Joint Venture Purchase Agreement VENTURE AGREEMENT OF STEWARTS ROOT BEER DRIVE IN RESTAURANTS
VENTURE
AGREEMENT
OF
STEWARTS
ROOT BEER DRIVE IN RESTAURANTS
This
Agreement, dated and effective as of January 1, 2007, by and between Frosted
Mug
Holdings, LLC, a New Jersey limited liability company ("Frosted"), and Rockelle
Corporation, a Delaware corporation ("Rockelle") (Frosted and Rockelle being
hereinafter sometimes collectively called "Partners" and individually called
a
"Partner"),
WITNESSETH
WHEREAS,
the Partners wish to engage together in the business of Stewarts Root Beer
Drive
In Restaurants and, to further that objective, to incorporate said business
in
the State of New Jersey under the name Frosted Rock, Inc. in order to form
a
Joint Venture (“JV”) and adopt this Agreement as the articles of the JV for the
operation of same;
WHEREAS,
Rockelle is intent on purchasing Frosted and all of its assets and business
and
the Partners agree that the formation of this JV with the purchase options
set
forth herein is the preferred form to engage in this effort;
NOW,
THEREFORE, in consideration of the foregoing and of the mutual covenants and
benefits herein set forth and contemplated, the Partners agree as
follows:
ARTICLE
I
ORGANIZATION
OF THE JV
(a) Establishment.
(i)
The
Partners hereby form and establish a General Joint Venture (the "JV") pursuant
to the laws of the State of New Jersey which shall govern the interpretation
and
operation of the JV.
(ii) Except
to
the extent otherwise provided herein, the rights and liabilities of the Partners
and the conduct and termination of the JV shall be governed by the law of the
State of New Jersey.
(iii) The
Partners will promptly execute all certificates and other documents, and make
all such filings and recordings and perform such other acts as may now or
hereafter be necessary or desirable, to comply with the requirements of New
Jersey law for the organization and formation of the JV and the carrying on
of
its business.
(iv) Each
Partner shall be a general partner.
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(v) All
assets of the JV hereafter acquired shall automatically be the property of
Frosted unless and until Rockelle makes the $4,000,000 payment under Article
XII(a)(3) herein. Thereafter, this section shall be governed by Article III
set
forth below.
(b) Name.
The name
of the JV is “Frosted Rock, Inc.” The JV’s business and affairs shall be
conducted only under that name.
(c) Effective
Date and Term.
The JV
shall commence on the date hereof (hereinafter called the "Effective
Date")
and
shall continue in effect until terminated as provided in Article X
hereof.
(d) Principal
Office.
The
principal office and place of business of the JV shall be ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or such other location as the Partners may
designate.
(e) Purpose
and Scope.
The sole
purpose of the JV shall be to engage in the business of administering the
licensees of Stewarts Root Beer, the franchisees of Stewarts Root Beer, the
growth of the business of Stewarts Root Beer, expansion of the trademarks of
Stewarts Root Beer and in other activities incidental to such business, which
activities may from time to time include: Expansion of the trademark’s use in
the market place and any other use and expansion of the business of Stewarts
Root Beer Drive In Restaurants as the Partners may see fit; and performing
all
other activities as are necessary or incidental to conducting such
business.
The
JV
shall have the power to do any act and thing and to enter into any contract
incidental to, or necessary, proper or advisable for, the accomplishment or
attainment of the purpose of the JV specified in this Agreement.
(f) Partners'
Authority.
Except
as
otherwise provided in this Agreement, no Partner acting alone shall have any
authority to act for, or to assume any obligations or responsibilities on behalf
of, the other Partner or the JV. Each Partner will indemnity the JV and the
other Partner against any claim, loss or damage to the JV or such other Partner
which may result from the Partner's breach of this Section (f). Except that
Rockelle shall have the right to operate the JV business on a day to day basis
including any and all agreements that can be performed in six months or less.
