ADDENDUM TO FRANCHISE AGREEMENT DATED FEBRUARY 6, 2006
EXHIBIT
10.4
ADDENDUM
TO FRANCHISE AGREEMENT
DATED
FEBRUARY 6,
2006
THIS
ADDENDUM TO FRANCHISE AGREEMENT (this “Addendum”) is
effective as of February 6th, 2006 (the
"Effective Date"), regardless of the date of signatures, and
amends and supplements the Franchise Agreement dated December 14th, 2006 (the
“Franchise Agreement”), between EVOS USA, INC.
(“we,” “us” or “our”) and
you, HEALTHY FAST FOOD, INC. (“you,”
“your” or “Franchise Owner”). You
and we are sometimes referred to individually as a "party" or
collectively as the "parties."
You
and we agree as follows:
1. Precedence
and Defined Terms. Terms not otherwise defined in this
Addendum have the meanings as defined in the Franchise
Agreement. This Addendum modifies and supersedes any contrary
provisions of the Franchise Agreement. All other terms and conditions
of the Franchise Agreement remain unaffected by this Addendum.
2. Negotiated
Changes. After negotiations, you and we have agreed to
certain modifications to the Franchise Agreement, at your request and for your
benefit. This Addendum contains the agreements between you and us
based on those negotiations.
3. Certain
Definitions. For purposes of Section 19.16, the
definition of the word “owner” is limited to the persons
described in that definition, but only if they also:
(a) serve
as an
officer, director, manager or other principal executive serving in a role
similar to that of an officer and director of a corporation; or
(b) are
persons who
hold a 10% or more, direct or indirect, legal or beneficial ownership interest
or voting rights, in the Franchise Owner, or have other legal or equitable
interests or powers resulting in any legal or equitable interest in 10% or
more
of the revenue, profits, rights or assets of the Franchise Owner.
The
Franchise Owner
represents that currently the only persons who meet this amended definition
of
“owner” are the following: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇. Accordingly, only those 4
individuals will be required to complete the Principal Owner’s Guarantee and
Confidential Evaluation Form at the inception of the franchise relationship.
However, additional owners who meet this amended definition may join the
Franchise Owner before the inception of the franchise
relationship. Those additional owners who serve as an officer,
director, manager or other principal executive serving in a role similar to
that
of an officer and director of a corporation will also be required to complete
and submit to us a complete and accurate Confidential Evaluation Form (which
will be considered a supplement to the Franchise Application) or such other
Franchise Application information that we develop. This information
will need to be completed and submitted to us prior to their admission as an
owner of the Franchise Owner. You will require prospective owners who
will not serve as an officer, director, manager or other principal executive
serving in a role similar to that of an officer and director of a corporation
to
complete investor questionnaires enabling you to meet your investigatory and
due
diligence obligations regarding their background.
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4. Transfer
Restrictions. Notwithstanding any contrary provision of
Sections 14.2 through 14.8 of the Franchise Agreement:
(a) Prior
to but not
following your sale of securities through a public offering (as that term is
defined under the Securities Act of 1933, as amended), our approval will be
required for transfers or sales of equity interests in the Franchise Owner
exceeding 5% or more. You understand and acknowledge that this right
of approval is intended to apply to single transfers and multiple transactions
with a single transferee that, when combined, exceed 5% or more during any
6
month period. Prior to but not following your sale of securities
through a public offering (as that term is defined under the Securities Act
of
1933, as amended), you will not issue additional securities or permit the
transfer of any securities in the Franchise Owner to anyone:
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(i)
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who
will have
a legal or beneficial interest of 5% or more who has not received
our
approval, not to be unreasonably
withheld;
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(ii)
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who
has been
convicted of, or is the subject of any, indictment for any felony;
or
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(iii)
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who
is an
officer, director, manager (or any similar executive position), or
owner
of 5% or more of the equity or voting securities, of any Competitive
Business who has not received our approval, not to be unreasonably
withheld.
