EXHIBIT 10.24
[O'CHARLEY'S INC. LOGO]
O'CHARLEY'S INC.
DEVELOPMENT AGREEMENT
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TABLE OF CONTENTS
ARTICLE I GRANT....................................................... 2
ARTICLE II FEES........................................................ 4
ARTICLE III SCHEDULE AND MANNER FOR EXERCISING DEVELOPMENT RIGHTS....... 5
ARTICLE IV PREREQUISITES TO OBTAINING LICENSES......................... 12
ARTICLE V TERM........................................................ 14
ARTICLE VI DUTIES OF DEVELOPER......................................... 14
ARTICLE VII DEFAULT AND TERMINATION..................................... 19
ARTICLE VIII TRANSFER OF INTEREST........................................ 23
ARTICLE IX COVENANTS................................................... 29
ARTICLE X INDEPENDENT CONTRACTOR AND INDEMNIFICATION.................. 32
ARTICLE XI APPROVALS................................................... 33
ARTICLE XII NON-WAIVER AND REMEDIES..................................... 33
ARTICLE XIII NOTICES..................................................... 34
ARTICLE XIV SEVERABILITY AND CONSTRUCTION............................... 34
ARTICLE XV ENTIRE AGREEMENT; APPLICABLE LAW............................ 35
ARTICLE XVI ACKNOWLEDGMENTS............................................. 37
Attachment A Operating Agreement......................................... A-1
Attachment B Lease Rider................................................. B-1
Attachment C Confidentiality And Non-Compete Agreement................... C-1
Attachment D Statement Of Ownership Interests and Principals............. D-1
Attachment E Guaranty.................................................... E-1
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O'CHARLEY'S INC.
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (the "Agreement") is made and entered into
this _____ day of December, 2003, by and among O'Charley's Inc., a Tennessee
corporation ("Licensor"), OCM Development Company, LLC, a Michigan limited
liability company d/b/a O'Charley's Development Company of Michigan
("Developer"), and Meritage Hospitality Group Inc., a Michigan corporation
("Controlling Principal").
WITNESSETH:
WHEREAS, Licensor, as a result of the expenditure of time, skill,
effort and money, has developed and owns the rights to develop and operate a
unique system of full service varied menu casual dining restaurants which
feature freshly prepared items such as hand-cut and aged steaks, fresh chicken,
seafood, homemade yeast rolls and fresh-cut salads with special recipe dressings
and which serve alcoholic beverages through a full-service bar all under the
trademark O'Charley's(R) (the "System");
WHEREAS, the distinguishing characteristics of the System include,
without limitation, distinctive exterior and interior design, decor, color
schemes, awnings, neons and furnishings, special recipes and menu items, uniform
standards, specifications and procedures for operations, quality and uniformity
of products and services offered, procedures for inventory management and
financial control, training and assistance, and advertising and promotional
programs, all of which may be changed, improved and further developed by
Licensor from time to time;
WHEREAS, Licensor identifies the System by means of certain trade
names, service marks, trademarks, emblems and indicia of origin, including, but
not limited to, the ▇▇▇▇ ▇'▇▇▇▇▇▇▇'▇(R) and such other trade names, service
marks and trademarks as are now designated (and may hereafter be designated by
Licensor in writing) for use in connection with the System (the "Proprietary
Marks");
WHEREAS, Licensor continues to develop, use and control the use of such
Proprietary Marks in order to identify for the public the source of services and
products marketed thereunder and under the System, and to represent the System's
high standards of quality, appearance and service;
WHEREAS, the value of Licensor's Proprietary Marks is based upon: (a)
the maintenance of uniform high quality standards in connection with the
preparation and sale of Licensor-approved food and beverage products; (b) the
uniform high standards of appearance of the individual restaurant units in the
System; (c) the use of distinctive Proprietary Marks, building designs and
advertising signs representing a uniformly high quality of products and
services; and (d) the assumption by its franchisees of the obligation to
maintain and enhance the goodwill and public acceptance of the System and of the
Proprietary Marks by strict adherence to the high standards required by
Licensor; and
WHEREAS, Developer wishes to obtain certain development rights to
operate one (1) or more full-service O'Charley's restaurants (each, a
"Restaurant" or "Licensed Business," and together, the "Restaurants" or
"Licensed Businesses") under the System in the territory described in this
Development Agreement.
NOW, THEREFORE, the parties, in consideration of the mutual
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound, hereby agree as follows:
ARTICLE I
GRANT
A. In reliance on the representations, warranties, covenants and
agreements of Developer and its Controlling Principals hereunder, Licensor
hereby grants to Developer and Developer hereby accepts, pursuant to the terms
and conditions of this Agreement, the right and obligation to develop the number
of Restaurants described in the Development Schedule (as defined below) solely
within the geographic area(s) described below (collectively the "Territory").
State of Michigan, except Lenawee County in Southeast Michigan
_______________________________________________________________________
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Developer may be granted rights to develop additional Restaurants in Licensor's
sole discretion. Any and all such rights to develop Restaurants are subject to
Developer's full compliance with all conditions precedent to the grant of such
rights outlined in this Agreement, and any such rights shall be exercised in
accordance with Article III.
B. Developer acknowledges and understands that the rights granted
hereunder are for the development of full-service O'Charley's restaurants.
Except as provided in this Agreement, and subject to Developer's full compliance
with this Agreement and any other agreements among Developer, or any of its
Affiliates and Licensor or any of its Affiliates, neither Licensor nor its
Affiliates shall establish or authorize any other person or any other
corporation, limited liability company, partnership, limited partnership, joint
venture, association, trust, unincorporated association or any other business
entity (each, an "Entity"), other than Developer, to establish a Restaurant in
the Territory during the term of this Agreement. Notwithstanding the above,
Developer acknowledges and agrees that Licensor and its Affiliates operate
restaurants under the trademark O'Charley's(R) and further agrees and
acknowledges that the rights granted hereby are only for the development and
operation of one (1) or more full-service O'Charley's restaurants, and,
therefore, Licensor and its Affiliates may conduct (or authorize one or more
third parties to conduct) the following activities:
(1) Licensor, its Affiliates, any O'Charley's developer or
operator and any other authorized person or Entity shall have the right, at any
time, to advertise and promote the System, and fill customer orders by providing
catering and/or delivery services in the Territory.
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(2) Licensor and its Affiliates may offer and sell (or may
authorize others to offer and sell) collateral and ancillary products and
services under the Proprietary Marks which may be similar to those offered by
the Restaurants in the Territory if offered and sold other than through a
full-service O'Charley's restaurant, such as pre-packaged food products,
t-shirts and O'Charley's memorabilia.
(3) Licensor and its Affiliates may offer and sell in the
Territory (or may authorize others to offer and sell) such products and services
under the Proprietary Marks through any permanent, temporary or seasonal food
service facility (e.g., a kiosk, concession or multi-brand facility) that will
provide a limited number or representative sample of the products and services
normally offered by, and be located in a smaller facility than, a full-service
O'Charley's restaurant ("Alternative Distribution Facilities").
(4) Licensor and its Affiliates may operate (or may authorize
others to operate) a full-service O'Charley's restaurant or other similar food
service facilities offering the same products and services offered by a
full-service O'Charley's restaurant or an Alternative Distribution Facility in
any area of retail sales establishments, food courts, transportation facilities
(e.g., airports, train stations, bus terminals or port authorities), hospitals
and other healthcare facilities, cafeterias, commissaries, schools, hotels,
sports and entertainment facilities (e.g., stadiums, arenas, ball parks or
convention centers) and other mass gathering locations or events designated by
Licensor (each, an "Excluded Area"). Licensor may first offer to Developer the
right to offer and sell the O'Charley's restaurant products in the Excluded Area
within the Territory. Developer must meet each of the conditions outlined in
Section IV(B), and any other criteria and qualifications deemed necessary by
Licensor, or any other third party involved in the arrangement such as an
airport or stadium authority, educational institution or other facilities
operator ("Facilities Operator"), to offer and sell the O'Charley's restaurant
products and services in the Excluded Area. If Developer does not meet all of
the criteria and qualifications required by Licensor and the Facilities
Operator, then Developer shall not be granted the right to offer and sell such
products and services within the Excluded Area and Licensor may conduct such
business, or authorize any other person or Entity to do so. If Developer meets
all the conditions, criteria and qualifications, Licensor shall offer to
Developer the right to offer and sell such products and services on such terms
and conditions as such arrangements may be offered to third parties as
determined by Licensor or such Facilities Operator, as applicable. Once such
offer has been made to Developer by Licensor in writing, Developer shall have
the right to accept such offer within thirty (30) days after receipt of such
written notification. If Developer fails to notify Licensor in writing of
Developer's intent to accept the offer within such thirty (30) day time period
or Developer fails to meet any criteria or qualifications imposed by Licensor or
the Facilities Operator, Licensor may conduct such business itself, or authorize
any other person or Entity to do so.
(5) Licensor and its Affiliates may offer and sell (or may
authorize others to offer and sell) products and services under any other names
and marks.
(6) Licensor, its Affiliates, any O'Charley's restaurant
developer or operator and any other authorized person or Entity may establish
and operate a full-service O'Charley's restaurant anywhere outside of the
Territory regardless of proximity to the Territory or the Location (as defined
in the Operating Agreement) of any O'Charley's Restaurant operated by Developer.
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C. This Agreement is not a franchise or license agreement and does not
grant to Developer any right or license to operate a Restaurant, distribute
goods or services, or any right to use or interest in the Proprietary Marks
(such right and license being granted only pursuant to the Operating Agreement
applicable to individual Restaurants as such Operating Agreement may be entered
into and become effective pursuant to this Agreement and such Operating
Agreement).
D. After this Agreement expires or is terminated, Licensor shall have
the complete and unrestricted right to operate or license other persons to
operate one or more restaurants utilizing the System in the Territory (except at
Locations for which Developer has a then outstanding and effective Operating
Agreement).
ARTICLE II
FEES
A. Developer shall pay Licensor an initial license fee of Fifty
Thousand Dollars ($50,000) for each of the first two (2) Restaurants developed
pursuant to this Agreement and Twenty-Five Thousand Dollars ($25,000) for each
additional Restaurant developed pursuant to this Agreement. Simultaneously with
the execution of this Agreement, Developer shall pay to Licensor one half (1/2)
of the license fees for all Restaurants to be developed pursuant to this
Agreement as a fee for such development. The remaining one half (1/2) of the
license fee for each of the Restaurants to be developed during the Development
Periods shall be paid by Developer upon the signing of an Operating Agreement
for each Restaurant.
B. Developer acknowledges that the portion of the license fees being
paid to Licensor simultaneously with the execution of this Agreement is being
paid in partial consideration of the administrative and other expenses incurred
by Licensor in connection with the development rights granted hereunder and for
its lost or deferred opportunity to grant such rights to any other party.
Developer acknowledges that no part of such fees shall be refunded to Developer
under any circumstances, even if no Restaurants are opened by Developer under
this Agreement, and that Developer shall have no right to recover from Licensor,
directly or indirectly, any of such portion of the license fees.
C. Pursuant to its obligations hereunder and under the applicable
Operating Agreements, Licensor will make various expenditures in connection with
the development of prospective Restaurant sites by Developer, including
expenditures for travel, lodging and meals. Developer shall promptly notify
Licensor of a decision to cease development of a prospective Restaurant site. In
the event that Developer fails to open a Restaurant at any such site, Developer
shall reimburse Licensor for Licensor's expenditures with respect to that site.
In such event, Licensor shall provide Developer with an itemized list of
Licensor's expenditures with respect to that site within sixty (60) days after
Licensor receives notice that Developer no longer intends to develop a
Restaurant at that site, and Developer shall reimburse Licensor for such costs
within thirty (30) days after receiving such list.
D. Developer shall not be entitled to withhold payments due Licensor
under this Agreement on grounds of alleged nonperformance by Licensor hereunder.
Any payment not actually received by Licensor on or before the date due shall be
deemed overdue. Time is of the essence with respect to all payments to be made
by Developer to Licensor. All unpaid obligations under this Agreement shall bear
interest from the date due until paid at the lesser of
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(1) the prime commercial rate of interest as reported in the Wall Street Journal
(Southeastern edition) from time to time or by any bank or financial institution
designated from time to time by Licensor for short term unsecured loans to
substantial and responsible commercial borrowers, plus three percent (3%), or
(2) the maximum rate allowed by applicable law. Notwithstanding anything to the
contrary contained herein, no provision of this Agreement shall require the
payment or permit the collection of interest in excess of the maximum rate
allowed by applicable law. If any excess of interest is provided for herein, or
shall be adjudicated to be so provided in this Agreement, the provisions of this
paragraph shall govern and prevail, and neither Developer nor its Principals
shall be obligated to pay the excess amount of such interest. If for any reason
interest in excess of the maximum rate allowed by applicable law shall be deemed
charged, required or permitted, any such excess shall be applied as a payment
and reduction of any other amounts which may be due and owing hereunder, and if
no such amounts are due and owing hereunder then such excess shall be repaid to
the party that paid such interest.
E. Developer acknowledges that the Development Period extension fees in
Article III and the transfer fee in Section VIII(B)(2)(j) may, in Licensor's
sole discretion, be increased annually effective January 1 of each year
beginning on January 1 of the year following the date of this Agreement, by an
amount equal to the annual percentage increase during the preceding calendar
year in the Consumer Price Index---All Consumers (All Items)---United States
City Average, as compiled and published by the United States Department of
Labor, or such comparable successor index as may be designated by Licensor from
time to time.
ARTICLE III
SCHEDULE AND MANNER FOR EXERCISING DEVELOPMENT RIGHTS
A. Developer shall enter into a separate Operating Agreement with
Licensor for each Restaurant for which a development right is granted. The
Operating Agreement to be executed for each Restaurant to be developed under
this Agreement shall be in the form of the Operating Agreement attached hereto
as Attachment A.
B. (1) Acknowledging that time is of the essence, and subject to the
requirements of Article IV, Developer agrees to exercise its development rights
according to the development schedule below (the "Development Schedule"), which
schedule designates the number of Restaurants in the Territory to be established
and in operation by Developer upon the expiration of each of the designated
development periods (the "Development Periods").
CUMULATIVE TOTAL NUMBER
OF RESTAURANTS LOCATED IN
THE TERRITORY WHICH
EXPIRATION DATE OF DEVELOPER SHALL HAVE OPEN
DEVELOPMENT PERIOD DEVELOPMENT PERIOD AND IN OPERATION*
------------------ ------------------ -------------------------
One September 30, 2004 1
Two December 31, 2004 2
Three August 31, 2005 3
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Four December 31, 2005 4
Five June 30, 2006 5
Six December 31, 2006 6
Seven June 30, 2007 7
Eight December 31, 2007 8
Nine June 30, 2008 9
Ten September 30, 2008 10
Eleven December 31, 2008 11
Twelve June 30, 2009 12
Thirteen September 30, 2009 13
Fourteen December 31, 2009 14
Fifteen June 30, 2010 15
*includes existing Restaurants, if any, purchased or acquired by Developer from
Licensor.
(a) Developer shall have the obligation to develop
each Restaurant within the Territory during the Development Periods. If
Developer has developed the Restaurant(s) required in the applicable Development
Period in accordance with the Development Schedule and continues to meet the
conditions set forth in Article IV, Developer shall have the right and
obligation to develop the Restaurant(s) required during the next applicable
Development Period. Developer acknowledges that compliance with its development
obligations in each Development Period described above and continued compliance
with Article IV is a condition precedent to the receipt of such additional
development rights. If Developer fails to meet its development obligations or
fails to comply with the Operational Approval, Financial Approval, Legal
Approval and Ownership Approval requirements in Article IV, the conditions to
the receipt of those further development rights shall not have been met, and
Developer shall have no further rights to develop Restaurants hereunder.