All other agreements will require the unanimous agreement of the Partners,
unless and until Rockelle makes the $4,000,000 payment under Article XII(a)(3)
herein. Thereafter, a majority of the Operating Committee may approve all
actions of the JV, as set forth under Article V(3) herein.
ARTICLE
II
OTHER
AND/OR COMPETING BUSINESSES
Except
as
otherwise provided herein, nothing contained in this Agreement shall be deemed
to restrict in any way the freedom of either Partner or of any Affiliate of
either Partner to conduct, independently of the JV, and whether or not in
competition with the JV, any business or activity whatever (other than the
business contemplated to be performed by the JV under and in accordance with
this Agreement) without any accountability to the JV or to the other Partner.
For purposes of this Agreement "Affiliate" means, as to any entity, a
corporation, company, trust, firm or other entity which directly or indirectly
controls, or is controlled by, or is under common control with, such
entity.
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ARTICLE
III
CONTRIBUTIONS
TO THE JV
(a) Initial
Contributions.
(i) Rockelle
shall pay $100,000 to Frosted upon execution of this Agreement and $50,000
to
Frosted within 120 days from the date hereof, for the exclusive purpose of
making interest and/or principal payments (as may be determined by Frosted
in
its sole discretion) to Stewarts Restaurants, Inc. (“SRI”) by Frosted on the
outstanding note due to SRI from Frosted. If the monies held in escrow have
not
been used to make payments to SRI within one year from the date hereof, such
monies shall be distributed back to Rockelle. From the date hereof, all income
of Frosted will be contributed to the JV and Rockelle shall be solely
responsible for all other capital needs of the JV. All property of Frosted
shall
be contributed to the use of the JV until the terms set forth in Article XII
are
fulfilled, at which time such property shall become the property of
Rockelle.
(ii) The
JV
hereby assumes the obligations and liabilities relating to Frosted as described
on Exhibit B and in accordance with the requirements set forth in Article XII.
Frosted hereby warrants and represents that there are no other liabilities
of
Frosted other than as set forth Exhibit B and in the ordinary course of
business.
(iii) On
the
date of this Agreement, Frosted shall contribute to the capital of the JV all
of
the issued and outstanding membership interests of Frosted to be held in escrow
subject to Rockelle satisfying the requirements set forth in Article
XII.
(iv) Subject
to payment as set forth in Article XII(a)(4), Rockelle shall make payment not
more than 120 days from the date hereof in the amount of $50,000 (payment two)
and payment of $100,000 (payment three) not more than 180 days from the date
hereof. However, upon execution of this Agreement Rockelle has the option to
choose to have 100% of all income from operations paid to Frosted until $100,000
has been obtained thus eliminating the need for payment number three set forth
herein. In the event that Rockelle should choose this option, then in that
event, all books of account shall remain in control of Frosted until full
payment has been obtained. Each subsequent payment shall not be due if payment
in accordance with Article XII(a)(4) is made prior to said payment two and/or
three are due.
ARTICLE
IV
JV
INTERESTS
(a) The
Partners' Percentage JV Interests.
The
Partners’ Interests in the JV shall be 51% for Rockelle and 49% for Frosted. All
income of the JV shall be retained by the JV subject to the terms of Article
XII.
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ARTICLE
V
MANAGEMENT
OF THE JV
(a) The
Operating Committee and the Manager.
The
general conduct of the business of the JV shall be vested in an Operating
Committee, which shall be empowered to set policy for and issue instructions
to
the Manager and to make all decisions in respect of the business and operations
of the JV, except as otherwise set forth in this Agreement. The Manager shall
have the responsibility for the day to day management of the operations and
activities of the JV and shall be subject to the overall supervision of the
Operating Committee. The Manager shall be Rockelle subject to Article
III(a)(iv).
(b) Operating
Committee Members, Voting and Meetings.