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(b) We
understand and
approve your financing strategy to raise capital through one or more private
placements of equity securities in the Franchise Owner, to be placed with
passive investors. You have represented to us that the passive
investors will not have management or control over the Franchise Owner, and
that
the existing owners will retain all management rights and control over the
Franchise Owner and its operations. You recognize that we are not an
issuer of any of the securities and you will provide us with copies of the
private placement memorandum and other disclosure documents for our comment
and
review prior to your dissemination of such offering materials. We may
require you to include statements in such documents to clearly indicate to
prospective investors that their relationship will be with you, and not with
us,
that we are for all purposes not an issuer of any of such securities, and that
the investors will have no claims against us relating to their purchase or
sale
of any such securities.
(c) You
have submitted
to us a list of the identities of your current executive officers and
directors. Prior to but not following your sale of securities through
a public offering (as that term is defined under the Securities Act of 1933,
as
amended), you agree not to change any of them without obtaining our prior
approval, which will not be unreasonably withheld.
(d) You
will require
prospective investors to complete investor questionnaires enabling you to meet
your investigatory and due diligence obligations regarding their background
so
that you can assure that the investors are eligible to be investors and do
not
have backgrounds which conflict with subsection 4(a)(ii)-(iii)
above.
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5. Initial
Public Offering. Under the Franchise Agreement, a public
offering of your securities would be deemed a transfer that requires you to
meet
certain conditions, including obtaining our written consent and the commencement
of our right of first refusal to acquire your
Restaurants. Nevertheless, we will not withhold our consent to your
sale of securities through a public offering (as that term is defined under
the
Securities Act of 1933, as amended), and we will waive our right of first
refusal, if all of the following conditions are met:
(a) Use
of
Proceeds: The net proceeds of such offering of securities are not used
primarily for the purpose of developing, opening, acquiring and operating
Competitive Businesses. The terms "net proceeds"
will mean the amount of funds raised in such offering less the offering costs
described in the associated registration statement and prospectus (e.g.,
underwriters’ commissions, marketing expenses, legal and accounting fees,
etc.).
(b) Management: In
the event that management does not include ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
we have approved the identity, duties and responsibilities of your Chief
Executive Officer and Chief Operating Officer who must have requisite experience
in the restaurant industry that otherwise meets the qualifications of our
individual franchisees. Such approval will not be unreasonably
withheld.
(c) Informational
Requirements: Due to the application of the U.S. federal and
state securities laws, you recognize you will be required to disclose various
information to prospective investors in a public offering. This
information may reflect upon us. Accordingly, prior to engaging in
any public offering and/or disseminating any preliminary prospectuses or other
offering materials, you agree to submit to us any such written information
concerning us prior to its inclusion in any registration statement, prospectus,
preliminary prospectus or other offering circular, business plan or other
documentation to be used in connection with the offering. Information
regarding us may only be used after we have provided our written consent to
its
use, and such consent shall not being unreasonably withheld. Our
consent to the use of such information, however, does not imply or constitute
our approval with respect to the sale of the underlying securities, the offering
literature submitted to us, or any other aspect of the offering. No
information regarding us will be included in any securities disclosure or
offering documents, unless such information has been furnished by us, in
writing, pursuant to your request, or we have previously approved
it. When requesting such information from us, you must state the
specific purpose for which the information will be used when making the
request. If we object to any information regarding us in any offering
literature, prospectus or other documentation, you must not use such information
unless and until our concerns are satisfied or our objections are
withdrawn. We assume no responsibility for the offering
whatsoever.
(d) Required
Legend: The prospectus, offering document or other offering
literature must contain the following language in bold-faced type in a prominent
location mutually acceptable to you and us:
EVOS
USA,
INC. IS NOT DIRECTLY OR INDIRECTLY THE ISSUER OF THE SECURITIES OFFERED AND
ASSUMES NO RESPONSIBILITY WITH RESPECT TO THIS OFFERING AND/OR THE ADEQUACY
OR
ACCURACY OF THE
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INFORMATION
DESCRIBED HEREIN, INCLUDING ANY STATEMENTS MADE WITH RESPECT TO
IT. EVOS USA, INC. DOES NOT ENDORSE OR MAKE ANY RECOMMENDATION WITH
RESPECT TO THE INVESTMENT CONTEMPLATED BY THIS OFFERING.
