franchisee.
|
| (d) |
Franchisee
shall establish the Accounts for the
Deposits.
|
| (e) |
All
expenses related to the operation of the Restaurants, including by
way of
illustration and not limitation, rent payments, insurance premiums,
real
estate taxes, ADP fees, and other impositions required under the
Leases
will be paid by the Company from the Accounts.
|
| (f) |
Either
party may cancel the provision of the Services provided by this Section
8.05 upon thirty (30) days notice to the other party. Upon such
discontinuation of the Services, the Franchisee shall pay a prorated
Accounting Services Fee for services provided and not billed, provided
however that all other reports to be provided to Franchisee pursuant
to
this Section 8.05 will be provided within twenty (20) days from the
end of
the then-current accounting period.
|
| (a) |
Franchisee
shall maintain in full force and effect at all times during the term
of
this Agreement at its sole expense:
|
| (i) |
Commercial
General Liability insurance, with an endorsement deleting the contractual
liability exclusion with respect to personal injury insurance, and
motor
vehicle liability insurance, if a motor vehicle, as opposed to mobile
equipment, is employed in the operation of the
Restaurant.
|
| (ii) |
Such
insurance coverage shall be maintained under one or more policies
of
insurance containing minimum liability protection of One Million
Dollars
($l,000,000) per person for bodily and personal injury or death,
Five
Million Dollars ($5,000,000) per occurrence for bodily and personal
injury
or death and One Million Dollars ($1,000,000) per occurrence for
property
damage, or such greater amounts or such additional coverages as may
be
required by the Company or any lease for the Restaurant property.
Such
insurance coverage shall name the Company as an additional
insured.
|
| (iii) |
Further,
Franchisee shall carry "Special Form" property insurance to keep
the
premises of the Restaurant and its contents insured against loss
or damage
by fire and such other risks covered in the Standard Extended Coverage
Endorsement, in an amount not less than 100% of the full replacement
cost
of such assets.
|
| (b) |
Franchisee
acknowledges that the minimum coverages and policy limits required
by this
Section may be reasonably increased from time to time by the Company
for
its own and Franchisee's protection, and agrees to comply with such
new
requirements promptly upon receipt of written notice from the Company.
The
insurance policy or policies required by this Section shall be written
by
an insurance company or companies possessing an A.M. Best rating
of A-, XI
or such other rating as the Company may approve in
writing.
|
| (c) |
Worker's
Compensation, Unemployment Compensation, Social Security and other
insurance coverages shall be maintained in such statutory amounts
as may
now or hereafter be required by any applicable
law.
|
| (d) |
Franchisee's
obligation to obtain and maintain the foregoing policies in the amounts
specified shall not be limited by reason of any insurance which may
be
maintained by the Company, nor shall Franchisee's performance of
such
obligation relieve it of liability under the indemnity provisions
set
forth in
Section
9.01
.
|
| (a) |
The
Company possesses certain proprietary know-how, consisting of the
unique
restaurant concept of a STEAK N SHAKE Restaurant and the methods,
techniques, formats, drawings, specifications, procedures, information,
systems and knowledge and experience in the design and operation
thereof
and the purchase, preparation and sale of authorized and approved
products
and services (the "Know-How"). The Company will disclose the Know-How
to
Franchisee by furnishing layouts, specifications and guidance in
the
development and operation of the Restaurant, the training program,
the
Operating Standards Manual and other instructional manuals, sale
promotion
aids, accounting procedures, marketing reports, informational and
product
bulletins, vendors price sheets and inventory systems and in guidance
furnished to Franchisee during the term of the
Franchise.
|
| (b) |
Franchisee
agrees that it will not acquire any legal or equitable interest in
the
Know-How, other than the right to utilize it in the development and
operation of the Restaurant during the term of the Franchise, and
that the
use or duplication of the Know-How in any other restaurant business
would
constitute an unfair method of competition. Franchisee acknowledges
and
agrees that the Know-How is proprietary to the Company and, except
to the
extent known in the relevant market or trade, is a trade secret of
the
Company and is disclosed to Franchisee solely for use by Franchisee
in the
development and operation of the Restaurant during the term of the
Franchise and on the condition that Franchisee does hereby agree,
that
it:
|
| (i) |
will
not use the Know-How in any other business or
capacity;
|
| (ii) |
will
maintain the confidentiality of the Know-How at all times during
and after
the term of the Franchise;
|
| (iii) |
will
not make unauthorized copies of any portion of the Know-How disclosed;
and
|
| (iv) |
will
adopt and implement all reasonable procedures prescribed from time
to time
by the Company to prevent unauthorized use or disclosure of the Know-How,
including without limitation restrictions on disclosure thereof to
employees of the Restaurant and the use of nondisclosure clauses
in
employment agreements with such
employees.
|
| (c) |
Franchisee
agrees that the Company would be unable to protect its trade secrets
and
Know-How against unauthorized use or disclosure if Franchisee were
permitted to hold interests in businesses similar to STEAK N SHAKE
Restaurants. Therefore, during the term of the Franchise, Franchisee
may
not have any interest as an owner, investor, partner, director, officer,
employee, consultant, representative or agent, or in any other capacity,
in any other restaurant business offering fast service or full service
meals which feature ground beef sandwiches as a principal product;
provided, however, that this restriction shall not apply to (i) other
STEAK N SHAKE Restaurants operated under Franchise Agreements previously
or hereafter entered into with the Company or (ii) ownership of
securities, that are publicly traded, representing five percent (5%)
or
less of the equity or voting power of any
corporation.