The
Operating Committee shall be composed of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇
or
any other person appointed by Frosted. Each Partner may from time to time and
for any reason appointed by it or designate an alternate to act for any member,
which alternate shall be deemed a member of the Operating Committee while so
acting. Each appointment made by a Partner to the Operating Committee shall
remain in effect until the Partner making such appointment shall notify the
JV
and the other Partner of a change in such appointment. The members of the
Operating Committee representing each Partner shall have one vote, and at all
meetings of the Operating Committee a member shall be acting solely as the
representative of the Partner which appointed him. All actions of the Operating
Committee shall be taken by unanimous vote; provided, however, that if a
Partner's JV Interest shall have been reduced below 45%, actions of the
Operating Committee shall be taken by majority vote with the representatives
of
each Partner being entitled to vote per percentage point of Interest held by
each Partner in the JV. An annual meeting of the Operating Committee, at which
among other things programs and budgets shall be considered, shall be held
at
the principal office of the JV on the first business day of the month of
February (or such other date as the Operating Committee shall designate) and
other meetings of the Operating Committee shall be held from time to time as
the
Operating Committee shall determine. Minutes shall be kept reflecting the
actions of the Operating Committee, copies of which shall be promptly
transmitted to each member and the Partners.
(c) Employees.
The JV
shall employ and pay such persons as the Manager shall from time to time
authorize.
(d) Certain
Matters Requiring Unanimous Consent.
The
specific consent of each Partner shall be required in connection with the
following matters, unless and until a Partner's JV Interest shall have been
reduced below 45%, at which time, such actions shall be approved by a majority
vote of the Operating Committee as set forth in Article V(b) above:
(i) Any
contract or agreement that cannot be performed in six months or shall have
a
term of more than six months.
(ii) Incurring,
guaranteeing or otherwise becoming liable for indebtedness for borrowed
money.
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(iii) Any
charge, mortgage, lien or other encumbrance on or with respect to property
owned
by the JV other than charges, liens or encumbrances incurred in the ordinary
course of business and removed or discharged within thirty days of the incurring
thereof.
(iv) Any
lease
or sublease of any property owned by the JV.
(v) Any
action or inaction which might cause the breach or termination of any material
agreement to which the JV or Frosted is a party, or termination of any rights
or
benefits to which the JV or Frosted is entitled.
(vi) Any
sale
or transfer of any property or asset of the JV.
(vii) The
adoption of pension and other employee benefit plans.
(viii) The
liquidation or dissolution of the JV, except pursuant to Article
XII.
(ix) Any
transfer, assignment, charge, mortgage, lien or other encumbrance of, on or
in
respect of a Partner's JV Interest.
(x) Amendment
of this Agreement or any of its Exhibits.
(xi) Merger
or
consolidation of the JV into or with any other entity.
(xii) Any
significant reduction or discontinuance of operations of the JV.
ARTICLE
VI
ACCOUNTING
MATTERS; BOOKS AND RECORDS; TAX RETURNS
(a) Fiscal
Year.
The
fiscal year of the JV shall be the calendar year.
(b) Books,
Records and Accounts.
(i) The
books
and records of the JV shall be maintained on a cash basis so as to reflect
accurately, among other things:
(A) contributions
by each Partner,
(B) the
capital account of each Partner,
(C) distributions
to each Partner,
(D) assets
and liabilities,
(E) receivables
from and payables to each Partner,
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(F) income
of
the JV, and
(G) adequate
records to permit the filing of Partners' and JV tax returns showing gross
receipts, cost of goods sold, gross income, other income, deductions, losses,
allowances, credits and net profits or losses.
The
Operating Committee shall review the foregoing from time to time and may revise
them if it so determines.
(c) Taxes
and Tax Returns.
The JV
shall prepare and file all tax returns required to be filed by the JV pursuant
to the Internal Revenue Code of 1986, as amended (the "Code"), or any successor
statutes, and all state and local tax returns required to be filed by the JV.
The tax books of the JV shall be kept on a cash basis. For tax purposes each
item of gross income, profit, gain, loss, cost, deduction, credit or allowance
shall be allocated to each partner in proportion to its JV Interest. No changes
in the accounting methods for the purpose of preparation of tax returns of
the
JV shall be made without the consent of each Partner.