(b) During any of the Development Periods set forth
above, subject to the terms and conditions of this Agreement, Developer, with
Licensor's prior written consent (which consent may be withheld in Licensor's
sole discretion), may develop more than the total minimum number of Restaurants
which Developer is required to develop during that Development Period.
Notwithstanding the above, Developer shall not open or operate more than the
cumulative total number of Restaurants Developer is obligated to develop under
this Agreement as set forth above in the Development Schedule without Licensor's
consent, which may be withheld in Licensor's sole discretion. Any Restaurants
developed during a Development Period in excess of the minimum number of
Restaurants required to be developed upon expiration of that Development Period,
shall be applied to satisfy Developer's development obligation during the next
succeeding Development Period, if any.
(2) If during the term of this Agreement, Developer ceases to
operate any Restaurant developed under this Agreement for any reason, Developer
shall develop a
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replacement Restaurant to fulfill Developer's obligation to have open and in
operation the required number of Restaurants upon the expiration of each
Development Period. The replacement Restaurant shall be developed within the
Territory and within a reasonable time to be determined by Licensor after
Developer ceases to operate the Restaurant to be replaced. If during the term of
this Agreement, Developer, in accordance with the terms of any Operating
Agreement for a Restaurant developed under this Agreement, transfers its
interest in such Restaurant, the transferred Restaurant shall continue to be
counted in determining whether Developer has complied with the Development
Schedule so long as it continues to be operated as an O'Charley's restaurant and
the transfer of the Restaurant is made in accordance with Article VIII of this
Agreement. If the transferred Restaurant ceases to be operated as an O'Charley's
restaurant during the term of this Agreement, Developer shall develop a
replacement Restaurant within the Territory and within a reasonable time to be
determined by Licensor after the transferred Restaurant ceases to be operated as
an O'Charley's restaurant. In either case, the reasonable time period shall
apply to the development of the replacement Restaurant only. In Licensor's sole
discretion, however, Licensor may extend the term of the applicable Development
Period to the end of the mutually agreed upon time period for an extension fee
of Five Thousand Dollars ($5,000) to be paid by Operator to Licensor; provided,
however, that in no event shall such time period exceed three (3) months; and,
provided, further, that such agreed time period shall not extend the term of
this Agreement. In addition, Developer shall be required to pay to Licensor a
lost revenue fee for any Restaurant that ceases to be operated as an O'Charley's
restaurant. The lost revenue fee shall be an amount equal to the amount of
revenue that Licensor would have received from Developer during the period
between the closing of the Restaurant and the opening of the replacement
Restaurant had the original Restaurant never closed. The lost revenue fee shall
be determined by multiplying (x) by (y) where (x) equals the number of
Accounting Periods (both complete and partial) between the closing of the
Restaurant and the opening of the replacement Restaurant and (y) equals the
greater of: (i) the closed Restaurant's Gross Sales (as that term is defined in
the Operating Agreement) for its last full Accounting Period of operation, or
(ii) the average of the Restaurant's last twelve (12) Accounting Periods (or
such shorter period the Restaurant has been operating) of Gross Sales. For
purposes of this Agreement, the term "Accounting Period" shall mean the
accounting periods for the Restaurant as established by Licensor from time to
time and described in the Manuals.
(3) Developer shall open each Restaurant developed hereunder
and shall commence business in accordance with the Development Schedule
described in this Article III.
(a) Developer may request in writing that Licensor
extend the Development Period of any one Restaurant to permit Developer to
complete construction and begin operation of such Restaurant. If Licensor
determines, in its sole discretion, to grant any such request, the applicable
Development Period shall be extended for a period of thirty (30) days (each such
30-day period being referred to as an "Extension Period"). Developer's written
request for extension must be received by Licensor no later than sixty (60) days
prior to the end of the Development Period for that Restaurant, and such written
request must include a description of the reasons for Developer's failure to
develop in a timely manner and the date that Developer expects to complete
construction and opening of the Restaurant.
(b) If Developer has agreed to develop five (5) or
more Restaurants hereunder, unless otherwise agreed to by Licensor, in
Licensor's sole and absolute discretion, Developer shall not be entitled to more
than three (3) Extension Periods for any one Restaurant,
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nor more than six (6) Extension Periods during the term of this Agreement. If
Licensor permits a fourth (4th) Extension Period for any one Restaurant,
Developer must pay Licensor an extension fee of Ten Thousand Dollars ($10,000)
at the beginning of such Extension Period, plus another Ten Thousand Dollar
($10,000) extension fee at the beginning of each Extension Period Licensor
approves thereafter until such Restaurant has begun operation. If Licensor
permits a seventh (7th) Development Period, Developer must pay Licensor an
extension fee of Ten Thousand Dollars ($10,000) at the beginning of such
Extension Period, plus another Ten Thousand Dollar ($10,000) extension fee at
the beginning of Extension Period Licensor approves thereafter until such
Restaurant has begun operation. No extension of any Development Period will
affect the duration of any Development Period for any other Restaurant or any of
Developer's other development obligations hereunder.
(c) If Developer has agreed to develop four (4) or
fewer Restaurants hereunder, unless otherwise agreed to by Licensor, in
Licensor's sole and absolute discretion, Developer will be permitted no more
than three (3) Extension Periods during the term of this Agreement. If Licensor
permits a fourth (4th) Extension Period, Developer must pay Licensor an
extension fee of Ten Thousand Dollars ($10,000) at the beginning of such
Extension Period, plus another Ten Thousand Dollar ($10,000) extension fee at
the beginning of each Extension Period Licensor approves thereafter until such
Restaurant has begun operation. No extension of any Development Period will
affect the duration of any Development Period for any other Restaurant or any of
Developer's other development obligations hereunder.
C. Developer acknowledges that the projected opening dates ("Projected
Opening Dates") for each Restaurant set forth below are reasonable and
consistent with the requirements of the Development Schedule. Subject to
Developer's compliance with Article IV hereof, Developer shall execute an
Operating Agreement for each Restaurant no later than six (6) months prior to
the Projected Opening Date for the applicable Restaurant.
RESTAURANT PROJECTED OPENING DATE
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One September 30, 2004
Two December 31, 2004
Three August 31, 2005
Four December 31, 2005
Five June 30, 2006
Six December 31, 2006
Seven June 30, 2007
Eight December 31, 2007
Nine June 30, 2008
Ten September 30, 2008
Eleven December 31, 2008
Twelve June 30, 2009
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Thirteen September 30, 2009
Fourteen December 31, 2009
Fifteen June 30, 2010
D. Developer assumes all cost, liability, expense and responsibility
for locating, obtaining and developing sites for each Restaurant, and for
constructing and equipping each Restaurant at each such site. Developer shall
not make any binding commitment to a prospective vendor or lessor of real estate
with respect to a site for a Restaurant unless the site is accepted as set forth
below. Developer acknowledges that the location, selection, procurement and
development of a site for each Restaurant is Developer's responsibility; that in
discharging such responsibility Operator may consult with real estate and other
professionals of Developer's choosing; and that Licensor's acceptance of a
prospective site and the rendering of assistance in the selection of a site does
not constitute a representation, promise, warranty or guarantee, express or
implied, by Licensor that the Restaurant operated at that site will be
profitable or otherwise successful.
(1) In connection with the development of each Restaurant
hereunder, Licensor shall do the following:
(a) Licensor shall provide Developer with written
site selection guidelines, which may be found within the Manuals or may
otherwise be communicated to Developer, and such site selection assistance as
Licensor may deem advisable.
(b) Licensor shall provide such on-site evaluation as
Licensor may deem necessary on its own initiative or in response to Developer's
reasonable request for site acceptance; provided, however, that Licensor shall
not provide an on-site evaluation for any proposed site prior to the receipt of
all required information and materials concerning such site prepared pursuant to
Section (III)(D)(2)(a). Licensor (or its designee) will provide at no additional
charge to Developer one (1) on-site evaluation. Thereafter, if additional
on-site evaluations are deemed appropriate by Licensor, or upon Developer's
reasonable request, Licensor reserves the right to charge a fee for each such
evaluation representing the reasonable expenses incurred by Licensor (or its
designee) in connection with such on-site evaluation, including, without
limitation, the cost of travel, lodging and meals.
(c) Licensor shall loan to Developer a set of
prototypical architectural and design plans and specifications for an
O'Charley's Restaurant.
(2) (a) Developer shall locate a site for the Restaurant
that satisfies the Licensor's written site selection guidelines. Developer shall
submit to Licensor, in the form specified by Licensor in the Manuals, a fully
completed site selection acceptance request package which shall include a
description of the site, evidence satisfactory to Licensor demonstrating that
the site satisfies Licensor's current site selection guidelines and criteria, a
letter of intent or other evidence satisfactory to Licensor which confirms
Developer's favorable prospects for obtaining the site, together with such other
information and materials as required in the Manuals or as Licensor may
otherwise reasonably require. Recognizing that time is of the essence, Developer
agrees that it will submit each such fully completed site selection acceptance
request package and materials for the proposed site to Licensor for its
acceptance at such time and in accordance with such procedures as are set forth
in the Manuals, or which are otherwise
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communicated to Developer by Licensor. Licensor shall have thirty (30) days
after receipt of this information and materials to accept or reject, in its sole
discretion, the proposed site as the location for the Restaurant. In the event
Licensor rejects the proposed site, Licensor may submit to Operator a document
outlining the reasons why Licensor rejected the proposed site. No site may be
used for the location of the Restaurant unless it is first accepted in writing
by Licensor.
(a) After a location for the Restaurant is accepted
by Licensor and acquired by Developer, the Location shall be described in
Attachment A to the Operating Agreement that will be executed by Developer in
connection with such Restaurant, which description shall be the legal
description and/or street address of the site at which the Restaurant is to be
located.
(3) At least six (6) months prior to the Projected Opening
Date for such Restaurant, Developer shall acquire by purchase or lease, at
Developer's expense, the site for the Restaurant as set forth below.
(a) If Developer intends to purchase the premises for
the Restaurant, Developer shall submit a copy of the proposed contract of sale
to Licensor for its written acceptance prior to Developer's execution of such
contract and shall furnish to Licensor a copy of the executed contract of sale
within ten (10) days after execution. If Developer intends to occupy the
premises of the Restaurant under a lease, Developer shall submit a copy of the
proposed lease to Licensor for Licensor's written acceptance prior to
Developer's execution of such lease and shall furnish to Licensor a copy of the
executed lease within ten (10) days after execution. No lease for the Restaurant
premises shall be accepted by Licensor unless a rider to the lease, prepared by
Licensor and executed by Licensor, Developer and the lessor, in substantially
the form attached as Attachment B, is attached to the lease and incorporated
therein. Licensor shall have thirty (30) days after receipt of the proposed
lease or the proposed contract of sale to either accept, reject or propose
amendments to such documentation prior to its execution. If Licensor fails to
notify Developer of an objection to the proposed lease or the proposed contract
of sale within this time period, Developer may use such lease or contract of
sale; provided, however, the proposed contract or lease satisfies Licensor's
then current criteria and requirements for contracts or leases outlined in the
Manuals or as otherwise communicated to Developer by Licensor. These criteria
and requirements may include financial requirements, specific lease requirements
or other requirements that Licensor deems necessary. Licensor retains the right
to vary from any requirement, add new requirements or make exceptions to any
requirements in Licensor's sole discretion.
(b) Developer shall be responsible for obtaining all
zoning classifications and clearances which may be required by state or local
laws, ordinances or regulations or which may be necessary as a result of any
restrictive covenants relating to the Restaurant premises. Prior to beginning
the construction of the Restaurant, Developer shall (i) obtain all permits,
licenses and certifications (including licenses and permits to sell alcoholic
beverages at the Restaurant) required for the lawful construction or remodeling
and operation of the Restaurant, and (ii) certify in writing to Licensor that
the insurance coverage specified in Article XIII of the Operating Agreement is
in full force and effect and that all required approvals, clearances, permits
and certifications (including alcoholic beverage licenses and permits) have been
obtained. Upon request, Developer shall provide to Licensor additional copies of
Developer's insurance policies or certificates of insurance and copies of all
such approvals, clearances, permits and certifications.
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(c) Developer must independently obtain any
architectural, engineering and design services it deems necessary for the
construction of the Restaurant at its own expense from an architectural design
firm, which Licensor reserves the right to approve. Developer shall adapt the
prototypical architectural and design plans and specifications for construction
of the Restaurant provided to Developer by Licensor as necessary for the
construction of the Restaurant and shall submit such adapted plans to Licensor
for review. If Licensor determines, in its sole discretion, that any such plans
do not satisfy Licensor's architectural or design standards and specifications
for a full-service O'Charley's restaurant or are not consistent with the best
interests of the System, Licensor may prohibit the implementation of such plans,
and in this event will notify Developer of any objection(s) within thirty (30)
days of receiving such plans or such other time period as may be specified in
the Manuals. If Licensor fails to notify Developer of an objection to the plans
within this time period, Developer may use such plans, provided such plans
satisfy Licensor's then current architectural and design standards and
specifications for a full-service O'Charley's restaurant. If Licensor objects to
any such plans, it shall provide Developer with a reasonably detailed list of
changes necessary to make the plans acceptable. Licensor shall, upon a
resubmission of the plans with such changes, notify Developer within thirty (30)
days of receiving the resubmitted plans whether the plans are acceptable. If
such changes are not acceptable, Licensor shall notify Developer of such
objections as described above, and Developer shall resubmit such plans in
accordance with the procedures described above until such plans are accepted by
Licensor. If Licensor fails to notify Developer of any objection within such
time period, Developer may use the resubmitted plans. Developer acknowledges
that acceptance by Licensor of such plans does not constitute a representation,
warranty or guarantee, express or implied, by Licensor that such plans are free
of architectural or any design errors and thus, Licensor shall have no liability
to Developer or any other party with respect thereto.
(d) Prior to commencement of construction, Developer
must submit all requested information, including, but not limited to,
architectural and design plans, construction schedules and current budgets in
accordance with Licensor's request. As time is of the essence, Developer shall
timely commence and diligently pursue construction of the Restaurant.
Commencement of construction shall be defined as the time at which any site work
is initiated by or on behalf of Developer at the Location accepted for the
Restaurant. Site work includes, without limitation, paving of parking areas,
installing outdoor lighting and sidewalks, extending utilities and demolishing
of any existing premises, depending on whether the accepted Location for the
Restaurant is freestanding. During the time of construction or remodeling,
Developer shall provide Licensor with such periodic reports regarding the
progress of the construction or remodeling as may be reasonably requested by
Licensor or as required in the Manuals. In addition, Licensor shall make such
on-site inspections as it may deem reasonably necessary to evaluate such
progress. If during such inspections Licensor identifies instances where
Developer's construction is inconsistent with, or does not meet, Licensor's
standards, Licensor shall notify Developer in writing of such deficiencies, and
Developer shall correct such deficiencies prior to opening the Restaurant.
Developer shall notify Licensor of the scheduled date for completion of
construction no later than sixty (60) days prior to such date. Within a
reasonable time after the date of completion of construction, Licensor shall, at
its option, conduct an inspection of the completed Restaurant. Developer
acknowledges and agrees that Developer will not open the Restaurant for business
without written authorization of Licensor and that
11
authorization to open shall be conditioned upon Developer's strict compliance
with this Agreement.
ARTICLE IV
PREREQUISITES TO OBTAINING LICENSES
A. Developer and the Controlling Principals understand and acknowledge
that the rights and duties set forth in this Agreement are personal to Developer
and its Controlling Principals (as applicable), are non-delegable and
non-assignable, and that Licensor has granted such rights in reliance on the
business skill, financial capacity and personal character of and expectations of
performance of the duties hereunder by Developer and the Controlling Principals.