|
| (d) |
The
Company has not authorized or empowered Franchisee to use the Marks
except
as provided by this Agreement, and Franchisee shall not employ any
of the
Marks in signing any contract, lease, mortgage, check, purchase agreement,
negotiable instrument or other legal obligation without the prior
written
consent of the Company.
|
| (e) |
Neither
the Company nor Franchisee shall make any express or implied agreements,
warranties or representations or incur any debt, in the name of or
on
behalf of the other or represent that their relationship is other
than
franchisor and franchisee and neither the Company nor Franchisee
shall be
obligated by or have any liability under any agreements or representations
made by the other that are not expressly authorized
hereunder.
|
| (f) |
The
Company shall have no liability for any sales, use, excise, gross
receipts, income, property or other taxes, whether levied upon Franchisee,
the Restaurant or its assets, in connection with the sales made,
services
performed or business conducted by
Franchisee.
|
| (a) |
Franchisee
agrees that the Company shall have good cause to immediately terminate
this Franchise Agreement, without notice to Franchisee, if Franchisee
|
| (i) |
files
a voluntary petition in bankruptcy or any pleading seeking any
reorganization, liquidation, dissolution or composition or other
settlement with creditors under any law; admits or fails to contest
the
material allegations of any such pleading filed against it; is adjudicated
a bankrupt or insolvent; a receiver is appointed for a substantial
part of
the assets of Franchisee or the Restaurant; a final judgment remains
unsatisfied or of record for thirty (30) days or longer (unless a
supersedeas bond or other appeal bond is filed); execution is levied
against the Franchise or any substantial part of the assets of the
Restaurant; tax levy is made; suit to foreclose any lien or mortgage
on
the premises or assets of the Restaurant is instituted against Franchisee
and Franchisee fails to diligently contest such action; a substantial
part
of the real or personal property of the Restaurant is sold after
levy of
judgment thereupon by any sheriff, marshal or constable; or the claims
of
creditors of Franchisee or the Restaurant are abated or subject to
a
moratorium under any law;
|
| (ii) |
(or
any of Franchisee’s members, shareholders, owners, partners, managers,
officers or directors) are convicted of or pleads no contest to a
felony,
a crime involving moral turpitude or any other crime or offense that
is
likely to adversely affect the reputation of the Restaurant and the
goodwill associated with the Marks;
|
| (iii) |
makes
any unauthorized use or disclosure to any third party of the Company's
System or utilizes, duplicates or discloses any portion of the Operating
Standards Manual in violation of this
Agreement;
|
| (iv) |
denies
the Company the right to inspect the Restaurant or to examine its
books
and records and other business documents in accordance with the
Agreement;
|
| (v) |
submits,
or the Company learns that Franchisee has previously submitted to
the
Company, a franchise application, a management commitment form and/or
capitalization plan which contains any false or misleading statements
or
omits any material fact necessary in order to make the statements
made not
misleading;
|
| (vi) |
submits
to the Company at any time during the term of this Agreement, reports,
financial statements, tax returns or schedules or other information
or
supporting records which intentionally understate gross receipts
for any
period covered by such report by more than two percent
(2%);
|
| (vii) |
fails
to timely pay the Company all amounts due pursuant to this Agreement,
including but not limited to payment of the Royalty Fee and Advertising
Fee when due; provided, however, that the Company will not terminate
this
Agreement for non-payment without giving Franchisee the opportunity
to
make such payment within 10 days after receipt of written notice
demanding
such payment; provided further, however, that Franchisee will be
entitled
to only 2 such notices in any 12 month period under this Agreement.
Upon a
third violation of this subsection in any 12 month period, this Agreement
may be immediately terminated by the
Company.
|
| (viii) |
fails
on two or more separate occasions within any 12 consecutive month
period
to submit when due financial statements, reports or other data,
information or supporting records required by this Agreement, unless
such
failures are corrected within 10 days after notice is delivered to
Franchisee; provided, however, that Franchisee will be entitled to
only 2
such notices in any 12 month period under this
Agreement.
|
| (ix) |
if
Franchisee is a corporation, limited liability company, partnership,
limited partnership or other entity, the transfer of any share or
ownership interest in Franchisee without Franchisor’s prior written
consent, which may be withheld in Franchisor’s sole
discretion.