ARTICLE
VII
DISTRIBUTIONS
Except
as
otherwise specifically provided in this Agreement, all distributions and
withdrawals of any JV assets shall be made only as and when determined by
unanimous agreement of both Partners and all distributions of any JV assets,
including those on termination and dissolution of the JV, shall be shared
equally by the Partners; provided that if either Partner shall have made a
contribution pursuant to Section 3(b)(iii) hereof, the property contributed
shall be distributed by the JV to the contributing Partner upon its request
by
written notice to the JV subject to any exception set forth herein.
ARTICLE
VIII
FAILURE
TO PAY
(a) Failure
of Rockelle to Pay.
In
the
event Rockelle should fail to make any payment required herein, specifically
the
$50,000 Second Payment; the $100,000 Third Payment; the $4,000,000 payment
within twelve months of the date hereof; then in that event, the JV shall
automatically be dissolved without notice to Rockelle; all assets of the JV
shall become property of Frosted and final tax returns will be filed and all
business of the JV shall revert to and become the sole property of Frosted.
In
the event that Rockelle should fail to make the final payment of $2,000,000
the
interest then held by Frosted shall be doubled to 22.54% and thereafter all
gross income being received at that time shall be given directly to Frosted
in
an amount equal 22.54% of the gross income until such time as the $2,000,000
is
paid to Frosted.
ARTICLE
IX
RESTRICTIONS
ON TRANSFER OF JV INTERESTS
(a) Permitted
Transfers.
Neither
Partner may transfer, sell, alienate, assign or otherwise dispose of all or
any
part of its interest in the JV, whether voluntarily, involuntarily or by
operation of law, or at a judicial sale or otherwise except as provided
herein
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| (i) |
Frosted
shall be required to transfer 66% of its ownership interest in the
JV to
Rockelle or its designee upon payment of $4,000,000 and the assumption
of
the $2,700,000 note to SRI in accordance with Article XII hereof.
Frosted
shall retain an 11.27% ownership Interest in the JV thereafter until
such
time as the balance of $2,000,000 is paid subject to increase in
accordance with Article VIII(a)..
|
| (ii) |
Frosted
shall be required to transfer its remaining ownership interest in
the JV
of 11.27% to Rockelle or its designee upon payment of an additional
$2,000,000 in accordance with Article XII
hereof.
|
ARTICLE
X
TERM;
DISSOLUTION; TERMINATION
(a) Term.
The JV
shall continue until terminated in accordance with the provisions of this
Article X. No Partner shall have the right to and each Partner agrees not to
dissolve, terminate or liquidate, or to petition a court for the dissolution,
termination or liquidation of the JV, except as provided in this
Agreement.
(b) Events
of Dissolution.
(i) The
JV
shall dissolve:
(A) upon
the
unanimous written agreement of the Partners to dissolve the JV,
(B) upon
the
payment of all money as set forth in Article XII,
(C) upon
the
dissolution of a Partner,
(D) upon
the
occurrence of the events described in Article VIII, or
(E) upon
the
occurrence of any of the following: a Partner becomes insolvent or generally
fails to pay, or admits in writing its inability to pay, debts as they become
due; or a Partner applies for, consents to, or acquiesces in the appointment
of,
a trustee, receiver or other custodian for such Partner or any property thereof,
or makes a general assignment for the benefit of creditors; or, in the absence
of such application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for a Partner or for a substantial part of its property
and is not discharged within thirty days; or any bankruptcy, reorganization,
debt arrangement, or other case or proceeding under any bankruptcy or insolvency
law, or any dissolution or liquidation proceeding is commenced in respect of
a
Partner and if such case or proceeding is not commenced by such Partner, it
is
consented to or acquiesced in by such Partner or remains for thirty days
undismissed.
(c) Continuing
Conduct of the JV.