Developer and the Controlling Principals have represented to Licensor that they
have entered this Agreement for the purpose of fully complying and with the
intention to fully comply with the Restaurant development obligations hereunder
and not for the purpose of reselling the development rights granted herein.
Developer and the Controlling Principals understand and agree that this
Agreement does not confer upon Developer a right to develop or license to
operate any Restaurant, but is intended by the parties to set forth the terms
and conditions which, if fully satisfied by Developer, shall entitle Developer
to obtain the right to develop and operate each Restaurant under an Operating
Agreement within the Territory.
B. In the event that Developer shall have obtained Licensor's
acceptance of a particular proposed site for a Restaurant and shall have paid to
Licensor all of the license fees due under this Agreement and the applicable
Operating Agreement, and if Licensor, in the exercise of its sole and absolute
discretion, has granted Developer, in writing, "Operational Approval,"
"Financial Approval," "Legal Approval" and "Ownership Approval" (collectively
the "Conditions"), then Licensor will grant Developer a license to operate a
Restaurant at the site in question. As used herein, Licensor will give Developer
Operational Approval, Financial Approval, Legal Approval and Ownership Approval
under the following circumstances:
(1) Operational Approval will be granted if Licensor has
determined, in the exercise of its sole discretion, that:
(a) Developer is in compliance with the Development
Schedule (including any extensions approved by Licensor in writing) and this
Agreement and has opened each Restaurant as required under the Development
Schedule (including any extensions approved by Licensor in writing);
(b) Developer and its Affiliates are in compliance
with any other agreement between Developer and its Affiliates and Licensor and
its Affiliates;
(c) Developer is conducting the operation of its
existing Restaurants, if any, and is capable of conducting the operation of each
proposed Restaurant required under the Development Schedule:
(i) in accordance with the terms and
conditions of the Agreement and any amendments thereto;
(ii) in accordance with the provisions of
the respective Operating Agreements and any amendments
thereto; and
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(iii) in accordance with the standards,
specifications and procedures:
(A) set forth and described in the
Manuals (as defined in the Operating Agreement), as
such Manuals may be amended from time to time;
(B) as evaluated by Licensor, in
its sole discretion, in accordance with the
evaluation programs outlined in the Manuals; or
(C) as otherwise set forth by
Licensor in writing.
(2) Developer acknowledges and agrees that it is vital to
Licensor's interest that each of its operators be financially sound to avoid
failure of an O'Charley's restaurant and that such failure would adversely
affect the reputation and good name of Licensor and the System. In accordance
with the foregoing criteria, Financial Approval will be granted if:
(a) Developer and the Controlling Principals satisfy
Licensor's then-current financial criteria for developers and controlling
principals of O'Charley's restaurants with respect to Developer's operation of
its existing Restaurants, if any, and the proposed Restaurant;
(b) Developer and the Controlling Principals have
been and are faithfully performing all terms and conditions under each of the
existing Operating Agreements with Licensor, if any;
(c) Developer is not in default, and has not been in
default during the twelve (12) months preceding Developer's request for
financial approval, of any monetary obligations owed to Licensor or its
Affiliates under any Operating Agreement or other agreement between Developer or
any of its Affiliates and Licensor or any of its Affiliates; and
(d) Developer is not in default, and has not been in
default during the twelve (12) months preceding the date of this Agreement, of
any financial covenant or monetary obligation with any of its lenders or
financing sources.
(3) Legal Approval will be granted if Developer has executed
and delivered to Licensor, in a timely manner, all information and documents
requested by Licensor prior to and as a basis for the issuance of individual
licenses or pursuant to any right granted to Developer by this Agreement or by
any Operating Agreement between Developer and Licensor, has taken such
additional actions in connection therewith as may be requested by Licensor from
time to time.
(4) Ownership Approval will be granted if:
(a) neither Developer nor any of its Controlling
Principals (as applicable) shall have transferred a Controlling Interest in
Developer; and
(b) Developer and the Controlling Principals upon
whom Licensor has relied to perform the duties under this Agreement shall
continue to own and exercise control over a Controlling Interest in Developer.
C. (1) If Licensor determines, in its sole discretion, that Developer
and the Controlling Principals:
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(a) have met all of the Conditions prior to the grant
of the right to establish each additional Restaurant, then Licensor shall grant
to Developer the right to develop such additional Restaurants pursuant to the
Development Schedule; or
(b) have not met one (1) or more of the Conditions,
Licensor may, (in addition to any other rights or remedies Licensor may have)
suspend, without extending the term of this Agreement, Developer's right to
develop Restaurants until the Conditions are satisfied in Licensor's sole
discretion, and re-state the Development Schedule (which may include a reduction
in the number of Restaurants and the number of Development Periods).
(2) The Conditions described above shall survive the
termination or expiration of this Agreement and shall apply with respect to any
Operating Agreement executed pursuant to this Development Agreement.
D. It is understood and agreed that the foregoing criteria apply to the
operational, financial, legal and ownership aspects of any Restaurant franchised
by Licensor in which Developer or any Controlling Principal has any legal or
equitable interest. It is further understood and agreed that Developer and the
Controlling Principals have an ongoing responsibility to operate each Restaurant
in which Developer or any Controlling Principal has any legal or equitable
interest in a manner which satisfies the foregoing requirements for Operational
Approval, Financial Approval, Legal Approval and Ownership Approval.
ARTICLE V
TERM
A. Unless sooner terminated in accordance with this Agreement, the term
of this Agreement and all rights granted by Licensor under this Agreement shall
expire on the date on which Developer successfully and in a timely manner has
exercised all of the development rights and completed the development
obligations under this Agreement in accordance with the Development Schedule
(including, if applicable, any extension thereof under Section III(B)(3)).
B. As set forth in Section VII(E)(3), upon such expiration, Licensor
shall, subject to the terms of the Operating Agreements executed pursuant
hereto, have the right to develop, or authorize any other person or Entity to
develop, O'Charley's restaurants in the Territory and Developer shall have no
further rights with respect to the development of O'Charley's restaurants in the
Territory; provided, however, if an Operating Agreement is fully executed in
accordance with Article III, prior to the expiration of the Development
Schedule, Developer shall complete the development of such Restaurant subject to
the Operating Agreement and shall open and operate such Restaurant as provided
in the Operating Agreement.
ARTICLE VI
DUTIES OF DEVELOPER
A. Developer and the Controlling Principals, as applicable, make the
following representations, warranties and covenants and accept the following
obligations:
(1) If Developer is a corporation, limited liability company,
partnership or other Entity, Developer make the following representations,
warranties and covenants to Licensor:
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(a) Developer is duly organized and validly existing
under the state law of its formation.
(b) Developer is duly qualified and is authorized to
do business in each jurisdiction in which its business activities or the nature
of the properties owned by it require such qualification.
(c) Developer's corporate charter, written operating
agreement or written partnership agreement shall at all times provide that the
activities of Developer are confined exclusively to the development and
operation of O'Charley's restaurants. Unless otherwise consented to by Licensor
in writing, Developer shall not use the Proprietary Marks as part of its
corporate or other legal name, and, in any event, shall obtain Licensor's
approval of such corporate or other legal name prior to applying for or filing
it with the applicable government authority.
(d) The execution of this Agreement and the
consummation of the transactions contemplated hereby are within Developer's
corporate power, if Developer is a corporation, are permitted under Developer's
articles of organization and written operating agreement and have been duly
authorized by Developer, if Developer is a limited liability company, are
permitted under Developer's written partnership agreement and have been duly
authorized by Developer, if Developer is a partnership.
(e) If Developer is a corporation, copies of
Developer's Articles of Incorporation, Bylaws, other governing documents, any
amendments thereto, resolutions of the Board of Directors authorizing entry into
and performance of this Agreement and any certificates, buy-sell agreements or
other documents restricting the sale or transfer of stock of the corporation,
and any other documents as may be reasonably required by Licensor, shall have
been furnished to Licensor prior to the execution of this Agreement; if
Developer is a limited liability company, copies of Developer's articles of
organization, operating agreement, any buy-sell agreements or other documents
restricting the sale or transfer of interests in the limited liability company,
and any other governing documents and any amendments thereto shall have been
furnished to Licensor prior to the execution of this Agreement; or, if Developer
is a partnership, copies of Developer's written partnership agreement, any
buy-sell agreements or other documents restricting the sale or transfer of
interests in the partnership, and any other governing documents and any
amendments thereto shall be furnished to Licensor prior to the execution of this
Agreement. Developer shall also provide to Licensor evidence of consent or
approval of the entry into and performance of this Agreement by the requisite
number or percentage of shareholders, members or partners, if such approval or
consent is required by statute or by Developer's Articles of Incorporation,
Bylaws, articles of organization, operating agreement, written partnership
agreement or other governing documents, as applicable.
(f) If Developer is a corporation, limited liability
company or partnership, the ownership interests in Developer are accurately and
completely described in Attachment D. Further, if Developer is a corporation,
Developer shall maintain at all times a current list of all owners of record and
all beneficial owners of any class of voting securities in Developer, if
Developer is a limited liability company, Developer shall maintain at all times
a current list of all owners of an interest in the limited liability company,
or, if Developer is a partnership, Developer shall maintain at all times a
current list of all owners of an interest in the partnership. Developer shall
immediately provide a copy of the updated list to Licensor upon the
15
occurrence of any change of ownership and otherwise shall make its list of
owners available to Licensor upon request.
(g) If, after the execution of this Agreement, any
person ceases to qualify as a Principal, or if any individual succeeds to or
otherwise comes to occupy a position which would, upon designation by Licensor,
qualify him as a Principal, Developer shall notify Licensor within five (5) days
after any such change and, upon designation of such person by Licensor as a
Principal, or as a Controlling Principal, as the case may be, such person shall
execute such documents and instruments (including, as applicable, this
Agreement) as may be required by Licensor to be executed by others in such
positions.
(h) If Developer is a corporation, Developer shall
maintain stop-transfer instructions against the transfer on its records of any
of its equity and voting securities and each certificate representing an equity
or voting security of the corporation shall have conspicuously endorsed upon it
a statement, in a form satisfactory to Licensor, that it is held subject to all
restrictions imposed upon assignments by this Agreement; provided, however, that
the requirements of this Section VI(A)(1)(h) shall not apply to the transfer of
equity securities of a Publicly-Held Entity that is otherwise approved to be the
Operator. If Developer is a limited liability company, its operating agreement
shall provide that ownership of an interest in the limited liability company is
held subject to all restrictions imposed upon assignments by this Agreement. If
Developer is a partnership, its written partnership agreement shall provide that
ownership of an interest in the partnership is held subject to all restrictions
imposed upon assignments by this Agreement.
(i) Developer and each of the Controlling Principals
have provided Licensor with the most recent financial statements of Developer
and each of the Controlling Principals. Developer shall provide an annual
balance sheet, income statement, statement of shareholders' equity and statement
of cash flows in the form prescribed by Licensor (which may be unaudited, unless
otherwise requested or required by Licensor) within one hundred twenty (120)
days after Developer's fiscal year end. Such financial statements present fairly
the financial position of Developer and each of the Controlling Principals, as
applicable, at the dates indicated therein and with respect to Developer, the
results of its operations, cash flow and owners' equity for the years then
ended. Developer agrees that it shall maintain at all times during the term of
this Agreement, sufficient working capital to fulfill its obligations under this
Agreement. Each of the financial statements mentioned above shall be certified
as true, complete and correct by Developer's treasurer or chief financial
officer (or by the applicable Controlling Principal, as appropriate) and shall
have been prepared in conformity with generally accepted accounting principles
consistently applied to all applicable periods involved. Developer's treasurer
or chief financial officer shall deliver to Licensor, simultaneously with the
financial statements mentioned above, a certificate certifying that Developer is
not in default of any of Developer's financial covenants or monetary obligations
with any of Developer's lenders or financing sources. No material liabilities,
adverse claims, commitments or obligations of any nature exist as of the date of
this Agreement, whether accrued, unliquidated, absolute, contingent or
otherwise, which are not reflected as liabilities on the financial statements of
Developer or such Controlling Principals or otherwise appropriately disclosed in
the notes thereto.
(j) Each of the Principals, except the Controlling
Principals, shall execute and bind themselves to the confidentiality and
non-competition covenants set forth in the Confidentiality and Non-Compete
Agreement attached hereto as Attachment C to this
16
Agreement (see Sections IX(B)(2) and IX(I)). The Controlling Principals shall
jointly and severally guarantee Developer's performance of all of Developer's
obligations (including, but not limited to, the payment of fees), covenants and
agreements described in this Agreement pursuant to the terms and conditions of
the guaranty attached hereto as Attachment E, and do otherwise bind themselves
to the terms of this Agreement as stated herein.
(k) Developer and the Controlling Principals
acknowledge and agree, jointly and severally, that the representations,
warranties, covenants and agreements set forth above in Section VI(A)(l)(a)-(j)
are continuing obligations of Developer and the Controlling Principals, as
applicable. Developer and each Controlling Principal will cooperate with
Licensor in any efforts made by Licensor to verify compliance with such
representations, warranties, covenants and agreements.
(2) Upon the execution of this Agreement, Developer shall
designate and retain an individual to serve as Operating Principal of Developer
("Operating Principal"). If Developer is an individual, Developer shall perform
all obligations of Operating Principal. Operating Principal shall, during the
entire period he serves as such, meet the following qualifications:
(a) Operating Principal may, at Operating Principal's
option, and, subject to the approval of Licensor, designate an individual to
perform the duties and obligations of Operating Principal described herein;
provided, however that Operating Principal shall ensure that such designee meets
all the requirements for an Operating Principal outlined below, conducts and
fulfills all of the Operating Principal's obligations in accordance with the
terms of this Agreement; provided, further, Operating Principal shall remain
fully responsible for any such performance.
(b) Operating Principal must maintain a direct
ownership interest in the Developer satisfactory to Licensor. Except as may
otherwise be provided in this Agreement, Operating Principal's interest in
Developer shall be and shall remain free of any pledge, mortgage, hypothecation,
lien, charge, encumbrance, voting agreement, proxy, security interest or
purchase right or options.
(c) Developer and Operating Principal (or his
designee, as applicable) shall devote their full time and best efforts to the
supervision and conduct of the business contemplated by this Agreement.
Operating Principal shall execute this Agreement as one of the Controlling
Principals, and shall be individually, jointly and severally with the Developer
and the other Controlling Principals, bound by all obligations of Developer, the
Operating Principal and the Controlling Principals hereunder.
(d) Operating Principal (or his designee, as
applicable) shall meet Licensor's standards and criteria for such individual
(including, but not limited to, educational, financial and operational
experience criteria prescribed by Licensor), as set forth in the Manuals (as
defined in the Operating Agreement) or as otherwise communicated by Licensor to
Operator from time to time.
(e) If during the term of this Agreement Operating
Principal (or any designee) is not able to continue to serve in the capacity of
Operating Principal or no longer qualifies to act as such in accordance with
this Section, Developer shall notify Licensor within ten (10) days and shall
designate a replacement within sixty (60) days after Operating Principal
17
(or any designee) ceases to serve or be so qualified, such replacement being
subject to the same qualifications and restrictions listed above. Developer
shall provide for interim management of the activities contemplated under this
Agreement until such replacement is so designated, such interim management is to
be conducted in accordance with this Agreement.