(e) Exchange
Listings: You must not use our service marks, trademarks, trade names
or any portion or abbreviation of them, or any word or letters bearing such
a
resemblance in any listing with any exchange, CUSIP forum, or any abbreviation
for any stock exchange listings in the media or otherwise. In
particular, the word EVOS will not be so used.
(f) Timing: Neither
of the parties may engage in any public offering of its securities at any time
within 90 days before or after the commencement or end of any public offering
of
securities by the other party.
(g) Indemnification:
You agree to indemnify, defend and hold us and our officers, directors,
employees and agents, harmless from and against any and all claims, demands,
liabilities, and all costs and expenses (including our cost of defense which
includes reasonable attorneys' fees) incurred in the defense of any claims,
demands or liabilities arising from your offer or sale of securities, whether
asserted by a purchaser of any such security or by any governmental
agency. We have the right (but not the obligation) to defend any such
claims, demands or liabilities and/or to participate in the defense of any
action in which we are named as a party.
(h) Notifications:
Once you become a "public company" (as that term is used in connection with
the
Securities and Exchange Act of 1934, as amended), you will be required to file
certain periodic reports with the U.S. Securities and Exchange Commission (the
"SEC"). In addition, your stockholders will also be
required to file certain notices with the SEC under certain
circumstances. You agree to furnish us with copies of all filings,
notices and reports made by you or by any of your stockholders that concern
you
or your securities to us if such filings, notices and reports are not publicly
available. In particular, you agree to provide us with notification
any time any person or group acquires a 10% or greater ownership interest in
your securities if such information is not publicly available.
6. Competitive
Restrictions.
(a) Competitive
Business: Prior to but not following your sale of securities
through a public offering (as that term is defined under the Securities Act
of
1933, as amended), you and we agree that ownership of 5% or more of your
securities by any other person, group or company that is engaged in a
Competitive Business without our prior written approval would constitute a
material breach of this Agreement. If such a breach is not cured
within 60 days of written notice to you, we may terminate the Franchise
Agreement and any other agreement we have with you or your affiliates, and
exercise any or all rights to acquire the Restaurant and any development rights
in accordance with the post-termination obligations described in the Franchise
Agreement.
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(b) Board
Membership. Prior to but not following your sale of securities through
a public offering (as that term is defined under the Securities Act of 1933,
as
amended), no member of your Board of Directors, operating managers (in the
case
of a partnership or limited liability company) may be affiliated with any
Competitive Business without our prior written approval.
7. Transfers
and Assignment. Your rights under this Addendum are
personal to you and may not be transferred in conjunction with the Franchise
Agreement and do not inure to the benefit of your successors or
assigns. You may not transfer or assign any rights under this
Addendum in a manner regardless if part of or separate from the transfer or
assignment of the entire Franchise Agreement. This Addendum will
automatically cancel if you engage in any transaction in which 50% or more
of
the ownership interests in the Franchise Owner (including any equity interests,
profits interests, or rights to cash flows) is transferred to anyone who serves
as an officer, director, manager or other principal executive serving in a
role
similar to that of an officer and director of a corporation who is not
affiliated with the current Franchise Owner.
8. Termination. This
Addendum will automatically terminate at the same time as the Franchise
Agreement.
9. LOI. We
and EVOS WEST, INC. (“EWI”) previously entered into a Letter of Intent to Master
Franchise, dated September 20, 2005 (the “LOI”). EWI
assigned the LOI to you on November 16, 2005. You waive any rights
you may have, and release us from any liability or obligation we may have,
arising out of the entering into of the LOI and/or entering into the Franchise
Agreement or any subsequent franchise or related agreement as contemplated
in
the LOI. You and we agree to terminate the LOI and release each other
from any claims either may have relating to it.
10. Remaining
Terms Unaffected. All remaining terms and conditions of
the Franchise Agreement are unaffected by this Addendum, and continue to be
effective and binding on the parties.
Intending
to be bound, you and we sign and deliver this Addendum effective as of the
Effective Date, regardless of the actual date of signature.
| HEALTHY FAST FOOD, INC. | EVOS USA, INC. | |||
| By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ | |||
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Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
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Title:
President
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Title:
Vice President
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Date:
2/6/06
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Date:
2/10/06
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