During
the pendency of any arbitration or request for arbitration or of the enforcement
of any claim against a Partner for a breach of or for default under the terms
of
this Agreement, the business and affairs of the JV shall be terminated and
all
business shall revert to and be fully and completely controlled by
Frosted
pending
the determination of the arbitrator; provided however, that if the $4,000,000
payment is made by Rockelle pursuant to Article XII(a)(3) herein, Rockelle
shall
control the business and affairs of the JV pending the outcome of the
arbitration.
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(d) Survival
of Claims.
Notwithstanding anything to the contrary contained in this Agreement, any claim
of any Partner against another Partner hereunder and any claim asserted by
any
Partner on behalf of the JV against another Partner hereunder shall survive
any
dissolution or termination of the JV.
ARTICLE
XI
ARBITRATION
Either
Partner may cause to be submitted to arbitration all disputes, controversies
or
questions of interpretation arising out of this Agreement or any breach or
default hereunder by giving to the other Partner notice to that effect. The
arbitration shall be held in Cranford, NJ and shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
as
in effect at the time of such arbitration except as follows. The Partner
desiring arbitration shall include in its notice to the other Partner the name
of the arbitrator chosen by it. Within twenty days after receipt of such notice
the Partner receiving notice shall, by written notice to the Partner desiring
arbitration, name the arbitrator chosen by it and within twenty days after
the
appointment of the second arbitrator an additional arbitrator shall be selected
by the two arbitrators theretofore appointed; provided, however, if one of
the
Partners shall have failed to appoint an arbitrator as hereinabove provided,
the
sole arbitrator appointed by the other Partner shall arbitrate the matter alone.
If the two arbitrators shall have failed to select an additional arbitrator
within the above stated time, the additional arbitrator shall be appointed
Frosted. Each Partner shall share equally the other costs and expenses of the
arbitration, including the costs and expenses of the additional arbitrator.
The
right of either Partner to seek or obtain any remedy pursuant to this Article
XI
shall be in addition to the remedies provided for in Article X hereof and shall
survive the dissolution of the JV or the sale and purchase of a Partner's
Interest in the JV pursuant to Article X hereof.
ARTICLE
XII
PURCHASE
OPTION
(a)
Rockelle’s
Purchase Option
Rockelle
shall have the option to purchase all assets of Frosted and dissolve this JV
and
proceed with the business of Frosted and the JV in its sole discretion upon
satisfaction of the following:
(1)
Payment of $100,000 payment upon execution of this Agreement;
(2)
Payment of $50,000 payment not more than 120 days from the date
hereof;
(3)
Payment of $100,000 nonrefundable good faith payment not more than 180 days
from
the date hereof;
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(4)
Payment of $4,000,000 not more than one year from the date hereof;
(5)
Assumption or other disposition of the $2,700,000 note to SRI not more than
one
year from the date hereof;
(6)
Payment of $2,000,000 not more than two years from the date hereof.
The
payments set forth in (1) and (2) above shall be for the exclusive purpose
of
making interest and/or principal payments to Stewarts Restaurants, Inc. (“SRI”)
by Frosted on the outstanding note due to SRI from Frosted. If the monies have
not been used to make interest payments to SRI within one year from the date
hereof, such monies shall be distributed back to Rockelle.
(b)
Frosted’s
Obligation Upon Payment
Upon
satisfaction of the requirements noted in Article XII(a) by Rockelle, Frosted
shall;
(1)
Upon
payment as set forth in Article XII(a)(1)-(4) Frosted shall transfer to Rockelle
66% of its total ownership interest in the JV and turnover control of all books,
financial records and full control of the finances of Frosted and the JV and
complete control of the JV Operating Committee. Frosted shall retain a seat
on
said committee and will be fully informed of all operations of the
JV.
(2)
Upon
satisfaction of Article XII(a)(5), Frosted shall completely relinquish the
balance of its ownership interest; shall relinquish its seat on the Operating
Committee and shall execute any and all documents needed to transfer ownership
in all trademarks or Frosted.
(3)
Frosted shall place adequate funds in escrow to pay for the liabilities set
forth on Exhibit “B”. Frosted hereby warrants and represents that to the best of
Frosted knowledge and belief there are no other liabilities of Frosted other
than as set forth Exhibit B and in the ordinary course of business.