(3) Developer and the Controlling Principals understand that
compliance by all developers and operators operating under the System with
Licensor's training, development and operational requirements is an essential
and material element of the System and that Licensor and developers and
operators operating under the System consequently expend substantial time,
effort and expense in training management personnel for the development and
operation of their respective O'Charley's restaurants. Accordingly, Developer
and the Controlling Principals agree that if during the term of this Agreement,
Developer or any Controlling Principal shall designate or employ any individual
who is at the time or was within the preceding three (3) months employed in a
restaurant managerial position, a multi-restaurant supervisory position or home
office staff position (e.g., officer or director level personnel, management
information systems personnel or human resources and training personnel), by
Licensor or any of its Affiliates, including, but not limited to, individuals
employed by Licensor to work in its O'Charley's restaurants, or at Licensor's
home office, or employed in a restaurant managerial position by any other
developer or operator operating under the System (a "Covered Individual"), then
such former employer of such Covered Individual shall be entitled to
compensation for the reasonable costs and expenses, of whatever nature or kind,
incurred by such employer in connection with the training of such Covered
Individual. The parties hereto agree that such expenditures may be uncertain and
difficult to ascertain and, therefore, agree that the compensation specified
herein reasonably represents such expenditures and is not a penalty. The
employing Developer or Controlling Principal shall pay to the former employer an
amount equal to the salary of such Covered Individual for the six (6) month
period prior to the termination of his employment with such former employer (or
if the Covered Individual was employed less than six (6) months, that Covered
Individual's projected salary had the Covered Individual been employed for the
full six (6) months) for any restaurant level managerial personnel. For any
Covered Individual employed in a multi-restaurant supervisory or home office
staff position, the employing Developer or Controlling Principal shall pay to
the former employer an amount equal to the salary of such Covered Individual for
the twelve (12) month period immediately prior to the termination of his
employment with such former employer (or if the Covered Individual was employed
less than twelve (12) months, that Covered Individual's projected salary had the
Covered Individual been employed for the full twelve (12) months). Such amount
shall be paid by Developer, or the applicable Controlling Principal, as the case
may be, within thirty (30) days after written notice, unless otherwise agreed
with such former employer. The parties hereto expressly acknowledge and agree
that no current or former employee of Licensor, its Affiliates, Developer, or of
any other Entity operating under the System shall be a third party beneficiary
of this Agreement or any provision hereof. Notwithstanding the above, solely for
purposes of bringing an action to collect any payment due under this Section,
such former employer shall be a third-party beneficiary of this Section
VI(A)(3). Licensor hereby expressly disclaims any representations and warranties
regarding the performance of any employee or former employee of Licensor or its
Affiliates, or any developer or operator operating under the System, who is
designated or employed by Developer or any Controlling Principal in any
capacity, and Licensor shall not be liable for any losses, of any nature or
kind, incurred by Developer or any Controlling Principal in connection
therewith.
18
(4) Developer shall comply with all requirements of federal,
state and local laws, rules, regulations and orders.
(5) Developer shall obtain and maintain all appropriate
licenses, permits and certificates for the operation of the Restaurant,
including licenses and permits to sell alcoholic beverages in the Restaurant.
(6) Developer and the Controlling Principals shall allow
Licensor and its representatives to review any and all of Developer's and the
Controlling Principals' documents and other materials relating to their
financing arrangements or capital structure.
B. Developer and the Controlling Principals represent, warrant,
covenant and agree that they shall comply with all other requirements and
perform such other obligations as provided in this Agreement and the Manuals.
ARTICLE VII
DEFAULT AND TERMINATION
A. Developer shall be deemed to be materially in default under this
Agreement and all rights granted herein shall automatically terminate without
notice to Developer if:
(1) Developer becomes insolvent or makes a general assignment
for the benefit of creditors or files a voluntary petition under any section or
chapter of federal bankruptcy laws or under any similar law or statute of the
United States or any state thereof ("Bankruptcy Laws") or admits in writing its
inability to pay its debts when due;
(2) Developer is adjudicated bankrupt or insolvent in
proceedings filed against Developer under any section or chapter of any
Bankruptcy Law;
(3) a ▇▇▇▇ in equity or other proceeding for the appointment
of a receiver of Developer or other custodian for Developer's business or assets
is filed and consented to by Developer, or if a receiver or other custodian
(permanent or temporary) of Developer's assets or property, or any part thereof,
is appointed by any court of competent jurisdiction;
(4) proceedings for a composition with creditors under any
state or federal law are instituted by or against Developer;
(5) a final judgment against Developer remains unsatisfied or
of record for thirty (30) days or longer (unless supersedeas bond is filed);
(6) Developer is dissolved;
(7) execution is levied against Developer's business or
property;
(8) suit to foreclose any lien or mortgage against the
premises or equipment of any business operated hereunder or under any Operating
Agreement is instituted and not dismissed within thirty (30) days; or
(9) the real or personal property of any business operated
hereunder or under any Operating Agreement shall be sold after levy thereupon by
any sheriff, marshal or other government official.
B. Developer shall be deemed to be in material default and Licensor
may, at its option, terminate this Agreement and all rights granted hereunder,
without affording Developer
19
any opportunity to cure the default except as specifically provided below,
effective immediately upon notice to Developer, upon the occurrence of any of
the following events of default:
(1) Developer fails to comply with the Development Schedule
(or any extension, if any, thereof approved by Licensor in writing), or
Developer fails to develop a replacement Restaurant within any time period
agreed upon by the parties under Section III(B)(2);
(2) Developer fails to execute each Operating Agreement in
accordance with Section III(C) (or any extension thereof approved by Licensor in
writing);
(3) Developer or any of the Controlling Principals is
convicted of, or shall have entered a plea of nolo contendere to, a felony, a
crime involving moral turpitude or any other crime or offense that Licensor
believes is reasonably likely to have an adverse effect on the System, the
Proprietary Marks, the goodwill associated therewith or Licensor's interest
therein;
(4) a threat or danger to public health or safety results from
the construction, maintenance or operation of any Restaurant developed under
this Agreement;
(5) Developer fails to designate a qualified replacement
Operating Principal or designee appointed by Operating Principal within sixty
(60) days after any initial or successor Operating Principal or designee ceases
to serve as such, all as required under Section VI(A)(2)(e);
(6) Developer or any of the Controlling Principals breach any
of the representations warranties and covenants in Article VI;
(7) Developer or any of the Controlling Principals transfers
or attempts to transfer any rights or obligations under this Agreement, any
interest in Developer or the assets of Developer, without first obtaining
Licensor's written consent pursuant to Section VIII(B) or offering Licensor a
right of first refusal with respect to such transfer pursuant to Section
VIII(D);
(8) Developer or any of the Controlling Principals fails to
comply with the covenants in Article IX or fails to obtain execution of the
covenants and related agreements required under Article IX hereof within thirty
(30) days after being requested to do so by Licensor;
(9) an approved transfer upon death or Permanent Disability is
not effected within the time period and in the manner prescribed by Section
VIII(E);
(10) Developer or any of the Controlling Principals misuses or
makes any unauthorized use of the Proprietary Marks or otherwise materially
impairs the goodwill associated therewith or with the System or Licensor's
rights therein;
(11) Developer, the Controlling Principals or any of their
Affiliates fails, refuses or neglects promptly to pay when due any monetary
obligation owing to Licensor or any of its Affiliates under this Agreement, any
Operating Agreement or any other agreement (which shall include payments to
lenders where Licensor has guaranteed the underlying indebtedness) and does not
cure such default within five (5) days following notice from Licensor (or such
other applicable cure period contained in such other agreement, unless no cure
period is stated or such period is less than five (5) days, in which case the
five (5) day cure period shall apply);
20
(12) Developer, the Controlling Principals or any of their
Affiliates fails or refuses to comply with any term or condition of any sublease
or related agreement, between Licensor or its Affiliates and Developer or its
Affiliates, and does not cure such default within any notice and cure period
provided for in such sublease or related agreement following notice from
Licensor of such default (unless no cure period is specified in the sublease or
other agreement), in which case the notice and cure period in Section VII(C)
shall apply; or
(13) Developer or any of the Controlling Principals repeatedly
commits a material event of default under this Agreement, whether or not such
defaults are of the same or different nature and whether or not such defaults
have been cured by Developer after notice by Licensor.
C. Except as provided above in Sections VII(A) and VII(B), if Developer
fails to comply with any other term or condition imposed by this Agreement, any
Operating Agreement or any other development or operating agreement between
Developer and Licensor, as such may from time to time be amended, Licensor may
terminate this Agreement only by giving written notice of termination stating
the nature of such default to Developer at least thirty (30) days prior to the
effective date of termination; provided, however, that Developer may avoid
termination by immediately initiating a remedy to cure such default and curing
it to Licensor's satisfaction within the thirty (30) day period and by promptly
providing proof thereof to Licensor. Subject to Section VII(D), if any such
default is not cured within the specified time, or such longer period as
applicable law may require, Developer's rights under this Agreement shall
terminate without further notice to Developer effective immediately upon the
expiration of the thirty (30) day period or such longer period as applicable law
may require, unless Licensor gives Developer notice of Licensor's intent to
continue this Agreement.
D. Upon default by Developer under Sections VII(B) or VII(C), Licensor
has the option, in its sole discretion, in addition to exercising its option to
terminate this Agreement as provided in Sections VII(B) and (C), to do any one
or more of the following:
(1) terminate or modify any territorial rights granted to
Developer in Article I;
(2) reduce the area of such territorial rights;
(3) reduce the number of Restaurants which Developer may
establish pursuant to Section III(B)(1);
(4) accelerate the Development Schedule;
(5) with respect to Section VII(B)(1), permit Developer to
obtain an extension of the Development Schedule under Section III(B);
(6) terminate or modify any right granted to Developer in
Section I(B); or
(7) pursue any other remedy Licensor may have at law or in
equity; provided, however, that Licensor shall not be entitled to recover money
damages for lost revenues or profits solely because of a failure of Developer to
meet the Development Schedule set out herein so long as Developer shall
demonstrate that such failure has occurred despite the exercise of all
commercially reasonable efforts on Developer's part to meet such Development
Schedule.
E. (1) Upon the termination or expiration of this Agreement,
Developer shall have no right to establish or operate any Restaurant:
21
(a) for which an Operating Agreement has not been
executed by Licensor and delivered to Developer at the time of termination or
expiration, or
(b) with respect to which Developer has not satisfied
the prerequisites for obtaining licenses as described in Article IV whether or
not an Operating Agreement has been executed.
(2) If Licensor elects to terminate the territorial rights
granted to Developer in Article I or modify such territorial rights or reduce
the area of territorial rights as provided in Section VII(D) above, Developer
shall continue to develop Restaurants in accordance with the Development
Schedule or Supplementary Development Schedule, to the extent that the number of
Restaurants Developer is required to develop is reduced and/or the area in which
such Restaurants are required to be developed is reduced by Licensor pursuant to
Sections VII(D)(2) and (3).
(3) If Licensor exercises any of its rights in Section VII(D)
or if this Agreement otherwise expires or terminates, Licensor shall be entitled
to establish, and to license others to establish, Restaurants in the Territory
or in the portion thereof no longer part of the Territory or pursuant to any
other modification of Developer's territorial rights, except as may be otherwise
provided under any Operating Agreement which is then in effect between Licensor
and Developer.
F. Licensors exercise of any of its options under Section VII(D) shall
not, in the event of a default, constitute a waiver by Licensor to exercise its
option to terminate this Agreement at any time with respect to a subsequent
event of default of a similar or different nature.
G. No default under this Agreement shall constitute a default under any
Operating Agreement between the parties hereto, unless the default is also a
default under the terms of such Operating Agreement.
H. Upon default of Developer and the early termination of this
Agreement, Licensor shall have the right to purchase the assets of all of the
Restaurants opened pursuant to Operating Agreements executed under the terms of
this Agreement. The terms and conditions of the purchase transaction, including,
but not limited to, the purchase price for the assets of such Restaurants, shall
be determined in accordance with the provisions contained in the applicable
Operating Agreement permitting the Licensor to purchase, at its option, such
assets upon termination or expiration of the Operating Agreement.
I. No right or remedy herein conferred upon or reserved to Licensor is
exclusive of any other right or remedy provided or permitted by law or in
equity.
J. Upon termination or expiration of this Agreement, Developer and the
Controlling Principals shall comply with the restrictions on confidential
information and the covenants against competition contained in Article IX. Any
other person required to execute similar covenants pursuant to Article IX shall
also comply with such covenants.
K. Developer acknowledges and agrees that each of the obligations of
Developer and the Controlling Principals described in this Agreement is a
material and essential obligation of Developer, that non-performance of such
obligations will adversely and substantially effect the Licensor and the System,
and that the exercise by Licensor of the rights and remedies set forth herein is
appropriate and reasonable.
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L. Any alleged default by Licensor of this Agreement shall be deemed
waived unless: (1) Developer gives Licensor written notice of such alleged
default within thirty (30) days of its occurrence; and (2) Licensor fails to
initiate a remedy to such alleged default within sixty (60) days of having
received written notice thereof.
ARTICLE VIII
TRANSFER OF INTEREST
A. Licensor shall have the right to transfer or assign this Agreement
and all or any part of its rights or obligations herein to any person or Entity
without Developer's consent. Specifically, and without limitation to the
foregoing, Developer and the Controlling Principals expressly affirm and agree
that Licensor may sell its assets, the Proprietary Marks or the System to a
third party; may offer its securities privately or publicly; may merge,
spin-off, acquire other Entities, or be acquired by another Entity; may
undertake a refinancing, recapitalization, leveraged buyout or other economic or
financial restructuring; and, with regard to any or all of the above sales,
assignments and dispositions, Developer and the Controlling Principals expressly
and specifically waive any claims, demands or damages against Licensor arising
from or related to the transfer of the Proprietary Marks (or any variation
thereof) or its assets or the System (or any portion thereof) from Licensor to
any other party. Upon such sale, assignment or disposition, Developer further
agrees that Licensor shall have no further obligations arising out of or related
to this Agreement so long as such obligations are assumed by the transferee.
Nothing contained in this Agreement shall require Licensor to remain in the
business of operating or licensing the operation of O'Charley's restaurants or
other restaurant businesses or to offer any services or products, whether or not
bearing the Proprietary Marks, to Developer, if Licensor exercises its rights
hereunder to assign its rights in this Agreement.
B. (1) Developer and the Controlling Principals understand and
acknowledge that the rights and duties set forth in this Agreement are personal
to Developer and the Controlling Principals and that Licensor has granted such
rights in reliance on the business skill, financial capacity and personal
character of Developer and the Controlling Principals and with the expectation
that the duties and obligations contained in this Agreement will be performed by
Developer and the Controlling Principals signing this Agreement. Accordingly,
neither Developer nor any Controlling Principal, nor any successor or assign of
Developer or any Controlling Principal, shall sell, assign, transfer, convey,
give away, pledge, mortgage or otherwise dispose of or encumber any direct or
indirect interest in this Agreement, in Developer or the assets of Developer,
without the prior written consent of Licensor; provided, however, that
Licensor's prior written consent shall not be required for a transfer of less
than a five percent (5%) interest in a Publicly-Held Entity. Any purported
assignment or transfer, by operation of law or otherwise, made in violation of
this Agreement shall be null and void.
(2) If Developer wishes to transfer all or part of its
interest in this Agreement or if Developer or a Controlling Principal wishes to
transfer any ownership interest in, or assets of, Developer, transferor and the
proposed transferee shall apply to Licensor in writing for Licensor's consent,
which may be withheld in Licensor's sole discretion. Without limiting the
generality of the foregoing, Licensor may require that any or all of the
following conditions be met prior to its approval of the transfer:
23
(a) All of the accrued monetary obligations of
Developer and its Affiliates and all other outstanding obligations to Licensor
and its Affiliates arising under this Agreement or any Operating Agreement or
any other agreement shall have been satisfied in a timely manner and Developer
shall have satisfied all trade accounts and other debts, of any nature or kind,
in a timely manner.