|
| (b) |
Franchisee
agrees that the Company shall have good cause to terminate this Franchise
Agreement if Franchisee commits any of the following material defaults,
unless Franchisee promptly takes action to cure such default, and,
within
thirty (30) days after receipt of a notice from the Company, succeeds
in
curing such default:
|
| (i) |
abandons
or surrenders or transfers control of the operation of a Restaurant
(including entering into a management arrangement with any person
not a
party to this Agreement), fails to maintain its right of possession
of the
premises of a Restaurant, fails to actively operate the Restaurant
during
required business hours, or, if applicable, commits a material default
under any lease or sublease for a
Restaurant;
|
| (ii) |
makes
an unauthorized assignment of the Franchise or an ownership interest
in
Franchisee or a Restaurant, or fails to assign the Franchise or an
interest in Franchisee owned by a deceased or disabled person as
herein
required;
|
| (iii) |
misuses
or makes any unauthorized use of the Marks or commits any act which
can
reasonably be expected to materially impair the goodwill associated
with
the Marks;
|
| (iv) |
operates
a Restaurant in a manner that presents a health or safety hazard
to its
customers, employees or the public or which is deleterious to or
reflects
unfavorably on STEAK N SHAKE
Restaurants;
|
| (v) |
fails
to maintain a responsible credit rating by failing to make prompt
payment
of undisputed bills, invoices and statements from suppliers of goods
and
services to a Restaurant;
|
| (vi) |
fails
to maintain and operate a Restaurant in accordance with the standards
and
specifications established by the Company from time to time; knowingly
sells any product on the premises which does not conform to the Company's
specifications; fails to sell products designated by the Company;
or sells
products not approved by the
Company;
|
| (vii) |
fails
to repair, restore or relocate a Restaurant building and premises
after
damage, destruction or public taking as provided in
Sections
3.02 and 3.06
hereof;
|
| (viii) |
fails
to complete all phases of any required training program to the Company's
satisfaction;
|
| (ix) |
defaults
in the performance of any other term, condition or covenant contained
herein which is not corrected within the time and under the conditions
provided with respect thereto.
|
| (c) |
If
Franchisee is in substantial compliance with this Agreement and the
Company materially breaches this Agreement and fails to cure such
breach
within thirty (30) days after delivery to the Company of written
notice
thereof, Franchisee may, at its option, terminate this Franchise
Agreement.
|
| (a) |
Franchisee,
upon any termination, cancellation or expiration of this Agreement,
shall
promptly pay to the Company, its affiliates and subsidiaries, any
and all
sums owed to them. In the event of termination for any default by
Franchisee, such sums shall include all damages, costs and expenses,
including reasonable attorneys' fees, incurred by the Company as
a result
of the default, which obligation shall give rise to and remain, until
paid
in full, a lien in favor of the Company against any and all of the
assets
of the Restaurant owned by Franchisee at the time of
default.
|
| (b) |
Upon
termination, cancellation or expiration hereof for any reason, all
Franchisee's rights hereunder shall terminate. Franchisee shall not
thereafter use or adopt any secret recipes, formulas, trade secrets,
Know-How or other proprietary information disclosed to it hereunder
or any
china or glassware, emblems, signs, displays or other property on
which
the Company's name or Marks are imprinted, or any simulation thereof.
Franchisee shall not otherwise use or duplicate the System or any
portion
thereof or assist others to do so. Franchisee shall remove from the
premises all signs, emblems and displays identifying it as associated
with
the Company or its System and shall surrender or destroy all written
materials bearing the Marks. It shall cease to use and shall return
to the
Company all copies of the Operating Standards Manual and all other
manuals, instructions or materials delivered to it hereunder and
shall
relinquish its STEAK N SHAKE Restaurant telephone number and assign
such
telephone number to the Company or the Company’s designee. At the
Company’s discretion, Franchisee shall also provide written notice to
telephone directory and yellow page providers to remove Franchisee’s STEAK
N SHAKE Restaurant listing.
|
| (c) |
Upon
termination, cancellation or expiration of this Agreement, unless
otherwise directed in writing by the Company, Franchisee shall at
Franchisee's sole expense change the exterior and interior design,
color
scheme, decor and trade dress of the Restaurant premises from that
unique
to STEAK N SHAKE Restaurants, and shall make or cause to be made
such
changes in signs, building and structure as the Company shall reasonably
direct, so as to effectively distinguish the same from its former
appearance and from other STEAK N SHAKE Restaurant units. If Franchisee
fails or refuses to comply herewith, then the Company shall have
a license
to enter upon the Restaurant property for the purpose of making or
causing
to be made such changes at the expense of Franchisee, payable on
demand to
the Company. Franchisee shall complete all such modifications within
sixty
(60) days after the STEAK N SHAKE Restaurant ceases to operate. No
business shall be conducted in the former STEAK N SHAKE Restaurant
building until such modifications have been
completed.
|
| (d) |
Upon
termination, cancellation or expiration of this Agreement, Franchisee
shall cease to hold itself out as a franchisee or affiliate of the
Company
or do anything which would indicate any relationship between it and
the
Company, and Franchisee shall take all appropriate steps to immediately
cancel all fictitious or assumed name filings or equivalent registrations
with state and local governmental
agencies.
|
| (e) |
In
the event this Agreement is terminated by Franchisee pursuant to
Section
11.01(c) hereof, the Company shall reimburse Franchisee for the reasonable
expenses incurred by Franchisee in connection with the removal from
the
premises of all signs, emblems and displays identifying it as associated
with the Company or the System, and any other reasonable expenses
incurred
to comply with any and all other requirements of Franchisee under
Sections
11.02(b) and 11.02(c).
|
| (f) |
The
covenants set forth in subsections (a), (b), (c), (d) and (e) of
this
Section
11.02
shall survive the termination, cancellation or expiration of this
Agreement.
|
| (g) |
All
rights, claims and indebtedness which may accrue to the Company or
Franchisee prior to termination, cancellation or expiration of this
Agreement shall survive termination, cancellation or expiration and
be
enforceable by the Company.
|
| 13.02. |
Assignment
by Franchisee
.
|
| (a) |
Franchisee
understands and acknowledges that the rights and duties created by
this
Agreement are personal to Franchisee and that the Company has granted
the
Franchise in reliance upon the individual or collective character,
skill,
aptitude, attitude, business ability and financial capacity of Franchisee.