ARTICLE
XIII
GENERAL
(a) Notices.
All
notices, demands or requests required or permitted to be given pursuant to
this
Agreement shall be in writing and shall be deemed to have been given when
delivered personally or when deposited in the United States Mail, postage
prepaid, by registered or certified mail, with return receipt requested,
addressed as follows:
If
to
Frosted, to:
Frosted
Mug Holdings, LLC
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
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or
at
such other address as Frosted may have furnished Rockelle by
notice;
If
to
Rockelle, to:
Rockelle
Corporation
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
or
at
such other address as Rockelle may have furnished Frosted by
notice.
(b) Amendment.
This
Agreement may not be amended except by a written instrument executed by both
Partners.
(c) Applicable
Law.
This
Agreement and the performance of the Partners hereunder shall be interpreted,
construed and enforced in accordance with the laws of the State of New Jersey
and no presumption shall be deemed to exist in favor of or against either
Partner as a result of the preparation and/or negotiation of
hereof.
(d) Entire
Agreement.
This
Agreement constitutes the entire agreement between the parties hereto relating
to the subject matter hereof and there are not other understandings,
representations or warranties, oral or written, relating to the subject matter
of this Agreement, which shall be deemed to exist or to bind any of the parties
hereto, their respective successors or assigns except as referred to
herein.
(e) Further
Assurances.
Each
Partner shall execute such deeds, assignments, endorsements and other
instruments and evidences of transfer, give such further assurances and perform
such acts as are or may become necessary or appropriate to effectuate and to
carry out the provisions of this Agreement. All such deeds, assignments,
endorsements and other instruments and evidences of transfer and all other
acts
of any kind which are to be as of the date of this Agreement shall be delivered
or taken as soon as possible following the date of this Agreement.
(f) Third
Parties.
No
person not a party to this Agreement (including any employee of either Partner
or its Parent or the JV) shall have or acquire any rights by reason of this
Agreement nor shall any party hereto have any obligations or liabilities to
such
other person by reason of this Agreement.
(g) Admission
of Additional Partners.
Except
as provided in Article XII hereof, no additional Partners may be admitted to
the
JV except upon the unanimous consent of the Partners and upon such terms and
conditions as the Partners may agree upon.
(h) Severability.
If any
provisions of this Agreement or the application thereof to any person or
circumstances shall be invalid or unenforceable to any extent, the remainder
of
the Agreement and the application of such provisions to other persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
(i) Binding
Agreement.
Subject
to the restrictions on transfers and other dispositions set forth herein, this
Agreement shall inure to the benefit of and be binding upon the undersigned
Partners and their respective successors and assigns.
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(j) Headings.
The
headings of Sections in this Agreement are for convenience only and are not
a
part of this Agreement.
(k) Third
Party Approval.
This
Agreement and specifically the assumption of the SRI note is subject to the
acceptance and approval of SRI. In the event that SRI should fail or refuse
to
accept or approve the assumption of the SRI note, then in that event the JV
shall be dissolved in accordance with the terms set forth herein.
(l) No
Royalty.
For
so
long as ▇▇ ▇▇▇▇▇▇▇, LLC owns and operates the Stewarts Root Beer restaurant
located on ▇▇▇▇▇▇ Avenue in Union, New Jersey (“Stewarts—Union”) shall pay NO
royalty fee to the JV or its successor; however, Stewarts—Union shall abide by
all other terms of the Franchise Agreement.
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IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement
in the State of Illinois by their duly authorized officers, effective as of
the
date and year first above written.
Frosted Mug Holdings, LLC
By:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Corporation
By:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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EXHIBIT
A
All
franchises.
All
income from the operation of Frosted’s business
All
trademarks and trademark licenses
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EXHIBIT
B
Eastern
Design Services Litigation ($29,000)
▇▇▇▇▇
Enterprises Litigation ($318,000)
Loan
payable to ▇▇ ▇▇▇▇▇▇▇, LLC ($100,000)