(b) Developer and its Affiliates are not in default
of any provision of this Agreement, any amendment hereof or successor hereto, or
any Operating Agreement or any other agreement between Developer or its
Affiliates and Licensor or its Affiliates; and Developer shall have
substantially and timely complied with all the terms and conditions of such
agreements during the terms thereof.
(c) The transferor and its principals, as applicable,
shall have executed a general release, in a form satisfactory to Licensor, of
any and all claims against Licensor, and its Affiliates, and each of such
Entity's respective officers, directors, shareholders, partners, agents,
representatives, independent contractors and employees, in their corporate and
individual capacities, including, without limitation, claims arising under this
Agreement, any Operating Agreement and any other agreement between Developer and
Licensor or any of their Affiliates or under federal, state or local laws,
rules, and regulations or orders.
(d) The transferee shall enter into a written
agreement, in a form satisfactory to Licensor, assuming full, unconditional,
joint and several liability for and agreeing to perform from the date of the
transfer, all obligations, covenants and agreements of Developer in this
Agreement, and, if transferee is a corporation, limited liability company,
partnership or other Entity, transferee's shareholders, members, partners or
other investors, as applicable, shall also execute such agreement as
transferee's principals, and guarantee the performance of all such obligations,
covenants and agreements.
(e) The transferee shall demonstrate to Licensor's
satisfaction that transferee meets the criteria considered by Licensor when
reviewing a prospective developer's application for development rights,
including, but not limited to, Licensor's educational, managerial and business
standards, transferee's good moral character, business reputation and credit
rating, transferee's aptitude and ability to conduct the business contemplated
hereunder (as may be evidenced by prior related business experience or
otherwise), transferee's financial resources and capital for operation of the
business and the geographic proximity of other territories with respect to which
transferee has been granted development rights or of other O'Charley's
restaurants operated by transferee, if any.
(f) The transferee shall execute the standard form
development agreement then being offered to new System developers or a revised
form of this Agreement, as Licensor deems appropriate, and such other ancillary
agreements as Licensor may require, which agreements shall supersede this
Agreement and its ancillary documents in all respects and the terms of which
agreements may differ from the terms of this Agreement, and if the transferee is
a corporation, limited liability company, partnership or other Entity,
transferee's shareholders, members, partners or other investors, as applicable,
shall also execute such agreements as transferee's principals, and guarantee the
performance of all such obligations, covenants and agreements.
(g) The transferee, at its expense, shall renovate,
modernize and otherwise upgrade the Restaurant and, if applicable, any
Restaurant delivery vehicles to conform
24
to the then-current standards and specifications of the System, and shall
complete the upgrading and other requirements within the time period reasonably
specified by Licensor.
(h) The transferor shall remain liable for all of the
obligations to Licensor in connection with this Agreement incurred prior to the
effective date of the transfer and shall execute any and all instruments
reasonably requested by Licensor to evidence such liability.
(i) At the transferee's expense, the transferee, the
transferee's Operating Principal (or his authorized designee), and any other
applicable Restaurant personnel shall complete any training programs then in
effect for operators of O'Charley's restaurants upon such terms and conditions
as Licensor may reasonably require.
(j) Developer shall pay a transfer fee of Five
Thousand Dollars ($5,000), or such greater amount as is necessary, to reimburse
Licensor for its reasonable costs and expenses associated with reviewing the
application to transfer, including, without limitation, legal and accounting
fees.
(k) If transferee is a corporation, limited liability
company, partnership or other Entity, transferee shall make and will be bound by
any or all of the representations, warranties and covenants in Article VI as
Licensor requests. Transferee shall provide to Licensor evidence satisfactory to
Licensor that the terms of Article VI have been satisfied and are true and
correct on the date of transfer.
(l) Developer shall have completed development of the
Restaurants required to be developed during the first three (3) Development
Periods of the Development Schedule.
(3) Developer acknowledges and agrees that each condition
which must be met by the transferee is reasonable and necessary to ensure such
transferee's full performance of the obligations hereunder.
C. In the event the proposed transfer is to a corporation formed solely
for the convenience of ownership, Licensor's consent may be conditioned upon any
of the requirements in Section VIII(B)(2)(a), (b), (d), (h), (i) and (k). With
respect to a transfer to a corporation formed for the convenience of ownership,
Developer shall be the owner of all the voting stock or interest of the
corporation, and if Developer is owned by more than one individual, each such
individual shall have the same proportionate ownership interest in the
corporation as he had in Developer prior to the transfer.
D. (1) If Developer wishes to transfer all or part of its interest in
the assets of a Restaurant or this Agreement, or if Developer or a Controlling
Principal wishes to transfer any ownership interest in Developer pursuant to an
offer received from a third party to purchase such interest, then such proposed
seller shall promptly notify Licensor in writing of each such offer, shall
certify that such offer is bona fide and shall provide and shall certify in
writing as to the accuracy of such information and documentation relating to the
offer as Licensor may require. Licensor shall have the right and option,
exercisable within thirty (30) days after receipt of such written notification
and copies of all documentation requested by Licensor describing the terms of
such offer, to send written notice to the proposed seller that Licensor intends
to purchase the proposed seller's interest on the same terms and conditions
offered by the third party. In the event that Licensor elects to purchase the
proposed seller's interest, closing on such purchase
25
must occur within the later of sixty (60) days from the date of notice to the
proposed seller of the election to purchase by Licensor, sixty (60) days after
the date Licensor receives and obtains all necessary permits and approvals to
complete such purchase or such other date the parties mutually agree upon in
writing. Any material change in the terms of any offer prior to closing shall
constitute a new offer subject to the same right of first refusal by Licensor as
in the case of an initial offer. Failure of Licensor to exercise the option
afforded by this Section VIII(D) shall not constitute a waiver of any other
provision of this Agreement, including the consent provisions of Section VIII(B)
and all of the other requirements of this Article VIII relating to a proposed
transfer.
(2) If the offer from a third party provides for payment of
consideration other than cash or involves certain non-cash items or intangible
benefits, Licensor may elect to purchase the interest proposed to be sold for
the reasonable equivalent in cash of such non-cash item or intangible benefit
(the "Cash Equivalent"). If the parties cannot agree within thirty (30) days on
the reasonable equivalent in cash of the non-cash part of the offer, then the
Cash Equivalent will be determined by one (1) or more professional appraisers or
independent certified public accountants who are qualified by experience and
ability to appraise (each, a "Qualified Appraiser"), selected under the
procedures in this Section. If the Cash Equivalent is to be determined by
Qualified Appraisers, Licensor and Developer will each have the opportunity to
appoint, at their own expense, a Qualified Appraiser, within five (5) days
following the expiration of the thirty (30) day period within which Licensor and
Developer could not mutually agree on the Cash Equivalent. If either party shall
fail to appoint a Qualified Appraiser within this five (5) day period, the other
Qualified Appraiser shall unilaterally establish the Cash Equivalent by a
written opinion and the cost of such Qualified Appraiser shall be split between
the two parties equally. If both parties appoint Qualified Appraisers within
this five (5) day period, the two (2) Qualified Appraisers shall establish the
Cash Equivalent in a single written opinion agreed to by both of them. If the
two (2) Qualified Appraisers cannot agree on the Cash Equivalent within ten (10)
days of the appointment of the latter of them, the two (2) Qualified Appraisers
shall together appoint a third Qualified Appraiser whose written opinion shall
establish a Cash Equivalent between the Cash Equivalents established by the
first two (2) Qualified Appraisers. In the event of such appraisal, each party
shall bear its own legal and other costs. In the event that Licensor exercises
its right of first refusal herein provided, it shall have the right to set off
(i) all amounts due from Developer for the Qualified Appraisers' fees and
appraisal costs, and (ii) all amounts due from Developer or any of its
Affiliates, against any payment therefor.
E. (1) Upon the death of Developer (if Developer is a natural
person) or any Controlling Principal who is a natural person (the "Deceased"),
the executor, administrator or other personal representative of the Deceased
shall transfer such interest to a third party in accordance with the conditions
described in this Section VIII(E) within twelve (12) months after the death. If
no personal representative is designated or appointed or no probate proceedings
are instituted with respect to the estate of the Deceased, then the distributee
of such interest must be approved by Licensor. If the distributee is not
approved by Licensor, then the distributee shall transfer such interest to a
third party approved by Licensor within twelve (12) months after the death of
the Deceased.
(2) Upon the Permanent Disability of Developer (if Developer
is a natural person) or any Controlling Principal who is a natural person,
Licensor may, in its sole discretion,
26
require such interest to be transferred to a third party approved by Licensor
within six (6) months after notice to Developer of such Permanent Disability.
"Permanent Disability" shall mean any physical, emotional or mental injury,
illness or incapacity which would prevent a person from performing the
obligations set forth in this Agreement or in the guaranty made part of this
Agreement for at least ninety (90) consecutive days. Permanent Disability shall
be determined upon examination of the person by a licensed practicing physician
selected by Licensor; or, if the person refuses to submit to an examination,
then such person shall be automatically deemed permanently disabled as of the
date of such refusal for the purpose of this Section VIII(E). The costs of any
examination required by this Section shall be paid by Licensor.
(3) Upon the death or claim of Permanent Disability of
Developer or any Controlling Principal, Developer or a representative of
Developer, must promptly notify Licensor of such death or claim of Permanent
Disability within fifteen (15) days of its occurrence. Any transfer upon death
or Permanent Disability shall be subject to the same terms and conditions as
described in this Article VIII for any inter vivos transfer. Developer and each
Controlling Principal shall have the right to seek approval of a transfer of
their respective interest to a proposed successor prior to the death or claim of
Permanent Disability by Developer or the Controlling Principal, as applicable.
If Developer or any Controlling Principal, as applicable, desires to obtain
approval of any proposed successor in interest prior to the death or claim of
Permanent Disability, Developer or the Controlling Principal, as applicable,
shall submit to Licensor such information and documentation concerning such
proposed successor required by Licensor in the Manuals or other written
directives. Further, as a condition to approval, Licensor may, in its sole
discretion, require compliance with any of the terms and conditions described in
this Section for any inter vivos transfer.
F. Licensor's consent to a transfer of any interest in Developer or in
this Agreement described herein shall not constitute a waiver of any claims it
may have against the transferring party, nor shall it be deemed a waiver of
Licensor's right to demand exact compliance with any of the terms of this
Agreement by the transferee.
G. Securities of, or other Entity ownership interests in, Developer may
be offered to prospective investors, including existing investors, by private
offering or otherwise, only with the prior written consent of Licensor. All
materials required for such offering by federal or state law shall be submitted
to Licensor for a limited review, as discussed below prior to being filed with
any governmental agency; and any materials to be used in any exempt offering
shall be submitted to Licensor for such review prior to their use. No offering
by Developer shall imply (by use of the Proprietary Marks or otherwise) that
Licensor is participating in an underwriting, issuance or offering of
Developer's securities or other Entity ownership interests or the securities or
other Entity ownership interests of any subsidiary or Affiliate of Licensor; and
Licensor's review of any offering materials shall be limited solely to the
subject of the relationship between Developer and Licensor and their Affiliates.
Licensor may, at its option, require Developer's offering materials to contain a
written statement prescribed by Licensor concerning the limitations described in
the preceding sentence. Developer, its Principals and the other participants in
the offering must prior to the commencement of such offering, agree in writing
to fully indemnify Licensor, Licensor's Affiliates and each of such Entity's
respective officers, directors, shareholders, members, partners, agents,
representatives, independent contractors and employees in connection with the
offering. For each proposed offering, Developer shall reimburse Licensor for its
reasonable costs and expenses associated with reviewing the proposed
27
offering materials, including, without limitation, legal and accounting fees.
Developer shall give Licensor written notice at least ninety (90) days prior to
the date of commencement of any offering or other transaction covered by this
Section.
H. Developer and each of its Controlling Principals, as applicable, may
transfer, sell or assign their respective interests in Developer, by and among
themselves only with Licensor's prior written consent; provided, however, such
transfer, sale or assignment shall not result in a change in the Controlling
Interest in Developer. Licensor's consent may be conditioned on compliance with
Section VIII(B)(2)(a), (b), (d), (h), (i), (k) and (l). For the purpose of this
Agreement, "Controlling Interest" shall mean:
(a) if Developer is a corporation, that the
Controlling Principals, either individually or cumulatively, (i) directly or
indirectly own at least fifty-one percent (51%) of the shares of each class of
Developer's issued and outstanding capital stock and (ii) are entitled, under
its governing documents and under any agreements among the shareholders, to cast
a sufficient number of votes to elect a majority of the members of the board of
directors or to require such corporation to take or omit to take any action
which such corporation is required to take or omit to take under this Agreement;
(b) if Developer is a limited liability company, that
the Controlling Principals (i) own at least fifty-one percent (51%) of the
outstanding units of membership interest in the limited liability company, and
(ii) are entitled under its operating agreement to act on behalf of the limited
liability company without the approval or consent of any other member or be able
to cast a sufficient number of votes to require the limited liability company to
take or omit to take any action which the limited liability company is required
to take or omit to take under this Agreement; or
(c) if Developer is a partnership, that the
Controlling Principals (i) own at least a fifty-one percent (51 %) interest in
the operating profits and operating losses of the partnership as well as at
least a fifty-one percent (51%) ownership interest in the partnership (and at
least a fifty-one percent (51%) interest in the shares of each class of capital
stock or other ownership interest of any direct or indirect corporate or other
Entity general partner) and (ii) are entitled under its partnership agreement or
other Entity organizational documents or applicable law to act on behalf of the
partnership without the approval or consent of any other partner or owner or be
able to cast a sufficient number of votes to require the partnership or other
Entity to take or omit to take any action which the partnership or other Entity
is required to take or omit to take under this Agreement.
I. If any person holding an interest in Developer (other than Developer
or a Controlling Principal, which parties shall be subject to the provisions set
forth in Section VIII(B) above) transfers such interest, then Developer shall
promptly notify Licensor of such proposed transfer in writing and shall provide
such information relative thereto as Licensor may reasonably request prior to
such transfer. Such transferee must have good moral character a good business
reputation, an acceptable credit rating and may not be one of Licensor's
competitors. Such transferee will be a Developer's Principal and as such shall
execute a confidentiality and non-compete agreement in the form then required by
Licensor, which form shall be in substantially the same form attached hereto as
Attachment C (see Sections IX(B)(2) and IX(I)). Licensor also reserves the right
to designate the transferee as one of the Controlling Principals.
28
ARTICLE IX
COVENANTS
A. Developer and Operating Principal covenant that during the term of
this Agreement (except as otherwise approved in writing by Licensor) Developer
and Operating Principal (and any approved designee for Operating Principal)
shall devote their full time, energy and best efforts to the management and
operation of the development activities contemplated under this Agreement.
B. (1) Neither Developer nor any of the Controlling Principals shall,
during the term of this Agreement and thereafter, communicate or divulge to, or
use for the benefit of, any other person, persons or Entity and following the
termination or expiration of this Agreement, shall not use for their own
benefit, any confidential information, knowledge or know-how concerning the
methods of development and operation of the Restaurants which may be
communicated to Developer or any of the Controlling Principals or of which they
may be apprised under this Agreement. Developer and each of the Controlling
Principals shall disclose such confidential information only to the Controlling
Principals and Developer's personnel who must have access to it in connection
with their employment with Developer. Any and all information, knowledge,
know-how, techniques and any materials used in or related to the System which
Licensor provides to Developer in connection with this Agreement shall be deemed
confidential for the purposes of this Agreement. Neither Developer nor the
Controlling Principals shall at any time, without Licensor's prior written
consent, copy, duplicate, record or otherwise reproduce such materials or
information, in whole or in part, nor otherwise make the same available to any
unauthorized person. The covenants in this Section shall survive the expiration,
termination or transfer of this Agreement or any interest herein and shall be
perpetually binding upon Developer and each of the Controlling Principals;
provided, however, if the jurisdiction in which this covenant is sought to be
enforced does not allow perpetual binding, then the maximum amount of time
allowed under the applicable law.