Therefore, except as provided with respect to assignment to a corporation
or partnership, or to a spouse or heirs in the event of Franchisee’s death
or disability pursuant to subsection 13.02 (c) below, neither the
Franchise, the Restaurant (or any interest therein), nor any part
or all
of the ownership of the Franchise may be voluntarily, involuntarily,
directly or indirectly assigned, sold, subdivided, subfranchised,
issued
or otherwise transferred by Franchisee (including without limitation
by
consolidation or merger) without the prior written approval of the
Company, which approval shall not be unreasonably withheld. Such
assignment or transfer without approval shall constitute a breach
hereof
and will convey no rights or interests in the Franchise or the Restaurant
to such assignee(s). Transferees shall be subject to the Company’s then
current franchisee selection and qualification criteria. Grounds
for
withholding consent to an assignment or transfer include, but are
not
limited to: (i) the transfer is proposed to be made to any competitor
of
the Company or a transferee involved with a competitor of the Company;
(ii) the transfer is proposed to be made to a transferee who fails
to
demonstrate to the Company’s satisfaction that it or its owners and
management meet the Company’s educational, managerial and business
standards, possess good moral character, business reputations, and
credit
ratings, and have the aptitude and ability to conduct the business
contemplated by this Agreement; or (iii) in the Company’s sole judgment,
the price, payment terms, or other material terms of the transaction
or
any financing incurred in connection with the transaction are so
burdensome, individually or in the aggregate, as to threaten the
continued
operation of the Steak n Shake Restaurant after the transfer.
Notwithstanding the foregoing, Franchisee may assign its ownership
of the
Franchise to a duly organized, validly existing partnership, limited
liability company, corporation or other entity that is not a natural
person provided
such
partnership,
limited liability company, corporation or other entity that is not
a
natural person is
controlled directly or indirectly through, or is under common control
with, the Franchisee. "Control" means the possession, directly or
indirectly, of the power to cause the direction of the management
and
policies of the Permitted Assignee, whether by the ownership of voting
securities, by contract, or otherwise. Franchisee shall provide Company
with written notice of a transfer to a Permitted Assignee along with
other
documentation evidencing the Permitted Assignee’s valid formation and, if
applicable, good standing.
|
| (b) |
In
the event Franchisee, including any successors, is a partnership,
limited
liability company, corporation, or other entity that is not a natural
person:
|
| (i) |
The
organizational documents shall recite that the issuance and transfer
of
any interest in the Franchise is restricted by the terms of this
Franchise
Agreement, and copies thereof shall be furnished to the Company upon
request (together with copies of the Resolutions of the Board of
Directors
authorizing its entry into this
Agreement).
|
| (ii) |
A
transfer of any fractional ownership interest in Franchisee from
one
partner, member or shareholder to another or by a partnership, limited
liability company or corporation must be approved in advance, in
writing,
by the Company. One condition of any such transfer shall be the
requirement that all general partners and all direct and indirect
holders
of an interest in Franchisee in excess of ten percent (10%) shall
execute
a written agreement with the Company, personally guaranteeing the
full
payment and performance of Franchisee's obligations to the Company
and
individually undertaking to be bound, jointly and severally, by all
terms
of this Agreement, including, without limitation, the restrictions
on
assignment in this
Section
13
.
|
| (iii) |
Franchisee
shall not use the name "STEAK N SHAKE", any other Mark or any name
deceptively similar thereto, in any offering of its securities, except
to
reflect its franchise relationship with the Company. Any prospectus,
private placement or Registration Statement proposed to be used in
such an
offering shall be submitted to the Company within a reasonable time
prior
to the filing and effective date thereof for the limited purpose
of
permitting the Company to verify Franchisee's compliance with this
requirement.
|
| (iv) |
Franchisee
shall furnish the Company, at the time of execution of this Agreement
and
upon all transfers subject to the provisions of this
Section
13
thereafter, a list of all stockholders and/or persons having an interest
in Franchisee which reflects the percentage interest of each stockholder
or person, and the ownership interest directly and indirectly held
or
controlled by each stockholder or
person.
|
| (c) |
Death
and Disability
.
In the event of the death or disability of an individual Franchisee,
the
Company shall consent to the transfer of the interest to Franchisee's
devisees and heirs, whether such transfer is made by will or by operation
of law, within six months after the death or disability of Franchisee,
provided that the surviving spouse, heirs or estate, maintain all
standards of the System and agree, in writing, to be bound by all
the
terms and provisions of this
Agreement.
|
| (d) |
Franchisee
agrees that the restrictions on transfer imposed herein are reasonable
and
necessary to protect the Company's Marks, trade secrets, trade dress,
Know-How, System and operating procedures and quality, as well as
the
Company's high reputation and image and are for the protection of
the
Company, Franchisee and other STEAK N SHAKE Franchisees. Any assignment
or
transfer permitted by this Section shall not take effect until the
Company
issues its written consent thereto, following its receipt and review
of a
completely executed copy of all transfer
documents.