(2) Developer shall require and obtain execution of covenants
similar to those set forth in Section IX(B)(1) from each of its Principals who
are not required to sign this Agreement as a Controlling Principal or as
Operating Principal. Such covenants shall be substantially in the form contained
in Attachment C. Developer shall provide Licensor with executed copies of all
such agreements ten (10) days after they are executed.
C. Developer and the Controlling Principals specifically acknowledge
that, pursuant to this Agreement, Developer and the Controlling Principals will
receive valuable training, trade secrets and confidential information which are
beyond the present skills and experience of Developer and the Controlling
Principals and Developer's managers and employees and that Developer has the
right and the obligation, arising from this Agreement, to develop the Territory
for the benefit of the System. Developer and the Controlling Principals
acknowledge that such specialized training, trade secrets and confidential
information provide a competitive advantage and will be valuable to them in the
development and operation of the Restaurants and that gaining access to such
specialized training, trade secrets and confidential information is, therefore,
a primary reason for entering into this Agreement. In consideration of such
specialized training, trade secrets, confidential information and rights,
Developer and the Controlling Principals covenant that, during the term of this
Agreement, except as otherwise approved in writing by Licensor, neither
Developer nor any of the Controlling Principals shall,
29
either directly or indirectly, for themselves, through, on behalf of or in
conjunction with any person, persons or Entity:
(1) divert, or attempt to divert, any business or customer of
the business described hereunder to any competitor, by direct or indirect
inducement or otherwise, or do or perform, directly or indirectly, any other act
injurious or prejudicial to the goodwill associated with the Proprietary Marks
and the System; or
(2) own, maintain, operate, engage in or have any financial or
beneficial interest in (including through any interest in an Entity that
conducts such activities), advise, assist or make loans to, any business that
operates a full service, varied menu, casual dining restaurant that features
freshly prepared items such as steaks, seafood, homemade baked goods and fresh
cut salads, and that serves alcoholic beverages through a full-service bar, and
which business is located within the United States, its territories or
commonwealths, or any other country, province, state or geographic area in which
Licensor has used, sought registration of or registered the same or similar
Proprietary Marks or operates or licenses others to operate a business under the
same or similar Proprietary Marks.
D. With respect to Developer, and for a continuous uninterrupted period
commencing upon the expiration or termination of (regardless of the cause for
termination), or transfer of all of the Controlling Interest in, this Agreement
(or with respect to each of the Controlling Principals, commencing upon the
earlier of: (i) the expiration, termination of, or transfer of all of the
Controlling Interest in this Agreement or (ii) the time such individual or
Entity ceases to satisfy the definition of Principal as described in this
Agreement), and continuing for two (2) years thereafter, except as otherwise
approved in writing by Licensor, neither Developer nor any of the Controlling
Principals shall, either directly or indirectly, for themselves or through, on
behalf of, or in conjunction with any person, persons or Entity:
(1) divert, or attempt to divert, any business or customer of
the business described hereunder to any competitor, by direct or indirect
inducement or otherwise, or do or perform, directly or indirectly, any other act
injurious or prejudicial to the goodwill associated with Licensor's Proprietary
Marks and the System;
(2) employ, or seek to employ, any person who is at that time,
or has been within the preceding six (6) months, employed by Licensor or any of
its Affiliates or by any other developer or operator of Licensor, or otherwise
directly or indirectly induce such person to leave that person's employment;
provided, however, that Developer may employ such person in a managerial
position with respect to Developer's operation of an O'Charley's restaurant
pursuant to the terms of the Operating Agreement applicable to such O'Charley's
restaurant; or
(3) own, maintain, operate, engage in or have any financial or
beneficial interest in (including through any interest in an Entity that
conducts such activities), advise, assist or make loans or provide guarantees
with respect to loans to, any business that operates a full service, varied
menu, casual dining restaurant that features freshly prepared items such as
steaks, seafood, homemade baked goods and fresh cut salads, and that serves
alcoholic beverages through a full-service bar, which business is, or is
intended to be, located within the Territory or within a fifteen (15) mile
radius of the location of any O'Charley's restaurant or food service facility in
existence or under construction (or where land has been purchased or a lease has
been executed for the construction of an O'Charley's restaurant or other food
service facility) as of the earlier of: (a) the expiration or termination of, or
the transfer of all of Developer's interest in, this
30
Agreement; or (b) the time the Controlling Principal ceases to satisfy the
definition of Developer's Principal, as applicable.
E. Sections IX(C)(2) and (D)(3) shall not apply to ownership of less
than a five percent (5%) beneficial interest in the outstanding equity
securities of any Publicly-Held Entity.
F. The parties acknowledge and agree that each of the covenants
contained herein are reasonable limitations as to time, geographical area and
scope of activity to be restrained and do not impose a greater restraint than is
necessary to protect the goodwill or other business interests of Licensor. The
parties agree that each of the above covenants shall be construed as independent
of any other covenant or provision of this Agreement. If all or any portion of a
covenant in this Article IX is held unreasonable or unenforceable by a court or
agency having valid jurisdiction in an unappealed or unappealable final decision
to which Licensor is a party, Developer and the Controlling Principals expressly
agree to be bound by any lesser covenant subsumed within the terms of such
covenant that imposes the maximum duty permitted by law as if the resulting
covenant were separately stated in and made a part of this Section.
G. Developer and the Controlling Principals understand and acknowledge
that Licensor shall have the right, in its sole discretion, to reduce the scope
of any covenant set forth in Section IX(B), or any portion thereof, without
their consent, effective immediately upon notice to Developer. Developer and the
Controlling Principals agree that they shall immediately comply with any
covenant as so modified, which shall be fully enforceable notwithstanding the
provisions of Section XV(A).
H. Developer and the Controlling Principals expressly agree that the
existence of any claims they may have against Licensor whether or not arising
from this Agreement, shall not constitute a defense to the enforcement by
Licensor of the covenants in this Article IX. Developer and the Controlling
Principals agree to pay all costs and expenses (including reasonable attorneys'
fees) incurred by Licensor in connection with the enforcement of this Section.
I. Developer shall require and obtain the execution of covenants
similar to those set forth in Sections IX(C) and (D) (including covenants
applicable upon the termination of a person's employment with Developer) from
each of Principal who is not required to sign this Agreement as a Controlling
Principal. Such covenants shall be substantially in the form set forth in
Attachment C. Licensor reserves the right, in its sole discretion, to decrease
the period of time or geographic scope of the non-competition covenant set forth
in Attachment C or eliminate such non-competition covenant altogether for any
party that is required to execute such agreement under this Article IX.
J. Developer and the Controlling Principals acknowledge that a
violation of this Section would result in irreparable injury to Licensor for
which no adequate remedy at law may be available, and Developer and the
Controlling Principals accordingly consent to the issuance of an injunction
prohibiting any conduct by Developer or the Controlling Principals in violation
of the terms of this Section. Developer and the Controlling Principals agree to
pay all court costs and reasonable legal fees incurred by Licensor in obtaining
specific performance, injunctive relief or any other remedy available to
Licensor for any violation of the requirements of this Section.
31
K. Notwithstanding anything else in this Article IX to the contrary, if
there is a state specific non-competition and/or non-solicitation addendum
attached to this Agreement, the terms of such addendum shall supersede the terms
of this Article IX to the extent they are inconsistent with one another.
ARTICLE X
INDEPENDENT CONTRACTOR AND INDEMNIFICATION
A. The parties acknowledge and agree that this Agreement does not
create a fiduciary relationship between them, that Developer shall be an
independent contractor and that nothing in this Agreement is intended to
constitute either party an agent, legal representative, subsidiary, Affiliate,
joint venturer, partner, employee, joint employer or servant of the other for
any purpose.
B. During the term of this Agreement, Developer shall hold itself out
to the public as an independent contractor conducting its development operations
pursuant to development rights granted by Licensor. Developer agrees to take
such action as shall be necessary to that end, including, without limitation,
exhibiting a notice of that fact in a conspicuous place in any Restaurant
established under any Operating Agreement for the purposes hereunder, the
content and form of which Licensor reserves the right to specify in writing.
C. Developer understands and agrees that nothing in this Agreement
authorizes Developer or any of the Controlling Principals to make any contract,
agreement, warranty or representation on Licensor's behalf, or to incur any debt
or other obligation in Licensor's name and that Licensor shall in no event
assume liability for, or be deemed liable under this Agreement as a result of
any such action or for any act or omission of Developer or any of the
Controlling Principals, or any claim or judgment arising therefrom.
D. (1) Developer and each of the Controlling Principals shall indemnify
and hold harmless Licensor and its Affiliates and their officers, directors,
shareholders, employees, managers, members, agents and representatives from any
and all claims, demands, suits, proceedings, fines, losses, liabilities damages,
costs and expenses (including reasonable attorneys' fees) suffered or incurred,
directly or indirectly, by any one or more of them (collectively, "Damages") as
a result of (a) any breach or other failure by Developer, Operating Principal or
any Controlling Principal to perform its or his obligations hereunder or under
any other instrument or agreement executed in connection herewith, or (b) any
other action or inaction by Developer, Operating Principal, any Controlling
Principal or any other person resulting from or in connection with the operation
of any Restaurant; provided, however, that neither Developer, Operating
Principal nor any Controlling Principal shall be liable for Damages resulting
from Licensor's or its Affiliates' gross negligence or willful misconduct.
(2) Developer and each of the Controlling Principals agree to give
Licensor immediate notice of any such action, suit, proceeding, claim, demand,
inquiry or investigation. Licensor shall have the option, in its sole
discretion, to defend any action seeking Damages as a result of any action or
inaction by Developer or any other person resulting from or in connection with
the operation of the Restaurant or to allow Developer to defend such action with
counsel satisfactory to Licensor.
32
(3) Developer and the Controlling Principals expressly agree
that the terms of this Section X(D) shall survive the termination, expiration or
transfer of this Agreement or any interest herein.
ARTICLE XI
APPROVALS
A. Whenever this Agreement requires the prior approval or consent of
Licensor, Developer shall make a timely written request to Licensor and such
approval or consent shall be obtained in writing.
B. Licensor makes no warranties or guarantees upon which Developer may
rely and assumes no liability or obligation to Developer or any third party to
which it would not otherwise be subject, by providing any waiver, approval,
advice, consent or suggestion to Developer in connection with this Agreement or
the construction of restaurants, or by reason of any neglect, delay or denial of
any request therefor.
ARTICLE XII
NON-WAIVER AND REMEDIES
A. No delay, waiver, omission or forbearance on the part of Licensor to
exercise any right, option, duty or power arising out of any breach or default
by Developer or the Controlling Principals under this Agreement shall constitute
a waiver by Licensor to enforce any such right, option, duty or power against
Developer or the Controlling Principals, or as to a subsequent breach or default
by Developer or the Controlling Principals. Acceptance by Licensor of any
payments due to it hereunder subsequent to the time at which such payments are
due shall not be deemed to be a waiver by Licensor of any preceding breach by
Developer or the Controlling Principals of any terms, provisions, covenants or
conditions of this Agreement.
B. All rights and remedies of the parties to this Agreement shall be
cumulative and not alternative, in addition to and not exclusive of any other
rights or remedies which are provided for herein or which may be available at
law or in equity in case of any breach, failure or default or threatened breach,
failure or default of any term, provision or condition of this Agreement or any
other agreement between Developer, or its Affiliates, and Licensor or its
Affiliates. The rights and remedies of the parties to this Agreement shall be
continuing and shall not be exhausted by any one or more uses thereof and may be
exercised at any time or from time to time as often as may be expedient. Any
option or election to enforce any such right or remedy may be exercised or taken
at any time and from time to time. The expiration, earlier termination or
exercise of Licensor's rights pursuant to Article VII of this Agreement shall
not discharge or release Developer or any of the Controlling Principals from any
liability or obligation then accrued, or any liability or obligation continuing
beyond, or arising out of, the expiration, the earlier termination or the
exercise of such rights under this Agreement. Additionally, Developer and the
Controlling Principals shall pay all court costs and attorneys' fees incurred by
Licensor in obtaining any remedy available to Licensor for any violation of this
Agreement.
33
ARTICLE XIII
NOTICES
All notices and other communications required or permitted to be given
hereunder shall be deemed given when delivered in person, by overnight courier
service, facsimile transmission or mailed by registered or certified mail
addressed to the recipient at the address set forth below, unless that party
shall have given written notice of change of address to the sending party, in
which event the new address so specified shall be used.
Notices to Licensor: O'Charley's Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Director of Franchising
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Notices to Developer and
the Controlling Principals: c/o Meritage Hospitality Group Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
ARTICLE XIV
SEVERABILITY AND CONSTRUCTION
A. Except as expressly provided to the contrary herein, each portion,
section, part, term and provision of this Agreement shall be considered
severable. If for any reason any portion, section, part, term or provision is
determined to be invalid and contrary to, or in conflict with, any existing or
future law or regulation by a court or agency having valid jurisdiction, this
shall not impair the operation of, or have any other effect upon, the other
portions, sections, parts, terms or provisions of this Agreement that may remain
otherwise intelligible, and the latter shall continue to be given full force and
effect and bind the parties. The invalid portions, sections, parts, terms or
provisions shall be deemed not to be part of this Agreement and there shall be
automatically added such portion, section, part, term or provision as similar as
possible to that which was severed which shall be valid and not contrary to or
in conflict with any law or regulation.
B. Except as expressly provided to the contrary herein, nothing in this
Agreement is intended, nor shall be deemed to, confer upon any person or legal
Entity other than Developer and Licensor, Licensor's officers, directors and
personnel and such of Developers and Licensors respective successors and assigns
as may be contemplated (and, as to Developer, authorized by Article VIII), any
rights or remedies under or as a result of this Agreement.
C. All captions in this Agreement are intended solely for the
convenience of the parties and shall not affect the meaning or construction of
any provision of this Agreement.
D. All references to the masculine, neuter or singular shall be
construed to include the masculine, feminine, neuter or plural, where
applicable. Without limiting the obligations individually undertaken by the
Controlling Principals under this Agreement, all
34
acknowledgments, promises, covenants, agreements and obligations made or
undertaken by Developer in this Agreement shall be deemed, jointly and
severally, undertaken by all of the Controlling Principals.
E. The term "Principals" shall mean, collectively and individually,
Developer's spouse, if Developer is an individual; all officers and directors of
Developer (including the officers and directors of any general partner of
Developer) whom Licensor designates as Principals and all holders of an
ownership interest in Developer and of any Entity directly or indirectly
controlling Developer, and any other person or Entity controlling, controlled by
or under common control with Developer. Each Principal as of the date of this
Agreement is listed on Attachment D.
F. For purposes of this Agreement, the term "Publicly-Held Entity"
means any Entity with a class of securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended, or an Entity subject to the
requirements of Section 15(d) of such Act. Further, for purposes of this
Agreement, an "Affiliate" of a person or Entity is any person or Entity that is
controlled by, controlling or under common control with such person or Entity.
G. This Agreement may be executed in counterparts and each copy so
executed shall be deemed an original.
H. This Agreement shall not become effective until signed by an
authorized officer of Licensor.
I. The word "including" when used herein shall mean "including without
limitation."
ARTICLE XV
ENTIRE AGREEMENT; APPLICABLE LAW
A. This Agreement, the documents referred to herein and the Attachments
hereto, constitute the entire, full and complete agreement between Licensor,
Developer and the Controlling Principals concerning the subject matter hereof
and shall supersede all prior related agreements between Licensor, Developer and
the Controlling Principals. Except for those permitted to be made unilaterally
by Licensor hereunder, no amendment, change or variance from this Agreement
shall be binding on either party unless mutually agreed to by the parties and
executed by' their authorized officers or agents in writing.
B. Developer and the Controlling Principals hereby irrevocably submit
themselves to the jurisdiction of the state and the federal district courts
located in the state, county or judicial district in which the Licensor's
principal place of business is located at the time such proceeding is commenced.
Developer and the Controlling Principals hereby waive all questions of personal
jurisdiction at the time such proceeding is commenced for the purpose of
carrying out this provision. Developer and the Controlling Principals hereby
agree that service of process may be made upon any of them in any proceeding
relating to or arising out of this Agreement or the relationship created by this
Agreement by any means allowed by applicable state or federal law. Developer and
the Controlling Principals further agree that venue for any proceeding relating
to or arising out of this Agreement shall be the county or judicial district in
which Licensor's principal place of business is located at the time such
proceeding is commenced; provided, however, with respect to any action (1) for
monies owed, (2) for injunctive or other extraordinary
35
relief or (3) involving possession or disposition of, or other relief relating
to, the Restaurant premises, Licensor may bring such action in any state or
federal district court which has jurisdiction. With respect to all claims,
controversies, disputes or actions related to this Agreement or the relationship
created thereby. This Agreement and any such related claims, controversies,
disputes or actions, shall be governed, enforced and interpreted under the law
of the state where Licensor's principal place of business is located at the time
any claim, controversy, dispute, or action (without regard to choice of law
rules) arose.
C. Developer, the Controlling Principals and Licensor acknowledge that
each party's agreement regarding applicable state law and forum set forth in
Section XV(B) above provides each of the parties with the mutual benefit of
uniform interpretation of this Agreement and any dispute arising out of this
Agreement or the parties' relationship created by this Agreement. Each of
Developer, the Controlling Principals and Licensor further acknowledges the
receipt and sufficiency of mutual consideration for such benefit, and that each
party's agreement regarding applicable state law and choice of forum have been
negotiated in good faith and are part of the benefit of the bargain reflected by
this Agreement.
D. Developer, the Controlling Principals and Licensor acknowledge that
the execution of this Agreement and acceptance of the terms by the parties
occurred at Licensor's principal place of business, and further acknowledge that
the performance of certain obligations of Developer arising under this
Agreement, including, but not limited to, the payment of monies due hereunder,
shall occur where Licensor's principal place of business is located at the time
such obligation is due.
E. Without limiting any of the foregoing, Developer and each of the
Controlling Principals acknowledge and agree that Licensor has the right, at any
time, to create a dispute resolution program and related specifications,
standards, procedures and rules for the implementation thereof to be
administered by Licensor or its designees for the benefit of all developers and
developers conducting business under the System. The standards, specifications,
procedures and rules for such dispute resolution program shall be made part of
the Manuals, and Developer and the Controlling Principals shall comply with all
such standards, specifications, procedures and rules in seeking resolution of
any claims, controversies or disputes with or involving Licensor or other
developers or operators, if applicable under the program. If Licensor, in its
sole discretion, makes such dispute resolution program mandatory, then
Developer, the Controlling Principals and Licensor hereby agree to submit any
claims, controversies or disputes arising out of or relating to this Agreement
or the relationship created by this Agreement for resolution in accordance with
such dispute resolution program, or if such claim, controversy or dispute
relates to another developer or operator, Developer and the Controlling
Principals agree to participate in the program and submit any such claims,
controversies or disputes in accordance with the program's standards,
specifications, procedures and rules, prior to seeking resolution of such claim
by any other judicial or legally available means.
F. Developer and the Controlling Principals hereby waive, to the
fullest extent permitted by law, any right to or claim of any punitive,
exemplary, incidental, indirect, special, consequential or other damages
(including, without limitation, loss of profits) against Licensor, its
Affiliates, and their respective officers, directors, shareholders, members,
partners, agents, representatives, independent contractors, servants and
employees, in their corporate and individual capacities, arising out of any
cause whatsoever (whether such cause be based in
36
contract, negligence, strict liability, other tort or otherwise) and agree that
in the event of a dispute, Developer and the Controlling Principals shall be
limited to the recovery of any actual damages sustained by them. If any other
term of this Agreement is found or determined to be unconscionable or
unenforceable for any reason, the foregoing provisions of waiver by agreement of
punitive, exemplary, incidental, indirect, special, consequential or other
damages (including, without limitation, loss of profits) shall continue in full
force and effect.
G. Licensor, Developer and the Controlling Principals hereby agree that
no form of proceeding permitted hereby will be maintained by any party to
enforce any liability or obligation of the other party, whether arising from
this Agreement or otherwise, unless brought before the expiration of the later
of: (i) one (1) year after the date of discovery of the facts resulting in such
liability or obligation; or (ii) two (2) years after the date of the first act
or omission giving rise to the alleged liability or obligation, except that
where state or federal law mandate or make possible by notice or otherwise a
shorter period, such shorter period shall apply.
H. Any obligation of Developer or the Controlling Principals that
contemplates performance of such obligation after termination or expiration of
this Agreement or the transfer of any interest of Developer or the Controlling
Principals therein, shall be deemed to survive such termination, expiration or
transfer, including the provisions of this Article XV.
I. Developer, the Controlling Principals and Licensor acknowledge that
various provisions of this Agreement specify certain matters that are within the
discretion or judgment of Licensor or are otherwise to be determined
unilaterally by Licensor. If the exercise of Licensor's discretion or judgment
as to any such matter is subsequently challenged, the parties to this Agreement
expressly direct the trier of fact that Licensor's reliance on a business reason
in the exercise of its discretion or judgment is to be viewed as a reasonable
and proper exercise of such discretion or judgment, without regard to whether
other reasons for its decision may exist and without regard to whether the trier
of fact would independently accord the same weight to the business reason.
ARTICLE XVI
ACKNOWLEDGMENTS
A. Developer acknowledges that it has conducted an independent
investigation of the business venture contemplated by this Agreement and
recognizes that the success of this business venture involves substantial
business risks and will largely depend upon the ability of Developer. Licensor
expressly disclaims making, and Developer acknowledges that it has not received
or relied on, any warranty or guarantee, express or implied, as to the potential
volume, profits or success of the business venture contemplated by this
Agreement.
B. Developer acknowledges that Developer has received, read and
understands this Agreement and the related Attachments and Agreements and that
Licensor has afforded Developer sufficient time and opportunity to consult with
advisors selected by Developer about the potential benefits and risks of
entering into this Agreement.
C. Developer acknowledges that it received a complete copy of this
Agreement and all related Attachments and Agreements at least five (5) business
days prior to the date on which this Agreement was executed. Developer further
acknowledges that it has received the disclosure document required by the Trade
Regulation Rule of the Federal Trade Commission
37
entitled "Disclosure Requirements and Prohibitions Concerning Franchising and
Business Opportunity Ventures" at least ten (10) business days prior to the date
on which this Agreement was executed.
(remainder of page intentionally left blank)
38
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement on the day and year first above written.
LICENSOR:
O'CHARLEY'S INC.,
a Tennessee corporation
By:_________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Director of Franchising
DEVELOPER:
OCM DEVELOPMENT, LLC,
a Michigan limited liability company
By:_________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.*
Chief Executive Officer
CONTROLLING PRINCIPAL:
MERITAGE HOSPITALITY GROUP, INC.,
a Michigan corporation
By:_________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Chief Executive Officer
* Denotes individual who is Developer's Operating Principal
39
ATTACHMENT A
TO DEVELOPMENT AGREEMENT
O'CHARLEY'S INC.
OPERATING AGREEMENT
(See Exhibit C of Offering Circular)
A-1
ATTACHMENT B
TO DEVELOPMENT AGREEMENT
LEASE RIDER
This Lease Rider is made and entered into this ____ day of
____________, 20___ by and between O'CHARLEY'S INC., a Tennessee corporation
("Licensor"), _________________ ("Operator") and
____________________("Landlord").
WHEREAS, Licensor and Operator are parties to that certain Development
Agreement dated as of _____________, 20___ ("Development Agreement");
WHEREAS, Operator and Landlord desire to enter into a lease (the
"Lease") pursuant to which Operator will occupy the premises located at
___________________________________ (the "Premises") for a full-service
O'Charley's restaurant (the "Restaurant") licensed under the Development
Agreement and an Operating Agreement to be executed between Licensor and
Operator prior to the opening of the Restaurant (the "Operating Agreement"); and
WHEREAS, as a condition to entering into the Lease, the Operator is
required under the Operating Agreement to execute this Lease Rider along with
the Landlord and Licensor;
NOW, THEREFORE, in consideration of the mutual undertakings and
commitments set forth herein, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
(1) During the term of the Operating Agreement, the Premises shall be
used only for the operation of the Restaurant.
(2) Landlord consents to Operator's use of such proprietary marks
("Proprietary Marks") and signs, neons, interior and exterior decor items, color
schemes, plans, specifications and related components of the O'Charley's
restaurant system ("System") as Licensor has prescribed, and may in the future
prescribe, for the Restaurant.
(3) Landlord agrees to send Licensor copies of any and all letters and
notices sent to Operator pertaining to the Lease and the Premises at the same
time that such letters and notices are sent to Operator.
(4) Licensor shall have the right to enter the Premises to make any
modification or alteration necessary to protect the O'Charley's Restaurant, the
System and Proprietary Marks or to cure any default under the Operating
Agreement or any development agreement entered into between Licensor and
Operator or under the Lease, without being guilty of trespass or any other crime
or tort.
(5) In the event of Operator's default under the terms of the Lease,
Licensor may, but is not required, to cure the default and may assume the lease
in Licensor's name. Licensor shall make this determination within thirty (30)
days after Licensor receives notice of the default. If Licensor elects to cure
the default, Licensor shall cure the default within thirty (30) days of such
B-1
election or, if the default cannot be reasonably cured within such thirty (30)
day period, then Licensor shall commence and proceed to cure the default within
such time as is reasonably necessary to cure the default. If Licensor also
elects to assume the Lease, Landlord agrees to recognize Licensor as the Tenant
under the Lease and Operator shall no longer have any rights thereunder.
(6) Operator shall be permitted to assign the Lease to Licensor or to
Licensor's assignees upon the expiration or earlier termination of the Operating
Agreement and the Landlord hereby consents to such assignment and agrees not to
impose or assess any assignment fee or similar charge or increase or accelerate
rent under the Lease in connection with such assignment, or require Licensor to
pay any past due rent or other financial obligation of Operator to Landlord, it
being understood that Landlord shall look solely to the Operator for any rents
or other financial obligations owed to Landlord prior to such assignment.
Landlord and Operator acknowledge that Licensor is not a party to the Lease and
shall have no liability under the Lease, unless and until the Lease is assigned
to, and assumed by, Licensor.
(7) Except for the Operator's obligations to Landlord for rents and
other financial obligations accrued prior to the assignment of the Lease, in the
event of such assignment, Licensor or any assignee designated by Licensor will
agree to assume from the date of assignment all obligations of Operator
remaining under the Lease, and in such event Licensor or any affiliate shall
assume Operator's occupancy rights, Operator's rights under any renewal or
purchase options, and the right to sublease the Premises, for the remainder of
the term of the Lease including any applicable renewal periods.
(8) Notwithstanding anything contained in this Lease Rider and in the
Lease, Licensor is expressly authorized, without the consent of the Landlord, to
sublet the Leased Premises to an authorized franchisee, provided such subletting
is specifically subject to the terms of this Lease and further provided the
franchisee expressly assumes all obligations of the Lease. Licensor agrees to
notify Landlord as to the name of the franchisee within then (10) days after
such subletting.
(9) Operator shall not assign the Lease or renew or extend the term
thereof without the prior written consent of Licensor.
(10) Landlord and Operator shall not amend or otherwise modify the
Lease in any manner that could materially affect any of the foregoing
requirements without the prior written consent of Licensor.
(11) The terms of this Lease Rider will supersede any conflicting terms
of the Lease.
[remainder of page intentionally left blank]
B-2
IN WITNESS WHEREOF, the parties have executed this Lease Rider as of
the date first above written.
O'CHARLEY'S INC.
a Tennessee corporation
By:_________________________________________
Name: ___________________________________
Title: __________________________________
OPERATOR:
By:_________________________________________
Name: ___________________________________
Title: __________________________________
LANDLORD:
By:_________________________________________
Name: ___________________________________
Title: __________________________________
B-3
ATTACHMENT C
TO DEVELOPMENT AGREEMENT
CONFIDENTIALITY AND NON-COMPETE AGREEMENT
This Agreement is made and entered into this _____ day of December,
2003, between O'Charley's Inc., a Tennessee corporation ("Licensor"), OCM
Development, LLC, a Michigan limited liability company d/b/a O'Charley's
Development Company of Michigan ("Developer"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
("Covenantor").
RECITALS:
WHEREAS, Licensor, as a result of the expenditure of time, skill,
effort and money, has developed and owns the rights to develop and operate a
unique system (the "System") of full service varied menu casual dining
restaurants ("Restaurants") which feature freshly prepared items such as
hand-cut and aged steaks, fresh chicken, seafood, homemade yeast rolls and
fresh-cut salads with special recipe dressings and which serve alcoholic
beverages through a full-service bar all under the trademark O'Charley's(R);
WHEREAS, the System includes, but is not limited to, certain trade
names, service marks, trademarks, symbols, logos, emblems and indicia of origin,
including, but not limited to, the ▇▇▇▇ ▇'▇▇▇▇▇▇▇'▇(R) and such other trade
names, service marks, trademarks, symbols, logos, emblems and indicia of origin
as Licensor may develop in the future to identify for the public the source of
services and products marketed under such marks ("Marks") and under the System;
WHEREAS, the Marks represent the System's high standards of quality,
appearance and service; distinctive exterior and interior design, decor, color
scheme and furnishings; special recipes and menu items; uniform standards,
specifications and procedures for operations; quality and uniformity of products
and services offered; procedures for inventory and management and financial
control; training and assistance; and advertising and promotional programs; all
of which may be changed, improved and further developed by Licensor from time to
time and are used by Licensor in connection with the operation of the System
("Trade Secrets");
WHEREAS, the Marks and Trade Secrets provide economic advantages to
Licensor and are not generally known to, and are not readily ascertainable by
proper means by, Licensor's competitors who could obtain economic value from
knowledge and use of the Marks and Trade Secrets;
WHEREAS, Licensor has taken and intends to take all reasonable steps to
maintain the confidentiality and secrecy of the Trade Secrets;
WHEREAS, Licensor has granted Developer the limited right to develop
Restaurants using the System, the Marks and the Trade Secrets for the period
defined in the development agreement made and entered into as of December _____,
2003 ("Development Agreement"), by and among Licensor, Developer and Developer's
Controlling Principals;
C-1
WHEREAS, Licensor and Developer have agreed in the Development
Agreement on the importance to Licensor and to Developer and other licensed
users of the System of restricting the use, access and dissemination of the
Trade Secrets;
WHEREAS, it will be necessary for certain employees, agents,
independent contractors, officers, directors and interest holders of Developer,
or any Entity having an interest in Developer ("Covenantor") to have access to
and to use some or all of the Trade Secrets in the management and operation of
Developer's business using the System;
WHEREAS, Developer has agreed to obtain from those Covenantors prior
written agreements protecting the Trade Secrets and the System against unfair
competition;
WHEREAS, Covenantor wishes to remain with, to become employed by or
associated with Developer;
WHEREAS, Covenantor wishes and needs to receive and use the Trade
Secrets in the course of Covenantor's employment or association in order to
effectively perform Covenantor's services for Developer; and
WHEREAS, Covenantor acknowledges that receipt of and the right to use
the Trade Secrets constitutes independent valuable consideration for the
representations, promises and covenants made by Covenantor herein.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, and other good and valuable consideration, the
receipt and sufficiency are hereby acknowledged, the parties intending to be
legally bound hereby agree as follows:
1. Confidentiality Agreement
1.1 Licensor and/or Developer may disclose to Covenantor some or all of
the Trade Secrets relating to the System. All information and materials,
including, without limitation, any manuals, drawings, specifications, techniques
and compilations of data which Licensor provides to Developer and/or Covenantor
shall be deemed confidential Trade Secrets for the purposes of this Agreement.