|
| (e) |
In
addition to the restrictions on assignment of the Franchisee or all
or a
portion of the interest in Franchisee set forth above, the Company
shall
have the right to condition its consent on the satisfaction of the
following requirements:
|
| (i) |
All
obligations of Franchisee and its owners incurred in connection with
this
Agreement have been assumed by the
assignee(s);
|
| (ii) |
Franchisee
shall have paid all amounts owed to the Company or its affiliates
which
are then due and unpaid;
|
| (iii) |
The
assignee(s) shall have completed the training program required of
new
STEAK N SHAKE franchisees pursuant to
Section
5.03
;
|
| (iv) |
The
assignee(s) and its owner(s) shall have executed and agreed to be
bound by
the then existing form of Franchise Agreement and such ancillary
agreements as are then customarily used by the Company in the grant
of
franchises for STEAK N SHAKE
Restaurants;
|
| (v) |
Franchisee
or the assignee(s) shall have paid a transfer fee to the Company
equal to
Five Thousand Dollars ($5,000.00) to defray expenses incurred by
the
Company in connection with the assignment, including without limitation
legal and accounting fees, credit and other investigation charges
and
evaluation of assignee(s) and the terms of the
assignment;
|
| (vi) |
The
Company shall have approved the material terms and conditions of
such
assignment, including without limitation, approval that the price
and
terms of payment are not so burdensome so as to adversely affect
the
future operations of the Restaurant by such assignee(s) in compliance
with
the Company's then standard Franchise Agreement and ancillary
agreements;
|
| (vii) |
Franchisee
and all of its shareholders, partners, members and the owners shall
have
executed a noncompetition covenant in favor of the Company and the
assignee(s), agreeing that for a period of not less than one (1)
year,
commencing on the effective date of the assignment, Franchisee and
its
owners will not have any interest as an owner, investor, partner,
director, officer, employee, consultant, representative or agent,
or in
any other capacity, in any restaurant featuring fast service or full
service meals featuring ground beef sandwiches as a primary product
and
located within the Exclusive Territory defined in
Schedule
1
to
this Agreement (except ownership of publicly traded securities
representing five percent (5%) or less of the equity or voting power
thereof and interests in other STEAK N SHAKE Restaurants pursuant
to other
franchise agreements heretofore or hereafter entered into with the
Company);
|
| (viii) |
Franchisee
and its owner(s) shall have entered into an agreement with the Company
agreeing to subordinate any rights they may have to receive installment
payments of the purchase price from the assignee(s), to the Company's
and
its affiliates' rights to receive monies from the assignee(s), including
without limitation, payment of royalty fees, and service fees and
advertising contributions; and
|
| (ix) |
Franchisee
shall have entered into an agreement with the Company agreeing to
release
any claims, known or unknown, Franchisee may have against the Company
at
the time of the transfer.
|
|
The
requirements set forth by subsections (iv) through (viii), above
shall not
apply to transfers or assignments pursuant to
Subsection
13.02 (c)
in
the event of Franchisee’s death or
disability.
|
| (f) |
If
an individual Franchisee desires to assign all of its rights to a
corporation or other entity formed for convenience of ownership,
then the
Company's consent to such assignment shall be conditioned on the
following
requirements, at the Company’s sole discretion, in addition to those in
subsections (b), (c) and (d) of this
Section:
|
| (i) |
The
Franchise and the assets and liabilities of the Restaurant may be
assigned
to a newly organized corporation or other entity that conducts no
business
other than the Restaurant (and other STEAK N SHAKE Restaurants under
Franchise Agreements with the Company), which is actively managed
by
Franchisee and in which Franchisee owns and controls at least fifty-one
percent (51%) of the equity and voting power of all issued and outstanding
capital stock or ownership interest therein;
and
|
| (ii) |
All
shareholders or owners of the assignee shall comply with the requirement
set forth in
subsection
(b)(ii)
of
this Section, if applicable; and
|
| (iii) |
The
Assignee shall execute the Company’s then current Unit Franchise
Agreement.
|
| (a) |
It
is understood and agreed by the parties hereto that Franchisee shall
be an
independent contractor and that nothing herein contained shall constitute
Franchisee as the agent, legal representative, partner, joint venturer
or
employee of the Company. Franchisee shall not have any right or power
to
and shall not bind or obligate the Company in any way or manner
whatsoever, nor represent that it has the right to do
so.
|
| (b) |
Franchisee
shall have sole responsibility for, and shall promptly pay when due,
all
taxes levied or assessed by reason of its operation and performance
under
this Agreement, including, but not limited to, local, state and federal,
property, license, sales, use, leasehold, excise and income taxes.