1.2 Covenantor shall receive the Trade Secrets in confidence and shall,
at all times, maintain them in confidence, and use them only in the course of
Covenantor's employment by or association with Developer and then only in
connection with the development and/or operation by Developer of Restaurants
using the System for so long as Developer is licensed by Licensor to use the
System.
1.3 Covenantor shall not at any time make copies of any documents or
compilations containing some or all of the Trade Secrets without Licensor's
prior written consent.
1.4 Covenantor shall not at any time disclose or permit the disclosure
of the Trade Secrets except to other employees of Developer and then only to the
limited extent necessary to train or assist other employees of Developer in the
development or operation of a Restaurant using the System.
C-2
1.5 Covenantor shall immediately surrender any material containing some
or all of Licensor's Trade Secrets to Licensor, upon request, or upon
termination of employment by or association with Developer, or upon conclusion
of the use for which such information or material may have been furnished to
Covenantor.
1.6 Covenantor shall not at any time, directly or indirectly, do any
act or omit to do any act that would or would likely be injurious or prejudicial
to the goodwill associated with the Trade Secrets and the System.
1.7 All manuals are loaned by Licensor to Developer for limited
purposes only and remain the property of Licensor and may not be reproduced, in
whole or in part, without Licensor's prior written consent.
2. Covenants Not to Compete
2.1 In order to protect the goodwill and unique qualities of the System
and the confidentiality and value of the Trade Secrets, and in consideration for
the disclosure to Covenantor of the Trade Secrets, Covenantor further agrees and
covenants that while employed by Developer Covenantor will not:
a. Divert, or attempt to divert, directly or indirectly, any
business, business opportunity or customer of the Restaurants to any competitor.
b. Employ, or seek to employ, any person who is at the time
(or has been within the preceding six (6) months) employed by Licensor, or any
of its Affiliates, or any operator or developer of Licensor, or otherwise
directly or indirectly induce such person to leave that person's employment,
except as may occur in connection with Developer's employment of such person if
permitted under the Development Agreement.
c. Except with respect to Restaurants described in the
Development Agreement and other restaurants operated under operating agreements
between Developer and its Affiliates, and Licensor or its Affiliates, directly
or indirectly, for Covenantor or through, on behalf of, or in conjunction with
any person, persons, partnership, corporation, limited liability company,
association, trust, unincorporated association, joint venture or other Entity,
without the prior written consent of Licensor, own, maintain, operate, engage in
or have any financial or beneficial interest in (including any interest in
corporations, partnerships, limited liability companies, associations, trusts,
unincorporated associations, joint ventures or other entities), advise, assist
or make loans to, any business that operates a full service, varied menu, casual
dining restaurant that features freshly prepared items such as steaks, seafood,
homemade baked goods and fresh cut salads, and that serves alcoholic beverages
through a full-service bar, and which business is located within the United
States, its territories or commonwealths, or any other country, province, state
or geographic area in which Licensor has used, sought registration of or
registered the same or similar Marks or operates or licenses others to operate a
business under the same or similar Marks.
2.2 In further consideration for the disclosure to Covenantor of the
Trade Secrets and to protect the uniqueness of the System, Covenantor agrees and
covenants that for one (1) year following the earlier of the expiration,
termination or transfer of all of Developer's interest in the
C-3
Development Agreement or the termination of Covenantor's employment by or
association with Developer, Covenantor will not without the prior written
consent of Licensor:
a. Divert or attempt to divert, directly or indirectly, any
business, business opportunity or customer of the Restaurants to any competitor.
b. Employ or seek to employ any person who is at the time (or
has been within the preceding six (6) months) employed by Licensor, or any of
its Affiliates, or any operator or developer of Licensor, or otherwise directly
or indirectly induce such persons to leave that person's employment.
c. Except with respect to other restaurants operated under
operating agreements between Developer and its Affiliates, and Licensor or its
Affiliates, directly or indirectly, for Covenantor or through, on behalf of or
in conjunction with any person, persons, partnership, corporation, limited
liability company, association, trust, unincorporated association, joint venture
or other Entity own, maintain, operate, engage in or have any financial or
beneficial interest in (including any interest in corporations, partnerships,
limited liability companies, associations, trusts, unincorporated associations,
joint ventures or other entities), advise, assist or make loans to, any business
that operates a full service, varied menu, casual dining restaurant that
features freshly prepared items such as steaks, seafood, homemade baked goods
and fresh cut salads, and that serves alcoholic beverages through a full-service
bar, which business is, or is intended to be, located within the Territory, as
such term is defined in the Development Agreement (and as described in an
attachment thereto), or within a fifteen (15)-mile radius of the location of any
O'Charley's restaurant or food service facility in existence or under
construction (or where land has been purchased or a lease executed for the
construction of an O'Charley's restaurant or other food service facility) as of
the earlier of (i) the expiration or termination of, or the transfer of all of
Developer's interest in, the Development Agreement; or (ii) the time Covenantor
ceases to be employed by or associated with Developer, as applicable.
3. Miscellaneous
3.1 Developer shall make all commercially reasonable efforts to ensure
that Covenantor acts as required by this Agreement.
3.2 Covenantor agrees that in the event of a breach of this Agreement,
Licensor would be irreparably injured and be without an adequate remedy at law.
Therefore, in the event of such a breach, or threatened or attempted breach of
any of the provisions hereof, Licensor shall be entitled to enforce the
provisions of this Agreement and shall be entitled, in addition to any other
remedies which are made available to it at law or in equity (including any right
to terminate the Development Agreement or any operating agreement, as provided
therein), to a temporary and/or permanent injunction and a decree for the
specific performance of the terms of this Agreement, without the necessity of
showing actual or threatened harm and without being required to furnish a bond
or other security.
3.3 Covenantor agrees to pay all expenses (including court costs and
reasonable attorneys' fees) incurred by Licensor and Developer in enforcing this
Agreement.
C-4
3.4 Any failure by Licensor or the Developer to object to or take
action with respect to any breach of any provision of this Agreement by
Covenantor shall not operate or be construed as a waiver of or consent to that
breach or any subsequent breach by Covenantor.
3.5 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE WHERE LICENSOR'S PRINCIPAL PLACE OF
BUSINESS IS LOCATED AT THE TIME SUCH PROCEEDING IS COMMENCED WITHOUT REFERENCE
TO CHOICE OF LAW PRINCIPLES. COVENANTOR HEREBY IRREVOCABLY SUBMITS HIMSELF TO
THE JURISDICTION OF THE STATE AND THE FEDERAL DISTRICT COURTS LOCATED IN THE
STATE, COUNTY OR JUDICIAL DISTRICT IN WHICH THE LICENSOR'S PRINCIPAL PLACE OF
BUSINESS IS LOCATED. COVENANTOR HEREBY WAIVES ALL QUESTIONS OF PERSONAL
JURISDICTION OR VENUE FOR THE PURPOSE OF CARRYING OUT THIS PROVISION. COVENANTOR
HEREBY AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON HIM IN ANY PROCEEDING
RELATING TO OR ARISING UNDER THIS AGREEMENT OR THE RELATIONSHIP CREATED BY THIS
AGREEMENT BY ANY MEANS ALLOWED BY APPLICABLE STATE OR FEDERAL LAW. COVENANTOR
FURTHER AGREES THAT VENUE FOR ANY PROCEEDING RELATING TO OR ARISING OUT OF THIS
AGREEMENT SHALL BE THE COUNTY OR JUDICIAL DISTRICT IN WHICH LICENSOR'S PRINCIPAL
PLACE OF BUSINESS IS LOCATED AT THE TIME SUCH PROCEEDING IS COMMENCED; PROVIDED,
HOWEVER, WITH RESPECT TO ANY ACTION WHICH INCLUDES INJUNCTIVE RELIEF OR OTHER
EXTRAORDINARY RELIEF, LICENSOR OR DEVELOPER MAY BRING SUCH ACTION IN ANY COURT
IN ANY STATE WHICH HAS JURISDICTION.
3.6 The parties acknowledge and agree that each of the covenants
contained herein are reasonable limitations as to time, geographical area, and
scope of activity to be restrained and do not impose a greater restraint than is
necessary to protect the goodwill or other business interests of Licensor. The
parties agree that each of the foregoing covenants shall be construed as
independent of any other covenant or provision of this Agreement. If all or any
portion of a covenant in this Agreement is held unreasonable or unenforceable by
a court or agency having valid jurisdiction in any unappealed final decision to
which Licensor is a party, Covenantor expressly agrees to be bound by any lesser
covenant subsumed within the terms of such covenant that imposes the maximum
duty permitted by law, as if the resulting covenant were separately stated in
and made a part of this Agreement.
3.7 This Agreement contains the entire agreement of the parties
regarding the subject matter hereof. This Agreement may be modified only by a
duly authorized writing executed by all parties.
3.8 All notices and demands required to be given hereunder shall be in
writing and shall be sent by personal delivery, expedited delivery service,
certified or registered mail, return receipt requested, first-class postage
prepaid, facsimile, telegram or telex (provided that the sender confirms the
facsimile, telegram or telex by sending an original confirmation copy by
certified or registered mail or expedited delivery service within three (3)
business days after transmission), to the respective parties at the following
addresses unless and until a different address has been designated by written
notice to the other parties.
C-5
If directed to Licensor, the notice shall be addressed to:
O'Charley's Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Director of Franchising
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If directed to Developer, the notice shall be addressed to:
OCM Development, LLC
c/o Meritage Hospitality Group, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If directed to Covenantor, the notice shall be addressed to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
c/o Meritage Hospitality Group, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any notices sent by personal delivery shall be deemed given upon receipt. Any
notices given by telex or facsimile shall be deemed given upon transmission,
provided confirmation is made as provided above. Any notice sent by expedited
delivery service or registered or certified mail shall be deemed given three (3)
business days after the time of mailing. Any change in the foregoing addresses
shall be effected by giving fifteen (15) days written notice of such change to
the other parties. Business days for the purpose of this Agreement excludes
Saturday, Sunday and the following national holidays: New Year's Day, ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ Day, Presidents' Day, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving and Christmas.
3.9 The, rights and remedies of Licensor under this Agreement are fully
assignable and transferable and shall inure to the benefit of its respective
Affiliates, successors and assigns. The respective obligations of Developer and
Covenantor hereunder may not be assigned by Developer or Covenantor, without the
prior written consent of Licensor.
(remainder of page intentionally left blank)
C-6
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as
witnessed by their signatures
LICENSOR:
O'CHARLEY'S INC.,
a Tennessee corporation
By:_________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Director of Franchising
DEVELOPER:
OCM DEVELOPMENT, LLC,
a Michigan limited liability company
By:_________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Chief Executive Officer
COVENANTOR:
____________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
C-7
ATTACHMENT D
TO DEVELOPMENT AGREEMENT
STATEMENT OF OWNERSHIP INTERESTS AND PRINCIPALS
A. The following is a list of stockholders, members, partners or other
investors in Developer, including, all investors who own or hold a
direct or indirect interest in Developer, and a description of the
nature of their interest:
Name Percentage of Ownership/Nature of Interest
------------------------------- ------------------------------------------
Meritage Hospitality Group Inc. 100% / Parent Company of Developer
A. The following is a list of all Principals described in and designated
pursuant to Section XIV(E) of the Development Agreement, each of whom
shall execute the Confidentiality and Non-Compete Agreement
substantially in the form set forth in Attachment C (see Sections
IX(B)(2) and IX(I) of the Development Agreement):
Name
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
B. The following is a list of all of Developer's Controlling Principals
described in and designated pursuant to Section XIV(E) of the
Development Agreement.
Name
Meritage Hospitality Group Inc.
D-1
ATTACHMENT E
TO DEVELOPMENT AGREEMENT
GUARANTY
Each of the undersigned acknowledges and agrees as follows:
(1) Each has read the terms and conditions of the Development Agreement
(the "Development Agreement"), dated as of December _____, 2003, by and among
O'Charley's Inc., a Tennessee corporation ("Licensor"), OCM Development, LLC, a
Michigan limited liability company d/b/a O'Charley's Development Company of
Michigan ("Developer"), and Meritage Hospitality Group Inc., a Michigan
corporation (the "Controlling Principals") and acknowledges that the execution
of this guaranty and the undertakings of the Controlling Principals in the
Development Agreement are in partial consideration for, and a condition to, the
granting of the development rights in the Development Agreement, and that
Licensor would not have granted such rights without the execution of this
guaranty and such undertakings by each of the undersigned;
(2) Each is included in the term "Controlling Principals" as described
in Section XIV(E) of the Development Agreement;
(3) Each individually, jointly and severally, makes all of the
representations, warranties, covenants and agreements of the Controlling
Principals set forth in the Development Agreement and is obligated to perform
thereunder; and
(4) Each individually, jointly and severally, unconditionally and
irrevocably guarantees to Licensor and its successors and assigns that all of
Developer's obligations under the Development Agreement will be punctually paid
and performed. Upon default by Developer or upon notice from Licensor, each will
immediately make each payment and perform each obligation required of Developer
under the Development Agreement. Without affecting the obligations of any of the
Controlling Principals under this guaranty, Licensor may, without notice to the
Controlling Principals, waive, renew, extend, modify, amend or release any
indebtedness or obligation of Developer, or settle, adjust or compromise any
claims that Licensor may have against Developer. Each of the Controlling
Principals waives all demands and notices of every kind with respect to the
enforcement of this guaranty, including, without limitation, notice of
presentment, demand for payment or performance by Developer, any default by
Developer or any guarantor and any release of any guarantor or other security
for this guaranty or the obligations of Developer. Licensor may pursue its
rights against any of the Controlling Principals without first exhausting its
remedies against Developer and without joining any other guarantor hereto and no
delay on the part of Licensor in the exercise of any right or remedy shall
operate as a waiver of such right or remedy, and no single or partial exercise
by Licensor of any right or remedy shall preclude the further exercise of such
right or remedy. Upon receipt by Licensor of notice of the death of any of the
Controlling Principals, the estate of the deceased will be bound by the
foregoing guaranty, but only for defaults and obligations under the Development
Agreement existing at the time of death, and in such event, the obligations of
the remaining Controlling Principals shall continue in full force and effect.
E-1
Additionally, with respect to the individual designated as the
Operating Principal, the Operating Principal acknowledges that the undertakings
by the Operating Principal under this guaranty are made and given in partial
consideration of, and as a condition to, Licensor's grant of rights to develop
Restaurants as described herein. The Operating Principal individually, jointly
and severally, makes all of the covenants, representations and agreements of
Developer and the Operating Principal set forth in the Development Agreement and
is obligated to perform hereunder.
THE CONTROLLING PRINCIPALS:
MERITAGE HOSPITALITY GROUP INC.
By:_________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.*
Chief Executive Officer
*Denotes individual who is Developer's Operating Principal
E-2