Franchisee shall have the right to contest in good faith the amount
or
validity of such payment by appropriate legal proceedings. Franchisee
shall be responsible for all loss or damage and contractual liabilities
to
third persons originating from or in connection with the operation
of the
Restaurant and for all claims or demands for damages to property
or for
injury, illness or death of persons directly or indirectly resulting
therefrom. Franchisee further agrees to indemnify and save the Company
harmless from or with respect to any such claims for taxes and other
liabilities, loss, expense or
damage.
|
| (c) |
In
all building directories, public records (except in telephone directories)
and in its relationship with other persons, Franchisee shall indicate
its
independent ownership of its business and that it is only a Franchisee
of
the Company. Franchisee shall file and maintain in the proper public
office for the locality involved, a statement showing the actual
name of
Franchisee as the owner of the
Restaurant.
|
| (d) |
The
Company may require Franchisee to identify itself as an independent
operator and franchisee of the Company in a manner prescribed by
the
Company.
|
| (a) |
Except
as otherwise provided herein, all acknowledgments, promises, covenants,
agreements and obligations herein made or undertaken by Franchisee
shall
be jointly and severally undertaken by Franchisee and all persons
signing
this Agreement in their individual capacities and by all
guarantors.
|
| (b) |
At
the Company's request, Franchisee shall from time to time obtain
an
executed confidentiality and other business interests agreement,
as it may
be revised by the Company, from every interest holder and such employees
of Franchisee as the Company may designate, and shall forward same
to the
Company.
|
| (a) |
Whenever
this Agreement requires the prior approval or consent of the Company,
Franchisee shall make a timely written request therefor, and such
approval
shall be obtained in writing from the Vice President of Franchising,
President or other officer that the Company may designate from time
to
time. By providing any waiver, approval, consent or suggestion to
Franchisee in connection with this Franchise, the Company makes no
warranties or guarantees and assumes no liability or obligation to
Franchisee.
|
| (b) |
No
failure of either party to exercise any power reserved to it by this
Agreement or to insist upon strict compliance by the other party
with any
obligation or condition hereunder, and no custom or practice of the
parties at variance with the terms hereof, shall constitute a waiver
of
either party’s right to demand exact compliance with any of the terms
herein. Waiver by either party of any particular default by the other
party shall not affect or impair the non-defaulting party’s rights with
respect to any subsequent default of the same, similar or different
nature. Any delay, forbearance or omission of either party to exercise
any
power or right arising out of any breach or default by the other
party of
any of the terms, provisions or covenants hereof, shall not affect
or
impair the non-breaching or non-defaulting party’s right to exercise such
power or right, nor shall such delay, forbearance or omission constitute
a
waiver by the non-breaching or non-defaulting party of any right
hereunder, or the right to declare any subsequent breach a default
and to
terminate this Agreement prior to the expiration of its term. Subsequent
acceptance by the Company of any payments due to it hereunder shall
not be
deemed to be a waiver by the Company of any preceding breach by Franchisee
of this Agreement and subsequent acceptance by Franchisee of any
services
or benefits provided under this Agreement shall not be deemed to
be a
waiver by Franchisee of any preceding breach by the Company of this
Agreement.
|
| (c) |
Each
right or remedy conferred upon or reserved to the Company or Franchisee
by
this Agreement shall be cumulative of every other right or remedy
herein
or by law or equity and is not exclusive of any other right or
remedy.
|
| (d) |
No
amendment, change or variance from this Agreement shall be binding
on
either party unless mutually agreed by the parties and executed in
writing.
|
| (a) |
All
notices required to be given to the Company shall be in writing and
shall
be sent by reputable overnight delivery service or by registered
or
certified mail, postage fully prepaid, addressed to the attention
of:
|
| (b) |
All
notices to Franchisee shall be in writing and shall be sent by reputable
overnight delivery service or by registered or certified mail, postage
fully prepaid, addressed to Franchisee, care of its designated agent,
at:
|
| (c) |
Notice
by mail shall be deemed delivered when received, but in no event
later
than the fifth (5th) business day following the date it was deposited
in
the mail duly addressed and posted. Notice by overnight delivery
service
shall be deemed delivered when actually delivered as confirmed by
such
delivery service.
|
| (d) |
Any
payment not actually received by the Company on or before the date
specified herein shall be deemed overdue if not postmarked at least
two
(2) days prior to the date due.
|
| 1. |
310
Wild Geese Road, Knoxville, Tennessee ("Knoxville
Restaurant")
|
| a. |
Seller
has and, at the time of Closing, will have good and indefeasible
fee
simple title to the Real Estate, free and clear of any and all
encumbrances and title exceptions other than the Permitted
Exceptions.
|
| b. |
There
are no adverse parties in possession of the Real Estate or any part
thereof and no parties in possession of any portion of the Real Estate
as
lessees, tenants at sufferance or trespassers; and no party has been
granted any license, lease or other right relating to the use or
possession of the Real Estate.
|
| c. |
There
is no pending or threatened condemnation or similar proceeding affecting
the Real Estate or any part thereof, nor is any such proceeding
contemplated by any governmental
authority.
|
| d. |
There
is no pending or threatened litigation, actions or proceedings against
Seller arising out of Seller’s ownership of the Real Estate which could
adversely affect or the ability of Seller to perform any of its
obligations hereunder or the use of the Real Estate by
Purchaser.
|
| e. |
Seller
has not received notice from any governmental, quasi-governmental
agency
or owner association requiring the correction of any condition with
respect to the owner association requiring the correction of any
condition
with respect to the Real Estate, or any part thereof, by reason of
a
violation of any federal, state, county or city statute, ordinance,
code,
rule or regulation or stating that any investigation has been commenced
or
is contemplated regarding any of the
foregoing.
|
| f. |
Seller
has full power and authority to enter into this Contract and to perform
its obligations under this Contract. The execution, delivery and
performance of this Contract and the transactions contemplated hereby
have
been duly authorized and approved and no other actions or proceedings
on
its part are necessary to authorize the execution, delivery or performance
of this Contract. This Contract constitutes the legal, valid and
binding
obligations of Seller enforceable in accordance with its
terms.
|
| g. |
Seller
is not a foreign person as defined in Section 1445 of the Internal
Revenue
Code of 1986, as the same may have been or may hereafter be amended,
or
the regulations promulgated
thereunder.
|
| a. |
A
special warranty deed duly executed and acknowledged by Seller, conveying
to Purchaser good, marketable fee simple title in the Real Estate,
subject
only to the Permitted Exceptions in the form attached hereto as
Exhibit
C
.
|
| b. |
A
non-foreign person affidavit sworn to by Seller as required by Section
1445 of the Internal Revenue Code. In the event that (i) Seller fails
to
deliver the affidavit at Closing; or (ii) Seller delivers the affidavit
but Purchaser has actual knowledge that the affidavit is false; or
(iii)
Purchaser receives notice that the affidavit is false from any agent
of
Purchaser or Seller, then Purchaser shall be entitled to withhold
from the
Purchase Price a sum equal to ten percent (10%) of the total amount
which
otherwise would have been realized by Seller from such sale, which
sum
will be paid by Purchaser to the United States Treasury pursuant
to the
requirements of Section 1445 of the Internal Revenue Code and the
regulations promulgated thereunder.
|
| c. |
An
ALTA Owner’s Policies of Title Insurance based on the updated Title
Commitment (the "Owner’s Policy") in the amount of the Purchase Price for
the Real Estate issued by the Title Company, insuring good and marketable
fee simple title to the Real Estate in Purchaser, subject only to
the
Permitted Exceptions and the standard printed
exceptions.
|
| d. |
Such
evidence or documents as may be reasonably required by the Title
Company
evidencing the status and capacity of Seller and the authority of
the
person or persons who are executing the various documents on behalf
of
Seller in connection with the sale of the Real
Estate.
|
| a. |
The
Purchase Price in full, subject to any prorations or other adjustments
contained in this Contract by means of a wire transfer or immediately
available funds at Closing or by a bank cashier’s check made payable to
the Title Company; and
|
| b. |
Such
evidence or documents as may reasonably be required by the Title
Company
evidencing the status and capacity of Purchaser and the authority
of the
person or persons who are executing the various documents on behalf
of
Purchaser in connection with the purchase of the Real
Estate.
|
|
9948
Ridge Drive
|
|
Indianapolis,
IN 46256
|
|
Reinwald
Enterprises Wild Geese, LLC
an
Indiana limited liability company
|
| A. |
Seller
and Purchaser have entered into that Multiple Unit Franchise Agreement
whereby Purchaser will become a franchisee of Seller and Seller will
transfer its interest in certain real and personal property located
in the
Knoxville, Tennessee metropolitan area to
Purchaser.
|
| B. |
The
Seller and Purchaser have entered into a separate agreement for the
sale
of the Real Estate located at 310 Wild Geese Road, Knoxville, Tennessee
(the "Knoxville Real Estate"); and
|
| C. |
Seller
and Purchaser have entered into a separate Assignment and Assumption
Agreement whereby Purchaser will assume Seller’s leasehold interest in the
real property located at 550 E. Emory Road, Powell, Tennessee (the
"Powell
Real Estate") (collectively Knoxville Real Estate and Powell Real
Estate
referred to as the "Real Estate").
|
| D. |
In
addition to transferring the Real Estate, Purchaser is desirous of
buying
and Seller is willing to sell all of the good will, inventory, equipment,
furniture and fixtures associated with the operation of its restaurants
on
the Real Estate under the terms and conditions set for
herein;
|
| 2. |
CONTINGENCIES
|
| 3. |
PURCHASE
PRICE
|
| 4. |
WARRANT
TITLE
|
| 5. |
USE
PENDING CLOSING
|
| 6. |
INSPECTION
|
| 7. |
BILL
OF SALE
|
| 8. |
CLOSING
|
|
Reinwald
Enterprises Emory, LLC
an
Indiana limited liability company
|
|
Reinwald
Enterprises Wild Geese, LLC
an
Indiana limited liability company
|
| 1. |
Definitions
.
In this Assignment, these defined terms are
used:
|
| (a) |
Assignor
:
Steak
n Shake Operations, Inc., an Indiana corporation as successor-in-interest
to Steak N Shake, Inc.
|
| (b) |
Assignee
:
Reinwald
Enterprises Emory, LLC
|
| (c) |
Landlord
:
JCS
Knoxville Properties, LLC and LKS Knoxville Properties,
Inc
.
|
| (d) |
Lease
:
Net Land & Building Lease dated June 18, 1999, between Interstate
Management Real Estate Partners, a Kentucky general partnership,
as
predecessor-in-interest to Landlord, and Assignor, as Tenant. A copy
of
the Lease is annexed to this Assignment as Exhibit A and made a part
of
this Assignment by this reference.
|
| (e) |
Premises
:
500 East Emory Road, Powell, TN, more particularly described on
Exhibit
A
.
|
| (f) |
Security
Deposit
:
$0
|
| (g) |
Date
:
The earlier of September 28, 2005, or the day on which Assignor delivers
possession of the Premises to
Assignee.
|
| 2. |
Assignment
and Delivery of the Premises
.
Assignor assigns to Assignee, effective as of the Date, all of Assignor’s
right, title, and interest in (a) the Lease, and (b) the Rent prepaid
under the Lease. Assignor will deliver possession of the Premises
to
Assignee on the Date.
|
| 3. |
Assumption
and Acceptance of the Premises
.
Assignee
assumes and agrees to perform each and every obligation of Assignor
under
the Lease, effective as of the Date. Assignee will accept the Premises
in
their condition on the Date.
|
| 4. |
Assignor’s
Warranties
.
Assignor warrants to Assignee that (a) the Lease is in full force
and
effect and unmodified, and all Rent (as that term is defined in the
Lease)
will be paid through the Date; (b) Assignor’s interest in the Lease is
free and clear of any liens, encumbrances, or adverse interests of
third
parties except those permitted exceptions shown on
Exhibit
B
("Permitted Exceptions"), and the Premises have not been sublet in
whole
or in part; (c) Assignor has full and lawful authority to assign
its
interest in the Lease; and (d) there is no default under the Lease
or any
circumstances which by lapse of time or after notice would be a default
under the Lease. The warranties contained in this paragraph will
be true
as of the date of Assignor’s execution of this Assignment and will be true
as of the Date. The warranties will survive the
Date.
|
| 5. |
Mutual
Indemnification
.
Assignor will indemnify Assignee against and hold Assignee harmless
from
any and all loss, liability, and expense (including reasonable attorneys’
fees and court costs) arising out of any breach by Assignor of its
warranties contained in this Assignment, and Assignee will indemnify
Assignor against and will hold Assignor harmless from any loss, liability,
and expense (including reasonable attorneys’ fees and court costs) arising
out of any breach by Assignee of its agreements contained in this
Assignment after the Date. In consideration for, and as inducement
to
Assignor entering into this Assignment with Assignee, Gary T. Reinwald
shall absolutely, unconditionally and irrevocably guaranty to Assignor,
the performance of Assignee’s obligations hereunder, and under the Lease;
the specific form of said guaranty being attached hereto as
Exhibit
"C"
and by this reference made a part
hereof
|
| 6. |
Contingencies
.
The Assignor’s obligation to assign the Lease and the Assignee’s
obligation to assume Assignor’s obligation thereunder is contingent upon
the following conditions being satisfied or occurring on or before
the
Date.
|
| (a) |
Consummation
of the sale of the real property at 310 Wild Geese Road, Knoxville,
Tennessee (åKnoxville Real Estateæ) pursuant to that Contract for the
Purchase and Sale of Real Estate entered into by Assignor and Assignee
and
having the same date hereof.
|
| (b) |
Commencement
of the franchise contemplated by that Multiple Unit Franchise Agreement
entered into by Assignor and Assignee and having the same date
hereof.
|
| (c) |
Consummation
of the sale of Personal Property located on the Premises and the
Knoxville
Real Estate and the Premises pursuant to that Personal Property
Agreement.
|
| (d) |
Assignee
approving, in its sole and absolute discretion, the condition of
title,
survey, legal description and environmental condition of the Real
Estate.
|
| (e) |
Assignee
can obtain on or before the Date, leasehold title insurance policies
insuring Assignee’s leasehold interest in the Real Estate in an amount,
insuring Assignee’s rights in said Real Estate and containing no
exceptions other than current, non-delinquent property taxes, and
the
Permitted Exception. In the event Assignee objects to any matter
of title,
Assignee’s sole remedy, which shall be exercised prior to the Date, shall
be the termination of this Agreement. Assignor shall order an update
of
Title Policy #138-00-035436, issued by lawyer’s Title Insurance Company in
the name of Assignee and an update of the ALTA/ACSM survey prepared
by
Batson Himes Norvell & Poe, on June 4, 1999 as Job No.
22985.
|
| (f) |
Assignee
shall have inspected, and approved to its sole satisfaction, the
Premises
on the Premises. In the event Assignee objects to any condition existing
on the Premises, Assignee’s sole remedy, which shall be exercised prior to
the Date, shall be termination of the
Agreement.
|
| 7. |
Amendment
of Lease
.
Assignee may only amend the Lease after the Date with the consent
of
Assignor, and no such amendment will increase the amount of Rent
for which
Assignor is obligated under the
Lease.
|
| 8. |
Joint
and Several Liability
.
The liability of Assignor and Assignee under the Lease will be joint
and
several. If the term "Assignee" refers to more than one corporation,
partnership, trust, association, individual, or other entity, their
liability under this Assignment will be joint and
several.
|
| 9. |
Entire
Agreement
.
This Assignment embodies the entire agreement of Assignor and Assignee
with respect to the subject matter of this Assignment, and it supersedes
any prior agreements, whether written or oral, with respect to the
subject
matter of this Assignment. There are no agreements or understandings
which
are not set forth in this Assignment. This Assignment may be modified
only
by a written instrument duly executed by Assignor and
Assignee.
|
| 10. |
Binding
Effect
.
The terms and provisions of this Assignment will inure to the benefit
of,
and will be binding upon, the successors, assigns, personal
representatives, heirs, devisees, and legatees of Assignor and
Assignee.
|